Archive for January, 2016

Conservative Myth – Climate Change Part 1

Tuesday, January 19th, 2016

This is an interesting one because it is so revealing about both the politics and the psychology of the conservative movement in this country. It speaks directly to the power of tribalism that Jonathan Haidt and Chris Mooney have written about.

In this first part, let’s see if we can figure out why climate change denial is a uniquely American phenomena. In fact, it isn’t just a uniquely American phenomena. It is a uniquely Conservative Republican phenomena. No other conservative party in the world denies the science. They all differ on the responses to climate change, most supporting international cooperating and binding treaties as the solution rather than unilateral actions.

This is also a recent phenomenon. Nixon created the EPA and Bush I strengthened it. Even Reagan signed an international agreement to curb the aerosol pollution that was depleting the ozone layer.

US conservatives were generally aligned with international conservatives on all of the big issues. Then something changed. That something has left US conservatives alone in the world, not only on the issue of climate change, but also on issues like supply side economics, opposition to universal health care, and a virulent anti-government ideology.

Let’s see if history can provide us a clue.

History

The effect of CO2 on the temperature of the earth was predicted as early as 1824. The actual effects of coal burning were measured in 1938. The US military began funding climate research in the ‘40’s. Oceanographer Roger Revelle was the first to sound an alarm in 1957 when he predicted that the oceans would not able to absorb all the additional CO2 that the world was pumping into the atmosphere. In 1979 the Charney Report was one of the first scientific assessments of climate change. The report warned of substantial warming already under way and that, “A wait-and-see policy may mean waiting until it is too late”.

Ronald Reagan, as part of his anti-regulation agenda, politicized climate change. He appointed a climate change denier as Secretary of Energy and proposed deep spending cuts for environmental research including CO2 monitoring. Al Gore led the opposition which managed to save some of the funding. It also saw the emergence of the first prominent climate change denier, Sherwood B. Idso. Prof Idso is a soil scientist who claimed that increased CO2 would be a net gain because of the agricultural benefits. He complained when his theories were debunked in peer reviewed journals. He later became closely associated with the coal industry. When the EPA came out with a report in 1983 warning that climate change was a real, immediate, and catastrophic threat, Reagan responded calling the report alarmist. In 1988, climate scientist James Hansen testified before Congress that climate change was under way, we’d see severe effects within 50 years, and that there was broad consensus in the scientific community that human activity was the likely cause.

In 1989 the fossil fuel industry began funding a disinformation campaign. The Global Climate Coalition and the George C Marshall institute adopted the same techniques perfected by the tobacco industry. In fact they even recruited the group that invented junk science for the tobacco industry (The Advancement of Sound Science Center) to undermine climate change science. Exxon was one of their major funders. They hired a small group of scientists who disagreed with the larger scientific consensus. That group began speaking to conservative political groups. Since their theories wouldn’t pass muster in peer reviewed journals, they started publishing books to support their positions. As their arguments were refuted by the larger scientific community, the disinformation campaign switched their tactics. They began circulating the idea of a global warming conspiracy and attacking the personal reputations of the scientists supporting legitimate climate change research.

That same year (1989) conservative think tanks including the Heritage Foundation and the American Enterprise Institute got involved. They had originally been formed in the 70’s as an intellectual counter-movement to socialism. With the collapse of communism, they needed a new enemy in order to continue to support themselves. They positioned climate change as a threat to private property, free trade, and global capitalism.

In 1998, The American Petroleum Institute got into the act offering $5M to interested scientists who would help promote a program of “raising questions about and undercutting the ‘prevailing scientific wisdom’”.

This activity did not go unnoticed. Articles starting in the 2000’s documented the connections between conservative think tanks and climate change deniers. Fossil fuel industry funding of these organizations has also been well documented including a Newsweek cover article in 2007. The NYT reported in 2015 that the oil companies have known their products caused climate change since the 70’s but continued to fund deniers – much like the tobacco industry.

The dramatic rightward shift of Republican politics in general, pretty much sealed the deal. It also started with Reagan’s election, and has continued unabated since. Climate change became one of the issues of difference between the increasingly conservative Republican party and the Democrats.

From Nate Silver's fivethirtyeight.com blog

From Nate Silver’s fivethirtyeight.com blog

Here’s a good summary from an October article in the Guardian.

And it’s clear from the language the Republican Party leaders use that they view climate change not as a scientific or critical risk management issue, but rather as a Democrat issue. Thus, Republican leaders simply can’t accept the need to address climate change, because that would put the on the same side of an issue as Democrats.

