The Coffee Klatch with Robert Reich

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How Trump will win the midterms for the Democrats Apr 04, 2022

Show notes

I know the conventional wisdom about midterm elections — the party in power loses big — and I’ve lived through enough midterms to know that the conventional wisdom is mostly correct. Does this make Biden and the Democrats toast when it comes to retaining control of the House and Senate? No — especially because of one huge loose cannon aimed at the Republican Party: Donald Trump.

About 30 percent of Americans love the guy, but a majority detest him. He’s toxic. As Republican Governor Chris Sonunu said of him Saturday night, “He's f***ing crazy!” Almost every time Trump moves center stage, Republicans’ odds decline. This is especially true in the swing suburbs that will determine the outcome of the midterms.

For a few months I thought Trump would stay quiet, but he’s constitutionally unable to keep his big mouth shut. This past week, he trumped his way into the news:

He loudly un-endorsed Alabama Rep. Mo Brooks, now running for a Senate seat, who returned the un-favor by disclosing that Trump repeatedly (including recently) pressed Brooks to overturn the 2020 presidential result. Expect Brooks to be called by Congress’s select committee investigating the reasons for the January 6 insurrection.

He called on Vladimir Putin to release dirt on the Bidens. Talk bad timing. Putin’s thugs were at that moment committing atrocities in Ukraine. Trump instantly reminded everyone that he had called on Ukrainian President Zelensky to dig up dirt on the Bidens during the 2020 presidential campaign by threatening to withhold U.S. military aide intended to defend Ukraine against Russia, and in the 2016 campaign had called on Putin to release Hillary Clinton’s emails. But in 2016 and 2020 the American public merely considered Putin to be bad news. Now he’s the arch-villain of the world.

He gave an incendiary speech at Michigan Stars Sports Center in Washington Township, Michigan, where he criticized Biden's presidency and teased another presidential campaign. "We're gonna bring back law and order," he told the crowd.

It was also revealed last week that Virginia Thomas (wife of Supreme Court justice Clarence Thomas) had, in the weeks following the 2020 election, pressed Trump’s chief of staff to do everything possible to reverse the outcome of the election.

And last week Congress recommended to the Justice Department that two former Trump advisers, Dan Scavino and Peter Navarro, be criminally charged with contempt of Congress for refusing to appear before the select committee investigating the January 6 insurrection. (This coming Thursday, Trump’s son-in-law, Jared Kushner, is expected to “voluntarily” appear before the committee. He will not be protected by executive privilege.)

Wait. I’m not done. Last Monday, federal Judge David Carter ruled that Trump, along with John Eastman (the lawyer who had advised him on how to overturn the 2020 election) had most likely committed felonies, including obstructing the work of Congress and conspiring to defraud the United States. (The January 6 committee – which is weighing making a criminal referral to the Justice Department -- had used a filing in the case against Eastman to lay out the crimes it believed Trump might have committed.) Judge Carter noted that Trump likely knew that Eastman's plan to throw out electoral votes was illegal because the “illegality of the plan was obvious,” and cited strong evidence of a “corrupt mindset,” such as Trump’s phone call to Georgia Secretary of State Brad Raffensperger in which he famously asked the secretary to "give [him] a break" and "find 11,780 votes" (one vote more than Biden's margin of victory in that state).

And this was just one week.

Remember, the January 6 committee’s report will be released in a few months. Expect a firestorm that may even force Hamlet-like Attorney General Merrick Garland to charge Trump with crimes. (Some argue that America does not prosecute its former presidents. While that’s historically true, before Trump no former president had launched an attempted coup or criminal insurrection.)

As if all this weren’t enough to keep him in the news, Trump has placed big midterm election bets on dozens of ballots across the nation, through Trump-branded “endorsements.” This means Trump will be a central player in campaigns just about everywhere.

So whether the Republican Party likes it or not (and even if Democrats are reluctant to talk about Trump because political operatives advise them not to) Trump is going to feature big in the upcoming midterms. As a result, the swing suburbs are more likely to vote Democratic – increasing the odds that Democrats will keep control over the House and Senate.

