February 2014 Archives

Dear America,

You may remember Mikhail Gorbachev, who was president of the Soviet Union when it was dissolved in 1991.  Gorbachev ascended to power during the Reagan administration, and at that time, he met with Reagan in Reykjavik, Iceland regarding disarmament, and at home, he instituted two policies, Perestroika and Glasnost, which were intended to bring about gradual change within the Soviet Union toward the end of personal freedom and government restructuring with openness and elimination of the solitary control of the communist party.  During the Reykjavik conference, Gorbachev actually proposed eliminating all nuclear weapons, but Reagan, the great advocate of peace not through diplomacy but through strength, declined with the now famous phrase "disarm, but verify," and later he admonished Gorbachev to "tear down this wall" as he dramatically postured for the world in Berlin.  Well, the Berlin Wall did come down shortly thereafter and Gorbachev was replaced during a peaceful coup by Boris Yeltsin, a notorious lush and buffoon who led what the USSR became--the Confederation of Independent States--through a period of delirium and chaos until he died, eventually leading to the ascendancy of Vlad the Putin, who is as notorious as Yeltsin was, but for his fascism-like intermingling of business and corrupt governance leading to the formation of an all-powerful oligarchy of obscenely wealthy cronies who enjoy immunity from law and order as well as unassailable power of a most unseemly kind.  In my opinion, the fire that the world has now jumped into from the frying pan of Gorbachev's evolving form of governance was kindled by Reagan's cowboy-like repudiations of Gorbachev and his efforts as too little too late.

What we have to show for the bravado and peremptory self-righteousness of the Reagan administration and its brand of conservatism is the situation in Ukraine and Crimea today, where corrupt government and governors enriched themselves to the extent that their policies were guided by personal greed sufficient to galvanize a nation against them to the extent that the president of Ukraine had to flee the country or risk his life staying.  It all stems from the impatience of Ronald Reagan, who could have been Gorbachev's patron on the world stage and fostered his attempts to gradually wean the Soviet Union from monolithic communism, which in reality was nothing but totalitarianism masquerading as communism, and thus join the free world as a force for democracy and self-determination.  But Reagan had to play the tough guy in Reykjavik and Berlin and humiliate Gorbachev at home, thus ensuring that his grasp on power would be undermined and the current third-world governing mentality would supplant what might have been: a Soviet Union that would be a force for good in the world instead of the bastion of corruption, both political and moral, that it has become.  We have the Republican Party--as afflicted then as now by a conservative, reactionary fringe--to thank.  If they had just bothered to think about the fact that it wasn't communism that they loathed but totalitarianism, they might have eschewed the dogmatic hounding of a Soviet leader who won the Nobel Peace Prize for his efforts, which efforts have now amounted to naught thanks to xenophobia and irrational fear of the apocryphal "Red Menace."  In a nutshell, we now have Vladimir Putin and his erstwhile minion in Ukraine, deposed president Viktor Yanukovych, because of the Republicans' international penis envy.  What used to be the Soviet Bloc is now the Russian Mafia, and I would argue that neither the Russian people nor any of the rest of the population of the former Soviet Union...nor the rest of the world for that matter...is better off for it.

Of course, no one on the right will ever admit that Saint Ronnie did anything wrong.  He has gone from being the president with the roughly 30% popularity rating when he left office to being the patron saint of conservatives for the most part while being dead.  And his adorers conveniently forget that Reagan believed, and even said during a presidential debate, that Social Security never added a penny to the national debt.  They don't remember that he was pushed into taking the bully pulpit against Gorbachev by people in his own party who thought he was too weak and liberal.  They don't remember the fourteen tax increases that he signed after signing the tax cuts that he self-servingly referred to as a "new American Revolution" that was supposed to revitalize and liberate the nation, but rather led to the greatest disparity of wealth between labor and capital since the Great Depression.  The irony of drafting Reagan as the inspiration for the new conservatism is palpable, but it is lost on Republicans.

We owe Ronald Reagan a great deal, but since he is dead, we can't give him what he deserves.  Instead, he is beatified by a party with a short memory committed to expediency rather than realism and truth, which won't produce the ignominy that he deserves in my opinion.  But what frustrates me most is that Republicans seem poised...at least in the opinions of most political talking heads...to gain power in The House, and perhaps even take over The Senate.  Why the American people can't see the truth when there is so much of it plaguing them I will never understand.  Be that as it may, I think we should encourage all conservatives to write in the name of their patron saint on their ballots.  He can't do us any more harm from where he is, and that is preferable to the harm that the Republicans will do if they succeed.

