European Union Finds Leading Fight for Open Trade a Tough Task

Activists staging a protest against the EU-Canada trade deal in front of the Austrian Parliament in Vienna in September. Photo: Joe Klamar/Agence France-Presse/Getty Images

The other side of the coin: Europe, which, unlike our president, believes in globalization and open trade, is having difficulty convincing its own citizens of its benefits. Perhaps the world is not yet ready for completely open borders.   

By EMRE PEKER  Dec. 28, 2017 for The Wall Street Journal

BRUSSELS—The European Union started this year by announcing a global trade offensive to counter rising U.S. protectionism. Now the bloc faces an uphill battle to prove it can deliver.

With U.S. President Donald Trump’s “America First” policies upending the world trading system championed for seven decades by the U.S., the EU was quick to suggest it would assume the mantle of globalization’s standard-bearer.

“Those who, in the 21st century, think that we can become great again by rebuilding borders, reimposing trade barriers . . . are doomed to fail,” European Trade Commissioner Cecilia Malmström said in January, four days after Mr. Trump’s inauguration. “It is important the EU shows confidence and leadership.”

Almost a year later, Brussels has a mixed record of success on the trade front. While the EU strives to fill the void left by the U.S. as an advocate of trade liberalization, it is also grappling with political divisions among its 28 members and calls for safeguards against China’s rising economic might.

Mr. Trump withdrew the U.S. from the 12-country Trans-Pacific Partnership on his first day in office, and soon after froze trade talks with the EU and demanded a renegotiation of the North American Free Trade Agreement with Canada and Mexico.

Brussels responded by extending a hand to all the trading partners the White House shunned.

So far, that has produced an agreement on world’s biggest trade deal, between the EU and Japan. It has also spurred frenzied talks to complete negotiations, or start new ones, with partners from Latin America to Asia.

The EU has also provisionally implemented a deal with Canada that slashed almost all tariffs between the two trading partners.

Brussels, however, fell short on its ambitious agenda of clinching deals this year with Mexico and Mercosur, the South American bloc grouping Argentina, Brazil, Paraguay and Uruguay. . . .

European Commission President Jean-Claude Juncker, the bloc’s top executive, has made strengthening the EU’s role in global trade his first priority as Washington retrenched.

In September he asked EU governments to approve fast-track negotiations with Australia and New Zealand, seeking to engage two more U.S. trading partners burned by Washington’s exit from the Pacific trade pact.

“Partners across the globe are lining up at our door to conclude trade agreements with us,” Mr. Juncker said. “Europe has always been an attractive place to do business.”

EU governments still haven’t greenlighted Australia and New Zealand talks, and such hesitation has frustrated efforts to get any EU trade pact fully approved.

Yet EU governments, leery of the populist backlash that fueled Britain’s decision to exit from the bloc and resistance to the Canada trade deal, are reluctant to yield more powers to Brussels.

Most European leaders—including strongly pro-EU ones such as French President Emmanuel Macron —want to preserve a national say in trade pacts. Some EU governments also demand safeguards against China, whose mix of state support, acquisitiveness and domestic protection have prompted the EU to bolster its trade defenses and consider screening foreign investments.

Next year will test the EU’s capacity to deliver on its liberal trade principles. . . .

. . . with the U.S. considering unilateral action against Chinese trade practices, Brussels will likely lack critical support from Washington in pressuring Beijing to abide by international rules.

“When the EU and the U.S. are not aligned, you have a much more fragmented landscape, with no clear leader, and it’s much harder to drive policy,” said Stephen Adams, a former EU trade official now with U.K.-based advisory firm Global Counsel. “The ambition can leak out of the process very quickly.”

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Almost Everything Is Wrong With the New Tax Law

BN-WT601_3ll6Y_OR_20171227102908The president’s signature and his notes on his Oval Office desk, Dec. 22. Photo: Brendan Smialowski/Agence France-Presse/Getty Images

This article, surprisingly critical of the new tax law, appeared in this morning’s Wall Street Journal, which has otherwise written favorably about the new law. Mr. Blinder, who wrote the article, is a professor of economics and public affairs at Princeton University and a former vice chairman of the Federal Reserve. 

Read it and weep.

By ALAN S. BLINDER  Dec. 27, 2017 for The Wall Street Journal

Dec. 20, 2017, should go down in political history as a day of infamy or absurdity, probably both. After passing a massive tax bill without a single Democratic vote—something highly unusual in itself—congressional Republicans gathered with President Trump on the White House steps that day to engage in an orgy of self-congratulation.

The president patted himself on the back so vigorously that he might have required physical therapy. One after another, Republican senators and representatives competed for the honor of offering the most unctuous praise for their Maximum Leader. But Sen. Orrin Hatch of Utah, who was previously thought to be level-headed, set a new standard for fawning by declaring that Mr. Trump may be the greatest president ever. Ever? Not Lincoln? Not Washington?

Was this love-fest because Republicans had just passed an economically sound and wildly popular tax bill that was winning praise from tax experts and scoring marvelously in public opinion polls? Not quite. Polls show that Americans hate this bill.

As they should.

