Good News in the Bad News


The markets got a bit spooked today by the unexpected drop in GDP for the final quarter of 2012. But buried in the numbers are signs of a positive transition from a war to a peace economy.

The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses…Despite the overall contraction, there was underlying data in the report suggesting the economy is not on the brink of a recession or an extended slump. Residential investment jumped 15.3 percent, a sign that the housing sector continues to recover, for one. Similarly, investment in equipment and software by businesses rose 12.4 percent, an indicator that companies are still spending.

I continue to be very optimistic about the direction of American policy as we emerge from our eight year Interregnum. Imagine if the 11 million undocumented workers emerged from the underground (cash) economy and started paying taxes. What would that do to the actuarial calculations of Social Security and Medicare? Imagine if Lockheed Martin started to manufacture wind turbines instead of fighter jets.

The greatest task of the next ten years will be Economic Conversion, the process of converting from a military economy to a civilian/peace economy. The economist Seymour Melman, who did the most important work on this subject, noted that the task ahead of us will not be easy.

“The problem of conversion from military to civilian work is fundamentally different now from the problem that existed after World War II. At that time, the issue was reconversion; the firms could and did go back to doing the work they had been involved in before the war. They could literally draw the olds sets of blueprints and tools from the shelf and go to work on the old products. At the present time, the bulk of military production is concentrated in industries, firms, or plants that have been specialized for this work, and frequently have no prior history of civilian work”

A larger part of the problem will be that the Military Industrial complex is situated deeply in the Red States, particularly Texas and the Deep South. Alex Bowles has pointed out to me that this could create even more Anti-Obama anger. Any attempt to pacify the South with some sort of Government aid to ease the Conversion, will be met with resistance.

The upshot is the mollifying the GOP will be easier said than done. Their response to the last election (“We’ll just rig the next one”) makes their contempt for both outsiders and democracy explicit. They are becoming, in a very real sense, un-American in that the overarching ideal of Government of, by, and for the people is becoming the focal point for organized rage directed at both the government and the people.
As Alex points out, even the Republicans most ardent anti-tax corporate benefactors will not be comfortable with the right wing pitchfork brigade. Fox’s firing of Sarah Palin is just one sign of the corporate pull back from what Bobby Jindal calls “the stupid party”.
As many of you know, I have had an open battle with some of the Libertarians who commented on this blog, including John Papola. But I must confess I found myself agreeing with the central argument (but not some of the details) of this piece he wrote for Forbes entitled “Think consumption is the engine of the economy, think again”.
Increased investment drives economic growth, while retrenched investment leads to recession and reduced employment–and it always has. Those who blame our stagnation on a lack of consumer demand rely on a toxic brew of dubious data and dangerous theory.
As I have argued for years, if our whole aim of the recovery is just to build “mall fever” again, so people hock their homes and their lives to buying the latest flat screen–then we’re screwed. As I wrote in 2009,
It seems to me that the American public has already made a shift to a culture in which spending at the mall will be a lot less important and yet the politicians are acting like their job is to restore the status quo ante–a world the public no longer cares about. Larry Summers talks about getting the big banks lending again, but what business wants to borrow when there is so much excess capacity? There are too many damn malls. Too many car dealerships. What person in their right mind would start a new retail clothing business today?
Papola points out that GDP is a terrible way to gauge the health of an economy and Rick Turner has been saying the same thing for years. This transition from a consumption and debt economy to a savings and investment economy is going to be painful, but when we emerge from this Economic Conversion we will be a much healthier society.


Posted in Business, Futurism | Tagged , , , , , , , , | 67 Comments

Obama’s Second Term

I must say I am looking forward to the President’s second Inaugural Address on Monday. In my lifetime there have only been two second term Democratic presidencies and Bill Clinton began his second term with the shadow of the Whitewater and Trooper gate  allegations hanging over him. He had already begun his dalliance with Monica Lewinsky, and so the events that led to his impeachment were already in motion. Barack Obama on the other hand begins his second term with a much bigger mandate (51% of the popular vote to Clinton’s 49%) and no threat of scandal.

Equally important, the Republican Party is in complete disarray, as can be seen by their cave in today on the debt ceiling. David Brooks wrote an unintentionally humorous column today complaining that Obama is being too tough on the Republicans at the very moment of their meltdown. After laying out how he would hope Obama might propose some small bore initiatives that Eric Cantor could agree on, Brooks then states he doesn’t think that is going to happen, unintentionally laying out a perfect strategy for the Democrats..

