Category Archives: CONGRESS WATCH

Kavanaugh Ethics Complaints Once Again Dodge Ruling In The 10th Circuit

By Steve Denning – The judicial review of multiple ethics complaints against Justice Kavanaugh continued on its Gilbert-And-Sullivan trajectory with a 6-1 decision by the 10th Circuit last Friday that that court does not have jurisdiction to consider the complaints, even though Chief Justice Roberts explicitly requested the 10th  Circuit to assess them.

Some 83 ethics complaints had been filed against Judge Kavanaugh alleging not only false statements under oath during hearings on his nominations to the U.S. Court of Appeals for the D.C. Circuit in 2004 and 2006, but also, more flagrantly, misconduct at the nomination hearing for the U.S. Supreme Court itself in 2018, including making inappropriate partisan statements and treating senators with disrespect.

The complaints were not made without legal basis. More than 2,400 law professors concluded that during the Senate confirmation hearings, Kavanaugh has “displayed a lack of judicial temperament that would be disqualifying for any court.” Unlike the allegations of lying about events that happened many years ago, there was no question of fact as to whether Kavanaugh’s conduct at the Senate hearings actually took place: it was visible for the whole country to see on national television.

Former Supreme Court Justice John Paul Stevens also stated that Judge Kavanaugh has demonstrated bias and is “not fit for the Supreme Court.” Former Justice Stevens, in remarks to retirees in Boca Raton, Fla, declared that Kavanaugh’s statements on September 27 revealed prejudices that would make it impossible for him to do the court’s work. “They suggest that he has demonstrated a potential bias involving enough potential litigants before the court that he would not be able to perform his full responsibilities.” more>

Debunking Deregulation: Bank Credit Guidance and Productive Investment

Deregulated banking in rich countries delivers more “investment” in speculative asset markets, not productive businesses.
By Josh Ryan-Collins – Mortgage and other asset-market lending typically does not generate income streams sufficient to finance the growth of debt. Instead, the empirical evidence suggests that after a certain point relative to GDP, increases in mortgage debt typically slows growth and increase financial instability as asset prices rise faster than incomes.

These new empirical findings support a much older body of theory that argues that credit markets, left to their own devices, will not optimize the allocation of resources.

Instead, following Joseph Schumpeter’s, Keynes’ and Hyman Minsky’s arguments, they will tend to shift financial resources away from real-sector investment and innovation and towards asset markets and speculation; away from equitable income growth and towards capital gains that polarizes wealth and income; and away from a robust, stable growth path and towards fragile boom-busts cycles with frequent crises.

This means, we argue, there is a strong case for regulation, including via instruments that guide credit. In fact, from the end of World War II up to the 1980s, most advanced economy central banks and finance ministries routinely used forms of credit guidance as the norm, rather than the exception. These include instruments that effected both the demand for credit for specific sectors (e.g. Loan-to-Value ratios or subsidies) and the supply of credit (e.g. credit ceilings or quotas and interest rate limits).

In Europe, favored sectors typically included exports, farming and manufacturing, while repressed sectors were imports, the service sector, and household mortgages and consumption. Indeed, commercial banks in many advanced economies were effectively restricted from entering the residential mortgage market up until the 1980s. Public institutions — state investment banks and related bodies — were also created to specifically steer credit towards desired sectors. more>

The great tax debate—the world is turning

When intellectual and moral arguments align, the global climate can change quickly. That’s what’s happening with the US tax debate.
By Atanas Pekanov and Miriam Rehm – Policy proposals by lawmakers in the United States have spurred a hotly contested debate on taxation among economists in recent weeks. The Democratic congresswoman Alexandria Ocasio-Cortez argued that the US needed to raise additional revenue by going back to marginal top-income tax rates of up to 70 per cent to fund social programs and a Green New Deal, while the Massachusetts senator Elizabeth Warren proposed a wealth tax of up to 3 per cent on the richest.

While opponents and some commentators have deemed such proposals radical or ideological, both are buttressed by economic research. Economists largely seem to agree on some basic facts: inequality within the US has been rising and the benefits of growth have accrued largely to the top 1 per cent, while the real incomes of what in America is called the middle class have stagnated over the past three decades.

There is also consensus that the progressivity of the income-tax system has been eroded in many countries since 1980 and that wealth is currently much more unequally distributed than income.

