Johnny Rocco Tax Act of 2017

The tax legislation now in front of Congress needs a name. I propose the Johnny Rocco Tax Act, in honor of the classic amoral gangster of Key Largo fame.

The ultra-rich (the top 0.5% or so) want MORE, just like Johnny. Will they ever get enough? Just like Johnny, they never have.

How evil is this bill? First, its main target is children, especially children living with a single parent. The percentage of African-American [c. 60%] and Latino children [c. 40%] living with a single parent is far higher the percentage of white children in that situation [20-25%]. The bill combines the current standard deduction and the personal exemption (NO, it does NOT “double” the standard deduction, it combines two existing exemptions), so that a single mother with one child, who now exempts $14.4k of her income, will only be able to exempt $12k. If she has a second child, her loss will climb from $2.4k to $6.45k.

Given US demographics, this provision will mainly harm African-Americans and Latinos: in short, it’s racist. The provisions about student loan interest, which disproportionately affect African-Americans and Latinos, are similarly racist in application.

The loss of the state and local tax deduction (taken now by about one-fifth of taxpayers) will mean the real cost of those taxes will climb 25% for a middle class taxpayer. Stung by such costs, many will demand lower state and local taxes. At the same time, the Federal payments to states will drop (as explained in last week’s NY Times, among other places).

So, states will face lower revenue and political pressure to reduce taxes. How can they cut expenses? Here in VA, the state spends roughly half of its money on two things: education and Medicaid [1.3 million people]. Half of those on Medicaid are children.

At the other end of the scale, the 1% possess a greater share of US wealth (c. 40%) than at any time since 1929. Why do they need MORE money? Corporations like Apple brag about having the largest cash stockpile in world history. Why does Apple need MORE money?

The Johnny Rocco Tax Act seeks to rob poor children of their health care and education so that ultra-rich Baby Boomers, who already have more money than anyone could use, let alone need, can fill their coffers with $100 bills instead of those tacky $50s.

Quite apart from the economic stupidity of this legislation – and it is equally objectionable from the standpoint of capitalist economics – it is the most evil, immoral piece of domestic legislation to come before the Congress in living memory.