This is no guarantee that Democrats will keep control over the House and Senate, of course. As I’ve said countless times, Democrats need an economic-populist message to put them over the top because most Americans accurately believe the economic game is rigged in favor of the super-wealthy and are furious about it — and if Democrats don’t talk about this no one will. (The Republicans won’t deliver this message; they’re too busy stirring up culture wars.) Nevertheless, Trump remains for Democrats the gift that keeps giving.

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The secret to Amazon workers' extraordinary win Apr 02, 2022

Show notes

Yesterday was a big day for American workers. I want to start with the remarkable worker victory at Amazon’s giant warehouse on Staten Island and then move to yesterday’s great jobs report — and the real danger lying within it.

First, the victory. America’s wealthiest, most powerful, and fiercest anti-union corporation — with the second-largest workforce in the nation (union-busting Walmart being the largest) — lost out to a group of warehouse workers who voted to form a union, by a remarkable 2,654 to 2,131. Even more remarkably, the workers won without any assistance from an established union or professional organizer.

If anyone had any doubts about Amazon’s determination to prevent this from ever happening, the corporation’s scorched-earth anti-union campaign in its Bessemer, Alabama warehouse should have put those doubts to rest. In New York, Amazon used every tool it had used in Bessemer, and then some. Many of its techniques are illegal under the National Labor Relations Act (hence the decision of the National Labor Relations Board to hold another election in Bessemer), but Amazon couldn’t care less. It’s rich enough to pay any fine or bear any public relations hit.

To put it bluntly, Amazon is one of America’s worst employers. It treats its warehouse workers like dog dung. The company has repeatedly fired workers who speak out about unsafe working conditions or who even suggest that workers need a voice. The corporation doesn’t mind a yearly turnover rate of warehouse employees exceeding 100 percent, because the jobs are designed to induce burnout so workers don’t stay and organize.

As its corporate coffers bulge with profits — and its founder and executive chairman practices conspicuous consumption on the scale not seen since the robber barons of the late 19th century — Amazon has become the textbook exemplar of 21st-century corporate capitalism run amok.

Much of the credit for yesterday’s victory over Amazon goes to Christian Smalls (see interview below), whom Amazon fired in the spring of 2020 for speaking out about the firm’s failure to protect its warehouse workers from COVID. Smalls refused to back down. He went back and organized a union. It was an extraordinary feat. Talk about David and Goliath.

But Smalls had something else working in his favor — which brings me to yesterday’s jobs report from the Bureau of Labor Statistics. The report showed that the economy continues to roar back to life from the COVID recession. With consumer demand soaring, employers are desperate to hire. This has given American workers more bargaining clout than they’ve had in decades. Wages have climbed 5.6 percent over the past year, according to yesterday’s jobs report. The acute demand for workers has also bolstered the courage of workers (such Amazon’s warehouse workers on Staten Island and Starbuck’s baristas) to demand better pay and working conditions, even from the most virulently anti-union corporations in America.

Is something to worry about? Not at all. America workers haven’t had much of a raise in over four decades. Since the late 1970s, most of the economy’s gains have gone to the richest 10 percent, largely to the richest 1 percent of the richest 10 percent. It’s about time average workers took home a piece of the pie. Besides, inflation is running so high that even the 5.6 percent wage gain over the past year is far less in terms of real purchasing power.

But corporate America believes these wage gains are contributing to inflation. As the New York Time solemnlyreported yesterday, the wage gains “could heat up price increases at a time when the Federal Reserve is trying to cool them down.”

This is pure rubbish. Unfortunately, Fed chair Jerome Powell believes it. He worries that “the labor market is extremely tight,” and to “an unhealthy level.” As a result, the Fed is on the way to raising interest rates repeatedly in order to slow the economy and reduce the bargaining leverage of American workers.

