Friday, January 27, 2012

Bloomberg: U.S. economy powered by slavery

Just keep this in mind when folks talk about going back to the "good old days" of the 18th and 19th centuries.

America's economy was powered by slavery, and the wealth generated by slavery reverberates in today's companies like Lehman Bros., Berkshire Hathaway and JPMorgan Chase.

By Sven Beckert and Seth Rockman
January 24, 2012 | Bloomberg

Friday, January 20, 2012

China subsidizing solar exports to U.S.

So China is smart and we're dumb, or rather, we naively stick to the rules of the "free market" while China plays by the rules of real business.

China's goal is to drive U.S. solar panel makers out of business and dominate U.S. market share by dumping panels that are about 10 percent cheaper on the U.S. Once their work is done, the Chinese government will stop providing $30 billion in subsidies to Chinese producers, and the price for panels will go up.

It's too bad that "industrial policy" is a dirty word in the U.S. that smacks of socialism, because China is eating our lunch while we're acting like choir-boy neo-liberal business professors.

And yeah, it's great that American workers are installing those solar panels, no matter where they're made, but does anybody believe that America's economic future will be secure if we don't MAKE stuff anymore, only provide each other with services?

By Christopher Joyce
January 19, 2012 | NPR

Thursday, January 19, 2012

The 'Duh' files: Condoms & family planning prevent HIV, abortions

There were two articles in two days from New Scientist on the impact of condoms and family planning in preventing the spread of HIV and incidence of abortions.

It's too bad the U.S. spent 8 years under Dubya de-emphasizing both these commonsense measures globally, especially in Africa. How many deaths could have been prevented?

By Andy Coghlan
January 19, 2012 | New Scientist

January 18, 2012 | New Scientist

'Libertarian' Koch bros. are hypocrites taking gov't subsidies

Even worse, the evil Koch bros. take their $41 million in government agricultural subsidies and plow it back into unregulated campaign spending, lobbying, and their army of think tanks.

We're paying for these pro-laissez-faire hypocrites to buy our political system.

Critics have questioned the amount of public money pumped into the industry
January 15, 2012 | AP

DC Johnston: Shrink the IRS, grow the deficit

Kind of reminds me of Republicans' stance on illegal immigration: Let's enforce the laws currently on the books, eh?

Every hour spent enforcing our tax laws produces almost $10,000 in lawful, legally-owed revenues which go to shore up our deficit hole. Now that's real bang for our taxpayer buck.

Those who want to de-fund the IRS are simply anti-tax zealots who don't believe in the rule of law or fiscal responsibility.

By David Cay Johnston
January 17, 2012 | Reuters

Congress will spend a trillion dollars more than it levies this year, so how do Washington's politicians respond to the 11th consecutive year of federal budgets in red ink? They plan to shrink the IRS.

Go figure. Cutting the IRS budget by more than 5 percent in real terms makes as much sense as a hospital firing surgeons or a car dealer laying off salespeople when customers fill the showroom.

Shrinking the IRS makes sense if you believe government is too big and that cutting everywhere is the best way to shrink government. But this is the staff that generates revenue, and there is easy money to be made.

Congress should listen to the national taxpayer advocate, a position it created to make sure taxpayers had a voice in how the IRS operates. In her annual report, released last week, advocate Nina Olson said Congress needed to "ensure that the IRS continues to be effective, either by reducing the IRS' workload or by providing adequate funding to enable it to accomplish its assigned mission."

Instead of cutting, we should be expanding the revenue-generating staff because there is plenty of tax money to be had, even in this awful economy.

IRS data show that auditors assigned to the 14,000 or so largest corporations found $9,354 of additional tax owed for every hour spent testing tax returns in the 2009 fiscal year. The highest-paid IRS auditors make $71 an hour. Based on a 2,080-hour work year, that works out to around $19 million of lost revenue annually for every senior corporate auditor position cut from the payroll.


It makes no economic sense to trim the ranks of auditors who generate more than a hundred times their annual salaries. Run a business that way and you go broke.

So why would President Barack Obama and Congress cut the IRS budget? Their actions illuminate the rise of corporate power and values, and the diminishing voice of Joe Sixpack, thanks partly to how we finance election campaigns. Then there is the growing army of corporate lobbyists and the Supreme Court's decision in Citizens United, which allows corporations (and unions) to spend all they can afford on influencing elections.

Keep in mind the IRS costs just a half penny for each dollar of tax collected. Its proposed $11.8 billion budget would be less than the Agriculture Department spends each month.

If the IRS budget is cut, the losers will be workers and ordinary investors, who will find it harder to get their questions answered and their problems resolved by the agency. On the whole, these people do not cheat on their taxes because their incomes are easily checked — through reports by employers, mortgage banks and others. Under a law taking effect in stages between last year and next, brokerages must report the cost basis of securities. This change will reduce capital gains cheating.


The winners will be tax cheats among sole proprietors and other business owners, who are subject to less verification. The latest IRS tax gap report, issued Jan. 6, estimates that just one percent of wages escapes tax, while 56 percent of "amounts subject to little or no" verification do so.

America's biggest corporations, those with more than $250 million in assets, also may escape some tax if the IRS budget is cut. These nearly 14,000 companies pay about 86 percent of corporate income taxes.

Audits of these big firms were down even without a budget cut. And audits have become far more complicated, partly because Congress changed the tax code more than once a day on average from 2001 through 2010, Olson reported.

From 2005 to 2009, hours spent auditing the biggest corporations declined by 33 percent, according to IRS records analyzed by the Transactional Records Access Clearinghouse at Syracuse University in New York.

Two decades ago, when the economy was a third smaller, the IRS staff numbered about 118,000. Now it numbers 95,000 and is on the way to about 90,000. The likelihood of a big company being audited has plummeted 50 percentage points from 72 percent in 1990 to 22 percent in 2010.

Big company audits are now limited to specific issues known to the companies in advance, not unlike when cops tip off owners of favored gambling dens before a raid. Each audit also begins with an "estimated time to completion." Working auditors tell me this is really a hard deadline that allows companies to run out the clock with delays in producing documents.

Some IRS tax detectives privately ridicule this system, calling it "audit lite."

Whether you like the corporate income tax or think it is an abomination, failing to enforce it with the same rigor as taxes on wage earners and most investors is indefensible on economic, budget deficit and moral grounds.

IRS budget cuts worsen budget deficits and send a corrosive signal that only chumps file honest tax returns. So you have a choice. Do nothing and suffer the consequences or call your congressman, senators and the White House — today — and then vote in politicians who support, rather than undermine, tax law enforcement.

