Category: History

Euro on the Brink

The European Union is a sweet deal for Germany – and the Euro makes that deal even sweeter. Germany isnt like most rich western countries. Proportionately, it has a double-size manufacturing sector. German exports are double that of the UK, triple that of France, and equal to the US, though Germany is only one-quarter its size. And while Germany runs a huge trade surplus, it’s still by far the EU’s biggest importer too.

More than any other nation, Germany depends on the EU’s open borders. And the common currency is a great facilitator of trade, lowering transaction costs and eliminating exchange-rate risks for Eurozone transactions. Given that Germany has the most to gain from a common currency – and the most to lose from its collapse – you’d think Germans would be very careful about keeping their Eurozone partners happy. Think again.

Up until 2008, countries like Greece, Portugal and Spain benefited greatly from the common-currency zone too. The Euro made it easier for foreign banks to extend credit, and as Euros poured in, real estate boomed, building skyrocketed, incomes rose, and tax revenues soared. Spain ran a budget surplus in 2007. But when the music stopped, fannies far outstripped seats. The financial crisis rendered many banks insolvent, so they stopped lending. Given the small size of those countries relative to the enormity of capital flows, their economies crashed. Things were tough all over – but small, developing countries like Greece got it worse.

From the wreckage, two schools of economic policy emerged. One is typified by Ben Bernanke, a scholar of the Great Depression. He, along with Tim Geithner, and ultimately Barack Obama, believed that the government needed to maintain pre-crash spending levels, even if deficits soared. Since consumers were broke and investors were freaked out, the government was the last man standing – to keep the economy going, they reasoned, the government would have to step up as the spender of last resort. Conservatives at the time heavily criticized Bernanke, Geithner and Obama for super-low interest rates, quantitative easing and generous deficit spending, predicting the devaluation of the dollar, increasing unemployment and hyper-inflation.

The other school was made up of fiscal and monetary conservatives, like Angela Merkel. Fearing inflation, they preferred to reduce deficits by slashing government spending, in the hope that the economy would bottom out, and business would pick up again once the recession ran its course. Interest rates were held steady to reduce the risk of inflation and to safeguard the currency. Liberals at the time criticized Merkel and the European Central Bank (ECB) for these policies, predicting that recessions would deepen into depressions, inflation would turn into deflation, and economies would founder for lack of demand.

Countries like Greece werent even free to choose their own course – the realities of the Eurozone meant that Greece had to accept the dictates of the ECB, which is and has been dominated by conservative economists.

Who was right? Six years and seven trillion dollars of debt later, US employment markets are approaching pre-crash levels, budget deficits have shrunk to sustainability, the dollar is at its strongest in years, inflation is at its lowest in a half-century, and the US economy is growing at its fastest pace since before Bush Duh. Meanwhile in Europe austerity has returned the Continent to recession. Unemployment is high, deflation hovers as a constant threat, and the countries that got hid hardest slid into full-fledged depression, with unemployment exceeding 25%, while the Euro has depreciated to its lowest levels in a decade.

It took Greeks seven years of misery to elect a government that shares their disgust with the status quo, and the failed German approach to the crisis. If only Greece had credibly threatened to leave the Eurozone seven years ago, a lot of suffering might have been avoided – Germany might have been coerced to do what was in its own best interest to do: zero out interest rates, and pour money into struggling states to keep their governments spending and their economies afloat – i.e., do what the US did under Obama, Bernanke and Geithner.

Today, it’s less clear what will happen if Greece exits the common currency – the Euro may in fact survive. And that, unfortunately, has emboldened Germany into playing chicken with Greece’s new government, which seems intent either to end current fiscal policies or to resurrect the drachma and go their own way. Germany’s handling of the Great Recession could hardly have been worse – but Germans themselves still have a lot to lose. The demise of the Euro would be a painful blow to Germany and a weak Continental economy.

Conservatives in the past have demonstrated a fearsome inability to learn from experience. Let’s hope, for Europe’s sake, that the dramatic triumph of liberal economic policies will not be lost on European policymakers – and that they will seize on the US example to plot a better course going forward.

