Saturday, April 22, 2017

The French Elections

Update: It looks like it will be Macron with 23.7% versus Le Pen with 21.7% in the final runoff.

Tomorrow France votes in the first round of the French presidential elections which will have a dramatic effect on the future of Europe. If a candidate gets more than 50% of the vote, he or she will become France's next President. But that is not going to happen as no candidate is even polling at half that number. That means that the top two finishers tomorrow will advance to a head-to-head matchup in early May.

There are four candidates all polling within 4 or 5 points of each other, either in the low 20s or the high teens. All four of these candidates are farther to the left of any US politician, especially when it comes to domestic policy, so take the descriptions of their positions with that grain of salt.

Marine Le Pen leads the National Front, an anti-Europe, anti-immigrant populist party that appeals to French nationalism and, in the past and perhaps even now, has been anti-Semitic. For most of this campaign, she had been expected to advance to the second round without any problems. Currently she is polling in second place at around 23%.

The Republicans, a more conservative party formerly led by former President Nikolas Sarkozy, is led by Francois Fillon. Like Le Pen, Fillon had been expected to easily advance to the second round. But a corruption investigation regarding payments made to his family for no-show jobs and his own obfuscations and deceptions on the issue derailed his campaign. Lately, he has shown a slight resurgence and holds the fourth spot in current polling with 19%. His campaign is pro-EU and more focused on lifting restrictions on French businesses, primarily at the expense of workers' protections.

Current President Francois Hollande is a Socialist but his hapless leadership and betrayal of his base has thrown the Socialist party into total disarray. Their current candidate, Benoit Hamon, is not even a factor, polling at just 8%. Instead, two former Socialists are among the four current poll leaders.

Emmanuel Macron, the former economic minister in the Socialist government is running on a pro-EU and socially liberal platform that might be considered traditionally Socialist. But his economic stance more resembles Fillon's in that is classically neoliberal, supporting deregulation. He currently leads the polls, slightly above Le Pen at 23%.

Macron's neoliberal economic polices opened the door for another former Socialist and more left-wing candidate, Jean-Luc Melenchon. He is anti-EU and, like Le Pen, would also reduce France's participation in NATO. Also, like Le Pen, he would like closer relations with Russia and would consider reducing sanctions on that country. Domestically, he is focused on the devolution of capital, corporate, and political power in a complete transformation of France's economic and political structure. It is Bernie Sanders' political revolution on steroids. The oratorically gifted Melenchon has come from virtually nowhere since the middle of March and now polls at 20%.

The most devastating result for the European Union would be to have Le Pen and Melenchon advance to the final round in June. With both candidates firmly against the EU, it could lead to France's exit from and the dissolution of the Union. For those who would like to see the wave of xenophobic populism stopped in its tracks, the preference would be to have Le Pen fail to make the final round.

The reality is, with the polls this tight, any two of these four could advance to the final round. Unlike the United State and its antiquated electoral system, we should know the results tomorrow evening.

US Is Now A Premier Haven For Foreign Tax Evasion And Money Laundering

Way back in 2005, a UBS banker named Bradley Birkenfeld discovered that his compatriots at the secretive Swiss bank were actively subverting a prior agreement between the bank and the IRS. He was particularly concerned about a memo from the legal department that outline prohibited practices in cross-border banking activities, practices that the bank itself directed its wealth managers to use. Birkenfeld saw the memo for what it was, an attempt to absolve the bank of any blame should a wealth manager be accused of ignoring the IRS agreement and laying responsibility at the feet of the individual wealth manager. His internal complaints of "unfair and deceptive practices" at the bank were ignored by management. Eventually, in 2007, he went to the US Department of Justice and outlined how UBS was avoiding its earlier agreement with the IRS.

Birkenfeld's whistleblowing began a long process of slowly whittling away at Swiss bank secrecy laws and began a global push to crack down on bank secrecy, tax evasion, and money laundering. That effort resulted in thousands of Americans, Europeans, and others to pay back taxes on earnings that flowed into accounts in those Swiss banks that were hidden from tax authorities. It culminated in an agreement by the members of the Organisation for Economic Co-operation and Development (OECD) called the Common Reporting Standards (CRS) that required the reporting of foreign accounts back to the owner's tax authorities. Under that agreement, banks would have to report foreign-owned accounts back to the tax authority that regulated the owner.

The US was one of the main drivers in getting the CRS finally adopted in 2014 by the 34 members of the OECD and, as of this year, 97 tax jurisdictions have signed on to the CRS. Much of the CRS was based on an already existing US standard that was adopted in 2010 called the Foreign Account Tax Compliance Act (FATCA). But, instead of joining the CRS in 2014, the US continued to stick to its own FATCA standard, even when the OECD requested that it join. Of all the nations that the OECD has asked to adopt CRS, only the US, Bahrain, Nauru, and Vanuatu have refused to sign on.

The adoption of CRS put a big crimp in the Swiss banks and the other secretive banking systems in Europe. But the failure of the US to adopt CRS and "the continued discrepancies between FATCA and CRS – and Washington’s willingness to join the likes of Bahrain and Vanuatu in failing to sign on to OECD standards – has swept the U.S. to the fore for foreign funds", according to the Kleptocracy Initiative. In an ironic twist, as the Swiss bank secrecy has faded, secretive monies have started flowing into the US. As one Swiss lawyer noted, "How ironic – no, how perverse – that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour."

The rise of the US as a haven for secretive foreign money is the result of actions taken on both the federal and state levels. On the federal level, the US insistence on using FATCA instead of the CRS "risks tearing a giant hole in international efforts" at financial transparency, according to the Tax Justice Network. But changes at the state level are even more important. States like Delaware, Wyoming, and Nevada have become havens because of the ease in which shell companies like LLCs or asset protection trusts can be set up which protect the real owner's anonymity. This has led to a surge in monetary flows out the tax havens of Europe and into these states. The states have come to rely on the money generated by the accounts set up in their state. In Wyoming, for example, there is one business entity for every 4.5 persons and Nevada relies on the over $100 million it receives from fees on these accounts to pay its teachers. According to the Tax Justice Network, Delaware, Wyoming, and Nevada show "clear characteristics of financially ‘captured states,’ where decisions about relevant legislation are taken between lawmakers and financial services interests behind closed doors, ring-fenced from complex democratic processes."

Needless to say, US financial services firms are ready and willing to service this offshore money. According to a Powerpoint presentation by Andrew Penney at Rothschild & Co., the US “is effectively the biggest tax haven in the world...and lacks the resources to enforce foreign tax laws and has little appetite to do so." The Bloomberg article gives a couple of examples of how these states can abet foreign account holders. "A wealthy Mexican opens a US bank account using a company in the British Virgin Islands. As a result, only the company’s name would be sent to the BVI government, while the identity of the person owning the account would not be shared with Mexican authorities". Penney himself provided this example about how a Chinese national could hide his wealth by
"[p]utting his assets into a Nevada LLC, in turn owned by a Nevada trust, [that] would generate no US tax returns...Any forms the IRS would receive would result in 'no meaningful information to exchange under' agreements between Hong Kong and the US."