Wednesday, January 18, 2012

Progressive California pulling the rest with it, again

Thank goodness for the United State of California, the 8th largest economy in the world. When California says "jump," industry asks "how high?"

California is so big that their progressive reforms will trickle down to the Red States and flyover country, too -- in fact all over the world. This is the very opposite of the "race to the bottom," the dark side of globalization.

By Naoki Schwartz
January 13, 2012 | Huffington Post

Britain Vice PM: Israeli settlements are 'vandalism'

When you're not beholden to the Israel lobby as a politician, sometimes you can get away with telling the truth. Hear, hear!

By David Stringer
January 16, 2012 | Huffington Post

Stiglitz: Austerity is a 'suicide pact'

By Malcolm Moore
January 17, 2012 | The Telegraph

Imposing austerity measures as countries slow towards recession is a fundamentally flawed response, said Mr Stiglitz, who won the Nobel prize in 2001 for his work on how markets work inefficiently.

"The answer, even though they see over and over again that austerity leads to collapse of the economy, the answer over and over [from politicians] is more austerity," said Mr Stiglitz to the Asian Financial Forum, a gathering of over 2,000 finance professionals, businessmen and government officials in Hong Kong.

"It reminds me of medieval medicine," he said. "It is like blood-letting, where you took blood out of a patient because the theory was that there were bad humours.

"And very often, when you took the blood out, the patient got sicker. The response then was more blood-letting until the patient very nearly died. What is happening in Europe is a mutual suicide pact," he said.

Keynesian economics, which require governments to help sustain demand, suggests that austerity measures should be imposed when an economy is booming, not waning.

Mr Stiglitz pointed out that 700,000 public sector jobs had been cut in the United States in the past four years, removing demand from the system as unemployment spikes. The UK is set to lose a similar number by 2017.

Instead, Mr Stiglitz argued the best economic medicine is infrastructure spending, especially on transport and energy projects. He pointed to China as one country that had successfully combatted financial crises with stimulus packages.

On Monday, George Osborne had told the same forum that the UK's fiscal austerity measures, which have been in place for a year and under which the economy has begun to tip into recession, were the only way to convince the market of the UK's economic credibility.

"When you have a high budget deficit, if you do not have a [disciplined fiscal] plan then you will not have sustainable growth because investors will be worried about investing in your country," the Chancellor said.

However Mr Stiglitz argued that austerity in the UK and elsewhere would not boost confidence. "There will not be a restoration of confidence as long as economies keep falling, and that will continue until [politicians] change economic course. And I do not think that is likely," he said.

Mr Stiglitz said economists are now not debating if the Euro will break up, but how and when it will happen.

"Among economists the discussion is about the best way to end the euro. It could be civilian upset that does it. Youth unemployment in Spain has been over 40pc since 2008. How much longer will they tolerate that? The policies of the new government are for more of the same medicine, except worse.

"The other way it may end is when the European Central Bank refuses to be the lender of last resort for some countries, precipitating a crisis. We can be sure that markets will be highly volatile and the end of the Euro will be a very severe disruption to the global economy," he said.

However, he compared the strictures of the single currency to the gold standard, and noted that countries which had abandoned the gold standard early had recovered more quickly.

"When the Euro was founded, most economists were skeptical," he said, noting that the single currency was a political project that had not satisfied the optimum conditions for a currency bloc. "They hoped they would be able to finish the project over time, but the politics was not strong enough," he said.

Mr Stiglitz also said that while he was critical of the ratings agencies, a decision to downgrade the European Financial Stability Fund (EFSF) on Monday was reasonable. "The EFSF was trying to leverage something out of nothing, and that was never going to work, and they were just saying that it wasn't going to work," he said.

U.S. no longer 'land of opportunity'

I missed this one earlier but fortunately stumbled across it today.

Less equality, less mobility than in other countries, including "socialist" Europe. Is the American Dream dead?

By Jason DeParle
January 4, 2012 | New York Times

Benjamin Franklin did it. Henry Ford did it. And American life is built on the faith that others can do it, too: rise from humble origins to economic heights. "Movin' on up," George Jefferson-style, is not only a sitcom song but a civil religion.

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.


Tuesday, January 17, 2012

Neocons at it again with Iran

Real neocons never die, they just shut up for a while. Now they're crying for war with Iran, again. Will these dufuses ever learn? Are they insane?

Iran is a country that can actually HURT us and our allies at home, unlike Iraq and Afghanistan. They have been preparing for this eventuality for years: just as we've been war-gaming, they've been preparing to make terrorist strikes.

And morally, if not legally, what would stop them if we declared unilateral war on them first? Our cries of, "Hey, that's not fair!" won't matter much when they're blowing us up where we live.

"We can destroy Iran's army in two weeks," this neocon duo wrote, as if that would be the end of conflict. Yeah, right! It would only be the start; and Iran's terror cells are global. So I rank that prediction right up there with, "They'll greet us with flowers"!

A step short of unprovoked attack -- "crippling" sanctions -- won't work; they won't turn the local population against Iran's supreme leaders, Iranians will rightly blame us for their misery. And ordinary people, not the clerics and Revolutionary Guard, would be the ones to suffer. That is always the way with sanctions. It happened under Saddam; it's happening now in Cuba. Sanctions just don't work.

Remember what happens when we listen to neocons: We get wars we could and should have avoided, draining us of U.S. blood and treasure!

By Reuel Marc Gerecht and Mark Dubowitz
January 17, 2012 | Bloomberg

Monday, January 16, 2012

MB360: Food stamp nation

I know ya'll want to blame this on 'Bama, but c'mon, you know it's not true. He's been adding private sector jobs almost every month since the end of the recession in mid-2009. But he's still digging us out of 7-million jobs hole.

(Yeah, yeah, I know: the POTUS, no matter who he is, doesn't sit in the Oval Office pulling the levers of the U.S. economy, but then that's just more reason not to blame BHO).

The point is that most new jobs suck. They certainly aren't "bloated" government paychecks; and they don't pay the bills. And this has been happening since before the Great Recession in 2008-09; it just accelerated when the housing bubble burst and average Americans couldn't use their mortgaged houses as a piggy bank anymore, in effect covering up for their declining wages with more debt.

Who's going to have the cajones to address this truth in the 2012 elections? Anyone? Anyone? Bueller?....

UPDATE (01.20.2012): My statement that Obama has been adding private sector jobs ever since August 2009 was inaccurate. I re-checked the BLS data. So, the recession officially ended in June 2009. That month, there were 107,936,000 private sector jobs. It actually took the economy until August 2010 to exceed that number. Ever since August 2010, the economy has been adding private sector jobs.

So, my statement was wrong. I should have said, it took a year after the end of the recession to start adding private sector jobs, which the economy has been doing steadily every month ever since.