First, while the president is wildly inaccurate when he claims the Tax Cuts and Jobs Act is the biggest tax cut in history—as a share of gross domestic product, the Reagan and George W. Bush tax cuts were far larger—it may be the most regressive. Ordinary people don’t know the details—does anyone at this stage?—but they understand that the new law is larded with provisions custom-made for the rich and superrich while offering mere crumbs for the middle class. Further, once the phase-outs occur at the end of 2025, even most of the crumbs disappear. The Tax Policy Center estimates that the share of tax cuts accruing to the top 0.1% of taxpayers will rise from 8% in 2018 to an astounding 60% in 2027 if Congress doesn’t extend the expiring cuts.

Second, the act emphasizes cutting taxes on corporations, not on people. Few Americans buy into the “trickle down” argument that tax benefits showered on corporations will translate mostly into higher wages and vastly faster economic growth. Most of the economic evidence supports their skepticism.

 Third, the tax cuts blow a large hole in the federal budget, and most Americans think the deficit is already too large. Have you noticed how Republican politicians stop caring about the deficit when their minds turn to tax cuts for the rich? Some of them are already clamoring for cutbacks in spending on income support, nutrition and health care because—you guessed it—the budget deficit is so large. They didn’t even wait for the ink to dry.

 

Fourth, many Americans are rightly suspicious of deals that get rammed through Congress on a strictly partisan basis, with no public hearings, but with language drafted by lobbyists under cover of darkness. But Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan understood the wisdom of the old adage that a rotting fish smells worse the longer it sits on the dock.

Let’s imagine that Mr. Trump and the Republicans really wanted to reform the tax code, rather than just deliver tax cuts to the rich. What might they have done instead?

First, Congress could have simplified the tax code rather than complexified it. To be fair, there is some genuine simplification in the Tax Cuts and Jobs Act. A few loopholes did get closed, and the near-doubling of the standard deduction will make paying taxes easier for millions of Americans. Terrific. But the new law also includes complex new provisions for taxing pass-through income from unincorporated businesses and corporate income that is earned (or, rather, booked) abroad. These defy description, will baffle people for years, and will spawn quite a few tax shelters.

Second, the tax changes could have been designed to be distributionally neutral, as the 1986 tax reform was, or even progressive. But once you decide to concentrate on reducing the corporate income tax, giving a sizable tax preference to pass-through business income, cutting the estate tax, and lowering the top income tax rate, you are headed down a highly regressive road.

Third, a true tax reform would have been revenue-neutral—again, as the 1986 reform was. Some taxes would have gone up while others went down, leaving only a negligible effect on the budget deficit.

 Fourth, a Congress truly focused on tax reform would not have thrust a completely unrelated dagger into the heart of ObamaCare. I refer to the repeal of the penalty that enforces the individual mandate. This mean-spirited provision is a first step toward “repeal without replace,” a foolish and cruel approach that Congress rejected last summer. Notice that the huge savings from this provision don’t come from cutting anyone’s taxes. They come, according to Congressional Budget Office estimates, from 13 million Americans dropping off the health insurance rolls over a decade.

And that’s just a hint of what’s to come. Already, Republicans are taking aim at other parts of ObamaCare, Medicare, Medicaid, food stamps and more. Class warfare? Yes, score the first round for the upper class.

The Megacity III

This is Part III of an article about how world cities—such as Seattle—are more closely tied financially to other world cities such as Shenzhen, China, than they are to neighboring Spokane or Tacoma.

SeattleSeattle, Washington

By EMILY BADGER  Dec. 24, 2017 for The New York Times

Inventing ‘New Stuff’ Before Anyone Can Catch Up

People in Rust Belt towns where Google has no office still use the search giant. Facebook and Twitter still require physical assets in server farms. Uber, a quintessential Bay Area company that is both global and digital, operates in about 250 American cities.

But these kinds of ties aren’t truly spreading the Bay Area’s prosperity. Server farms don’t create mass middle-class employment. Using Google isn’t the same as having a hand in engineering it.

Yes, Uber’s innovation eventually reaches smaller cities in Texas and Ohio. “But the economic benefits of it are at Uber headquarters,” said Michael Storper, an economic geographer at U.C.L.A. “The people who got rich off of it are not going to be in the small area. They’re going to be where it’s invented.”

To put it more harshly, when global cities need other communities today, Ms. Sassen said, it’s often to extract value out of them. New York bankers need Middle America’s mortgages to construct securities. San Francisco start-ups need idle cars everywhere to amass billion-dollar valuations. Online retail giants need cheap land for their warehouses.

The rest of the country may receive the innovations that flow out of global cities, and the benefits to consumers are real. “But by the time that’s done, the cities have already invented something new and made themselves richer again,” Mr. Storper said. “Before anywhere else can catch up, San Francisco has already leapt ahead again with new stuff they’ve invented.”

The advantages bestowed by the global economy keep compounding from there. Research by Filipe Campante at Harvard and David Yanagizawa-Drott at the University of Zurich finds that when two cities are linked by direct flights across the globe, business links between them increase as well, such that places with more connections grow more economically. Those economic benefits, though, don’t appear to touch places more than 100 miles beyond the airport.

Shenzhen-650x260Shenzhen, China

“The Torontos, Ottawas and Waterloos in countries like Canada and the U.S., they will link with Shenzhen in China, they will link with Munich and Stockholm in Europe,” Mr. Bathelt said. “And other places will be kind of left out.”

