Tuesday, July 31, 2012

Taxing Our Credibility

Whatever else can be said about America, our political process is broken, democracy has taken a distant back seat to power elites, our representation in the Congress is subject to the influence-shifting power of incumbents to realign congressional districts in their favor and the harsh reality that whether a state has 37 million (like California) or 1 million people (like Montana), it only gets two U.S. Senators, hardly the one person, one vote mythology that hovers around the concept of “America.”

We further treat entire classes of people with statutes that impose inequality in the system. You don’t think that a student, who may have received a bad education but who can never discharge student debts through bankruptcy, is treated equally to a major U.S. corporation that can always resort to bankruptcy to restructure its debt? Or a senior manager at a private equity firm whose pay is based on percentages of upside generated for clients – and taxed at half the rates of other people making the same money from other forms of commission income – is treated fairly in comparison with other workers? What are the long-term impacts on our country from these unequal practices? The demise of the middle class?

Not only is America polarized politically and economically (repeating that difficult-to-accept fact that 1% of this nation owns 42% of its wealth – the widest gap in the developed world), but as you can see above, our laws are actually constructed to widen the gap between rich and poor with literally two parallel legal systems. The middle class, which is built around the notion of pay for hard work, is penalized in another way. The more money you make, the more loopholes you get in the tax code to benefit your income stream. The less you rely on labor income and the more you move into investments, your tax rates drop like a stone, and if you can use some clever corporate structuring to generate and keep money overseas, you might be able to avoid U.S. taxes altogether.

Adding the 2010 Citizens United vs. Federal Election Commission Supreme Court decision to this volatile mix, allowing “corporations and unions could spend unlimited money on elections… has contributed to a flood of money for groups such as the conservative Crossroads GPS and liberal Priorities USA that fund political ads and activities but do not have to disclose their donors. The key distinction for the IRS [in determining tax-exempt status] is whether politics is a group’s ‘primary purpose,’ which has come to be sketchily defined as 50 percent or more of a group’s budget.” Washington Post, July 25th. If you are rich enough to spend enough money to advertise widely in support of your particular opinion, and you don’t want folks to know who you are but prefer to hide behind a catchy patriotic-sounding name, America’s the place! If you are poor, talk to your neighbors and go to the ballot box, because that’s all the power you will ever have. And if you are in the middle, don’t worry because your way of life is moving rapidly downwards, and you don’t even have a voice in the process.

This profound distortion of our purported democracy will eventually lead to more than the rhetoric-driven cacophony all around us into protests, desperate acts, violence and perhaps someday armed insurrection. The great the number of people with little to lose, the greater the probability of political upheaval. Remember, the Arab Spring started because of harsh economic times and clear schisms between the haves and have nots. Are we so arrogant that we believe “that couldn’t happen here”? History tells us such regime changes are routine and inevitable. The ancient Roman and Ottoman Empire, the Ming Dynasty, all existed for hundreds of years before they were relegated to the history books. The U.S.S.R. was gone in under a century, and the sun sets on the British Empire every day.

If we want to preserve this country, we need to disassemble the structures of inequality we have embedded into our system. We need to level the playing field and empower the people who have lost their voice to power elites. One small ray of hope may come in the deductibility of contributions to the SuperPacs born of Citizens United: “In July last year, the Campaign Legal Center and Democracy 21 watchdog groups submitted a petition challenging the IRS regulations, calling them over-broad and in defiance of congressional intent and court rulings. Nearly a year later, on July 17, the IRS responded with a three-paragraph letter suggesting that the agency might consider reviewing its rules.

“‘The IRS is aware of the current public interest in this issue,’ wrote Lois G. Lerner, director of exempt organizations at the IRS. ‘These regulations have been in place since 1959. We will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department’s Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance.’” Washington Post. But there may be less than meets the eye here, since the Treasury Dept has to approve the change, and if legislation is required from Congress, we can forget about it.

If we do not address the underlying issues that foster inequality in the system, the power elites may face the millions of guns protected under the Second Amendment that they seem to have embraced and recall the fate of one member of the power elite who a long time ago is purported to have said of the bread-deprived masses, “Let them eat cake.” The rest, they say, is history.

I’m Peter Dekom, and it sickens me that so many Americans are unwilling to change the flaws in the system that are slowly strangling it to death.

Monday, July 30, 2012

That Was the Weed that Was

Anyone who tells you that marijuana (a/k/a cannabis), when eaten or smoked, is a harmless organic plant with no long-term negative effects is probably… er… smoking dope. Long-term use seems to degrade brain cells and concomitant brain functionality, and you really don’t want to be on a highway with a truly stoned driver at the wheel. Productivity and accuracy are also impaired. But it is equally clear that there are medical uses for that weed that make life tolerable for many with serious ailments.

A review of medical literature provides “that medical cannabis has established effects in the treatment of nausea, vomiting, premenstrual syndrome, unintentional weight loss, insomnia, and lack of appetite. Other ‘relatively well-confirmed’ effects were in the treatment of ‘spasticity, painful conditions, especially neurogenic pain, movement disorders, asthma, [and] glaucoma’… Preliminary findings indicate that cannabis-based drugs could prove useful in treating inflammatory bowel disease, migraines, fibromyalgia, and related conditions… Medical cannabis has also been found to relieve certain symptoms of multiple sclerosis and spinal cord injuries by exhibiting antispasmodic and muscle-relaxant properties as well as stimulating appetite.

“[Studies also provide] cannabis or cannabinoids may be useful in treating alcohol abuse, amyotrophic lateral sclerosis, collagen-induced arthritis, asthma, atherosclerosis, bipolar disorder, colorectal cancer, HIV-Associated Sensory Neuropathy depression, dystonia, epilepsy, digestive diseases, gliomas, hepatitis C, Huntington's disease, leukemia, skin tumors, methicillin-resistant Staphylococcus aureus (MRSA), Parkinson's disease, pruritus, posttraumatic stress disorder (PTSD), psoriasis, sickle-cell disease, sleep apnea, and anorexia nervosa.” Wikipedia.