Posted by mybudget360
January 13, 2012

Robert Parry: Founders couldn't have stopped Obamacare

All you "strict constitutionalists" out there better make sure you're not reading revisionist history. Robert Parry quotes the Founding Dudes and a Reagan-appointed conservative judge. It's case closed.

By Robert Parry
January 13, 2012 | Consortium News

Exclusive: Rep. Ron Paul and other right-wingers have lured many average Americans into their camp by creating a false narrative about America's Founding, claiming that the drafters of the Constitution wanted a weak central government. But that's not the real history, Robert Parry writes.

NYT: Who is the One Percent?

Just who makes up the One Percent?   What are their hopes and fears, their dreams and failings, their favorite sports teams?   .... Do we care?  No -- just tax the hell out of 'em!

Seriously though, I suppose regional cost of living differences do matter.  So we could easily take the upper East/West Coast bound of, say, over $1 million income per household, and raise taxes on them to post-WWII levels.  

(We are still paying for two long-term wars, by the way, don't forget!  The post-WWII/post-Depression era comparison is totally appropriate.)

By Shaila Dewan and Robert Gebeloff 
January 14, 2012 | New York Times

Sunday, January 15, 2012

Reuters: 'Zombie banks' try to fool markets to delay inevitable

Publicly traded banks which come clean about the real value of their bad loans get punished by the market, so they have adopted a "delay-and-pray" strategy.

How many "zombie banks" are still out there? As long as they keep playing tricks and papering over their losses, we won't know for sure... until it's too late and it causes a financial crisis and a call for another expensive government bailout.

By Jonathan Weil
January 12, 2012 | Reuters

Reuters: Who profits from Greek debt deal?

Greece's government is asking its creditors to accept a 50 percent reduction (haircut) in the principle amount owed to them.

The major creditors, mostly hedge funds, are still holding out, they won't accept Greece's offer.

It's interesting to note that the original creditors or holders of Greece's debt got out a long time ago and sold their bonds for anywhere from 20-45 cents on the euro, depending on the maturity of the bond, to these risk-loving hedge funds. So if the new owners of the debt accepted a 50 percent haircut, they would still make a profit.

It's just important to keep in mind that many of those who originally took the risk of buying Greece's debt have left the picture, and took a 55-80 percent loss just to be done with it. That is, "the market," which knows everything, has already written down the street value of Greece's debt.

January 13, 2012 | Reuters

CEA Chair Kreuger: Inequality hurts us all

It's not up for debate anymore whether income inequality has been growing in the United States since the 1970s, (with the exception of the Clinton years). America's level of inequality more closely resembles Brazil or Russia's than Germany, Japan or Great Britain's.

Apropos, here are some excerpts a recent speech by Alan Krueger, the chairman of the White House Council of Economic Advisers, to the Center for American Progress, a left-leaning think tank. I encourage everybody to read it.

Here Kreuger debunks the myth of income-mobility in the United States:

"Studies that use income data averaged over longer periods of time for parents and children tend to find higher correlations between parental and children's income. A reasonable summary is that the correlation between parents' and their children's income is around 0.50. This is remarkably similar to the correlation that Sir Francis Galton found between parents' height and their children's height over 100 years ago. This fact helps to put in context what a correlation of 0.50 implies. The chance of a person who was born to a family in the bottom 10 percent of the income distribution rising to the top 10 percent as an adult is about the same as the chance that a dad who is 5'6" tall having a son who grows up to be over 6'1" tall. It happens, but not often."

Here Krueger debunks the myth that our tax system redistributes wealth on par with "socialistic" countries: "Of all the OECD countries, only Chile, Korea, and Switzerland have tax systems that reduce inequality by less than the U.S."

And here he explains how greater income equality would be beneficial for all Americans:

"... restoring more fairness to the economy would be good for all parts of American society. This is not a zero-sum game. The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth. Businesses would benefit from restoring more fairness to the economy by having more middle class customers, more stable markets, and improved employee morale and productivity."

Moreover, a recent study by the IMF covering countries from 1950 to 2006 found that a 10 percent decrease in inequality increased the expected duration of economic growth by 50 percent. Inequality hurts us all in the long run.

By Alan B. Krueger
January 12, 2012 |

America's hidden social welfare state

"Once tax expenditures for social welfare programs are included in social spending figures, the U.S. welfare state is a similar size to those in Europe."

You don't hear about that every day! Here are some details:

"Based on direct spending on social welfare programs as a proportion of the total economy, the U.S. (at 16.2 percent) lags behind every country in Europe except Slovakia, according to data analyzed by the Organization for Economic Cooperation and Development. By contrast, when it comes to tax breaks with a social purpose, the U.S. -- at 2 percent of gross domestic product -- leads the pack."

You also don't hear that those tax expenditures go to the middle class and especially to the rich.

By Dan Froomkin
January 13, 2012 | Huffington Post

Krugman: Government can't run like a business

Boy, oh boy, if you have ever said government needs to run like a business, then you must read the latest by Krugman.

Krugman also could have mentioned that any large company must be extremely bureaucratic. It's just a law of organizational design. It's a function of size and the complexity of the external environment. If we want government to do lots of complex things -- as the majority thinks it should -- then government's structure must be complex and bureaucratic, too.

I also find the comment that government should run like a business -- meaning, today, that it should be less bureaucratic, and focused mainly on cost-cutting -- very ironic, considering that fathers of public administration, Max Weber and Woodrow Wilson, also argued 100 years ago that government needed to run more like a business -- meaning, more bureaucratic and rules-oriented, with rigid hierarchies, systems of files and documentation, written procedures, and impersonal execution of duties!

By Paul Krugman
January 13, 2012 | New York Times

"And greed - you mark my words - will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A."

That's how the fictional Gordon Gekko finished his famous "Greed is good" speech in the 1987 film "Wall Street." In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.

Today, however, let's focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it's the main plank of Mitt Romney's case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.

In so doing, he has, of course, invited close scrutiny of his business career. And it turns out that there is at least a whiff of Gordon Gekko in his time at Bain Capital, a private equity firm; he was a buyer and seller of businesses, often to the detriment of their employees, rather than someone who ran companies for the long haul. (Also, when will he release his tax returns?) Nor has he helped his credibility by making untenable claims about his role as a "job creator."

But there's a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn't at all like maximizing corporate profits. And businessmen - even great businessmen - do not, in general, have any special insights into what it takes to achieve economic recovery.

[Krugman's being modest in failing to mention that most large corporations employ egghead economists like Krugman to figure out what's happening in the macroeconomic environment and to guess how it will affect the company. - J]

Why isn't a national economy like a corporation? For one thing, there's no simple bottom line. For another, the economy is vastly more complex than even the largest private company.