It’s more likely that today’s majority party is going to adopt a different strategy, which you might call Kill the Wounded. It’s more likely that today’s Democrats are going to tell themselves something like this:

“We live at a unique moment. Our opponents, the Republicans, are divided, confused and bleeding. This is not the time to allow them to rebuild their reputation with a series of modest accomplishments. This is the time to kick them when they are down, to win back the House and end the current version of the Republican Party. Continue reading

Posted in Barack Obama, Futurism | Tagged , , , , , , | 26 Comments

Aaron Swartz


I noticed a lot of comments on the suicide of young Aaron Swartz on my last post. It’s a tragedy when anyone takes their own life and I can’t really write about the issues surrounding the legal case he was involved in because I’m tired of dealing with the Mob– the idiots that send me emails saying “Why don’t you shove a nail in your ass” after we released our report on Ad Networks and Piracy. The problem with the copyleft is that they can’t imagine someone actually having to go to jail for stealing intellectual property. That was probably part of Aaron’s problem. It never occurred to him that breaking into a server was the equivalent of breaking into a house. He had a history of depression and wrote romantically about suicide in the comic book movies he loved. He seemed like a very generous soul. But he was clearly not ready to go to jail.

But the fact that I feel constrained to speak my mind about piracy because I am tired of the mob is sad. Last year I wrote about my friend David Fanning having his whole web enterprise destroyed by Lulzsec because his show Frontline reported on the darker side of Julian Assange’s sense of morality. I know for a fact that most musicians are scared to speak out about having their content exploited by criminals like Kim Dotcom, because they are afraid of the cyber mob. I don’t know how the hell we are going to have a civil conversation about IP with those of us who want to defend the artist’s right to get paid for their work, being under the threat of bodily harm (note that most of the most threatening comments have been taken down)?

Posted in Advertising, Corruption | Tagged , , | 67 Comments

A New Civil War?

Andrew O’Hehir’s latest essay in Slate is pretty damn provocative. It’s titled Welcome to the New Civil War and it pulls no punches.

So even though it’s a truism of American public discourse that the Civil War never ended, it’s also literally true. We’re still reaping the whirlwind from that long-ago conflict, and now we face a new Civil War, one focused on divisive political issues of the 21st century – most notably the rights and liberties of women and LGBT people – but rooted in toxic rhetoric and ideas inherited from the 19th century.

We’ve just emerged from a presidential campaign that exposed how hardened our political and cultural divide has become, and how poorly the two sides understand each other. Part of the Republican problem, in an election that party thought it would win easily, was that those who felt a visceral disgust toward both the idea and the reality of President Barack Obama simply could not believe that they didn’t represent a majority. As many Republicans are now aware, the party now faces an existential crisis. It’s all very well to go on TV and talk about attracting Latinos and downplaying cultural wedge issues. But the activist core of the Republican Party is neo-Confederate, whether it thinks of itself that way or not. It isn’t interested in common cause with Mexicans or turning down the moral thermostat. Just ask Rick Santorum: What it wants is war.

As anyone who has read this blog for a while knows, I believe in a certain power that comes from regionalism. I think the notion that California has a different economy and culture than Georgia is OK and that as Justice Brandeis said, “It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”

But O’Hehir’s essay raises another larger question, which is what happens when individual states circumscribe the rights of individuals in areas like abortion or gay rights? As Alex Bowles wrote to me, “so while decentralization improves decision making in many, many areas, there are some things—like equality before the law—that are no longer subject to debate. To the extent that humanity is universal, there’s no need for regional considerations to enter the picture.”

So this begs the question. Is it possible to have the kind of decentralized regional experimentation that I think leads to innovation while still preserving that Federal power to enforce “equality under the law” for gays, women, immigrants and minorities? I think this is what has to happen, but it may take a showdown with the neo-confederates before it happens.

Posted in New Federalism | Tagged , , , | 74 Comments

America 3.0

Here is a speech I gave last month to the Chattanooga Chamber of Commerce. It is as close to my “philosophy of everything” as you will get.


Posted in Economics, Futurism | Tagged , | 26 Comments

America’s Paranoia Problem

A year ago I wrote a post called American Crack-up, in which I argued that a good bit of the country had become completely divorced from Reality. It began with these lines.

When did it start?

When did America’s mass consensual hallucination begin? When did the boundaries between truth and fiction dissolve?

In these Post Newtown days, I am even more convinced that the American Crack up is like a continuing set of mass paranoid delusions. Here is the Mayo Clinic definition of the delusions associated with Paranoid Schizophrenia.

