July 5, 2012
The Congressional 18th of NY

 I was originally going to write an article discussing the Democratic Primary held in the Congressional 18th district of New York on June 26. However, after a few days of solemn contemplation I decided there is a broader story here. These primaries are suppose to be to pick the best candidate to represent the interests of your district both socially and economically. As in any democratic government, there is suppose to be a broader social pact with the State. We as citizens pay taxes to both the Federal and State government, and that money comes back to the community in the form of roads, infrastructure, community development, education and security. We go through these election cycles and both sides, Democrats and Republicans ask us to elect them and they will in turn cut out the waste in Washington. “Waste” is a code word; for the Left it means cutting boondoggle defense contracts and eliminating tax breaks for corporations; for the Right it means cutting Medicare, Social Security and Welfare. We as good citizens go to the voting booth polarized by the news medias’ rhetoric and vote based on those polarized beliefs. But none of it is true. Neither side has any interest in eliminating their respective “waste” as it continues to polarize people and help them raise money from their respective interest groups.

So what are we really seeing. The politicians we are electing to congress are affluent, in most cases have multiple homes, send their kids to private schools and don’t have an economic interest in the district they represent. That’s the key, don’t have an economic interest in the district they represent. A Congressperson’s responsibility is to represent that district and bring federal dollars to their constituents, in the form of education, infrastructure and security. With the growing lack of economic interest in their communities, Congresspersons no longer have a vested economic interest in bringing that money back to said district for education, infrastructure or security. Don’t get me wrong, if they have a chance to slap their name on an earmark they will do it, but not much incentive after that.

Over the last 10 years we have seen over 40 municipalities go bankrupt in this country, and a number more are under emergency financial managers, and thousands are on the verge. One significant reason for this is that the Federal and State governments are allocating less money back to the municipalities, forcing these different localities to raise property taxes and school taxes, as well as issue more municipal debt. This is to pay for crumbling infrastructure, increased education costs associated with federal mandates and growing population and of course security. The discussion of “Waste” in Washington is a ruse, to keep people distracted enough so they wont see that more and more money is being extracted from the communities they live in, and those that do see it think it’s that “Waste.” It is not, it is just money being extracted out of the communities and into the hands of large corporations and large donors.

So what does this have to do with the Congressional 18 of NY. Everything. In that election we had five candidates running for election, only three of which actually lived and had an economic interest in the district. One of them Sean Patrick Maloney, who subsequently won the nomination, was hand picked by the Democratic Party to represent the 18th district. So instead of the district picking, the DNC poured money into Maloney’s campaign to ensure they had someone loyal to the party, irrespective of whether the candidate actually lived in the community or would be loyal to that community. The DNC lined up the unions to mobilize the democratic vote and it worked. However, as we have seen in Wisconsin and all throughout the US, the Democrats really don’t care about unions, they are only good for mobilizing the vote, when it comes to standing and marching with them they don’t really care about their issues.

Now I don’t know Sean Patrick Maloney, and I am sure he is a nice guy. But given that he didn’t campaign in the district much, and put all his effort hiring out of state phone banks for robo calls and sending out mailers once a day and having former President Bill Clinton make robo calls on his behalf, I have to ask, does he really have an interest in representing the 18th District, or is he only interested in going to Washington and representing Democratic party interests. Since he announced he has spent little time in the region getting to know the people in the communities and our issues and now the race for Congress in the 18th District comes down to Republican Congresswoman Nan Hayworth and a Republican party that believes any money sent to your district for education and infrastructure is welfare and Sean Patrick Maloney.  Given the area has lost millions in Federal and State funding, I seriously doubt either candidate has a desire to build and grow our communities and return to us what belongs to us, our tax dollars in the form of infrastructure, education and security.

May 22, 2012
Who Really Pays Taxes in the US

I’m sure you’ve all heard that our income taxes are “unfair” because the top 1% pays 40% of the taxes in this country and that half of us pay nothing at all. People espousing this view are quick to jump to doomsday scenarios and paranoid rambling. The Heritage Foundation thinks our very democracy is at risk because those darn poor people get to vote. The Daily Mail engaged in a bit of hand-wringing over potential “resentment” from people who do pay taxes, even as pointing out that the group who isn’t taxed includes kids, retirees, and other people who don’t work. Darn freeloading babies, old people, and stay-at-home moms! But are the numbers even accurate? Let’s take a look.