Most relevant for our current situation, however, is the point that even giant corporations sell the great bulk of what they produce to other people, not to their own employees - whereas even small countries sell most of what they produce to themselves, and big countries like America are overwhelmingly their own main customers.

Yes, there's a global economy. But six out of seven American workers are employed in service industries, which are largely insulated from international competition, and even our manufacturers sell much of their production to the domestic market.

And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.

Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm's owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.

But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.

Now, to be fair, being a career politician isn't necessarily a better preparation for managing economic policy than being a businessman. But Mr. Romney is the one claiming that his career makes him especially suited for the presidency. Did I mention that the last businessman to live in the White House was a guy named Herbert Hoover? (Unless you count former President George W. Bush.)

And there's also the question of whether Mr. Romney understands the difference between running a business and managing an economy.

Like many observers, I was somewhat startled by his latest defense of his record at Bain - namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.

But what really struck me was how Mr. Romney characterized President Obama's actions: "He did it to try to save the business." No, he didn't; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America's slump. Does Mr. Romney understand the distinction?

America certainly needs better economic policies than it has right now - and while most of the blame for poor policies belongs to Republicans and their scorched-earth opposition to anything constructive, the president has made some important mistakes. But we're not going to get better policies if the man sitting in the Oval Office next year sees his job as being that of engineering a leveraged buyout of America Inc.

Thursday, January 12, 2012

'Laffer curve' inventor sued for Ponzi scheme

Laffer Curve Napkin

If you think about it, the Laffer curve is kind of the opposite of a Ponzi scheme: it argues that we must put less and less money into the scheme to keep it going, and in fact we make more
money the less we put in.

It is one of those ideas that is so stupid yet so simple and tempting to believe in that it nevertheless catches on, in spite of all evidence to the contrary.

Now it looks as if Arthur Laffer has moved on to more traditional hucksterism....

By Cameron Langford
January 11, 2012 | Courthouse News Service

Um, about that 35% corporate tax rate...

... Something is seriously wrong when more than two-thirds of a country's corporations are non-taxable.

By John D. McKinnon
January 10, 2012 | Wall Street Journal

StoneMor Partners LP, the publicly traded firm that specializes in running cemeteries, expects to see handsome profits in coming years as baby boomers age and die. But unlike its largest rivals, its corporate tax bill from the federal government will be zero.

StoneMor is among the many businesses organized so they don't pay a penny in federal corporate income tax. And yet such firms don't employ an army of accountants to shield profits in complex tax shelters. Their enviable tax position is perfectly legal and has been encouraged by Congress and state governments. Known as pass-throughs, these firms pass along profits to investors who pay taxes on those sums through their individual returns.

This exception has been around for decades, and has been broadened repeatedly in recent years as a way to spur entrepreneurship. Millions of small businesses have organized this way, but so too have some behemoths like private-equity giant Blackstone Group LP, construction firm Bechtel Group Inc. and pipeline firm Kinder Morgan.

The percentage of U.S. corporations organized as nontaxable businesses has grown from about 24% in 1986 to about 69% as of 2008, according to the latest-available Internal Revenue Service data. The percentage of all firms is far higher when partnerships and sole proprietors are included.

Old-line U.S. public companies generally remain taxable, and many complain that they must pay higher effective rates than foreign competitors. They are eagerly seeking a cut in the 35% U.S. corporate-tax rate, now one of the highest in the world. But increasingly they find themselves at odds politically with the growing breed of nontaxable firms.

By some estimates, more than 60% of U.S. businesses with profits of $1 million are structured as pass-throughs, the highest rate among developed countries. Their popularity is one big reason why federal corporate tax collections amounted to just 1.3% of GDP in 2010, well below their mark of 2.7% in 2006 and far beneath their peak of 6.1% in 1952.

Almost everyone in Washington appears to agree that the Byzantine corporate tax code needs a revamp. But on this point, the business community is split, presenting perhaps the biggest obstacle to any overhaul.

Many Democrats as well as some Republicans are willing to consider taxing the largest pass-throughs. It is a matter of fairness, they argue, and would also raise new revenue to help offset the cost of cutting tax rates.

On the other side, a Republican-backed coalition including building contractors, beer distributors, auto dealers and funeral directors argues that changing the rules will inhibit entrepreneurship, as well as hit their pocketbooks.

Various proposals for overhauling the tax code threaten to hit the untaxed entities to some degree, by curbing the business tax breaks they receive. And pass-throughs—unlike taxable corporations—would receive no benefit from a drop in the corporate rate.

Treasury Secretary Timothy Geithner has kicked the issue squarely back to lawmakers. "Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they're treated as corporations for tax purposes or not," Mr. Geithner said at a Senate Finance Committee hearing last year.

Pass-throughs are especially prevalent in industries such as agriculture, mining, construction, finance, real estate, professional services and entertainment. Businesses in these sectors often have relatively few owners and can rely on private financing to flourish. By contrast, public companies, with some exceptions, must organize as taxable entities.

Analysts noted the tax advantage of pass-throughs when pipeline giant Kinder Morgan announced in October that it would buy rival El Paso Corp. in one of 2011's biggest tie-ups. Kinder Morgan holds nearly all of its assets in Kinder Morgan Energy Partners LP, a so-called master limited partnership, a nontaxable entity. El Paso, though, for various business reasons, has kept a large percentage of its assets in the standard taxable corporate form. A Kinder Morgan spokesman said energy MLPs were authorized by Congress "to promote the development of energy infrastructure" in the U.S.

KKR, the big private-equity concern, reported that it earned a total of about $1.3 billion in 2010 through its pass-through ownership structure. KKR paid about $74 million in corporate tax, largely through a taxable subsidiary. If KKR were instead organized as a single taxable corporation, it would have paid about $523 million in corporate tax, counting both federal and state taxes, the company said. That means its pass-through structure saved it about $449 million.

Some but not all of that tax savings disappears when the individual taxes paid by the owners also are considered. Even so, KKR's current pass-through structure saves at least $277 million in taxes overall, compared to a taxable corporate structure, when all taxes are considered.

Many large pass-throughs are private, and few details have emerged about their tax status. Construction giant Bechtel Group, for instance, has become a frequent target for congressional critics who say it is inappropriately taking advantage of pass-through rules designed for smaller companies. The company declines to comment on how it is organized for tax purposes.

Nontaxed companies go by a smorgasbord of appellations, from Subchapter S corporations to limited liability companies and master limited partnerships, to even more specialized forms. A common example would be a limited liability partnership, such as a law or accounting firm, which distributes profits to its partners. The firm itself typically doesn't pay taxes. Instead, the federal government gets its cut by taxing partners' income. The late Donald Alexander, an IRS commissioner in the 1970s, called this "tax nirvana."

