Political MoJo

Europeans have it better?

| Tue Nov. 8, 2005 1:55 PM EST

Today at Mother Jones:

James K. Galbraith knocks a few holes in the notion that Europeans have it better than Americans. (LINK)

Bill McKibben explores the Brazilian city of Curitiba, a global model for development that both respects the earth and delights its inhabitants. (LINK)

Sara Catania profiles hellraising Ukrainian journalist Olena Prytula, whose newspaper keeps the Orange Revolutionaries honest. (LINK)

Nick Turse considers who had the real intel about the war -- the protesters who knew it would be a disaster and that, in any case, it was wrong. (LINK)

Tova Andrea Wang and Jonah H. Goldman argue that requiring voters to present a nationally uniform driver's license at the polls compromises voter rights and won't solve the problem of electoral fraud. (LINK)

Advertise on MotherJones.com

The Truth About Free-Riders

| Mon Nov. 7, 2005 9:44 PM EST

The latest issue of the British Medical Journal has an excellent article on American drug companies. To put this in context, recall that of late, the pharmaceutical industry has been lobbying the U.S. government to sign "free" trade deals with other countries that would: raise prices on patented drugs; extend patent protection to delay the introduction of generics; and block "re-importation" to the United States. Why would they do such a thing? Because, says Big Pharma, the rest of the world hasn't been paying its "fair share" of research expenditures, and it's time for them to stop free-riding. Which brings us to the BMJ article, which basically screams "Liar!"

The United States government is engaged in a campaign to characterise other industrialised countries as free riding on high US pharmaceutical prices and innovation in new drugs...

The campaign, strongly backed by the pharmaceutical industry, seems to have started in the late 1990s as a response to a grass roots movement started by senior citizens against the high prices of essential prescription drugs. This issue was the most prominent one for both parties in the 2000 elections and has since been fuelled by a series of independent reports documenting that US drug prices are much higher than those in other affluent countries...

We can find no convincing evidence to support the view that the lower prices in affluent countries outside the United States do not pay for research and development costs. The latest report from the UK Pharmaceutical Price Regulation Scheme documents that drug companies in the United Kingdom invest proportionately more of their revenues from domestic sales in research and development than do companies in the US.

Prices in the UK are much lower than those in the US yet profits remain robust. Companies in other countries also fully recover their research and development costs, maintain high profits, and sell drugs at substantially lower prices than in the US.Interestingly, the U.S. pharmaceutical industry's claim that European countries "free ride" seems to be based primarily on a 2004 report produced by Bain & Company, a consulting group in Boston. (The AARP passed it widely around.) But that report doesn't provide any evidence for its claim that "innovative drugs" are somehow less available in Europe as a result of overly-low prices. Perhaps American pharmaceutical companies aren't marketing their absolute latest and flashiest patented drugs in Europe, true. But considering how many of these are "me-too" drugs with little to no significant medical benefit, perhaps it's no surprise that Europeans aren't suffering much for the loss.

The IRS finally looks at church/state separation

| Mon Nov. 7, 2005 7:50 PM EST

After Justice Sunday passed this year, some of us were wondering whether the Internal Revenue Service would ever investigate blatantly political churches like Two Rivers Baptist in Nashville.

Now, we learn that the IRS is indeed going after a church for political involvement: All Saints Episcopal Church in Pasadena may lose its tax-exempt status because its rector, J. Edwin Bacon, preached an anti-war sermon two days before the 2004 election.

In all fairness, it should be noted that in 1992, the IRS revoked the tax-exempt status of a Binghamton, New York church because it ran ads opposing the candidacy of Bill Clinton. The tax code explicitly prohibits churches from becoming involved in campaigns and elections. Though an argument can be made that opposing the war in Iraq was a campaign issue in 2004, the same argument can be made that August's Justice Sunday, which involved many churches, was a direct promotion of the Supreme Court nomination of John Roberts. Then there is the matter of large tax-exempt church-related organizations such as Focus on the Family and the Christian Coalition, which routinely involved themselves in election matters.

I am opposed to the tax exempt status of churches because I perceive them as primarily as private clubs at the least, and agents of social control at their very worst. But if the tax-exempt status is to remain in place--and we know it is--how odd that, after thirteen years, the only target is a liberal institution in California.

Wal-Mart in the Sights

Mon Nov. 7, 2005 4:38 PM EST

The latest issue of the American Prospect features a piece reiterating charges of cruel working conditions at those Central American plants where Wal-Mart sources a good deal of its clothing. So what's new? The source of the charges. Harold Meyerson profiles Jim Bill Lynn, who in 2002 took over the company's internal labor monitoring program. And after being drummed out on an unrelated violation of the company's fraternization policy, he's not happy. According to Lynn, the company undermined his findings of actual malfeasance and sought to limit his investigatory powers after he reported back to the behemoth's Bentonville headquarters and agitated for genuine accountability.

