“Three Expensive Milliseconds”: Society Is Devoting An Ever-Growing Share Of Its Resources To Financial Wheeling And Dealing
Four years ago Chris Christie, the governor of New Jersey, abruptly canceled America’s biggest and arguably most important infrastructure project, a desperately needed new rail tunnel under the Hudson River. Count me among those who blame his presidential ambitions, and believe that he was trying to curry favor with the government- and public-transit-hating Republican base.
Even as one tunnel was being canceled, however, another was nearing completion, as Spread Networks finished boring its way through the Allegheny Mountains of Pennsylvania. Spread’s tunnel was not, however, intended to carry passengers, or even freight; it was for a fiber-optic cable that would shave three milliseconds — three-thousandths of a second — off communication time between the futures markets of Chicago and the stock markets of New York. And the fact that this tunnel was built while the rail tunnel wasn’t tells you a lot about what’s wrong with America today.
Who cares about three milliseconds? The answer is, high-frequency traders, who make money by buying or selling stock a tiny fraction of a second faster than other players. Not surprisingly, Michael Lewis starts his best-selling new book “Flash Boys,” a polemic against high-frequency trading, with the story of the Spread Networks tunnel. But the real moral of the tunnel tale is independent of Mr. Lewis’s polemic.
Think about it. You may or may not buy Mr. Lewis’s depiction of the high-frequency types as villains and those trying to thwart them as heroes. (If you ask me, there are no good guys in this story.) But either way, spending hundreds of millions of dollars to save three milliseconds looks like a huge waste. And that’s part of a much broader picture, in which society is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.
How much waste are we talking about? A paper by Thomas Philippon of New York University puts it at several hundred billion dollars a year.
Mr. Philippon starts with the familiar observation that finance has grown much faster than the economy as a whole. Specifically, the share of G.D.P. accruing to bankers, traders, and so on has nearly doubled since 1980, when we started dismantling the system of financial regulation created as a response to the Great Depression.
What are we getting in return for all that money? Not much, as far as anyone can tell. Mr. Philippon shows that the financial industry has grown much faster than either the flow of savings it channels or the assets it manages. Defenders of modern finance like to argue that it does the economy a great service by allocating capital to its most productive uses — but that’s a hard argument to sustain after a decade in which Wall Street’s crowning achievement involved directing hundreds of billions of dollars into subprime mortgages.
Wall Street’s friends also used to claim that the proliferation of complex financial instruments was reducing risk and increasing the system’s stability, so that financial crises were a thing of the past. No, really.
But if our supersized financial sector isn’t making us either safer or more productive, what is it doing? One answer is that it’s playing small investors for suckers, causing them to waste huge sums in a vain effort to beat the market. Don’t take my word for it — that’s what the president of the American Finance Association declared in 2008. Another answer is that a lot of money is going to speculative activities that are privately profitable but socially unproductive.
You may object that this can’t be right, that the invisible hand of the market ensures that private returns and social returns coincide. Economists have, however, known for a long time that when it comes to speculation, that proposition just isn’t true. Back in 1815 Baron Rothschild made a killing because he knew the outcome of the Battle of Waterloo a few hours before everyone else; it’s hard to see how that knowledge made Britain as a whole richer. It’s even harder to see how the three-millisecond advantage conveyed by the Spread Networks tunnel makes modern America richer; yet that advantage was clearly worth it to the speculators.
In short, we’re giving huge sums to the financial industry while receiving little or nothing — maybe less than nothing — in return. Mr. Philippon puts the waste at 2 percent of G.D.P. Yet even that figure, I’d argue, understates the true cost of our bloated financial industry. For there is a clear correlation between the rise of modern finance and America’s return to Gilded Age levels of inequality.
So never mind the debate about exactly how much damage high-frequency trading does. It’s the whole financial industry, not just that piece, that’s undermining our economy and our society.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 13, 2014
“The War Against American Citizens”: Metastasizing Money Drowns Out The Voices Of Actual Americans
In 1971, before becoming a Supreme Court justice, Lewis F. Powell Jr. penned a memo to his friend Eugene Sydnor of the U.S. Chamber of Commerce advocating a comprehensive strategy in favor of corporate interests. Powell wrote, “Under our constitutional system, especially with an activist-minded Supreme Court, the judiciary may be the most important instrument for social, economic and political change.”