Pause here to consider this: The Commerce Department reported Wednesday that corporate profits are at a 70-year high. You read that right. Not since 1952 have corporations done as well as they are now doing. Across the board, American corporations are flush with cash. Although they’re paying higher costs (including higher wages), they’ve still managed to increase their profits. You see, they have enough pricing power to pass on those higher costs to consumers, and even add some more for themselves.

So when American corporations are overflowing with money like this, why should anyone believe that wage gains will necessarily “heat up price increases,” as the Times blindly reports? In a healthy economy, corporations would not be passing on higher costs — including higher wages — to their consumers. They’d be paying the higher wages out of their profits. But that’s not happening. Corporations are using their record profits to buy back enormous amounts of their own stock in order to keep their share prices high. The labor market isn’t “unhealthily” tight, as Jerome Powell asserts; corporations are unhealthily fat. Workers don’t have too much power; corporations do.

So let’s celebrate the extraordinary win of the workers of Amazon’s Staten Island warehouse. Let’s hope that it marks the beginning of a renewal of worker power in America. Yet here’s the reality: Corporate America doesn’t want to give up any of its record profits to its workers. If it can’t fight off unions directly, it will do so indirectly by blaming inflation on wage increases, and then cheer on the Fed as it slows the economy just enough to eliminate American workers’ new bargaining clout.

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The pending death of the Supreme Court Mar 31, 2022

Show notes

Andrew Jackson allegedly defied the Supreme Court in 1832 over a case called Worcester v. Georgia, involving Georgia's attempt to apply state laws to Cherokee lands. As the story goes, Jackson announced “John Marshall has made his decision now let him enforce it.” Whether Jackson actually said this is disputed, but it illustrates a fundamental truth about the Supreme Court: It has no power to enforce its decisions. Alexander Hamilton called it the “least dangerous branch” because it has neither the “purse” of Congress nor the “sword” of the President.

So what does it have? Nothing but public trust. That trust is now eroding — faster and more dangerously for the Court’s future than at any time in its history. The Supreme Court confronts a profound crisis of legitimacy.

Consider:

1. After several days of hearings last week on the confirmation of Judge Ketanji Brown Jackson, Republicans on the Judiciary Committee made it clear they had no interest in knowing anything about her, but only making false charges and smearing her with innuendo. Her credentials are impeccable, but their relentless and baseless attack on Jackson’s sentencing in child pornography cases demeaned her — and further eroded the Supreme Court’s standing and integrity. (Although Judge Jackson appears certain to win Senate confirmation, almost all of the Senate’s 50 Republicans will vote against her.)

2. Then came the news that Virginia Thomas, wife of Clarence Thomas, had been actively engaged in trying to overturn the outcome of the 2020 election, including being present at the Trump rally immediately preceding the assault on the U.S. Capitol and sending numerous emails to Mark Meadows, then Trump’s Chief of Staff, urging him to find ways to reverse the election. Yet without recusing himself or revealing his wife’s activities, Thomas was the only justice to dissent in the Supreme Court’s decision in January to reject Trump’s request to block documents from being released to the House select committee investigating the January 6 insurrection.

3. The Court’s legitimacy was already under a cloud because of Trump’s and Mitch McConnell’s relentless packing of it. Starting with the blockade of Merrick Garland’s nomination in 2016 and culminating in the rushed confirmation of Amy Coney Barrett just days before the 2020 election, Republicans have signaled that partisanship is at the heart of the court’s decision-making. (Not to forget the right-wing justices who cut off the Florida recount and handed the 2000 presidential election to George W. Bush and the right-wing justices who effectively nullified the Voting Rights Act after Congress voted nearly unanimously to renew it.)

All this worries me on several levels. I know the Supreme Court. (I’m fortunate enough to have argued cases before it. I also clerked for the chief judge of the First Circuit, several of whose decisions went to the Supreme Court.) The Supreme Court can be, and has been, a remarkable institution for the public good. America needs a Supreme Court that can be trusted to make difficult decisions — especially when it comes to protecting the rights of individuals and minorities. The political branches cannot do this because at best they reflect the will of the majority, at worst they reflect the will of the wealthy and powerful.

