Monday, March 28, 2016

The Left Awakens and Finds Its Voice: The US and the UK

The UK is dealing with the ramifications of a 2015 election while the US is in the throes of nomination campaigns for a 2016 election.  It is intriguing to note that in both political systems, the two main parties are each undergoing a revolt from below as party elites struggle with insurgencies.  Could there be some common basis for what is occurring?

The British right is the ruling party in the UK and it is battling with conservatives who wish to either leave the European Union or modify the current rules of engagement with that entity.  That situation has no relationship to the issues besetting the conservative Republican Party. 

The Republican Party has been directed by an incredibly wealthy elite who defined a party agenda favorable to the wishes of wealthy people.  However, to win elections, a large number of unhappy voters driven by cultural issues had to be convinced to vote for Republican candidates based on the belief that the Republican Party actually cared about their issues.  These voters are much closer to Democrats on economic matters, but have allowed their voting to be dominated by cultural disputes with the more-liberal Democrats.  This year that subservience to the plutocratic Republicans has vanished.  The result has been a wave of candidates who have strived to demonstrate their independence from the party establishment and its traditional agenda.  Here again, there is no correlation with events in the UK.

It is on the left where things get more interesting.  Both nations have gone through periods in which the party of the left has produced leaders that were, at best, center-right in practice and supportive of some of the favorite conservative policies.  That would be the Blair/Brown era in the UK, and the Clinton era in the US.  Obama has been center-left in philosophy, but, as it turns out, those who voted for him were even further to the left than he might have imagined.

Tariq Ali provides an interesting look at what has transpired in the British Labour Party since last year’s election in an article for the London Review of Books: Corbyn’s Progress

After the election in which Labour lost a significant number of seats, the party’s titular leader resigned and the party leaders scrambled to produce a candidate to replace him.  Unexpectedly, Jeremy Corbyn, who was considered too far left to be a viable party leader, was elected.  The party leaders, media allies, and Blair/Brown did everything in their power to defeat Corbyn, including hints that the military might mutiny and refuse to be led by such a person.  Nevertheless, Corbyn easily won the majority of the votes. 

“Absolutely nobody, including Corbyn himself, thought that he could win. The campaign was intended just to show that there was an alternative to the neoliberal leadership that had ruled the country for the last three decades. What appealed to the young and to the many who had left the party in disgust during the Blair/Brown years – what appealed to the people who turned the campaign into a genuine social movement – was precisely what alienated the political and media cliques. Corbyn’s campaign generated a mass movement that renewed the base of the Labour Party – nearly two hundred thousand new members and counting – and led to his triumph. He won almost as many votes as all his opponents put together.”

The 2015 election, in which Labour lost seats to the Conservatives, was widely viewed as an endorsement of the conservative agenda.  The result is better interpreted as a rejection of an insipid Labour Party agenda.  The Labour Party actually increased its percentage of the votes cast in that election relative to the share received by the Conservatives.  It was the peculiarities that can arise in a winner-take-all election that cost it seats.

“The Labour Party that lost the election was conformist and visionless: it had forgotten what it meant to mount an opposition.”

And the party leaders from the Blair/Brown era seemed to have gotten too close to those they were supposed to be regulating and policing.

“Blair, angered by this outburst of democracy in a party that he had moulded in his own image, declared that the Labour Party would be unelectable unless Corbyn was removed. Brown kept relatively quiet, perhaps because he was busy negotiating his very own private finance initiative with the investment firm Pimco (Ben Bernanke and the former ECB president Jean-Claude Trichet are also joining its ‘global advisory board’). Simultaneously, his ennobled former chancellor, Lord Darling, was on his way to work for Morgan Stanley in Wall Street. Blair, an adviser to J.P. Morgan since 2008, must have chuckled. At last, a New Labour reunion in the land of the free. All that ‘light-touch’ regulation was bearing rich fruit. Virtually every senior member of the Blair and Brown cabinets went to work for a corporation that had benefited from their policies….It was not just the Iraq War that was responsible for the growing public disenchantment with New Labour.”

Were Corbyn’s policy goals really so extreme?  Ali believes Corbyn’s views represent the views of the majority of the citizens.  He presents this statement by Corbyn as representing his position.

“We also as a party have to face up to something which is an unpleasant truth, that we fought the 2015 election on very good policies included in the manifesto but fundamentally we were going to be making continuing cuts in central government expenditure, we were going to continue underfunding local government, there were still going to be job losses, there were still going to be people suffering because of the cuts we were going to impose by accepting an arbitrary date to move into budget surplus, accepting the language of austerity. My suggestion is that the party has to challenge the politics of austerity, the politics of increasing the gap between the richest and the poorest in society and be prepared to invest in a growing economy rather than accepting what is being foisted on us by the banking crisis of 2008 to 2009. We don’t have to set this arbitrary date, which in effect means the poorest and most vulnerable in our society pay for the banking crisis rather than those that caused it.”

With a few of the UK-specific references removed, this could have been extracted from a speech by Bernie Sanders.  Sanders is a candidate for the Democratic presidential nomination who was also spurned by party leaders and given no chance at success.  As was Corbyn, he was deemed too far left to be electable, and was invited to disappear and avoid mucking things up for the ordained candidate, Hillary Clinton.  For years Sanders had proudly worn the socialist label.  Who could imagine him competing with Hillary Clinton?

Ryan Lizza produced an excellent analysis of what is transpiring in the race for the Democratic nomination in an article in The New Yorker: The Great Divide: Clinton, Sanders, and the Future of the Democratic Party.

Hillary Clinton’s experience in her husband’s administration, plus her service as a senator and secretary of state were supposed to be valuable assets that would guarantee her nomination for president.  Unfortunately for her, her experience has been more a handicap than a benefit.  If one reflects on Bill Clinton’s accomplishments as president, things like Wall Street deregulation, NAFTA, mass incarceration of blacks, the destruction of the welfare system, and the Defense of Marriage Act come to mind.  This provides Sanders with plenty of ammunition to use against her.

“The subtext, and often the center, of Bernie Sanders’s campaign to upset Hillary Clinton is that too many of the signature achievements of her husband’s Presidency were a series of betrayals—the deregulation of Wall Street, an obsession with deficit reduction, the Defense of Marriage Act, his crime bill, the North American Free Trade Agreement—and that she was an enthusiastic partner in passing that agenda.”

“As Sanders noted in the debate in Flint, on March 6th, when Hillary was First Lady she publicly supported NAFTA, while he ‘was on a picket line’ protesting it. Today, both candidates oppose the agreement—and many other aspects of Bill Clinton’s record.”

Probably the most disgraceful of the Clinton legacies was the welfare reform bill. This politically profitable action was taken almost entirely with Republican support and opposed by Democrats.  Hillary vigorously supported it.

“….he signed into law a welfare-reform bill, in 1996, which passed with mostly Republican support and helped clinch his reĆ«lection that year. Ninety per cent of Democrats in the House and the Senate, including Sanders, opposed the bill, and prominent members of Clinton’s Administration resigned in protest over it.”

Sanders also benefits from his rival being on the wrong side of history when two notable movements arose from the left: the Occupy Movement, and Black Lives Matter.