Greg Spencer, another researcher at the University of Toronto, has analyzed the global footprints of the world’s 500 largest firms in advanced industries like machinery, digital services and life sciences — mapping their headquarters, regional offices, manufacturing plants, warehouses, retail stores.

In the international network that emerges, global cities stand out. Other places connect to the global economy by going through them.

“I keep coming back to the idea that a lot of this is about power,” Mr. Spencer said. He means relative power — which places are gaining or losing it as the geography of the economy shifts, too. “Not only are they losing their power,” he said of the places left out, “but they’re losing their connection to the power centers as well.”

That dynamic also leaves smaller places at the mercy of global cities, where decisions are made about which plants to close or where to create new jobs. And so Tulsa, Buffalo and Tucson turn to Seattle as supplicants for a windfall of Amazon jobs. None of them have what Amazon really wants, though: an international airport with daily direct flights to Seattle, the Bay Area, New York and Washington.

Emily Badger writes about cities and urban policy for The Upshot from the San Francisco bureau. [The Upshot provides news, analysis and graphics about politics, policy and everyday life for the NY Times.] She’s particularly interested in housing, transportation and inequality — and how they’re all connected. She joined the Times in 2016 from The Washington Post. @emilymbadger

This concludes this three-part article.

The Megacity II

This is Part II of an extraordinary article about a new phenomenon, the megacity, that has closer ties to other world cities than to the smaller cities that surround it. Consequently, it quickly surpasses them in skills and profits. 

nyc-2New York City 

By EMILY BADGER Dec. 24, 2017 for The New York Times

The Rise of Global Cities

For much of the 20th century, wages in poorer parts of the country were rising faster than wages in richer places. Their differences were narrowing, a product of migration between the two and gains from manufacturing that helped lift up regions that were once deeply poor. Then around 1980, according to work by the Princeton researcher Elisa Giannone, that convergence began to stall. Cities full of highly educated workers like Boston, San Francisco and New York began to pull away. And that pattern, Ms. Giannone finds, has been driven entirely by what’s happening with high-skilled workers: When they cluster together in these places, their wages rise even more. That widens inequality both within wealthy cities and between wealthy regions and poorer ones.

“Big changes have been happening over the last 30 years,” Ms. Giannone said. “Now we’re actually seeing the impact of them.”

Those changes have come from multiple directions — from globalization, from computerization, from the shift in the United States away from manufacturing toward a knowledge and service economy. These trends have buffeted many smaller cities and nonurban areas. The uncomfortable political truth is that they’ve also benefited places like San Francisco and New York.

“The economic base has shifted in a way that highly favors cities — and big cities — because it’s now based on knowledge, on idea exchange, on agglomeration,” said Mark Muro, the policy director of the Metropolitan Policy Program at the Brookings Institution.

Boston, Massachusetts

Programmers benefit from having more programmers nearby, in ways different than when  assembly line workers gather together. The forces of agglomeration, which big cities enable, are strongest in the kind of knowledge work that has become central to the economy.

For all of the talk of how globalization has cost America manufacturing jobs, it has created American jobs, too — but the high-paying ones have tended to go to such cities.

Ms. Sassen argues that a global economy has created new kinds of needs for companies: accountants specializing in Asian tax law, lawyers expert in European Union regulation, marketers who understand Latin America. Global cities must connect to other global cities to tap these resources, which have become more valuable to them than lumber and steel.

Inventors in these global cities are also increasingly connecting to one another. Using the addresses of patent co-inventors, Mr. Mudambi [Ram Mudambi, a professor in the Fox School of Business at Temple University] has traced a steep rise starting in the early 1990s of global connections from a few American metro areas, which are today among the most prosperous in the country.

Many American companies still create physical things, in addition to inventing digital products and ideas. But globalization has changed who benefits from their business, too, enabling firms to separate intellectual work from routine work and scatter those roles across the globe. The knowledge work has tended to stay in the United States. The routine work is what was historically performed in the hinterland. And that in large part is the work that has gone overseas.

“The hinterland for Silicon Valley is Shenzhen,” said Timothy Sturgeon, a senior researcher at the M.I.T. Industrial Performance Center.

Emily Badger writes about cities and urban policy for The Upshot from the San Francisco bureau. [The Upshot provides news, analysis and graphics about politics, policy and everyday life for the NY Times.] She’s particularly interested in housing, transportation and inequality — and how they’re all connected. She joined the Times in 2016 from The Washington Post. @emilymbadger

To be continued

The Megacity I

A new blow to inequality, totally unsuspected by us, appeared in Sunday’s New York Times— the megacity. Because of the nature of the new electronic wealth and industry that is not dependent on being fed parts and components from smaller cities around the country as in the past but does all its manufacturing abroad, our megacities—San Francisco, New York, Los Angeles, Chicago, et al—have a closer relationship with other  world cities—London, Tokyo, Beijing—and only depend on our smaller cities as markets for their products. As a consequence these megacities absorb the lion’s share of the talent and money that formerly were more evenly distributed throughout the country.

This alarming development is described in three segments. Here is Part I:

By EMILY BADGER  Dec. 24, 2017 for The New York Times

SAN FRANCISCO — Well before anyone thought of this place as the center of the tech economy, the Bay Area built ships. And it did so with the help of many parts of the country.

