Tag Archives: economic policy

The long shadow of the Panama Papers

For the last few days, world news has been abuzz about the world’s as of yet largest leak of private information, which are now being called the “Panama Papers.” Publicized by a German newspaper a year after being given them, the information is from a Panama-based investment firm specialized in offshore and otherwise tax evasive practices. Major names around the world have been listed as having engaged in hypocritical and at times criminal financial transactions designed typically to avoid paying the full tax cost owed to various countries and localities.

One of the central figures in the leak was Iceland’s former Prime Minister Sigmundur Davíð Gunnlaugsson, who resigned on Sunday. Elected as a reformer who largely delivered on promises to turn Iceland’s economy back around, the revelation that he had profited from the financial reforms he oversaw through an undeclared and indirect investment essentially invalidated his political legitimacy.

2016-04-05_1414.pngCountries in which heads of state, high ranking public officials, or close associates have been named in the current leak.

Although uniquely duplicitous and corrupt, his place in the broader story of the Panama Papers actually speaks to a broader worry. His gains from Iceland’s economic restructuring weren’t just undisclosed, they were also untaxed. There’s a palpable failure of an Iceland-like series of new restrictions and standards on banks to address the ability of him and other Icelanders to strategically engage in capital flight. With Iceland facing warnings from international financial institutions over the costs of their response to the global crisis, this isn’t a trivial matter. It’s a shortfall in the millions if not billions globally, which in a political climate of widespread austerity has been felt worldwide by the classes who don’t have hidden bank accounts.

Outside of the Sanders-Clinton fight eating up US leftists’ attention, this is one of the system problems the “Warren Wing” has been hinting with growing volume. In the wake of anemic banking reforms, Elizabeth Warren’s individual focus has shifted somewhat towards addressing capital flight, even if just rhetorically. That’s just about the only ideological contingent in the US that can talk about this easily – for civil libertarians currently defending encryption this is an example of the public costs that high tech and high price secrecy can incur, for the more corporate friendly this only demonstrates the shady ethics of the economic order they defend, and for domestically-focused social democrat factions this represents the international scale of the problem which they often don’t acknowledge.

With a Democratic primary debate barely more than a week away, this is precisely the issue that both of them can and should be pressed on. Let’s see if CNN’s Wolf Blitzer brings it up.

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Economics helped decide the Michigan primaries, maybe more

The Progressive Caucus in the US Congress released their proposal for how the US should spend its money in 2017 earlier this month, and it’s garnered about as much attention as it typically does – which is to say virtually none. An executive summary is available here, which has a link to their full budget at the bottom.

Looking over it, it’s not exactly surprising to see it flounder in the recent news cycles. It’s exactly the sort of deliberate, careful accounting of resources and responsibilities that certain political elements have drummed out of politics. We can all argue about whether it offers the right solutions to the problems in this country, but it’s asking at least some of the right questions when many at that level of government won’t.

On the same day as that budget’s publication, the Economic Policy Institute (EPI) released a report on the effect of trade relations on employment within the US. It’s caught little more attention than the budget, unfortunately. Breaking it down by congressional district, the EPI only found two such districts where trade deficits with fellow signatories of the Trans-Pacific Partnership (TPP) had a net positive impact on local employment. In stark contrast, a band across the middle of the country, stretching from the western Rust Belt down into the Deep South, is estimated to have lost staggering numbers of jobs to this international effect.

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(An interactive version of this map can be found here.)

As the presidential primaries continue, both of the economic concerns these and other issues have stoked threaten to take center stage in the general election. Exit polling in Michigan showed majorities of voters in both major party primaries agree with the EPI assessment that international trade reduces the number of jobs in the US. These aren’t just meaningless statistics, but lived realities that help people decided whether and how to vote.

What’s more, the exit polling showed Donald Trump taking a large portion of the Republican primary voters who felt that way and an even larger majority in the Democratic primary supporting Bernie Sanders.The former has in many ways become a vehicle for political and economic fervor, as racist violence has routinely erupted at his events, including even ones held since the Michigan primary on Tuesday. The latter is already bringing his explicitly anti-TPP message to Ohio and Illinois. In an election cycle previously dominated by less economically-driven policy debates, economics has suddenly jumped back into center stage.

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Skirmish of the Titans

For a while, energy policy in the US has been characterized by many as a sort of apocalyptic battle between a group of interconnected fossil fuels industries and a kind of scrappy coalition of underdog competitors.

Even I’ve written about energy proposals somewhat from that angle myself, where policies fairly neatly cleave into two adversarial camps. There’s those that recognize the risks of climate change and those that don’t and the outcomes on how you want government to work as a result. There’s those that see resource renewability as a key issue and those that don’t, giving us economic policies based on endless resource extraction and those based on resources being possible to exhaust. There’s those that want to create a new energy system and those that want to double down on maintaining what they already have, creating a competition for federal research funds between those who want to improve the viability of solar panels and those who want to perfect the science of dredging oil from the earth. They’re two different worlds and two different political realities struggling to live together in just one.