“As a long stalemate began in Washington, the activist left began to support movements such as Occupy Wall Street, which began in 2011, as a response to economic inequality, and Black Lives Matter, which arose in 2013 and addresses criminal-justice reform and institutional racism. Both movements are sharply critical of the Clinton era. Occupy points to Clinton’s deregulation of the financial industry, and Black Lives Matter has highlighted the fact that Clinton’s crime bill, which introduced the three-strikes-and-you’re-out rule, sparked a rise, in the past two decades, in imprisonment, particularly of young African-American men. Last year, Bill Clinton told the N.A.A.C.P., ‘I signed a bill that made the problem worse. And I want to admit it’.”

As in 2008 when she ran against Obama and lost, women were assumed to be a source of strong support.  However, women, and especially young women, have been less than enthusiastic about her campaign.  ZoĆ« Heller has provided a discussion of Hillary Clinton and her troubles with women voters in an article in The New York Review of Books: Hillary & Women.

The idea of Clinton as the first woman president is insufficient to arouse support for her.  She must try to convince women that she is the candidate most likely to produce progress in areas of interest to women.  Unfortunately, her record in this arena is surprisingly weak.

“….Clinton’s record as an advocate for women is distinctly uneven. Whenever feminist principles have been at odds with what is politically expedient, expediency has tended to win the day. In the 1990s, she vigorously supported her husband’s welfare reform bill—a piece of legislation that has probably done more to immiserate the lives of poor women—particularly poor black women—than anything else over the last twenty-five years.”

Clinton has also taken the expedient and cowardly path of choosing to avoid arousing pro-life anger by buying into their lies about the “tragedy and regret” associated with a woman’s decision to have an abortion.

“In 2005, when it was politically convenient to distance herself from the pro-choice plank of the Democratic platform, she lectured family planning activists on what was regrettable and even ‘tragic’ about abortions….”

What is perhaps most striking to women about Clinton’s past is her willingness to “man-up” when it is deemed necessary to put our military in harm’s way—not necessarily an inducement for women to vote for her.

So, Hillary Clinton is the candidate associated with a past that harbors some distinctly anti-progressive actions.  She is also part of the party leadership that is deemed to have been tainted by those actions.  If the party supporters are, in fact, to the left of the party leadership, one would expect her to struggle to gain their confidence.  That is exactly what has happened. 

And if the Democratic voters are to the left of the party leaders then one might expect a vocal and reliable “left-winger” to generate some enthusiasm with the progressive base.  That is exactly what has happened. 

Lizza provides perspective on why Sanders has been successful.

What is most notable—and most encouraging for progressives—is Sanders support from the young.

“At seventy-four, with campaign ads featuring Simon and Garfunkel’s music, he seems an unlikely standard-bearer for the Democratic Party of tomorrow. But the next generation of voters clearly favors him, or at least what he stands for. Through March 8th, Sanders won voters between seventeen and twenty-nine years old in thirteen of the fifteen states for which there were entrance or exit polls. In that age range, he beat Clinton by an average of sixty-seven per cent to thirty-two per cent. His biggest victory among this group, in his home state of Vermont, was ninety-five per cent to five per cent. Millennials supported Sanders even in Arkansas, where Clinton was First Lady.”

“Sanders has long embraced the socialist label, and it seems not to hurt him among younger voters. Ben Tulchin, Sanders’s pollster, told me that millennials support Sanders ‘because their generation is so fucked, for lack of a better word, unless they see dramatic change. What’s their experience been with capitalism? They have had two recessions, one really bad one. They have a mountain of student-loan debt. They’ve got really high health-care costs, and their job prospects are mediocre at best. So that’s capitalism for you’.”

Are we observing a common trend in progressive politics in the US and in the UK?  It seems so.  In both cases party members seem to feel betrayed by a party, and its leaders, that has acquiesced to a form of capitalism that has eliminated for them any hope for a better future.  In both cases it is the young who are most invested in bringing about change.  In both cases a potential leader who was far removed from the current corridors of power was turned to by the young. 

This has the aura of a revolution—two revolutions.

Have the plutocrats who control the makers of rules and regulations finally gone too far?  Have they created an economic system that can no longer provide even the illusion of general prosperity?  Have the people finally figured out the scam that has been imposed upon them?  Have they finally noticed that other countries have better ways to do things?

It is not clear what is going to come of all this.  However, it is certain that fundamental changes are taking place in the Democratic and Labour Parties, and it is certain that those two institutions will never be the same again.

The interested reader might also profit from the following articles.

Tuesday, March 22, 2016

Subsidizing the Wealthy As They Make Charitable Contributions to Themselves

It is well-known that free-market capitalism was a failure leading to intolerable economic volatility.  It was the capitalists themselves who recognized the need to control markets when they set up monopolies called “trusts” intended to dominate particular industries in such a way that prices could be controlled and competition inhibited.  This state of affairs was not particularly satisfactory to consumers and generated government regulation to inhibit the formation of monopolies.  What evolved from this contention between capitalists and government regulation was the realization that each side needed the other and an accommodation was required if the system was to work efficiently.

Robert B. Reich has assessed this balance between markets and regulation in his new book Saving Capitalism: For the Many, Not the Few.  He concludes that the required balance between capitalists and regulation has been lost.  Those who have acquired great wealth have used the power that wealth can buy to control government regulation and use it to increase the ability of the wealthy to grow wealthier at the expense of the rest of the population.  In Reich’s view we are living under an oligarchy, and we must begin to organize in order to regain a “countervailing” political power.

Reich provides numerous examples to support his contention.  The intent here is a discussion of ways the tax code has been used to protect the wealth of the wealthy, making sure that little of it gets redistributed.  Reich organized his thoughts in two dueling chapters; the first was titled The Rise of the Working Poor followed by The Rise of the Non-working Rich.  It is the latter we will focus on here.

Reich claims that those who have acquired great riches can pass enough of their assets on to their children that our nation is beginning to look like one of those nineteenth-to-early-twentieth century European aristocracies.

“Consider that in 1978, the richest 1 percent of households accounted for 20 percent of business income.  By 2007 they accounted for 49 percent.  They were also taking in 75 percent of all capital gains.  By 2014, the value of the stock market was significantly higher than it was before the crash of 2008.  Accordingly, the top was earning substantially more from their investments and acquiring even more of all capital gains.”

“America is on the cusp of the largest intergenerational transfer of wealth in history.  A study from the Boston College Center on Wealth and Philanthropy projects that $36 trillion could be passed down to heirs in the half century leading up to 2061….It is about to become the source for a new American aristocracy.”

There are many ways to avoid paying taxes on assets.  Perhaps the most troubling are those that use the “charity” tax deduction to obtain what is essentially a subsidy provided by tax payers to support whatever actions are being taken.  It is an example of what is known as a tax expenditure.  Tax expenditures add up to about $1 trillion each year.  They are equivalent to taxes being gathered and redistributed to those eligible for a transfer.  The wealthy are the greatest beneficiaries of these transfers.  While our income tax rates are progressive, these giveaways are regressive in the sense that funds are preferentially transferred from lower income taxpayers to higher income taxpayers.

Let us refer to two articles written by Lewis B. Cullman.  Cullman is a wealthy old man who has given many millions to charitable causes.  He was in a bad mood when he wrote an article for The New York Review of Books in 2003.  It was titled Private Foundations: The Trick.  Scam would have been a more appropriate term, but Mr. Cullman is apparently also a gentleman.  He was still angry more recently when he returned to the same publication with a new article: Stop the Misuse of Philanthropy!

