Occupy Movement – Revolution of process

You, me…WE ARE THE 99%; like it or not you are more like us and will never be one of them (or as likely to be struck by lightning).  This is not a revolution to change policies; it is a revolution to change the process.

I have just returned from the Occupy Howe Street event. I have been surprised how the market media has been handling the whole “Occupy” movement. There have been a number of analogies to the ‘Arab spring’ hitting our own shores. Many of the commentators are struggling to understand what it is the protesters want. Unlike the ‘Astroturf’ Tea Party, there is not central structure, no simple message…or so the pundits say.

What they fail to see is this moment is not about resolving any single grievance. Some are against the FEDS…others corporations…some BIG oil…this is not a movement about issues but about process. It is a movement that is taking to the parks…the streets…to every city in the world…it is taking the message that the system is broken, democracy is broken and we are mad as hell and we are NOT going to take it anymore.

In the past politicians would find an issue the people cared about and then formed policy around that. They may or may not believe in the issue (after all politics has long been a job and not a calling) and would put a left/right or center spin on it. The primary point is the politicians would get their marching orders from the people. They would have to convince people the issues they cared about would be solved by that party’s solution.

Now our democracy has been high-jacked by consumerism and the moneyed elites.

Now a small cabal of lobbyist – who’s intent is to protect the wealth and privilege of the 1% – create policy…create law, and through the lubricant of political contributions get our politicians to adopt these prefab policies.

Political contributions have become the mechanism for this abduction of our democracy. Contribution that comes in the form of dollars – direct campaign contributions, material support – use of private facilities for fund raising or personal trips,  or manipulation of mainstream media – through corporate control of the editorial content of highly concentrated media or the evisceration of the CBC (I think it no small coincidence that popular control of politics parallels the decline of the CBC…a decline directly caused by the concerted efforts of consecutive governments to defund the once pride of our nation).

Having been purchased, it has now become the job of the politicians to sell the people on these prefab policies…using the same political contributions to at first distract, and then devalue and ultimately disenfranchise the people. It is much easier to govern a disinterested and impotent populous than an engaged empowered one.

So our politicians evade on the BIG issues…the important policies and instead distract us by micro-target issues to ‘key’ demographics to win timely support…we worry about gun registries, military in the arctic, apologies for past wrongs… and while we focus the small important issues we no longer see the elephant in the room that the core policies politicians actually enact while in government are against the very interests of society…the interest of the 99%.

Recently we had elections in nearly half of the provinces/territories. The common feature of these is near record low turnout. Federal elections in the 60s had over ¾ of the people vote, now its little better than 1 in 2 voting. Historic lows in ‘democratic’ participation with less than 1/2 of Ontario voters bothering to show …bothering to help shape their government…bothering to care about their communities.

Why?

It is not that they do not see or feel a crumbling infrastructure, roads in need of repair…increased user fees for health care…decreased government services…increased fees for driver’s licences/passports…reductions in employment insurance …increased tuition…decreased research spending…increased costs for you and me while decreased investment in our country.  Governments bailout corporate greed (70$ billion to support bad bank investments[1]) and corporate incompetence (GM, Chrysler) while letting the rest of us suffer (EI reductions, Education funding gap). Pundits say that we need first-past-the-post (winner take all) voting system to ensure politicians are accountable to their constituents; yet what we see is a disregard (or apathy) about the needs and wished of the people they are supposed to represent. Party discipline to ensure political patronage…political power…their jobs…become supreme…partisan loyalty run amok!

While Rome burns, our elected officials continually increase the cost of being a citizen. There are increases in transit fees…there are GUARDS at Skytrain to ensure no one sneaks a free ride.

Free ride!!!

A new ‘fare-turn-stall’ system is to be implemented into our mass transit system at a cost of $170 million to prevent $7 million loss due to working people not getting a ticket. Work it out; it will take 24 years for the system to pay for itself…assuming it works perfectly. London has a system like this but must spend millions year to pay for guards to prevent people ‘hopping over’ the turn stalls. The only one to profit from this is the corporation installing it, the only one to lose are you and me who use the system and the only ones who don’t care are the politicians who have kept their donors happy – do that and the electorate will follow.