Well, about half of all Americans don’t pay income tax. That doesn’t mean they aren’t paying any taxes. When you factor in all the other ways in which each of us is taxed every day, it’s virtually impossible for an individual to pay absolutely nothing. Contrary to what the talking points would have you believe, income taxes are not the only source of government revenue, and in 2011 actually only made up 47% of total moneys collected. The next largest chunk of revenue comes from Social Security and Social Insurance taxes at 36%, with a measly 8% coming from corporate income taxes, 3% from excise taxes on products like gasoline, alcohol, and cigarettes, and 6% from miscellaneous sources such as estate and gift taxes.

Pie chart breaking down 2011 U.S. Federal Tax Revenue, in which individual income tax makes up 47%, social security tax is 36%, corporate income tax is 8%, excise tax is 3% and other sources are 6%

Congressional Budget Office numbers for 2011

Pretty much everyone who has a job pays Social Security and Medicare taxes under FICA, the Federal Insurance Contributions Act, though some student workers are exempt and individuals who are self-employed pay a variation that I’ll get to in a second. The Social Security tax rate is usually 6.2% but was temporarily dropped to 4.2% for 2011 and 2012, and in 2011 is only levied on the first $106,800 of gross income for a limit of $4,485.60. Since any wages above the $106,800 cap isn’t taxed at all, people pay a progressively lower overall rate the more money they make; for example, someone earning a million dollars would only pay about 0.45%. For this reason, it’s considered a regressive tax. Medicare taxes are an additional 1.45% with no upper cap. Employers also pay these taxes in addition to what was taken out of the salary for a total of another 7.65% (they didn’t get the temporary SS tax discount but the cap still applies so the percentage is lower for higher-wage employees). The tax on people who are self-employed is more complicated, with them paying the combined employee and employer taxes but with some finagling and income tax deductions to make it work out fairly.

Yellow bumper sticker that reads "47% pay NO taxes so who isn't paying their "FAIR SHARE"?

But if it’s on a bumper sticker, it must be true! (via Zazzle)

When you look at excise taxes and state and local taxes, the bottom 50% pays even more. Excise taxes are generally invisible since they’re factored into the price of products before sales tax is added and vendors factor them into the retail price. For examples, think about the .9¢ on gasoline and diesel prices, or the vastly different prices on tobacco products depending on where you buy them, which is due to different levels of federal, state, and local excise taxes. These taxes are the same no matter what your income level, and in some cases poor people may pay much more since they may not be able to afford newer cars that go farther with each gallon of gas, leading to higher consumption. Sales taxes also disproportionately affect lower-income individuals since they tend to spend a much higher percentage of their income. Most people also pay property taxes, either directly on homes/land they own or indirectly as a portion of rent paid to landlords. Almost every state and some cities charge their own income taxes or commuter taxes for people who work there but live elsewhere.

Cartoon of President Obama saying "I won't allow the half of Americans who pay no taxes to beat the burden of the other half who aren't paying their fair share."

Oh, fuck off.

So how much does the 1% pay in comparison to everyone else? According to figures compiles by Americans for Responsible Taxes, the top 1% of wage-earners made an average of $1,328,000 in 2010, giving them 20.4% of total income earned by all Americans that year. Taking into account all forms of taxation, this left them paying a 30.8% tax rate which accounted for 22.1% of total tax revenue. The bottom 99% only earned $56,200 on average, spending 28.2% of it on taxes, only a 2.6% lower rate. Even the bottom 20% who only earn on average $12,400 pay 16% in taxes. In real numbers, that average 1 percenter will still have $918,976 left over after tax, while the average person in the bottom 20% will only have $10,416. Tell me again how the top 1% has it hard?

May 17, 2012
TED Talk - Nick Hanauer

March 8, 2012
"Invisible Children" not what you think it is.

Thanks to an incredibly effective social media effort, #StopKony is trending on Twitter today. The campaign coincides with a new awareness-raising documentary by the group Invisible Children. Former FP intern Michael Wilkerson, now a freelance journalist and Ph.D. candidate at Oxford — who has lived and reported from Uganda — contributed this guest post on the campaign. -JK 

By Michael Wilkerson:

“Joseph Kony is basically Adolf Hitler. He has an army of 30 000 mindless children who slaughter innocent people in Uganda.”