 

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Detroit Gets a Treatment, Not a Cure

Sixteen months after becoming the largest-ever US municipality to enter bankruptcy, Detroit has a court-approved plan to move forward, and is poised to move ahead with several billion dollars less debt, plus new aid commitments from the state and federal governments. But nothing has been done to fix the underlying problem: that the “City of Detroit” is a legal fiction – an anachronism with no bearing whatsoever on the region’s physical and economic facts.

Detroit’s history follows both the rise of the automobile industry and the use of the automobile itself. Detroit grew from a modest-sized town in 1900 to become the 5th largest city in the US in 1950. But then the course of the city and the auto industry diverged. While the industry continued to expand, new plants were built in Detroit’s suburbs. Workers took advantage of cheap cars and better roads to head to the suburbs too.

The depopulation of midwestern cities is not unique to Detroit. Almost every midwestern city has lost between twenty and sixty percent of its population since 1950. The larger metropolitan areas have kept right on growing – it’s only the cities that have shrunk. While the city of Detroit today has about one-third the population it had in the early 50s, the larger Detroit region is now forty percent more populous.

The difference is the automobile and the US highway system. Before the age of cheap transport, economic realities forced people to live in town, close to work and needed services: schools, shops, family, etc. Since the 50s, people have had the option to live away from town, relying on cars and a modern road network to get where they need to go.

Newer American cities in the west have established their city limits in accordance with this new reality. The major cities of Texas are a good example. Austin and El Paso each have nearly the same area as New York City. Dallas, Fort Worth and San Antonio are all geographically larger than New York City, and Houston is twice New York’s size. But those six Texas cities combined have fewer people than New York City. Unlike older cities in the east and midwest, Texas cities were were built around the automobile, and their sprawling incorporated limits reflect that.

The urban sprawl of cities like Detroit is, today, no less extensive – however most midwestern cities have literally left their incorporated limits unchanged since the days of the horse-drawn carriage. Detroit is about one-half the size of New York City, and has been for more than a century.

The people leaving midwestern cities since the 50s have been disproportionately affluent, because they can more readily afford cars and new houses in the suburbs. The people left behind are disproportionately poor. And because of the disparity between black and white incomes, and discriminatory business and banking practices, the net result is relatively white, affluent suburbs and relatively black, poor cities. This demographic trend is common to many major metropolitan areas across the midwest, including Detroit, Buffalo, Cincinnati, Milwaukee, St. Louis, and Cleveland.

In and of itself, this would not have been a problem if the larger metropolitan area were united within a single municipality. However suburbanites were able to escape the tax base of the city, while still using numerous city resources, from hospitals to roads to water supply and other elements of the city’s infrastructure. Detroit spent billions of dollars providing health, education and other services to people who would ultimately leave to become productive members of society elsewhere.

The real cure for cities like Detroit is the annexation of its suburbs – to bring political realities (the lines on the map) into accord with the social and economic reality: that city and suburb is a single entity, united by a common infrastructure and commerce. Detroit today is little more than the least desirable neighborhood in a much larger economic zone, of which it comprises less than 20% of the total population, and an even smaller fraction of the total land area.

Leaving the old municipal lines intact effects a ghetto, within which medical care and education are far inferior, predictably producing children who will lack the skills to be productive in a modern economy. The obstacles to incorporation of the suburbs are political, but they have been overcome in places such as Kansas City and Louisville. Detroit’s latest plan will get it out of bankruptcy, and improve things a little bit in the short term. But over the long haul it will only perpetuate an unjust and unproductive status quo.

 

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GHWB’s Gallery of Irony

You could fairly ask why the National Constitution Center – a museum devoted to the US Constitution – would name a new gallery for George H.W. Bush. This, after all, is the president who irresponsibly appointed Clarence Thomas, the Supreme Court’s least qualified appointee since at least WWII, whose signature contribution during 20 years on the bench is his ongoing effort to legitimize prison beatings. (Really.) VP while the Reagan administration was running roughshod over the Constitution during the Iran-Contra affair, Bush, as president, pardoned everyone implicated, arguably to obstruct investigation into his own law-breaking.