Your friend,

Mike

Dear America,

The CBO (Congressional Budget Office) is an office within congress that speculates on the economic and fiscal effects of various laws for the legislators to consider as they decide whether to vote for them or not.  It is non-partisan in its composition, but what people don't realize about it is that it makes its calculations based on certain rules prescribed by congress, some of which are outlandish.  For example, when making determinations about the effects of a proposed law--a bill--on the budget, they include Social Security's trust fund and the cost of benefits in the budget.  But by law, Social Security has been "off budget," that is, not a part of the federal accounting for assessment of federal government assets, deficits, debt and expenditures, for decades because it doesn't belong there.  FDR created the trust fund for the specific reason that Social Security is intended to be an annuity in which everyone participates as if it were a private, insurance company annuity, and by law, it cannot pay out more than it has in the trust fund.  It never causes an increase in income taxes because we pay for it separately.  So when the CBO includes it in federal accounting for purposes of assessing a bill, it builds into its calculations both income and expenditures that don't belong there.  Of course, the inclusion of Social Security in calculations related to federal budget matters is only one of the accounting assumptions imposed on the CBO by congress, and candidly, I have no idea what the others are, but if they are of the same ilk as those related to Social Security, they render CBO's calculations jaded and biased, so that should be considered when we consider the report on the increase in the minimum wage proposed by President Obama, which was issued a week ago.

The report is brief, even though the Republicans, and conservatives like self-described Tea Party types, have made much of it.  The report says--with very little explanation of how these conclusions were reached or even the details of those conclusions--that the minimum wage hike to $10.10 per hour would result in fewer people working, but an a decrease in the number of people living below the poverty line.  The implications of the change in the minimum wage propounded by the report are simply that there would be 500,000 to a million fewer jobs in ten years, and that the income of those who are better off would be reduced.  That's it in a nutshell as far as I'm concerned, and it still seems to me to be a good idea because I favor shifting wealth from the top of the economic scale to the bottom.  But regardless of how you fell about it, you can read the report in a few minutes, it's that short...and sketchy...and I urge you to do so.  As I always say, think with your own mind, not someone else's.  Not even mine.  But when you do read the report, think about these tangential things.

With the minimum wage as it is, there are millions of people who can't feed their families adequately or find shelter under a roof that doesn't leak or enjoy enough heat in the winter to keep them all healthy.  On the other hand, the concentration of wealth in the hands of the richest 10% of Americans, let alone the top 1%, is as high as it was in 1928, which for perspective's sake was the year before the stock market crash of 1929, which marks the beginning of the Great Depression.  And all of that begs the question, why should someone go to work if he can't live a decent life by doing so.  What is the advantage to our society of having a million more jobs if they are to no avail in terms of their ability to sustain people, and almost as important, provide them with hope of relative prosperity at some point in the foreseeable future.  And those questions are the same ones we should ask when conservatives talk about the working poor as if they were pariahs of some kind...burdens on our society.  Tens of millions of Americans live in poverty, and many of them work.  Yes, they get food stamps, and their health insurance will be subsidized under the Affordable Care Act, but how unreasonable can that be in the richest nation in the world.  Projections by the CBO relative to what Republicans love to call Obamacare are that people will work less on account of it, but the reason is that without the pressure of providing for their insurance at outlandish cost, they can consider other things when deciding whether to work full-time or not.  They can consider retiring in their sixties rather than in their seventies.  They can consider starting their own businesses, which is the holy grail for Republicans, because they can count on health care when they need it now.  In addition, those hours that such people don't work in other people's businesses will be available to the millions of unemployed people who are now unemployed, thus lessening the unemployment rate by affording the opportunity to work for a decent wage...provided that the increase in the minimum wage gets passed by the conservatives in The Senate and The House, who have the power to prevent it as the Democrats don't have the power to pass it without them.  And there would be ancillary benefits for all of us: tax revenues would be increased even though some people stopped working full-time; with more entrepreneurs having the opportunity to try their luck in obtaining the wealth that everyone is supposed to have the opportunity to accrue under our form of capitalism, there would be more jobs created for others; and people on the lower end of the economic ladder would have happier lives because they would have more money to spend, which spending would create more jobs in the bargain.