But more interesting than the charges, is how the article is coordinated with the upcoming release of Robert Greenwald's (the director of Outfoxed and Uncovered) new film WAL-MART: The High Cost of Low Prices. It's the newest evidence of the growing coalition of labor, human rights, community, and environmental groups that are questioning Wal-Mart's business model. It will be quite interesting to watch the groups at work over the coming months (and indeed years) to see what sort of concessions they may be able to win from America's largest corporation, while still holding a diverse group of partners—with differing short term goals—together.

 

Taken on its own, it will surely be a big battle. But if successful, it could provide the blueprint for a bigger coalition that might be able to emerge to take bigger underlying questions about the nature of today's corporate capitalism. In any case, it seems to have Wal-Mart quite scared; last week The New York Times explained how company has drawn a page—and staff members—from the political world, to set up its own rapid-response war room.

The Lie Factory

| Mon Nov. 7, 2005 4:11 PM EST

New at Mother Jones:

On Mother Jones Radio Robert Dreyfuss explains how in the run-up to war the Bush administration—with Scooter Libby a major player—set up a "lie factory" in the White House to push bogus intelligence about Iraq. (LINK)

Gary Greenberg details how a pulverized, liquefied, and doctor-prescribed form of marijuana could transform the drug-war landscape. (LINK)

Tom Engelhardt proposes a "Wall of Shame" to honor the Bush administration for having "heaped favor, position, and honors on those who have blundered, lied, manipulated, and broken the law (not to say, cracked open the Constitution and the republic)." (LINK)

Montana's Governor Brian Schweitzer makes the case for synthetic fuels—including gasoline derived from coal; they might just give us a push down the road to energy independence. (LINK)

Forcing People to Save

| Mon Nov. 7, 2005 3:26 PM EST

I shouldn't really discuss Sperling's book any more until I actually, um, read it, but here's another point he brings up. One consistent plank of Democratic economic policy is the idea of "forced savings." Liberals rebelled, rightly, against privatizing Social Security and replacing social insurance with individual stock portfolios. Nevertheless, most Democrats believe that we should still have some sort of "add-on accounts" that would force short-sighted Americans to save for retirement. Some economists even believe that a higher savings rate will lead to higher economic growth, and exhort us so. Seems fair, but let's look at the numbers here more closely.

Looking at the BLS's 2003 Consumer Survey, the people who save in this country are overwhelmingly wealthy. The bottom income quintile pulls home $8,201 a year before taxes, and spends $18,492. Meanwhile, the top quintile hauls home $127,146 a year before taxes, and spends $81,731. The poor are borrowing to the hilt and the rich are happy to oblige them. At the end of 2004, the amount of after tax income that went towards debt service was roughly 16 percent, and those numbers are much higher for low-income families. Bankruptcies are skyrocketing. So why are these families borrowing so much? Robert Pollin of EPI put out a study in 1990 arguing that the bottom 40 percent of Americans were borrowing to compensate for stagnant or falling wages. More recently, Elizabeth Warren and Amelia Tyagi's Two-Income Trap compiled similar evidence—the 6,000 percent increase in credit card debt between 1968 and 2000 didn't come about because people were buying frivolities; they're simply trying to tread water.

Now obviously if you're in the creditor class, this state of affairs looks pretty damn good. Not only do you earn interest on your surplus funds, but mass borrowing among low-income Americans reduces pressure for higher wages, by letting them buy stuff they couldn't otherwise afford, and it certainly makes America look like a middle-class consumer society, thus staving off the angry hordes. (For neoliberals who believe that society will be "fair" when everyone can own a prom gown, this state of affairs looks very good. Ditto for those who think we should measure poverty by whether or not a person can afford a refrigerator.) One might also note that workers with their Visas maxed out are much, much less likely to go on strike, agitate for social change, or do anything dangerous. As they say, it's a feature, not a bug. Foucault would be proud.

The downside, of course, is that among the lower classes, very few people have much wealth to speak of. The richest 10 percent of Americans own 79.8 percent of all financial assets. The bottom 40 percent, collectively, own as much in liabilities as in assets. (Average wealth among the bottom 10 percent has been consistently declining since the 1960s.) Among minorities, especially African-Americans and non-white Hispanics, the disparities are even worse. In 2001, the average black household had a net worth equal to about 14 percent of the average white household. It's a real problem.

