Friday, June 29, 2012

SCALIA'S TYPO(S), OR POOR EDITING?


This is on the sidelines now but it definitely is of interest.

U.C. Berkeley Professor of economics Brad DeLong had an interesting string of comments and posts on his blog immediately after the Supreme Court's 5-4 decision to uphold the Affordable Care Act (Obamacare). Delong's posts focus on what appear to be evidence of Chief Justice Roberts last minute decision to switch his vote.



The evidence is based on Associate Justice Antonin Scalia's dissenting opinion. Specifically, Justice Antonin Scalia's dissent is written as if it were the majority opinion. 


Scalia, who voted against the Affordable Care Act, consistently refers to Justice Ginsburg's majority opinion as "the dissent." To be sure, Justice Ginsburg's rationale for supporting Obamacare differed from Chief Justice Roberts' reasoning. But does that make her opinion a "dissent"? Or is Justice Scalia's opinion simply rife with typos and/or a confused writing style (or some terrible law clerk editing)?


In all cases, if this stuff interests you, it's definitely worth your time to click on Delong's post titles below ...


* "LAWRENCE SOLUM: EVIDENCE THAT THE VOTES SHIFTED AFTER CONFERENCE (INITIAL VOTE TO DECLARE MANDATE UNCONSTITUTIONAL)" 
* "MORE EVIDENCE THAT SCALIA'S DISSENT WAS ORIGINALLY WRITTEN TO BE THE OPINION OF THE COURT..."
* "DID NINO SCALIA FIRMLY THINK HE HAD HIS "CONSTITUTIONAL MOMENT", AND HIS MAJORITY?"


You can also go straight to the U.S. Supreme Court's National Federation of Independent Businesses et al. v Sebelius Secretary of Health and Human Services, et al. (2012) document here and see for yourself (the dissent starts on p. 127, while the referenced copy below starts on p. 140).




Typo, confused writing, or sloppy editing (from the clerks)? Either way Scalia's dissent is strange, to say the least. Mother Jones has an excellent discussion on the issue here.


As an aside, I also like the post below because of how it raises questions about the relationship between politics and the Supreme Court ... 

* "ALITO, KENNEDY, ROBERTS, SCALIA, THOMAS HAVE JUST SAID THAT GEORGE W. BUSH'S 2005 SOCIAL SECURITY PRIVATIZATION PLAN WAS UNCONSTITUTIONAL"

We'll save this one for another day.

- Mark

Thursday, June 28, 2012

LET THE CAMPAIGN SEASON BEGIN ...


With the Supreme Court's 5-4 decision upholding the Affordable Care Act (Obamacare) there are now two high profile achievements that President Obama can use during the presidential campaign.








What's especially sweet is the contrast President Obama can draw between his administration and the previous one when it comes to winding down President Bush's failed war policies and getting out of Iraq ...









Then we have the contrast that can be drawn between President Obama's accomplishments with the economy and what President Bush handed him ...




Let the campaign season begin ...

- Mark

OBAMACARE STANDS



Incredible. In a split 5-4 decision the Supreme Court - with Chief Justice John Roberts acting as the swing vote - upheld the constitutionality of the Affordable Care Act (Obamacare). While there are many benefits (which I wrote about) that will show up over time here are several results we can all look forward to in the immediate term ...




If you're unsure what the Supreme Court's ruling means for your family situation check out this short Washington Post interactive here. It will take you all of 20 seconds ...

One thing is certain, the legacy of Chief Justice Roberts just took a turn. Following Chief Justice Roberts' concurring decision on the Arizona immigration policy, decisions like this in the future could help make him one of the most respected Supreme Court justices in our nation's history.

- Mark

Tuesday, June 26, 2012

OUR BANKING CRISES IS REAL (AND NOT AN ACCIDENT)

Have you ever wanted evidence of what's happened to our financial system since we started bailing out the private sector (beginning with Lockheed in 1971) and then began deregulating our financial sector?  This chart from the International Monetery Fund (IMF) Working Paper titled “Systemic Banking Crises Database” is a good place to start connecting some dots ...


You can read the report here, and draw your own conclusions.

- Mark


Monday, June 25, 2012

IF YOU CAN'T YELL FIRE IN A CROWDED THEATER ...

If you can't yell fire in a crowded theater you shouldn't be allowed to set fire to a political campaign, no matter how much money you have ...


The Supreme Court was wrong in their Citizens United decision, and was wrong to uphold their decision on the Montana challenge.