I don't consider the CBO reports on the minimum wage and the Affordable Care Act to be definitive.  But even if they were, if you look at the whole picture that they report, those two prospects represent a measurable enhancement of the quality of tens of millions of lives, and at a cost that is minimal, even by the CBO's tendentious standards.  So, read the reports and talk about them among yourselves.  Then, when you go to the polls in November, remember who you think is on your side.

Your friend,

Mike

Dear America,

I have been talking lately about ways in which we can alleviate the profound migration of wealth from the pockets of the population at large to those of the select few who get their initial wealth from their parents and boards of directors.  Another means by which wealth is relocated has been the financial industry, and in particular, the derivatives markets have been prominent.  Our current economic malaise is a function of the damage done five and more years ago by the perversion of the mortgage securities market, that is the trade in mortgages by those who can afford to buy them, from a pure financing enterprise for home buyers to a giant bingo game in which the lucky few make fortunes not just by financing home ownership, but by betting on who will be able to pay his mortgage through the purchase and sale of derivatives like "credit default swaps."  Swaps are not mortgage financing per se, but rather are promises to pay off the mortgages of those who cannot pay...a kind of insurance for financiers.  But in addition to those swaps there are several other kinds of derivatives that amount to nothing but wagers.  In fact, you may remember J.P. Morgan's payment of billions of dollars as a fine for its behavior in the derivatives market through an employee of theirs known worldwide as the "London Whale."  And J.P. Morgan just payed $14 billion in fines for their dishonest representations to investors who bought "mortgage backed securities" from them.  What they did was bundle mortgages in groups, which they rated for soundness, and then sold pieces of those groups of mortgages...tranches, they were called...to unwary investors, who then took a bath when the housing market crashed.  The fine was for the ratings they assigned, which turned out to be inaccurate in ways that favored the bank's profitability in that bad investments could then be sold at a premium...an undeserved premium, that is.  So, as I have said before, the profits from this kind of financial manipulation is barely more than ill-gotten gain, and the rationale for taxing them at lower rates than regular income doesn't exist.  We have begun--through our tax laws and by other means--to extol the acquisition of what used to be known as filthy lucre, and that isn't the equivalent of encouraging hard work and dedication as means to prosperity.  The way to address the problem is at least bifurcated.

First, we should insist that the Republican Party get out of the way of implementation of what is known as The Volcker Rule within the Dodd-Frank Act.  That rule segregates the speculative activities of "investment banks" like J.P. Morgan from the legitimate borrowing and lending activities of your local savings bank.  Investment banks cannot be under the same corporate umbrella as commercial banks like your local lender under the Volcker Rule, and that is how it should be...and how it was before the Glass-Steagal Act was repealed during the Clinton administration.  Incidentally, Larry Summers, President Obama's first choice for the chairmanship of the Federal Reserve, was the one who advised President Clinton to sign the Republican bill that effected the repeal, which passed in a Republican controlled legislature under the aegis of Speaker Newt Gingrich and his "Contract with America."  I still wonder who old Newt thinks America is.  The regulations directed at the problem of enforcing the separation have been impeded, and now diluted, but the Republicans in congress, and they should be exposed for their efforts on behalf of all the wrong people.  Second, we should insist that the tax reform that the Republicans have been claiming to favor, but which seems never to happen as a consequence of their outright control of The House of Representatives and their de facto, filibuster-enabled control of The Senate.  If the capital gains tax break that was built into the federal income tax statutes during the Reagan administration were eliminated, at least as it applies to speculation income, that would go a long way toward discouraging speculation in derivatives, the profits from which should be taxed at a higher rate than earned income in my opinion, not a lower one.  After all, is hard work the American way or is it easy money made by having money.  We are the putative land of opportunity, where hard work and talent are the road to riches, so why don't we reward those things in our tax policy rather than encouraging the rapacious acquisition of unseemly wealth by dubious means.

Of course, changes in tax policy will not be enough to relocate the money purloined by the wealthy from our economy as a whole.  Now that the jobs of those who choose not to go to college have gone abroad, there aren't too many opportunities left in this country...at least not enough for all of the people walking around with college degrees that they can't do anything with.  There is always talk about the 3% unemployment rate of college graduates compared to the 10% suffered by those without high school diplomas and the 7% of this with them.  But the fact is that many of those "employed" college graduates aren't doing jobs that might be associated with college education, like the law school graduate supporting himself waiting tables in a pizza parlor, which is not just a piece of apocrypha that I cite for my own purposes.  Nor is the lineman's apprentice, who makes good money on his job, but who isn't exactly doing the kind of work that requires a college diploma in philosophy.  As to the former, I saw him on the news, but as to the latter, he just moved into his own apartment after 24 years of living in our house.