That dynamic seems to be changing somewhat, however. The anemic coal industry has slowly reached the realization that fracking and other innovations extracting other fossil fuels are at least some of its biggest competitors, joining if not quite replacing renewables and regulatory oversight as its bogeymen. The huge leak of natural gas in California has called into question the natural gas industries not so subtle claim to being the safest fossil fuel energy source. Ethanol producers, long seen as a fossil-fuel-like and fossil-fuel-cooperative energy industry a bit like the nuclear industry, has emerged as a competitor for favor and support within the same Republican energy-minded circles. There’s no outright conflict between any of these powerful industries yet, but there’s a new sense of fractures between them.

There’s a sense that these different industries feel crowded together within the US marketplace. The Republican energy policy proposals expected to be put to a vote before Congress in the coming days seem to attempt to address those feelings in a number of ways. Lifting the ban on export for certain energy commodities might allow fuels like coal which aren’t terribly competitive domestically to be exported to where they might be (or at least, whoever buys them thinks they are). On the other end of these industries, reopening certain federal lands to speculation and extraction might similarly allow all of these possible competitors to co-exist again. Failing that, it might at least create a feeling that they can all get along. From production to sales, the focus in “adult” Republican circles has shifted towards carving out a big enough space for all of these different industries, seemingly to keep the peace.

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From here.

Curiously, this would politically put the Republicans in the place of actively governing, and at that in a way that would be to reduce competition within one of the biggest markets in the US. That’s in a nutshell precisely what they’ve branded themselves as being opposed to. In spite of the risks, they appear ready to do anything to avoid wasteful conflicts between your biggest donors, particularly as even mainstream discussions about energy sources have started talking about keeping all of it in the ground. That’s a bit of a tell – they think they might need a united front in the coming years, and are willing to spend political points today to have one tomorrow.

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Economic justice… for whom?

It’s one of the familiar just so stories about US politics that’s become crystal clear in recent decades. The Democrats want to maintain or even expand programs designed to provide economic resources and benefits to people with less. Republicans want to shrink or dismantle those types of programs. One party for workers, one party for the “1%”, so the story goes.

Even the candidates who look like exceptions – like Donald Trump with his promises to maintain social security and medicare – tend to ultimately reveal policy ideas that firmly locate them in the political party that they’ve already embraced (Trump, for example, thinks “wages [are] too high” – an implicit criticism of current minimum wage standards).

More interesting, I think, than those less easily categorized oddballs are the terms on which the debate between these two camps is being held. Economic redistribution and inequality are actually somewhat lofty, vague even, concepts. How to measure, to quantify them is an open question. The language tends to be like that in what I’ve linked above – a discussion focused on easily indexed numerical statistics: wages, entitlements, inflation, productivity, unionization.

That’s not a wrongheaded way of talking about who wins and who loses in the US economy, but it’s just one way of doing that. Unfortunately, it’s a way shaped by, and sometimes specifically for, articulating a particular group’s economic grievances. One of the easiest ways of seeing that is in terms of communities with large numbers of undocumented people – for whom income taxes are a murky territory and benefits exist in a similarly unclear limbo.

For largely Latin@ agrarian worker communities, how do you quantify being an exception to environmental regulations? For the far broader set of populations at risk of being targeted with detention or even deportation, how can that not be among other things an economic threat – both held over you by your boss and your landlord but also just ominously lurking outside your home, endangering everything you have.

2016-01-04_1015.pngLeft, 2012 chlorpyrifos use in the western US, from here. Right, a heatmap of Latin@s in the western US made using the 2010 census, from here.

The Bernie Sanders campaign has recently sought to highlight a difference between their candidate and Trump. Sanders is a meaningful, redistributive choice. Trump is manipulating some of those hoping for greater economic opportunity, without any intention to deliver on it. In order to prove that, the Sanders campaign has latched on to Trump’s comments on wages.

Why was that necessary? Trump has already spoken to a more wild set of economic policies designed to hoard resources for some. That’s one of the things inherent in his promise to deport millions of people. That is economic injustice, and it’s important to ask why it hasn’t been considered that by the largely non-Latin@ mainstream media or presented as that by the redistribution-centered campaign of Bernie Sanders.

Is the economic populism advanced by Sanders and tolerated within major media really for everyone? Whose concerns does it speak to? Whose concerns does it barely register?

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A tale of two capitalisms

Senators Bernie Sanders and Elizabeth Warren have kicked up quite the commotion within the Democratic Party in the past couple of weeks. I’ve mentioned before how Sanders’ presidential campaign has pushed fellow candidate Hillary Clinton into adopting more substantive promises to the liberal base, particularly when it comes to affordable access to education. More than a few observers have noted how this has stoked the less obvious competition within the Democratic Party over what economic policies the leaders of the party will advance.

That’s just what’s happening within the presidential primary, however, as Elizabeth Warren is similarly galvanizing the Democrats’ economic left in the Senate. Even while Sanders’ defense of reinstating Glass-Steagall regulations on banks has captured the media’s attention, it’s easy to see Warren’s less eye-catching work on those and other issues. In a traditional legislative dynamic, her criticisms and suggestions to the financial industry and the broader economic system both suggest she might block financial deregulation in the Senate and help inspire left-leaning Democrats in the House to directly oppose it.