Cullman explains how “charity” is used to create and pass on dynastic wealth to succeeding generations.

“The next time you read about a rich person donating $100 million to charity, you should be aware that this seemingly generous gift may never actually reach the institutions that need it. The chances are that the donation is being used to set up a private foundation. The gift will earn the donor a full deduction against income or estate taxes. But the little-understood trick of this form of philanthropy is that the $100 million that launched the foundation need never go to charity.”

The “trick” involves hiding behind the IRS requirement that private foundations must spend at least 5% of their assets each year.  However, the IRS does not require those funds be issued as a grant of some sort.  It is perfectly legal to charge 5% against the assets for administration costs.  Consider also that it is relatively easy for smart money managers to earn (tax free) at least 5% on multimillion dollar nest eggs.  Given that private foundations have no termination date, a charitable foundation could go on forever without donating a significant amount to charity.

Now consider the wealthy person who wanted to avoid estate taxes and still provide for his children.  The $100 million could be administered by a son or daughter or multiple offspring.  This task would provide a salary and expense account worth millions every year that could be passed on to subsequent generations.

Cullman claims to have given about $500 million for actually charitable purposes and is outraged at the misuse of supposedly charitable contributions allowed by our tax system.

“Recent estimates indicate that at least $700 billion is tucked away in private foundations, money that could be doing good for charities and for the economy—and you and I as taxpayers have underwritten the tax benefits awarded those foundations.”

Reich provides an estimate of how much is lost each year in allowing tax deductions and sheltering earnings from charitable entities.

“In economic terms, these deductions and tax-free earnings are the equivalent of government subsidies.  In 2011, the last year for which good data are available, they totaled an estimated $54 billion….To put this into some perspective, $50 billion is more than the federal government spent in 2011 on the Temporary Assistance for Needy Families program (what’s left of welfare), school lunches for poor kids, and Head Start put together.”

Although the details of how it is done might be unfamiliar, it has always been known that the wealthy have ways to protect their assets and pass them on.  Reich also provides a glimpse at the less familiar mechanisms by which the tax system allows us to subsidize the rich as they funnel money to their favorite educational institutions.

“Another portion goes to the elite prep schools and universities that benefactors once attended or want their children to attend.  (Such institutions typically give preference in admissions to applicants and legacies whose parents have been notably generous, a kind of affirmative action for the wealthy.)  Harvard, Yale, Princeton, and the rest of the Ivy League are important institutions, but they do not educate large numbers of poor young people.”

“Private university endowments in 2014 totaled about $550 billion, centered in a handful of prestigious institutions.  Harvard’s endowment is more than $32 billion, followed by Yale at $20.8 billion, Stanford at $18.7 billion, and Princeton at $18.2 billion.”

Because of the charitable deduction any contribution to these extremely wealthy institutions is actually coming out of our tax payments at the rate of about 30 percent.  In addition, the income and capital gains earned by these endowments goes untaxed—in other words we taxpayers provide a subsidy to cover the taxes that should have been paid.  The sum of these subsidies is enormous.

“Add in these endowments’ exemptions from taxes on capital gains and on income they earn, and the total government expenditure is even larger.  Divide by the relatively small number of students attending these institutions, and the amount of subsidy per student is huge.  The annual government subsidy to Princeton University, for example, is about $54,000 per student, according to an estimate by economist Richard Vedder.  Other elite private universities aren’t far behind.”

Now compare this with the level of public support received by students at public universities which are not generally in possession of large endowments.  These institutions receive most of their funding from state and local governments, and that level of support has been rapidly falling.

“….the average annual government subsidy per student at a public university comes to less than $6,000, about one-tenth the per-student government subsidy at Princeton.”

Reich also makes sure we are aware that government subsidies are being used to increase the inequality in funding of public schools in the K-12 range.  These schools are mostly funded by property taxes.  Consequently the higher the property values the higher the level of funding for the local schools.  Some states and localities have attempted to correct this inequality by allocating funds at comparable rates per student.  What is new about this situation is that things called “parents’ foundations” are becoming common as a mechanism to feed extra money into particular schools.  These foundations have the same tax privileges as university endowments, providing a government-subsidized mechanism that allows them to provide better education for their own children—and avoid contributing funds via taxes for a better education for all children.

Laura McKenna provides a discussion of these foundations and their impact in an article in The Atlantic: How Rich Parents Can Exacerbate School Inequality.

“Clearly, affluent communities have greater financial resources to support their schools. Parents there also have the time and social capital needed to organize elaborate fundraisers and fill out the lengthy legal paperwork required to establish these foundations. With these enormous resources, parents in affluent communities can raise far more money for their schools than parents in other locations.”

“This extreme fundraising prowess is seen in wealthy communities across the country. Some parents groups at elite public schools in New York City, for example, raise so much money that their schools have earned the nickname “public privates.” School foundations at places like Brooklyn Tech, raise millions to fund science equipment, guest lecturers, and scholarships for summer programs. An elementary school in a wealthy area of Chicago raised $400,000 in one night with an auction that included airfare to vacation homes (while another school in a less-affluent neighborhood raised only $8,000 for the entire year with bake sales and book fairs). The school foundation for Woodside, California, will hold an auction in May that includes six tickets, a makeover, and a limo to a Taylor Swift concert (valued at $3,700), a shopping spree at a jewelry store (valued at $15,000), and a week at a vacation home in the Hamptons (valued at $15,000).”

McKenna quotes Rob Reich (not Robert Reich) a Stanford professor and co-director of its Center on Philanthropy and Civil Society.

“Reich….pointed out that when wealthy people give money to their town foundations, their tax-deductable donations stay in their own communities. The contributions enhance the schools’ success, which in turn increases the donors’ property value. In other words, the rich receive tax credits for giving money to themselves. ‘All of us are subsidizing the magnification of inequality in public schools,’ he told me. ‘It’s preposterous’.”

“These highly educated, affluent parents, he said, use their finite energy and wallets to do some something that exclusively benefits their children. As a result, the parents may be less likely to advocate for policy changes that would benefits kids in other school districts, taking away some of their ‘political voice,’ Reich theorized. Instead of going to Trenton or Albany to fight for public schools, they are running the town’s science fair.”

Robert Reich provides this reckoning of how much “charitable” giving actually reaches poor people.

“A 2005 analysis by Indiana University’s Center on Philanthropy showed that even under the most generous of assumptions only about a third of ‘charitable’ giving is targeted to helping poor people.”

We would become a better society if we eliminated the charity tax deduction and used the funds gained to augment our pathetic social support system.  The main problems with our education system are poverty and the increased isolation of the rich from the poor.

Thursday, March 17, 2016

Bernie Sanders and the Funding of Social Programs

We have a serious Democratic candidate for the presidency, Bernie Sanders, who likes to point to countries like Denmark as examples of how the United States should conduct its business.  This candidate has been mocked by Republicans as “an ideal candidate for the presidency—of Sweden.”  Sanders is claiming that we can afford to provide all the social services that the Scandinavian countries provide if we would just tax the wealthy more.  No one, not even mainline Democrats, seem to believe him.