In last week’s ruling in McCutcheon v. Federal Election Commission , the Supreme Court was not a mere instrument so much as a blowtorch, searing a hole in the fabric of our fragile democracy.
This predictable decision from the 1 Percent Court to repeal federal limits on overall individual campaign contributions overturns nearly 40 years of campaign finance law.
It also completes a trifecta of rulings that started in 1976 with Buckley v. Valeo, and the Midas touch of judicial malpractice, turning money into speech. As Justice Stephen Breyer wrote in an impassioned dissent to McCutcheon, taken together with the 2010 ruling in Citizens United, “today’s decision eviscerates our Nation’s campaign finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve.”
This, foreshadowed in Powell’s decades-old memo, has always been the right’s plan — to shift the system in favor of the wealthy and powerful. Put it this way: If the limit hadn’t existed in 2012, the 1,219 biggest donors could have given more money than over 4 million small donors to the Obama and Romney campaigns — combined.
But McCutcheon was not the only body blow to our democracy, in what was possibly the worst week in the history of campaign finance reform.
New York Gov. Andrew Cuomo (D) let his proposal for publicly financed statewide elections die after years of promises to restore the public trust. In a state that’s often a laboratory of democracy, the governor has agreed to what is little more than a clinical trial — a single comptroller’s race this year — that some experts claim is “designed to fail.”
The American experiment seems to be run by a smaller and smaller control group as billionaires — like the Koch brothers and Sheldon Adelson — get expanding seats at the shrinking political table.
NASCAR drivers wear the corporate logos of their sponsors on their suits. The justices who sided with plutocracy ought to wear sponsorship logos on their robes, too.
Conversations about court rulings and policy proposals can obscure what’s really at stake: the well-being of the American people. The Court and Cuomo gave the 1 percent even more opportunities to, effectively, buy the kind of access to elected officials that most voters and small donors could never dream of. The weakening of campaign finance laws tracks with the widening income gap, as the wealthiest have secured policies, from lower taxes to deregulation — that enrich themselves at the expense of everybody else.
This, to paraphrase Massachusetts Sen. Elizabeth Warren (D), is why the system is rigged. Metastasizing money drowns out the voices of actual Americans, and suffocates policies such as raising the minimum wage and equal pay that would benefit workers. It also skews the playing field, not just between the haves and have-nots, but also between male and female candidates.
We live in a world where elected officials care less about checks and balances and more about their checkbooks and balance sheets. Where fundraising is more important than legislating. Where public policy is auctioned off to the highest bidder.
That’s why getting money out of politics is not a partisan issue. According to Gallup, nearly eight out of 10 Americans think campaigns should be limited in what they can raise and spend, while a 2012 CBS poll shows that about two-thirds of Americans believe in limiting individual campaign contributions.
Hopefully, popular outrage will boost the pressure for reform; there has already been a sharp increase in grassroots action. In the hours and days after the ruling, coalitions such as Public Citizen have mobilized thousands of people in 140 demonstrations across 38 states to protest the McCutcheon ruling. Nearly 500 local governments and 16 states and the District have called for a constitutional amendment to wrest our elections back from the elite. Move to Amend, which supports a constitutional amendment to reverse Citizens United and McCutcheon, and end the fiction that corporations are people and money equals speech, already has over 300,000 members.
A resolution from Sen. Tom Udall (D-N.M.) — with a House companion introduced by Rep. Jim McGovern (D-Mass.) — calling for a constitutional amendment to allow Congress to fully regulate campaign contributions, and to encourage states to regulate and limit campaign spending, already had 29 co-sponsors and picked up 3 more on the day the Roberts Court announced its decision. Citizens in New York, who are furious at Cuomo for failing to enact reform, are renewing the drive to hold him accountable for his actions. And even while pushing for a constitutional amendment — an uphill battle —supporters of clean elections in Congress and outside are fighting for increased disclosure and public financing of elections.
The all-out assault against campaign finance reform, on the heels of the Court’s gutting of the Voting Rights Act in Shelby County v. Holder , is just one more example of our democratic system in crisis. “Under the leadership of Chief Justice John Roberts,” my Nation colleague Ari Berman recently wrote, “the Supreme Court has made it far easier to buy an election and far harder to vote in one.” But the fear of democracy’s premature death doesn’t look like it’s silencing people; instead, it is inspiring a renewed commitment to fight for its survival.