In paranoid schizophrenia, a common delusion is that you’re being singled out for harm. For instance, you may believe that the government is monitoring every move you make or that a co-worker is poisoning your lunch. You may also have delusions of grandeur — the belief that you can fly, that you’re famous or that you have a relationship with a famous person, for example. You hold on to these false beliefs despite evidence to the contrary. Delusions can result in aggression or violence if you believe you must act in self-defense against those who want to harm you.

Sound familiar?

Now it’s fairly clear that many of the Mass Gun Murderers were suffering from Paranoid Schizophrenia and even Adam Lanza’s mother seemed to be somewhat paranoid. But what concerns me equally is the number of seriously delusional people who are in positions of power or influence. Take for instance Larry Pratt, President of Gun Owners of America.

During the interview on Hardball, Pratt argued that guns are necessary to “control the government.” When Matthews asked for an example, Pratt pointed to 1946, in Athens, Tenn., when townsmen took up arms against corrupt government officials.

Why is this guy walking into the TV studios of Washington rather than being treated for his paranoid delusions that he needs assault rifles to defend himself from the government? The problem is that since the FCC banned the Fairness Doctrine, paranoid loons like Glenn Beck can fill our airwaves with delusional crap that is accepted by imbeciles like Larry Pratt. People can live their whole lives with an alternative set of facts as if they were in a Twilight Zone episode. Climate Change is a Hoax, the Government has already been taken over by Communists who will enslave God Fearing, Gun Toting Americans, Women’s bodies reject the sperm of a rape.

I really feel like 30% of Americans are living in an alternative universe where they slowly get dumber every day. It is truly scary.

Posted in Corruption, Education | Tagged , , , , | 55 Comments

Time for a Change

“Then someone came and told us to run down the hallway. There were police at every door. There were lots of people crying and screaming.The officers led children past the carnage. “They said ‘Close your eyes, hold hands.’”

How many times do we have to repeat this scene before we tell the ideologues who run the NRA that they no longer have a veto on gun legislation? Even the rank and file of the NRA believe in background checks to keep criminals and the mentally ill from getting access to firearms. But Wayne LaPierre and his minions want to protect the right of gun show dealers to sell to anyone with no background checks needed. This has to stop. Congress needs to pass a bill with the following pieces, now.

  • No gun show loopholes for background checks
  • Ban assault rifles
  • Ban large magazines for semi automatics

This is at least a start. Continue reading

Posted in Justice, Politics | Tagged , , , , | 44 Comments

Big Shift

It has been the continuing obsession of this writer that we are living in an Interregnum, where the “old is dying, but the new cannot be borne”. The new National Intelligence Council report, Global Trends 2030, seems to be further evidence that others share my assumptions.“The ’unipolar’ moment is over and Pax Americana — the era of American ascendancy in international politics that began in 1945 — is fast winding down,”the report says.

The 140-page report released today by the National Intelligence Council lays out dangers and opportunities for nations, economies, investors, political systems and leaders due to four “megatrends” that government intelligence analysts say are transforming the world.

Those major trends are the end of U.S. global dominance, the rising power of individuals against states, a rising middle class whose demands challenge governments, and a Gordian knot of water, food and energy shortages, according to the analysts.

“We are at a critical juncture in human history, which could lead to widely contrasting futures,” Council Chairman Christopher Kojm writes in the report. Continue reading

Posted in Futurism | Tagged , , , | 14 Comments

Subsidies and Collective Action Problems

The New York Times is running an amazing series of articles about how corporate America has played city and state governments like a fiddle to extract generous subsidies for locating plants in their areas.

A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

Game theory names this a collective action problem. Continue reading

Posted in Business, Economics | Tagged , , , , | 19 Comments

Fiscal Cliff Follies

The phony Republican outrage after Tim Geithner’s visit to Congress yesterday shows what a pickle they are in. Geithner carried to the Hill the same proposal Obama made to Boehner and Co. last Friday, but this time the Speaker went public with his outrage as if he had never heard the proposal before. According to insiders, that’s because Boehner didn’t think Obama was serious last week and only now realizes the President is serious as a heart attack.

Time is on Obama’s side. If the Republican leadership won’t yield before December 31, the Bush Tax Cuts go away and Republican’s get blamed for raising taxes on the middle class. You can bet a bill changing that gets passed within days and so all this talk of fiscal Armageddon is pure nonsense. The bigger question for progressives is how to hold on to the big cuts in the Military budget that were part of the sequester. As Christopher Drew has pointed out, there is so much waste and incompetence in Pentagon weapons budgets, that cutting the billions from their budget is desperately needed to force them to get their house in order. This is where the Liberal-Libertarian coalition against the Military Industrial Complex has got to step up to the plate.

Posted in Economics, Politics | Tagged , , | 17 Comments