Free rides!!!

What about the free ride defense minister McKay enjoyed from his private camping trip[2]…a ride provided by an air-to-sea rescue helicopter costing you and me thousands of dollars. It has come to light this is not an exception but standard practice. The politician gets perks while real people must live the letter of the law.

Why don’t people vote?

Tommy Douglas, the father of Medicare, had a good parable about the democratic land of Mouse-ville. Every four years they would hold an election to vote in a new government…every year the mice were offered cheese by the black cats…every year the mice voted for a black cat government. The government was fair and just and confronted important issues of the day…such as speed limits for mice; regulations to ensure paw-sized entrance on mice homes. Well, as you can bet, the mice were appalled by this and come next election they voted out the black cats…and voted in the white cats. This continued until one day a little mouse quested why government had to be run by cats? Why not elect mice?

(My addition to Tommy’s story)
When one mouse tried to run, he was told it could cost more money than 1000 mice made in a year…that he would have to rely on cat owned media to present his platform…and that the first-past-the-scratch-post voting system mean he had get more votes than all the other competing cats. The mouse saw why few (if any) mice were ever elected; it was not the issues that prevented the mice from having a voice it was the system. The next day, the mouse began a movement…Occupy Mouse-ville.

So we have an election and we kick out one set of politicians only to have another set do the thing…remember they are all at the mercy of the 1% to get elected. Our first past the post system simply ensures those at the front of the line, the 1% and their lobbyist; always elect someone who can work within the system…their system. Elections have become a way for corporations…the 1%…to ensure the loyalty of their political puppets – “mess with my lobbyist and I will throw my support behind your opposition; they will not be so uppity; they will know their place”.

We no longer have a democracy, it has been stolen and replaced by the ghost of democracy past  or the image of democracy but lacking it’s substance…it’s power…it’s meaning!

The system does not understand what the Occupy movement is…they cannot see it because it has not existed before. We have taken to the streets…we have taken to the internet…we have taken it into our hearts that the system as it is will not address our needs, our concerns, our existence as free people. It is no longer in the hands of the politicians (who fear us and use state power to harass and suppress us) where the people go. Our demands may be many but our message is a singular one – THIS IS OUR SOCIETY AND THE TIME HAS COME FOR US TO TAKE CONTROL AGAIN! Stand in our way if you must, but know WE ARE THE 99%, if might makes right, we are the righteous!

Some for all the people, not all for some!

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[1] http://www.globalresearch.ca/index.php?context=va&aid=12007

[2] http://www.canada.com/news/Opposition+slams+MacKay+high+flying+abuse+military+helicopter/5450709/story.html

The cost of tax cuts

In the shadow of the elections victories of the Tea Party in the US election and the recent announcement of our own Campbell government here in BC to both cut income taxes while implementing a user fee for hospital stays, I thought it would be educational to take a sceptical look at taxes and in particular tax breaks.

Taxes have been a widely used tool by governments to punish ‘sin’ (in the form of alcohol and tobacco taxes) and to promote investment (in the form of tax holidays or credits like the capital gains tax). I am not going to get too partisan here. There are valid arguments on all sides about what are appropriate taxes and at what level those taxes should be – that is a discussion for a different day and perhaps a different show. What I would like to investigate here are two things: first that cutting taxes increases tax revenue (this was called Voodoo economics by G. Bush Sr., trickle-down economics by others but economist refer to this broadly as supply-side economics) and second that tax cuts are always good.