By: Katrina vanden Heuvel, Opinion Writer, The Washington Post, April 8, 2014
“A Most Revealing Week For Republicans”: What Matters Most To The GOP, Protect The Rich, Injure The Poor
If you haven’t done so yet, I urge you to take three minutes here with me to reflect on this unusually revealing week. Three big developments—the Obamacare enrollment deadline, the Paul Ryan budget, and the Supreme Court’s McCutcheon decision—return us to first principles, so to speak; remind us of what our two parties (and the philosophical positions behind them) are really and truly about. And they remind me, at least, of why the Republican Party, on a very basic level, can’t ever be truthful with the American people about what matters to it most at the end of the day.
So what is it that matters most to the Republican Party? A lot of things do, and for different Republicans, the answer will be different: abhorrence of abortion, disgust at social relativism, hatred of big government. These things matter. But they don’t, in my view, matter most. What matters most, especially to elected Republicans in Washington (that is, more so than the rank-and-file), is this: Protect the well-off from redistribution of their wealth to those who don’t deserve it.
On what basis do I make this claim? Well, I’ve been watching Republicans on Capitol Hill pretty closely for many years now. There are, Lord knows, a number of topics on which they are not exactly what you’d call amenable to compromise. The climate-change denialism, the constant attempts to chop away at reproductive rights (which are constitutional rights), et cetera.
But I think it’s fair and accurate to say that, especially in the Obama era, two issues have obsessed the party more than all the others: opposition to tax increases, especially on the wealthy; and a zeal for cutting the budget, which really means cutting domestic spending programs.
In other words—protect the rich, and injure the poor. These are the points on which they’ve fought tooth and nail. After all, think about this: They could have had a major concession from Obama on entitlements (chained CPI) if they’d been willing to allow an income-tax increase on dollars earned above $250,000. But even that couldn’t reel them in. It’s true they did allow an increase on dollars earned above $450,000 (for families) in the fiscal-cliff deal, but their backs were really against the wall on that one: They relented to that small increase only because the country was hours away from a major tax increase (the expiration of the Bush tax cuts), and it was clear to everyone that the Republicans were going to shoulder most of the blame.
As for cutting the federal budget, downsizing government—and we all know doing that hurts poor and working-class families most directly—well, wasn’t that the chief impetus behind the creation of the Tea Party? Remember Rick Santelli’s creation-myth rant, about the anger at the people who took mortgages they couldn’t afford. (Classic liberal-conservative divide, rooted almost entirely in psychological outlook: Liberals tended to blame the banks that hornswoggled people, while conservatives tended to blame the people who let themselves be hornswoggled.)
That’s the game. Redistribution, as in loathing of. That’s the glue of the Washington Republican Party. And it’s wrong to think of it as just an “economic” issue. It is, to them, a moral one. Don’t believe me? Take it from Arthur Brooks, head of the American Enterprise Institute, who wrote a famous Wall Street Journal column back in April 2009 headlined “The Real Culture War Is Over Capitalism.” Reread that. Money, a cultural issue. Defenders of free enterprise, he wrote, “have to declare that it is a moral issue to confiscate more income from the minority simply because the government can.” He also charged these same defenders with the task of defining true “fairness” as “protecting merit and freedom.” I shouldn’t have to decode those two words for you, I shouldn’t think.
But here’s the thing: Brooks’s candor was and is rare. It wasn’t a risk of any kind for him to express those views to the readers of the Journal’s Op-Ed page, who would strongly agree. But most Americans don’t agree. Most Americans support redistribution to one degree or another. They support progressive taxation, they support many or even most categories of government spending, and so on. We—liberal Democrats, centrist Democrats, and moderate Republicans, to the extent that they exist—argue about how much spending, but not about the very notion of spending. Real conservatives stand outside this conversation: They believe that virtually no redistributive spending is justified. But they know that’s a highly unpopular position, so most of the time, they can’t say that. They have to say other things.
Now let’s circle back to this week. What Republicans really think about Obamacare, as E.J. Dionne put it in The Washington Post yesterday, is that “they don’t want the federal government to spend the significant sums of money needed to get everyone covered.” But they know that sounds cruel, so they can’t say that. So instead of inveighing against redistribution directly, they’ve spent months talking about its unworkability. Well, that’s been proven wrong (so far), and so now they’ll just say, as they have been this week, that they don’t believe the numbers. Then they’ll fish out more alleged horror stories that don’t check out. But they won’t say what they actually think.