Bruce Bartlett produced a book on the US tax system a few years ago, The Benefit and the Burden, that provided a fascinating look at how the United States actually spends—or wastes—its money.  He included a brief section under the heading “The Hidden American Welfare State” that presented this chart.

The data was from a 2005 compilation by the OECD (a rich-country organization that provides data and analyses of rich-country issues).  What was compiled was all the money governments spend on providing social benefits as a percentage of the country's GDP. 

What is interesting is that the United States ends up just behind Sweden and ahead of Denmark and Norway in social spending.  How can this be?  The Scandinavian countries provide essentially free healthcare, education, preschool child care, plus income floors, and pensions with the money they spend.  We spend at least as much and get none of these benefits.

To understand what is going on one must recognize the intrinsic stupidity of the way we do business.  What is included in our system is something called private healthcare, and something called tax expenditures.  Healthcare costs about twice as much as a percentage of GDP as in other countries, and provides generally worse health outcomes.  Our system is designed to avoid any interference with the accumulation of revenue by physicians, hospitals, drug and device corporations, and insurance companies—and at least half the healthcare cost comes out of the government budget. 

About $1 trillion is tied up in tax expenditures which are rarely even associated with tax revenue.  These are a collection of tax rebates and deductions that are, in effect, a tax collection followed by a redistribution (an expenditure), with the redistribution aimed at accomplishing some social goal.  These include the mortgage interest deduction (encourage home ownership) charity contribution deduction (encourage charity), 401k contributions deduction (save for retirement)….  The list is long.

When the Scandinavians wish to address a social issue they tax people to produce the revenue and create a program to solve the problem.  When we wish to address a problem we take some of our existing revenue and throw it up in the air hoping that a bit will land someplace useful.  The net result is that little is accomplished, and, even worse, most of the money thrown upward lands in the laps of the wealthy who don’t even need it.

So Bernie Sanders is right; the United States could afford the services provided by the Scandinavian countries if it had the will to change its ways.  However, the European countries do it by charging high taxes to everyone, not just the wealthy.

Thomas Picketty addresses almost everything associated with wealth in his book Capital in the Twenty-First Century.  He provides this insight into the way France taxes its people to provide its expensive social programs.

“….a detailed study of French taxes in 2010, which looked at all forms of taxation, found that the overall rate of taxation (47 percent of national income on average) broke down as follows.  The bottom 50 percent of the income distribution pay a rate of 40-45 percent; the next 40 percent pay 45-50 percent; but the top 5 percent and even more the top 1 percent pay lower rates, with the top 0.1 percent paying only 35 percent.”

 The taxes are certainly high by US standards, but it would be difficult to describe them as a “soak the rich” scheme.  It would actually be more accurate to describe the system as one that taxes most heavily those who benefit the most from the services provided by the taxation.  There is an intriguing sense of fairness about this approach.

An examination of who benefits most from a high tax, high service/benefits society reveals that it is the middle class.  The European “welfare states” have been much more successful at the creation of a middle class than has the United States.  A family of four in the United States must be quite wealthy or it must spend its life saving every penny to cover healthcare, childcare, education, and retirement costs.  If all that was offered essentially for free provided one would be willing to pay French-like taxes, the smart citizen would decide to pay the taxes.

So, thank you Bernie for daring to dream the impossible dream, but please also dare to level with the people who are entranced by your vision.  After all, the truth isn’t so bad.

The interested reader might find something informative in The Creation of the Middle Class.

Monday, March 14, 2016

Executive Pay Is Even More Outrageous Than We Thought!

The fact that executive pay at big corporations has been soaring over the past few decades while wages of almost everyone else have stagnated or fallen is well known.  What is less well known, are the various games corporations and executives can play to manipulate both the value of the compensation and the level of taxation.  Robert B. Reich included a chapter titled “The Hidden Mechanism of CEO Pay” in his book Saving Capitalism: For the Many, Not the Few in which he provides details.

“Anyone who still believes people are paid what they’re worth is obliged to explain the soaring compensation of CEOs in America’s large corporations over the past three decades….Overall, CEO pay climbed 937 percent between 1978 and 2013, while the pay of the typical worker rose 10.2 percent.”

One might assume that an individual receiving a lofty salary is a small perturbation on a large corporation’s balance sheet, but the CEO is not the only executive rewarded with large paychecks.

“The share of corporate income devoted to compensating the five highest-paid executives of large public firms went from an average of 5 percent in 1993 to more than 15 percent in 2013.  Not incidentally, this was money corporations could have invested in research and development, additional jobs, or higher wages for average workers.”

The compensation packages for executives are large enough to make a significant dent in corporate income.  Fortunately, corporations have friends in Washington who have helped them by making most executive compensation tax deductible.  Huh!

“….in 1993, the Clinton administration decided to allow companies to deduct from their taxable income executive pay in excess of $1 million if that pay was linked to corporate performance—that is, if it came in the form of stock options and awards linked to share prices.  Not surprisingly, stock options thereafter boomed.”

So, if you hear someone complaining about the ties between the Clintons and Wall Street, pay attention.

“Meanwhile, you and I, and other taxpayers are subsidizing all this….because corporations deduct CEO pay from their income taxes, requiring the rest of us to pay more proportionally to make up the difference.  To take but one example, Howard Schultz, CEO of Starbucks, received $1.5 million in salary for 2013, along with a whopping $150 million in stock options and awards.  That saved Starbucks $82 million in taxes.”

All those executives and all that money add up.  Their rewards are significant economy-wide.

“The Economic Policy Institute estimated that between 2007 and 2010, a total of $121.5 billion in executive compensation was deducted from corporate earnings.”

To put this in perspective, Reich points out that federal government expenditures in 2011 on the Temporary Assistance for Needy Families (welfare) program, school lunches for poor kids, and Head Start together added up to less than $50 billion.  Corporations seem to have been granted a welfare system of their own.

The move to stock options and awards for executive compensation is not without its own tax advantages: cashing in stock shares allows one to claim capital gains which are taxed at a lower rate than regular income.

Of more concern are the perverse incentives inherent in this system of reward.    The increased use by corporations of stock options or rewards as compensation has been coupled with a rise in the tactic of allocating income to the buying back of publicly-held shares.  Sometimes money is even borrowed for this use.

“This maneuver pumps up share prices by reducing the number of shares owned by the public.  A smaller supply effortlessly increases the price of each remaining share.  In recent years, such buybacks have become a major corporate expenditure.  Between 2001 and 2013, they have accounted for a whopping $3.6 trillion in outlays of companies in the standard & Poor’s 500 index.”

Companies must report the fact that a buyback has been authorized, but they do not have to announce when they are to occur.

“Buybacks are executed anonymously through the company’s broker.  So share prices can rise without investors having any idea that buybacks are the cause.  (If they knew of the artifice, they might be less willing to buy or hold the shares of stock.)  Yet CEOs can use their inside knowledge of when the buybacks will occur and how large they’ll be in order to time their own stock sales and exercise their own stock options.  Presumably, they’ll time them to coincide with the rise in share prices, which all too often is temporary.”

An incentive has been created to manipulate a company’s stock price to enhance the earnings of the company’s executives.  What could be wrong with that?

“If this sounds a lot like insider trading, or a conflict of interest with the CEO’s fiduciary duty to shareholders, it is no coincidence.”