Douglas fir trees logged in the Pacific Northwest were turned into lumber schooners here. Steel from the East, brought in by railroad, became merchant vessels. During World War II, workers assembled battleships with parts from across the country: steam turbines from Schenectady, N.Y. and Lester, Pa.; gear winches from Tacoma, Wash.; radio equipment from Newark; compasses from Detroit; generators from Milwaukee.

Most of these links that tied the Bay Area’s prosperity to a web of places far from here have faded. Westinghouse closed the Pennsylvania plant. General Electric downsized in Schenectady. The Milwaukee manufacturer dissolved. The old Bethlehem Shipbuilding yard in San Francisco will soon be redeveloped. And its former parent company, the Bethlehem Steel Corporation in Bethlehem, Pa., went bankrupt in 2001.

The companies that now drive the Bay Area’s soaring wealth — and that represent part of the American economy that’s booming — don’t need these communities in the same way. Google’s digital products don’t have a physical supply chain. Facebook doesn’t have dispersed manufacturers. Apple, which does make tangible things, now primarily makes them overseas.

A changing economy has been good to the region, and to a number of other predominantly coastal metros like New York, Boston and Seattle. But economists and geographers are now questioning what the nature of their success means for the rest of the country. What happens to America’s manufacturing heartland when Silicon Valley turns to China? Where do former mill and mining towns fit in when big cities shift to digital work? How does upstate New York benefit when New York City increases business with Tokyo?

The answers have social and political implications at a time when broad swaths of the country feel alienated from and resentful of “elite” cities that appear from a distance to have gone unscathed by the forces hollowing out smaller communities. To the extent that many Americans believe they’re disconnected from the prosperity in these major metros — even as they use the apps and services created there — perhaps they’re right.

“These types of urban economies need other major urban economies more than they need the standardized production economies of other cities in their country,” said Saskia Sassen, a sociologist at Columbia who has long studied the global cities that occupy interdependent nodes in the world economy. New York, in other words, needs London. But what about Bethlehem, Pa.?

Bethlehem, Pennsylvania

Such a picture, Ms. Sassen said, “breaks a past pattern where a range of smaller, more provincial cities actually fed the rise of the major cities.” Now major cities are feeding one another, and doing so across the globe.

Ram Mudambi, a professor in the Fox School of Business at Temple University, offers an even more unnerving hypothesis, in two parts: The more globally connected a city, the more prosperous it is. And as such cities gain global ties, they may be shedding local ones to the “hinterland” communities that have lost their roles in the modern economy or lost their jobs to other countries.

Chicago Panorama Skyline

Chicago, Illinois

Richard Longworth, a distinguished fellow with the Chicago Council on Global Affairs, fears that exactly this is happening in Chicago. The metropolitan area long sat at the center of a network of economic links crisscrossing the Midwest. They connected Chicago to Wisconsin mill towns that sent their lumber there, Iowa farmers who supplied the city’s meatpackers, Michigan ice houses that emerged along the railroads transporting that meat to New York.

“These links have been broken,” Mr. Longworth said. Of course, some remain. And antipathy toward prosperous big cities is not a new theme in history. “But this is different: This is deeper,” Mr. Longworth said. “It is also, as far as we can see, permanent, simply because the economy that supported the earlier relationships has gone away and shows no sign of coming back.”

Emily Badger writes about cities and urban policy for The Upshot from the San Francisco bureau. She’s particularly interested in housing, transportation and inequality — and how they’re all connected. She joined the Times in 2016 from The Washington Post. @emilymbadger

To be continued

Peggy Noonan’s Christmas Carol

You must read this editorial by Peggy Noonan, The Wall Street Journal columnist, in its entirety. In our mind she has got it exactly right. We all want this tax thing to turn out well. Her appeal to her fellow Republicans to act for the good of the nation as politicians of yore did, we share. Her view of the young, progressive spirit in the Democratic party as a warning to them is accurate and heartening (if only Nancy Pelosi and Chuck Schumer could see it).

What more is there to say? Merry Christmas!

By PEGGY NOONAN  Dec. 21, 2017 for The Wall Street Journal

On the tax bill we begin grouchy and wind up, as befits the season, hopeful.

Grouchy: Wednesday afternoon’s big White House rally celebrating its passage was embarrassing. All these grown men and women slathering personal, obsequious, over-the-top praise—“exquisite presidential leadership,” “a man of action,” “the president of the United States, whom I love and appreciate so much”—as Donald Trump emceed and called new praisers to the stage. They do this to keep the president happy, feed his needy ego and insist on his competency. It looked less like praise than self-abasement.

Actually, and I’m sorry to say this, the mood reminded me of the tale of Stalin telling some lame joke in a dinner speech. His ministers all laughed as if it were the wittiest thing they ever heard. Then they kept laughing, louder, and wouldn’t stop, because they knew the first one to stop would be noticed by Stalin and would soon be gone. So boy did they laugh.

The president thinks this kind of thing makes him look good. It doesn’t, it diminishes him: Keep the buffoon happy. Here is what would make him look good, and elevate him: normal human modesty. If he modestly waved off the praise, shut it down, said, “Please, let’s talk about the bill and how it will help our country . . .”