Summary

An aggressive propaganda campaign waged by the fossil fuel industry and conservative think tanks has successfully positioned climate change as a political rather than a scientific topic in this country. The rightward shift in American politics provided climate change denial a constituency that it does not have anywhere else in the world. Climate change denial has become a matter of belief for many of those who make up the conservative base of the Republican Party. As a result, it is a litmus test along with supply side economics, evolution, and opposition to universal healthcare. In order to run for office in today’s Republican Party, you have to at least question, if not outright deny the science of climate change.

While it won’t change any conservative minds, in the next segment I’ll go through the six stages of denial for those who question climate change. This won’t touch on every objection that has been raised over the past 25 years of propaganda, but it does follow a fairly logical progression and will address the majority of denial views.

More Thoughts on Income Inequality

Saturday, January 16th, 2016

Paul Krugman recently published a good summary of the historical discussions regarding income inequality.

Before diving into climate change, I thought it would represent a reasonable addendum to what has already been posted.

It does venture in a little bit into the territory of why we should reduce income inequality and how we should go about doing that.

First let’s explore the three generally accepted reasons for the current huge income inequality.

Productivity
People get paid based on the value of their work. The reason some people get paid hundreds or thousands of time more than other people is because they are uniquely capable, skilled, and experienced. It is the old plumber joke. A man calls a plumber because he is having a problem. The plumber walks in, looks around for a minute, and hits a pipe with his hammer. The problem is fixed. The plumber hands the homeowner a bill for $100. The homeowner objects complaining that the plumber was only in the house for 10 minutes. The plumber takes the invoice back, adds these itemizations, and hands it back to the homeowner. Labor – $20. Knowing which pipe to hit and where to hit it – $80.

For the record, I have no problem with those with unique skills getting paid what the market will bear for those skills. Those include athletes, entertainers, and actors as well as brilliant developers and visionary entrepreneurs.

Luck
People get rich because they are in the right place at the right time. No better example of that than the recent Powerball lottery. That event produced roughly 5 people each worth $200M or so after taxes. Their chances of winning were ridiculously thin, but they won none the less because there are always winners. Not many who participated in one of our gold rushes struck it rich either, but the number of people who did participate spoke to the belief in this country that we all have an opportunity to strike it rich. But this sort of windfall has nothing to do with character, talent, or persistence. Just luck. That same luck is evidenced in the fact that parentage directly or indirectly accounts for a significant percentage of those who are wealthy today. This whole concept of “wealthy” luck was explored deeply in Malcom Gladwell’s Outliers book.

I have no problem with those who end up being wealthy because they were lucky. I don’t think that they have any standing to suggest that a higher tax rate will somehow reduce the small percentage of people who figuratively or literally win the lottery. But I agree that we have always been a “gold rush” country where we celebrate the good fortune of those who overcame enormous odds through blind dumb luck.

Power
Executives at large corporations who get to set their own compensation programs. Financial speculators who benefit from information that the rest of the market doesn’t have. Fraudsters who get rich off schemes that fleece the naïve or greedy. Power brokers who are able to exchange political power for financial gain.

These are the segment of wealthy that I think are the most troublesome. That’s because they use their wealth to acquire political influence. They use that political influence to gain an unfair advantage. That process is corrosive in a democratic society.

So What
There is the claim that “it has ever been thus”. We’ve always had income inequality, the claim goes. What is so different now?

The difference is that the income inequality is now larger than it has been since the robber baron gilded age. The public’s disgust about the influence of wealth at that time elected reformers like Teddy Roosevelt and William Howard Taft. These wealthy civic-minded leaders realized that our democracy couldn’t survive if so much wealth was concentrated in the hands of so few people. That’s because our political system then, and our political system now, allows money to purchase political influence. Those that are driven to dominate industries through economic power see political power as just another opportunity to acquire an unfair advantage over their competitors. Reformers passed legislation to break up the trusts and monopolies built by folks like Morgan, Carnegie, Rockefeller, and Schwab.

I’ve documented how the same thing is going on in markets today. It is clearly more sophisticated, but it is no less insidious.

There are certainly those, like Mark Zuckerberg, who built his fortune on the strength of a great idea that created a whole new category of software. We can talk about his luck of being in the right place at the right time, combined with being born into a wealthy family that could afford to send him to the best schools, to getting accepted at Harvard at a time when the college-based social networks were just taking off. But for every Mark Zuckerberg, there are roughly 30 corporate execs just making a salary.