The concept gained momentum in the 1950s when Congress created the Subchapter S corporation, a relatively strictly defined designation aimed at encouraging start-ups and diluting the influence of corporate giants. It got a boost in the 1970s, when Hamilton Brothers Oil Co. persuaded Wyoming's legislature to approve a new form called the Limited Liability Company or LLC.

Starting in the late eighties, when the IRS recognized LLCs as partnerships for tax purposes, other states quickly followed suit. By 2008, about 1.9 million LLCs were filing tax returns with the IRS. "I tell friends my biggest business error was not getting a royalty" on the idea, said A.J. Miller, the former Hamilton executive who led the effort.

Reagan-era tax cuts made the structures more attractive because corporate rates suddenly were significantly higher than individual rates. Top individual rates have since risen and now are at 35%, the same as top corporate rates.

But organizing as a pass-through for tax purposes is still attractive for most businesses, because it eliminates one layer of taxation. Corporate profits are typically taxed twice, first at the corporate level and secondly when they are paid out to individuals as dividends and capital gains. Investors in pass-throughs, therefore, often benefit from larger sums being distributed.

Congressional officials knew they were encouraging businesses to become pass-throughs. Even so, "there were a hell of a lot more pass-throughs created than I think we expected," says J. Roger Mentz, a former Reagan Treasury official who helped guide the 1986 Act through Congress.

In 1987, amid a rush by businesses to convert to the pass-through form, Congress declared that publicly traded companies should also be taxable corporations. But it carved out a few exceptions that seemed narrow at the time. One was for companies in the energy and natural resources field. Another was for real estate. Still another was for certain financial firms.

Despite occasional recent threats by some lawmakers to try to block private-equity firms from using the pass-through technique, Blackstone Group and KKR took advantage of the rules for publicly traded partnerships a few years ago. In 2011, two more well-known financial firms, Carlyle Group LP and Oaktree Capital Management LP, filed to go public in the same manner.

Todd Molz, general counsel of Oaktree, said the industry's moves are appropriate, because they prevent another layer of taxation on earnings. Businesses owned by private-equity firms often pay corporate taxes. Shareholders of the private-equity firms pay tax on their payouts. So imposing a levy on the investment firm itself would create a third layer of tax on the same activity, he said.

Since 2004, StoneMor, based in Levittown, Pa., has been organized as a master limited partnership. That means it doesn't pay corporate-level taxes even though it is publicly traded and has grown to become one of the industry's larger firms. StoneMor filings indicate that the firm is structured to take advantage of the real-estate and financial exceptions.

The firm's chief aim in converting to an MLP was to encourage investors to look at its cash flow and yield, the way MLP's usually are valued, rather than by typical corporate measures of profitability, said Tim Yost, a company vice president. "This isn't a tax-avoidance" maneuver, he said. StoneMor's market capitalization recently hovered around $450 million, up from $120 million at the end of 2006.

Company materials tout StoneMor's "predominantly tax free" structure, and tax benefits for investors. But StoneMor has to pay some corporate tax through subsidiaries, for income such as casket sales that doesn't qualify for one of the MLP exceptions. And company officials note their investors pay taxes on their share of the profits.

The structure is so potentially valuable that one of StoneMor's directors has sought to replicate it with other companies, and has obtained a patent on an investment-fund strategy that involves converting corporations to master limited partnerships.

StoneMor's largest rivals in the death-care industry, as the firms dub themselves, are organized as traditional taxable corporations. Industry analysts say too much of their income comes from funeral services, which doesn't fit into any of the exceptions for publicly traded partnerships. Two of them, Service Corporation International and Carriage Services Inc., paid total tax rates of more than 40% each on their 2010 profits, counting federal and state corporate levies, according to their financial filings. They both declined to comment.

The administration has been working for months on a business-tax overhaul, but has yet to release it.

White House and Treasury spokesmen declined to comment. Some lawmakers have called for curtailing business tax deductions, with the additional revenue redeployed to help lower corporate tax rates. A few lawmakers—mostly Democrats—have floated the idea of imposing a tax on the largest pass-throughs.

But small-business groups and their allies in Congress, particularly Republicans, have pushed back on the idea of raising taxes on pass-throughs, warning that such a move could slow job creation. And the larger pass-through companies retain significant lobbying and political clout.

Most Republicans say they favor reducing both corporate and individual tax rates. "I don't know how you deal with the [corporate] rate without dealing with also the pass-through entities," Rep. Vern Buchanan (R., Fla.), whose own businesses are organized as pass-throughs, said at a House hearing in June. "It all has to be looked at."

U.S. moving to universal 'Net access too slowly

Obama's FCC is definitely taking steps in the right direction -- toward universal broadband Internet access -- but they are insufficient, especially given: 1) America's great wealth, population, and population dispersion; and 2) our ostensible competitive advantage in high-tech and knowledge-based industries.

A few far-sighted countries like Finland and Estonia, meanwhile, have enshrined the basic right to high-speed Internet access in their law and national constitution, respectively! Other EU countries seem to be headed that way, too....

You can't help but feel we are falling behind, and for no good reason.

By Gerry Smith
January 9, 2012 | Huffington Post

Try EPA's new greenhouse gas data tool!

This tool from the good folks at the EPA is kind of neat. It allows you to see what enterprises are emitting the most greenhouse gases in your area, whether it's carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) or others.

So it lets me see, for example, that the biggest polluter near me in my home state is a coal-fired Duke Energy power plant spitting out 4,117,452 metric tons (MT) of carbon dioxide, 10,219 MT of methane and 21,942 MT of nitrous oxide a year.

Using their handy-dandy equivalencies calculator, I can see that amount of greenhouse gas equals the amount emitted by 1.98 million passenger vehicles a year, or the CO2 emitted by consuming 23.5 million barrels of oil.

Wednesday, January 11, 2012

Israel to ban Nazi/Holocaust analogies?

Israeli Jews are only about 4 years behind me, when I first supported banning Nazi/Hitler comparisons (as well as Stalin/Lenin/Communist comparisons) in our democratic polity.

Such comparisons are like a very big and clumsy but powerful gun that nobody knows when to use or how to aim properly, so we'd be better off just leaving it.

By Eline Gordts
January 12, 2012 | Huffington Post

JERUSALEM -- A proposed bill would make it a crime in Israel to criticize people by comparing them to Nazis.

The draft legislation would impose penalties of up to six months in jail and a $25,000 fine for using the word "Nazi" or Holocaust symbols for purposes other than teaching, documentation or research.