As to some of those other means of addressing the problem of wealth distribution, at least one of them is under discussion right now among the "gang of three," which comprises the heads of state of the three countries in North America.  Problems with NAFTA (North American Free Trade Agreement), another gift of the Clinton administration, are causing criticism of the contemplated extension of its terms, and President Obama seems to be given pause by the debate between business and everyone else over what's good for the country...and over who the country actually is.  That discussion, which has much in common with the debate over the Keystone XL pipeline, is the next topic of our discussion regarding leveling the wealth disparity in this country.

Your friend,

Mike

Dear America,

By now you have probably realized that my solution to the problem of economic inequality relies in large part on regulating or outlawing the things rich people do to get richer without actually working or producing anything.  And among those things is trading in "derivatives."  That term covers a lot of ground, some of which is legitimate, but some of which is just institutionalized gambling for people who have too much money to use.  Among derivatives are the kind that got our economy into the mess it is still in five years after the collapse of the housing market, but more on that another time.  Another part of the derivatives market is in the area of commodities.  You can buy large quantities of almost anything in advance of its production, and in many cases that is useful.  An orange grower may need money for maintenance of his orchard now so that his crop will be fulsome when it comes in in a year, so he can sell orange juice futures on the commodities market to finance its maintenance.  But then there is the use of the market by speculators, which has an impact on all of us in that it leaves the farmer with his obligation to sell the juice of his crop at one price while driving the price we pay in the supermarket relentlessly upward.

Orange juice futures seem almost frivolous in light of the fact that the price seems relatively stable, though trending ever upward in subtle ways; a half-gallon of orange juice is no longer a 64 ounce half-gallon, but now is rather what passes for a half-gallon: 59 ounces.  But there are other commodities that are more essential and that are caused to fluctuate wildly because of speculation...oil in particular.  It is not unusual for the price of a barrel of oil on one of the oil futures exchanges to go up by 20% in a month, or even quicker, because someone in the middle east is angry at someone else there.  That isn't a function of scarcity, because even when Libya was in a state of revolutionary chaos, the world's supply, which runs at about 83 million barrels of oil per day, went down by only about 1%, which the Saudi's made up effortlessly along with ever increasing American production, which continually decreases American demand in the world market.  But the price of a barrel of oil changed dramatically during that period, and we paid for it at the pump when we bought gasoline.  The reason was neither a significant change in supply, nor was it demand, which has been declining lately because of slow economies here, in Europe and in Asia.  So what was it then; it was speculators who bought oil futures in the market though they were not otherwise in the oil business.  Thus, my solution to the problem of the market being moved by people who think that time will increase the value of a commodity--or of any derivative including mortgage based ones like credit default swaps, the kind of derivatives that were the main cause of the worldwide economic crash at the end of 2007 and the beginning of 2008--is to bar from those markets anyone who cannot take delivery of the commodity.  In the case of oil in particular, individuals and companies that do not deal in oil, or use it in volume like airlines, would be effectively barred from trading in it because they would not have the storage or shipping capacity under their control to allow them to accept delivery of any significant amount of oil, and thus, they would be eliminated from the trading process that now allows the price to swing wildly because someone thinks there might not be enough soon.  It's simple really; even though we don't control all of the markets in which oil is traded, we do use more foreign oil than any other nation, and what we do affects the market worldwide.

If that kind of market regulation were combined with a nationalized portion of the oil industry--just enough to supply the federal government with the 10% of total American consumption that the military and government agencies use each day--there would be that much less demand, and since the law of supply and demand would control oil prices rather than the ability of oil speculators to manipulate it, we would have a rational market for petroleum, which would be to the advantage of everyone who uses petroleum based products.

Then there is the unfair trading practices of participants in the world market in general, including that of American companies.  There has been a taboo in economics in that regard for decades.  It is an aversion to what is called protectionism, which is the scourge of international, macro-economic theory.  But we now have a problem not just with foreign competitors.  We also have one with American companies that exploit foreign advantages like obscenely low labor costs on account of the weakness of labor in some other countries like Bangladesh and China.  More on that Friday.