So the answer, then, is forced savings, right? Well, I don't know. If real wages had been growing at a decent clip these past three decades, households might have saved much more than they did. So that's one leftist solution, along with Edward Wolff's idea of a wealth tax. Government-funded savings incentives, tax shelters and the like, ultimately work as a subsidy to the wealthy, who as we've seen are the lucky few who can truly afford to save. Having the government drop extra pennies in the accounts of the poor will help, but barely cancel out the staggering liabilities among the poorest 40 percent. And what about the larger economic benefits to savings? Will boosting the savings rate in this country increase growth? Hard to say. In this congressional testimony, James K. Galbraith noted that increasing the savings rate—by government fiat, say—could just as easily depress consumption. Traditionally, economists haul out graphs showing that higher savings rates are associated with periods of higher economic growth, but it might just be that it's the latter causing the former (i.e., wages rise so people can save more). A bit of skepticism never hurts.

Advertise on MotherJones.com

Pro-Growth Progressives

| Mon Nov. 7, 2005 2:17 PM EST

Needless to say, liberals have been way too fond of agreeing with each other since Bush came to office, so it's time for a bit of ideological bickering. Over at TPMCafe's BookClub this week, Gene Sperling is discussing his new book, The Pro-Growth Progressive, which apparently tries to reconcile liberal and policies to promote economic growth. So, for instance, we get calls for "fiscal discipline," and individual forced savings, along with plans to strengthen health and education, which policies will supposedly make our workforce more "competitive." Oh yeah, and free trade uber alles. (By which I assume he means ending protectionism for blue-collar workers, and not for professionals or pharmaceutical companies.) In other words, DLC policies are the real pro-growth platform; accept no substitutes!

Now I haven't read Sperling's book yet—it's sitting on my desk and looks good—but color me unconvinced so far. At most, this looks like tinkering at the margins. Yes, yes, as a country we should certainly be investing in universal health care, strengthening public education, and providing other support services for working families and individuals—though not because these policies will definitely boost economic growth, but because they're the bare minimum requirements of a decent society. Any benefits that accrue from acting decent—IWPR, for instance, has argued that providing seven days of sick leave to workers would save companies $21 billion a year—are mere niceties. If they were a drag on growth, we should still do them.

Would better education be good for economic growth, and help people get the jobs they need, as Alan Greenspan would argue? Perhaps at some level, but that's not the core problem here; read "The Job Ghetto" by Katherine D. Newman and Chauncey Lennon and it becomes clear that educated workers in Harlem are being turned away from work they're perfectly qualified to do. Or read this old post. A lack of jobs and wage support, rather than a lack of education, is the thorny brush here. Meanwhile, a single-payer health care system will, of course, relieve businesses of the burden of dealing with health insurance, and that will give GM, Ford, and the rest a tidy boost in profits—and might even make them competitive, as Tom Friedman loves to say—but so long as globalization continues to further inequality, and workers see little of the benefits of economic growth, there's not much reason to care.

So here's where we part ways. Ultimately, the Democratic Party is still toeing the old Newt Gingrich line on macroeconomic policy, which is roughly: let the Fed do its job crushing inflation—and raising rates when unemployment gets "too low"—and get the budget back into balance. Then fiddle with progressive policy. This has been the ideal despite the fact that the late '90s showed that unemployment can go much, much lower than previously thought, and the Fed's rigid enforcement of 6-7 percent unemployment during the Reagan, Bush I, and early Clinton years was a swindle of colossal proportions, keeping wages stagnant. Jared Bernstein and Dean Baker are a must read on this. Meanwhile, the "fiscal discipline" obsession I don't get; if we repealed the Bush tax cuts and spent all of that money on health and education, we would still have those big deficits, but that wouldn't be a problem. Take care of people and our kids will be smart enough to figure it out. After that, it's time to reduce inequality and ensure that any future gains in productivity are shared with workers, rather than fattening corporate profits. There are other ideas but we're running out of space.

Not that the DLC platform—which, as best I can tell, is what Sperling's supporting—isn't worth fighting for. It's good. Great, even. Things like the EITC make a real difference in people's lives. I'd canvas for it. It's probably "good politics" too, for all I know. But what I'd prefer, as I wrote in a book review back in April (which has a lot more examples of the sort), is for the Democratic Party to come up with an actual economic vision, rather than an array of wonky policies to tack onto the current structure of American capitalism. As Jack Kemp always said, if you're going to go for it, you should really go for it. Especially if you're not even running for election.

In Guantanamo for... Satire?

Fri Nov. 4, 2005 7:03 PM EST

Roughly one hundred prisoners in U.S. custody are sitting in undisclosed locations across Eastern Europe. There are hundreds more at Guantanamo Bay. There many more in Iraq and Afghanistan. There could be many others elsewhere. And no one really knows how many are guilty or innocent, because the administration and the military have continually refused to grant the vast majority of detainees anything resembling a trial.