Vaclav Havel

Vaclav Havel, the Bayard of the Semantic War, died this week. We lost in him one of the towering figures of the 20th century. I first encountered his writing on French television, sitting in the living room of my dear departed friend, Jean Tanguy, in Locquirec, France. On that day, fittingly enough 14 July 1989, I had chosen to share the celebrations with Jean and his family, rather than to sit on the reviewing stand on the Champ Elysées (I was in France to participate in the Bicentennial conference, “L’Image de la Révolution Française”, organized by Michel Vovelle. The conference speakers sat on the reviewing stand with then President Mitterand.)
Jean and Marie-Claire had never seen a play by Havel, and French tv had chosen that night to air a Paris production of Havel’s one-act play, “The Petition.” We all found it a remarkable play, and performance. (Havel had been in the audience.) A few days later, I bought a French version of three of Havel’s plays, “The Petition” among them: I quickly translated it into English, to use in my European Civilization class. We still read it each year. The publication of a splendid collection of Havel’s essays, Open Letters. Selected Writings, 1965-1990, allowed me to assign that text, too. In May 2005, I had the delightful experience of sitting in Georgetown’s Gaston Hall, listening to Havel. In the Q&A that followed his dialogue with Madeleine Albright, all but one student in the queue came from my Euro Civ class: all of them had read Havel and asked wonderful questions. Teachers don’t get many moments that fulfilling.
Why have I insisted that so many Georgetown students read Havel? He spoke the truth, as he saw it. Long before the term “Semantic War” came into usage, Havel understood that the war of ideas, expressed through words, ultimately determines the fate of political systems. [For what it’s worth, I think someone in the Clinton Administration, perhaps Albright, essentially put together Havel’s emphasis on semantics and the American obsession with declaring “war” on everything in sight.] He believed, much as John Stuart Mill did, that the truth has the annoying characteristic of being true, and thus cannot easily and permanently be suppressed. Those who have used the term “Semantic War” have usually meant the conflict between different interpretations of a given event, or different sides in a given conflict (say, the US Government and one of its foreign enemies, state or non-state), but Havel understood it in its genuine essence: the war between truth and falsehood. These political Semantic Wars claim to revolve around that paradigm – each side claims a monopoly on truth, and denounces the other side as minions of Satan and all his lies [my Euro Civ students begin their fall semester with a classic example of this technique, the Chanson de Roland] – but each side mixes genuine truth with falsehood or prevarication. States do not much care about the truth as an abstract concept; they care about their own survival, that’s the ultimate “truth” for them.
Havel could be ruthless in rooting out the truth behind the semantic subterfuge of even his own side: Stanek, in “The Petition,” examines his weaknesses more thoroughly than virtually any character in the history of the theatre. He, not Vanek, takes apart each side of the issue. Havel wonderfully ends the play by the device of Stanek’s political connections getting poor Javurek, the “dissident” musician lover of Stanek’s daughter, out of prison. The petition seemingly has become pointless, at least insofar as Javurek’s fate is concerned. Havel thus forces viewers/readers to get beyond the specific case.
In his 1978 essay, “The Power of the Powerless,” Havel provided an essential theoretical underpinning to the movements all over East Central Europe. The intro to that essay in the Open Letters collection cites Solidarity activist Zbygniew Bujak on its importance to the Gdansk workers in 1979-80. Havel gives one of my favorite examples of how we must understand the Semantic War between truth and falsehood. That War is less a titanic clash of thundering ideological salvos, and more an endless series of seemingly innocuous skirmishes. Havel offers us a simple case (from the version in Open Letters, 132-33):
“The manager of a fruit-and-vegetable shop places in his window, among the onions and carrots, the slogan, “Workers of the world, unite!” Why does he do it? What is he trying to communicate to the world? Is he genuinely enthusiastic about the idea of unity among the workers of the world? Is his enthusiasm so great that he feels an irrepressible impulse to acquaint the public with his ideals? […]