He would look bigger, as modest people always do, and his praisers would not look smaller.

On to hope: The fair way to judge the tax bill was never through the mindless, whacked-out rhetoric on both sides—the worst bill in the history of the world, the best thing since Coolidge was a pup—but through the answer to one question: Will this bill make things a little better or a little worse? There is much reason to believe it will make things better. It is imperfect, to say the least. But it is good to cut the corporate rate from an absurd and uncompetitive 35% to a more constructive 21%; it is compassionate to double the child tax credit; it is fair to cut taxes for small businesses, many of which are struggling.

America is waiting and hoping for a boom. By all means encourage the circumstances in which it can take place.

And the bill is going to prove popular. The Democrats bet wrong on this. Almost immediately on passage, Wells Fargo and Fifth Third Bancorp announced a raise in their lowest wage to $15 an hour. AT&T said it would give about 200,000 unionized workers a $1,000 bonus and increase capital spending $1 billion. Comcast said it would give 100,000 employees bonuses and spend more than $50 billion in infrastructure improvement.

You can sit back in your sophisticated way and say, “Hmm, that looks like a curiously orchestrated public relations push.” You can say, “How nice, the malefactors of great wealth are giving their workers a little tip.” You can wonder if they’re spreading cheap good cheer to grease their mergers. But if you are working the line in Smalltown, U.S.A., and just got bumped up to $15, or you’ve been surprised by an unexpected thousand dollars at Christmastime, you will see this not as a tip but as a real and concrete break, thanks to that most unexpected of benefactors, the U.S. government.

Who cares about CEOs’ motives if they’re doing something good?

It is true the tax bill is not popular in the polls. A recent Wall Street Journal/NBC survey put support at 24% with 41% opposing it. But here’s something I’ve been meaning to mention for a while: During the Reagan era, I noticed a funny thing about public opinion and tax policy. When you run for office and promise you’ll cut taxes, the crowd cheers lustily. Then once in office you put together a tax bill and the polls show public support is lukewarm. Then you pass it and its popularity bubbles around in the polls. Then an election comes and you win and the voters tell pollsters they backed you because you cut taxes. There are a lot of reasons this might be—a campaign vow is intentional and abstract, a final bill is real and messy—but I suspect there’s something in this: Voters don’t like to tell pollsters they’re for tax cuts. They have the feeling it’s the wrong position, that it’s small-minded and if they were nicer, they’d be less self-interested.

Anyway, polling doesn’t matter right now. Down the road it matters.

As for me, I am interested in my own lack of sustained dismay. I share this information because I’m wondering if there isn’t something of a broader public mood in my reaction. As a salaried worker in a high-tax state, I am about to get clobbered with the loss of the state and local tax deduction. And yet I find myself not minding so much. America is in so much and so many kinds of trouble that if this thing makes it a little better, then OK. Please, 2018 tax bill, make it better.

I end with this. This bill gives American big business more than a boatload of money, it offers a historic opportunity—a timely and perhaps final one.

Big corporations can take the gift of the tax cut (and the continuance of the carried interest loophole, that scandal) and do superficial, pleasing public relations sort of things, while really focusing on buying back stock and upping shareholder profits.

And they’ll do this if they’re stupid, and craven.

Or they could set themselves to saving the system that made them, and helping the country that made their lives possible.

They can in some new way see themselves as citizens—as members of America, as people with a stake in this nation, a responsibility for it. They can broaden, invest, hire, expand and start the kinds of projects that take the breath away. They can literally get young men and women out of the house, into the workplace, learning something. They can change and save lives. This would be costly. Spend.

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One of our two political parties is being swept by a young and rising new left that is fiercely progressive and on fire for socialism. It may well in coming decades sweep the CEOs and their corporations away if they cannot rouse themselves to present economic freedom as an ultimate and democratic good.

This may be the last opportunity for business leaders to do what hasn’t been done in a generation, and that is defend the reputation of capitalism. 

Wall Street once had statesmen; it wasn’t dominated by dumb quarterly-report jockeys. Shareholders were assumed to be patriots, and grateful ones, because they had so profited from the luck of being born here, into a system where the quick and sturdy could go from nothing to everything.

That system is troubled. If they cannot see private interest as utterly aligned right now with public interest, then they are truly as stupid and venal as their enemies take them to be.

Are they? I hope not. But I also hope they see this moment for what it is.

And now on to Christmas. God bless us every one.

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Huge Human Inequality Study Hints at Revolution

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 This piece with its terrifying conclusion was discovered over a month ago by one of our members, Cynthia Cuza, in a science magazine and distributed by her to several of us in the Santa Monica Meeting. We have been slow to pick up on it, but now, recognizing its importance, we are reprinting it for the readers of this blog. Thank you, Cynthia.

By YASMI TAYAG  Nov. 15, 2017 for Inverse Science

There’s a common thread tying together the most disruptive revolutions of human history, and it has some scientists worried about the United States. In those revolutions, conflict largely boiled down to pervasive economic inequality. On Wednesday, a study in Nature, showing how and when those first divisions between rich and poor began, suggests not only that history has always repeated itself but also that it’s bound to do so again — and perhaps sooner than we think.