Kudos to Gary for sharing this cartoon.

- Mark 

Saturday, June 23, 2012

THE PROFIT MOTIVE IS ONLY ONE PART OF OUR STORY ...


I've written about the myth of the free market, and the subsequent over emphasis on the great man theory. Long story short? The profit motive is only one part of what motivates people. Great achievements and advances in the human condition occur because of a larger cumulative process that involves a combination of timing, luck, initiative, inquisitiveness, talent and, yes, even concern for the humanity.



If you're interested in reading more on this check out The Atlantic's "Forget Edison: This is How History's Great Inventions Really Happened." Here's the opening lines:

The world's most famous inventors are household names. As we all know, Thomas Edison invented the light bulb, Alexander Graham Bell invented the phone, and Eli Whitney invented the cotton gin.  
Except they didn't. The ideas didn't spring, Athena-like, fully formed from their brains. In fact, they didn't spring fully formed from anybody's brains. That is the myth of the lonely inventor and the eureka moment. 
"Simultaneous invention and incremental improvement are the way innovation works, even for radical inventions," Mark A. Lemley writes in his fascinating paper The Myth of the Sole Inventor. Lemley's paper concentrates on the history and problems of patents. But he also chronicles the history of the 19th and 20th century's most famous inventors -- with an emphasis on how their inventions were really neither theirs, nor inventions. Here is a super-quick summary of his wonderful distillation of the last 200 years in collaborative innovation.

You can read the entire article here The commentary section makes for good reading too.

- Mark 

Thursday, June 21, 2012

YOU CAN LEAD A HORSE TO WATER ...

One of the great experiences I get from communicating on FB, via e-mail, or on the many other social networking paths that we have around us today is reading stuff from really stupid people. I especially enjoy reading their stuff when they like to claim they're smart. Check this out. 

I saw the collection of pictures on train systems below ...



Before sharing this picture I decided to comment on the FB site where I originally saw the collection of train pictures. I wanted to explain that our nation's infrastructure is crumbling because it is not being maintained or rebuilt ...




If we understand this we can begin to understand why we're not making any progress when it comes to our nation's infrastructure future, and on the jobs front today. Here's my FB comments on our infrastructure system (and our jobs problem):

  • Let's make this real simple ... it's the GOP and their never ending effort to make sure President Obama has a no jobs agenda to run on in 2012. From ignoring his jobs proposals, the threat of record filibusters in the Senate, and Eric Cantor's magical budgets which gut middle class programs, the goal is to make President Obama a one term president ... even if it means stiffing workers and the progress of our nation.

Several of the follow up FB comments were the standard, "We don't have the money ...", "We like our cars so we won't use this ...", etc. But then I saw these comments pop up:

  • ... Mark grow and get a life 
    ... remember BHO had two years of senate houe control and could hardly pass a bill 
    ... mark would not know the truth if it bit him on the ass!

I know. Pure genius. The writer really put me in my place.

But I was really delighted to see this private FB correspondence, which was sent directly to me from the same person who told me to get a life:

    • ... you are as dumb as dirt! I graduated fro CSUB with a degree in History and call tell from your dribble you know nothing about what is going on. You are just another left wing wacko out of touch with reality. Remember BHO had both the house and senate and could not pass a bill out of either except health care which will be shortly be overturned. So now you blam the GOP....HaHaHa....only 4 more months...

After chuckling and thinking this would be a great example for my next book because of how it demonstrates what it's like when you engage really stupid people in conversation, I decided to respond privately with the following:

  • ... I could start by walking you through the filibuster threats and the GOP's acknowledged strategy to stonewall President Obama but your commentary suggests that, as an intellectual cripple, you're not up to the walk. Seriously, are personal attacks all that you're up for? But thanks for a quote that just might make it in my next book (or on my blog) ;-)

Since I was on a roll I decided to follow up on the more public (original) FB site where all this started. I wanted to explain that, as a nation, we should be able to walk and chew gum at the same time. So I wrote the following about our ability to do several big things in the past:


  • [Look], Abraham Lincoln signed into law the Homestead Act, the Morrill Act, the National Banking Act, and a bill that chartered the first transcontinental railroad. He was thinking about our future and our national infrastructures. You can't say we have to ignore the future because George Bush put us in a financial hole. More importantly, Lincoln did all of this while managing the Civil War and all the debts we were racking up at the time. Funny what you can do when you don't have recalcitrant political enemies acting like political anchor ... Hey, [Chuckles], since you don't seem to understand the reality behind filibusters let's start with this ... http://markmartinezshow.blogspot.com/search?q=filibuster

Then I followed it up with this ...