But the salient facts are that GHWB is a former chairman of the Center, and that his son Jeb is the current chair – and so with nauseating irony GHWB is getting his eponymous gallery. According to Center president Jeffrey Rosen, the George H.W. Bush gallery will for the next three years, “be the focal point… of debate and education about the meaning of the Bill of Rights.” Barf bags, anyone?

As if to double-down on the grotesque, the task of obfuscating George Bush’s antagonistic relationship to the Bill of Rights was given to Justice Samuel Alito, who Bush appointed to the Third Circuit in 1990. Alito, after all, has himself been hard at work eviscerating the Bill of Rights since Bush Duh put him on the Supreme Court in 2006. It’s kind of like adding a George Wallace wing to a Black History Museum – with the dedication ceremony conducted by Charles Murray.

Conservatives like Alito cannot sing the praises of the Bill of Rights without irony. Speaking at the dedication ceremony, Alito distinguishes the American Bill of Rights as “having teeth” – as compared to other declarations of human rights that, through history, have not been so readily enforceable. The joke is that Alito has made a career of knocking those teeth out at every opportunity.

Three Constitutional cases were deadlocked 4-4 at the time Alito was seated on the Court, each implicating the Bill of Rights. Solely for Alito’s benefit were they reargued, so that he might cast the tie-breaking vote. Alito went 3-for-3: his was the fifth vote to undercut liberties protected by the 1st (speech), 4th (search and seizure) and 8th (cruel and unusual punishment) amendments in those three cases, respectively.

Alito was just warming up. His subsequent decisions have undermined women’s right to choose, expanded the police power, and reduced free speech protections; his dissents have often advocated even greater violence toward the Bill of Rights. So perhaps it’s unsurprising what his short talk on the history of the Bill of Rights included – and excluded.

Alito began by asserting that the Bill of Rights is a “codification” of those “unalienable rights” alluded to in the Declaration of Independence. He conveniently fails to mention that, as a codification, it is explicitly incomplete. Which is probably why, in his discussion of the views of the late 18th century supporters and opponents of the Bill of Rights, he fails to mention one of the Bill’s most important objections: that the absence of a particular right from the Bill might be used as evidence that that right does not exist. This problem was cured by the 9th amendment, which forbids that specific form of reasoning. But go try finding a conservative like Alito who has ever used the 9th amendment to expand the protections of the Bill of Rights.

Alito goes on to discuss the importance of the defeat of fascism in WWII for the spread of human rights worldwide. Ever more ironically, he fails to acknowledge that the Bill of Rights itself was not generally operable against state governments until the 1960s. Before then, the state police could break into your house without a warrant, arrest you and beat you for a confession, and the Constitution had nothing to say about it. That only changed when liberal justices changed the law, over the objection of the Court’s conservatives.

If the National Constitutional Center were enhanced by a gallery dedicated to efforts to undermine the Bill of Rights, it could hardly have a more fitting name, nor a more apt individual to introduce it.

 

Deficits and the Party of Duh

Since the Field Guide last discussed the dramatic decline of the US budget deficit, the non-partisan Congressional Budget Office came in with its revised numbers for Fiscal Year 2014, which ended September 30th. According to CBO, the deficit for FY 2014 shrank to $486 billion, or 2.8% of GDP. Because the US economy grows, on average, at a rate of about 3% per year, deficits smaller than that can be sustained forever. The US fiscal crisis is over.

The turnaround of the nation’s finances under the Obama Administration has been remarkable. FY 2009, which began while Obama was yet Illinois’ junior senator, had a budget deficit of 9.8% of GDP – the highest since World War II. Under Obama, that figure has fallen every year, to at last slip below 3%. FY 2014’s deficit is in fact slightly smaller than the average of the past 40 years.

If conservatives were thoughtful by nature, they might be scratching their heads. According to their dogma, Obama’s increased taxes on the wealthy, and the ACA’s expanded social insurance for the poor, should have led to mounting deficits and economic stagnation. That’s what they’ve been predicting for the past 6 years – along with hyperinflation. But the fact that reality has returned the precise opposite of conservative predictions – decreasing deficits, economic growth, increasing employment and below-average inflation – has not caused conservatives to reconsider their beliefs.