Have you seen something like that fly across your Twitter or Facebook feed today? Or perhapsthis?:

“#TweetToSave the Invisible Children of Uganda! #Kony2012 Make Joseph Kony Famous!!”

Kony 2012,” a video posted by advocacy group Invisible Children to raise awareness about the pernicious evil of Lord’s Risistance Army (LRA) leader Joseph Kony,  has already been viewed over 8 million times on Vimeo and more than 9 million times on YouTube (and surely more by the time you read this) since its release this week.

It would be great to get rid of Kony.  He and his forces have left a path of abductions and mass murder in their wake for over 20 years.  But let’s get two things straight: 1) Joseph Kony is not in Uganda and hasn’t been for 6 years; 2) the LRA now numbers at most in the hundreds, and while it is still causing immense suffering, it is unclear how millions of well-meaning but misinformed people are going to help deal with the more complicated reality.

First, the facts. Following a successful campaign by the Ugandan military and failed peace talks in 2006, the LRA was pushed out of Uganda and has been operating in extremely remote areas of the DRC, South Sudan, and the Central African Republic — where Kony himself is believed to be now. The Ugandan military has been pursuing the LRA since then but had little success (andseveral big screw-ups). In October last year, President Obama authorized the deployment of 100 U.S. Army advisors to help the Ugandan military track down Kony, with no results disclosed to date.

Additionally, the LRA (thankfully!) does not have 30,000 mindless child soldiers. This grim figure, cited by Invisible Children in the film (and by others) refers to the total number of kids abducted by the LRA over nearly 30 years. Eerily, it is also the same number estimated for the total killed in the more than 20 years of conflict in Northern Uganda.

As I wrote for FP in 2010, the small remaining LRA forces are still wreaking havoc and very hard to catch, but Northern Uganda has had tremendous recovery in the 6 years of peace since the LRA left.

So why is “Uganda” trending on Twitter?

Unfortunately, it looks like meddlesome details like where Kony actually is aren’t important enough for Invisible Children to make sure its audience understands. The video, narrated by Invisible Children co-founder Jason Russell, says its purpose is to intensify pressure on the U.S. government to make sure Kony is brought to justice this year, and as the message broadcast throughout says, what is important is simple: Stop Kony.

Among other emotive shots, the video features Russell’s attempt to explain the LRA to his toddler son, enthusiastic (and mostly white) volunteers putting up posters and wearing Kony 2012 bracelets, and some heart-wrenching footage of children who walked for miles to sleep in a safe place at the height of the LRA’s power in Northern Uganda. The latter comprised much of Invisible Children’s namesake first film and brought the organization to prominence.

But in the new film, Invisible Children has made virtually no effort to inform. Only once, at 15:01 in the movie, over an image of a red blob on a map leaving Northern Uganda and heading West, is the fact that the LRA is no longer in Uganda mentioned, and only in passing:

“As the LRA begain to move into other countries, Jacob [one of the children filmed in Northern Uganda in 2003] and other Ugandans came to the US to speak on behalf of all people suffering because of Kony. Even though Uganda was relatively safe they felt compelled to tell the world that Kony was still out there and had to be stopped.”

That’s it, in a 30-minute movie. And with both the graphic and reiteration of how awful the LRA is, you might think reasonably “move into other countries” meant expanding rather than fleeing. In any case, the focus, seconds later,  is on Invisible Children’s activities in the U.S. at the time, not what was happening back in Africa. I can see why some of P. Diddy’s followers might be confused.

Award-winning Ugandan journalist Angelo Izama is among those not thrilled:

“To call the campaign a misrepresentation is an understatement. While it draws attention to the fact that Kony, indicted for war crimes by the International Criminal Court in 2005, is still on the loose, its portrayal of his alleged crimes in Northern Uganda are from a bygone era. At the height of the war between especially 1999 and 2004, large hordes of children took refuge on the streets of Gulu town to escape the horrors of abduction and brutal conscription to the ranks of the LRA. Today most of these children are semi-adults. Many are still on the streets unemployed. Gulu has the highest numbers of child prostitutes in Uganda. It also has one of the highest rates of HIV/AIDS and Hepatitis.

