Tag Archives: Congress Watch

Capitalism’s Core Problem: The Case for Universal Property

Capitalism’s most grie­vous flaws are, at root, problems of property rights and must be ad­dres­­sed at that level.
By Peter Barnes – Capitalism as we know it has two egregious flaws: it relentlessly widens inequality and destroys nature.  Its ‘invisible hand,’ which is supposed to transform individual self-seeking into widely shared well-being, too often doesn’t, and governments can’t keep up with the consequences.  For billions of people around the world, the challenge of our era is to repair or replace capitalism before its cumulative harms become irreparable.

Among those who would repair capitalism, policy ideas abound.  Typically, they involve more government regulations, taxes and spending.  Few, if any, would fundamentally alter the dynamics of markets themselves.  Among those who would replace capitalism, many would nationalize a good deal of private property and expand government’s role in regulating the rest.

This book explores the terrain midway between repairing and re­pla­cing capitalism.  It envisions a transformed market economy in which private property and businesses are complemented by universal property and fiduciary trusts whose beneficiaries are future generations and all living persons equally.

Economists wrangle over monetary, fiscal and regulatory policies but pay little attention to property rights. Their models all assume that property rights remain just as they are forever.  But this needn’t and shouldn’t be the case.  My premise is that capitalism’s most grie­vous flaws are, at root, problems of property rights and must be ad­dres­­sed at that level.

Property rights in modern economies are grants by governments of permission to use, lease, sell or bequeath specific assets — and just as importantly, to exclude others from doing those things.  The assets involved can be tangible, like land and machinery, or intangible, like shares of stock or songs. more>

The F-35 At 20: How Its Successes, And Failures, Shaped The Aerospace Industry

The takeaway from the last 20 years, according to aerospace analyst Richard Aboulafia, might well be, “You succeeded, but please don’t try that again.”
By Valerie Insinna – On Friday, Oct. 26, 2001, executives and employees from the nation’s two biggest defense primes gathered in boardrooms and sprawling production facilities to watch a Pentagon press conference. At stake: the Joint Strike Fighter competition, which would decide who would dominate the next 40 years of the defense aerospace industry — and rake in hundreds of billions in profits.

It was a moment five years in the making. The Pentagon wanted to buy a single stealth aircraft for the Air Force, Navy and Marine Corps capable of three distinct operational requirements: conventional landings on a runway, landing on aircraft carriers, and performing short takeoffs and vertical landings.

It awarded contracts to Lockheed Martin and Boeing in 1996 to build competing prototypes, known as the X-35 and X-32. By July 2001, Lockheed’s X-35 had proven it could execute a short, 500-foot takeoff, fly at supersonic speeds and then vertically land in a single flight. While Boeing’s X-32 also demonstrated supersonic flight and vertical landings, it did not accomplish them in the same flight.

For the engineers that had designed and developed the two planes, emotions were running high as a group of white-haired defense acquisition officials approached the podium of the Pentagon press briefing room.

And just like that, the competition was over. more>

Updates from Chicago Booth

Who is right about inflation?
The US Fed and consumers have very different expectations about the future
By Brian Wallheimer – Inflation chatter started heating up this spring, along with inflation itself. In April 2021, the US Consumer Price Index, which measures how fast prices change, rose at a 4.2 percent annual rate, more than double the usual target rate. Then in May, the inflation rate soared to 5 percent. With the worst of the pandemic seemingly easing, US consumers were apparently venturing out again and spending at a fast clip.

The figures took inflation watchers off guard. The Wall Street Journal’s editorial page noted that Federal Reserve chairman Jerome Powell had wanted some inflation but would likely be surprised by the force of April’s numbers, saying, “Powell’s inflation ship has come in, albeit more rudely than he probably wanted.”

Financial journalists and investors, always looking for signs of how the central bank will react to signs of inflation or deflation, kicked into high gear, trying to anticipate the timing of any Fed actions.

But consumers—who actually drive inflation—seemed unfazed, apparently already operating with the understanding that prices were rising fast, and would continue to do so. Homeowners remodeling their homes during the pandemic were aware of historically high lumber prices. Home cooks felt the impact on food prices. Buyers of both new and used cars saw prices surge due to a shortage of computer chips. more>

Related>

Restoring the manufacturing base in the US is the key to our prosperity

By Tom Conway – Eager to capitalize on opportunities in the dynamic renewable energy field, the manufacturing company Rotek secured incentives, hired additional workers and successfully launched production of the huge metal rings that keep wind turbines spinning.