Which brings me to that fascinating new industry, the dispensing of medical marijuana, that has sprung up in places like… fer sure and totally… California, where such use is statutorily sanctioned (at least at the state level). Los Angeles currently has 762 registered and a few hundred yet-unregistered medical marijuana dispensaries, with weed classified as to quality, tendency to produce differing effects, etc., where customers with easy-to-get prescriptions can secure their weed. These dispensaries seem to be very profitable, and indeed there are more such dispensaries in the City than there are McDonald’s fast food franchises… at least now.

The Obama administration, once thought to be on the side of not wasting federal officers to police a trade that still violates federal law, has intermittently moved its enforcement efforts against the local dispensary business. Various towns where such dispensaries are common have tried to create ordinances that limit where they can be situated, often a backhanded effort to get rid of them completely. Now Los Angeles had decided that it wants to ban all such dispensaries within its city limits: “The LA City Council voted unanimously [on July 24th] to ban all dispensaries, although patients and caretakers still can grow marijuana at home. When the vote was tallied after a full day of deliberation and public comment, a few members of the public stood up and shouted angrily at the city council, as police stood protectively in front of members.” Huffington Post, July 24th. While the ordinance will undoubtedly be challenged in the courts, it will take effect in September with the potential of devastating this trade… legally anyway.

But the bigger issue remains. Our war against drugs is an abysmal failure. Half of our incarcerated prisoners are in jail because of drug-related crimes (half of those for possessing or dealing). At north of $40 thousand/year to house such prisoners, plus the trillion or more dollars this nation has spent in police action, chasing our tail in the fruitless effort seems about as effective as the efforts to stop alcohol under Prohibition between 1919 and 1933. We’ve empowered drug cartels and street gangs, the only kind of folks who deal with such substances given the legal sanctions, fomented an active cross-border arms industry to support the vicious gangsters who ply this trade resulting in an escalating number of murders, taxed ourselves into oblivion to pay for police and military efforts to stop drugs and missed a massive opportunity to tax and control these currently-illegal substances (except in this medical marijuana field) at a time when we desperately need the money. The U.S. drug trade is as robust and widespread as it has ever been.

It doesn’t look like the U.S. is going to legalize any of these banned narcotics anytime soon, and we will continue to have to raise money for new prisons, police officers, etc. to pay for our “never-to-be-realized” quest. Indeed, we seem to be a nation more concerned with slogans and unworkable policies – no matter the cost – than with common sense, practical solutions.

I’m Peter Dekom, and it would seem that our financial condition would wake up those who want to continue these policies… but it doesn’t… yet.

Sunday, July 29, 2012

Cell-Driven Cell Phone Requests

“What happens in Vegas stays in Vegas” is a nice catch-phrase, but except for the very naïve, folks really should know that really isn’t true. Equal fodder for the terminally naïve is the notion that the “delete” button actually does, and for the most part what goes on the Internet stays on the Internet… and your hard drive. But what may pass for ethereal messages lost in the night air – that seemingly infinite litany of data regarding cell phone movement between and among clearly positioned cell phone towers (which provides sufficient information to track the whereabouts of users whenever they make a call), text messages, etc. – is actually embedded in various carrier’s massive file servers (electronic storage bins), waiting for inquiring minds to track and trace. And with geo-positioning functions in many new smart phones, tracing is that much easier to implement.

Today, that cell phone data has become the backbone of police information in their search for criminal activity. It can also form the basis to track wayward husbands and wives in their infidelities and generally stands “out there” ready to support a vast pool of inquiries that have slammed into the various carriers’ operations. State, local and federal governmental informational requests for data from carriers are pervasive. “AT&T alone now responds to an average of more than 700 requests a day, with about 230 of them regarded as emergencies that do not require the normal court orders and subpoena. That is roughly triple the number it fielded in 2007, the company said. Law enforcement requests of all kinds have been rising among the other carriers as well, with annual increases of between 12 percent and 16 percent in the last five years. Sprint, which did not break down its figures in as much detail as other carriers, led all companies last year in reporting what amounted to at least 1,500 data requests on average a day.” New York Times, July 8th.

The phone companies compiled this accessing data in response to a Congressional request. The total of such governmental requests – based on emergencies, court orders and subpoenas – totaled 1.3 million just last year. While clearly, some of this information is appropriate, one has to ask the question – in a world where “privacy” appears to be nearing extinction – as to whether or not most of these requests and demands are necessary, reasonable and consistent with our American ideal of protecting the rights and privacy of individual citizens… whether it is time for some more clearly-delineated constitutionally-derived limits and restrictions to narrow the arena for governmental inquiry and standardize the threshold for releasing such information.

When “terrorism” became the government’s justification for all sorts of excessive surveillance of just about everybody, the government just pressed for information well-beyond anything they could remotely justify under the constitution. National security is still an important governmental function, and leeway in this sector is going to continue to remain wider than for more routine inquiries, but even here the abuses have been significant: “Legal conflicts between those competing needs have flared before, but usually on national security matters. In 2006, phone companies that cooperated in the Bush administration’s secret program of eavesdropping on suspicious international communications without court warrants were sued, and ultimately were given immunity by Congress with the backing of the courts. The next year, the F.B.I. was widely criticized for improperly using emergency letters to the phone companies to gather records on thousands of phone numbers in counter-terrorism investigations that did not involve emergencies.

“Under federal law, the carriers said they generally required a search warrant, a court order or a formal subpoena to release information about a subscriber. But in cases that law enforcement officials deem an emergency, a less formal request is often enough. Moreover, rapid technological changes in cellphones have blurred the lines on what is legally required to get data — particularly the use of GPS systems to identify the location of phones.” NY Times. You may not care if someone looks at your text messages, knows where you and your mobile phone are at any time of the day or, perhaps, even tracks the words you utter in your conversations.