At the end of the day I should have just led Chuckles & Friends to this post on the GOP's 30 year long race to the bottom strategy. But it really doesn't matter. Chuckles & Friends stopped posting. This is par for this crowd. Sigh ...

As my Dad used to say, "You can lead a horse to water but you can't make them drink."




Long story short? If Abraham Lincoln could afford to take time out of the Civil War to make policy and plan for the future - while pushing forward with the concept of Manifest Destiny - we can afford to build for the future of our nation today. Unfortunately we're stuck with the Party of No, and a petulant leadership that cares more about power today than it does about the future of America.




- Mark


Tuesday, June 19, 2012

Thursday, June 14, 2012

YES, IT'S CLASS WARFARE ...




Let's assume that the nation's richest 1 percent saw their total wealth drop from $126 million in 2007 to $77 million in 2010. That's a collapse of about 40 percent. What would the nation's political, financial, and media elites do? This is a question that James Carville raises at CNN.

Carville reflects on the Federal Reserve's report this week that the bottom 99 percent of America saw their total net wealth drop by almost 40 percent after the 2008 market meltdown (from $126,000 to $77,000). Then Carville ponders what would have happened if the same story was told about the wealth of our nation's richest one percent. What if they lost 40 percent of their total wealth?

But we already know what would have happened. We don't even have to ask. Consider the following.

Wall Street's 2008 collapse and the threat that it would drag down capital markets compelled America's financial elites to get their political Oompa Loompas in Congress to act. They wrote up legislation that would dump more than $1.5 trillion into Wall Street and the economy. Both the Bush and Obama administrations signed off on this (TARP/Stimulus).

Then the Federal Reserve started "printing" trillions of dollars while Wall Street got the Treasury Department to start covering their ridiculous market bets with a myriad of government sponsored bailout programs (see also this, this and this).




So, no, we don't even have to ask what would have happened if America's financial elites lost 40  percent of their wealth. Just the threat of a prolonged market collapse compelled Congress and our government's financial institutions to initiate a monster trillion dollar rescue on behalf of our nation's moneyed elite.

But when the bottom 99 percent actually lose 40 percent of their wealth ... well, that's another story. The fact that little has been said about the vast majority of ordinary middle-class Americans losing 40 percent of their wealth is astounding.

But here's the real point over looked by just about everyone. At the same time that the bottom 99 percent saw 40 percent of their wealth nest(s) disappear the top 1 percent actually saw their wealth and incomes increase through 2010-11.





This is critical because we all know that if the nation's richest class lost 40 percent of their wealth - while the bottom 99 percent actually saw their wealth increase - the process would immediately be tagged as some kind of apocalyptic Robin Hood syndrome.

Now, what would we call this? Hmmmm ... let's see ... what would we call a transfer of wealth where one class benefits disproportionately at the expense of another? Let's get serious, if what happened to the bottom 99 percent had happened to the top 1 percent it would have been called class warfare.

But since it happened the other way around it's best that we, well, quit casting blame and look to the future.





As multi-billionaire and the Oracle of Omaha Warren Buffet put it: “There’s class warfare, all right ... but it’s my class, the rich class, that’s making war, and we’re winning.”





Sigh ...

- Mark

Tuesday, June 12, 2012

STUDENT LOAN DEBT

I didn't have parents who could pay my way so one of the biggest issues for me coming out of graduate school was my student loan debt. One thing is for sure, I am not alone in dealing with these issues ...



With state cutbacks to higher education and rising fees you can rest assured that this problem will persist long into the future.

- Mark

Hat tip to my friend Mark in Santa Cruz for the post.

MIDDLE CLASS WEALTH IN FREE FALL

What happens when you fail to address the problems that caused our 2008 market collapse but bend over backwards to make sure financial institutions do well? You wipe out two decades of wealth accumulation, that's what happens.

According to the Federal Reserve family net worth, or total accumulated wealth, dropped almost 40 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. In a few words, Americans are about where they were at in 1992.

While much of the disappeared wealth is due to collapsed home values, stagnating wages for Main Street and super payouts for Wall Street have a big hand in what's happening in America.


- Mark

Monday, June 11, 2012

OUR NEVER ENDING WALL STREET BAILOUT CONTINUES ...



