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Week-end Wrap – Political Economy – June 11, 2023

by Tony Wikrent

Strategic Political Economy

What Happens When Corporations are Taxed at 50% – Like Before the Reagan Revolution?

Thom Hartmann, June 5, 2023 [DailyKos]

The main benefit of raising the top personal income tax bracket back up to nosebleed levels is that it causes CEOs and business owners (people who can essentially determine their own pay) to restrain themselves from draining the corporate coffers just to buy a new super-yacht, jet, private island, or a fourth 70-room mansion in the Swiss Alps.

Back in the 1933-1981 era, instead of behaving like spendthrift wastrels, CEOs and business owners would take income up to the edge of the top tax bracket and then stop (with the most prosperous CEOs maxing out at around 30 times average worker income), leaving the rest of the money in the company….

The second, though, is really the most important: taxes are used to incentivize behaviors that are good for the nation and discourage behaviors that are destructive to the nation.

What Happens When You Tax Billionaires at 90 Percent?

Thom Hartmann, June 3, 2023 [DailyKos]

[TW: Ian explained the damage tax cuts inflict on real investment in a January 2008 post on FireDogLake, which is now longer even archived. It was entitled, “Why Financial Crises Will Keep Happening” and I saved this excerpt of it:

At this point to wring the excesses out of the system and to stop the systemic incentives to keep blowing bubbles is going to require doing something to make it so it doesn’t pay. There are two parts to any solution. The first and simplest way is to put a very progressive tax on all income no matter how or where earned that probably comes in at over 95% of all income over, say, $500,000 or a million at the most. Suddenly, needing to actually keep the companies sound, and knowing that in 7 years when the loans go bad, they’ll still be there taking the heat for it, will tend to concentrate the mind not on “can I make enough money to be in a yacht in 3 years” but into “does this deal make sense over the longrun”.

-TW ]

The economic consequences of major tax cuts for the rich (PDF)

[LSE Research Online, via Naked Capitalism 6-8-2023]

The Abstract: “This paper uses data from 18 OECD countries over the last five decades to estimate the causal effect of major tax cuts for the rich on income inequality, economic growth, and unemployment. First, we use a new encompassing measure of taxes on the rich to identify instances of major reduction in tax progressivity. Then, we look at the causal effect of these episodes on economic outcomes by applying a nonparametric generalization of the difference-in-differences indicator that implements Mahalanobis matching in panel data analysis. We find that major reforms reducings taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.”

(anti)Republican Party debt charade

The Fix Was In With Biden’s Debt Ceiling Deal (podcast)

June 8, 2023 [The Lever]

On this week’s Lever Time, Sirota and David Dayen of The American Prospect unravel the “meager thinking” behind the debt ceiling deal.

The Coming Storm of Fiscal Policy

Dylan Gyauch-Lewis, June, 2023 [The American Prospect]

How Democrats created a worse debt ceiling situation in 2025…. A default was sidestepped, but only for now. Depending on decisions made by voters just a year and a half from today, we could well see a replay of exactly the same type of hostage-taking from congressional Republicans—only then, President Biden would have even less leverage than he had this time around. Indeed, 2025 will feature a Kilimanjaro-sized fiscal cliff, giving the 2024 elections even higher policy stakes. Provisions of the Affordable Care Act and most provisions of Donald Trump’s tax cuts are both set to expire in 2025, and at the same time the debt ceiling will unfreeze, and the spending caps instituted under the Fiscal Responsibility Act will expire….

The Biden administration has been at its best when using the administrative state to take on rapacious corporations and protect the public. This deal impedes that work. The next deal might see it grind to a halt. Looking at who the president trusted with negotiations doesn’t exactly cause a swell of optimism, either. One of the top negotiators Biden appointed was Steve Ricchetti, a former head of lobbying for pharmaceutical companies (among other industries). Ricchetti has a documented history of opposing labor interests and overt elitism and nepotism. Also heavily involved was White House Chief of Staff Jeff Zients, who has long been a key pathway for getting corporate preferences into policy. On top of that, Zients himself exemplifies the type of corporate tycoon that the full weight of regulatory power should be coming down on. Trusting either with the fate of regulatory agencies is letting the fox negotiate the strength of the henhouse.