Yet the Court can protect the powerless in our society only if it is trusted by most Americans. When in 1954 the Supreme Court decided that racially segregated schools violated the constitutional rights of Black children, many Americans were outraged. They ultimately came around, in part because of the trusted role the Court held in American society. When in 2015 the Court narrowly ruled that the Constitution guarantees a right to same-sex marriage, it also faced blowback. Yet here again, its decision was considered the law of the land.

The only person with the stature and responsibility to rescue the Court from its current death spiral is its chief justice, John Roberts. (Those who claim a chief justice doesn’t have power over his colleagues doesn’t understand the Court. A chief has the power to assign the writing of decisions in cases where he’s in the majority. He also has power over countless perks. And he has the informal authority to speak for the Court with the political branches and, unofficially, with the media.)

Roberts must do four things:

1. Push the Court to accept a code of ethics similar to the code now governing the lower federal courts.

2. Ask Clarence Thomas to recuse himself from all further cases involving Donald Trump or the January 6 attack on the Capitol.

3. Become an outspoken public advocate of the Court’s impartiality and a critic of those who would use it for partisan ends.

4. Openly and clearly ask the Senate to conduct confirmation hearings in ways that respect the impartiality and integrity of the Court.

In September 2005, I testified against Roberts’ confirmation to be chief justice because I was not convinced he would adequately protect the Court’s integrity. As I noted then — I’ve included a clip below — Roberts had told the Judiciary Committee that he would side with the powerful (the “big guy”) when the Constitution told him to and with the weak (the “small guy”) when the Constitution told him to. But the Constitution says nothing about protecting the powerful. It is entirely about protecting the rights of individuals and minorities from the powerful.

The Court will not die. But unless Roberts responds adequately to the current crisis of legitimacy, it will be reduced to becoming yet another instrument by which the wealthy and powerful entrench themselves — another casualty of the vicious and divisive era in which we are living.

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Office Hours: How are you staying hopeful in these trying times? Mar 30, 2022

Show notes

A pandemic that hasn’t ended. Inflation that’s soaring. Putin’s war in Ukraine that could escalate into a nuclear confrontation. A climate crisis that’s worsening. Trump and his followers’ continued attacks on our democracy. I could go on.

I don’t know about you, but I’m feeling a degree of stress I don’t remember feeling in a very long time.

So here’s today’s Office Hours question: How are you staying hopeful in these trying times? At least, what are your coping mechanisms?

Please let us know. I’ll give you my two cents as well.

Okay, it’s now time for me to weigh in.

Several of you have asked me how I stay hopeful, and what are my coping strategies in stressful times like these. I rely on six.

1. Young people. My students (all 750 of them this semester) are mostly around 20 years old. My colleagues at Inequality Media are mostly in their late 20s. In other words, all are about a half-century younger than I am. Their energy, optimism, laughter, and hopefulness are hugely infectious.

2. Laughter. I try to find at least five things to laugh at each day (including myself). As I age, I find that the world is brimming with ironies, that the cosmos is deviously humorous, and that most of the people I know or read about are hilarious (whether they know it or not).

3. Activism. I not only stay active physically, but also try to help push my small corner of the world toward truth and social justice. The more I do, the better I feel. I love this Substack because it gives me an opportunity to share some thoughts and ideas with you, and hear your own thoughts and ideas.

4. Nature and personal time. I’m blessed to live in a beautiful place, with gorgeous flora and with mountains descending into glorious valleys and to the sea, along with easily accessible trails. Quiet walking through this fabulous environment puts me at ease.

5. Dance. There is nothing that lifts my spirits more quickly than clicking on a song by Paul Simon, the Doobie Brothers, Stevie Wonder, Ray Charles, James Brown, Marvin Gaye, Sam Cooke, Buena Vista Social Club, or Dolly Parton – and dancing. My preference is to dance with someone, but I’m perfectly happy to dance alone in my kitchen.