Until more recent a Supreme Court decision reversed this notion, the earliest judicial reviews did not equate tapping phones as violative of the Fourth Amendment, because such “searches” were not conducted on the physical premises of the persons searched. Is it time to reign in the excess? I’ll leave you with the actual words of that Fourth Amendment to our Constitution: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

I’m Peter Dekom, and if we the people do not fight to protect our rights from popular waves of contrary sentiments, who will?

Saturday, July 28, 2012

I Came, I Thawed, I Conquered

Beastly hot weather on the east coast, raging forest fires tearing up in Colorado, California, Texas and New Mexico and farmland through the mid-west, southwest and west that is bone dry with no relief in sight. And that’s just the United States. The news “elsewhere” is equally discouraging, and when you look at the extreme evidence, there has to be a large contingent of environmental scientists and climatologists who are quietly asking the big question, trying not to speak it too loudly for fear of sparking panic: have we reached that tipping point in global warming where the process of melting and warming has grown sufficiently that such phenomenon are able to accelerate the process regardless of what humans do to contain their greenhouse gasses?

The barometer that captivates the scientific community is Greenland, that massive Danish island off Canada that is usually anything but green. In normal times, about 40-50% of the surface ice melts in the summer months and reforms as the colder months take over. This year, in late July, that number actually doubled to a 97% meltdown of surface ice. The above rendered satellite comparison photograph is about as strong a visual presentation of this phenomenon as you can find. Startling! July had already seen a huge crack release a massive glacier into the sea: “An iceberg twice the size of Manhattan tore off one of Greenland's largest glaciers, illustrating another dramatic change to the warming island.

“For several years, scientists had been watching a long crack near the tip of the northerly Petermann Glacier. On [July 23rd], NASA satellites showed it had broken completely, freeing an iceberg measuring 46 square miles. Stuff.com.nz, July 25th. Water is rising fast in Greenland, as this recent photography illustrates:

Skeptics have countered that Greenland has seen this level of meltdown before – back in 1889 – but even the skeptics are worried that if this trend does in fact continue, it is a profoundly bad omen. By 2100, depending on whose numbers you believe, oceans should rise globally by two to six feet. I won’t be here, so someone else will have to check it out for me. What worries me is the here and now… and the immediate future my son and his family will have to live in. I fear that those bad projections might just accelerate and happen well before my son (who is a married adult) is my age.

Some of the nastiness comes from simple stuff. Ice is white and reflects light and heat away from the earth. Lack of ice creates darker shades that absorb and hold such heat. So as ice melts, there’s more dark spots, which generate heat, which melt more ice, and so on. Tundra traps lots of organic methane, a gas which creates the greenhouse effect over twenty times more serious than a comparable release of carbon dioxide. When temperatures melt tundra – which is happening in places like Russia and Canada – the escaping methane accelerates the greenhouse effect, heating the tundra even more, and you can see how pernicious that cycle has become.

Back in March of this year, “leading scientists, policy-makers and environment groups gathered at the ‘Planet Under Pressure’ conference in London” and reached the collective conclusion that “The world is close to reaching [irreversible] tipping points that will make it irreversibly hotter, making this decade critical in efforts to contain global warming.” Reuters, March 26th. But are we already there? “Despite this sense of urgency, a new global climate treaty forcing the world's biggest polluters, such as the United States and China, to curb emissions will only be agreed on by 2015 - to enter into force in 2020.

“‘We are on the cusp of some big changes,’ said [executive director of the Australian National University's climate change institute Will] Steffen. ‘We can ... cap temperature rise at two degrees, or cross the threshold beyond which the system shifts to a much hotter state.’” Reuters. And exactly how will we live in the new environment if we have in fact tipped that scale?

I’m Peter Dekom, and reactive solutions simply don’t work in dynamics where irreversible tipping points govern.

Friday, July 27, 2012

Governed by Fear

People don’t make great decisions when their primarily motivations are based on fears, particularly if such fears are unjustifiable. The number one motivation of recent American policy seems to be fear, however, enhanced by a vast body of Americans who truly believe that they have lost their standard of living and quality of life forever, all because of “others” that we need to fear. Start with a couple of basic premises, and you will begin to understand the magnitude of what has become a fear-driven America. Terrorists do not succeed unless they instill terror, until they change the way their enemies think and act. If they scare us, they win.

Still, we have fought two major wars, have created the Department of Homeland Security, which, with about 200,000 employees, is the third largest cabinet government agency in the federal government out of fear. Of that mass of bodies and overlapping jurisdiction with other agencies – particular the Department of Justice – there are about 60,000 TSA agents, most of whom are working at airports and harbors checking travelers. Feel safer when you travel? Do you really believe a dedicated terrorist can’t get through that screening procedure?

We are never going to be able to stop small groups of extremists from figuring out how to infiltrate and inflict explosions or other violent acts. When your chances of getting hit by a bus are vastly higher than your being killed by a terrorist act, how many trillions of dollars, disruptions of your lifestyle and profound detriment to our tourism industry when we need the money, is this really worth to you? We could ban cars, trucks and busses from the roads and saving hundreds of thousands of lives from traffic fatalities! What percentage of your income are you personally willing to commit to pay for the extra military and Homeland Security agents to make you feel better about security? Even if it doesn’t work? Even if virtually no other modern nation on earth applies the same level of security at its airports and harbors? How much deficit came from fear-based decision-making?

We are also terrified of immigrants, which is particularly strange in a country that was actually built by immigrants. Even though the jobs at the bottom end of immigration generally encompass work no American would do under any circumstances, we actually want to stop those people from working! Even when innocent children of undocumented workers who have lived here all their lives rise to the academic top, we have debates about whether or not they should be permitted to stay. We make it exceptionally difficult for well-trained immigrants, particularly if they do not have while skin, to move to the U.S. these days, and even when we see the wisdom of allowing their expertise into the country, we make it almost impossible for their wives and kids to join them. Here’s a strange fact that no one seems to remember when immigration debate hits. Japan and most of Western Europe is getting increasingly dominated by older workers and retirees at the expense of younger people entering the market, and their safety nets will have insufficient workers to cover the graying population. We’d be in that same boat but for… immigration!

