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I have to say this was a good day for the President. Not only was his health care plan declared constitutional, but also some signs of a true long lasting economic recovery are beginning to fall into place.

First to the Affordable Care Act. I think Roberts’ vote was the true mark of a great Chief Justice. He saw that his court was deeply in danger of becoming totally politicized and a tool of the Republican Party. I think he truly believe Congress has the power to tax and since Obama had made that as a back up argument to the Commerce Clause, he seized on it. Beyond that, I think it secures Obama’s place in history besides FDR (Social Security) and LBJ (Medicare).

Beyond healthcare I was struck by two articles in this morning’s paper. The first was on housing.

But roughly six years after the housing market began its longest and deepest slide since the Great Depression, a growing number of experts and people who actually put money into housing believe the end has come.The trend is clear in the data. The widely respected S.&P./Case-Shiller index reported earlier this week that sales prices for existing homes rose in April for the first time this year. Several other measures, including a seasonally adjusted version of the index, show that price increases began in February. The pace of housing construction has increased. And the National Association of Realtorssaid Wednesday that pending home sales climbed to the highest level since the end of a federal tax credit for first-time buyers in September 2010.

It may be anecdotal, but you certainly feel in LA that the market has turned around. This would be a critical part of a sustained recovery. Read more…

Adelson and Milken

As I wrote a couple of months ago, I suspect that the shadow figure of Mike Milken, the convicted felon banker of the late 80′s is working hard with his minions to get his former client Mitt Romney elected. Yesterday, the Boston Globe surfaced the story in the MSM.

Romney, meanwhile, once referred to the deal as emanating from “the glorious days of Drexel Burnham,” saying, “it was fun while it lasted,” in a little-noticed interview with American Banker magazine.

The “glorious” part, for Romney at least, was that he used junk-bond financing to turn a $10 million investment into a $175 million profit for himself, his partners, and his investors. It marked a turning point for Romney, according to Marc Wolpow, a former Drexel employee who was involved in the deal and later was hired by Romney to work at Bain Capital.

“Mitt, I think, spent his life balanced between fear and greed,” Wolpow said. “He knew that he had to make a lot of money to launch his political career. It’s very hard to make a lot of money without taking some kind of reputational risk along the way. It’s just hard to do. It doesn’t mean you have to do anything illegal or immoral, but you often have to take reputational risk to make money.”

But there is a far darker tale to be told of the influence of the former Junk Bond King on our current Presidential race. If I was to tell you that the current Republican Presidential nominee and the four largest contributors to Republican Super Pacs are all intimately tied to one convicted felon banker, would you not think it some sort of Oliver Stone conspiracy movie?

But it is true. Mike Milken is responsible for the billion dollar fortunes of Sheldon Adelson, Harold Simmons and Ken Griffin, the top three Super Pac donors. In addition both Rupert Murdoch and David Koch were clients of Milken and Koch serves as Chairmen of the Board of Milken’s Prostate Cancer charity.

I have no idea what Milken’s mission is other than his belief that banking and environmental regulations are “harmful to capital formation” and his steadfast support of Likud party politics in Israel. I know he has tried with both Clinton and Bush to get a pardon without success.

Is the fact that Milken was responsible for the fortunes of both the candidate and his main corporate sponsors mere coincidence or something more sinister?

I’ve read two articles in the last 24 hours that seem profoundly important. Both of them suggest that we are a somewhat lazy species—we aren’t really interested in putting in the hard work to change the world. The first article entitled Infinite Stupidity, by the great evolutionary biologist, Mark Pagel. Read the whole piece, but here is his thesis.

A tiny number of ideas can go a long way, as we’ve seen. And the Internet makes that more and more likely. What’s happening is that we might, in fact, be at a time in our history where we’re being domesticated by these great big societal things, such as Facebook and the Internet. We’re being domesticated by them, because fewer and fewer and fewer of us have to be innovators to get by. And so, in the cold calculus of evolution by natural selection, at no greater time in history than ever before, copiers are probably doing better than innovators. Because innovation is extraordinarily hard. My worry is that we could be moving in that direction, towards becoming more and more sort of docile copiers.

If only a few people in the society have to be innovators and their innovations flow more from ideas than massive factories or deployed capital, then maybe we should be a little more protective of intellectual property. I’ve been having a battle with the Copyleft mob on Twitter (@JTTaplin) over an interview of the doyenne of copying as art, Nina Paley. 

“Intellectual disobedience is civil disobedience plus intellectual property,” Paley explained. “A lot of people infringe copyright and they’re apologetic … If you know as much about the law as, unfortunately, I do, I cannot claim ignorance and I cannot claim fair use … I know that I’m infringing copyright and I don’t apologize for it.”