I shall address the former first. For those of us who had access to an US media source (or those who can remember any recent political campaign) every politician was promising to cut taxes; when asked how they would pay for these tax cuts, they would either respond by saying tax cuts cost nothing or they said they will reduce spending…when asked what spending, they would say something like “that fat in the system” or “improved efficiencies” – IE they would not cut anything. For example they often say they will cut “ear-marks’, but this only accounts for $3 billion out of a budget of $3.6+ trillion (with a deficit of $1.7 trillion)…or 0.08% of budget (0.17%  of deficit).

It seems popular among voters across the political spectrum. However, the recent dual announcements of our local government show the reality of the situation. Campbell announces a popular across the board tax cut of 15%. This applies to rich and poor alike (although not equally, but again that’s a different show*). This equates to a loss of over half a billion dollars a year. That is money the government will not have to provide services…like hospital beds. The government also recently announced a user fee on hospital rooms amounting to over $200 a week. Who is going to make up for the loss in tax revenues? The sick.

Environics Poll 2007

Now don’t get me wrong, maybe we are all happy with that, but most people when asked the question do they want to cut public spending (especially healthcare), they say no…in fact it is one of the few areas people show an innate socialist tendency.

Just to put the two into perspective, the median family will save about $350 a year in taxes.  The average hospital stay for an individual is 3-10 days (depending largely on age)…that’s a fee cost of $87 to $290 (and for those of you who say “well most people will not be in hospital that long” just remember that makes the fee even more onerous because it WILL effect most those who are suffering most and likely least like to afford it).

Okay, my math may be a little dodgy (mainly due to the lack of accurate numbers for ‘average hospital’ stay or the myriad of different income/fee/taxes an individual will pay) but the point should still be obvious. The hospital fee was not to pay for the tax cut but add in the added cost of medical insurance premiums[1], camping fees[2], transit fees[3], licence fees[4], tuition[5] and so on you will get there. (for those of us old enough, we remember when ‘user fee’ was a dirty word and the fees that did exist were token…not any more).

Cost of Bush's tax cuts

The point I am getting at, is if we want social services we have to pay for them as a society. That means when someone yells “tax cuts” remember they are also saying “cut services”. Maybe something you are comfortable with…maybe not but that is the reality of it. I was going to go on to talk about the wisdom of providing robust social services but that would be straying perhaps outside the bound of a sceptic podcast so we shall stop here and address the second point.

Many have claimed, largely Republicans and Monetarists, that cutting taxes increases tax revenue. On the surface this sounds paradoxical; however there is a shred of logic to be found. The idea, goes that if you cut taxes, those who have more money will invest in the economy, the economy grows, from this larger tax base you collect more absolute dollars even though the rate is lower. The idea works in reverse as well; increasing the tax rate will cause a contraction of the economy and a reduction in absolute dollars.

Often the example of the Reagan Revolution is used to prove this point…i.e. that it works in practice. However this is a flawed claim. As many modern economists have shown[6], including noble prize winner Paul Klugmen, the Reagan tax cuts did not improve the US economy and actually made government finances worse.

It is true the US economy grew fast from 1983-89 however this is in contrast to the miasma of the severe recession of 81-2. Capitalist markets are cyclical, and this was not an unusual recovery. Private savings, something supply-side economics assumes from the masses to provide the capital for investment, continues to decline throughout the decade (7.8->4.8%). Meaning, the money for the recovery, as it was, came from spending savings and increasing personal debt. Finally, this trend is echoed in the US budget; when Reagan came to office the US debt as a % of GDP was 32.5%, when Bush Sr. left it was 66.1%. Clinton, who raised taxes, brought the rate down to 56.4%. The same happened in Canada, when we increased taxes in the 90’s and went from the ‘basket-case’ nation to arguably the country with the most stable finances.