The draft legislation passed its first hurdle Monday when Cabinet ministers approved it. It now goes to the full parliament for a vote.

The bill was proposed after ultra-Orthodox demonstrators set off a furor by dressing young boys as Nazi concentration camp inmates during a protest against what they said was incitement against their community. Protesters have also called police "Nazis."

The bill has been criticized by civil rights groups that see it as infringing on freedom of expression.

David Brooks: Why aren't there more liberals?

Of course Brooks's op-ed is mostly wrong, but it's wrong in a thoughtful way, not a "liberals-hate-America-and-are-trying-to-destroy-it" way, so Brooks deserves a thoughtful response.

To start, we must concede that "liberal" is a dirty word in the U.S. nowadays, unfair and silly as that may be. We liberals have failed to own it and say it proudly. (Except for me). The Right has done a pretty good job of destroying it, by linking "liberal" to anything that goes wrong with government. As Brooks correctly points out, Republicans are in the ridiculous but advantageous position of being able to criticize any lapse of government, including lapses of their own creation, on "liberal" government, or Big Government. When they screw up it's just an abstract "See, I told you so," moment. When they don't screw up, they've defied the odds and "proven" that Republicans govern better. Win-win for them. Give them a pat on the back for excellent spin control.

But as Michael Moore and others have aptly noted, when you go policy by policy, Americans who won't dare call themselves liberals say they hold liberal policy views -- equal pay for equal work; higher taxes on the rich; right to abortion and gay marriage; environmental regulation, etc.

Liberals and liberalism, I believe, are partly a victim of their own successes. I don't distinguish "progressives" from liberals in any significant way, except self-identified progressives seem more interested in reform. Anyway, my point is that the Progressive Era, one of the only hopeful and shining eras of U.S. politics, is now under attack, as is the word "progressive" *. I've written about this before. The achievements of the Progressive Era, presided over by reformist Republicans Teddy Roosevelt and William Taft, are numerous, profound, and enduring. To name just a few: ban on child labor; the 8-hour workday; regulating sweatshops; direct election of U.S. senators; breaking up monopolies and trusts; regulating interstate commerce; food and meat inspection; establishing national wilderness parks (a uniquely American invention); and on and on. None of us wants these reforms repealed. We take them so much for granted, or are simply ignorant about how hard-fought they were, that today's liberal-progressives don't even think to brag about their track record of successful reform within the framework of free market capitalism.

* Evil psych patient Glen Beck's recent "lectures" about the "horrors" of the Progressive Era and Teddy Roosevelt are his attempt at Swiftboating U.S. history; because Republican sharks like him understand they must attack their opponent's greatest strengths, not their weaknesses.

If you want to go back to the post-WWII and Great Society, again, I believe liberals are victims of their own success. After winning two world wars and ending the Great Depression, Democrats passed two programs, Social Security and Medicare, which have helped to keep generations of U.S. seniors out of squalor, suffering and indignity in old age. Compare poverty stats of seniors before and after Social Security: 50 percent in poverty before; 12 percent in poverty today (during a recession, mind you). No comparison. The G.I. Bill and cheap G.I. housing loans put the Greatest Generation through college with a roof over their heads. The War on Poverty did work. It's just that Democrats (and liberal-progressives) don't take credit for it, because, well, maybe we look at those today as American achievements. But strictly speaking, they weren't. They were liberal-progressive achievements. We liberals are always stuck, as David Brooks remarks, defending Big Government's administrative weaknesses, and not celebrating its dramatic successes -- as Republicans would do... if they had any successes to celebrate. (Seriously, think hard and name one in the last 30 years that is all theirs. Tick-tock. Tick-tock. .... OK, I'll name one for you: they ended unfunded federal mandates on the states. Bet you weren't going to say that, though.)

Brooks is right about "rent-seeking" behavior, although let's face it, he's really just talking about the need for congressional campaign finance reform of our pay-to-play system. We don't have bureaucrats regularly soliciting bribes in America, or political patronage on a 19th century scale anymore. What we have are the rich paying for more legislated tax breaks and privileges all the time, to the detriment of the middle-class majority.

Americans may not have a lot of trust in government, but compared to what? The military? Oops, that sort of is government. The priesthood? Big oops. Corporations? Do they trust BP more than the EPA? I doubt it. But again, it's the fault of us liberal-progressives for not constantly pointing out the obvious, which is just how seamlessly our federal bureaucracy works most of the time. We suck at self-promotion. Instead we let conservatives jump on every badly designed program, or dishonest citizen who games the system, and blame it all on hapless liberals, as if the exceptions prove the rule.

For better or worse, America is a country where the loudest voice seems the most convincing, where you spike the ball in the endzone to brag about every achievement, and where you kick your opponent when he's down and call him a loser. But that's just not the way most liberals are. And it costs us. We look terribly weak and ineffective when in fact we are strong and make America stronger. That is our problem, Mr. Brooks.

By David Brooks
January 9, 2012 | New York Times

Why aren't there more liberals in America?

It's not because liberalism lacks cultural power. Many polls suggest that a majority of college professors and national journalists vote Democratic. The movie, TV, music and publishing industries are dominated by liberals.

It's not because recent events have disproved the liberal worldview. On the contrary, we're still recovering from a financial crisis caused, in large measure, by Wall Street excess. Corporate profits are zooming while worker salaries are flat.

It's not because liberalism's opponents are going from strength to strength. The Republican Party is unpopular and sometimes embarrassing.

Given the circumstances, this should be a golden age of liberalism. Yet the percentage of Americans who call themselves liberals is either flat or in decline. There are now two conservatives in this country for every liberal. Over the past 40 years, liberalism has been astonishingly incapable at expanding its market share.

The most important explanation is what you might call the Instrument Problem. Americans may agree with liberal diagnoses, but they don't trust the instrument the Democrats use to solve problems. They don't trust the federal government.

A few decades ago they did, but now they don't. Roughly 10 percent of Americans trust government to do the right thing most of the time, according to an October New York Times, CBS News poll.

Why don't Americans trust their government? It's not because they dislike individual programs like Medicare. It's more likely because they think the whole system is rigged. Or to put it in the economists' language, they believe the government has been captured by rent-seekers.

This is the disease that corrodes government at all times and in all places. As George F. Will wrote in a column in Sunday's Washington Post, as government grows, interest groups accumulate, seeking to capture its power and money.

Some of these rent-seeking groups are corporate types. Will notes that the federal government delivers sugar subsidies that benefit a few rich providers while imposing costs on millions of consumers.

Other rent-seeking groups are dispersed across the political spectrum. The tax code has been tweaked 4,428 times in the past 10 years, to the benefit of interests of left, right and center.