70% of the top .1% of fabulously wealthy wage earners are corporate execs, financial professionals, real estate speculators, and lawyers. It is this dramatic growth in executive salaries that has been the dominant force in creating a new gilded age.

What Should Government’s Role Be?
That leaves the fundamental question of the purpose of progressive taxation, government oversight in market rules making, and money in politics.

The extraordinary gap between the rich and poor, driven by power rather than luck or skill, demonstrates that money is already providing the “Power” wealthy inordinate influence in politics. The powerful have already reduced the impact of taxation on their annual income as well as increased their ability to preserve their wealth for their heirs. They have manipulated the rules of the marketplace to provide their companies an unfair advantage against both competitors and the public. Finally they have achieved this by becoming the primary funders for political campaigns of those politicians who are willing to do their bidding. Four hundred families have provided half the funding for the current presidential campaign. That is unprecedented.

Progressive taxation is not punishment for success. Instead it is a tool that a democratic society can use to balance the political power that naturally accrues to the wealthy. The purpose of that balance is not to discourage success, but rather to lower the barriers that the “Power” wealthy can put in place to make it more difficult for others to succeed.

Revenues generated from higher taxes on those that I characterize as “powerful”, can be used to build a stronger social safety net and provide access for all citizens to the tools (education, investment, and government subsidies) needed to participate in the start-up economy. The 50’s and 60’s were the period of our most rapid growth and technological progress. We also had much higher top tax rates and much lower income inequality. Sweden is a good example of a high-tax, low-inequality state today. They have high marginal tax rates on their top earners and a very healthy start-up economy. They use the revenue generated from these high taxes on top earners to build a strong social safety net. They claim that this strong safety net encourages more risk taking because it reduces the personal costs of failure.

Creating markets that operate more fairly than today’s markets protect investors and reward innovation in ways that our current markets don’t. Most start-ups get acquired today because big companies continue to have significant market advantages over small ones. Freeing up small companies from issues of tortuous patent infringement, contractual barriers to competition, and de-facto monopolies will benefit consumers and the economy in general.

Breaking the connection between money and political influence will deliver on the promise of our democracy. One person. One vote.

Summary
The issue is not wealth.

The issue is not talent.

The issue is not luck.

The issue is how we want our economy to function.

We currently have a wealth-based economy. Wealth-based economies are inherently less stable than consumer-based economies. Our wealth-based economy was not the natural outgrowth of the disruptive events of automation. It was the unnatural influence of money on government policies. Those government policies encouraged a dramatic increase in corporate executive compensation that was not justified by company performance, allowed insider trading and stock manipulation, and increased corporate power and protection which weakening the bargaining power of workers.

I submit that a wealth-based economy is also not sustainable in a democracy. That’s because the natural tendency of those who have wealth is to protect it. That “protection” inevitably becomes influence on government policies from taxation, to market rules, to executive compensation.

At some point, those who are not part of the wealthy class will begin to realize that they are playing a game that is rigged against them. Rewards don’t go to those who are willing to work hard and play by the rules. Rewards go those who make the rules.

In a democracy the rules should be made by and for the largest number of voters. Right now many of our rules benefit only a small minority – an oligarchy.

One of those rules will be a rejection of the myth that high taxes discourage investment innovation. There is no data to support that claim. Innovation suffers when markets are dominated by large companies and rules/monopolies prevent the emergence of disruptive technologies.

If we want to encourage innovation, subsidize education, promote new business formation, expand the social safety net, and invest in emerging technologies. That would increase the number of “Productivity” billionaires even with high marginal tax rates. We would return to the meritocracy of the 60’s where talent and determination opened the doors to opportunity. Today, parentage is the primary determination of success.

We would not reduce the number of “lucky” wealthy because taxes have no impact on luck. Those who are lucky will continue to be lucky and should in some ways be willing to give back to a society that afforded them an opportunity that they didn’t themselves deserve.

We WILL reduce the number of those who achieve their wealth through warping the marketplace to their own benefit. The savings will diversify our economy, reduce those companies that became “too big to fail”, and close all of the loopholes and shortcuts to prosperity that only the “smart” money could take advantage of. In other words, those who in the past depended on Power to secure their wealth will now have to work for it just like everyone else.

That may result in some of the fabulously wealthy becoming just wealthy. It may also reduce inequality, but inequality will always be with us. It will expand opportunity which has always been the basic promise of this country.