In short, this round of negotiations was fought to a draw, but the White House backed itself into a corner before the next one even started. The White House may have won a reprieve from fiscal policy fights, but there’s a fiscal policy hurricane brewing.

Global power shift

Falling Behind: The Growing Gap in Life Expectancy Between the United States and Other Countries, 1933–2021

[American Journal of Public Health, via Naked Capitalism 6-5-2023]

From the Abtract: “The US life expectancy disadvantage began in the 1950s and has steadily worsened over the past 4 decades. Dozens of globally diverse countries have outperformed the United States. Causal factors appear to have been concentrated in the Midwest and South.” For some definition of “causal factors.”

An Unwinnable War 

[Foreign Affairs, via Naked Capitalism 6-6-2023]

[Yves Smith notes: “Foreign Affairs is THE heavyweight American foreign policy journal, so rest assured that whatever it says has a big following or is emerging conventional wisdom.” ]

The Battle of Bakhmut: Postmortem 

[Big Serge Thought, via Naked Capitalism 6-5-2023]

6 Swing States Will Decide the Future of Geopolitics 

[Foreign Policy, via Naked Capitalism 6-9-2023]

Brazil, India, Indonesia, Saudi Arabia, South Africa, and Turkey.

Saudi crown prince threatened ‘major’ economic pain on U.S. amid oil feud 

[Washington Post, via Naked Capitalism 6-10-2023]

The capitalists are revolting over China: Western hawks face an unlikely resistance

BY Thomas Fazi [Unherd, via Mike Norman Economics, June 6, 2023]

Who is looting Yemen’s oil, and where does it all go?

[The Cradle, via Naked Capitalism 6-5-2023]

Health care crisis

[Twitter, via Naked Capitalism Water Cooler 6-6-2023]

[Twitter, via Naked Capitalism Water Cooler 6-6-2023]

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Giving It All Up For The Davos Elite 

[Pandemic Enclave, via Naked Capitalism 6-8-2023]

But here’s the problem: our world is run by a bunch of greedy, thoughtless wealthy elites who don’t see us as human, who don’t give the slightest fuck about us. The politicians are just puppets they manipulate.

We keep asking things like why has COVID been allowed to run rampant? While many of us have surmised the answer – the mass culling of us proles – here we have it now laid out in a major publication, in Scientific America. The authors don’t point fingers, but I’m happy to do so.

COVID was a gift to the Davos crowd (the billionaires, essentially). They’re perfectly aware of how dangerous SARS-CoV-2 is, and they’re also perfectly aware of how transmission can be prevented. And even those who aren’t in the Davos league but are rich enough know better send their kids to Davos-safe schools (e.g., Ashish Jha and Rochelle Walensky).

But the oligarchs tell us – the proles, the worker bees, the expendables – through their bought and paid for politicians and media outlets that it’s just a cold, just the flu, nothing to worry about! Masks are bad. Vax and relax! Or don’t vax at all. It’s all good. You do you!

The carnage of mainstream neoliberal economics

Zeitgeist 2023 

[Heisenberg Report, via Naked Capitalism 6-6-2023]

Shares of Dollar General fell precipitously after the discount retailer reported weaker-than-expected comps for Q1 and slashed its full-year sales and profit forecasts in what one bank called a “surprisingly poor” update.

Company analysts debated the “real” cause of the disappointing report, but if we take Dollar General at its word, the key issue is the macro environment and the impact it’s having on the company’s “core customer.” At the risk of accidentally offending anybody, “core customer” in this context just means people with very little money….

…could be viewed as a manifestation of the familiar, post-GFC inequality dynamic wherein financial asset bubbles stood in stark contrast to mostly stagnant wages and other signposts of a Main Street malaise that’s existed in one form or another for the better part of four decades….

Commenting further on the company’s analyst call, Owen said Dollar General’s customers are “under greater pressure than we have seen in quite some time.” “We continue to see signs of increasing financial strain as they seek affordable options, including increased reliance on private brands and items at or below the $1 price point,” he added.