It is not against U.S. law, per se, to offer secrecy to financial clients. But it does open up a significant avenue for foreigners to avoid taxes in their home countries as well as engage in criminal money-laundering. An investigation showed that companies in Delaware were used to divert millions of dollars earmarked to improve safety at nuclear facilities in post-Soviet Russia to individual Russian nationals. Arms dealers and corrupt heads of foreign nations have also used the secret US state accounts.

It is, however, against the law for US financial firms to actively market these secret accounts as a way to avoid home country taxes. Of course, most of the financial firms declare that they are very careful to not do so. A spokesman for Rothschild declared that the bank "adheres to the legal, regulatory, and tax rules wherever we operate...We do not offer legal structures to clients unless we are absolutely certain that their tax affairs are in order; both clients themselves and independent tax lawyers must actively confirm to us that this is the case."

That kind of statement is very reminiscent of the stand that UBS took before Bradley Birkenfeld exposed it for the lie that it was. And the bank doesn't really have to advertise the tax evasion and money laundering advantages anyway. The rich foreign elites who are looking to hide or launder their money either know how to play the "game" of not declaring their illicit purposes or advisers who do. Even less convincing was a financial adviser in South Dakota, which has became a similar state haven, who said, "I do not hear anybody saying, 'I want to avoid taxes'. These are people who are legitimately concerned with their own health and welfare."

I don't think many of us would think of the US as the "biggest tax haven in the world". But that is effectively what we've become in the last decade. And one of the easiest and safest ways to hide or launder money is through U.S. real estate. It is probably how Donald Trump recovered from his bankruptcy in the late 1990s, but that requires a whole other post.

Today, however, we do know that the Trump companies have sold at least 58 units in the US for over $90 million. In Las Vegas, an unknown buyer has purchased 11 units in a Trump co-owned tower for $3.1 million in just four months. The paper owner is a company called Milan Investment incorporated in Nevada, but the address and contact information given for that firm is a financial service firm office in a strip mall that apparently has no knowledge of Milan Investment. USA Today possibly tracked the owners as potential Chinese nationals but, because of the secrecy that Nevada provides, could not confirm that. Milan Investment is now the third largest owner of condos in that Las Vegas tower.

As the Tax Justice Network noted, states that offer the real beneficial owners secrecy can easily be captured by those interests. With the US now acknowledged as a premier safe-have for tax evasion and money-laundering via real estate and a President who has massive conflicts of interests and may be engaged in outright corruption, we may never know when US policy is actually directed by foreign moneyed-interests or powers.


Natural Weekends - Spring Flowers









Friday, April 21, 2017

Criminal Justice Inequality In California Means "Buying" A Safer Jail Cell

We all know there is a two-tiered justice system in America. But apparently that isn't enough and we are intent on creating a third tier as well. The classic case of the two tiers of justice is the black guy who goes to jail for 20 years for having crack cocaine while the white guy who had the same amount of cocaine, but in powder form, walks away on probation. But the third tier has usually been reserved for the wealthy elite, who could steal millions in white collar crime and serve their time in Club Fed.

Now, apparently, California, specifically Los Angeles and Orange County, are making that third tier available to those who have the ability and willingness to pay. In what is called "pay-to-stay", some convicted felons are offered the opportunity to "shop around" for jails with much more safety and many more amenities than the average state or county jail as long as they pay the daily rate for their incarceration costs.

California law allows those convicted of misdemeanor crimes to serve their time in these "pay to stay" jails as long as they are located in the same county as the crime. In practice, however, judges have not only allowed convicted felons to participate in this program but also allowed them to serve their time in "pay to stay" jails in different counties than where the crime was committed.

As the Marshall Project report states, "Most facilities offer bunk beds and shared common areas. The programs vary in size from one cell, which contains two beds, a refrigerator, phone and television, in Fullerton, to an eight-bed dorm room in Montebello". And because these "pay to stay" jails were designed for non-violent misdemeanor convictions, some do not even allow for overnight stays. "Monterey Park even offers the option of serving time in half-day increments...Two programs, in Monrovia and Whittier, do not allow overnight stays; participants come in for shifts to do janitorial work and other duties."

The rational behind these jails is that "they provide a valuable alternative for those who may be particularly vulnerable in county jail, such as sex offenders, celebrities and very young or old inmates".  As one defense attorney explained it, "There’s a pecking order among inmates…he’s [his client] not somebody who would do well" in California's notoriously dangerous and violent state and county jails.

Look, I have nothing against these people being incarcerated in a safe environment with amenities like TV and a refrigerator, or perhaps even a phone. But this kind of environment should be available for every inmate in the California prison system, not just the most vulnerable or the most wealthy. One person who took advantage of a "pay to stay" jail said, "County jail, you’re verbally abused, physically abused by everybody. I didn’t want to spend one day there." So he didn't, by paying over $18,000 to stay in a jail in Seal Beach. But not everyone has that option. As one police officer noted, "The whole criminal justice system is becoming more and more about: How much money do you have? Can you afford better attorneys? Can you afford to pay for a nicer place to stay?". "Pay to stay" is just another example of the rampant inequality that currently exists in our society and our headlong march toward plutocracy.

Cherokee Nation Tries To Stand Up To Opioid Dealing Monopolies

Since federal and state governments seem unwilling to impede that efforts of the pharmaceutical and drug distribution monopolies to get all of America addicted to opioids, it is left up to local governments and now the Native Americans to fight this battle.

The Cherokee Nation has sued the three largest drug distributors, McKesson, Cardinal Health and AmerisourceBergen, in Tribal Court, charging them with turning "a blind eye to the problem of opioid diversion and profited from the sale of prescription opioids to the citizens of the Cherokee Nation in quantities that far exceeded the number of prescriptions that could reasonably have been used for legitimate medical purposes." Also named in the suit are the three largest prescription providers, Walgreen's, CVS, and Walmart, yet another oligopoly. The suit alleges that these firms flooded the 14 counties that comprise the Cherokee Nation with enough hydrocodone and oxycodone pills to supply every man, woman and child in the Nation with at least one pill each in 2015 alone. It claims that these drug distributors knew, or should have known, that this represented a suspiciously large number of prescriptions for such a small area yet did nothing. By doing so, these companies were conspirators in creating a public health crisis in the Nation.

You may remember the oligopoly of McKesson, Cardinal Health, and AmerisourceBergen as being also identified as the key players in flooding West Virginia with over 780 million hydrocodone and oxycodone pills over the span of six years, enough for around 430 pills for every man, woman, and child in that state. As in the Cherokee Nation, individual pharmacies as well as the Board of Pharmacy of the state of West Virginia were also complicit in this massive drug dealing and yet, as far as I know, the state itself has taken no action against the distributors or the pharmacies. Seven West Virginia counties have joined together to sue these companies on similar grounds to the charges of the Cherokee Nation.

The purpose of filing this case in Tribal Court is to not so much do anything to stop these monopolies from continuing their mass dealing of addictive drugs and rampant pursuit of profits. It is to more quickly gain evidentiary access to the companies' internal records about what they knew about the mass distribution of these pain pills. That information could then be used to potentially stop these monopolies from their abusive practices and in further cases in the normal US legal system as well.