If six years ago children in Uganda would have feared the hell of being part of the LRA, a well documented reality already, today the real invisible children are those suffering from “Nodding Disease”. Over 4000 children are victims of this incurable debilitating condition. It’s a neurological disease that has baffled world scientists and attacks mainly children from the most war affected districts of Kitgum, Pader and Gulu.”

Along with sharing the movie online, Invisible Children’s call to action is to do three things: 1) sign its pledge, 2) get the Kony 2012 bracelet and action kit (only $30!), and 3) sign up to donate.

There is intense criticism out there over Invisible Children’s finances, including that it spends too much money on administration and filmmaking, while still touting its on the ground NGO-style projects. Also, apparently it’s never been externally audited. I’m going to stay out of that, other than to say you can check out IC’s own financial disclosure information here.

What worries me more is that it’s unclear what exactly Invisible Children wants to do, other than raise a lot of money and attention. Here’s Russell in the video (21:40):

“We know what to do. Here it is, ready? In order for Kony to be arrested this year, the Ugandan military has to find him. In order to find him, they need the technology and training to track him in the vast jungle. That’s where the American advisors come in. But in order for the American advisors to be there, the American government has to deploy them. They’ve done that, but if the government doesn’t believe the people care about Kony, the mission will be cancelled. In order for the people to care, they have to know. And they will only know if Kony’s name is everywhere.

So the goal is to make sure that President Obama doesn’t withdraw the advisors he deployed until Kony is captured or killed. That seems noble enough, except that there has been no mention by the government of withdrawing those forces — at least any I can find. Does anyone else have any evidence about this urgent threat of cancellation? One that justifies such a massive production campaign and surely lucrative donation drive?

There are many reasons uninformed and oversimplified advocacy can cause trouble, and Siena Antsis catalogues some of them here, noting that Invisible Children expertly “commodifies white man’s burden on the African continent.”  Buy a bracelet, soothe some guilt.

But as researcher Mark Kersten notes, after “stopping Kony”, then what? Or what if the activism just results the the 100 U.S. advisors staying but no Kony?

One of the biggest issues with a simplistic “Stop Kony” message is that discussions of Navy Seals or drone strikes are inevitable when patience runs out with Ugandan-led efforts . But what about the dozens or hundreds of abducted and brainwashed kids? Should we bomb everyone? Will they actually stop fighting after Kony is gone? What if they shoot back?

Coming back to the “Kony 2012” video and its celebrity endorsements, what are the consequences of unleashing so many exuberant activists armed with so few facts? Defining Uganda in the international conversation by issues that are either geographical misfires (Save northern Uganda!) or an intentional attempt to distract the international community (Death to the gays!), do a disservice to the many critical problems Uganda has.

In addition to the problems of poverty and nodding disease Izama highlights, Uganda is barely (if at all) democratic, and the president Yoweri Museveni ushered himself to a 4th term last year, taking him to over 25 years in power. Corruption is rampant, social services are minimal, and human rights abuses by the government common and well documented. Oh, and oil is on the way.

Stopping Kony won’t change any of these things, and if more hardware and money flow to Museveni’s military, Invisible Children’s campaign may even worsen some problems.

Here’s to hoping Kony hands himself in tomorrow and that the fear of the U.S. “cancelling” its LRA-hunt support is misplaced. But if the most impactful the result of Invisible Children’s campaign is to cause millions of viewers to think Northern Uganda is a war zone, even if it’s not their intent, it’s hard to defend.

March 7, 2012
Greece’s Private Creditors Are the Lucky Ones

A myth is developing that private creditors have accepted significant losses in the restructuring of Greece’s debt; while the official sector gets off scot free. International Monetary Fund claims have traditional seniority, but bonds held by the European Central Bank and other eurozone central banks are also escaping a haircut, as are loans from the eurozone’s rescue funds with the same legal status as private claims. So, the argument runs, private claims have been “subordinated” to official ones in a breach of accepted legal practice.

Getty Images
Nouriel Roubini, professor of economics and international business at New York University

The reality is that private creditors got a very sweet deal while most actual and future losses have been transferred to the official creditors.