Idle rich baffled by poor people’s distaste for dangerous, low-paying jobs 

[Boing Boing, via Naked Capitalism 6-6-2023]

Big Agriculture Squeezing Argentina 

[ConsortiumNews, via Naked Capitalism 6-10-2023]

Why is it so hard to buy things that work well? 

Dan Luu, via Naked Capitalism 6-5-2023] (Jason Boxman).

Very dense, very long, very thought-provoking. “[I]f we think about things from the vendor side of things, there’s little incentive to produce working products since the combination of the fog of war plus making false claims about a product working seems to be roughly as good as making a working product…, and it’s much cheaper.

Boeing finds another quality problem on 787, delaying deliveries again

[Seattle Times, via Naked Capitalism Water Cooler 6-8-2023]

“Boeing said Tuesday it has discovered yet another manufacturing quality flaw on the 787 Dreamliner — this time in an attachment fitting on the horizontal tail, referred to as the stabilizer — that will delay deliveries of the jet as mechanics work to fix the defect. ‘We are inspecting 787s in our inventory for a nonconforming condition related to a fitting on the horizontal stabilizer,’ Boeing said in a statement. ‘The inspections and required rework will affect timing of near-term 787 deliveries.’ The statement added that the defect in the tail is ‘not an immediate safety of flight issue and the in-service fleet may continue to operate.’ It’s the latest in a long and very expensive litany of 787 quality woes…. The defect is a small, paper-thin gap in the attachment, Boeing said. Such gaps are typically plugged using a filler known as a shim. The shims in the attachment were incorrectly sized so that the gap exceeded the five-thousandths of an inch allowable in the specification.” • I keep hearing the word “shim” associated with Boeing manufacturing. It reminds me of another word: kludge. An alert reader threw this over the transom:

“Assembled in SC. My son tells me every damn last one of ’em has to be taken to Everett for rework. Honest to Pete. The stories I’ve heard from my husband’s uncle (89) who did 36 years at Boeing as an Engineer and my son’s recent two-stint experience working at the Fredrickson Plant right here near Tacoma, then training in Everett, then another stint in Renton. Then a couple my husband and I met. A couple in the 5th wheel next to us, the husband retired after 30+ years. Lots of parts coming in bad, the whole financialization. He directly saw, felt knew the impacts. This plane company is a manufacturing shit-show. David Calhoun needs a required unpaid two year internship working on the line in Renton.”

Need for Speed Has Taken Focus off Rail Safety 

[The Wire, via Naked Capitalism 6-8-2023]

Predatory Finance

JPMorgan and Citigroup Are Using the Same Accounting Maneuver as Silicon Valley Bank on Hundreds of Billions of Underwater Debt Securities

Pam Martens and Russ Martens, June 6, 2023 [Wall Street on Parade]

The Three Large Banks that Blew Up This Year Were Not Even on the FDIC’s Problem Bank List

Pam Martens and Russ Martens, June 5, 2023 [Wall Street on Parade]

Disrupting mainstream economics

What the debt ceiling debate missed 

Rana Foroohar [Financial Times, via Naked Capitalism 6-6-2023] Important (and archive.ph is your friend)

What got lost in the heat and noise of the debate is that the debt created by the government sector turned into growth in the household sector. This is a point made by former banker Richard Vague, now the Secretary of Banking and Securities for the Commonwealth of Pennsylvania, in his upcoming book The Paradox of Debt.

Vague notes that in 2020, during the Covid pandemic, the US federal deficit reached $3tn as the government acted to help rescue America’s economy — and to some extent the world’s. At the same time the wealth of the country as a whole increased by around $11tn, thanks largely to the fact that the net worth of US households rose by $14.5tn that same year.

In fact, if you look at the full three years of the pandemic from 2019 to 2022, government net worth went down $1.7tn dollars (it was down $6tn at the federal level), while household net worth went up $30.9tn. This is true even when you account for the stock market decline of last year.