It is more than ironic that Attorney General Jeff Sessions and DHS head John Kelly are more than prepared to crack down on marijuana, which has been proven to be minimally addictive, but are quite prepared to ignore the "legal" effort to get millions of Americans addicted to opioids by a handful of companies that wield enormous political power. It is even more ironic that the fight against these efforts is now being led by Native Americans, a group that has been abused more than any. More distressingly, it is the very communities that largely supported Donald Trump that have been, and continue to be ravaged, by the rapacious efforts of these monopolies. And the Trump administration will do nothing to stop them.

Wasting More Words On Hillary's Campaign And Ignoring The Elephant In The Room

Since this week seems to be one in which we all re-litigate the competency of the Hillary Clinton campaign while blithely ignoring the impact of James Comey, let me throw my two-cents into the mix. Clinton lost the election when she decided not to pick Tom Perez as her running mate. Perez had a stellar record both at the Civil Rights division of the Department of Justice and at the Labor Department and he would have had appeal for the disaffected Sanders' voters as well as the angry white working class because of his efforts to support workers.

As I wrote when I endorsed Perez for Vice President, "He has pursued voting rights, civil rights, and police misconduct cases in his work in the Civil Rights Division of the Justice Department. As Labor Secretary he has supported the fight for $15 minimum wage, paid leave, and unions frankly love him. He instituted the new overtime rule that extended overtime pay to millions of workers; he has been involved in pursuing wage theft; and he was instrumental in negotiating an end to the Verizon strike which was a huge victory for the unions. In fact, when rumors surfaced that he was being considered to replace Eric Holder as Attorney General, unions revolted, demanding that he stay in place at Labor."

Perez would have had credibility with the working class in Michigan, Wisconsin, and Pennsylvania and would have made clear that workers' concerns would have had not only an ear but an advocate in the Clinton administration. Perez could have gone to coal country and the abandoned factory towns of the Rust Belt and had some credibility. Tim Kaine, on the other hand, brought far less to the table - perhaps a few more votes in Virginia and a handful of Hispanic votes as well, which Perez could have easily brought in as well. Hillary's problem turned out to be with the working class and Kaine did very little to help in that regard.

Look, when Clinton wins the popular vote by 3 million and loses in the Electoral College by under 100,000 votes, you can point to almost anything as the "cause" of her loss. The reality is that she was running against a lot of headwinds to start with. Running for a "third" presidential term has traditionally been rather difficult. She was faced with a press that held her to something higher than a presidential standard while her opponent was allowed to get away with virtually anything, simply because the media never believed Trump had a chance and the usual "Clinton rules". And Trump managed to tap into the racism, xenophobia, misogyny, and angst of the white working class that had never recovered from the Great Recession of 2008. But the data does not lie and it is clear the biggest mover in this election was James Comey. There is just no getting around that fact. But if you want to put aside Comey, media bias, the Russian hacking, and the misunderstood appeal of Trump, then you can make just as good a case that the reason Hillary lost is because she didn't choose Tom Perez as her running mate as opposed to any other.

Thursday, April 20, 2017

Confirming What We Already Knew

I can honestly say for the first time in a very, very long time I simply don't have much to post about today. Maybe it is simply a matter of Trump fatigue. But anything that strikes me as worth saying today, I've said already, probably in numerous posts.

Bill O'Reilly was finally fired by Fox because of his history of sexual assault and discrimination. But we've know about O'Reilly and his "problems" with women for over a decade. We know that the "culture" at Fox was essentially sexually predatory for decades as well, thanks to Roger Ailes. (It always amuses me when corporations get caught in criminality, we say it needs to change its "culture". No, it needs to stop being either a criminal organization or an co-conspirator in their individual employee's criminality). And we've known for well over a decade that Murdoch's News Corporation was essentially a criminal enterprise. There really is nothing new here. We already knew it.

When Sean Spicer stands in front of the press and says the administration was not lying about whether the carrier group heading to the Sea of Japan in order to give the President options for dealing with the North Korean threat when it was actually heading in the opposite direction because the administration did not provide a timetable for when the carrier group would arrive, we know that he will say virtually anything to defend the administration's lies. But we already knew that.

When Erik Prince is finally shown to be an adviser to the Trump campaign and transition and becomes the fifth Trump-related official to have either lied about Russian contacts or the administration lied about their role in the campaign and transition, it is no surprise. Prince becomes, what, the seventh or eighth Trump-related person to have had meetings with Putin, or Russian officials, or representatives of Russian interests before he became President. It is just another example of Trump's collusion with Russia. But we already knew that.

When Exxon asks for a special waiver from Russian sanctions or Dow wants pesticide research and regulations invalidated by the EPA, it is just another sign of the power of corporate money and the corruption of the Trump administration. But we already knew that.

The Office of the Comptroller of the Currency (OCC) admitted yesterday that its regulatory oversight of Wells Fargo was "untimely and ineffective." Wells Fargo, of course, committed fraud against their customers by opening accounts without permission in order to generate fees and commissions for over a decade. The OCC was well aware of the complaints that the bank had received regarding this practice, from both within and outside the firm, but did nothing about it. Wall Street firms love to go shopping for regulators and the OCC has been a toothless tiger for decades. So its no surprise Wells Fargo had them as their regulator and the OCC did nothing. We already knew that.

The big technology monopolies have built their business by stealing the ideas and products of others. So it's not surprising that Facebook has basically stolen the best ideas from Snapchat and incorporated them into Facebook. The usual method for these companies is to at least buy the competitor to steal the idea and then destroy the competitor's product. Facebook at least tried to do it in this instance but Snapchat refused to sell. So Facebook just took the ideas anyway. Look at what Google did to CelebrityNetWorth.com. When Google couldn't get the net worth data from the company, they stole it. It's what monopolies do and what they can get away with. But we already knew that.

So, not much news today. Just a lot of stuff we already knew...

Astronomy Adventure - Messier 41

Messier 41 is an open cluster in the constellation Canis Major. It lies just south of the brightest start in the sky, Sirius. It is visible to the naked eye with dark skies and was "discovered" back in 1654, but there are indications that it may have been seen as far back as 325BC, as described by Aristotle. The cluster is around 215 million years old and is 2,300 light year from Earth.


Here are the technical details for those handful who might be interested:

Scope: Starblast 4.5; tracking on, but clearly not perfectly polar aligned
Magnification: ~30x
Camera: iPhone6 using NightCapPro app; ISO 8000(?)
Processing: 10 sec. image adjusted curves using GIMP

Wednesday, April 19, 2017

Trump Plays Politics With National Security To Help US Airline Monopoly

Back in March, the Trump administration suddenly instituted a ban on having laptops and tablets as carry-on luggage on flights from 10 Middle Eastern airports in eight countries to the United States. The UK shortly followed with a similar ban. The ban was prompted by information that terrorists had a computer bomb that could escape detection by the equipment those airports used. What was interesting about the ban was that the airports included in the list by the United States did not quite match up with the list provided in a similar ban by the UK.

There were airports in four countries on the US list that were not on the UK list - UAE, Qatar, Kuwait, and Morocco. Adding these additional countries meant that five specific airlines were also effected by the US ban. Those airlines were Emirates Airline, Qatar Airways, Kuwait Airways, Etihad Airways, and Royal Moroccan Air. Significantly, these are the biggest competitors to the US airline oligopoly in travel to and through the Mideast. The US airlines have been complaining for years about the Open Skies rule that allows these foreign airlines easy entry into the US market.