6. History. Not only do I love to read it, but I learn a great deal from reading it – especially the truism that we’ve been here before. Lately I’ve been focusing my attention on the years between 1870 and 1916 – the first Gilded Age, followed by the Progressive Era. I’ve found many parallels between then and now, along with quite a bit that’s encouraging.

What I’ve left out and why:

Friends? I have them, and sometimes they contribute to one of the six-mentioned coping mechanisms above. But (and here again, probably age-related) I’ve found that too often our get-togethers descend into gripe sessions about the nation, the world, or personal health. Ugh.

Family? I love them dearly. But I don’t rely on them to buoy my spirits. That’s too much of a burden to place on them. And, of course, families are complicated in all sorts of ways.

Work? I’m trying to cut back on the parts of my work that don’t fit under the six-mentioned coping mechanisms, because they’re mostly meetings about processes or they’re paperwork or they require bureaucratic problems. I don’t really enjoy any of this, and I have less and less time for them.

Any of this helpful to you?

(Oh, and here’s a video …)

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Really? A billionaire tax? Now? Are you kidding me? Mar 29, 2022

Show notes

President Biden’s budget, which came out yesterday, proposes a new minimum tax of 20 percent on households worth more than $100 million — which the White House says will reduce federal budget deficits by $1 trillion over a decade. The tax would apply only to the top 0.01 percent -- the richest 1 percent of the richest 1 percent. Half of the expected $1 trillion in revenue would come from 704 households worth $1 billion or more.

If enacted, it would effectively prevent the wealthiest sliver of America from paying lower rates than middle-class families, while helping to generate revenues to fuel Biden’s domestic ambitions and keep the deficit in check relative to the U.S. economy.

Recall that America’s 704 billionaires have increased their wealth by $1.7 trillion since the start of the pandemic in February 2020, while most Americans have struggled to make ends meet. That means the billionaires could theoretically pay for everything Joe Biden and House Democrats have proposed — from childcare to climate measures — and still be as wealthy as they were at the start of the pandemic. Elon Musk’s pandemic gains, for example, could cover the cost of tuition for 5.5 million community college students and feed 29 million low-income public-school kids, while still leaving Musk richer than he was before Covid.

The dirty little secret is the ultra-rich don’t live off their paychecks. They live off their stock portfolios. Jeff Bezos’s salary from Amazon was $81,840 in 2020 yet he rakes in some $149,353 every minute from the soaring value of his Amazon stocks, which is how he affords five mansions, including one in Washington DC with 25 bathrooms. (Why would anyone want 25 bathrooms?)

So if you want to tax billionaires, you have to go after their wealth.

But does Biden’s plan have a snowball’s chance of getting this enacted in the hell called Washington? The problem is the old political chicken-and-egg: A big reason why the super-wealthy have done so well is they’ve bankrolled politicians who alter laws (such as tax laws) to give them even more wealth. They’ve bought armies of lobbyists to keep their taxes minuscule and create tax loopholes large enough to drive their Lamborghinis through.

ProPublica’s bombshell report last June showing America’s super-wealthy paying little or nothing in taxes revealed not only their humongous wealth but also how they’ve parlayed that wealth into political power to shrink their taxes. Jeff Bezos, the richest man in America, reportedly paid no federal income taxes in 2007 and 2011. Elon Musk, the second richest, paid none in 2018. Warren Buffett, often ranking number 3, paid a tax rate of 0.1 percent between 2014 and 2018.

All previous efforts to tax America’s super-rich have failed amid major political head winds. Republican senators obviously won’t bite the billionaire hands that feed them, and so – yet again – Biden needs every Democratic senator’s vote. But why would any sane person who has followed politics over the last year suppose that Joe Manchin and Kyrsten Sinema will go along? Haven’t we been here before?

Yes, except that for months now Manchin has been on the receiving end of unremitting horse dung — not just from progressives but from establishment Democrats who accuse him of torpedoing any chance Biden and the Democrats have of retaining control over Congress after the midterms. Manchin has also been criticized by the mainstream press for taking big money from coal interests and then voting down climate measures (see yesterday’s New York Times front page feature story, here). In other words, Manchin badly needs some cred.