In the same way, Paul Ryan puts out a budget document that makes dramatic cuts on programs for poor and working people, which makes four domestic promises in the summary—“Expand Opportunity,” “Strengthen the Safety Net,” “Secure Seniors’ Retirement,” and “Restore Fairness”—but in its numbers does the opposite. Ryan’s budgets have always been first and foremost about attacking redistribution aggressively. But he can’t say that. So he just says the opposite.
And what does the McCutcheon decision have to do with all this? Very simple. Redistribution happens because redistributionist politicians have the nasty habit of getting elected. They get elected, in part, because of campaign-finance laws that limit wealthy conservatives’ ability to influence outcomes. In this sense the campaign-finance reform laws of the 1970s are themselves redistributionist—they were explicitly designed to level the playing field, which is a hoary cliché but expresses a proper goal, i.e., not letting the wealthy own Congress lock, stock, and barrel.
McCutcheon tells us, to an extent that even Citizens United hadn’t quite, that Chief Justice John Roberts detests this electoral redistributionism, and as Jeffrey Toobin wrote this week, has as his goal “the deregulation of American political campaigns.” Roberts’s opinion says: “It is not an acceptable governmental objective to ‘level the playing field.’” You can’t ask for it to be put more plainly than that. (Roberts doesn’t face voters and has a job for life and can speak with more candor than senators.)
Savagely fighting the delivery of health care to financially struggling people; slashing the federal programs that help these people get by; rigging elections so that rich conservatives (who outnumber rich liberals substantially) have more control over who wins them. These may seem disparate battles, especially the third one, but the motivation in each case is the same: Protect the well-off from redistribution of their wealth to those who don’t deserve it.
You’ll rarely hear an elected Republican admit this. But it’s usually the motivation. And we saw it this week in starker relief than we usually do. But don’t despair too much: They may yet prevail on campaign spending, but Ryan is going to lose, and Obamacare is going to win. So maybe, even though they won’t talk about it openly, people are onto them anyway.
By: Michael Tomasky, The Daily Beast, April 4, 2014
“Worried About The Men”: Paycheck Fairness Act Generates Unexpected GOP Fears
Senate Democrats are moving forward with their election-year “Fair Shot” agenda, including popular bills intended to make life a little more difficult for the Senate Republican minority. First up is the Paycheck Fairness Act, which GOP policymakers have already killed twice – once in 2010 and again in 2012.
For those who may need a refresher, the bill would “enhance the remedies available for victims of gender-based discrimination and require employers to show that wage differences are job-related, not sex-based, and driven by business necessity. The measure would also protect employees from retaliation for sharing salary information, which is important for deterring and challenging discriminatory compensation.”
The Lilly Ledbetter Fair Pay Act was an important step forward when it comes to combating discrimination, but it was also narrowly focused to address a specific problem: giving victims of discrimination access to the courts for legal redress. The Paycheck Fairness Act is a broader measure and Dems consider it an important part of their agenda.
It’s not surprising that Republican opposition will likely kill the bill for a third time, but I am struck by the arguments some in the GOP have come up with.
Tennessee Republican Sen. Lamar Alexander is worried that the Paycheck Fairness Act – a bill designed to ensure equal pay – will hurt men.
“Take me through exactly what would have to happen, with a specific example of a man and woman, where a man is being paid less than the woman,” Alexander asked during a Senate hearing. “Because this law is not just about women – it’s about men and women.”
Under the status quo, women receive unequal pay for equal work – for every dollar a man makes, a woman makes 77 cents. Alexander isn’t just opposed to a legislation intended to address wage discrimination, he also wants to know what men will get out of it?
The answer isn’t complicated: men will get a more just society for all. Isn’t that enough?
Perhaps the more salient point to consider is why pay equity has become such a problematic issue for much of the Republican Party.
Two weeks ago, Cari Christman, the executive director of a political action committee for Texas Republican women, got the ball rolling when she struggled to explain her party’s opposition to pay-equity laws. She said women don’t need measures like the Lilly Ledbetter Fair Pay Act, in part because “women are extremely busy.”
Soon after, Beth Cubriel, the executive director of the Texas Republican Party, said women are to blame for receiving unequal pay for equal work. She argued that if women “become better negotiators,” the problem will take care of itself.