Why? Because government debt became household income, as well as rising asset wealth from stocks and home values, which have increased along with debt — public and private — since the 1980s. “Debt is, quite simply, required to create GDP growth,” says Vague, who lays out why total debt to GDP ratios in the US, and in all but two of the world’s seven largest economies, have risen in tandem since the 1950s.

He refers to this as a “government debt and spending model” in which the benefits of government spending flow to non-financial businesses as well as households.

Using Angola’s power glut for Germany’s energy transition 

[DW, via Naked Capitalism 6-6-2023]

German developers want to exploit a power plant in Angola to produce hydrogen for Europe’s industries. At the same time, many households in Angola have no electricity. Will remote areas lose out against economic might?

Smoke Sends US Northeast Solar Power Plunging By 50% As Wildfires Rage In Canada 

[Reuters, via Naked Capitalism 6-10-2023]

The world is finally spending more on solar than oil production

[MIT Technology Review, via The Big Picture 6-6-2023]

The International Energy Agency just released its annual investment report. Here’s where the money is going.

Scientists Beam Space-Based Solar Power to Earth for First Time 

[Gizmodo, via Naked Capitalism 6-7-2023]

Information age dystopia / surveillance state

[Twitter, via Naked Capitalism Water Cooler 6-10-2023]

[Lambert Strether adds: “Reminds me, ‘Every time we witness an injustice and do not act, we train our character to be passive in its presence and thereby eventually lose all ability to defend ourselves and those we love.’ Julian Assange “]

Lie, Cheat, and Steal: The CIA’s Disastrous Scientific Legacy 

[Science for the People, via Naked Capitalism 6-8-2023]

(anti)Republican Party

[Twitter, via Naked Capitalism 6-6-2023]

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The Trump Indictment Is a Phenomenal Self-Own

Alex Shephard, June 9, 2023 [The New Republic]

…But there’s something else that stands out to me about the indictment: It’s really funny. Much of that is in the document’s details, which contain several instances of Trump walking around Mar-a-Lago bragging about all of the classified documents he has stashed around his club or showing said documents to people while also telling them he shouldn’t be doing it….

The indictment is also funny because it could have been avoided. Donald Trump probably would have gotten away with all of this if he had simply returned these documents when he was asked to….

It’s not entirely clear why he refused to do this, though Occam’s razor suggests that he simply wanted to hold onto the documents because they make him feel important and special and that he likes showing them to people (even though doing so is illegal) because, well, it makes him feel important and special. His refusal to hand the documents over made this indictment inevitable but, again, he probably wouldn’t have been indicted if he had just … given them back earlier. He didn’t, and now he has been handed one of the most damning and hilarious indictments in American political history.

 [TW: Trump’s behavior — his need to feel important — has been explained quite well by observers of oligarchs throughout history, such as Plato, Cicero, Machiavelli, and Milton (“Better to reign in hell than serve in heaven.”) This behavior is also exhibited by members of the Democratic Party; a recent, very notorious example is California Senator Diane Feinstein’s refusal to relinquish power despite her clear physical inability to fulfill her duties to “do the peoples’ work.” ]

The (anti)Federalist Society Infestation of the Courts

The Supreme Court’s Latest Ruling Against Unions is Really Aimed at the New Deal 

Ruben J. Garcia [Washington Monthly, via Naked Capitalism 6-10-2023]

The most recent example of the Court hindering the labor movement is last week’s decision in Glacier Northwest v. Teamsters Local 174. On the surface, the opinion skates the nerdy surface of labor preemption and the alleged misdeeds of a union on strike. Its real target is a favorite of conservative judges—the administrative state, particularly the National Labor Relations Board.…

Merck Says Negotiating Drug Prices Is Unconstitutional 

Ryan Cooper, June 8, 2023 [The American Prospect]

As my colleague David Dayen has written, the Inflation Reduction Act included some exceedingly modest drug price reforms. A handful of drugs will be subject to negotiation starting this year, with the actual prices coming into force in 2026, and a few dozen more being added over time.

Yet the pharmaceutical company Merck is now suing the government over even this modest change, claiming that the reform is unconstitutional. Apparently, any restrictions on their ability to pillage Medicare would make James Madison cry.