Manchin has also expressed concern about the size of the federal budget deficit. And in December, he told the White House he would support some version of a tax targeting billionaire wealth.

What really convinces me Biden’s billionaire tax stands a chance is that I doubt the White House would risk another big public loss to Manchin. After getting all hell beat out of them for building public expectations of passing Build Back Better, only to have Manchin kill it, Biden and his staff would not propose another big initiative unless Manchin had already given it the green light.

What about Sinema? She’ll go along with whatever Manchin ultimately votes for.

So a billionaire tax is by no means dead. Even in this disappointing year, I’m staying hopeful.

(By the way, check out our latest video:)

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Why do Putin, Trump, Tucker Carlson, and the GOP sound so much alike? Mar 28, 2022

Show notes

In a speech on Friday delivered from his office in the Kremlin, Putin criticized the West’s “cancel culture” which, he charged, is “canceling” Russia -- “an entire thousand-year-old country, our people.” It was the third time in recent months Putin has blasted the so-called “cancel culture.”

Which is exactly what Trump, Tucker Carlson, and the GOP have blasted for several years.

"The goal of cancel culture is to make decent Americans live in fear of being fired, expelled, shamed, humiliated and driven from society as we know it," Trump said as he accepted his party's nomination at the Republican National Convention in 2020.

Tucker Carlson, one of Fox News’s most prominent personalities, has charged that liberals have been trying to cancel everything from Space Jam to the Fourth of July.

Putin’s fixation on transgender and gay people has also been echoed on the American right. Republican state bills aimed at limiting LGBTQ rights or discussion in schools are soaring. Last fall — months before Texas Republican Governor Greg Abbott threatened to criminalize parents who give their transgender children gender-affirming care — Putin argued that teaching children about different gender identities was “on the verge of a crime against humanity.”

Then there’s admiration for Putin himself. Just before Putin ordered a full-scale invasion of Ukraine, Trump deemed him "savvy," "genius," and "smart” for “taking over a country, literally, a vast, vast, location, a great piece of land with a lot of people, and just walking right in.”

On his Fox News program Carlson asked, rhetorically, “why do I hate Putin so much? Has Putin ever called me a racist? Has he threatened to get me fired for disagreeing with him?” But Carlson called Ukraine “an obedient puppet of the Biden State Department,” and suggests Putin’s invasion was nothing more than a “border dispute.”

Putin’s lies and the lies coming from America’s extreme right are mutually reenforcing. Carlson’s Fox News segments show up in Russian propaganda. And when the American site “Infowars” resurrected an unfounded Russian claim that the United States funded biological weapons labs in Ukraine, Putin repeated the Infowars story.

To conclude from all of this that authoritarians think alike is to miss a deeper truth. Putin, Trump, Carlson, and a growing number of rightwing commentators and activists have been promoting much the same narrative — for much the same reason.

Remember, Putin was put into power by a Russian oligarchy made fabulously rich by siphoning off the wealth of the former Soviet Union. Likewise, Trump and the radical right in America have been bankrolled by an American oligarchy — Rupert Murdoch, Charles Koch, Rebekah Mercer (daughter of hedge fund tycoon Robert Mercer), Blackstone CEO Stephen Schwarzman, and other billionaires.

What do these two sets of oligarchs get in return? Strongmen divert the public’s attention away from the oligarchs’ hijacking of their economies toward cultural fears of being overwhelmed by the “other.” Putin’s MO has been to fuel Russian ethnic pride and nationalism. The Trump-Carlson-radical right’s MO has been to fuel white American nationalism.

In both cases, strongmen and their allies have mythologized a “superior” culture (replete with creation stories of blood ties, motherlands, and religion) supposedly endangered by decadent forces intent on attacking and overwhelming it.

To Putin, the decadent force is the West. As he put it Friday, “domestic culture at all times protected the identity of Russia,” which “accepted all the best and creative, but rejected the deceitful and fleeting, that which destroyed continuity of our spiritual values, moral principles and historical memory.” Hence, a mythic justification for taking Ukraine back from a seductive but inferior Western culture that threatens to overwhelm it and Russia.