So it's happened, again. The banking and financial industries got another bailout. This time it was in Spain. While it's not being billed as yet another bailout for Wall Street and our banking institutions it's hard to look at it any other way. I've written about this before (here and here) so I will simply say that what's going on amounts to little more than robbing Peter to pay Paul.

A financial circle jerk, if you will.


While the bailout is not billed as part of our on-going Quantitative Easing (QE) bank welfare program the bailout of Spain is really part of a larger effort to save our economic bacon. Without these bailouts European institutions would have to dump U.S. stocks and bonds, which would depress market prices.

This would get everyone closer to a market stampede mentality here in the U.S.


Instead, with our bailout in perpetuity program, the European debt crisis and the on-going bailouts keep European banks afloat. This allows them to continue supporting our debt drenched financial markets which keeps our derivative laced markets going.

While the bailouts keep the banks afloat the policy is really a financial blood letting. It does little more than inflict slow motion pain on the European workforce (unemployment is 24.1% in Spain, 21.7% in Greece, and 15.3% in Portugal) because of how it continues to dump money into financial institutions while imposing austerity measures on the general population.



In fact, keeping individual banks afloat with regular money dumps - while squeezing the money supply for jobs and other make work projects - has created a mentality that a British journalist once dubbed “sado-monetarism.” It's a perversion of what governments are supposed to do and how markets are supposed to work.

Put another way, it is yet another example of why we don't have free markets.


- Mark

Thursday, June 7, 2012

FINALS WEEK NOTES FOR MY 101 CLASS ...

So students in my PS 101 class don't look like this during finals next week ...



... below I am providing a set of links to topics that I have discussed in lecture. These links should not be interpreted as providing all the information needed for each question in the final. After reading through the first two mid-terms they are simply links to topics that needed more depth in my estimation.


The following links address issues that will be in Part I of the final exam ...

Liberal Republic / Liberal Revolution. Look here under "Three Intertwined Developments" for the "historical forces and intellectual roots behind our political and economic system." Then tie them into our Constitution and our Liberal Republic.

* Federal Imperative / California: California in the federal system (initiative process, recall, etc.). The issues surrounding the recall of Gray Davis, and Arnold's election, are discussed here.

* Courts and/or American Presidency: Here's the link to help with the FISA courts.

The Presidency: Do we have an emerging American Caesar? This post and this op-ed review several issues tied to the American presidency that we discussed in class. These two  posts discuss signing statements.

* From Civil Liberties to Civil Rights: The long march to equality involved issues tied to blacks, women, labor laws, the influence of junk science (which justified social stereotypes), etc. It's all discussed here in last 2/3 of this post."

Congress: Why is it that many members of Congress appear overwhelmed and uninformed? Why do they appear to talk at each other instead of with each other? This post on the Bell Experiment ties into our lecture on post-industrialandia and semi-democracy in America.

* Political Parties: Here's a link that I have used in previous class lectures to help explain the evolution of political parties in America.





The following links address issues that will be in Part II of the final exam ...

Economic Policy Making: This link helps us understand how the market actually works, and why economic policy making is so important in America. This post discusses the role of fiscal and regulatory policy in America.

* Social Security: If I decide to have an independent question on social security you might want to look at this, this, and this. For a discussion on COLAs (cost of living allowances), "hedonics," and social security see this (under "Boskin Commission").



Good luck.
 
- Mark

Tuesday, June 5, 2012

WHY THE REPUBLICAN TAX CUT JIHAD NEEDS TO END

Imagine the following. Let's say you own a home that is worth $300,000. You put a small down payment on the house so your monthly payments are about $1,700. Would you rather have an annual salary of $54,000 to pay off your home mortgage or would you rather have $69,000?

What if the difference in your salary depended on you voluntarily giving up $15,000 so that your boss/manager could have a bonus every year? Would you do it? Would you do it if your boss/manager - who you have nothing in common with - promised to share in his prosperity by taking you water skiing on the boat he bought with his bonuses? What if he promised you twice?


Given the financial situation I just described it's hard to imagine anyone who would embrace the offer. So why in the world - given our current national debt woes - would we want to continue with the Bush era tax cuts that go primarily to the super rich and the financial managers on Wall Street? Yeah, I know they promised the wealth would trickle down, but check this out ...

The undisputed financial referee of the U.S. Congress, the Congressional Budget Office (CBO), has come out with their projections and analysis for our nation over the next few decades. It's not pretty.