But the boom quickly faded. The Aurora, Ohio, plant struggled to compete with unfairly traded, foreign-made products and ended up eliminating many of the jobs it created just a couple of years before.

Ensuring future prosperity will require not only stimulating a manufacturing resurgence but also stabilizing long-term markets for domestically produced goods and raw materials.

Fortunately, President Joe Biden’s American Jobs Plan provides an unprecedented opportunity to do exactly that.

The plan calls for historic investments in American infrastructure, including roads and bridges, schools and airports, locks and dams, water-treatment systems, communications networks, the electric grid and renewable energy projects, like the wind farms that workers at Rotek strived to supply. more>

Empire Politician

A Half-Century of Joe Biden’s Stances on War, Militarism, and the CIA
(theintercept.com)By Jeremy Scahill – “I’m not going to change,” Joe Biden said in his 2008 vice presidential debate with Sarah Palin. “I have 35 years in public office. People can judge who I am. I haven’t changed in that time.”

Never in U.S. history has the country had a president with the voluminous paper trail that followed Biden into the White House. Since the Vietnam War, Biden has been in public office for all but four of the past 49 years. He has cast thousands of votes, sponsored or co-sponsored hundreds of bills, and taken public positions on virtually every possible foreign and domestic policy issue. He has served long enough to make it possible to chart, in great detail, the evolution of his positions on a range of issues, to analyze his contradictions, and to draw conclusions about how he sees the role of Congress and the executive branch on the most sensitive and consequential decisions made by the government: decisions about war and organized state violence.

The Intercept conducted an exhaustive analysis of Biden’s political career, with a focus on his positions on dozens of U.S. wars and military campaigns, CIA covert actions, and abuses of power; his views on whistleblowers and leakers; and his shifting stance on the often contentious relationship between the executive and legislative branches over war powers. While many of Biden’s positions could be assessed by reviewing his sprawling voting record and public statements, evaluating some of his actions, particularly from the first few decades of his career, required poring over copies of the congressional record, speech transcripts, archival media reports, and declassified government documents, including from the CIA.

The picture that emerges is of a man who is dedicated to the U.S. as an empire, who believes that preserving U.S. national interests and “prestige” on the global stage outweighs considerations of morality or even at times the deaths of innocent people. It also reveals a politician who consistently claims to hold bedrock principles but who often strays from those positions in support of a partisan agenda or because he wants a policy adopted regardless of the hypocrisy or contradictions. Nowhere is this dynamic more pronounced than on U.S. wars.

The picture that emerges is of a man who is dedicated to the U.S. as an empire. more>

Disinformation Is Among the Greatest Threats to Our Democracy. Here Are Three Key Ways to Fight It

By Daniel J. Rogers – In October 2019, the late Supreme Court Justice Ruth Bader Ginsberg was asked what she thought historians would see when they looked back on the Trump era in United States history. Justice Ginsberg, known for her colorful and often blistering legal opinions, replied tersely, “An aberration.”

As President Biden’s administration settles in, many feel an enormous sense of relief, an awareness that the United States dodged a proverbial bullet. But how do we ensure that Justice Ginsberg’s prediction becomes reality? This is not an academic question; Trump’s recent speech at CPAC all but announced his desire to return in 2024. Only by recognizing the underlying reason he succeeded in the first place and by making the structural changes necessary to prevent someone like him from succeeding again can we head off this eventuality.

First, to understand what we must do to prevent the return of someone like Trump or even Trump himself, we first need to define what Trumpism really is and how it came to be. The seeds of Trumpism in America have been analyzed to exhaustion, but something specific emerged in 2016 that holds the key to Trump’s rise to power: Online disinformation.

Modern online disinformation exploits the attention-driven business model that powers most of the internet as we currently know it. Platforms like Google and Facebook make staggering amounts of money grabbing and capturing our attention so they can show us paid advertisements. That attention is gamed using algorithms that measure what content we engage with and automatically show us more content like it.