We are absolutely terrified by Muslims, thinking that they are all extremists ready to kill us at a moment’s notice. That India has 180,000 Muslims, and there has never been one single Indian national identified with al Qaeda is a fact most of Americans would like to ignore… assuming that they know the fact. Why aren’t we using American Muslims to help understand and defeat Islamic fundamentalists who mean to do us harm? Why do we care where they build their houses of worship? Why does a religion scare us so much when moderate Muslims have been such good citizens for years? Test yourself. Does the picture above give you any discomfort?

We also dread Iran, on the other side of the world, so much so that we threaten and cajole the world to encircle them with sanctions and openly talk about how we can effect regime change. If someone huge threatened us with sanctions and regime change, think we might want to have some nuclear deterrents on hand? We talk about the danger of nuclear weapons, but we have one of the greatest nuclear arsenals on earth, and we are doing very little to eliminate it. Aren’t we pretty much mandating that Iran get its nukes and delivery systems up to snuff?

We are absolutely terrified of competition, even though Americans pay lip-service to being a competitive capitalist state. We want China to adjust its currency because we cannot compete with their pricing. Because Canada has got its healthcare in order (a whole lot cheaper than the average cost in the U.S.), their skilled labor is the same as ours, but because they can supply healthcare “insurance” for about $800/year and our private system costs about $6500 for the same level worker, skilled car-making jobs have scooted off to Canada at the expense of Michigan and other rust-belt states.

We’re even more terrified of losing our jobs in this country, because in the U.S. healthcare comes with employment, so if you lose your job, healthcare benefits soon expire. Still, we are terrified at letting the government reduce healthcare costs and institute a workable system because someone told us – rather conclusively incorrectly – that we have the best healthcare system in the world. We drop the standards in our schools, expect our next generation to compete against better-educated workers “over there,” and want to erect trade barriers to protect our domestic labor force.

The list of “fear factors” that allow politicians to run amok with stupid slogans that do little other than get them elected… and probably create vastly more harm than good… is immense, and I am sure you have your share to add to this list. But the basic premise here is that Americans are acting out of fear, have lost confidence in themselves, and as a result have elected a do-nothing, polarize Congress that simply cannot function anymore. The fear policies that have slipped by have literally devastated our spirit, catered to our worse self-image, have made most of the world resent us, have contributed massively to our loss of confidence and are the product of a nation that seems to be terrified of just about everything in sight. It’s time to start thinking positively and question and decisions that have their roots in fear.

I’m Peter Dekom, and I certainly hope that Americans regain their strength very soon before they alienate the entire planet out of a notion of widening xenophobia.

Thursday, July 26, 2012

Watching Paint Dry

When you think of chartered (a U.K. term) or certified public accountants (U.S.), if you have any images at all, you are likely to conjure up green-eye shade minions pouring over books and records (or, more likely, computer screens) or those guys with the briefcase at the Oscars who have tallied the Academy’s votes. Accounting stuff to most of us is about as interesting as watching paint dry. But these devilish souls often move from their little accounting cubicles into the highest ranks of the corporate world, from chief financial officer to chief executive officer, and their societies’ private rules often have more of an impact on financial transparency than government regulations. Without the implicit or explicit cooperation of these accountants, the pervasively nasty and twisted financial machinations that brought down the global economy could never have happened.

So when certified or chartered accountants from around the world address global standards in financial reporting, what it takes for them to “certify” a corporate financial statement for public dissemination, this seemingly little news strikes at the heart of financial reform and the perhaps-naïve hope that what happened in the debt-derivative-debacle in the last ten or fifteen years will be regulated in such a way that it will never happen again. We already have seen how Wall Street’s lobby watered down the only major federal legislation (Dodd-Frank) aimed at fixing the broken machine and convinced a GOP House not to fund the Securities and Exchange Commission (SEC) to create rules under that statute, rendering even that less-than-perfect legislation impotent.

So now we turn to how chartered and certified accountants are working to create global standards in financial reporting and certification of financial results. Europe, now reeling from a technically resurrected recession (yes, it’s official now) from its debt crisis, has pressed its accountants to create stronger rules and greater transparency. The big American financial institutions are pressing for continuing the world without significant new rules or greater visibility. Since the relevant assemblage of American CPA’s follow the Financial Accounting Standards Board (FASB), and most other countries adhere to the rules of the International Accounting Standards Board (IASB), the rules applicable to reporting and disclosure under these NGOs can differ depending on where you account. Interpretations of the same facts, even with the same rules, can also differ based on which board governs your transactions.

In June, the “Group of 20 Countries” – the most powerful economies in the world – met to address global financial instability and concluded with a goal of “continuing work to achieve convergence to a single set of high-quality accounting standards.” Nice words, but when major financial institutions faced the truth of having to report the genuine value of bad loans, loans which they carry on their books at full or unsustainably high value in bad market conditions and through defaulting borrowers, the thought of such accurate reporting – which would drop the value of their portfolios significantly triggering all kinds of financial ramifications – was simply too much to bear.

Europe and those nations following IASB rules favored truth. The Americans under FASB favored continuing existing practices. Indeed, in an election year, pressure was even placed on the SEC itself to leave the status quo in the U.S. American financial institutions believe that their misleading “bad loan” values support other needed financial structures needed for their continued operation, that dropping these loan values now would have devastating consequences for the American economy. The only path this is heading towards is literally a double standard of accounting – the United States vs. most of the rest of the world.

“[D]ays after the United States Securities and Exchange Commission made clear it was not going to move toward adoption of international standards anytime soon — the two boards found themselves in angry disagreement over one of the most contentious issues to emerge from the financial crisis: how banks should account for loans that may be going bad… The push for international rules in the United States turned out to have little domestic support. The major accounting firms love the idea, and so do some large multinational companies. But many domestic companies fear the expense of changing.” New York Times, July 19th.