Responding to facts, after all, is only something that rational people do. Conservatives in the end are dogmatists whose beliefs are fundamentally religious in nature – they dont care a whit about reality. This is how conservatives can continue clinging to the discredited notion that tax cuts pay for themselves, and that social insurance is a black hole of waste and inefficiency. Despite being wrong again and again, they are unable to learn and move on.

Shortly after Reagan came to office in 1981, he got through his signature legislative initiative: slashing taxes on the wealthy, while affording smaller tax cuts to everyone else. The nation’s finances never recovered. Though the economy rebounded – as was expected, following the sharp recession of the early 80s – deficits remained unsustainably high until Reagan left office in 1989, and were still averaging nearly 4% of GDP during the Bush years that immediately followed. To fully grasp the significance of Reagan’s policy failure, it helps to appreciate that the Carter’s administration never ran a budget deficit greater than 3% of GDP, despite a poor economy.

Clinton came to power as the unReagan: he raised taxes on the wealthy (without a single GOP vote in Congress), while also increasing government spending on stimulus programs that typically help middle income families. With conservatives predicting gloom and doom, the US economy responded with its longest sustained expansion in history, while the deficit shrank to zero.

You’d think this experience would be the slam-dunk/death-knell of Voodoo Economics – if, after all, tax cuts demonstrably worsen deficits, while tax increases shrink them to nothing, while coinciding with unsurpassed economic growth, how could conservatives persist in their folly? But the charm of conservatives is their inability to learn from experience, no matter how obvious or unequivocal its lessons. And thus Bush Duh continued with the same conservative foolishness, cutting taxes on the rich, which gave away the nation’s hard-won surplus, replacing it with deficits stretching far into the future, culminating in a lackluster economy and the nation’s worst fiscal straits in more than 60 years.

Under Obama, the US has expanded its social safety nets and raised taxes on the wealthy, while lowering the deficit and growing the economy. In other words: it’s the same old story – and if conservatives in the Party of Duh had any connection to reality, they wouldnt be surprised at all.

 

The Field Guide is off mid-week for Veterans’/Armistice/Decoration Day – we’ll return with new material on Friday.

 

 

Who Lost North Korea

As South Korean spies ended weeks of speculation by revealing the mundane cause of North Korean dictator Kim Jong Un’s recent absence from public view (ankle surgery), a much more ominous bit of news was simultaneously reported: North Korea has begun work on a submarine-based nuclear missile launching system. With present technology, North Korea may be able to strike Alaska, or perhaps Washington state. With sub-based missiles, they could potentially hit any city in the US. While this project will take years, the long-term prospects are chilling. And no matter how conservatives try to wriggle out from under the inescapable truth, blame for North Korea’s nuclearization falls squarely on the Bush Duh administration.

A little background info is crucial. There are just two paths to creating a nuclear fission weapon. One uses uranium, which involves a technologically complex enrichment process. The other uses plutonium, and is much quicker – if you have a ready supply of plutonium, which can be readily produced in certain kinds of nuclear reactors.

When Bill Clinton came to the White House in 1993 – fresh out of Little Rock, without a scintilla of foreign policy experience – he inherited a Korean peninsula already in nuclear crisis. Clinton competently negotiated a deal, and under the 1994 “Agreed Framework,” North Korea halted its uranium enrichment program, and also shut down its plutonium-producing nuclear plant – blocking both paths to nuclearization. In exchange, the US promised to build North Korea two new nuclear plants – of a kind that could not be harnessed to manufacture weapons – and to supply them with fuel oil in the interim. The Agreed Framework also put the US and North Korea on track for improved relations.

Fun fact: North Korea’s Yongbyon nuclear reactor – source of its weapons-grade plutonium – was constructed on Ronald Reagan’s watch, during 1980-86.

Enter Bush Duh. Late in 2002, the US accused North Korea of violating the Agreed Framework by restarting its uranium enrichment program. Whether or not that’s true, in the 21 years since the Agreed Framework was signed, North Korea has never detonated a uranium-based nuclear weapon. What is true is that the US failed to follow through on its promises to build two new reactors and deliver fuel oil. The reactors were far behind schedule, and oil shipments were often delayed – all because conservatives in Congress opposed the agreement, and sought to sabotage it by withholding funding. This makes it particularly laughable for conservatives to blame North Korean nukes on Clinton, since they did everything they could to undermine his otherwise effective policies.