Even after private sector involvement, Greece’s public debt will be unsustainable at close to 140 percent of gross domestic product: at best, it will fall to 120 percent by 2020 and could rise as high as 160 percent of GDP. Why? A “haircut” of €110 billion on privately held bonds is matched by an increase of €130 billion in the debt Greece owes to official creditors. A significant part of this increase in Greece’s official debt goes to bail out private creditors: €30bn for upfront cash sweeteners on the new bonds that effectively guarantee much of their face value. Any future further haircuts to make Greek debt sustainable will therefore fall disproportionately on the growing claims of the official sector. Loans of at least €25 billion from the European Financial Stability Facility to the Greek government will go towards recapitalising  banks in a scheme that will keep those banks in private hands and allow shareholders to buy back any public capital injection with sweetly priced warrants.

The new bonds will also be subject to English law, where the old bonds fell under Greek jurisdiction. So if Greece were to leave the eurozone, it could no longer pass legislation to convert euro-denominated debt into new drachma debt. This is an amazing sweetener for creditors.

Moreover, the official sector began restructuring its claims (both the IMF ones and those with equal status to private ones) well before private sector creditors. Maturities were lengthened – effectively a debt restructuring – and the interest rate on those loans reduced, repeatedly.

This was despite the fact that all official loans should have been senior to the private ones, as they were all extended after the crisis struck; an attempt to resolve it rather than its cause. Historically, bilateral official (Paris Club) claims are treated as equivalent to private ones (London Club) only because such debt builds up for decades as governments lend money to former colonies or allies for political reasons. But all official lending in the eurozone began after the crisis and should have been senior to private claims. Any senior creditor that extends new financing to a distressed debtor should be given seniority; this is the principle of “debtor in possession” financing in corporate debt restructuring.

Moreover, until PSI occurred, for the last two years official loans by the Troika allowed Greece’s private creditors to exit their maturing claims on time and in full (or with a modest discount for the bonds purchased at high prices by the ECB). PSI came too little, too late.

Also, while the Eurosystem will receive, in the debt exchange, new Greek bonds valued at par, all the accounting profits from this scheme (plus the coupon on the bonds) will be transferred to governments, who have the option of passing these gains to Greece. The result is a haircut of about 30 per cent on these official sector claims. And if the ECB’s Greek bonds are passed – with no loss – to the EFSF, the latter will end up taking the losses for the difference between the bonds’ current low market price and the price at which the ECB bought them.

In conclusion, the idea that Greece’s debt restructuring is all PSI and haircuts, with no official sector involvement, is a myth. OSI started well before PSI; the PSI deal has substantial sweeteners; and with three quarters of Greek debt in the hands of official creditors by 2014, Greece’s public debt will be almost entirely socialised. Official creditors will be left to suffer most of the huge additional losses that remain likely on Greece’s still unsustainable debt in future. Moreover, the second official sector rescue of Greece will not be the last. Greece will not regain market access for at least another decade; so its fiscal and current account deficits will have to be financed with additional official resources for the foreseeable future.

So, Greece’s private creditors should stop complaining and accept the deal offered to them this week. They will take some losses, but those losses are limited and, on a mark-to-market basis, the debt exchange offers them a potential capital gain. Indeed, the fact that the new bonds are expected to be worth more than the old bonds suggests that this PSI exercise has further transferred losses to Greece’s official creditors.

The reality is that most of the gains in good times – and until the PSI – were privatized while most of the losses have been now socialized. Taxpayers of Greece’s official creditors, not private bondholders, will end up paying for most of the losses deriving from Greece’s past, current and future insolvency.

The writer is chairman of Roubini Global Economics and professor at the Stern School of Business, NYU

February 26, 2012
Five Theses on Privatization and the UC Struggle

The Argument for Raising College Tuition:

Why would students take on more debt? Because, the argument goes, a university education is an investment in your future—because it will “pay off” down the line. This logic entails an implicit social threat: if you do not take on massive debt to pay for a university degree, you will “fall behind”—you will be at a disadvantage on the job market, and you will ultimately make less money. The fear of “falling behind,” in the future, results in a willingness to pay more in the present, which is essentially a willingness to borrow more, to go further into debt in order to make more money later.