The CBO points out that if we continue to maintain the Bush era tax cuts (listed in the graph as "Extended Alternative Fiscal Scenario") the total federal debt held by the public will grow from about 73 percent of GDP (what we produce) today to about 200 percent of GDP in 2037 (see also figure 1.2). Worse, federal revenues as a percentage of GDP will grow slightly from 16 percent today, and then stagnate at about 18 percent of GDP.

Translated this means that George W. Bush's tax cuts, which have primarily benefited the rich, will likely push our nation into bankruptcy if we keep them. They do nothing to remedy the financial hole we find ourselves in in today.

However, if we remove the Bush era tax cuts ("Extended Baseline Scenario") national revenue climbs to about 22-23 percent of GDP, and we have a chance. Federal debt held by the public doesn't hit 200 percent. Instead it drops to 53 percent (p. 2). This means we can begin to put a dent in the multi-trillion dollar financial hole that unfunded tax cuts for the rich and Wall Street bailouts have cost us since Ronald Reagan and the Bush's dumped their supply-side trickle down economic policies on the nation.

______________________________________

On another but related note, according to the same CBO report, the total amount of national income that is projected to be excluded from social security taxes will jump from about 15 percent today to about 17 percent by 2037 (p. 64).

Why will this happen you ask? Because, currently, every penny a hedge fund manager from Wall Street earns after $110,000 is NOT taxed by social security. As income gaps between Wall Street and Main Street continue to rise more and more of our national income will be excluded from the social security tax. This means that the super wealthy (the top 1 percent) will continue to pay less into social security as a percentage of their income than you and I do (but we still get to pay for their bailouts).

Why is this important? Because if we raised the payroll tax limit from $110,000 to $300,000 there would be absolutely no problem with social security until at least 2075 (rescinding the Bush era tax cuts would help fix the problem too).


We would also bring some equity to our tax system when you consider that a family with two $100,000 incomes actually pays more into social security (since both are taxed separately) than the Wall Street hedge fund manager who brings home $5 million a year.
______________________________________

Put another way, the GOP's tax cut for the rich jihad needs to stop. America's super rich have received the vast majority of all the income gains over the previous 30 years and all we have to show for it is a pile of debt and a casino economy structurally poised for (yet) another market collapse.

Main Street shouldn't have to shoulder the burden of every market collapse while America's super rich and Wall Street money managers walk away with all the gains.

- Mark

Friday, June 1, 2012

OUR 2008 MARKET COLLAPSE ... ON A GLOBAL LEVEL

Wall Street fell 2 percent today. Many analysts want to blame it on the bleak jobs report. My friends, it goes beyond that.

For years now - in my classes, in numerous posts, and in private presentations - I have argued that history is whispering in our ear. In a few words I have tried to point to the conditions that have led to economic collapse and political breakdown in the past. Then I explain how these conditions are being recreated today.

Politically and economically a perfect storm is on the horizon.



There are many indicators that I discuss in my book, in my classes, and in my blog posts (which will also appear in my next book). Still, one thing is clear: the hedging, gambling, and artificial markets that have been created on a pile of debt have been made worse by successive bailouts and favorable legislation.

I bring all of this up because of this post from Zero Hedge. It directs us to what the founder of Global Macro Investor, Raoul Pal, has to say about the looming perfect storm. He agrees with what I've been saying for years and it's not pretty.

But unlike other investor windbags trying to scare people into investing with them Pal succinctly outlines what been happening to the global economy and leaves it at that. In a few words he writes that this looming perfect storm will soon become our reality because:


[t]he problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives ... Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations.

Translated what this means is that the combined debt of the largest economies in the world totals about $70 trillion (as a point of reference, in 2012 the entire U.S. economy will produce about $15 trillion in goods and services). The world's financial players have placed about $700 trillion in bets on this debt. Put another way, $700 trillion in global hedging and gambling rests on a pile of debt.

Worse, because that debt is unstable (think Greece, Portugal, Spain, Ireland ... EU ... England ... etc.) it effectively rests on a weak and largely artificial market.

In more practical terms, what happened in the U.S. economy in 2008 is now being done globally. And it's all made possible, in part, because successive bailouts and favorable legislation have anesthetized our political and financial leaders to the market stupidity we've created and engaged in over the past 30 years.

Raoul Pal thinks we have about 6 months left before the house of cards comes tumbling down. Definitely by 2013 he argues. I'm not so sure about the dates.

But rest assured, we're f**ked.

- Mark