The inclusion of the UAE, which include the important hubs of Dubai and Abu Dhabi was especially critical. At the time, an important UAE  commentator wrote, "There is no doubt that a significant reason behind the electronic ban is to stifle competition from Gulf airlines, and to encourage U.S. bound passengers to fly on American carriers."

Today, Emirates Airline announced that it was cutting back service to the US because of the security and laptop restrictions. The airline announced that it was cutting service on five US routes because of reduced demand.

If you are inclined to believe the worst, as I am, this is just a further indication of the total corruption of the Trump administration. It seems the administration is willing to even play politics with national security in order to support its corporate benefactors. Combined with its other foreign policy blunders, it does not bode well for the future.

Interesting Timing In Chaffetz' "Retirement"

Jas Chaffetz has suddenly and surprisingly announced that he will not run for re-election in 2018. The Utah congressman and bane of Hillary Clinton's existence said his decision was not influenced by political or health factors. Chaffetz had already received a Republican primary challenger and a Democrat who had already raised $400,000 more than Chaffetz awaited him should he survive the primary challenge. In addition, Chaffetz' raison d'etre was no longer there as Trump had taken the White House. There was nothing left for him to investigate as head of the House Oversight Committee, unless he actually wanted to pursue the myriad of Trump scandals (ha! ha!).

But it does seem a little unusual to make this kind of announcement this far out from the next election. Announcements like these always fuel speculation and the timing of this announcement adds even more fuel to that fire. The area of speculation that is most intriguing is that Chaffetz himself has been caught up in the Russian hacking scandal. A recent story from the Palmer report stated that Chaffetz himself may be subject to blackmail by the Russians and the FBI has found out. According to the story and citing Louise Mensch who has been covering the Russian hacking scandal, "Mensch is suggesting that Russia has 'turned' Chaffetz to the point where it controls him, ostensibly ensuring that his committee will never investigate Trump-Russia". The Palmer Report also notes that the largest donor to the Chaffetz campaign is "an illegal pyramid scheme that does business in Russia". Of course, none of this can be corroborated at this time.

Another intriguing possibility that is not exclusive of Chaffetz being compromised by the Russians, is that he was colluding with the Russians and WikiLeaks in the Hillary Clinton email investigation. If the FBI has proof of that collusion, it could also be a reason for Chaffetz to agree not to run at this time in the hopes of avoiding prosecution. Again, there is no corroboration for this speculation either.




Trump - Governance By (False) Proclamation

The first 100 days of the Trump presidency are liable to be the most ineffectual in modern American history. He is the only recent President who has seen his signature effort go down to defeat. For Trump, that was repealing Obamacare, and despite Republican control of the House and the Senate, the effort went down to defeat without even a vote. But I'm not sure Trump even recognizes how significant a defeat that was, because he seems to believe that if he says it, it must or will be true.

The only major accomplishments of his administration so far has been to roll back Obama era regulations and issue great-sounding but essentially ineffective executive orders. The regulations were mostly taken care of by the Senate and even some of Trump's executive orders have been failures. The Muslim ban was struck down by the courts twice and hasn't really been heard about since. And many of the other executive orders will require years of rule-making and presumably court challenges before they will go into effect.

Take, for example, yesterday's executive order on H-1B visas. While it is clear the program is being abused by the outsourcing firms that bring primarily Indian workers into the US under the guise of this program, have US workers train them, and then send those workers back to India and outsource the jobs there, Trump's executive order does nothing to really deal with the problem. It merely authorizes a study of the program and then recommendations and rule-making that will take years to complete. And by having the program focus on truly high-skilled workers, it will favor the big tech companies over their smaller competitors. In addition, Trump "Buy American/Hire American" promises were pretty much nothing more than making sure existing policies were being followed. None of this will stop the "theft of American prosperity" as Trump claimed.

What's more disturbing is the sight of the machinery of the US government being put into gear into trying to make Trump's patently false statements true. It now appears that the whole Devin Nunes fiasco and the associated false charges against Susan Rice were solely driven by a desire within the White House to provide some "evidence" for Trump's baseless claim that Obama had wiretapped him. According to Ryan Lizza at the New Yorker, "The intelligence source told me that he knows, “from talking to people in the intelligence community,” that “the White House said, ‘We are going to mobilize to find something to justify the President’s tweet that he was being surveilled.’ They put out an all-points bulletin”—a call to sift through intelligence reports—“and said, ‘We need to find something that justifies the President’s crazy tweet about surveillance at Trump Tower.’ And I’m telling you there is no way you get that from those transcripts, which are about as plain vanilla as can be."

The accusations, then, against Susan Rice for "unmasking" Trump-related individuals was a lie in order to prove Trump's original lie that Obama had wiretapped him. Even more disturbing is the fact that many White House officials knew the Susan Rice accusation was a lie but simply wanted "to put it out there" to support Trump's Obama allegation.

But this kind of covering for the President's lies comes not only from the political operatives in the White House. It is apparently now coming from the "rational" members of the administration like Defense Secretary James Mattis and NSA H.R. McMaster. It all started when it was announced that a US carrier strike force was headed to the "Western Pacific", which was interpreted as a sign that the US was escalating the tensions with North Korea. The same day, McMaster said the move of the carrier strike force was part of giving the President "a full range of options to remove" the North Korean nuclear threat.

Two days later, Trump told Fox News that "we're sending an armada" to the Sea of Japan as a show of force against the North Koreans. Further escalating tensions, Trump tweeted that same day "North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A." Spicer also confirmed that the carrier group was headed toward North Korea. Also on that day, Mattis again confirmed that the carrier group was in its way to North Korea and that the reason its itinerary was being disclosed is because going to North Korea required the cancellation of joint exercises with Australia that also involved that same carrier group.

Then this past Monday, Defense News spotted a photo of the carrier group posted by the Navy as it went through the Sunda Straight in Indonesia. That seemed a little odd for a carrier group that was supposedly on its way or near North Korea over a week earlier. In fact the carrier group had spent most of the last week actually taking part in those joint exercises with Australia in the Indian Ocean, not the Western Pacific. If not for the catch by Defense News, the American public and much of the public in South Korea and Japan would have assumed that the carrier group was in a position to strike North Korea, fueling heightened tensions.

Now, the administration is trying to blame this on miscommunication between the Pacific Fleet commander and the Defense Secretary and members of the administration. That is highly unlikely but frightening on its own as it is an admission that the administration has no knowledge or control over what its fleet commanders are actually doing. And if you don't believe that story, it is clear that McMaster and Mattis knew that the "armada" was not steaming toward North Korea but did nothing to contradict that impression or, more importantly, Trump's statement. They abetted his lie.