The argument is made that share buybacks that drive up the value of investors’ shares is equivalent to giving shareholders income that can be taxed at the capital gains rate rather than as regular earnings in the case of a dividend.  However that only holds if the stock maintains the gain in value over the long term.  The argument falls apart completely if the buyback funds would have better spent in R&D or other investments, and company performance suffers in the future.  Reich has some thoughts to express on that matter.

The main point Reich wants to make is that the explosive rise in CEO pay has not been justified by improvement in CEO performance.  He—somewhat gleefully—reported the results of a study by three professors: Michael J. Cooper, Huseyin Gulen, and P. Raghavendra Rau.  They compared the performance of 1,500 large companies as correlated with CEO pay across various industries, and over three-year time periods covering the years 1994 to 2011.

“They discovered that the 150 companies with the highest paid CEOs returned about 10 percent less to their shareholders than did their industry peers.  In fact, the more these CEOs were paid, the worse their companies did.  Companies that were the most generous to their CEOs—and whose high-paid CEOs received more of that compensation as stock options—did 15 percent worse than their peer companies, on average.”

It is outrageous that corporate executive compensation is such a large component of our economy.  It is even more outrageous that corporations don’t seem to know what to do with their earnings other than to increase their executives’ salaries and to manipulate their stock prices.  That is no way to run an economy.  We will all suffer in the long run if companies do not spend wisely, including delivering some of that profit back to workers as higher wages.  The nation’s corporations cannot continue to grow earnings indefinitely when consumers don’t have growing incomes. 

Thursday, March 10, 2016

Antonin Scalia: His Legacy

Justice Scalia spent three decades on the Supreme Court.  During his tenure many cases of great consequence were argued and decided.  Scalia was always part of the conservative bloc on the court, thus it is not surprising that he will be remembered differently depending on the politics of the observer.  This conclusion suggests a troubling consequence inevitable for any country that depends on an ancient constitution incapable of providing guidance on new issues as they emerge: justices will rule based on social, political, and religious leanings.  Scalia seemed to have been burdened by all three classes of bias.

It is of interest, and hopefully informative, to collect a few of the commentaries generated by Scalia’s recent passing in order to assess the divergence of viewpoints. 

Ross Douthat is a politically conservative writer (mildly so by today’s standards) who produces columns for the New York Times.  He is an admirer of Justice Scalia and his legal philosophy and expressed his thoughts in Antonin Scalia, Conservative Legal Giant

Douthat credits Scalia with bringing the concepts of originalism and textualism to the fore in the arena of constitutional interpretation.

“He was important because of his intellectual influence. There were and are many legal theories and schools of constitutional interpretation within the world of American conservatism. But Scalia’s combination of brilliance, eloquence and good timing — he was appointed to the court in 1986, a handful of years after the Federalist Society was founded, and with it the conservative legal movement as we know it — ensured that his ideas, originalism in constitutional law and textualism in statutory interpretation, would set the agenda for a serious judicial conservatism and define the worldview that any ‘living Constitution’ liberal needed to wrestle with in order to justify his own position.”

In Douthat’s opinion, Scalia’s ideas provided “rigor and integrity” to constitutional arguments that liberal justices with their perspectives could not match.

“….Scalia had a long record of putting originalist principle above a partisan conservatism. And this, too, set an example for his fellow conservatives: The fact that today the court’s right-leaning bloc has far more interesting internal disagreements than the often lock-step-voting liberal wing is itself a testament to the premium its leading intellectual light placed on philosophical rigor and integrity.”

Douthat also ascribes to Scalia purity when it comes to partisan thoughts and motives.

“This intellectual importance was compounded by the way he strained to be consistent, to rule based on principle rather than on his partisan biases — which made him stand out in an age when justices often seem as purely partisan as any other office holder.”

The article concludes with a repeat of the claim that Scalia was above political wrangling and personal bias as Douthat anticipates a nasty situation awaiting any nominee to replace him.

“The irony is that this kind of high-stakes collision of law and politics is precisely the thing that Scalia’s legal philosophy strained to curb and check and roll back, by promoting a more limited and humble vision of the Supreme Court’s role in our republic.”

Let us examine Scalia and his legal philosophy, and compare it to the liberal belief in a ‘living Constitution,” in the contentious area of abortion rights. 

Roe v. Wade was decided in 1974 with a decision that made abortion legal.  To fully understand what was happening at the time, let us recall the situation that led to the Supreme Court decision.  Katha Pollitt provides an assessment of the state of affairs with regard to abortion at the time of the decision in her book Pro: Reclaiming Abortion Rights

“Today, the real-life harms Roe was intended to rectify have receded from memory.  Few doctors remember the hospital wards filled with injured and infected women.  The coat-hanger symbol seems as exotic as the rack and thumbscrew, a relic waved by gray-haired ‘radical feminists’.”

Prior to Roe v. Wade, the contention by the factions that today we refer to as “pro-choice” and “pro-life” had been resolved in vastly different ways around the nation.  Abortion was legal in some locations and illegal in others, a situation that could be easily resolved by the wealthy, but left others helpless, depending on where they lived.  The disparity in laws produced economic and racial discrimination.

“The more exceptions there were to the criminalization of abortion, the more glaringly unfair and hypocritical the whole system was seen to be.  By the time Roe came to court, well-off savvy women could flock to New York or several other states where laws had been relaxed and get a safe, legal termination; poor women, trapped in states that banned abortion, bore the brunt of harm from illegal procedures.  There was a racial angle too: Not only did women of color, then as now, have far more abortions than whites in proportion to their numbers, they were much more likely to be injured or die in botched illegal procedures.  According to the Centers for Disease Control and Prevention, from 1972 to 1974, the mortality rate due to illegal abortion for nonwhite women was 12 times that for white women.  The injustice of a patchwork system, in which a simple medical procedure could leave a woman dead or injured based purely on where it took place, was obvious.”

The Supreme Court, the majority of the population, and most religious groups were in favor of relaxing the laws against abortion and decriminalizing it in many situations.

“If you assume the churches were united against abortion, think again: Beginning in 1967, the Clergy Consultation Service founded by the Reverend Howard R. Moody, a Baptist….helped thousands of women across the country find their way to safe illegal abortions.  In the years leading up to Roe, legalization of abortion under at least some circumstances was endorsed by the Union for Reform Judaism, the Southern Baptist Convention, the National Association of Evangelicals, the United Methodist Church, the Presbyterian Church USA, the Episcopal Church, and other mainstream denominations.”

“You would never know that Ayn Rand and Barry Goldwater were pro-choice, and that in 1967, the governor of California, Ronald Reagan, signed what was then the most liberal abortion law in the nation.”

Abortion is as old as history.  Whether for economic, medical, or personal reasons, women have been willing to risk their lives to attain one.  That is fact.  Women were dying in large numbers because there was no definitive ruling on the matter, and the majority of the people were in favor of addressing this problem.  The Constitution says nothing about abortion, so what is one to do?

Jeffrey Toobin provides a very concise description of how liberals and conservatives approached this issue in his book The Oath: The Obama White House and the Supreme Court.

“Starting in the 1960s, liberals on the Supreme Court and elsewhere developed a theory built around the idea of “enumerated rights.”  Even if a right was not specifically mentioned in the Constitution, the Court could draw on the implications of the explicit provisions of the Constitution, prior decisions, and the broader evolution of American society to expand the liberties of Americans.  Most famously (or notoriously) during this period, the Court recognized a constitutional right to privacy, which became the basis for protecting a woman’s right to choose abortion.”