If anything, the future is likely to bring more divisions between these two mega-financial boards, making comparing an American company to a German company significantly more difficult, since reconciliation of differing valuations must be added to the mix.” Whatever happens to bank accounting, the two boards may move farther apart in the near future. Currently four of the 16 members of the international board are Americans, but two of them — including Paul Pacter, a former top staff official of the American board — have terms expiring this year. Some Europeans, including Michel Barnier, a member of the European Commission, have suggested that the board should be limited to people from countries that use the rules.” NY Times.

Europeans still blame the United States and its financial institutions (who are very present in Europe) for introducing the world to a culture of debt at every level, allowing financial institutions to bundle that debt and trade it like stock… demanding more and more debt to generate more and more transactional fees from trading more and more bundles. The global financial collapse was based on way too much debt without genuinely-supporting asset values.

The inability to reconcile how companies report “bad assets,” how they present their financial condition to regulators, investors and the society around them that is vulnerable to another financial collapse if they collectively don’t get it right, is serious stuff. It will impact how much you earn, what your home may be worth, your kids’ future and the viability of the United States as a functioning economy. But Americans rail at regulation, even when it is nothing more than a request to require truth and accuracy. How long can this continue without disastrous consequences… again?

I’m Peter Dekom, and I guess Wall Street just “can’t handle the truth.”

Wednesday, July 25, 2012

Chasm Politics

The last time this nation was so coarsely polarized led to our Civil War. There is no middle anymore, and with economic strains and natural disasters looming, the United States is tearing itself apart from the inside. We don’t need 9/11 bombers targeting our skyscrapers or Taliban fighters dreaming of smuggling and then detonating a nuclear device or two in strategic locations around the United States. We are imploding within our own country.

Writing for the June 6th Los Angeles Times, David Horsey notes: “When it comes to American politics, the stark distinctions are actually increasing. According to a new study from the Pew Research Center, the ideological gap between [Vermont’s “democratic socialist” U.S. Senator] Bernie Sanders and, say, South Carolina’s [conservative Republican] Sen. Jim DeMint is the same gaping chasm that separates most American voters. Over the last 25 years, on issues that once had strong support in both the Republican and Democratic parties, there is now little common ground, according to the Pew poll. Immigration, the social safety net, environmental protection and, especially, the role of government all have become deeply partisan areas of debate.

Republicans and independents who lean toward the GOP have become much more uniformly conservative – distrustful of government, environmental regulations, social services and generous immigration policies. Democrats and independents who lean left have completely opposite views. Only a tiny sliver of independent voters is ideologically untethered and that is because most of them pay scant attention to politics… Republicans are overwhelmingly white and right wing. Democrats are a party of racial minorities and white moderates and liberals…

“There is a 180-degree difference in perspective between the Boston and Charleston memorials. One celebrates men who fought for change, liberation and the authority of the federal government; the other commemorates those who resisted big government and disruption of a traditional way of life. Now, a century and a half after Americans slaughtered each other by the tens of thousands, a similar philosophical divide defines American politics. No longer blue versus gray or North versus South, it is blue states versus red states. It is Vermont and Massachusetts versus South Carolina and Kansas. It is San Francisco versus Birmingham, Ala., and Seattle versus Dallas…

“We will have an election in November, but no matter who wins, nearly half the electorate will feel the country has been stolen from them. Regional differences are tolerable and charming, but political differences can run so deep that the people on the other side begin to look less like countrymen than like enemies.”

Is there potential for reconciliation? As long as Americans are scared, uncertain of their future and sensing that desperate policies are the only possible salvation – measures defined by their passionate commitments to the “correct” ideologies espoused above and perhaps even by a hope of divine intervention – the answer is, unfortunately, a resounding “no.”

If by some miracle, economic stability and more significant growth (read: hope) reappear and linger for more than a fleeting moment, that commonality that used to define the American spirit, that political willingness to compromise to enable democracy to flourish, may return. But if the middle class vaporizes and haves and have-nots become the new definition of America, expect the polarization to continue… and the wondrous experiment in democracy called “America” to unravel. Perhaps we should redefine patriotism as willingness to compromise… but then perhaps there won’t be many folks who fit into that category anymore.

I’m Peter Dekom, and I am digging deep and reaching high to find that commonality that might just bring us back together as Americans.

Tuesday, July 24, 2012

Loopholes, People Who Love Loopholes

Over the years, various special interest groups have managed to build a labyrinth of tax credits and deductions, some direct subsidies (such as the infamous farm support payments), that add up to a staggering estimated loss of governmental revenue on the order of magnitude of $1 trillion a year. Using such tax and subsidy structures, Congress has encouraged everything from home ownership (the home mortgage deduction, although capped) to managers working for upside in hedge funds and private equity (where, without the requirement of investing a dime, their earnings are taxed at capital gains rates… about half of the federal rate they would have to pay if they had a sales commission job in some other industry). If we collected that $1 trillion, our annual deficit would almost disappear (the deficit is currently project to hit $1.2 trillion this year).

We have the highest corporate tax rates in the world (we used to be among the lowest), with a loophole that drops what most multinationals pay – if they pay anything at all – to one of the lowest effective tax collection percentages on earth. Our laws effectively cause such cross-border companies to keep their money overseas, to hire workers overseas, rather than repatriate that money to the U.S. and face crushing 35% federal corporate tax rates. If we were to declare a six month moratorium for companies to repatriate to the U.S. that money at 20% and then permanently reduce the corporate rate to 25% but tax global earnings, we could generate hundreds of billions of lost revenue.

Our impasse-oriented do-nothing Congress has pledged to address many of these loopholes, but the process is one of “eliminate all the loopholes that don’t benefit my state/Congressional district, but I ain’t gonna give those up.” Here’s how the process works: “As a member of the ‘Gang of Six,’ Senator Mike Crapo of Idaho has emerged as something of a hero among advocates of bipartisanship, one of three conservative Republicans working with three Democrats to cut the deficit by closing loopholes that allow businesses and households to avoid paying taxes.