Beyond opposing a conservative vision for the economy, Warren and like-minded congressional representatives have begun presenting the type of reforms that are anathema for Republicans and distasteful to the more corporate-friendly Democratic circles. She began a speech last week by deflating the calls for lowering corporate taxes, and from there moved to a progressive tax proposal arguing that “revenue generated from corporate taxes is far too low.”

As a part of that, she delivered deeply topical response to the economic conversations being had among both conservatives and centrist Democrats about lowering the taxes collected on international companies to encourage them to remain in or return to the US. As Warren explained, “Fortune500 companies proudly proclaim that they are making record-breaking profits, and then they hire armies of lawyers to make sure they don’t pay taxes on those record-breaking profits.” With Carl Icahn having openly done this, she seems to have a point. She wasn’t kidding about the armies, either, as she noted-

“In just the past ten years, the amount of untaxed, off-shore profit has increased nearly five-fold. In other words, one of the hottest investments in America in the past decade hasn’t been biotech or big oil, it’s been tax lawyers. The money sheltered overseas is now about the same as the combined total earnings of all US corporations in 2013.”

Big-short-inside-the-doomsday-machine

“The Big Short” is, according to Warren, actually the big siphon.

She points out that the push for lowering taxes in the US to be competitive is being driven by other country’s somewhat collective efforts to “shut down tax dodges”. The main companies keeping their money perpetually between countries to avoid taxes in either are looking for a deal competitive with their current set-up that can replace the looming risk of tax litigation.

Centrists like Senator Chuck Schumer (D-NY) and business-centered Republicans like Senator Rob Portman (R-OH) have been happy to offer that kind of a deal, including deemed repatriation (one-time giveaways on sheltered companies that keeps them from paying the full cost of back taxes).

As I’ve noted before, one of the most salient differences between the parties in the coming election appears to be their distinct understandings of economics and capitalism. What Sanders and Warren seem to have done is created that, not only by pushing some centrists like Clinton further to the left, but also by making others like Schumer into obvious examples of the centrist wing, rather than just another Democrat.

It’s become common to argue that the two parties are essentially indistinguishable on economics. It’s true that they are both offering, for the most part, fundamentally modern capitalist economics. That said, the specific prescriptions within that type of economic thought have begun to notably diverge. Their common worldview isn’t as shared as one might suspect.

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Coal lights the way

Perhaps it’s because the heart of coal country – West Virginia and Kentucky – won’t be voting in the presidential primaries until relatively late in the season next Spring, but coal hasn’t capture the conversation quite as much as it has in prior campaigns. As a commodity, it’s deeply implicated in almost all of the issues raised in both major parties – climate change, energy availability, domestic economic competitiveness – but it’s become something of a pariah.

Lewis Wickes Hine

A West Virginia coal mine entrance, by Lewis Wickes Hine, 1908. From here.

Quietly however, a few prominent politicians have still come out recently with policies for the industry and its most intense regions of operation in the US. That there is a space for the government to do something to help is, surprisingly, something of a bipartisan concern, particularly advanced by the more business-centered wings of both major parties.

Still, that’s about where agreement ends. Republicans led by Ohioan Republican Senator Rob Portman have called for investment to encourage innovations within the coal industry, particularly to capture carbon emissions. Democratic presidential candidate Hillary Clinton, meanwhile, instead suggested a broader revitalization project to address any negative outcomes of her environmental policies. It aims to shore up public education in the region and expand access to job training, in case the industry’s workforce ends up being reduced.

In spite of their differences, both proposals attempt to shrink the climate footprint of the US and improve the economic lot of the people of Appalachia. Their different ways of going about those goals, however, indicate a subtly distinction between the typical economic policies from the major parties. The government filling in for the failure of investors to create a drive for carbon-capturing power plants is basically a gentle nudge on the existing market dynamics. The government creating opportunities for people to enter different industries is equally capitalist and competition-minded, actually, but understands the government’s role differently. Instead of redirecting the occasional dinner conversation, the government puts a lot of thought into the seating chart and lets conversations develop organically from there.

What this speaks to is a broader disagreement on how capitalism and economics necessarily function, or at least potentially could. From the conservative perspective, private ownership is absolute and can only rarely and carefully be circumscribed. From eminent domain to taxation, the government is begrudgingly permitted to get involved, but with the constant expectation that it should explain its reasons why and quickly get back out.

For liberals on the other hand, and that doesn’t mean anti-capitalists, the understanding is that the government has always been involved, if for no other reason than it sets up the courts and legal standards that create our understanding of ownership and award different people ownership of different goods, territories, or resources. The government’s involvement is a constant – as it continually maintains the legal, social, and political systems and expectations that basically create the economic system.

It’s a shame that coal has ended up on the back burner of US politics, because the policies around it have created such a great example of the contrasting understandings of the world and ideas about how it should work which the two major parties are offering.

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