The selection of privacy as the justification was considered the weakest of arguments in support of the abortion right.  Women justices seem to have a better idea of women’s issues than men.  When they had their chance, they produced better justifications, with women’s equality perhaps the favorite.  The concept of equal rights for women is also not found in the Constitution.

“On the Supreme Court, Antonin Scalia and Clarence Thomas had led the charge for what became known as ‘textualism,’ which said that if the Constitution did not explicitly create a right, it did not exist.  A close cousin to textualism was originalism, which asserted that the words of the Constitution must be interpreted as they were understood by the men who wrote and ratified it.  Under either textualism or originalism, there was no such thing as a right to privacy and, of course, no constitutional right to abortion.”

While it might appear that Scalia and friends had an approach laden with “rigor and integrity,” it was, in fact, a shield to hide behind as they proceeded to negate any Court precedent that they found inconvenient, and to create any “right” that was necessary to forward their agenda.  Corporations were not mentioned in the Constitution, but they managed to provide them the same rights as individuals and override Congressional legislation limiting their ability to spend their vast wealth influencing elections.  Somehow, the opinions and intentions of the men who wrote and ratified the Constitution always seemed to be the same as those of the Republican Party.

Toobin also tells the tale of Scalia’s forced admission that his originalist philosophy led to absurdities. 

Scalia was selected write the majority opinion on District of Columbia v. Heller, the decision that was supposed to finally decide on the meaning of the Second Amendment as to the right to bear arms.  The wording of this amendment is simple.

“A well regulated militia being necessary to the security of a free State, the right of the People to keep and bear arms shall not be infringed.”

For over 200 years this was interpreted as associating the right to bear arms with militia duty, along with plenty of “originalist” documentation to support that assumption.  However, the agenda required that that perception be changed and Scalia had to justify that change within the constraints of originalism.  This he labored mightily to do, but there was one problem he could not dodge: our founding fathers associated the right to bear arms with the desire for them to be used in military activities.

“In the uniform militia Act of 1792, Congress compelled militia members to purchase muskets, bayonets, and other weapons that were needed in military combat.  The true originalist would, presumably, assert that the Constitution protected an individual right to possess military weapons.”

Even Scalia could not deal with a population set free to own machine guns, bazookas, flamethrowers, and other such things.  He limited the Court ruling to handguns.  The decision to rule that it was only handguns that the District of Columbia could not prohibit was a compromise between the desired agenda and the realities of modern life.  It left no one happy; the gun-rights activists were particularly disturbed.  The focus on handguns clearly had nothing to do with anything related to the intentions of the framers of the Constitution.

“It was clear….that for all its rhetoric and historical citations, Scalia’s decision had little to do with the original meaning of the Second Amendment.  It was an improvisation designed to reach a policy goal, which was, not coincidentally, one of the top priorities of the modern Republican Party.”

“Notwithstanding his denials, Scalia had demonstrated precisely how the Constitution is not dead at all—but a vibrant living thing.  In other words, there was less to the originalism revolution than met the eye.  Originalism was no more principled or honorable than any other way of interpreting the Constitution.  It was, as Heller demonstrated, just another way for justices to achieve their political goals.”

Scalia is best known for his social views such as his antiabortion stance and his revulsion towards homosexuality.  James Surowiecki penned a note in The New Yorker, Courting Business, to remind us that his most lasting damage to society may arise from his pro-business and anti-consumer decisions.

“Yet Scalia’s death will have only a limited impact on the culture wars, because regarding many social issues he was already in the minority on the Court. But there is one area where the question of his replacement has huge consequences: business. As a member of the Court’s conservative majority, Scalia played a key role in moving American law in a more corporate-friendly direction.”

“In Citizens United, it famously ruled that corporations had free-speech rights and that many restrictions on corporate spending in elections were therefore unconstitutional. It has overturned long-standing antitrust restrictions. It has limited liability for corporate fraud and made it harder for workers to successfully sue for age and gender discrimination. It has made suing businesses and governments more difficult, especially in class-action suits.”

Scalia wrote the majority opinion in a few cases that received little publicity but have far-reaching consequences.  The N.Y.U. law professor Arthur R. Miller and Brian Fitzpatrick a Vanderbilt law professor are quoted.

“In these cases, both of which turned on an interpretation of a once obscure 1925 law, the Court ruled that companies could require customers to give up their right to sue in open court, with disputes to be settled by a private arbitrator instead. ‘These cases don’t get people’s attention the way things like abortion and same-sex marriage do,’ Miller said. But, if the decisions stand, Fitzpatrick argues, ‘they have the potential to literally wipe out the class-action lawsuit’.”

 And why is access to class-actions so important?

“….in an era when regulators are routinely falling down on the job, lawsuits play a crucial role in deterring corporate misbehavior. Miller calls them a ‘private enforcement of public policies.’ And when it comes to big corporations class-action suits are often the only kind that make any economic sense. If every individual defrauded by a company loses fifty dollars, the collective harm can be immense, but it’s not worthwhile for any single victim or lawyer to bother. Fitzpatrick says that obstacles to filing class-action lawsuits make it more likely that ‘companies will not be held accountable for hurting people, for cheating people, for defrauding people, for discriminating against people.’ In that sense, the battle over access to the courtroom is, as Miller puts it, ‘a kind of class conflict between ordinary individuals and corporate power.’ And in that conflict there’s no question which side Scalia was on.”

Surowiecki points out that consequences have already been observed from Scalia’s disappearance from the Court.

“….just last week, Dow Chemical settled a major class-action suit, saying that Scalia’s death increased the chances of ‘unfavorable outcomes for business’.”

And there is his final note on Scalia’s passing.

“It’s unlikely that Scalia will be replaced anytime soon. But let’s hope that, when a successor is finally appointed, it is someone willing to give ordinary citizens the day in court that Scalia worked so hard to deny them.”

Jeffrey Toobin also contributed a piece in The New Yorker commenting on Scalia’s passing: Looking Back.  Here are a few relevant comments.

“Antonin Scalia, who died this month, after nearly three decades on the Supreme Court, devoted his professional life to making the United States a less fair, less tolerant, and less admirable democracy. Fortunately, he mostly failed. Belligerent with his colleagues, dismissive of his critics, nostalgic for a world where outsiders knew their place and stayed there, Scalia represents a perfect model for everything that President Obama should avoid in a successor.”

“The great Justices of the Supreme Court have always looked forward; their words both anticipated and helped shape the nation that the United States was becoming. Chief Justice John Marshall read the new Constitution to allow for a vibrant and progressive federal government. Louis Brandeis understood the need for that government to regulate an industrializing economy. Earl Warren saw that segregation was poison in the modern world. Scalia, in contrast, looked backward.”

Scalia’s social views were formed from a 1950s Catholic upbringing, while his politics was unabashedly Republican and pro-business.

“Scalia described himself as an advocate of judicial restraint, who believed that the courts should defer to the democratically elected branches of government. In reality, he lunged at opportunities to overrule the work of Presidents and of legislators, especially Democrats. Scalia helped gut the Voting Rights Act, overturn McCain-Feingold and other campaign-finance rules, and, in his last official act, block President Obama’s climate-change regulations. Scalia’s reputation, like the Supreme Court’s, is also stained by his role in the majority in Bush v. Gore. His oft-repeated advice to critics of the decision was ‘Get over it’.”