Your friend,

Mike

Dear America,

I have talked about this before, and now I see that it is being discussed occasionally elsewhere, but not nearly enough.  The State Department process for approval or denial of approval for the Keystone XL pipeline is nearing its conclusion, but the public debate on the subject of the benefit derived from the pipeline--that is, who will benefit from it--seems to have been successfully swept under the rug by conservative forces.  So for the record, the answer to that question is, oil refiners along the Gulf of Mexico, which is the end-point for the pipeline.  To be blunt, it is not a project that serves the needs of the American people.  It is for the benefit of American oil refiners, including the big oil companies, and whether or not we pay an environmental price for it, it shouldn't be built.

It isn't abundantly clear to most people why certain interests are so keen on the Keystone XL, so here are a few facts that everyone should know when taking a position on it.  First, there has been a ban on the exportation of petroleum for 40 years, and that prevents the big oil companies--they now produce something like 60% of the fossil fuels we need in this country--from exporting our oil to other countries...only because the government has forced them to give our people what they need from what is produced from under our soil and waters.  The reason that such a law was necessary is that the price they can get for that oil elsewhere would be higher than it is here, like OPEC oil, especially now that Americans are conserving in both the number of miles that they drive and the mileage their cars get, among other things.  But there is no ban on exportation of gasoline, which as you know comes from petroleum.  We export from this country something in excess of 100,000,000 gallons of gasoline per day from this country.  In other words, since the petroleum companies cannot export petroleum, they refine it into gasoline--and other petroleum derivatives as well--and export them instead.  In unvarnished terms, the oil companies have found a way around the ban on exports, and the Keystone XL pipeline will allow them to take advantage of that loophole in the law not just with American oil, but with Canadian oil that they import as well.  They will pipe it down to the Gulf Coast in the pipeline, refine it into gasoline and diesel fuel, and then export those products to other countries since they cannot export the raw material: petroleum.  That isn't some liberal canard.  All you have to do to confirm that it's true is look up the facts...and you can do that online...and then apply a little simple analysis to what you find...and by simple analysis I mean addition and subtraction...nothing complex...it's that obvious.

But that isn't the only money-making part of the scheme to import Canadian tar-sands oil directly to our Gulf Coast.  When they import the Canadian oil, it all goes into an undifferentiated pool with the oil they import from elsewhere, which is the basis of the price we pay for the products refined from it.  Thus, the cost of that oil goes into calculating what we pay here for gasoline even though we will never see the Canadian oil except for when it passes over our country's hinterlands in order to get to the refineries where it will be turned directly into profits for the refiners, including Exxon-Mobil, BP and others.  They get to gouge us twice with the same oil.  It's all just a money making scheme.  But there is an alternative.  Instead of transporting that oil across the country, the oil companies could build refineries along the Canadian border, and transport the products they produce from Canadian oil far shorter distances to where they will be consumed in this country, thus bringing down the price we pay for them.  That may seem like an imposition on they oil companies, but consider this.  There is currently a shortage of propane here in the United States, and as a consequence, there is rationing on the wholesale level and the price of propane has more than doubled in a period of just months.  But propane is produced during the process of refining  petroleum and is also a byproduct of processing natural gas, which as you know is streaming out of the ground in the Dakotas--which by the way are right next to Canada.  So, the raw ingredients for propane are already there, and oil refineries would produce...as a byproduct of the refining they have to do anyway...more propane for use largely in the agricultural areas of the United States, right where the Canadian oil comes into the country and where the natural gas comes out of the ground.  Currently, the greatest need for the fuel, which is used to keep livestock warm among other things, is in our mid-west, and shortages are causing hardship there; problem solved.  In fact, by building refineries in the northern mid-west, we could solve a few problems.  First, we would minimize the risks inherent in transporting tar-sands oil across land in pipelines.  Second, we could reduce the cost of the infrastructure needed to transport the new supply of propane because we already receive the preponderance of the propane we now import from Canada by pipeline.  Those extant pipelines could provide the trunk from which subordinate supply lines could start; a far less expensive endeavor than building a 1,500 mile pipeline and then building new pipelines to carry the increased supply of propane back up north.  Third, we could reduce our imports of propane because we could produce more of our own right where it is needed...in farm country...thus making ourselves even more energy independent.  And fourth, we would be reducing the price of both the propane and the gasoline and other products refined there because they would be closer to the points of distribution for wholesale and retail sale.  Everybody wins, so why not do it that way.  Here's the answer to that question: the oil industry doesn't want it that way.