I think it can safely be assumed that the overwhelming majority of shopkeepers never think about the slogans they put in their windows, nor do they use them to express their real opinions. That poster was delivered to our greengrocer from the enterprise headquarters along with the onions and the carrots. He put them all in the window simply because it has always been done that way for years, because everyone does it, and because that is the way it has to be. If he were to refuse, there could be trouble. […]
Obviously the greengrocer is indifferent to the semantic content of the slogan on exhibit; he does not put the slogan in his window from any personal desire to acquaint the public with the ideal it expresses. This, of course, does not mean that his action has no motive or significance at all, or that the slogan communicates nothing to anyone. The slogan is really a sign, and as such it contains a subliminal but very definite message. Verbally, it might be expressed this way: “I, the greengrocer XY, live here and I know what I must do. I behave in the manner expected of me. I can be depended upon and am beyond reproach. I am obedient and therefore I have the right to be left in peace.” […]
Let us take note: if the greengrocer had been instructed to display the slogan “I am afraid and therefore unquestionably obedient,” he would not be nearly as indifferent to its semantics, even though the statement would reflect the truth. The greengrocer would be embarrassed and ashamed to put such an unequivocal statement of his own degradation in the shop window, and quite naturally so, because he is a human being and thus has a sense of his own dignity. […] Thus the sign helps the greengrocer to conceal from himself the low foundations of his obedience, at the same time concealing the low foundations of power.”
Havel later asks the greengrocer to stop “living the lie.” Take down the sign. Refuse to participate in bogus elections. Say what you think. Havel is no fool: he knows (from personal experience) what refusal to “live the lie” will mean. [Think of that wonderful scene from The Lives of Others, when the Stasi officer asks the neighbor, whom he has never seen before, how her daughter’s studies at X University are going.]
It’s hard to think of Havel’s greengrocer without also thinking of Mohammed Bouazizi, isn’t it? He could no longer live the lie. Just as Havel puts it, Bouazizi was “a human being and thus ha(d) a sense of his own dignity.”
When you build your whole system upon lies, Havel reminds us, there will come a point when the person who says 2+2=4 is a threat to the system. We might think of Galileo’s brilliant retort to his opponents, who suggested that Aristotle had insisted the Sun revolved around the Earth, so it must be so. Galileo replied that Aristotle had made that deduction based on the evidence from the naked eye; honest empiricist that he was, Aristotle, had he had access to Galileo’s telescope, and seen what Galileo had seen, would have come to the same conclusion as Galileo. 2+2=4. Poor Galileo spent the last 20 years of his life under house arrest for stating the obvious. The system, in this case the Catholic Church’s hierarchy, could not accept, in a time of conflict about religious dogmas [the Church placed Galileo’s work on the Index at the same time that it condemned a work of Calvin], anyone who questioned any doctrine it had formally approved.
How often do political leaders today lie? How often does a state murder people, often deliberately and in cold blood, and then offer some pathetic and usually transparently false justification? In how many ways are we all the greengrocer? In the US, the Republicans have raised deliberate lying to an art form. Most of them have become such ingrained liars, so deeply committed to an ideology [Havel’s “Powerless” essay explains how that works] that they can no longer recognize the truth. One lie leads inexorably to the next, because the foundation on which they have built their ideology is demonstrably false. The Democrats, in part because they do not, in fact, have an ideological foundation, are very poor liars. They lie, of course, but they can’t stay on message as well as the Republicans: now and again, the truth pops out of their mouths. They can’t help it: 2+2=4. One minute they tell some ridiculous lie (say about the monstrous budget deficits that lie ahead, after about 2014), the next they point out a genuine truth (that taxes on the wealthiest Americans will have to up). They naturally shy away from the truth of that second statement: such a change in the tax system will help reduce the share of national wealth held by the 1% and bring us back to the more equitable wealth distribution of ca. 1980 or even 1994. The Occupy movements are telling that simple truth: no solution is possible until we reduce significantly the share of national wealth held by the 1%.
Maybe we should all post the slogan, “Power to the Powerless,” on our front doors, both literal and virtual.