The recent economic debate has thus revolved around whether higher taxes on top incomes or for very wealthy people should be deployed to counteract these trends. American progressives argue that higher revenues are needed if the US aspires to become more like the role-model European welfare state, with more inclusive social systems and better public services, financed by top marginal income-tax rates of above 40 per cent (in most EU countries) and/or some form of wealth tax. While some have misrepresented these ideas, they would only burden very wealthy individuals. more>

Faith and Religion in Public Life Are Not Replacements for Reform

By Chayenne Polimédio – Last week, religious leaders, humanitarians, and politicians came together at the Hilton Hotel in Washington, D.C., for a fellowship breakfast “in the spirit of Jesus.” The National Prayer Breakfast, held every year since 1953, is one of those moments—now rarer by the day—when political strife and division ostensibly take a back seat to prayer, calls for unity, and reminders of our shared identities. It’s also a reminder of how faith and public life are intertwined in a country where 70 percent of the population is Christian, and where the public’s trust in the church has always been greater than its trust in government.

But one need only think about recent headlines detailing a racist attack, a homophobic remark, or even broader political pettiness to question the extent to which the breaking of bread is enough to overcome the record-breaking level of division in American democracy.

The National Prayer Breakfast, in other words, is a reminder not of what kinds of positive changes faith is able to effect in public life, but of the kinds of changes it isn’t able to bring about. more>

How Trump’s Economic Chickens Are Finally Coming Home To Roost

By Steve Denning – Assisted by the least qualified White House staff in history, Trump has continued to breach conventional wisdom and practice. Yet Liberal analysts have watched with dismay as polls have showed stable support from Trump’s base, no matter how outrageous the behavior. Surely, they said, the economic reality of what Trump is up to must eventually kick in.

Now a trifecta of bad economic news for his base raises the question whether that time has finally arrived:

The comfort offered by Trump’s fictions is too seductive to be undermined by facts. To Trump’s base, the beautiful myth of “the Wall” is, and remains, more attractive than the real world.

In this way, “the Wall” has become a code-name for the racist, anti-immigrant isolationist policies of Trump’s presidency and a symbol of multiple toxic policies,

There’s a catch with the use of fictions in politics. “The chief disability of propaganda,” wrote Hannah Arendt in her classic book, The Origins of Totalitarianism, “is that it cannot fulfill the longing of the masses for a completely consistent, comprehensible, and predictable world without seriously conflicting with common sense.”

For a time, common sense can be held at bay and prevented from intruding into the cocoon of reassuring fiction. Yet the deliberate distortion of reality is also the cause of propaganda’s inevitable downfall. It is the inexorable collision with reality that eventually ruins the cocoon. It’s not a matter of whether. It’s only a question of when. more>

Democracy splutters—good governance under pressure

Amid political polarization and declining democratic standards, can OECD and EU countries sustain the good governance challenges such as globalization, social inequality and climate breakdown demand?
By Christof Schiller – Eroding standards of democracy and growing political polarization are severely hampering the implementation of sustainable reforms. This is one of the main findings in the Sustainable Governance Indicators (SGI) 2018 study by the Bertelsmann Foundation.

SGI is an international monitoring tool, which sheds light on the future viability of all 41 countries in the OECD and the European Union. On the basis of 140 indicators, we assess democratic standards, the quality of governance and reforms in the areas of economics, social affairs and the environment. More than 100 international experts are involved in our cross-national survey.

The most recent study highlights how waning standards of democracy and growing political polarisation hamper sustainable reform. Governments in countries including the United States, Hungary and Turkey are deliberately stoking social tensions rather than seeking consensus.

The report shows that the quality of democracy in many western industrial nations is waning, with democratic standards declining in 26 of the countries surveyed, compared with similar data from four years earlier. ‘Even within the OECD and the EU, the model of liberal democracy is subject to growing pressure—in some countries this means that even central democratic and constitutional standards such as media freedoms are already severely damaged or undermined,’ it finds.

Compounding this worrying trend, the study’s authors identify a simultaneous decline in the adequacy of governance, with many countries losing ground on key measures of good governance. more>

How a World Order Ends

And What Comes in Its Wake
By Richard Haass -A stable world order is a rare thing. When one does arise, it tends to come after a great convulsion that creates both the conditions and the desire for something new. It requires a stable distribution of power and broad acceptance of the rules that govern the conduct of international relations. It also needs skillful statecraft, since an order is made, not born. And no matter how ripe the starting conditions or strong the initial desire, maintaining it demands creative diplomacy, functioning institutions, and effective action to adjust it when circumstances change and buttress it when challenges come.

Eventually, inevitably, even the best-managed order comes to an end. The balance of power underpinning it becomes imbalanced. The institutions supporting it fail to adapt to new conditions. Some countries fall, and others rise, the result of changing capacities, faltering wills, and growing ambitions. Those responsible for upholding the order make mistakes both in what they choose to do and in what they choose not to do.