Lastly, the multiplier effect. Not all tax cuts are equal. Tax cuts cost money; those who claim that it is not should ‘not’ collect their next pay-check and see if it costs them money. So, the current desire of governments everywhere is stimulus. When the government (or anyone really) spends money it has what is called, a multiplier effect on the economy; that is for every “Y” dollars spent it generates Y*x (or Y’) in the economy. So, if I give you a dollar and you burn it, which generates no activity in the economy, in fact it removes the dollar from circulation so has a negative multiplier effect. Now most people will spend it or ‘invest’ it (be it real investments or just in your bank account) and they have a positive effect; that is they generate more than a dollars worth of economic activity. The best way to think about this is if you spend the dollar, the merchant sells more, can now hire a new employee, and we will in turn make more dollars and spend them; the new employee generates the new value. An economist could spin a better story, but I think you get the gist of it – the one dollar generates more than a dollar of economic activity.

Relative stimulus effect

Having given the background, how do tax cuts fair as stimulus[7]? In general, every dollar of tax cuts generates $1.30 of economic activity compared to a dollar spent on increasing UI benefits would generate $1.62 or increasing food stamps generates $1.74. There is also the issue of WHO to give the cut to. Lower income people spend (out of necessity) every penny they make so a cut in their taxes (thanks to HST we ALL pay taxes even the poorest) will generate the most activity but they latterly also have the least money (the bottom 50% of household control about 3% of Canadian wealth). As you move to the other extreme, the very wealthy often ‘invest’ most of their tax cuts (earning more than they need), so less activity generated but because they make more money a big bang (the top 10% own around 58.2% of the nation’s wealth[8] in the USA its 1% owning 35%). However, in a global world, it is most likely their investments will be ‘trans-national’ or outside ‘our’ economy and thus lost completely to the system – complete fizzle.

Society, of course, is not only extremes but a lopsided slope of ‘everything-in-between’ (note percentages of wealth ownership mentioned earlier) otherwise it would be easy to define tax policy; the trick is to determine both purpose (stimulate consumption, promote manufacturing, decrease inflation) and effectiveness. History has given us lessons to learn from and one a sceptical economist should be able to apply.

 

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[1] http://www.tbs-sct.gc.ca/hr-rh/in-ai/2009/1124-eng.asp

[2] http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20100331/bc_april_fee_increases_100331?hub=BritishColumbia

[3] http://edmonton.ctv.ca/servlet/an/local/CTVNews/20100331/bc_april_fee_increases_100331?hub=EdmontonHome

[4] http://www.hsd.gov.bc.ca/lclb/docs-forms/2010_fee_increase.pdf

[5] http://www.aved.gov.bc.ca/tuition/welcome.htm

[6] http://www.youtube.com/watch?v=-dQUIzzIOPo

[7] Recovery Act

[8] http://www.wsws.org/articles/2007/jun2007/cana-j20.shtml

* By this i mean 15% of $100k = $18k while 15% of roughly the median income, $50k = $7.5k. So, the tax applies the same but the benefit is very unequal.

For Profit politics – US Healthcare

A Facebook friend posted this video about the ‘secrecy’ used to pass health care. Watch and read my take on it….

 

The enemy of my enemy is NOT necessarily my friend!

1) Obama is not a leftist, socialist nor very progressive…so no surprise the american “for profit” system of government wins the day and the Healthcare reform did little for ‘main street’ and a jackpot for ‘wall street’
2) The reason it had to go to reconciliation was because of the Republicans…THEY have not given a millimeter (0.04″ for the Yanks). The reason those on the left complained about the bill because it was a (pre-tea party) Republican bill.
3) The Republicans DID have a say, both in committee and, notable, in the VOTES in the Senate and House, where they had several amendments passed. A process used more often by Bush (GW) than any other Prez in history.
4) You think it would have been better with McCain & Palin? Both having proven they are more pro-corporate and anti-‘main-street’ than any Dem.(note how they, Tea Party/Rep are against gov. spending on healthcare but pro spending on military and Big-Agri subsidies). Sadly, there is no better choice.
Take away? A two-party, for profit (thanks to the Supreme Court) political system will ALWAYS screw the people and promote the corporate class. There needs to be a REAL grass-roots movement to elect progressives to the states, governors, house and senate…then after electoral reform, the rest will follow.