“Yet earlier this year, the senator made sure that a $3 billion loophole — protecting ‘black liquor,’ an alcoholic sludge used as fuel in timber mills and factories — remained open in the negotiations over the highway bill that President Obama signed this month. Many budget experts criticize the loophole as a tax dodge because it allows the sludge to qualify for an energy subsidy created to wean the country off imported oil for vehicles, which black liquor does not do.” New York Times, July 20th. This isn’t a Republican or a Democratic habit, it’s just the way congress has worked for a very, very, long time. It is extraordinarily difficult to change such deeply embedded habits. Whether it comes from the hidden (??) message in campaign contributions or the simple fear of losing local voters, our elected representatives practice NIMBY politics.

On a national level, there also seem to be some sacred cows that have little to fear from significant Congressional cuts: “[T]he three largest are as popular as they are expensive: the mortgage interest deduction has cost about $75 billion a year recently, the employer deduction for health care has cost $120 billion a year, and the charitable-giving deduction has cost $38 billion a year, according to the bipartisan Joint Committee on Taxation.” NY Times. With the housing market in the toilet, healthcare hitting new levels of price increases and charities find their coffers seriously reduced by the recession, it is extremely unlikely that these loopholes are in any danger of elimination. In the end, something has got to give, and even if we phase most of these loopholes out over time, we need to address the underlying policies to live within our means while still investing in our future growth.

I’m Peter Dekom, and hypocritical commitments to closing loopholes leave this country desperately short of solutions on budget deficit reductions.

Monday, July 23, 2012

Letting Go...

I’ve been wanting to write this blog for a very long time, but I kept looking for evidence that perhaps there will be a reversal of recent trends. That search has proven very frustrating, and I am left with the conclusion that most Americans are either apathetic, misinformed or have given up caring about the survival of their country entirely… very much like a drowning man’s letting go of the last lifeline and weakly slipping into the water. We seem to be a nation of me first… me only… and damned be to anyone and everyone else. Leave me alone! The notion of facing and solving problems together seems to have vaporized. The willingness to accept compromise to move the nation forward appears to be slipping into a distant historical memory. Considering that we were once a great nation because we rallied together against difficulties and genuine enemies, proudly calling ourselves Americans along the way, we are letting go of that lifeline that defines us as Americans.

Polarization and immobility define America today. Archaic systems, etched in stone, are beginning to topple our dearest institutions. For example, generous pensions to government employees – according defined benefits on retirement, usually a function of the highest pay grade achieved, regardless of how much money rests in the pension account – are slowly taking down cities – Harrisburg, Stockton, San Bernardino, etc. – and even entire states (California and Michigan have unfunded and growing pension obligations that they can never afford). Municipal bankruptcy robs people of their retirements, and reflects that no one seems to be willing to deal with issues until the problems create utter disaster.

So it is with our educational system reporting ever-sinking math and science scores for our students that fall further every year… as we cut our school budgets at every level. In a world of hyper-accelerating opportunities in technology and sophisticated financial systems, clearly a nation with under-educated workers in these fields can only expect their relative global value – and hence their standard of living – to decline. We look at unemployment statistics as a measure of our “economic recovery,” but we aren’t asking if the jobs that do exist are comparable to what once was. With rare exception, average Americans do not expect their children to do better that they did in life… the first such moment in American history. We live in a polarized society where the vast majority of Americans are facing further-declining employment opportunities.

Our infrastructure has to collapse – levees must breach, dams must fail, and highways must crack into oblivion – before we pay attention, but the cost of dealing with the ensuing catastrophe is always multiple of what it would have cost to fix the problem before the failure. We’d rather spend money on the largest military in the world, one that has easily become embroiled in no-win conflicts, than invest in what needs to be done right here, right now.

For a nation built on immigration and a competitive spirit, we seem to hate immigrants and the fact that children of native born Americans dedicate themselves to significantly less study time than the children of immigrants just seems to piss us off even more. We just want to have our lives back without getting into that competitive spirit that made us great.

The 1% use their money and power – now amplified a thousand-fold by Citizens United – to push policies that allow them to operate with decreasing transparency, lower taxes and enhance their ability to increase their current holdings of 42% of this nation’s wealth to an even more staggeringly-untenable number. The losers are always the lower classes, but for the first time in our history, our middle class is falling backwards, declining in numbers, earning less, and about half our nation is now defined by the Bureau of Labor Statistics as either below the poverty line or within that vast swell of Americans defined as “low income.” Americans feel hopeless about changing this situation… and are letting go of their connective lifeline to America.

We watch as global banks are shown to have conspired for years to create false data that is used by the UK government to defined their interbank lending rates (Libor), and it does seem that the branches of US banks were heavily involved in that process. JP Morgan Chase, which screamed that they did not need regulations to protect the markets from bad practices and rogue traders, is slowly increasing their internal loss number – from $2 billion to at least $6 billion and perhaps more – from very recent bad practices and rogue traders.

Yet people are now terrified to challenge these institutions, and the amount of political spending seems directed at blowing away as many regulations against financial institutions as possible despite all the evidence of their continued malignant operations. We are killing ourselves. Our moral strength is no longer a value proposition where a big institution is involved. We will twist and turn to protect these behemoths from accepting the kind of accountability that honesty and fairness should demand.

A convicted pedophile – Jerry Sandusky – operated for years, abusing young boys using Penn State facilities, without risk or censure within one of the most prestigious academic sports programs on earth, despite ample evidence presented to legendary coach Joe Paterno and the Penn State higher-ups. Janitorial staff were too scared to reach outside the system for fear of job loss, and those at the top cared more about the institution than the horrific emotional destruction of young lives that would leave lifetime scars. They buried the criminal evidence and allowed the abuse to continue without action. The Penn State scandal is a terrifying metaphor for America.

We don’t seem to treasure honesty and justice. We don’t care to help level the playing field of opportunity. We don’t want to invest in ourselves. We don’t seem willing to compromise and work together. One of my very conservative friends, a 1%-ter, said something that really surprised me. He noted that in a land where opportunity is receding at an alarming rate, where increasing numbers of people are left with nothing to lose within declining quality employment opportunities, where wealth is increasingly concentrated… and in a land where the right to bear arms has left millions of guns in the hands of a lot of angry-and-getting-angrier people, violent disruption on a growing and perhaps even massive scale is inevitable. It is unless we put America first again.