But if the end of every order is inevitable, the timing and the manner of its ending are not. Nor is what comes in its wake. Orders tend to expire in a prolonged deterioration rather than a sudden collapse. And just as maintaining the order depends on effective statecraft and effective action, good policy and proactive diplomacy can help determine how that deterioration unfolds and what it brings. Yet for that to happen, something else must come first: recognition that the old order is never coming back and that efforts to resurrect it will be in vain.

As with any ending, acceptance must come before one can move on.

Although the Cold War itself ended long ago, the order it created came apart in a more piecemeal fashion—in part because Western efforts to integrate Russia into the liberal world order achieved little. One sign of the Cold War order’s deterioration was Saddam Hussein’s 1990 invasion of Kuwait, something Moscow likely would have prevented in previous years on the grounds that it was too risky. Although nuclear deterrence still holds, some of the arms control agreements buttressing it have been broken, and others are fraying.

The liberal order is exhibiting its own signs of deterioration. Authoritarianism is on the rise not just in the obvious places, such as China and Russia, but also in the Philippines, Turkey, and eastern Europe. Global trade has grown, but recent rounds of trade talks have ended without agreement, and the World Trade Organization (WTO) has proved unable to deal with today’s most pressing challenges, including nontariff barriers and the theft of intellectual property.

Resentment over the United States’ exploitation of the dollar to impose sanctions is growing, as is concern over the country’s accumulation of debt. more>

Why Is the US Losing the AI Race?

By Chris Wiltz – AI is rapidly becoming a globally valued commodity. And nations that lead in AI will likely be the ones that guide the global economy in the near future.

“As AI technology continues to advance, its progress has the potential to dramatically reshape the nation’s economic growth and welfare. It is critical the federal government build upon, and increase, its capacity to understand, develop, and manage the risks associated with this technology’s increased use,” the report stated.

While the US has traditionally led the world in developing and applying AI technologies, the new report finds it’s no longer a given that the nation will be number 1 when it comes to AI. Witnesses interviewed by the House Subcommittee said that federal funding levels for AI research are not keeping pace with the rest of the industrialized world, with one witness stating: “[W]hile other governments are aggressively raising their research funding, US government research has been relatively flat.”

Perhaps not surprisingly, China is the biggest competitor to the US in the AI space. “Notably, China’s commitment to funding R&D has been growing sharply, up 200 percent from 2000 to 2015,” the report said.

AI’s potential threat to national security was cited as a key reason to ramp up R&D efforts. While there has yet to be a major hack or data breach involving AI, many security experts believe it is only a matter of time.

Cybersecurity companies are already leveraging AI to assist in tasks such as monitoring network traffic for suspicious activity and even for simulating cyberattacks on systems. It would be foolish to assume that malicious parties aren’t looking to take advantage of AI for their own gain as well. more>

Updates from Chicago Booth

No, America is not more divided than ever before
By Howard R. Gold – It may seem sometimes like the United States is coming apart. “While rural America watches Duck Dynasty and goes fishing and hunting, urban America watches Modern Family and does yoga in the park,” write Chicago Booth’s Marianne Bertrand and Emir Kamenica.

“The economically better-off travel the world and seek out ethnic restaurants in their neighborhoods, while the less well-off don’t own a passport and eat at McDonald’s.” Conservatives, they write, favor masculine names for boys while liberals prefer more-feminine names, and men play video games while women browse Pinterest.

These kinds of cultural splits can have economic, social, and political consequences in that they may ultimately reduce social cohesion within a country. But according to Bertrand and Kamenica, who measured cultural divisions over time, the cultural gap in the US is largely stable—not widening.

The data reveal that divisions definitely exist. Watching certain movies or television shows, reading certain magazines, or buying particular consumer products are predictable markers of traits such as how much money people make or how far they got in school. more>

Related>

Why Society’s Biggest Freeloaders Are at the Top

By Rutger Bregman – These days, politicians from the left to the right assume that most wealth is created at the top. By the visionaries, by the job creators, and by the people who have “made it.” By the go-getters oozing talent and entrepreneurialism that are helping to advance the whole world.

Now, we may disagree about the extent to which success deserves to be rewarded – the philosophy of the left is that the strongest shoulders should bear the heaviest burden, while the right fears high taxes will blunt enterprise – but across the spectrum virtually all agree that wealth is created primarily at the top.

So entrenched is this assumption that it’s even embedded in our language. When economists talk about “productivity”, what they really mean is the size of your paycheck. And when we use terms like “welfare state”, “redistribution” and “solidarity”, we’re implicitly subscribing to the view that there are two strata: the makers and the takers, the producers and the couch potatoes, the hardworking citizens – and everybody else.

In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders are supporting the apex of the pyramid. They are the true mechanism of social solidarity. more>