In the end, his beloved originalism was becoming a joke.

“Even Scalia’s ideological allies recognized the folly of trying to divine the ‘intent’ of the authors of the Constitution concerning questions that those bewigged worthies could never have anticipated. During the oral argument of a challenge to a California law that required, among other things, warning labels on violent video games, Justice Samuel Alito interrupted Scalia’s harangue of a lawyer by quipping, ‘I think what Justice Scalia wants to know is what James Madison thought about video games. Did he enjoy them’?”

Toobin provides this epitaph.

“For all that Presidents shape the Court, the Justices rarely stray too far from public opinion. And, on the social issues where the Court has the final word, the real problem for Scalia’s heirs is that they are out of step with the rest of the nation. The public wants diversity, not intolerance; more marriages and fewer executions; less money in politics, not more. Justice Scalia’s views—passionately felt and pungently expressed though they were—now seem like so many boats against the current, borne back ceaselessly into the past.”

The nation should remember Justice Scalia for who he was and what he did.

Saturday, March 5, 2016

Climate Change: Global Warming and Global Dimming

Global warming is occurring and the climate is changing.  One does not need a scientist to confirm that fact.  Awareness of the local environment and perusal of news items should suffice.  The fact that something so momentous is taking place means there are money, power, and prestige on the table.  Everyone from politicians, to corporations, to scientists is determined to grab a piece of the action.

Of interest here is the role of the scientists and their ability to make predictions of the particulars of climate change.  A few are paid professionals whose job is to spend their careers trying to understand the weather and climate.  The majority are entrepreneurs who must acquire funds from some agency or other in order to do their work.  The way one gains this funding is to produce a string of publications that provide an aura of competence, and to confidently claim to program mangers that the issues are sufficiently understood that a model will make some prediction about where the changes we are making to our environment are taking us.  Proposals for funding are generally peer-reviewed in an attempt to validate the proposer’s confidence.  It is a system that often works just fine. 

There is a famous quote discussing the existence of “known unknowns” and “unknown unknowns.”  Climate change modeling is replete with occurrences of both.  There is, or at least should be, another famous quote about “always validate your models.”  Such validation is near impossible because of the known and unknown unknowns and the difficulty in conducting global experiments.  Even the data on “knowns” is difficult to assess.  This is not meant to discourage modeling efforts which are important, but to reign in the excessive confidence with which modeling results are presented in the popular media.  A good scientific paper must include estimates of the uncertainty involved in any conclusion.  A good newspaper article will blithely ignore any consideration of uncertainties.  Why complicate a good story?

The net result is that modeling claims are often proved to be false or inaccurate, providing ammunition for those who deny human-initiated climate change.

There is an even more troubling aspect of the assumption that the Earth’s climate can be accurately modeled.  There are those who claim that geoengineering schemes are sufficiently understood that they will allow us to solve our warming problem if we so desire.

This somewhat long introduction was prompted by two articles that discuss aspects of global climate change that are rarely discussed, but have the benefit of providing relatively near-term benefits to both human health and the stabilization of the global climate.  These articles also provide examples of the complexity of climate response to human activities, and serve as a warning to those who would use simple assumptions to conclude that human geoengineering can solve our problems.

Carbon dioxide is the largest pollutant we produce contributing to global warming, but it is not the most potent.  There are other pollutants that produce comparable effects but have the benefit of being more easily contained and eliminated.  That is the point made by David G.Victor, Charles F. Kennel, and Veerabhadran Ramanathan in a Foreign Affairs article [2012] A Climate Threat We Can Beat: What It Is and How to Deal with It

“At least 40 percent of current global warming can be blamed on four other types of pollutants: dark soot particles called black carbon, methane, lower atmospheric ozone, and industrial gases such as chlorofluorocarbons (CFCs) and hydrofluorocarbons (HFCs), which are used as coolants in refrigerators. Nearly all these pollutants have life spans of just a few weeks to a decade -- much shorter than that of carbon dioxide. But although their tenure is brief, they are potent warmers. Emitting just one ton of black carbon, for example, has the same immediate effect on warming as emitting 500-2,000 tons of carbon dioxide.”

Limiting these pollutants would not arouse the political and social angst that has hindered progress on carbon dioxide.  In fact, a program to address them would be a social and economic boon.

“A few hundred million tons of crops are lost to ozone smog every year; in India, air pollutants have decreased the production of rice by about ten million tons per year, compared with annual output in the 1980s. Globally, the inhalation of soot produced by cooking indoors already kills about two million people each year, mostly women and children living in extreme poverty. And because soot is dark, it traps heat from sunlight and thus speeds melting when it settles on mountain glaciers -- a direct threat to drinking-water supplies and agricultural lands that depend on glacier-fed river systems in China and India, such as the Ganges, the Indus, and the Yangtze.”

The technology for controlling these pollutants is already in hand.  What is required is the implementation of the appropriate policies.  There is much to be gained in pursuing the short-term goal of minimizing the four identified pollutants.

“Last year, the UNEP [United Nations Environment Program] summarized their work, highlighting the potential benefits of installing new cookstoves, building more efficient power plants [curbing emissions], and plugging the leaks that occur when natural gas is extracted from wells. The UNEP concluded that such steps would make it possible to cut 40 percent of global man-made methane emissions and almost 75 percent of global black carbon emissions by 2030. Those reductions could ultimately prevent as many as five million deaths every year and safeguard as many as 140 million tons of corn, rice, and soybeans every year -- the equivalent of four percent of annual global production.”

The authors then provided this startling assessment.

“These measures would also halve the global warming expected to occur between now and 2050....”

A second article by Veerabhadran Ramanathan, Jessica Seddon, and David G. Victor appeared in Foreign Affairs recently dealing with related topics: The Next Front on Climate Change: How to Avoid a Dimmer, Drier World.  Human activity also produces a number of atmospheric pollutants that that tend to counter the warming effects described above, but that doesn’t mean they don’t contribute to climate change.

“Until now, governments have focused on limiting the greenhouse gases that cause global warming and its attendant hazards, such as rising sea levels and stronger storms. But there is more to climate change than higher temperatures. Many of the activities that cause greenhouse gas emissions—burning coal for power, diesel for transport, and wood for cooking, for example—also yield ultra-small particles known as aerosols, which blanket vast areas in a haze that blocks and scatters sunlight. By reducing the solar energy that reaches the earth’s surface, aerosols reduce evaporation and slow the water cycle that governs where, when, and how much rain falls.”

These aerosol emissions are well-known, but most studies have focused on temperature changing effects.

“Darker aerosols, such as diesel soot and other kinds of black carbon, absorb sunlight and accelerate warming. But lighter aerosols, such as the sulfates and nitrates formed from coal, gasoline, and other fuel emissions, cool the planet by reflecting sunlight back into space. That explains, in part, why the world hasn’t seen more of a temperature increase from the greenhouse gases already present in the atmosphere.”

The cooling or “dimming” effects of this class of aerosols produces first local effects due to the concentration of sources associated with population and industrial distributions before they contribute to net global effects.  This means that local pollution can affect precipitation patterns in complex ways.