Ms. Paley cannot claim fair use, because she copies whole sections of other artists work to construct her “original” work. I may have been a little rough with Paley over what she claims to be art, but the main point is that to call this act of theft “civil disobedience” is an insult to Thoreau, Gandhi, and Martin Luther King. What human right is Paley asserting with her civil disobedience? The right to steal other artists work? I don’t get it.

That brings me to the second article, written by one of my favorite writers, John Ralston Saul. Saul is wondering why so little has been accomplished in the half century of the environmental movement. And like Pagel, he reaches the conclusion that we would rather let someone else do the hard work.

We believe we live in an era of facts and of proofs. Yet what we don’t feel able to take on has little to do with those facts and proofs. It has everything to do with a failure of imagination.

The first error has to do with misunderstanding the nature of power. The environmental era mirrors almost exactly that of the rise of the NGOs. Why? The central characteristic of the globalist era is that we came to believe the power of the citizenry had been weakened by the power of economics. We gradually accepted that the power of national politics was therefore limited. It followed that the power to ignore the public good was international and amorphous in the sense that it had to do with broad economic assumptions. In that case, the best way to fight back was also international. And since there were no international representative legislative institutions devoted to the public good, well then, we would devote ourselves to creating institutions that would set the global agenda, our contemporary NGO army.

These new institutions would not have actual power – the power to act. But they would speak for us all, for the shared public good. And those devoted to the international economic interests would have to listen. We convinced ourselves that the persistent sound would be too loud to be ignored by those with power.

Except they didn’t listen to these NGOs. And they didn’t – don’t – have to listen. After all, economics is power. Real power. The NGOs – the new institutions of the public good – have only influence. Influence can have periodic successes. But this is a weak hand to play if you have other options. Imagine if the tens of millions of hours devoted to influencing power and opposing power had been devoted to taking power. Imagine if the millions of NGO members had joined political parties and virtually taken them over. That is how change is actually made – through political parties, elections, governments and laws.

I want to call the attention of this community to a wonderful post from David Lowery (of the band Cracker) that has been getting a huge amount of attention in the last few days. It was written to a young music intern at NPR’s All Songs Considered who confessed on the air that she had onlyy purchased 15 songs out of the 11,000 in her music collection. Here is a small piece of the article, but I really hope you will read the whole post.

What the corporate backed Free Culture movement is asking us to do is analogous to changing our morality and principles to allow the equivalent of looting. Say there is a neighborhood in your local big city. Let’s call it The ‘Net. In this neighborhood there are record stores. Because of some antiquated laws, The ‘Net was never assigned a police force. So in this neighborhood people simply loot all the products from the shelves of the record store. People know it’s wrong, but they do it because they know they will rarely be punished for doing so. What the commercial Free Culture movement (see the “hybrid economy”) is saying is that instead of putting a police force in this neighborhood we should simply change our values and morality to accept this behavior. We should change our morality and ethics to accept looting because it is simply possible to get away with it.  And nothing says freedom like getting away with it, right?

But it’s worse than that. It turns out that Verizon, AT&T, Charter etc etc are charging a toll to get into this neighborhood to get the free stuff. Further, companies like Google are selling maps (search results) that tell you where the stuff is that you want to loot. Companies like Megavideo are charging for a high speed looting service (premium accounts for faster downloads). Google is also selling ads in this neighborhood and sharing the revenue with everyone except the people who make the stuff being looted. Further, in order to loot you need to have a $1,000 dollar laptop, a $500 dollar iPhone or $400 Samsumg tablet. It turns out the supposedly “free” stuff really isn’t free. In fact it’s an expensive way to get “free” music. (Like most claimed “disruptive innovations”it turns out expensive subsidies exist elsewhere.) Companies are actually making money from this looting activity. These companies only make money if you change your principles and morality! And none of that money goes to the artists!

I have been debating this issue for the past two months with young digerati like Alexis Ohanian of Reddit and Mike Masnick of Techdirt. Somehow I feel like the conversation is changing and respect for the creative artist’s rights is coming back. Let’s hope so.

I wrote this In June when Koch was first starting to push his boy Paul Ryan towards Romney
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On a week when President Obama is being accused of being out of touch, its probably important to understand just how radically “out of touch” the Republican Kingmaker Charles Koch really is. It is Koch who has wanted Obama gone from Inauguration Day and unless you understand the nature of the opposition, you will never understand the fight ahead of us.