Last week, Texas Gov. Rick Perry (R) appeared on msnbc and seemed annoyed by the entire subject, calling the debate “nonsense,” and urging Democrats to focus on “substantive issues” – as if this issue isn’t substantive at all.
And now Lamar Alexander is worried about men facing gender-based wage discrimination.
Don’t be too surprised if pay equity becomes a key element of Democrats’ 2014 strategy. Not only are they on the right side of public opinion, but it seems the GOP is struggling badly to address the issue coherently.
By: Steve Benen, The Maddow Blog, April 2, 2014
“The New Tribalism”: Not That Different From What’s Happening In The Rest Of The World
We are witnessing a reversion to tribalism around the world, away from nation states. The same pattern can be seen even in America – especially in American politics.
Before the rise of the nation-state, between the eighteenth and twentieth centuries, the world was mostly tribal. Tribes were united by language, religion, blood, and belief. They feared other tribes and often warred against them. Kings and emperors imposed temporary truces, at most.
But in the past three hundred years the idea of nationhood took root in most of the world. Members of tribes started to become citizens, viewing themselves as a single people with patriotic sentiments and duties toward their homeland. Although nationalism never fully supplanted tribalism in some former colonial territories, the transition from tribe to nation was mostly completed by the mid twentieth century.
Over the last several decades, though, technology has whittled away the underpinnings of the nation state. National economies have become so intertwined that economic security depends less on national armies than on financial transactions around the world. Global corporations play nations off against each other to get the best deals on taxes and regulations.
News and images move so easily across borders that attitudes and aspirations are no longer especially national. Cyber-weapons, no longer the exclusive province of national governments, can originate in a hacker’s garage.
Nations are becoming less relevant in a world where everyone and everything is interconnected. The connections that matter most are again becoming more personal. Religious beliefs and affiliations, the nuances of one’s own language and culture, the daily realities of class, and the extensions of one’s family and its values – all are providing people with ever greater senses of identity.
The nation state, meanwhile, is coming apart. A single Europe – which seemed within reach a few years ago – is now succumbing to the centrifugal forces of its different languages and cultures. The Soviet Union is gone, replaced by nations split along tribal lines. Vladimir Putin can’t easily annex the whole of Ukraine, only the Russian-speaking part. The Balkans have been Balkanized.
Separatist movements have broken out all over — Czechs separating from Slovaks; Kurds wanting to separate from Iraq, Syria, and Turkey; even the Scots seeking separation from England.
The turmoil now consuming much of the Middle East stems less from democratic movements trying to topple dictatorships than from ancient tribal conflicts between the two major denominations of Isam – Sunni and Shia.
And what about America? The world’s “melting pot” is changing color. Between the 2000 and 2010 census the share of the U.S. population calling itself white dropped from 69 to 64 percent, and more than half of the nation’s population growth came from Hispanics.
It’s also becoming more divided by economic class. Increasingly, the rich seem to inhabit a different country than the rest.
But America’s new tribalism can be seen most distinctly in its politics. Nowadays the members of one tribe (calling themselves liberals, progressives, and Democrats) hold sharply different views and values than the members of the other (conservatives, Tea Partiers, and Republicans).
Each tribe has contrasting ideas about rights and freedoms (for liberals, reproductive rights and equal marriage rights; for conservatives, the right to own a gun and do what you want with your property).
Each has its own totems (social insurance versus smaller government) and taboos (cutting entitlements or raising taxes). Each, its own demons (the Tea Party and Ted Cruz; the Affordable Care Act and Barack Obama); its own version of truth (one believes in climate change and evolution; the other doesn’t); and its own media that confirm its beliefs.
The tribes even look different. One is becoming blacker, browner, and more feminine. The other, whiter and more male. (Only 2 percent of Mitt Romney’s voters were African-American, for example.)
Each tribe is headed by rival warlords whose fighting has almost brought the national government in Washington to a halt. Increasingly, the two tribes live separately in their own regions – blue or red state, coastal or mid-section, urban or rural – with state or local governments reflecting their contrasting values.
I’m not making a claim of moral equivalence. Personally, I think the Republican right has gone off the deep end, and if polls are to be believed a majority of Americans agree with me.
But the fact is, the two tribes are pulling America apart, often putting tribal goals over the national interest – which is not that different from what’s happening in the rest of the world.
By: Robert Reich, The Robert Reich Blog, March 23, 2014
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 