Others exercise their power transparently and democratically. As Will notes, in 2009, the net worth of households headed by senior citizens was 47 times the net worth of households led by people under 35. Yet seniors use their voting power to protect programs that redistribute even more money from the young to the old and affluent.

You would think that liberals would have a special incentive to root out rent-seeking. Yet this has not been a major priority. There is no Steve Jobs figure in American liberalism insisting that the designers keep government simple, elegant and user-friendly. Sailors scrub their ships. Farmers clear weeds. Democrats have not spent a lot of time scraping barnacles off the state.

Worse, in an attempt to match Republican rhetoric, Democratic politicians are perpetually soiling the name of government for the sake of short-term gain. How many times have you heard Democrats from Carter to Obama running against Washington, accusing it of being insular, shortsighted, corrupt and petty? If the surgeon himself thinks his tools are rancid, why shouldn't you?

In the past few weeks, the Obama administration has begun his presidential campaign by picking a series of small fights with the Republican-led House over things like recess appointments. These vicious squabbles may help Obama in the short term by making him look better than Republicans in Congress. But they will only further discredit Washington over the long run.

Life is unfair. Republican venality unintentionally reinforces the conservative argument that government is corrupt. Democratic venality undermines the Democratic argument that Washington can be trusted to do good.

Liberalism has not expanded because it has not had a Martin Luther, a leader committed to stripping away the corruptions, complexities and indulgences that have grown up over the years.

If you'll forgive some outside advice, President Obama might consider running for re-election as Luther. It's not enough to pick a series of small squabbles and then win as the least ugly man in the room. He might run as someone who believes in government but sees how much it needs to be cleansed and purified.

Make the tax code simple. Make job training simple. Make Medicare simple. Every week choose a rent-seeker to hold up for ridicule and renunciation. Change the Congressional rules. Simplify the legal thickets that undermine responsibility.

If Democrats can't restore Americans' trust in government, it really doesn't matter what problems they identify and what plans they propose. No one will believe in the instrument they rely on for solutions.

Tuesday, January 10, 2012

Despite balanced-budget amendments, states still in deficits

Get ready for the U.S. economy to get worse in 2012 as more states continue to have budget gaps, and if the federal government won't bail them out anymore, since austerity seems to be in fashion. (As we all know, government austerity measures everywhere at the same time leads to depression.)

This just goes to show we can't cut our way to economic growth and prosperity. It's not the problem that U.S. states aren't cutting back, or the government sector generally, which shrank in manpower by 280,000 in 2011. The problem is that there is not enough economic growth and resulting tax revenue.

Obama's greatest failure as POTUS?

One of Obama's greatest, tragic failures as President has been his willful neglect of mortgage borrowers in distress.

By contrast, when the Too Big To Fail (TBTF) banks were in trouble, starting in 2007, help from Congress, Treasury and the Fed was overwhelming (in the $ trillions, not $ billions) and above all FAST, with so little oversight that to this day we don't know who got loans why and under what terms and conditions.

But help for distressed homeowners has been almost nil, ostensibly because of poor administration and contradicting directives, but in fact because of Obama's lack of interest and political will.

It just goes to show that Obama is Wall Street's boy, not Main Street's.

By Loren Berlin
December 9, 2012 | Huffington Post

Sunday, January 8, 2012

UrbanBaby asks who's 'rich' -- NO JUDGING!

This is why Republicans still do well at the ballot box. Even the coastal liberal elite won't admit they're rich; meanwhile the poor don't want to seem like "haters" and anyway aspire to be rich... er, solidly upper-middle class, too.

This reminds me of the Bloomberg story from last March about a survey of actual U.S. millionaires by Fidelity Investments. Respondents said they'd need $7.5 million in assets to feel rich. Meanwhile, the average annual gross income in the U.S. is $25,000!

This comment on the original post puts it in perspective: (BOOKLES): "If people with 300k feel poor I may as well get a cup and brush off my guitar and hit the trains. Because begging is my only logical next step. I won't even go into the higher amounts."

You literally have to have a private jet and be able to influence elections to be considered "rich" in America today... And even then if you just act normal you get to enjoy suck-ups breathlessly telling everybody "what a normal guy/gal" you are, like you're doubly blessed by fate for not being an asshole too.

It's like everybody wants to take off their uniforms and pretend to play for the other team. (Sigh) Good ole' class consciousness / class interests / class warfare is much more honest and believable.

And yes, I am judging. There's a whole lot of judging coming from my side.

jan411poverty.jpg This is a family of millionaires (Life)

By Jamie Feldmar
January 4, 2012 | Gothamist

With a walloping 46.2 million Americans living in poverty right now, it's the perfect time to start an anonymous internet thread about how much money you make and how it makes you feel, right? No, really: check out this "What's your hhi and do you FEEL poor, middle class, upper middle class or rich where you live. No judging" thread on UrbanBaby, and prepare to feel nauseous inside.

The New Yorker who feels poor on $700,000 a year should probably shack up with the guy who made $2 million and feels middle class, so they can gang up on the Greenwich Village mother who makes $180,000 and feels like "I am doing my child a disservice when she cried at age 4 because I told her we will NEVER buy a country house." Then again, maybe they should all just take advice from the guy who made $13 million, but "FEELS" upper-middle class in New York: "Under 1Bil in savings in NYC, and you cannot buy anything. Rich means being able to influence political contests," he explains. Oh, so that's how it works. No judgement. [via Daily Intel]

Huntsman: Break up the TBTF banks

Well, well, well, it looks like Huntsman's trying to get noticed. "The Obama and Romney plan" for the banks. That's funny. As if they sit and plan together.

Probably it won't do him any good; it may just put pressure on Romney. Criticizing Wall Street doesn't play well to the GOP's radical base, which hates anything that smells like "class warfare" or OWS: now they will have a knee-jerk reaction against any criticism of Wall Street.

The Tea Parties' silence on the Fed's Wall Street bailouts is evidence enough that breaking up the TBTF banks is a losing issue among hardcore Republicans.

By Jon Huntsman
January 7, 2012 | FoxNews

Rebuilding our economy and restoring trust in our government will require a leader with the independence to implement bold reforms that take on the establishment, from Washington to Wall Street.

Thus far, however, we are the only campaign willing to confront honestly and directly one of the greatest threats to our long-term economic prosperity: Too-Big-To-Fail Wall Street banks.

In 2008, with the nation's economy in crisis, Washington and Wall Street offered American taxpayers a Sophie's Choice: spend hundreds of billions of dollars to save big banks from failure, or witness the collapse of our financial system and irreparable economic harm.

This was not only a betrayal of the public's trust; it was also a betrayal of our free market system, which only works when every business plays by the same rules.