I’m Peter Dekom, and I hope we right this ship before insurrection is no long what happens “elsewhere.”

Sunday, July 22, 2012

Conventional Wisdom

Restoring jobs to pre-recession levels is a “trailing economic indicator.” This means that employment figures are among the last to improve following a major economic downturn. In the post-WWII era, the time following the beginning of a recovery (end of the recession) to achieve these former employment levels began with a six month period, slowly increased until the last number require 39 months, with consulting firm McKinsey suggesting their projections, assuming that there isn’t another downturn, require at least 60 months for the same restorative timing to happen from the current malaise. What happened?

With the expansion of the worldwide web and the steady upgrading in worker skills around the planet, it has never been easier for American factories and service providers to follow the cheapest labor to get the job done right. Additionally, even in the U.S., in industries from car-making to mining, increasingly automated and technologically-advanced mechanization has reduced the number of required workers and elevated the skills required for those who remain. So the last employee to be added in the U.S. is going to be the average American who lost the job in the first place, assuming that the lost job has not been rendered completely obsolete in the interim. The marketplace has removed many businesses that simply were not keeping up with the times… as well as the jobs that went with those firms, and the oversupply of housing holds back residential construction in a big way.

So you have conventional wisdom from both sides of the aisle, spouting what they believe to be the “only solutions” to the employment crisis. Republicans tout supply side solutions – creating a more favorable business climate reduce taxes on the wealthy whom they believe create jobs, directly incentivizing job creation with favorable tax provisions and reducing regulations that they believe hinder business with costly restrictions and impose requirements to support a social network (like “Obamacare”) that increases the cost of adding employees. Democrats prefer attacking the problem from the demand side – noting that since the lack of consumer liquidity and confidence have not generated enough demand from the private sector for employers to have the confidence to add employees to make more products and provide increasing services, it is the government that needs to step in to provide that demand until confidence is restored to the system. The Republicans justify the tax decrease by cutting “entitlements and social mandates” – somehow believing that military spending should remain sacrosanct – while Democrats suggest that the wealthiest sectors of our society should pay more tax. It is an imperfect storm.

We are still teetering, facing many issues that were created in the past decade which we cannot reverse and an unstable economic situation overseas, particularly in Europe, over which we have no control. But perhaps the solution lies in applying elements from both the Democratic and the Republican side in a combined attack on our employment and underlying housing issues.

On the issue of regulation, it is probably necessary differentiate between regulations that are geared toward limiting or preventing the kinds of financial excesses that brought us down in the first place and those that impose layers of approvals and procedures – many of which are imposed at the state and municipal levels – without much of a concomitant offsetting public benefit. Looking around at the wildfires and the extreme heat and drought across the United States, there are still strong arguments for environmental regulations. However, the argument that we are running out of fossil fuels appears to be dead on arrival these days, as massive new oil reserves are being identified in places like Brazil, Israel and Canada. The issue has now focused on reducing the impact of using such fuels.

On the issue of containing social benefits, the first and most obvious issue has to be at every level of government pension determination. We need federal and state systems that can shift unfunded pensions into structures that can someday provide retirement to the relevant workers without breaking the backs of those who have to work currently to service these past obligations. Retirement ages need to be raised, benefits determined by how much money is in a contribution account as opposed to fixing retirement as a defined benefit based on the earning power in later years. Seniority systems that don’t reduce pay levels or allow replacement for workers that cannot sustain required object performance standards should be more flexible; we need the best and the brightest to stay and worst and the dimmest to leave.

On the issue of government spending, we need to be aware of several key issues. First, certain kinds of spending (investments really) generate long-term direct economic benefits because they increase efficiency, provide new economic opportunities and up-grade value-producing skills. Second, other expenditures are more like “consumables” that make life more pleasant but do not help the economy in the longer run. Staying healthy and fighting off attacking enemies are probably pretty high on the list of desirable, but cost consciousness should apply here as well. Third, we have actually reduced spending in areas where those direct economic benefits will be generated (and we will desperately need them) – cutting our infrastructure repair and construction expenditures to about half of pre-recession levels, slamming education – even with a rapidly growing population – by a 13.7% reduction (with more to follow).

These short-sighted policies threaten to keep the United States on a downward spiral, dropping our competitiveness and standard of living. I’ve blogged constantly on these subjects, and by now you know that I do not believe that our nation can survive without vastly improving our infrastructure, education systems (which continue to fall when measured against international standards) and government-funded research. By combining policies from both sides of the aisle as noted above, we actually maximize what we can do to restore American employment. Good ideas need to be deployed no matter where they come from.

I’m Peter Dekom, and it is clear that we need to lose partisan rhetoric and begin working together or face losing what was and is a great nation.

Saturday, July 21, 2012

Hello! Hello! Anybody Home?

We know that but for immigration, the overall population of the United States would join the genuine contraction rate – where reproduction falls below replacement – being experienced in Japan, Europe and many other advanced nations on earth. “From 2000 to 2010 the U.S. population increased by the smallest rate than at any time since the Great Depression, rising 9.7 percent to approximately 308 million people, according to … census data. It’s yet another sign of the tough times that many Americans faced during the second half of the 2000s due to an ailing economy, but it only begins to paint a picture of the country’s money woes.” Newsweek, January 21, 2011. Whether it is a general conscious effort that comes with education or simply a reflection of the rising cost of living in developed nations (further exacerbated by a long-term economic downturn), it is not a trend experienced in the overpopulated and underdeveloped lands in Africa, Asia and Latin America.

Demographic shifts in the United States, the shift of massive rust-belt manufacturing overseas and the collapse of the housing market have provided another shift in U.S. well-being. Not only is the average Canadian now economically better-off than the average American (at least in terms of net worth), but Canada is not experiencing the abandonment of major urban areas by reason of the trends noted above. With tighter bank regulation – creating a housing market where subprime loans just weren’t possible – Canadians have been able to maintain the value of their homes, the opposite of the American experience.