It is bad enough that Trump is a congenital liar. What's worse is the lengths this administration will go to in order to provide cover for those lies. For Trump's supporters, the executive orders sound like they are fulfilling his campaign promises, but they are not. For his supporters in Congress, they must now realize that he will create even more lies to cover for his original lies. That should not give them a warm and cozy feeling when they are negotiating with him. And for our allies and enemies, they now know that even McMaster and Mattis will cover for Trump's lies. The Russians and the Chinese certainly knew where that carrier group was and, if they knew, then North Korea surely knew as well. The real question is whether the South Koreans and the Japanese were also informed. Imagine the lack of confidence it would create if they were not.

Trump will live in his fantasy world of what he says automatically happens. But the machinery of the US government should not be forced to "prove" his lies. If it continues, it's a very dangerous road ahead.



Dems Come Close Again In House Election, But Need An Actual Win Soon

In yet another election, Democrats came up just a hair short, with Jon Ossoff garnering 48% of the votes in Georgia's 6th District when 50% would made a runoff unnecessary. That runoff will take place in June and will be a head-to-head matchup with Republican Karen Handel.

It would have been nice for Democrats if Ossoff had managed to take this seat. And it would have sent shock waves through the Republican congressional caucus if he had. An outright win by Ossoff would have forced the GOP to confront Trump more directly and probably derailed what little is left of his legislative agenda.

I expect Ossoff will lose the runoff in June, but if he can maintain his share of the vote in the high 40s, it would accomplish much the same thing as a victory today. That would mean two House elections in a row would show a 20-point swing in the Democrats' favor since last November, the first being in Kansas. If that were extrapolated across the entire country, it would mean well over 100 current GOP House members would lose their seats.

The next real opportunity for Democrats to show their renewed strength is at the end of May, when the special election for the House seat in Montana occurs. There, Rob Quist, a renowned country singer in the state, is running a Bernie Sanders' style campaign and showing surprising strength. Ryan Zinke, the current Secretary of the Interior, was re-elected in 2016 by a 16-point margin. Currently Quist is also running in the high 40s and, like Ossoff, if he can maintain that position, even in another close loss, it would be yet another double-digit swing toward a Democrat.

In addition, there is a special election in South Carolina to replace Budget Director Mick Mulvaney scheduled for June. Mulvaney won by a 20 point margin last November and it really is a safe Republican seat. We won't have a real read on this race until May when the primaries are completed but if Democrats can just cut the margin in this race to 10 points, it would still be a statement.

Peter Wehner, a long-time Republican operative and senior adviser to George W. Bush was on the Last Word with Lawrence O'Donnell last night and said, "So, look, this is an administration that is in trouble and the Republican Party is in trouble.  And I think the important thing to bear in mind is
this is in trouble in the first 90 days of his presidency. This is supposed to be the apex of popularity.  So this is – this is a lot of trouble early on."

Republicans are realizing that they are in serious trouble already for 2018. Health care was a debacle, tax reform can't seem to get off the ground, they need to pass a budget this month, and the debt ceiling is looming in the fall. That leaves little or no room for legislative achievements in 2017 and puts the congressional GOP in a tough position for 2018. 

My guess is that the GOP will finally realize they will have to pass some legislation in 2018 so they have something to run on that fall. But if Democrats can keep making inroads in the special elections and Trump's poll numbers continue to sink, especially among Republicans, it may actually become even harder for Republicans to pass anything at all.

For Democrats, the most recent results show that it is imperative to compete in every race, no matter how improbable. However, coming close can only last so long. A surprise upset in Georgia or Kansas would be just the kind of "winning" that could be contagious in 2018.

Tuesday, April 18, 2017

Broaden The Base, Lower The Rates May Sound Good But Never Works Long Term

As the midnight hour approaches for filing your taxes, I wanted to talk about a Leonard Lopate interview with Washington Post reporter T.R. Reid who has written a book advocating a total revamping of our tax system.

Reid points out that our tax code has been massively overhauled every 32 years, starting in 1922, again in 1954, and finally in 1986. If things hold true to form, then 2018 should be the year to do it again. And it seemed with the ascension of Trump and Republican control of the legislature, we were on track to do it again. But Trump's incompetence and the war within the GOP caucus makes the possibilities of that happening more remote.

But Reid makes the important point that it takes about 20 or 20 years of legislating special tax breaks and exemptions for specific industries, companies, or policies until the tax code becomes unmanageable. And we are clearly at that point again.

In general, tax overhaul has usually involved eliminating deductions and exemptions. By doing so, you can raise more revenue and therefore you can lower the rates. Reid's term for this is BBLR, which stands for Broaden the Base, Lower the Rates. He notes that the 1986 tax reform bill eliminated many deductions, lowered the rates, and still brought in as much or more money than before. If you count the tax credits in current tax law as actual government spending instead, it would be the largest expenditure in the US budget, coming in at $1.17 trillion.

And it is an appealing idea. He points to New Zealand where there are virtually no deductions or exemptions and where the top rate is only 17%. In addition, with hardly any deductions available and a simpler tax code, most Americans could actually do their own taxes. In fact, in Japan and the UK, the government actually has all the information about your taxes already and merely sends you a completed form. Your obligation is to check that form and accept it or make the necessary changes. But most of the time, the government's number are correct. Tax returns in Japan usually take about 5 minutes to complete.

Here in the US, the IRS could perform the same function for the majority of US taxpayers, saving millions of us time and money. But that idea is continually blocked by Congress that caves in to the pressure from the tax prep industry, primarily H&R Block and Intuit, maker of the TurboTax program. Those companies complain that it would be "unfair competition" from the government should the IRS do that.

Reid makes it very clear that lowering the rates alone does not do the trick. It must be accompanied by broadening the base. He says, "The idea that you can cut tax rates and bring in more revenue sounds great but it just doesn’t work". And he is a strong believer in the graduated rates that we have, saying we should be taxing those groups that can best afford it. As he admits, the two greatest boom periods in the postwar US economy were the 1950s and the 1990s. In the 1950s, the top rate was 90% and taxes were raised twice in the 1990s. Higher tax rates are not incompatible with strong economic growth and anecdotally they may even help create a stronger economy.

I guess at this point it is important to point out that when he says the top rate is 90%, that does not mean that the highest earners' entire income was taxed at that rate. That rate only applies to income above a certain threshold amount. He tells the possibly apocryphal story of Ronald Reagan not working after October because he would only make 10% of a new income he got at that point.

But even so, Reid offers a truly pathetic reason for not wanting to revert to the confiscatory tax rates of the 1950s. Says Reid, "I like the idea of lower rates; it just makes things simpler and people are more likely to comply…the lower the rates, …the more people are willing to pay the tax they owe". Well, he may like the idea of lower rates but higher rates will not only bring in more revenue but will also reduce income inequality. And his point about tax compliance is ridiculous when his plan envisions the IRS essentially calculating your taxes for you. If they already know your income and what you owe, how is compliance an issue. And the highest rates will only kick in for the super rich and their highest level of earnings, leaving that vast majority of Americans unaffected.

But the real flaw in Reid's approach is that he never deals with the problem he identified to begin with. Sure we can eliminate a boatload of deductions and broaden the base and that will allow us to lower the rates. But history and Reid himself has shown that corporate influence will load that tax code up with specific breaks over the next 20 or 30 years, putting a greater squeeze on federal revenue. That is especially true these days when corporate influence over elections is so strong. In the end, we will just be left with lower rates for the highest earners and less revenue over all. So there is really no long-term upside for his plan. Just like the flat tax and the idea that lower rates raises more revenue, BBLR sounds like a great idea but it never works in practice.