And so because of congressional conservatives, North Korea had legitimate gripes about the US failing to keep up its end of the bargain. With ham-handed diplomacy, Bush Duh so thoroughly alienated North Korea that they pulled out of the Nuclear Non-proliferation Treaty, restarted their Yongbyon reactor, and – while Bush Duh slept – they ran it for two years, producing enough plutonium to build several bombs. Duh dozed on as North Korea shut the reactor down, extracted the plutonium, and got to work. They successfully detonated their first nuclear weapon in late 2006 – during Duh’s 6th year in the White House.

Bush Duh followed up that 6 year snooze-a-thon with inaction in the face of North Korea’s missile tests, as the North worked on the development of a nuclear weapons delivery system to allow them to strike US allies, as well as the US mainland. He was, after all, quite busy in Iraq, confirming what UN inspectors said before the US invasion: that Iraq had no weapons of mass destruction. Duh!

Kansas Voodoo

Perhaps even conservatives can only be fooled so many times before they get wise. In Kansas, Democrat Paul Davis has pulled even with Republican incumbent Sam Brownback in the race for governor. Davis has even received the endorsement of numerous Republican officials across Kansas, who find Brownback’s dalliance with Voodoo Economics too spooky for their taste.

Credit for the term “Voodoo Economics” goes to George Bush. While he was competing for the 1980 GOP presidential nomination, he applied it to describe Ronald Reagan’s economic proposals, which relied on the notion that tax cuts pay for themselves. To George Bush, and to most of us, Reagan’s policies seemed like a crackpot idea at the time. Our experience over the past 30 years have borne out Bush’s skepticism.

Fiscally, the US never recovered from Reagan’s tax cuts. Deficits remained sky high for twelve years, right through the departure of his successor from the White House in 1993. That not-so-grand experiment only ended with Clinton’s tax increases, which, instead of bringing the disasters predicted by conservatives, delivered the longest economic expansion in US history, and replaced Reagan and Bush’s deficits with surpluses projected far into the future.

Under Bush Duh, the US again endured the folly of Voodoo Economics. His tax cuts gave away the surplus to the very rich, and left the country’s fiscal health permanently compromised. The cure only came via Obama’s tax increases on the wealthy – and the sustained economic recovery that’s (again) happened with conservatives (again) predicting gloom and doom.

But these experiences werent enough to deter Kansas from embarking on the very same, failed supply-side Voodoo. Conservative Sam Brownback was elected governor in 2011, and in 2012 pushed through a massive tax cut, slashing the top income tax rate by 25%, and eliminating income taxes on small businesses entirely. Brownback was hoping for a little of that ol’ black magic: to see state tax revenue grow, even though almost all Kansans were going to be paying a lower tax rate.

For all its voodoo, Kansas is now in deep budgetary doo-doo – because Voodoo Economics has failed Kansas too. With tax receipts falling short of expenses by hundreds of millions of dollars, education, along with other government services have been slashed, and the state’s credit rating has been downgraded. And in addition to all that red ink, Kansas is adding jobs at a slower pace than the national average. With inept governance, deficits, and weak job growth, one might regard today’s Kansas as a time capsule of the Bush Duh years – from which even Kansas Republicans seem eager to escape.

 

 

 

 

 

 

How Jim Crow Holds Florida

In denying the right to vote to criminals, even after they have been released from prison, the US is an outlier with respect to much of the world. Let alone allowing ex-cons to vote, numerous countries permit inmates to vote from prison, including Australia, Canada, the Czech Republic, Denmark, Finland, France, Germany, Israel, Japan, Netherlands, Norway, Poland, Romania, Serbia and Sweden. Among US states, only Maine and Vermont let everyone vote, including prisoners.

With America’s skyrocketing prison population, felony disenfranchisement affects an increasing fraction of the US population. While it denied suffrage to about 1 million Americans the in the early 70s, 3 million were disenfranchised by the mid-90s, and nearly 6 million are disenfranchised today. Across much of the south, upwards of 7% of the adult population cannot vote because of past convictions.