Taxpayers were promised those bailouts would be a one-time, emergency measure. Yet today, we can already see the outlines of the next financial crisis and bailouts.

The six largest financial institutions are significantly bigger than they were in 2008, having been encouraged to snap up Bear Stearns and other competitors at bargain prices.

These banks now have assets worth over 66% of gross domestic product – at least $9.4 trillion – up from 20% of GDP in the 1990s.

Dodd-Frank, which purportedly designed to fix Too-Big-To-Fail, has only made things worse. Not only has it left us with larger banks, but it imposes massive new regulations and unreasonable compliance costs on smaller banks, which hurts small business lending.

President Obama has offered no real solutions other than to demonize capitalism, which may score political points but does nothing to solve the problem.

My opponents have also failed to take on Wall Street with substantive reforms. This includes – unsurprisingly – the establishment's preferred front-runner, Mitt Romney.

Governor Romney, who has accepted more Wall Street money than any other candidate, has offered no concrete solutions to protect taxpayers in the event of a future financial crisis.

The Obama and Romney plan simply appears to be to cross our fingers and hope no Too-Big-To-Fail banks fail on their watch – a stunning lack of leadership on such a critical economic issue.

As president, I will break up the big banks, end future taxpayer bailouts, and restore capitalist principles – competition and creative destruction – to our financial sector.

We will accomplish this by imposing a fee on banks whose size exceeds a certain percentage of GDP, proving them an incentive to slim down and localize.

Many of us can recall an earlier time when we had community banks that were actually a part of the community, instead of a faceless Wall Street entity. They sponsored our kids' baseball teams. You knew the president on a first name basis. Your small business or farm's credit was based as much on your reputation and character as your FICO score.

We need banks that are closer to our communities that, if mismanaged, are small and simple enough to fail – not financial public utilities.

The federal government cannot afford to wait until the next financial crisis is upon us to act, which will be too late and cost taxpayers too much.

Whether it is ending Too-Big-To-Fail, reforming the corrupted culture of Congress, or eliminating special interest preferences in our tax code, we need a president who is not indebted to the power brokers in Washington or on Wall Street.

We need a president who will take on the establishment from the outside, and deliver the bold reforms our country desperately needs. That is what I will continue to offer the American people.

Saturday, January 7, 2012

Canada & U.S. in 'race to the bottom'

This is the "race to the bottom" in action, folks. Guess what? Canada's not going to win it; neither will we. That's why it's a fool's game; we shouldn't play it. Germany has found a better way.

By Alexander Eichler
January 6, 2012 | Huffington Post

Jeremy Rifkin on the 3rd Industrial Revolution

Jeremy Rifkin, a professor at Wharton business school, gives longer and shorter versions of this presentation on the Third Industrial Revolution that's coming (or already starting). This is a longer one from 2010, still current, covering pretty much everything. You can find shorter ones on YouTube, the gist is the same.

You can focus on the scary parts of his presentation, like this:

"We human beings, we are the youngest species in the evolutionary neighborhood.... Anatomically modern human beings have been here only 175,000 years. We make up only one-half of one percent of the entire living biomass of the earth. One-half of one percent. Right now this afternoon we are using 24 percent of all the photosynthesis of the earth. And we're heading from 6.8 to nearly 10 billion people. We're monsters. We're devouring this earth, and it's probably going to lead to our extinction unlesse we turn this around quickly. This is just not sustainable by any reckoning."

... or this:

"... in 1980 that was the first time we mentioned climate change.... And we continued to underestimate the speed and accelaration of climate change, all of us, for 30 years, because we can't anticipate all the feedback loops. That's what's terrifying us right now."

...or this:

"So our scientists say that we may see a 3 degree Celsius rise in temperature on Earth in this century. It could go much higher. That's a middle, negotiated scenario. But to put this in perspective, if we only go up 3 degrees, it takes us back to the temperature on earth 3 million years ago in the Pliocene. Different flora, different fauna, different ecosystems. And here's the key, that I wish Al Gore and others had talked about in their public campaigns. It is all about water. This is really all about the water. The hydrological cycle. And that is for every 1 degree Celsius that the temperature rises on this planet, the atmosphere absorbs 7 percent more precipitation from the ground. That's the key. That means the whole water cycle shifts: more floods, more droughts, more periods of infrequent rain. And so ecosystems that were developed over eons of time cannot adjust to this disruptive change in the hydrological cycle.

If we go 2-3 degrees, which is looking awfully optimistic, our scientists say we could lose between 23-24 percent of all the assessed species on Earth by the end of this century -- your kids' lifetime -- and on the upper end 70 percent or more extinction -- in the lifetime of babies who are here now."

... or the more hopeful, pragmatic parts:

"Peak oil, peak globalization, accelerating climate change. What do we do? What do we do? What we need now is a new economic vision, a new economic game plan that is powerful enough, practical, can be implemented in less than 40 years, and can move us to a complete post-carbon era by mid-century. Nothing short of that will do. And we have to do it now, because the window is narrowing every year.

"So we stepped back and we asked how did the great economic revolutions in history occur? That will give us a cue, as to what we need to do. The great economic revolutions in history occur, I believe, when two things come together. First, we change the way we organize energy on the earth. And we've done that many times. When we create new energy regimes, they make possible more complex civilizations. When that happens, it requires a communication revolution agile enough to manage these complex new energy regimes. When energy revolutions converge with communication revolutions, they change economic history. They change temporal and spacial orientation. They change the way we set up our living environments. As the Germans say, they change gestalt. And they change consciousness. Fundamentally."

Most interesting is his far-ranging review of human civilization to-date, when he describes how new economic forms required new communications methods and new consciousness in order "to extend empathy to cover new temporal-spacial boundaries."

Empathy is what he calls "the social glue." It's what organizes us, allowing us to live and work together. Empathy has so far extended from mythological-blood ties --> to theological-religion --> to ideological-nation states --> and now to psychological-modern. Rifkin wonders if empathy could extend to cover every human being on the planet within two generations?

This would sound like a lot of Kumbaya-hippie claptrap if it weren't so thoroughly and convincingly argued.

Without much fanfare in the media, the EU has committed to a Five-Pillar Infrastructure to build a new energy-communications economy. Rifkin advises them on their strategy. According to him, for us to survive, the future must be "flat, collaborative, and distributive" -- including our sources of energy. (Fast forward to 31:00 to hear Rifkin's explanation of "distributive energies.") It may seem risible now to think Europe will follow through, what with all their debt problems, but then again, if Rifkin is right, they can't afford not to. Neither can the U.S.

Uploaded by Green Home TV
April 26, 2011 | YouTube