The problem, of course, emerges when these algorithms automatically recommend and amplify our worst tendencies. As humans, we evolved to respond more strongly to negative stimuli than positive ones. These algorithms detect that and reinforce it, selecting content that sends us down increasingly negative rabbit holes. Resentful about losing your job? Here’s a video someone made about how immigrants stole that job from you! Hesitant about the COVID-19 vaccine? Here’s a post from another user stoking a baseless anti-vaccine conspiracy theory. Notice, of course, that truth is nowhere in this calculus—the only metric the algorithm rewards is engagement, and it turns out that disinformation and conspiracy theory make the perfect fodder for this algorithmic amplification. more>

Updates from Chicago Booth

Could the US raise $1 trillion by hiking capital gains rates?
By Natasha Sarin, Lawrence H. Summers, Owen Zidar, Eric Zwick – Capital gains taxes are a perennial issue in US tax-reform debates. Some people maintain that preferential rates on capital gains encourage entrepreneurship and capital formation, while others question whether these benefits are worth the costs.

What are those costs, exactly? It’s clear in terms of direct fairness costs: the wealthiest 1 percent of US households accounted for two-thirds of capital gains realizations in the Federal Reserve’s 2019 Survey of Consumer Finances. However, the fiscal costs, which are estimated by the Joint Committee on Taxation, are far less clear. In the parlance of policy makers, the JCT is considered the official “scorekeeper” that decides how tax legislation “scores” if implemented. The prevailing wisdom in the taxation-scorekeeping community appears to be that the revenue-maximizing rate for capital gains is about 30 percent, which is well below both current top marginal tax rates on other income and top rates currently under debate. But in a simple exercise, we estimate that increasing capital gains rates to match the ordinary income level could raise more than $1 trillion over a decade. This illustrates the need to rethink scorekeeping in the debate.

The prototypical example of a capital gain is a share of corporate stock. An individual who bought an $18 share of Amazon when it went public could sell that share today and pay taxes on more than $3,100 of appreciation.

If the revenue-maximizing rate is 30 percent, setting a rate too far above this level will actually reduce the total amount of revenue collected, as the gains expected will fail to materialize because the dynamic response of taxpayers will dramatically shrink the tax base.

Such a response could take the form of an investor retiming a stock sale to avoid realizing a capital gain event. This certainly happens, but we suspect that in most instances the investor doesn’t avoid paying taxes on that gain entirely, just immediately. The tax is simply postponed, in which case these behavioral effects are overstated, resulting in a potentially severe underestimate of the revenue at play. more>

Related>

Updates from McKinsey

America 2021: Renewing the nation’s commitment to climate action
To America’s leaders, innovators, and changemakers; here’s how you can help build a low-carbon economy that is resilient, competitive, prosperous, and fair.
By Dickon Pinner and Matt Rogers – The new federal administration has arrived in Washington with ambitious plans to address the climate crisis—and in so doing, revitalize the US economy and reclaim a leadership position on the international stage. During their campaign, President Joe Biden and Vice President Kamala Harris highlighted “the opportunity to build a more resilient, sustainable economy—one that will put the United States on an irreversible path to achieve net-zero emissions, economy-wide by no later than 2050 […] and, in the process, create millions of good-paying jobs.”

Their vision recognizes that the global transition to a low-carbon economy is well under way. The cost of many clean-energy technologies fell significantly during the past decade—as much as 90 percent for some renewable-energy projects. The capital markets are funding the use of these technologies at historically low costs of capital, thereby accelerating scale-up investments. A climate-friendly policy tilt is taking hold in many places. With China, Japan, and the European Union having announced targets to achieve net-zero emissions, more than 110 countries, accounting for more than 70 percent of global GDP, have made net-zero pledges. Of the US states, 23 have established emissions-reduction goals and 12 have instituted carbon-pricing policies. Groups representing prominent American companies have endorsed the use of market-based mechanisms to promote emissions reductions. Some large businesses, along with four former Federal Reserve chairs (including the new treasury secretary), have voiced support for a nationwide carbon tax. These trends are creating possibilities for American leadership, innovation, entrepreneurship, competitive advantage, and economic growth.