Kelly, Sessions Focus On Pot In Order to Ignore True Cause Of Opioid Crisis

The Trump administration seems to be determined to crack down on marijuana as both Jeff Sessions and now DHS head John Kelly have both declared that pot is "a gateway drug". Of course, research and science have shown this statement to be categorically false but when did science drive any Republican policies.

As opposed to Sessions who apparently wants us to return to the 1980s, at least Kelly admitted over the weekend that cracking down on marijuana should not be an enforcement priority and instead the focus should be on meth, cocaine, and heroin. But that was two days ago. Apparently something changed in the last two days because, in a speech today at George Washington University, Kelly took a much harder line, saying, "And let me be clear about marijuana. It is a potentially dangerous gateway drug that frequently leads to the use of harder drugs. Its use and possession is against federal law and until the law is changed by the U.S. Congress we in DHS are sworn to uphold all the laws on the books." Kelly also made it clear that immigrants convicted of marijuana infractions would be targeted be ICE for deportation. In a further provocation, Kelly also challenged those in Congress who opposed the strict enforcement of the law to either change the law or "shut up" and let DHS do its job.

What's so interesting is that both Sessions and Kelly seem to think the opioid epidemic is driven by heroin use. The reality is that the epidemic is primarily driven by the pharmaceutical industry in collaboration with unscrupulous doctors and pharmacies. The situation in West Virginia where there were enough prescriptions written for ever man, woman, and child in the state to receive 430 hydrocodone and oxycodone pills is probably the most extreme example of the real source of the problem.

But Sessions and Kelly are not about to stand up to the monopolies in the pharmaceutical and pharmacy industries. By focusing on marijuana, meth, cocaine, and heroin they can claim big strides in locking people up for drug crimes. In the meantime, the real drug profiteers who make their money through "legal" means won't be touched.



Never Forget That The Trump Kleptocracy Is Protected And Enabled By The GOP

The openness of the grift and corruption of the Trump family is extraordinary and shocking. They are a truly dysfunctional family where everything is apparently transactional and total self-absorption is a given. And they get away with it.

Ivanka Trump had dinner with President Xi in China on the same day that country approved three exclusive trademarks for her clothing line. This is not the first time China has openly bribed the Trumps, as the Trump Organization received multiple trademarks shortly after Trump was inaugurated.  And China has positioned itself quite nicely to capitalize on Trump's infrastructure program if it ever comes to pass. Transportation Secretary Elaine Chao (and wife of Senate Majority leader Mitch McConnell) has been touting the "public/private" partnerships that are merely a giveaway to businesses and a Chinese billionaire has apparently hired Paul Manafort to funnel that public infrastructure money his way.

Yesterday, Trump himself apparently called and congratulated Prime Minister Erdogan of Turkey for effectively eliminating democracy in that country. In a closely fought referendum that gives Erdogan sweeping new powers, the country's election commission reported that the referendum passed with a slim majority of just over 50%. However, opposition parties are contesting the election and point to 3 million unstamped and therefore unofficial ballots that the election commission decided to count. The number of those ballots was greater than the margin of victory on the referendum. European election observers harshly criticized the entire process, pointing to the arrest of Erdogan opponents, the stifling of free media, and improper and illegal election procedures. The European Commission refused to accept Erdogan's victory and called for an investigation.

But none of that stopped Trump from making his own congratulatory call to Erdogan. As usual, the readout we received from the Trump administration was short on details but neither the election irregularities or the stifling of free discussion in the run-up to the election were apparently discussed. Again, the Trump Organization has interests in Turkey and receives licensing fees from a tower in Istanbul. Their partner in that country has already been used as a bargaining chip by Erodgan to try and influence Trump.

Trump's congratulatory call put him at odds with his own State Department whose statement was far more subdued, sayin, "We look to the government of Turkey to protect the fundamental rights and freedoms of all its citizens — regardless of their vote on April 16 — as guaranteed by the Turkish Constitution and in accordance with Turkey’s international commitments, such as under the Helsinki Charter". As David Frum says, "This is so beyond troubling into alarming. US foreign policy has been sold for hotels & handbags".

The other features of open Trump grift are legion. The trips to Mar-a-Lago, the amount of money the Secret Service has paid to Trump companies, forming a 2020 re-election committee and taking contributions already, The involvement of the Trump family in both business and the affairs of state, and on and on. But it is the brazenness of it that is just so shocking and disturbing.

But the most disturbing part of the open Trump grift is the fact that the Republican party is silent and is prepared to just go along. The GOP seems content with seeing democracy destroyed at home and abroad, as long as they maintain their power. Trump may be the ultimate kleptocrat but the Republican party is his enabler and protector. And when the Republicans have effectively broken the bonds of our democracy, how are we going to put them back together again.


Theresa May Shockingly Calls For Snap Election In UK

In an abrupt reversal and what amounts to an enormous gamble, Theresa May has called a snap election in the UK and British voters will yet again go to the polls on June 8. May's decision was an enormous surprise and contrary to what she has consistently said since she took over for the disgraced David Cameron. Nicola Sturgeon has called May's decision and "extraordinary U-turn" while other MPs have been even more forceful. Labour MP Jess Phillips said that "Theresa May has lied to the country again and again - and she is being opportunistic".

According to May, she reluctantly came to this conclusion in the last few weeks, complaining about parliamentary gridlock. "In recent weeks, Labour have threatened to vote against the final agreement we reach with the European Union. The Liberal Democrats said they want to grind the business of government to a standstill. The Scottish National Party say they will vote against the legislation that formally repeals Britain’s membership of the European Union. And unelected members of the House of Lords have vowed to fight us every step of the way...If we do not hold a general election now, their political game playing will continue."

Such a diverse group in opposition might give one pause, but May hopes that the disarray in the Labour party will allow the Conservatives to pick up more seats in Parliament and give her a firmer majority. But even the Conservatives are not a united bloc supporting May's negotiating stance of a "hard" Brexit.

May formally began the process of negotiating the UK's exit from the European Union less than a month ago when she finally invoked Article 50. At that time, she sketched out her plan for a clean break from the EU, although many of the details were lacking simply because Brexit will be  negotiation. Calling this snap election seems like an attempt to confirm her approach to Brexit negotiations after she has already decided on the strategy.

While some other issues may come up in the short campaign, this vote will primarily be another referendum on Brexit, less than a year after the original vote. This election will give Nicola Sturgeon and SNP an opportunity to further consolidate their power and opposition to Brexit in Scotland and do the same for the SDLP and Sinn Fein in Northern Ireland. Large wins in those countries by the parties opposed to Brexit will make independence referendums in those countries even more likely. Sturgeon has already vowed to hold such a referendum in Scotland before the final acceptance of Brexit. In addition, this gives the Liberal Democrats another opening to expand their base in England and recapture some of the seats they have lost to Conservatives in the last election.