In the largest study of its kind, a team of scientists from Washington State University and 13 other institutions examined the factors leading to economic inequality throughout all of human history and noticed some worrying trends. Using a well-established score of inequality called the Gini coefficient, which gives perfect, egalitarian societies a score of 0 and high-inequality societies a 1, they showed that civilization tends to move toward inequality as some people gain the means to make others relatively poor — and employ it. Coupled with what researchers already know about inequality leading to social instability, the study does not bode well for the state of the world today.

“We could be concerned in the United States, that if Ginis get too high, we could be inviting revolution, or we could be inviting state collapse. There’s only a few things that are going to decrease our Ginis dramatically,” [see the end of article] said Tim Kohler, Ph.D., the study’s lead author and a professor of archaeology and evolutionary anthropology in a statement.

Currently, the United States Gini score is around .81, one of the highest in the world, according to the 2016 Allianz Global Wealth Report.

Kohler and his team had their work cut out for them, as studying inequality before the age of global wealth reports is not a straightforward task. It’s one thing to measure modern day economic inequality using measures of individual net worth, but those kind of metrics aren’t available for, say, hunter-gatherers chasing buffalo during the Paleolithic. To surmount this obstacle, the researchers decided to use house size as a catch-all proxy for wealth, then examined the makeup of societies from prehistoric times to modern day using data from 63 archaeological digs.

Overall, they found that human societies started off fairly equal, with the hunter-gatherer societies consistently getting Gini scores around .17. The divide between rich and poor really began once humans started to domesticate plants and animals and switch to farming-based societies. Learning to till the land meant introducing the concept of land ownership, and inevitably, some people ended up as landless peasants. Furthermore, because these societies no longer lived as nomads, it became easier to accumulate wealth (like land) and pass it down from generation to generation.

The Gini scores got higher as farming societies got bigger. The small scale “horticultural” farmers had a median Gini of .27, and larger-scale “agricultural” societies moved up to .35. This pattern continued until, oddly, humans moved into the New World — the Americas. Then, over time, the researchers saw that Gini scores kept rising in Old World Eurasia but actually hit a plateau in the Americas. The researchers think this plateau happened because there were fewer draft animals, like horse and water buffalo, in the New World, making it harder for new agricultural societies to expand and cultivate more land. A selection of Gini scores from the 2016 Allianz Global Report are shown in red. A score of 1 is given to societies with the highest inequality.

Overall, the highest-ever historical Gini the researchers found was that of the ancient Old World (think Patrician Rome), which got a score of .59. While the degrees of inequality experienced by historical societies are quite high, the researchers note, they’re nowhere near as high as the Gini scores we’re seeing now.

A selection of Gini scores from the 2016 Allianz Global Report are shown in red. A score of 1 is given to societies with the highest inequality.

“Even given the possibility that the Ginis constructed here may somewhat underestimate true household wealth disparities, it is safe to say that the degree of wealth inequality experienced by many households today is considerably higher than has been the norm over the last ten millennia,” the researchers write in their paper.

On Monday, a global report from Credit Suisse showed that modern humans are continuing the trends set by our predecessors: Now, the report showed, half of the world’s wealth really does belong to a super-rich one percent, and the gap is only growing. Historically, Kohler says in his statement, there’s only so much inequality a society can sustain before it reaches a tipping point. Among the many known effects of inequality on a society are social unrest, a decrease in health, increased violence, and decreased solidarity. Unfortunately, Kohler points out, humans have never been especially good at decreasing inequality peacefully — historically, the only effective methods for doing so are plague, massive warfare, or revolution.

According to The Wall Street Journal, the Democratic Left Rules the Party

Would that the newspaper were correct. However, we suspect that neither Charles Schumer nor Nancy Pelosi reads the Journal.

We extracted the following three paragraphs from today’s Journal editorial. They sum up what we have hoped for: a party more  concerned with providing a decent living standard for American workers—and for their health and education—rather than with the business executive’s bottom line. People in business can take care of themselves; they always have. They don’t need an assist from the government. But the American worker does or he’ll soon be gone. Follow our subsequent blogs on this topic. 

   Elizabeth Warren and the Democratic left

Lead Editorial from The Wall Street Journal  Dec. 18, 2017                                            [The bulk of the article berates the Democrats for not supporting the Republican tax reform.]

. . . Part of the explanation is ideological. The Democrats as a party moved sharply left during the Obama years—on economics nearly as much as on identity politics. They have made income inequality their main economic priority rather than growth, and the fact that the slow-growing Obama economy increased inequality hasn’t changed that obsession. 

One result is that there isn’t a pro-business Democrat left in the Senate, except perhaps on energy policy in fossil-fuel states like West Virginia and North Dakota. Democrats are now the party of Thomas Piketty, the French economist who thinks tax rates should return to pre-Kennedy levels to reduce inequality. 

Democratic economists who might have offered an alternative view have no choice but to go along if they ever want to serve in another Democratic administration. They all saw what Elizabeth Warren and the Democratic left did to block Larry Summers from getting the job of Federal Reserve Chairman. . . .

   Thomas Piketty and Larry Summers—which man do you believe?

Los Angeles Lags Behind in Attacking Homelessness

It cannot be repeated often enough that in a country as rich as ours, in a city as wealthy as LA, the poverty one encounters on the streets is a disgrace, and it is directly attributable to us, no one else. We cannot sidestep the issue.