If the Canadian oil goes directly to the refineries in Louisiana and Texas, it is just one small step to make it into exportable products...more profitable products.  That's the long and short of it.  This has nothing to do with jobs, because it takes workers to build refineries too, maybe even more of them than it takes to build a pipeline.  But despite the Republican misdirection about creating jobs by building the pipeline, jobs have nothing to do with it.  The Republicans are fed by the oil industry.  They continue to pule about drilling for more oil when we are exporting a huge amount of petroleum in the form of petroleum derivatives every day, as if we can become energy independent while we allow the oil companies to export what we produce here for more profit.  We will never be independent as long as there is a market elsewhere...unless we begin to make smart decisions, that is, unless our government gets on our side instead of theirs.  So remember all this, and all the other ways in which Republican, supply-side economics puts money in someone else's pocket on the premise that it will find its way into the pockets of the American people.  Check your pockets and see if it has arrived yet.  I don't know about you, but it's been over thirty years since the supply-side has been in the process of producing my dollars, and they still haven't come.

Your friend,

Mike

Dear America,

Though I have a few more ideas on the subject of economic inequality, it seems appropriate to take a short hiatus from the subject and discuss what is not only the current political situation relative to the debt ceiling and immigration, but what has been the chronic problem in American politics since the Republicans lost control of both houses of Congress in 2006.  Everyone forgets that for the first six years of the 21st century, Republicans controlled all of elected government: the White House and the Congress.  You might remember if you think about what they gave us when in total control: two foreign wars that produced nothing but debt and death for the United States, a drug program for the elderly that has increased both the deficit and the national debt because it forbade the federal government to negotiate with drug manufacturers and providers regarding price, and a tax cut for not just the middle class, but for the richest Americans that gave them the lowest tax burden since Ronald Reagan, all of which eventually led us into the largest budget deficits in history until that point and a doubling of the national debt along with obligations for the government that continue to mount debt on top of debt.  The deficit--that is the annual rate at which the national debt increases because of an excess of spending over revenue--now continues to decline dramatically, but it is no thanks to the Republicans, who no longer have universal control of the related government processes.  But perhaps what is most notable about all that isn't that as a nation we seem to have forgotten what the Republicans have done to us, but that we still seem ambivalent about the policies that have led us to near ruination.  We should have learned that the Republican obsession with supply-side economics is a self-serving canard manifested only in the policy of the party, not in reality.  You can have all the supply possible, but without demand it doesn't create wealth or prosperity for anyone; what difference does what you produce make if you can't sell it because almost no one has any money to buy it with?  None-the-less, the Republicans are newly emboldened in their never-ending quest to enrich those already in control of most of the capital in the nation, and as a bi-product of that effort an attempt the evisceration of the social programs that have lifted millions out of hunger, if not out of poverty.

Flush with the oft mischaracterized victory in reduction of the food stamps program by $800 million per year for the next decade, there is renewed talk among the reactionaries in the Republican Tea Party caucus of withholding an increase in the debt ceiling--which allows the government to borrow to pay the government's bills--and forcing a default with ruinous effects on the cost of borrowing in the future for both the federal government and us citizens if they don't get even more draconian spending cuts, which are already cutting not just fat, but muscle and bone as well, as evinced by the fact that millions of people will have less food on their tables because of the cut in the food stamps program embodied by the recently passed, two-years- overdue agriculture bill.  They also seem unconcerned by the political effect of refusing to pass an extension of unemployment benefits for the long-term unemployed because the Republicans in The Senate are filibustering it.  Further, they are undaunted by the potential electoral disaster represented by the refusal of conservatives in The House to allow an immigration bill that would affect millions of voters' families in a positive way to even be considered.  They seem to think that no one remembers what their policies have produced in the past...the recent past.  And this is all possible because John Boehner, the Republican Speaker of the House, won't put the relevant issues to a vote for fear that his party will embarrass itself by refusing to help the millions of workers who put food on their tables, clean their houses and manicure their lawns as well as many of the other things that most Americans don't want to do.  So, it comes down to this.  We won't have an immigration bill during 2014 because the electoral consequences of the argument over it in The House will embarrass the Republicans, and it is possible only because there are two men in Congress who have something more potent than veto power; they can prevent issues from even being discussed.

