Monthly Archives: July 2013

I’ll Vote for Rush Holt

Rush Holt is a NJ congressman, formerly Princeton physicist, who is running for the Senate nomination to replace Frank Lautenberg. He is running a very progressive campaign and saying some things that need saying but are not necessarily popular.

I think I will vote for him even though I don’t think he will win. It will do the winner good to know there are people who stand behind Holt’s ideas.

Nuclear Power?

As we look for alternatives to fossil fueled energy sources there is a lot of talk about solar and wind power, but little of nuclear power. In fact, since the disaster in Japan after the tsunami several years ago, some European users of nuclear power are proposing to shut their plants down. We are afraid of nuclear power and the type we have been using deserves its reputation.

The problem is that natural limitations are likely to limit the ability of solar and wind to meet the demands of modern economies in the way that coal and gas fired plants have been able to do. Nuclear power could meet that demand and, fortunately, new ideas in this area are now being studied that give promise of eliminating or mitigating the dangers of conventional nuclear power systems: major failure with widespread release of radioactive waste, generation of stockpiles of highly radioactive waste with a lifetime of thousands of years, and nuclear weapon proliferation.

One example is the development of thorium burning molten salt reactors. These give promise of solving the nuclear disaster problem, lead only to short lived radioactive waste, can even burn the long lived waste from current reactors, and can mitigate the problem of proliferation. There’s considerable interest in this in Europe, India, and China, but less in the US, although the concept was born here. Work on this was killed because it clashed with our cold war interests. The word nuclear is feared in the US and environmentalists seem to have acquired a knee-jerk reaction.

Global Catastrophe?

The end of the human race will be that it will eventually die of civilization. – Ralph Waldo Emerson

The two big issues in US politics are the rise of extreme inequality and global warming. Doing anything about these is difficult since the fools and knaves who control the Republican party are opposed to doing so. This suits the short-term interests of the moneyed class.

I don’t know what Emerson had in mind when he wrote the words above, but global warming is a good candidate. After all, our civilization is based on fossil fuels. However by threatening the end of the human race I violate one of the rules of those concerned about global warming, which says that we must never exaggerate by warning of consequences that are not provable at this time.

The trouble with that is that some potential effects of warming cannot be disproved either. I’m thinking of the potential for accelerated warming due to the release of trapped methane in the now-frozen tundra of the northern regions and under the arctic ice, the uncertainty about the timing of the loss of major ice sheets, and the new realization that natural changes in climate are probably mitigating man-made effects currently, but are likely to intensify the effects in the future. We have heard a lot lately about risk management on Wall Street. It hasn’t been working too well lately. The same can be said of risk management analysis with respect to our use of fossil fuels.

Why Inequality Matters

Inequality of income among the American people gets almost no discussion in Washington, even though I believe it is the most important economic problem facing the US. I think one reason for this is that many people think this is just the usual bleeding heart rant. They think: “Of course incomes are unequal. Only a fool would expect them to be equal for everyone.”

This ignore the real problem, namely that income inequality has increased tremendously in the last 30 years, to the point that much of the gains in our economy have gone to just a tiny minority, about one percent of all households.

This is well illustrated by some data taken from: “Winner-Take-All Politics” by Jacob Hacker and Paul Pierson. It shows the distribution of average income across various groups in 1979 and in 2006. The incomes have been corrected for inflation and includes the leveling effects of the graduated income tax and of programs that shift income to lower levels.

inequality

Click on the chart to see it enlarged.

Note that the lowest income group increased its income by only 11% in 27 years, or less than 0.4% per year. The changes for higher income groups are larger, but not very great until the upper 20% are considered. The amazing thing is that the upper one percent have gained so much.
This kind of change in inequality is extraordinary. It has led one prominent economist to say that the economy is broken. (Note that the data is for households, so the effect of the increased number of two-earner families can explain some of the gains among the lower levels.)

Explanations for the changes abound. Many center on economic factors, such as the effect of globalization. Others emphasize political changes, such as reductions in taxes. In fact both are just two sides of the same coin. Economic factors are the proximate cause but political factors are the ultimate cause. (Hacker’s and Pierson’s book have the best analysis of the political factors. Both are political scientists.)

My own conclusion is that the economy has been tweaked by the political power of the wealthy to shift most of its gains to capital. This is the natural tendency of a laissez-faire economy and the proper objective of government policy should be to counter this tendency. Only then can the middle class prosper and the economy thrive. A business manager with his eye on the bottom line will try to minimize the cost of labor. Henry Ford knew that if he wanted to sell his cars to his employees, he would have to pay them enough to do so.