United Nations monitor Philip Alston tours last week with Los Angeles skid row activist General Dogon, right. (Maria Alejandra Cardona / Los Angeles Times)

By GALE HOLLAND  Dec. 16, 2017, for The Los Angeles Times

The United Nations’ monitor on extreme poverty and human rights said Friday that political will created the hundreds of encampments that he saw lining the streets of Los Angeles, adding that the country is rich enough to end homelessness.

“But we don’t want to put the money into it,” special rapporteur Philip Alston,  just off a two-week fact finding tour that included downtown L.A.’s skid row, said at a Washington, D. C. news conference. “We want to see homeless people as losers, a low form of life.”

Alston, an Australian and law professor at New York University, also accused the Trump administration of promoting a “double whammy” of tax reform and welfare cuts that he said will  “make the U. S. the world champion of extreme inequality,” exacerbating the homelessness crisis.

“The social safety net is riddled with holes,” Alston said, adding that if the administration achieves its goals, “it will essentially be torn apart.”

Los Angeles is lagging behind other cities in attacking its homelessness problem, Alston said.

In his written report, the monitor was particularly scathing about what he described as an over-reliance by Los Angeles and other cities on criminalization to “conceal” homelessness. Los Angeles police made nearly 7,000 arrests of homeless people on skid row from 2011 to 2016, he said.

Sitting in public places, panhandling or public urination — in cities like Los Angeles that provide almost no public toilets — triggers citations that quickly turn into misdemeanors, warrants, jailings and “unpayable” fines and finally the stigma of a criminal conviction, he said.

“That in turn virtually prevents subsequent employment and access to most housing,” Alston said.

Thanksgiving

Mayor Eric Garcetti’s spokesman said he believes the way to solve the homelessness crisis is by focusing on housing and services — not citations and misdemeanor charges.

“That’s why he is dedicating unprecedented resources to the construction of permanent supportive housing, and leveraging health and mental health services for people in desperate need,” spokesman Alex Comisar said in an email.

Alston also assailed an “Orwellian side” to a database system used by Los Angeles and other cities to match homeless people to social services.

The system, a “pillar” of Garcetti’s strategy, asks homeless people to give up “the most intimate details of their lives,” including histories of medication theft or sex work, for a slim chance at landing a place to live,  Alston wrote.

“According to some of my interlocutors, only a minority of those homeless individuals being interviewed actually acquire permanent housing” because of the statewide housing shortage, Alston said in his report.

While the head of the Los Angeles Homeless Services Authority said police cannot get at the sensitive personal data, homeless people fear disclosure, and pressure is building to let departments in.  “Access by the police to the [data] is only one policy decision away,” Alston said.

“What is made to appear as the intractability of the situation on skid row cannot be the case,” he said in a phone interview after the conference. “You’ll find other cities around the country have more integrated policies and are digging down deeper to find the root causes.”

Alston was appointed special rapporteur by the U.N. human rights council to investigate whether persistent poverty undermines the human rights of the most vulnerable citizens in the United States.

During his trip, with stops in San Francisco, West Virginia and Alabama, he said he talked to poor and homeless people, state, local and federal officials, including Sen. Bernie Sanders (I-Vt.).

Alston said he found much good in the country, including wealth, a strong work ethic, innovative capacity and municipal officials and community groups determined to improve social protection for the poorest 20% of the people in their communities.

But the strong economy only made the contrast with squalor starker, he said.

Homelessness in Los Angeles

In San Francisco, Alston said he watched police hustle homeless people off the streets with no place to go. In Alabama, raw sewage flowed into yards, forming cesspools and spurring the return of tropical diseases largely unknown in industrialized nations.

“Hookworm in Alabama,” Alston said. “In the 21st century.”

“I saw people who had lost all of their teeth because adult dental care is not covered by the vast majority of programs available to the very poor,” Alston said in his report.

Alston’s report and remarks addressed his initial findings, with a final report due out in the spring. The U.S. is not expected to face U.N. sanctions, but the report will be closely watched in Europe, as well as by the country’s global foes, Alston said.

“No country wants to be seen adopting inhumane policies,” he said in the interview. “Hopefully there will be some effort to improve the U. S.’ standing internationally.”

Alston said the United States is not unique in harboring “blind spots” about its shortfalls in achieving its own high ideals.

“What’s different is this is largely a question of resources, and there are ample resources here,” he said. “Now is the time with the economy booming to be precisely tackling these issues.”

 

Hang In There, Marco

Little Marco is back—this time as opposition to now President Trump’s beloved tax plan. Let us hope this time he wins because he is clearly the good guy as he sticks up for extending child tax credits to working class families over further tax cuts for the wealthy. This is an abbreviated version of the story as it appeared in The Washington Post.

Senator Marco Rubio (R-Fla.)

By JEFF STEIN, ERICA WERNER  and DAMIAN PALETTA  Dec. 14, 2017 for The Washington Post

Sen. Marco Rubio (R-Fla.) threatened Thursday to vote against Republicans’ $1.5 trillion tax overhaul unless it further expands a child tax credit to millions of working families, leaving GOP leaders searching for answers on a final deal that had appeared on the verge of sailing through the House and Senate.