John Boehner as Speaker controls what bills come to the floor of The House for votes.  If he says that a bill won't be brought to a vote, he can accomplish that with parliamentary procedure.  And in The Senate, Mitch McConnell, the Republican minority leader, can call for the withholding of votes for cloture of debate on a subject and without saying a word on the floor on account of expedient conventions in the form of Senate rules, thus also preventing bills from being voted on in The Senate.  These men, who claim to support strict construction of our Constitution, exercise their peremptory powers like vetoes cast even before the fact of the attempt to legislate, and they do so despite the fact that this country purports to be a democracy in which the majority rules.  I say "purports to be" because in our federal legislature, the opinion of the majority of the voters as expressed in the most recent election never even gets to be heard much of the time, which has brought law-making in this country to a virtual halt and thus stalled progress on all kind of things from economic recovery to the humanism that we would like to take credit for in the world.

And now, the Republicans are indignant about the fact that President Obama, in an attempt to move forward on some important issues in despite the intransigence of a disloyal opposition , is employing plenary use of his executive powers to bypass the Republican blockade on legislation as if that impediment to the progress of our nation at a time when progress is so sorely needed.  What I wonder is this; will the American people remember all this when they cast their votes in November.  They seem to blame the Democrats for much of what is going on...or I guess I should say isn't going on...but while the Democrats have the power in the sense that they control The Senate and The White House, they are not able to use it because the democratically obtained mandate they have has been trumped by furtive procedural chicanery.  It is rarely noted that of the votes cast for members of The House in 2012, a majority were democratic by a margin of millions, but I say this about that.  If the majority of the American people want what President Obama and the Democrats have offered, they should stop voting as if they don't.  Either send a Democratic congress to Washington to work with The President in November or just give it all to the Republicans and let them do it to us again.  But either way, stop blaming the Democrats for what the Republicans won't let them do.  As I often say, on election day the majority of Americans get what they deserve.  But sometimes unfortunately, the rest of us get it too.

Your friend,

Mike

Dear America,

By now you have probably realized that my solution to the problem of economic inequality relies in large part on regulating or outlawing the things rich people do to get richer without actually working or producing anything.  And among those things is trading in "derivatives."  That term covers a lot of ground, some of which is legitimate, but some of which is just institutionalized gambling for people who have too much money to use.  Among derivatives are the kind that got our economy into the mess it is still in five years after the collapse of the housing market, but more on that another time.  Another part of the derivatives market is in the area of commodities.  You can buy large quantities of almost anything in advance of its production, and in many cases that is useful.  An orange grower may need money for maintenance of his orchard now so that his crop will be fulsome when it comes in in a year, so he can sell orange juice futures on the commodities market to finance its that maintenance.  But then there is the use of the market by speculators, which has an impact on all of us in that it leaves the farmer with his obligation to sell the juice of his crop at one price while driving the price we pay in the supermarket relentlessly upward.

Orange juice futures seem almost frivolous in light of the fact that the price seems relatively stable, though trending ever upward in subtle ways; a half-gallon of orange juice is no longer a 64 ounce half-gallon, but now is rather what passes for a half-gallon: 59 ounces.  But there are other commodities that are more essential and that are caused to fluctuate wildly because of speculation...oil in particular.  It is not unusual for the price of a barrel of oil on one of the oil futures exchanges to go up by 20% in a month, or even quicker, because someone in the middle east is angry at someone else there.  That isn't a function of scarcity, because even when Libya was in a state of revolutionary chaos, the world's supply, which runs at about 83 million barrels of oil per day, went down by only about 1%, which the Saudi's made up effortlessly along with ever increasing American production, which continually decreases American demand in the world market.  But the price of a barrel of oil changed dramatically during that period, and we paid for it at the pump when we bought gasoline.  The reason was neither a significant change in supply, nor was it demand, which has been declining lately because of slow economies in Europe and Asia.  So what was it then; it was speculators who bought oil futures in the market.  My solution to the problem of the market being moved by people who think that time will increase the value of a commodity--or of any derivative including mortgage based ones like credit default swaps, the kind of derivatives that were the main cause of the worldwide economic crash at the end of 2007 and the beginning of 2008--is to bar from those markets anyone who cannot take delivery of the commodity.  In the case of oil in particular, individuals and companies that do not deal in oil, or use it in volume like airlines, would be effectively barred from trading in it because they would not have the storage or shipping capacity under their control to allow them to accept delivery of any significant amount of oil, and thus, they would be eliminated from the trading process that now allows the price to swing wildly because someone thinks there might not be enough soon.  It's simple really, even though we don't control all of the markets in which oil is traded because we use more foreign oil than any other nation, and what we do affects the market worldwide.