Merck’s complaint is jarringly heated for a legal filing. “This is not ‘negotiation.’ It is tantamount to extortion,” it whines. That’s likely because Merck’s law firm is Jones Day. As Brad Miller wrote in a recent Prospect print issue, Jones Day pioneered the scorched-earth legal tactics that are now routine in the right-wing legal universe. It used every dirty trick it could think of, for instance, to defend R.J. Reynolds from the lawsuits of sickened smokers—from dragging out every procedural point as long as possible with tendentious filings, to claiming that smoking doesn’t cause lung cancer, to bringing up irrelevant embarrassing personal details about the plaintiffs. It worked closely with the Trump administration; one of its top lawyers, Don McGahn, served as White House counsel and heavily influenced Trump’s judicial nominations. The firm also represented Trump in his efforts to overturn the 2020 election through legal chicanery.

Clarence Thomas’ Billionaire Benefactor Tied To SCOTUS Bombshell 

Branko Marcetic, June 6, 2023 [The Lever]

The Supreme Court just gutted wetland protections after lobbying by Harlan Crow’s business interests….

First exposed by ProPublica in April, Thomas was revealed to have failed to disclose decades worth of generous gifts from right-wing billionaire Harlan Crow, the chairman and former CEO of Crow Holdings. The long-standing financial relationship between the two men — which has included not just lavish holidays and pricey private-school tuition for the boy Thomas raised as his son, but even purchase of real estate — has already led to calls to impeach Clarence Thomas.

As HuffPost reported in April, a trade group chaired by Ken Valach, currently the CEO of the development platform of Crow Holdings, was directly involved in the Sackett case, pouring cold water over Thomas’s claim that Crow’s gifts weren’t a conflict of interest because the billionaire had no business before the court.

Disrupting mainstream politics

Cornel West Announces Presidential Bid … as a People’s Party Candidate

Prem Thakker, June 5, 2023 [The New Republic]

West, born in Oklahoma before the civil rights era, has been an outspoken voice who has bridged the schools of socialist tradition to Christianity and spiritualism more broadly. He carries a history of fierce advocacy for racial and economic equality, and a strong rejection of blaming material or social misery on the marginalized, as opposed to the elites and structural forces actually responsible.

And he is now running on a party ticket that purports to embrace similar ideals but has had trouble on the execution side of things. While the party began in 2017 with noble roots to form a new political party independent from corporate money and influence, it has been mired in troubling allegations, as well as broader organizational dysfunction.

#2 The Startup Party: reflections on the last 20 years, what could replace the Tories, and why 

Dominic Cummings [via Naked Capitalism 6-8-2023]

…Another political dynamic hugely underrated in Europe and almost invisible in UK media: AOC, Bernie and practically the entire Democrat network have fallen into line on Ukraine because of the power of the ‘Trump was a Putin agent’ meme, so the ‘war against Putin’ is, for Democrats, part of the war against Trump, which is the war against fascism. The hysteria and irrationality over Ukraine among Insiders across political divides and media organisations can only be understood if you grasp the emotional force of this meme. (Even though I watch this carefully I only sensed its power when I went to America last year and talked to people. You can’t see it watching US news on the internet.)

The ‘Trump + Brexit = Putin + Jedi technology = end of democracy + fascism’ Insider meme can only become weirder because of a) Trump 2024, b) we are early in the AI exponential — models in November 2024 may be ~10X or 50X more powerful than GPT4, which is impossible for most including me to imagine. There’s no going ‘back to normal’, the halcyon days between the fall of the Wall and the fall of the Towers, it’ll only get weirder and weirder.

Is Capitalism Really Cracking Up Nation-States?

Lee Harris, June 7, 2023 [The American Prospect]

Quinn Slobodian’s new book shimmers with libertarian dreams but fails to demonstrate that zones are splintering national governments…. Slobodian convincingly demonstrates that libertarians rival neoliberals, the subject of his previous book, in their open hostility to democracy. But while Crack-Up Capitalism takes a colorful trip through the reveries of right-wing economists, tech billionaires, and racist secessionists, it never quite shows that their despotic fantasies shade into a new variant of capitalism.