Rubio, along with Sen. Mike Lee (R-Utah), wants Republican leaders to include the expansion as they reconcile separate tax measures passed by the House and Senate, working to craft a final compromise bill that could pass both chambers and be sent President Trump for his signature.

Senator Mike Lee (R-Utah)

GOP leaders had said Wednesday they believed that they had reached a broad agreement both chambers could pass, and they planned to unveil the package Friday morning with hopes of voting on it early next week. But opposition from Rubio and perhaps Lee — who has not yet decided whether to support the bill, a spokesman said Thursday — could delay or derail the tax effort.

Rubio says it’s imperative that the GOP make its plan more generous for working families, especially as lawmakers repeatedly revise it to strengthen benefits for the wealthy and corporations.

“I understand that this is a process of give and take, especially when there’s only a couple of us fighting for it, the leverage is lessened,” Rubio said Thursday in the Senate. “But given all the other changes made in the tax code leading into it, I can’t in good conscience support it unless we are able to increase [the child tax credit], and there’s ways to do it and we’ll be very reasonable about it.”. . .

Individual Republican senators have significant influence over the plan as the party works to move it through the Senate while holding only a narrow majority. Republicans control 52 Senate seats and need 50 votes to pass the tax bill, as Vice President Pence could be called on to break a tie.

Sen. Bob Corker (R-Tenn.), who voted against the Senate version of the bill because of its projected additions to the deficit, says he’s reviewing the final version but is expected to oppose it as well. With Democrats unanimously opposed to the plan, Republicans can afford to lose no more than two members of their caucus in a final vote.

Top Republicans expressed hope Rubio could eventually be won over.

“He’s really been a great guy, very supportive,” Trump said while taking questions after a speech. “I think that Senator Rubio will be there.”

Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said of Rubio’s request, “. . . I think we can resolve that problem. I sure hope so.”

static.politicoSenator Orrin Hatch (R-Utah)

The change Rubio is seeking would add tens of billions of dollars in new tax breaks for millions of low-income and working-class families, further squeezing negotiators as they struggle to comply with Senate rules that block the bill from adding more than $1.5 trillion over a decade to the national deficit.

Earlier Thursday, Hatch said the party was considering a plan that would . . . cut the measure’s overall tax breaks for middle-class and working-class families. . . .

The shortened duration would free up more revenue Republicans could use to pay for new tax breaks they’re adding in the compromise package to their overhaul, but it could also heighten complaints that the bill prioritizes cuts for corporations over households.

The additional revenue is needed because Republicans are seeking to lower the top tax rate paid by wealthiest Americans, ratchet back proposed curbs on the deductions of state and local taxes, and scale back proposed tax rules for investment income. All of these changes are expected to add more than $200 billion to the cost of the bill, which is one reason GOP leaders have said they don’t have much flexibility to address Rubio’s demands.

Under of the Senate version of the tax plan, many of the cuts and credits for individuals are set to phase out in 2025, but Republicans are considering moving the expiration date to 2024.

Republicans have said that the expiring tax cuts for families and individuals would eventually be extended by a future Congress because they will prove popular, but they need to make them temporary to comply with budget rules.

The backbone of the Republican tax plan is a massive cut to the corporate tax rate, but it would also pare an inheritance tax paid almost exclusively by the very wealthy and cut taxes for millions of other businesses — ranging from small stores to large, wealthy firms — that pay taxes through the individual tax code. Individuals, including the middle class, working class and poor, would see more uneven benefits, with many getting a tax break but some losing out as the breaks expired or certain deductions were shrunk or eliminated.

Republicans, including Trump, have touted their plan as a middle-class tax cut, but by further shortening the duration of individual tax cuts while leaving most corporate rate cuts permanent, the GOP could bolster Democrats’ argument that the package is tilted in favor of the wealthy and corporations. . . .

Marco Rubio, Donald Trump

Trump and Rubio have a history. They faced off during the GOP primary in 2015 and 2016 and launched nasty, personal attacks against each other. Rubio is seen as considering a future presidential run. He has never fully embraced the type of bare-knuckle politics that Trump likes to employ. . .

Rubio and Lee hope their proposed change to the child tax credit would address some of those concerns by giving more credits to the low-income families.

The Republican plan would increase the child tax credit from up to $1,000 per child under existing law to up to $2,000. But Rubio and Lee want to change the credit’s rules to extend additional benefits to families who pay payroll taxes but do not make enough to owe any income tax.

Rubio has been negotiating with the GOP leaders tasked with crafting the final bill, and on Wednesday they said they could increase the tax credit in the final bill by about $13 billion, according to a person with knowledge of the private negotiations. Rubio had pressed for the tax credit to be bolstered by, at a minimum, between $30 billion and $40 billion.

Frustrated by leadership’s counteroffer, Rubio told party leaders late Wednesday night he planned to vote against the GOP tax plan. . .

By Thursday afternoon, as the discrepancy remained unresolved, Rubio announced publicly that, without a more robust credit, he would vote “no.”

. . . in opposing the Rubio-Lee plan, Republican leaders said they need to keep the corporate tax rate at 20 percent to help U.S. companies compete globally. But in their talks to reconcile the House and Senate bills, GOP leaders have a tentative agreement to raise the rate to 21 percent — largely to pay for a tax cut for wealthy individuals. . . .