Moreover, this election will be focused on the details of the Brexit negotiations and the pro-Brexit forces will not be able to get away with the breezy rhetoric and outright lies, such as the millions of pounds that would be saved and funneled into the NHS, that they got away with in the original Brexit referendum. The pressure on the government to provide real details about their negotiating strategy should be strong and any details that do emerge will be critiqued by the industries and constituents they effect. The focus has fundamentally changed from everything that the EU does that is bad to how the government is going to protect the things that the EU brings that is good. That is an entirely different ground to be running on election on.

May's entire gamble here seems to hang on the total disarray in the Labour party. But this election will not be about who leads the country, meaning that the top of the ticket will matter less than usual. The election will entirely be a referendum on May's approach to Brexit, leaving local Labour MPs freedom to campaign as needed. And whatever gains the Conservatives will make in England will be offset by the increased chances that Scotland and Northern Ireland will be one step closer to leaving the Union. As we have seen recently, elections these days are highly unpredictable and the electorate can seemingly turn on a dime. For May, this election not only reeks of rank opportunism but poses more danger that Conservatives and the UK as a whole will emerge weaker than before than I think she even realizes.

Monday, April 17, 2017

The Question On The Images Of War

Christa Blackmon over at LGM has a post on those pictures of the Mother of All Bombs that Trump recently dropped in Afghanistan. Most of the stories we heard about that attack focused on the bomb itself and hardly any of the coverage explored the actual damage the bomb created. In fact, some of the media stories dwelt on the possibility that the attack was designed as a signal to North Korea, ignoring the very real effects in Afghanistan entirely.

As Blackmon notes, "If images of war set the tone for public support, then the best images are the ones that tell almost no story at all...In combing through numerous articles, videos, and commentary over the event [the bombing] I am certain about one thing: the weapon is the only story available to be told". In addition, even the pictures that the Defense Department provided gave no real perspective on the damage that had been wrought. This is a constant with most of the official footage we receive. For example, these were the most frequent pictures we saw and they told us virtually nothing about the results of the bombing.


As Blackmon admits, the Defense Department is unwilling to release any photos that would show the actual destruction that was caused and the strike may have taken place in an isolated area that independent journalists would have a tough time reaching. And, in fact, the Guardian finally did get reporters to the scene but the story provides very little insight into the attack's effectiveness.

On the other hand, the horrific pictures of the men, women, and children dead or suffering after the chemical attack in Syria apparently prompted the quick response of the Trump administration, with reports that Ivanka was particularly troubled by those images. Other images of the Syrian civil war have also had a similar impact, including the Syrian boy who washed up dead on a beach and became the face of the refugee crisis, the dust-covered child sitting in an ambulance, and the pictures of the totally bombed out buildings in Aleppo. Unfortunately, however, none of those images have seemingly brought Syria any closer to peace.

But many of those images are "clean" in the sense that the bodies are clearly whole, not bloody and dismembered which is how a majority of the innocent victims have died. Those other images are certainly available if you care to seek them out but are largely ignored by the mainstream media for the obvious reason that they are horrific and deeply disturbing.

In addition, there is the concern that we will become desensitized if we are continually bombarded by the most gruesome images of war or, on the other hand, that those images will provoke a retaliation that has not been thoroughly thought through, which may be what happened with Trump's Syrian missile attack.

These are difficult questions and I do not have the answers. What I do know is that the images we got from the Defense Department are almost meaningless in actually describing what happened. There is absolutely no reason for the networks to be running these pictures and videos virtually 24/7 in the days after the attack if the images provide no meaning. All that does is provide more propaganda for "a lovely, bloodless, corpseless war, just the sort the politicians love", as Blackmon quotes David Hackworth as saying.

Does The GOP Really Have A Strategy On Health Care Anymore?

Donald Trump and Paul Ryan seem to be unable to let go of the failure of Trumpcare and keep on throwing out proposals that they hope will somehow, some way, find enough supporters to actually pass. But one has to wonder what exactly their strategy really is or if there really is one.

Before they left for the Easter recess, Ryan's latest proposal was to move older and sicker people into high-risk pools that would be run by the states. It also included the provision that would allow the insurance companies to charge older and sicker people who would remain in the private market significantly higher premiums and offer skimpier policies that provide far less coverage than the ACA currently requires. Of course, it provided insignificant subsidies to the states to cover these high risk pools and actually phased these insufficient subsidies out entirely in under ten years. The idea behind this plan is that it would reduce premiums for the majority of those who remained in the private insurance market, while markedly hiking rates for a smaller subset of people.

For Ryan, passing something on health care may be a matter of self-preservation, as there are already rumblings within his own caucus that he should be removed as Speaker. At a town hall meeting, House Freedom Caucus member Justin Amash said, "We need either a change in direction from this speaker, or we need a new speaker." In addition, the massive tax cuts the Ryan so desperately wants and on which the entirety of his "Better Way" agenda is based on, relies on the $1.2 billion in tax cuts that repealing the ACA would bring. For Ryan, passing something on health care may be existential.

Trump, on the other hand, just seems to be unable to accept defeat because, I guess, he's a "winner". Trump also realizes that repealing the ACA is the real path to the tax cuts he, the GOP, and their corporate and wealthy overlords are counting on. Tax reform just won't do it. Says Trump, "we get hundreds of millions of dollars in savings that goes into the taxes" if they can pass a health care bill that replaces the ACA, mostly through the repeal of around a 5% tax increase on the rich that undergirds Obamacare. In addition, the idea was to force through the ACA repeal under the 2017 budget reconciliation rules and then do tax reform under the 2018 budget reconciliation, as both would only need 50 votes for passage in the Senate. That would allow them to complete both actions without breaking the rule to increase the deficit over a 10 year period. Combining them into one budget resolution package will break that 10 year rule.

Trump's line of attack now seems to try to get Democrats on board with some kind of bipartisan change in the health law. Trump's initial attempt to do this came when he floated the idea of combining an infrastructure package with either a health care bill or tax reform. That plan didn't last too long as someone probably convinced Trump that tackling any of one these issues individually is a nightmare, but to do two of them at once is virtually impossible. In addition, Democrats made it clear that there was no deal like that to be made.

The current line of attack is threatening to destroy the ACA and then blaming Democrats. This strategy is based on an ongoing court case that Congress brought against the executive branch when Obama was President. The case revolves around subsidies paid directly to insurers so that they could reduce premiums and out-of-pocket costs for enrollees. Congress claims that those subsidies were not authorized in the ACA bill and are therefore illegal and they received an initial ruling on the case in their favor. The Obama administration appealed that decision and it is now up to the Trump administration whether to continue with that appeal or let the initial ruling stand.  Last week, HHS indicated that it would continue the appeal but Trump apparently reversed that decision and claims that no decision has been reached, in an apparent attempt to use these subsidies as a bargaining chip.

Interestingly, a joint statement by groups representing health insurers, doctors, hospitals, and more importantly the US Chamber of Commerce urged the administration to continue these subsidies. The letter points out that insurers need to make decisions about 2018 plans by the end of this month so a decision on this issue is critical. The appearance of the Chamber of Commerce on this letter add some real pressure from a solidly Republican and important lobbying group to not destroy the ACA this way. But that is the threat Trump is using.