From Tom Tomorrow comes this Newsday report about two innocent brothers who were lucky enough to be set free. As is often said to be the case, the pair thinks an old rival took advantage of the United States' "imprison first, ask questions later" mentality and turned them in to settle his grudge. Three years of detention followed. And for what nefarious act were the brothers repeatedly questioned? Read on:

Badr Zaman Badr and his brother Abdurrahim Muslim Dost relish writing a good joke that jabs a corrupt politician or distills the sufferings of fellow Afghans. Badr admires the political satires in "The Canterbury Tales" and "Gulliver's Travels," and Dost wrote some wicked lampoons in the 1990s, accusing Afghan mullahs of growing rich while preaching and organizing jihad. …

For months, grim interrogators grilled them over a satirical article Dost had written in 1998, when the Clinton administration offered a $5-million reward for Osama bin Laden. Dost responded that Afghans put up 5 million Afghanis—equivalent to $113—for the arrest of President Bill Clinton.

"It was a lampoon ... of the poor Afghan economy" under the Taliban, Badr recalled. The article carefully instructed Afghans how to identify Clinton if they stumbled upon him. "It said he was clean-shaven, had light-colored eyes and he had been seen involved in a scandal with Monica Lewinsky," Badr said.

The interrogators, some flown down from Washington, didn't get the joke, he said. "Again and again, they were asking questions about this article. We had to explain that this was a satire." He paused. "It was really pathetic."

Badr's right. The detentions, the lack of trails, the unbelievably poor work of the interrogators and analysts… it is really pathetic.

Why Bush is bad for business

| Fri Nov. 4, 2005 3:21 PM EST

New (and new-ish) at Mother Jones:

Mark Engler argues that George Bush and Dick Cheney, on top of their other shortcomings, aren't even good capitalists. (LINK)

Jarhead author Anthony Swofford says he's pleased with the movie version of his Gulf War memoir (though he admits it might be used as "war porn"). (LINK)

Stand-up comic and Mother Jones regular Bill Santiago alerts us to the latest public health threat: new car smell. (LINK)

Thomas Palley, who wrote earlier this week about Alan Greenspan's questionable legacy (LINK), says Greenspan's replacement, Ben Bernanke, is in for a tough time. (LINK)

Pension Socialism?

| Thu Nov. 3, 2005 6:18 PM EST

Over at Tapped, Ezra Klein points out that as the Pension Benefit Guaranty Corporation starts bailing out more and more troubled companies by taking over their pensions, it will start controlling more and more stocks, which means that Congress will technically "own" a greater share of corporate America. Bam! Instant socialism! He also points out that privatizing Social Security would have had a very similar effect—if Congress could choose the index funds in which workers invested—thus "potentially wreaking all sorts of havoc."

Interesting thought, though it's hard to see how worried we should be about all of this. Here in California, the two big pension funds—CalPERS ($180 billion) and CalSTRS ($125 billion)—have, under Angelides, engaged in a limited bit of activism, dumping tobacco stocks and the like, but it never seems to go anywhere. Divesting doesn't have much effect on a company's share price. On the other hand, a government-run pension fund could acquire enough shares in a company to influence the vote on this or that. Maybe this is cause for concern, though I have a hard time believing that activist pension-funds could do any more damage to the economy than hedge funds that regularly buy up shares of a company, tip the vote in favor of bad mergers, and then reap the profits at the expense of shareholders—as might have happened with the Compaq-HP deal. So I'm conflicted. William Greider's "The New Colossus" made a decent case for activist public pension funds like CalPERS, but there also won't always be progressive activists at the helm, obviously.

At any rate, reading Roger Lowenstein's "The End of Pensions" reminded me of yet another way in which America's pension problem is related to Social Security privatization—or any mandatory savings plan. For years, many companies have been predicting wildly optimistic rates of returns for their pension-fund stock holdings so that they could scale back contributions to the fund and use the cash for other purposes. Which, in turn, drives up the price of their own stocks, many of which were held by… pension funds. Can we all say "Ponzi"? Right. But the system's falling apart now that those rates of return have failed to materialize, and there's no way out for corporate pensions, which are under-funded by some $450 billion.

The Bush administration, to its credit, wants to tighten the rules for pension funding. But if firms were required to set aside even more money for pensions, many might go bankrupt, or stock prices might decline, which would in turn further endanger pensions, and on and on. Conversely, if the PBGC started bailing more funds out—with taxpayer money—that would only increase the "moral hazard," causing more firms to make risky investments. Either way, disaster. One conceivable exit strategy, then, is for Congress to create mandatory savings accounts for all workers and hence pour all that taxpayer money—or the Social Security Trust Fund—into the stock markets, creating a bubble which could help some of those rickety pension funds out. It's not clear that this would actually work, though. So disaster's probably inevitable, unless someone dreams up a clever exit strategy.