“One of the unfortunate results of a bad [U.S.] housing market are [sic] empty homes. Vacant properties have increased by 43.8 percent nationwide since 2000, according to the Census Bureau. Homes can be vacant for many reasons, but are defined by the bureau as both unoccupied rental inventory as well as homes that are unoccupied and ‘for sale.’ As of 2011, there were about 14.3 million year-round vacant housing units in the country, with a 10.6 percent gross vacancy rate that excludes seasonal vacancies such as vacation homes.” RealEstate.aol.com, July 19th.

Orlando (Fl.), Dayton (Oh.), Memphis (Tn.), Detroit (Mi.), Richmond (Va.), Las Vegas (Nv.), Atlanta (Ga.), Houston (Tx.), Tampa (Fl.) and Toledo (Oh.), in that order, lead the country in both rental and homeowner vacancy rates. And in terms of cities with the greatest population declines, three of the top ten are in Michigan (Flint, Grand Rapids and Detroit), three more are from fellow rust belt states (South Bend, Indiana; Pittsburgh, Pennsylvania; and Cleveland, Ohio), two from so-called “sand states” where good weather overheated the housing markets (Hialeah, Florida and Vallejo, California), one was decimated by a hurricane and never recovered (New Orleans, Louisiana) and one was home to an industrial leader, Kodak, that has filed for bankruptcy (Rochester, New York).

But what has happened to cities has been amplified in the mid-west and southwest among farmers and ranchers as weather patterns have seen their agricultural lands, crops and livestock dry up and almost blow away in some of the driest and hottest weather this country has faced in recorded history. Water supplies are dwindling; some – like the massive Ogallala Aquifer – might just dry up totally within our lifetimes. Relief is nowhere in sight.

But these are numbers and statistics. What they reflect is sustained pain, a permanent change in the American way of life that is taking whole generations of workers and potential workers out of the system, either because of obsolescence, outsourcing or climate change. We could choose to retrain those workers, begin to deal with our greenhouse gasses, create an environment with better infrastructure, add research supported by the government to generate new industries and new jobs and upgrade an educational system that will provide competitive value-added workers for a competitive future. Or we could blindly cut deficits, reduce taxes on the rich (hoping that with the extra money they will hire workers in a world without consumer demand), support a military that spends about 40%+ of the entire world’s military budget and more on defense research than the rest of the world combined… and kill all of the above. Hmmmm….

I’m Peter Dekom, and I wonder exactly when having common sense disqualified a potential candidate from running for office in this country.

Friday, July 20, 2012

Mountain Momma

If I were to ask how you would feel about living and working in a place with the following description, how would you react? “[It is a land of coal mining through mountain top removal,] a radical form of strip mining that has left over 2,000 miles of streams buried and over 500 mountains destroyed. According to several recent studies, people living near surface mining sites have a 50 percent greater risk of fatal cancer and a 42 percent greater risk of birth defects than the general population.” Jason Howard writing in the July 8th New York Times. Yep, it’s in the United States. Nope, the feds and the Environmental Protection Agency are pushing to reign in the environmental damage and the increased risk to those living in the area of abundant coal mines.

But in this land, particularly among those most exposed to the health risks, the miners and their families living in the immediate vicinity of these radical mines, there are very, very strong sentiments against environmental regulation. A large billboard looms over Interstate 77 just outside of Charleston, West Virginia screams: “Obama’s No Jobs Zone.” It’s about economic survival, and the local mining companies have convinced the locals that if such environmental rules continue to be enforced, the jobless malaise that has settled over many in America will define West Virginia’s future for some time to come… and a few of the other Appalachian states where coal mining is the driving industry.

But is this mountain top removal the coal industry’s promised massive job-creating machine or are such environmentally destructive efforts simply a way for the mining companies to bring the coal to the surface where labor-saving mechanized mining can harvest the coal with a fraction of the workers necessary to operate a sub-surface mine? Are they just buying political support with false promises of lots of new jobs? “Of course, since mountaintop removal is heavily mechanized, the coal industry is the real job killer — and, until recently, miners would have been suspicious of any claim to the contrary. For decades the companies had fought the miners’ efforts to unionize, resulting in violent strikes.

“After finally recognizing the union, King Coal opposed its demands for things like a living wage, health insurance, safety precautions and measures to curb the alarming rates of black lung disease. The strategy was simple: the companies would buy off individual communities and leaders, exchanging meager payouts for silence or even support against the more adamant activists.

“The presence of the United Mine Workers of America helped stymie such tactics. But now, with a mere 25 percent of miners belonging to the union, the allegiance of miners has largely shifted to the coal companies. The old divide-and-conquer strategy is back. This time, it’s a matter of pitting workers against their erstwhile allies in Washington: increased environmental regulations — a hallmark of the Obama Environmental Protection Agency following eight years of lax guidelines and enforcement under President George W. Bush — are branded as a war on coal miners… At the same time, dissent against King Coal is increasingly greeted with open hostility and harassment.” NY Times.

The SuperPACs and the power of King Coal have drowned out any meaningful opposition to their “kill environmental regulation” mantra. Just think, if the companies get their way, they will be able to underpay those lucky enough to get the few incremental jobs that highly mechanized surface mining will produce, they will not be encumbered by the costly life-and-environment-saving measures for which the EPA was created in the first place and they will be able to rake in the profits without the slightest responsibility for the damage they will have done, to the land that will linger for centuries after the coal has long-since been exhausted and the death and disease that will reside in the bodies of those who work the slopes or live in the area. If you publicize a falsehood long enough, it often develops the ring of truth, and if those living in denial in the hopes of a better life need to believe the lies, the invasion of truth itself has little or no hope of taking root.

I’m Peter Dekom, and it is increasingly the one with the loudest and most persistent voice that enjoys the victory with truth and justice all too often relegated to the loser’s bench.