In the summer of 1974 Koch established the Charles Koch Foundation with the help of Murray Rothbard, a Professor of economics at the New York University campus in Brooklyn. At the time, Koch was Chairman and CEO of Koch Industries, the second largest privately held firm in the United States. At Rothbard’s suggestion they changed the name of the foundation to The Cato Institute in July of 1976. Rothbard was an early associate of Ayn Rand, hailing her book Atlas Shrugged, as “not merely the greatest novel ever written, it is one of the very greatest books ever written, fiction or nonfiction.” It is in Rand’s hero John Galt that we find the roots of the libertarian belief that a great society is ruled by a class of Nietzschian supermen (the givers), and that most of the society (the takers) free rides on their work. “We have granted you everything you demanded of us, we who had always been the givers, but have only now understood it,” Galt lectures the “looters” and “moochers” who make up the populace. “We have no demands to present you, no terms to bargain about, no compromise to reach. You have nothing to offer us. We do not need you.”

Rand’s novel, cited by Charles Koch and many other libertarians as the book that changed their lives, was the basis for a new philosophy, Objectivism, that shunned both religion and the Lockean liberal politics of the Founders for a new view that man’s sole purpose is to pursue his own self-interest. But by 1958, long before he was hired by Koch, Rothbard had begun to go beyond Objectivism into a philosophy that he named “anarcho-capitalism”. Rothbard considered that government was the greatest danger to liberty and the state “was nothing but a gang of thieves writ large.” The solution was to get rid of the state: anarchism. Rothbard wrote, “Capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism.” He argued that taxation represents coercive theft on a grand scale, and “a compulsory monopoly of force” prohibiting the more efficient voluntary procurement of defense and judicial services from competing suppliers. For Charles Koch this was a philosophy that fit perfectly with his view that the government was the one force impeding the growth of his businesses, many of which were “plagued” by the Environmental Protection Agency for polluting the water and air. As to how the society would enforce order without a government the anarcho-capitalists had a solution as well. Competing insurance companies would have private security forces that would protect the property of their customers. Rothbard argued this would lower prices for police services because of private market competition. Just how two competing “Insurance Militias” might resolve a property dispute was never specified.

Read more…

I’ve been thinking about this fiscal cliff all the pundits are warning us against. Since the election of Ronald Reagan the country has made two profoundly damaging mistakes. It has continually raised the Defense Budget, thereby robbing our education system and basic infrastructure (roads, bridges, broadband, etc) of the needed funding and dragging us down to second world status in those areas. The second mistake was to cut taxes on the top five percent. As Nick Hanauer’s astonishing Ted Talk (which was censored by TED until the outrage grew too loud) shows, this move to cut taxes on the 1% by both Reagan and Bush II was destructive beyond belief to our country.

So now if Congress DOES NOTHING in the next six months, both those disastrous mistakes will be fixed in ONE DAY, January 1, 2013. On that day the Bush Tax Cuts will disappear for good, and the Sequester (along with previously agreed upon cuts) will take at least $1 trillion out of the Defense Budget in the next ten years.

Why are Progressives and Libertarians not cheering for this to happen? It would quickly solve the deficit problem as Ezra Klein points out in this chart. Letting the Tax cuts expire and the Sequester go through is called the Extended Baseline Scenario in this Chart.

The Chart on the lower right, is what Mitt Romney and the Republican’s want. Now I am aware that the Keynesian effect of taking a lot of government spending (on planes and missiles) out of the economy might cause a recession and that’s probably why Bill Clinton said the stupid thing about the tax cuts this week. Quite honestly, a couple of quarters of flat growth to address the two biggest mistakes of the Conservative era and put our fiscal house in order, would be worth it.

It has been my contention since 2007 that global capitalism was entering a period of stagnation that could not be cured by the temporary fix of lowering interest rates. Yesterday’s grim unemployment report in the U.S. only compounded the problems in the rest of the world.

The report on American jobs added to the global pall that has deepened with Europe’s debt crisis and slowing growth in China and India. Global financial markets, weak in early trading on Friday, sank further on the report. The Dow Jones industrial average lost 2.22 percent, or 274.88 points, wiping out its gains for the year, and the main index of the German stock market closed down 3.4 percent.

The American economy since Ronald Reagan first started to push Supply Side economics (sometimes know as trickle-down economics) has increasingly skewed gains to the top 1% and flattened middle and lower class wages. In such an atmosphere the engine of consumer spending could only be fueled by easy consumer credit mixed with aggressive marketing efforts—the classic “keeping up with the Jones’s” routine. Fiscal stimulus depended mostly on aggressive military spending which seemed to grow even in the face of the collapse of the Soviet empire. The financial sector, which was once restricted to aiding the manufacturing economy, gradually became the driving force in the economy. Speculative finance became so important to keeping the dogs of depression at bay, that the Lender of Last resort–The Fed–essentially ended up becoming the backstop to the most egregious kind of derivative trading, pouring hundreds of billions into Wall Street investment banks. Read more…