February 18, 2012
Climate change threatens traditional [bird] marriage

Here’s a reason for Republicans to finally care about climate change: It threatens straight monogamous bird marriage. According to a new study, unpredictable climates cause birds to Gingrich it up, making them more likely to play the field rather than sticking with one partner.

Birds typically bond with one partner for a season, and sometimes for longer — most birds play the field at least a little, but the ones in the study were “socially monogamous,” i.e. they shack up with a single partner even if they’re also running around sowing their wild birdseed. The researchers focused on mating outside the partnered pair (which they referred to in the paper as “infidelity”) and switching to a new breeding partnership (referred to as “divorce”). And they found that more unpredictable climates drove infidelity and divorce rates up.

The idea is that female birds will choose mates with the most attractive traits — best plumage, biggest beak, most enthusiastic courtship dance, or what have you. But when the climate is changing erratically, which traits are most desirable can vary from year to year. So the ladies are more likely to switch things up.

“A male that could look very pretty at one point may not look as good when the environment changes, because he’s not getting as much food,” says Botero. “The quality of a potential mate depends on the context.”

(h/t Steve Silberman)

February 17, 2012
Billionaire Romney donor uses threats to silence critics

Frank VanderSloot is an Idaho billionaire and the CEO of Melaleuca, Inc., a controversial billion-dollar-a-year company which peddles dietary supplements and cleaning products; back in 2004, Forbes, echoing complaints to government agencies, described the company as “a pyramid selling organization, built along the lines of Herbalife and Amway.” VanderSloot has long used his wealth to advance numerous right-wing political causes. Currently, he is the national finance co-chair of the Mitt Romney presidential campaign, and his company has become one of the largest donors ($1 million) to the ostensibly “independent” pro-Romney SuperPAC, Restore Our Future. Melaleuca’s get-rich pitches have in the past caused Michigan regulators to take action, resulting in the company’s entering into a voluntary agreement to “not engage in the marketing and promotion of an illegal pyramid”‘; it entered into a separate voluntary agreement with the Idaho attorney general’s office, which found that “certain independent marketing executives of Melaleuca” had violated Idaho law; and the Food and Drug Administration previously accused Melaleuca of deceiving consumers about some of its supplements.

January 31, 2012

In November 1933 Retired Major General Smedley Butler claimed that wealthy business leaders in the US were plotting to overthrow the President FDR. FDR was pushing through radical new legislation called the New Deal, which among other things, would pose new regulations on banks and increase the taxes on the wealthy from 52% to 63%. In 1933, General Butler met with Gerald MacGuire, a wealthy bond salesman for Murphy & Company who tried to enlist General Butler in a plot to overthrow FDR. With the backing of the business community including the Dupont Family, JP Morgan, Andrew Mellon , and the Remington Family, he promised General Butler 500,000 troops (made up of primarily veterans) and military equipment supplied by DuPont and Remington. The ultimate goal was to either install their own fascist leadership with sympathies toward the business community or to get FDR to reverse his positions on the New Deal.  The Coup never took place, General Butler testified in Congress as to the plot and those involved denied the allegations.  However, the committee investigating determined their was enough evidence available to determine the plot to be credible, but given the individuals involved, no charges were ever filed.

Why is this important? Last week, wealthy political activist, Grover Norquist gave an interview in which he indicated that if President Obama was allowed to let the Bush Tax Cuts on the wealthy expire, that he would push Republicans in Congress to Impeach the President. According to Article 2 - Section 4 of the United States Constitution, “The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.”  Allowing the Bush Tax Cuts to expire does not sound like an impeachable offense, however,  Norquist will still call on his Republican allies to do it anyway. The reason the story above is important is that if allowed to happen, an impeachment of Obama for allowing the Bush tax cuts to expire would be tantamount to a military coup by the wealthy. 

January 23, 2012
I posted this in a map the other day, this is a bit clearer. Why is it the States that benefit the most from the so called Welfare state have the politicians with the loudest voices against Welfare? I want my money back…

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I posted this in a map the other day, this is a bit clearer. Why is it the States that benefit the most from the so called Welfare state have the politicians with the loudest voices against Welfare? I want my money back…

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