“Since the 1880s, when reliable record keeping began, global temperatures have increased by about 0.9 degrees Celsius. And as the planet has warmed, rainfall at latitudes above 45 degrees has generally increased. But twice since the mid-twentieth century, surges in aerosol emissions have significantly disrupted this pattern, reducing rainfall in a number of regions.”

“The first disruption was the result of the sulfur dioxide emissions produced by the massive combustion of coal and other fuels across Europe and North America in the mid-twentieth century, driven by rapid industrial growth after World War II. From the 1950s to the late 1980s, global emissions of sulfur dioxide (which in the atmosphere becomes sulfate, a reflective aerosol) nearly doubled, reducing the amount of sunlight reaching the earth’s surface by about two percent, on average. As a direct result of this dimming, average rainfall in the Northern Hemisphere declined by between three and four percent over the same period.”

Just as small global temperature effects can have major consequences, these seemingly small changes in average precipitation can produce significant effects.

“Indeed, there is strong evidence that sulfur dioxide emissions in the United States and western Europe contributed to the Sahelian megadroughts that began in the 1960s and continued through the 1990s, a period during which precipitation in the Sahel and some other parts of sub-Saharan Africa fell by between 25 and 50 percent relative to twentieth-century averages.”

Policy decisions made in the 1970s have reduced aerosol pollution and allowed average precipitation levels in North America and Europe to return to the earlier values.

The second aerosol-caused disruption is occurring in East Asia and South Asia.

“These regions, which have rapidly industrialized over the past four decades, have seen a two- to fourfold increase in sulfur dioxide and black carbon emissions since the 1970s. As a result, in 2010, China and India received somewhere between ten and 15 percent less sunlight than they did in 1970.”

This pollution did not go unnoticed by Mother Earth.

“As the wind has carried sulfates and black carbon over thousands of miles, the dimming effect has extended to the atmos­phere over the Indian Ocean, reducing the evaporation of seawater and thus weakening the monsoons that bring much-needed water to East Asia and South Asia every year. From 1950 to 2002, the most recent period for which estimates are available, there was a seven percent decrease in average annual rainfall over the Indo-Gangetic Plain, the fertile belt of land crossing eastern Pakistan, northern India, and Bangladesh that is home to more than one billion people, many of them dependent on rain-fed agriculture. Over the same period, summer monsoon rainfall in parts of northern China decreased by more than ten percent.”

As was the case with emissions of particulates that cause atmospheric heating, those that cause the cooling, or dimming, effect can be addressed with current technologies.  The main areas of concern are power generation, transportation, and energy consumption by the poor.

“With regard to electric power generation, most of the concern about aerosols centers on burning coal, which is responsible for more than 70 percent of the world’s sulfur dioxide emissions. Given its environmental and health impacts, conventional coal power is increasingly hard to justify.”

“Regulators in California and the European Union, meanwhile, have already pioneered policies that cut aerosol emissions from transportation. They have mandated cleaner fuels and combustion technologies, such as low-sulfur diesel and exhaust systems equipped with efficient particulate filters and catalytic converters. Officials elsewhere should follow their lead, and they should pair these regulations with rigorous compliance regimes, which are currently lacking in many countries.”

“Cutting aerosol emissions produced by burning dirty fuels in the world’s poorest households is another way to reduce global dimming. Just over one billion people, most of them in the developing world, rely on kerosene to light their homes, and three billion use solid fuels, such as crop residue and dung, for cooking and heating. Burning these fuels with traditional technologies generates aerosols that damage lungs along with the climate: the particulates emitted by biomass-based cooking and heating are responsible for about a third of the dimming in South Asia. Cleaner technologies for cooking, heating, and lighting, such as energy-efficient cookstoves and solar lanterns, are readily available, and making them universally accessible would offer huge health and environmental benefits to the world’s poor.”

Since these solar “dimming” aerosols act to counter the effect of increased greenhouse gases, eliminating them would require even greater efforts to inhibit the emission of atmosphere-warming pollutants such as carbon dioxide.

“Since aerosols have a short atmospheric life span, pursuing policies such as these could significantly reduce global dimming within ten or 20 years. That would dramatically limit the risk of droughts and irregular monsoons. It would also heat up the planet by reducing the atmosphere’s reflective aerosol ‘mask,’ however, so any effort to reduce global dimming must be accompanied by significant cuts to carbon dioxide and other greenhouse gas emissions.”

The success of these solar dimming aerosols has been recognized by a class of scientist and capitalists who would argue that it is cheaper, quicker, more efficient—and even safer—to purposely modify the earth’s climate by spraying large amounts of dimming aerosols into the atmosphere.  The atmospheric temperature would go down and we could continue spewing greenhouse gases into the air indefinitely.  What could be simpler?  What could possibly go wrong?

The issue of geoengineering the climate brings us back to where we began and the notion that climate modeling is beset by “known unknowns” and “unknown unknowns” and is most renowned for its incorrect predictions.  It is impossible to change the climate of the Earth without causing disruptions.  Lowering the atmospheric temperature would lower ocean evaporation and alter precipitation patterns.  Droughts and flooding would begin to occur in different locations, perhaps threatening the lives of billions of people.  Don’t listen to those people who would sell such geoengineering nonsense.

This source provides us with a chart of temperature over recent geologic history.

This data is derived from ice cores removed from glaciers.  The temperature is derived from the local temperature where the ice core was extracted.  Consider the temperature excursions that have occurred over the past 100,000 years.  They have been enormous—much larger than the potential human-generated changes that arise in current climate discussions.  In fact, plotting at this scale dampens really rapid changes that have occurred in recent geological history.  The chart is accompanied by these comments.

“On a shorter time scale, global temperatures fluctuate often and rapidly. Various records reveal numerous large, widespread, abrupt climate changes over the past 100,000 years. One of the more recent intriguing findings is the remarkable speed of these changes. Within the incredibly short time span (by geologic standards) of only a few decades or even a few years, global temperatures have fluctuated by as much as 15°F (8°C) or more.”

“For example, as Earth was emerging out of the last glacial cycle, the warming trend was interrupted 12,800 years ago when temperatures dropped dramatically in only several decades. A mere 1,300 years later, temperatures locally spiked as much as 20°F (11°C) within just several years. Sudden changes like this occurred at least 24 times during the past 100,000 years. In a relative sense, we are in a time of unusually stable temperatures today—how long will it last?”

Those who believe humans are causing irreversible climate change have plenty of scientific evidence to point to.  Those who choose not to believe also have plenty of geologic data to point to in arguing that the climate change we observe is probably natural.  It has become like religion and the existence of a God; it is an argument that no one can win.

Perhaps a better approach is to stare at the recent few tens of thousands of years on that chart and admit that humanity has been graced with the most benign climate period in history.  For whatever reason, this “stable” climate has allowed us the time to develop our civilization.  That civilization could be taken away from us in a human lifetime, either by our own actions or by the actions of Mother Earth.  We were lucky enough to stumble on the scene during an era with a relatively stable climate.

The best strategy when existing in a state of unstable equilibrium is to change nothing.  No matter what we believe about current climate change, the appropriate plan should be to get the planet back into the state it was in when we began to mess with it.  After we have accomplished that to the best of our abilities, then we should hold on tight and hope that we are provided a few more years of grace.

For the interested reader, here are a few more articles on climate change.

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