With the wind at their backs, government agencies and private-sector organizations can continue advancing the new national climate agenda that’s been set in motion already. The stimulus and government appropriations bill of December 2020, which received bipartisan support, set out tax incentives and funding for energy innovation and climate-related programs. And within days of his inauguration, President Biden signed executive orders initiating the process to reenter the Paris Agreement, positioning climate as a foreign-policy and national-security issue and calling on federal agencies to coordinate an all-government push to cut greenhouse-gas emissions, purchase clean-energy technologies, support innovation, conserve nature, and create economic opportunities across America. 1 Making good on these intentions will require new information, products, operations, and market innovations from public officials and business leaders. To inform their work, this memo highlights four sets of practices with notable potential to deliver the prosperity, security, and social-justice outcomes that the administration has prioritized. more>

Public Sees Black People, Women, Gays and Lesbians Gaining Influence in Biden Era

Half of Americans say evangelical Christians will lose influence
pewresearch.org – As Joe Biden navigates the first few weeks of his presidency, Americans have distinctly different views of which groups will gain influence – and which ones will lose influence – in Washington during his administration.

Nearly two-thirds of U.S. adults (65%) say Black people will gain influence in Washington with Joe Biden taking office. Just 14% say Black people will lose influence, while 20% say they will not be affected.

Large shares of adults also expect women (63%) and gay and lesbian people (60%) to gain influence over the next four years. Only about one-in-ten expect each of these groups to lose influence.

Other groups expected to gain influence include younger people (54%), Hispanic people (53%), poor people (50%) and unions (48%). Relatively small shares – no more than about quarter – say any of these groups will lose influence during Biden’s presidency.

By contrast, evangelical Christians are expected to lose influence with Biden as president: 50% say they will lose influence, while just 9% expect them to gain influence; 39% say they will be unaffected.

By sizable margins, more Americans also say business corporations and the military will lose than gain influence, though about a quarter (24%) say corporations will be unaffected and 32% say the same about the military. more>

Why Immigration Drives Innovation

Economic history reveals one unmistakable psychological pattern.
By Joseph Henrich – When President Coolidge signed the Johnson-Reed Act into law in 1924, he drained the well-spring of American ingenuity. The new policy sought to restore the ethnic homogeneity of 1890 America by tightening the 1921 immigration quotas. As a result, immigration from eastern Europe and Italy plummeted, and Asian immigrants were banned. Assessing the law’s impact, the economists Petra Moser and Shmuel San show how this steep and selective cut in immigration stymied U.S. innovation across a swath of scientific fields, including radio waves, radiation and polymers—all fields in which Eastern European immigrants had made contributions prior to 1924. Not only did patenting drop by two-thirds across 36 scientific domains, but U.S-born researchers became less creative as well, experiencing a 62% decline in their own patenting. American scientists lost the insights, ideas and fresh perspectives that inevitably flow in with immigrants.

Before this, from 1850 to 1920, American innovation and economic growth had been fueled by immigration. The 1899 inflow included a large fraction of groups that were later deemed “undesirable”: e.g., 26% Italians, 12% “Hebrews,” and 9% “Poles.” Taking advantage of the randomness provided by expanding railroad networks and changing circumstances in Europe, a trio of economists—Sandra Sequeira, Nathan Nunn and Nancy Qian–demonstrate that counties that ended up with more immigrants subsequently innovated more rapidly and earned higher incomes, both in the short-term and today. The telephone, hot blast furnace, screw propeller, flashlight and ironclad ship were all pioneered by immigrants. The analysis also suggests that immigrants made native-born Americans more creative. Nikola Tesla, a Serbian who grew up in the Austrian Empire, provided George Westinghouse, a New Yorker whose parents had migrated from Westphalia, with a key missing component for his system of electrification based on AC current (Tesla also patented 100s of other inventions).

In ending the quotas imposed under the Harding-Coolidge administration, President Johnson remarked in 1964 that “Today, with my signature, this system is abolished…Men of needed skill and talent were denied entrance because they came from southern or eastern Europe or from one of the developing continents…” By the mid-1970s, U.S innovation was again powerfully fueled by immigrants, now coming from places like Mexico, China, India, Philippines and Vietnam. From 1975 to 2010, an additional 10,000 immigrants generated 22% more patents every five years. Again, not only did immigrants innovate, they also stoked the creative energies of the locals. more>