If that kind of market regulation were combined with a nationalized portion of the oil industry--just enough to supply the federal government with the 10% of total American consumption that the military and government agencies use each day--there would be that much less demand, and since the law of supply and demand would control oil prices rather than the ability of oil speculators to intervene, we would have a rational market for petroleum, which would be to the advantage of everyone who uses petroleum based products.

Then there is the unfair trading practices of participants in the world market in general, including that of American companies.  There has been a taboo in economics in that regard for decades.  It is called protectionism and it is the scourge of international, macro-economic theory, but we now have a problem not just with foreign competitors.  We also have one with American companies that exploit foreign advantages like obscenely low labor costs on account of the weakness of labor in some other countries like Bangladesh and China.  More on that next Tuesday.

Your friend,

Mike

Dear America,

The solutions to one of our nation's afflictions--economic, and hence social, stratification--are not the kind of remedies that smack of social engineering iterated in President Obama's State of the Union address.  Rather, what we need is a candid assessment of American capitalism and a fundamental willingness to change some things at their most quintessential levels.  The reason that our system seems stacked against those who are not already at the top of our economic ladder is that it is.  And changing tax laws will impede the tendency in that direction to some extent, but until we acknowledge the difference between natural and artificial wealth in every sphere, we can do nothing to change the institutionalization of inequality that is the American economic system.  We have cast in stone the rules that make the sedimentation of our society ineluctable.  We actually protect what has become an economic caste system and thus change in the disparity between rich and poor is almost certain not to occur.  That is why preschool education and reinforcement of values that have fallen by the wayside will not serve to get us on the path toward the real egalitarianism that we have always claimed was the American Way, but that in reality hasn't been since the industrial revolution.  The virtual aristocracy of the wealthy in this country didn't start yesterday, or ten years ago.  It evolved over the course of a century and a half, sponsored of late by those who subscribe to supply-side economics and the Calvinistic social Darwinism of would-be pundits like Ayn Rand and her modern acolyte, Paul Ryan.  It represents the decay of our ideals, not their manifestation, and in order to alter that trend, we must dig deep into the economic institutions that have precipitated it, starting with corporations.

Some years ago, back when I believed the notion that one could make money legitimately by investing in the stock market, we owned some stock in a tire company.  It began to move in the wrong direction and the shareholders were up in arms about the policies implemented by management and the CEO in particular.  There was a grass-roots movement to replace him and the board of directors at the annual shareholders' meeting, where millions of shares were voted against the compensation package that the CEO was slated to receive.  But millions of shares--a majority of those cast--were not enough because they did not represent a majority of all the shares that were outstanding, a substantial plurality of which didn't vote at all.  Thus, the consensus of the majority of those who were interested in the running of the company was thwarted by a corporate by-law...one that is on the books of a great many corporations.  That style by-law virtually guaranties both the impunity of over-paid executives and their exorbitant compensation, and not incidentally the astronomical pay outs they receive when they get fired for being failures.  It is the American equivalent of inherited titles of nobility, and addressing that one thing in particular would be of enormous moment.  Limiting tax incentives that maximize profits while diminishing the national weal will help to reduce the corporate tendency toward exploitation of impoverished people at the expense of American workers, but it is not enough.  Raising the minimum wage will help in several ways: it will put more buying power in the hands of people who will exercise that power and thus stimulate the economy and create the need for more workers, hence more jobs, but that is not enough either.  Even The President's executive order to pay all employees of federal contractors $10.10 per hour at a minimum will help by putting more power in the hands of workers at the expense of the capitalist upper class that decides how much is enough to pay people without eroding their own profits.  They will have to compete with federal contractors for workers at a time when we can anticipate more federal spending on infrastructure, among other things, and that will drive wages up after five years of downward pressure on wages because of the scarcity of jobs at the lower levels of business and industry.  But eliminating the insular power of the board room to sequester corporate revenue for the benefit of the select few executives would go much farther in that it would prevent the accretion of wealth in the hands of people who make their livings deciding things rather than doing them.  It should result in a more equitable wage scale for executives who used to make 40 times the average wage and now make 400 times that amount, and as a byproduct of that reconciliation of compensation with value, wages at the lower levels of business--the levels at which the work is done--can be more reflective of the division of labor within the company, and thus within our society.

So, I would take the step of outlawing corporate by-laws that insulate executives from the will of the majority of interested shareholders who actually vote their shares--rather than allowing those who don't bother to vote but just cash in the dividends to have a say in determining executive compensation by doing nothing--as a first step, but that is all it would be: a first step.  I'll tell you about step two on Friday.

Your friend,

Mike