Further complicating the issue is the upcoming debt ceiling vote and the looming budget reconciliation for 2017. Trump and the GOP may demand try to attach tax reform or health care to raising the debt ceiling vote and dare Democrats to say no. According to another Freedom Caucus member, Dave Brat, "So I think that debt ceiling piece will be tied to -- and in my view it has to be tied to -- tax reform being in stone." On the other hand, while Democrats are currently demanding a "clean bill", if the GOP links other issues to the debt ceiling vote, Democrats may have their own demands, possibly setting the stage for another standoff as the US heads for default on its obligations. It takes an enormous faith in the bully pulpit and the right wing echo chamber to believe that Democrats could be successfully blamed for a government shutdown and possible default of US Treasury obligations when the GOP controls both houses of Congress and the presidency, but that power should not be underestimated.

In any case, it is hard to see how Trump's strategy will work. At this point, having tried to screw around with the ACA, Trump and the Republicans will own what happens in 2018. If premiums and deductibles increase again like they did in 2017, any low-information voters will assume that Republicans have changed the law somehow. If Trump does not defend the insurer's subsidies, most high-information voters will understand he sabotaged the law. And others will wonder, having talked about the issue for most of 2017 and having full control of government, why Republicans allowed the increases to happen. Again, it takes an enormous faith in the bully pulpit and the right wing echo chamber to believe that Democrats could be successfully blamed.

More importantly, the preoccupation with a health care plan that seems doomed to failure simply gives the GOP less time to move on the tax reform and the budget, both of which have the potential to split the Republican caucus in the same way as health care. Remember, Republicans were unable to craft a budget in 2016, despite controlling the House and the Senate. The continuing budget resolution passed in December expires April 28th, and Democrats may use the leverage on that vote to insist that these insurer subsidies be continued.

Lastly, the Republican health care plan has been a total PR debacle and members going back to their districts over the Easter break have been absolutely pummeled on the issue. Many Americans have already made up their minds about the GOP health care plan and it is overwhelmingly negative. Keeping the issue front and center merely keeps the inability of Republicans to govern front and center. I'm sure for most members of Congress, the preference would be to simply move on to something else, despite Ryan's and Trump's wishes. And perhaps this was all a gambit to force the Democrats to use the insurer subsidies as a bargaining chip in the budget debate. If health care disappears from the agenda after April 28th, we will know why. But it really seems that Ryan and Trump want to pass something for real and the discussions will still continue. At this point for Democrats, the longer the GOP spends on health care, the better.

Memorable Boston Marathon Today As Kenyans Win And Beach Goes for 50

Kenyans took back control of the Boston Marathon today as Geoffrey Kirui won on the men's side and Edna Kiplagat outpaced the women. American Galen Rupp was in a tight race with Kirui and Suguru Osako until Kirui pulled away around mile 23 when he put up a blistering 4:27 mile, the fastest of the day, and leaving Rupp to take second place. For Kipligat, this was her first Boston Marathon despite being an elite marathoner for nearly a decade and she blew away the field after the halfway point of the race.

Today's race also marks the 50th consecutive marathon for my good friend Ben Beach, the first to do so and just an amazing accomplishment. The Boston Red Sox honored both Ben and Katherine Switzer, the first woman to break the brutal sexist barriers put up by Boston organizers and male runners and officially compete in the marathon 50 years ago, by having them both throw out the first pitch out at Fenway Park yesterday.

Ben is still out there running as I write this and needs to finish within the 6 hour time limit to have the streak be officially recognized. The last few years have been tough for Ben as he fights dystonia which causes involuntary movements in his calf and other muscles, making mileage training difficult. His most recent finishes have been 5 hours plus and hopefully the warmer temperatures today won't slow him down too much. If Ben can keep on going for a few more years, he will eclipse the legendary Johnny Kelley's 58 Boston finishes.

Ben and his lovely wife Carol also host an incredible tailgate at the annual Harvard-Yale football game, where Carol makes the tastiest sausages (affectionately known as "Bulldog tails"), and have been doing that for nearly as long as Ben's marathon streak. As Ben admits, "I’m sort of a creature of habit."

Keep on truckin', Ben!!

UPDATE: Well, Ben did it, finishing his 50th consecutive Boston Marathon in a fantastic time of 5:01:26!  Here is Ben (the silver streak) heading down the home stretch:







Sunday, April 16, 2017

Warning Signs For The US Economy

The sluggish, but consistent, recovery in the US economy has officially been going on for nearly eight full years. That is an unusually long time to sustain a normal economic expansion but may not be that unusual when recovering from a near depression and a financial crisis. But there are some worrying signs out there that this expansion may have finally begun to run its course.

Last month's unemployment report was particularly underwhelming with only 98,000 new jobs created, far below the consensus number of 178,000 and not even enough to keep up with population growth. In addition, the prior two months were revised down by a combined 38,000 jobs. However, the unemployment rate did drop to 4.5% and the all-important 25-54 year old employment population ration continued to rise, although the participation rate for the group remained constant. Average hourly income increased by 5 cents and now stands at a year-over-year rate of 2.7%, slightly above the current inflation numbers of around 2%, depending on which CPI you want to use. So, all in all, it was a decent report but the headline jobs number is worrying, especially if that continues to disappoint for the next couple of months.

But, as Kevin Drum points in this nice graph below, new job creation actually peaked in July of 2014 and has been on a slow, but steady, decline ever since.


Despite the Fed's desire to raise interest rates, inflation continues to be incredibly weak. Although it has bumped up slightly to have some indicators finally reach their 2% target, the important core PCE (personal consumption expenditures prices excluding food and energy) remains well below target at just 1.75%. Again, this is hardly the sign of a booming economy, much as the Fed may want it so.

The retail sales numbers for March were also disappointing, dropping by 0.2% for the month. In addition, the numbers for January and February were revised down by 0.4% combined. That means that retail sales have declined for the first three months of this year. What's more worrying is the alarming number of retail outlets that have begun to close. Bloomberg reports that if the pace of retail store closures continues at its present pace, 2017 could be even worse than 2008, when the worst effects of the Great Recession were being felt. That year, over 6,200 retail outlets closed while this year is on pace for over 8,500 closings. These closing, of course, ripple through the employment sector as already nearly 90,000 retail jobs have been lost since October and February and March showed the greatest two-month job loss in the sector since 2009.

The loss of retail jobs is directly related to automation and the increasing use of e-commerce. For many communities already decimated by the loss of manufacturing jobs, the retail sector was a steady source of employment. If those jobs continue to disappear, we will only see the despair in these communities continue to rise. There is certainly no indication that the Trump administration, despite its wonderful campaign promises, has any idea how to deal with this problem or that they are even focused on it.

Lastly, those disappointing retail sales numbers have flowed into the revised GDP numbers for this year. The New York Fed is now anticipating GDP for the first quarter of the year to be 2.6% and 2.1% for the second. This is a total downward revision of 0.7%, a significant reduction. However, the headline numbers are still not bad.

There is nothing in these numbers right now that you can point to and say we are headed for a downturn or even a recession in the near future. But the weakness in new employment and especially retail sales and the attendant store closures should be cause for some concern. If this weakness continues for another two or three months, that would truly be a serious warning sign.

Natural Weekends - Egrets, Herons, And A Turkey