Relative to the irrevocable, lifetime disenfranchisement that the Constitution permits (for the moment), states are generally much more liberal about allowing convicted criminals to vote after they’ve completed their sentences, if not parole or probation. As usual, it’s regressive southern states who are the most unforgiving, with a few effectively disenfranchising convicted criminals forever.

Disenfranchisement disproportionately affects blacks. Across the country, about 8% of blacks, and some 13% of black men cannot vote – compared to about 2% of all other adults. Florida is the worst case of all. In 2011, its GOP governor gave the state the most extreme felony disenfranchisement law in the country. With just 6% of the US population, Florida is home to 25% of all of America’s disenfranchised. 20% of all blacks in Florida – and about 35% of all black men – cannot vote. One neednt wonder at the GOP’s zeal for felony disenfranchisement. In its absence, Florida would not be a swing state – it would be solidly democratic.

US AG Eric Holder has been pressing states to reform these outmoded laws – many of which date back to Reconstruction, a living remnant of the Jim Crow south, whose purpose was, then and now, to suppress the black vote. Felony disenfranchisement is an ugly anachronism, with no place in a modern law or governance.

 

Refs:

https://www.aclu.org/maps/map-state-criminal-disfranchisement-laws

http://www.washingtonpost.com/world/national-security/eric-holder-makes-case-for-felons-to-get-voting-rights-back/2014/02/11/b0556492-932b-11e3-84e1-27626c5ef5fb_story.html

http://en.wikipedia.org/wiki/Felony_disenfranchisement#Other_European_countries

http://www.washingtonpost.com/blogs/govbeat/wp/2014/02/12/how-felon-voting-policies-restrict-the-black-vote/

http://www.fairvote.org/research-and-analysis/voting-rights/felon-disenfranchisement/

http://www.demos.org/blog/2/13/14/racist-history-behind-felony-disenfranchisement-laws

http://www.motherjones.com/mojo/2012/07/black-vote-felon-disenfranchisement-laws-florida

http://truth-out.org/buzzflash/commentary/felon-disenfranchisement-the-new-jim-crow/17952-felon-disenfranchisement-the-new-jim-crow

http://en.wikipedia.org/wiki/Reconstruction_Acts

http://en.wikipedia.org/wiki/Reconstruction_Amendments

http://en.wikipedia.org/wiki/Fifteenth_Amendment_to_the_United_States_Constitution

http://en.wikipedia.org/wiki/Fourteenth_Amendment_to_the_United_States_Constitution

The Constitutionality of Felony Disenfranchisement:

In the aftermath of the US Civil War, with southern states excluded from Congress and yet subject to military rule, northern states changed the Constitution to protect its citizens’ voting rights – somewhat. The 15th amendment, which became law in 1870, is short and simple:

The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude.

18 months previously, northern states had ratified the 14th amendment. Section 2 is a fine bit of 19th century prose:

Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice President of the United States, Representatives in Congress, the Executive and Judicial officers of a State, or the members of the Legislature thereof, is denied to any of the male inhabitants of such State, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such State.

It sprawlingly ties together many areas of law, including apportionment, the legal status of “Indians”, federal and state elections, voting rights and criminal disenfranchisement. That’s a good thing, because it mutually binds, one to another, numerous rights, capacities and effects, forcing courts to interpret them with respect to one another. The bad of it is that it implicitly allows for the unfettered disenfranchisement of convicted criminals. The 15th amendment meanwhile only prevents states from denying the right to vote for 3 specific reasons – leaving other bases for disenfranchisement valid, including not just crime, but gender.

There is hope. See:

http://en.wikipedia.org/wiki/Richardson_v._Ramirez

http://en.wikipedia.org/wiki/Hunter_v._Underwood

n.b. The Reconstruction amendments were drafted, voted up by 2/3 majorities in both houses, and passed on to the states for ratification while southern states had no representation in Congress, were yet subject to military rule, and were effectively territories – not states – governed from Washington, D.C. Their readmission to the Union – and with it, the restoration of their Congressional delegations – was conditioned on their ratification of the these amendments.