“Sovereign” debt

At long last, some public commentators have begun to focus on the core of the so-called “sovereign debt” crisis: it’s not sovereign debt. Our modern definition of sovereignty began with Jean Bodin (Les Six Livres de la République, 1576), who defined “souveraineté” as the right to make law binding on all in general and each in particular. Bodin mentioned some of the key elements of this right to make law: coining money was one of them. Any country that does not control its own currency has no sovereign debt; it’s as simple as that.
The countries in the Euro zone, with the possible exception of Germany, do not control their own currency. The recent negotiations make it clear that Germany has the deciding vote on questions related to the Euro, so one could argue that it has something close to sovereignty with respect to currency. Sovereign countries also control their fiscal policy. Once again, the Euro zone countries do not qualify, because they clearly do not control such policies.
The Business section of the NY Times has, at long last, begun to address this issue (other mainstream media have been little better). On Wednesday, 2 November, a story quoted V. Serafeimakis, identified as a senior official as one of Greece’s main oil and gas distribution companies (Avinoil), as saying “The real problem is that we are now operating under a foreign currency.” Quite so. On Friday, 4 November, in an excellent column, Floyd Norris posed the issue of why it was so anathema to European leaders that Greek voters actually have a say in the financial policies of Greece. As Norris rightly pointed out, European leaders essentially have said fiscal policy no longer belongs to the people of Europe: they must henceforth do what the Brussels bureaucrats, under orders from German bankers, tell them to do.
Norris and others (for example, al-Jazeera’s news anchors) have suddenly discovered that the combination of a common currency (i.e., a fundamental element of sovereignty in the hands of an external authority) and “sovereign state” political and economic policies is an oxymoron. The choice appears simple: create a common set of political and economic policies, set by a central authority, or return control of currencies to the states.
Banks have fallen victim to their own hype and disingenuousness: Greek debt is not sovereign debt. It’s not the equivalent of borrowing by the governments of the US or the UK; it’s the equivalent of borrowing by Rhode Island or Mississippi. The markets have gotten around to that point of view in a hurry, raising Greek short-term debt interest rates from under 2% to close to 30% over the last two years. As Americans look at this situation, we might consider that Greece looks a lot more like Germany than Mississippi looks like the Megalopolis states running from Boston down to northern Virginia. Greece’s per capita GDP, about $30k, is far closer to those of Germany or France ($40-42k) than the per capita SDP of Mississippi ($32k) is to that of NY, NJ, or Massachusetts ($56-58k), let alone Connecticut ($64k). West Virginia, with its per capita SDP of $35k is a different world from Virginia ($53k, a figure that does not take into account the massive gap between wealthy Virginia north of the Rappahannock and impoverished Virginia, west and south: the median household income in Lee County is $29k, in Loudoun County, it’s $114k). Europe’s “state” economic disequilibria are little different from those in the US, and within those “states” Europe has far less economic inequality among social groups than we have in the US (in terms of the Gini index of inequality). The Euro zone’s real outliers are the East Central states (Czech Rep., Slovakia), whose per capita GDPs are well under $20k. No wonder Slovakia balked at bailing out Greece (in American terms, it’s like asking Mississippi to bail out Georgia, both in terms of per capita GDP and in terms of overall GDP size).
The Federal solution (deeply rooted in European history, by the way) will create a central monetary and fiscal policy and dramatically reduce the authority of national governments (and, by extension, the effective power of those who elect them). Listening this morning to a German analyst discussing the Greek situation, one got a clear sense of how thoroughly Germany dominates the Euro zone. As he said, many other countries have an anti-Europe party; Germany does not. Why should it? Europe dances to Germany’s tune. Any country that does not understand that rule, has to leave, as Chancellor Merkel made crystal clear to PM Papandreou with her comments about the referendum.
What will happen if Greece does leave the Euro zone? We have plenty of historical evidence of countries leaving what were, in effect, imperial currency zones. We could look to the newly created states of 1919, like Poland or the Baltics or Czechoslovakia, which had to create new currencies and abandon old ones (often more than one – the Poland of 1920, for example, had been part of three different currency zones in 1914). The shift did lead to massive inflation, in part because the largest nearby economy (Germany) had government induced runaway inflation.
Assets valued in drachmas will lose much of their value, because the Greek government – following in the footsteps of countless predecessors, including those 1920s Germans – will inflate its way out of debt. More recently, we can follow the case of the split between the Czech Rep. and Slovakia in the 1990s. Once all the dust had settled, the Slovak koruna was worth about 20% less than the Czech one. That’s roughly the difference in the per capita GDPs: the three easily accessible estimates for that statistic – from the World Bank, the IMF, and the CIA – disagree sharply about Slovak per capita GDP – a high of $18.4k from the CIA, a low of $13.5k from the WB. The IMF figures suggest a difference of about 13%, the WB figures a difference of 30%. (The CIA figure for Slovakia seems grossly inflated.) By that standard, one would expect a devaluation of the drachma, vis-à-vis the Euro, by something like 33% [if we make the comparison to the Euro big boys, France and Germany; bringing in the other three states that matter – Italy, Spain, Netherlands – would lower the comparative per capita GDP and suggest an inflation more like 20%]. Greece’s catastrophic debt ratio to GDP, however, is far, far worse than anything seen in the Czech Rep. or Slovakia in the 1990s, so the initial period of adjustment will likely be even worse.

Japan

We have had so many examples of the bad sides of human nature in the last few weeks (Libya, Yemen, Cote d’Ivoire, Sudan, and the international response to many of the problems in each place, just for starters), that I’d like to take a minute to honor those who show the best of us.

Saturday’s Le Monde had some excellent articles on the nuclear problems at Fukushima; several of them focused on the workers (one with a nice look back at the workers still alive from the Chernobyl disaster).  One of those articles mentioned that among the heroes working at Fukushima are about 20 people who had been evacuated from the site when the problem started, but who volunteered to go back to help seal off the plant.  As the article said, most of them believe they are giving up their lives for the sake of the nation.  If you look at the news on Libya or Yemen (etc.) and despair, consider for a moment the astounding courage and selflessness of these volunteers, and, indeed, of the fire fighters and nuclear plant workers who risk their lives in what Le Monde called “terrifying conditions”, to prevent a meltdown.