Laurels for bunglers

Two items in the news emphasize how much our society rewards incompetence. An article in the NY Times tells us that that General Petraeus, famed for his theories of how our military can build foreign societies, was going to be paid $200,000 per year by CUNY to conduct two 16-student seminars and give two lectures – with the assistance of two graduate students. He has now backed off and offered to do it for free. Don’t worry, though, Wall Street is going to make him a rich man anyway.

The fact that CUNY said that this was to be paid for with private money is even more appalling, showing that positions at that institution are for sale to he highest bidder. How about a nice spot for David Koch?

Then we have the fact that Larry Summers, Bill Clinton’s Treasury secretary and devoted proponent of derivatives, is angling for Bernanke’s job as chairman of the Fed. Robert Scheer does a nice analysis of this prospect on Truthdig. Given Obama’s apparent admiration for Summers – in 2009 he made him director of the National Economic Council – this appointment might really be made.

In the words of Lily Tomlin: “No matter how cynical you get, it’s impossible to keep up.”

On Eisenhower

Paul Krugman’s blog today has an interesting comment on how far we have come from the fifties, and a great quote from Dwight Eisenhower.

The first thing is to understand Eisenhower’s significance. What you need to realize is that Republicans spent much of the early postwar period still trying to dismantle the New Deal. It took their shocking upset defeat in 1948 to drive home the fact that it just wasn’t going to happen. And Eisenhower became the symbol of a GOP that was not going to try to return to Gilded Age capitalism; in his famous letter to his brother he wrote:

“Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas.Their number is negligible and they are stupid.”

Of course, that tiny splinter group now controls the GOP.

A Cartel?

There’s an interesting article in the Washington Monthly about how Medicare payments are determined. Here’s how the magazine characterized it:

The Shadowy Physician Cartel That Controls Medicare

Three times a year, a small group of well-connected medical doctors meets behind closed doors to decide how much they think Medicare should pay them for the services they perform. The meeting, run by the American Medical Association, is off-limits to both the press and the public, and everyone who enters is required to sign a strict non-disclosure agreement.

Sounds shady, right? It gets worse. Afterward, the vast majority of this committee’s payment decisions are rolled into law-and therefore de facto determines how roughly $85 billion in U.S. taxpayer money is divvied up every year.

The Supreme Court

Last week the Supreme Court took a pass on the popular issue – gay marriage rights – and continued its low-level war on the real targets of conservative concern, minorities who try to vote and the victims of business.

Even Kennedy had to agree that DOMA was outrageous, although the rest of the conservatives had no trouble with it. And the predictable pass – even I predicted that – on the California gay marriage case just bypassed a real consideration of the issue. You think the justices don’t watch the polls?

On the Voting Rights Act we had Scalia, who denounced the liberals on the DOMA decision for placing their opinions above that of Congress, join a bunch of conservatives who decided to do the same. So much for conservative principles. (Am I the only one who thinks Scalia is manifesting serious signs of senile dementia?) There’s been enough discussion of this decision so I won’t go on.

Less talked about are a series of decisions relating to business and it’s rights vs its customers. There was an excellent op-ed on this topic by Erwin Chereminsky, Dean of the law school at UCAL Irvine. Here are a few excerpts:

The Supreme Court’s momentous decisions last week on affirmative action, voting rights and same-sex marriage overshadowed a disturbing trend: in the final two weeks of its term, the court ruled in favor of big business and closed the courthouse doors to employees, consumers and small businesses seeking remedy for serious injuries.

A majority of the justices seem to believe that it is too easy to sue corporations, so they narrowly construed federal laws to limit such suits. These decisions lack the emotional resonance of the cases involving race and sexuality, but they could have a devastating effect on people who have been wronged by companies.

……………

These cases evince a disquieting theme about the conservative majority of the Roberts court. It obviously believes, and sometimes expressly says, that there is a need to protect big business from litigation. But in discrimination, product liability and arbitration, it has left injured employees, consumers and small businesses without recourse.

To me these are just a few more of a thousand cuts that the courts and legislatures of this country have inflicted on the other 99%. This is how the economic system of this country has been crafted, step by step, to give us the incredibly unequal society we have now. Until the people wake up it will continue.

Finally, my advice, whenever a liberal or conservative justice tells you about the lofty legal principles he or she follows, is to ignore them. They primarily use legal reasoning to rationalize the conclusion their gut demands. So do we all. The solution is to get the right kind of guts on the court.