The Trump-Carlson-white nationalist narrative is similar: America’s dominant white Christian culture is endangered by Black people, immigrants, and coastal elites who threaten to overwhelm it.

The culture wars now being orchestrated by the Republican Party against transgender people, gay people, poor women seeking abortions, and schools that teach about sex and America’s history of racism, emerge from the same narrative as Putin’s culture war against a “decadent” West filled with “sociocultural disturbances.” As does the right’s claim that “secularists” have, in the words of former Trump Attorney General William Barr, mounted “an unremitting assault on religion and traditional values.”

These tropes have served to distract attention from the systemic economic looting that oligarchs have been undertaking, leaving most people poor and anxious. Which is why the grievances that Putin, Trump, Carlson, and the GOP use are unremittingly cultural; they are never economic, never about class, and most assuredly not about the predations of the super-rich.

Reduced to basics, today’s oligarchs and strongmen (along with their mouthpieces and lackeys) are trying to justify their wealth and power by attacking liberal values that have shaped the West, beginning with the enlightenment of the seventeenth and eighteenth centuries – the values of tolerance, openness, democracy, self-government, equal rights, and the rule of law. These values are incompatible with a society of oligarchs and strongmen.

Ultimately, the oligarchs and strongmen will lose. Putin won’t succeed in subduing Ukraine, Trump won’t be reelected president, and Carlson and his ilk won’t persuade Americans to give up on American ideals. But the culture wars won’t end anytime soon because so much wealth and power have consolidated at the top of America, Russia, and elsewhere around the world that anti-liberal forces have risen to justify it.

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Warning: The Fed is aiming a battering ram at the American economy Mar 26, 2022

Show notes

As Putin’s war shakes up the world economy, the Fed last week raised interest rates by a quarter point and penciled in six more increases by the end of the year. Fed Chair Jerome Powell says he’s ready to do whatever it takes to bring inflation down, including following the example of his predecessor Paul Volcker, who increased interest rates to 20 percent in 1981.

Volcker’s rate rise triggered a deep recession and double-digit unemployment. We can debate whether that harsh medicine in 1981 was necessary. What should be clear is that the current inflation is nothing like the inflation of the late 1970s — a time when nearly a quarter of all private-sector workers were unionized and American corporations couldn’t easily outsource production. Today, only 6 percent of private-sector workers are unionized — which means workers have almost no long-term bargaining leverage. And today American corporations can outsource almost anywhere (although China is becoming more complicated, and Russia is now off limits).

Inflation is running almost 8 percent annually, which is surely a problem. But it’s not due to permanent wage or price hikes. In fact, it has nothing to do with the business cycle. So expecting the Federal Reserve to remedy today’s inflation by raising interest rates to slow the economy is like trying to cool off on a hot day by aiming a battering ram at your head. Wrong diagnosis. Wrong remedy. The current inflation is the consequence of a perfect storm of unique events that won’t recur — and won’t be remedied by higher rates.

We’re emerging from a once-a-century pandemic during which much of the world economy closed down. In March through May 2020, demand evaporated as people retreated into their homes. Because the nation’s (and world’s) productive capacity couldn’t be closed down all at once (productive capacity includes factories, offices, warehouses, and so on, all of which take a while to wind down), the resulting excess of supply over demand caused a deep recession.

Now, at the other end, and without much opportunity to buy for the last two years, American consumers are flush with cash (the national savings rate is at its highest level in decades). So they want to buy lots of stuff (and they haven’t yet gone back to spending much on services such as restaurants, hotels, air travel, movies and other places where COVID reigned for two years). Yet the nation’s (and the world’s) productive capacity can’t be fully operational all at once. The resulting excess of demand over supply is causing major inflation.

That inflation is being driven by other unique events as well. In housing, the real engine of rising prices is demographics. The huge Millennial generation (the largest in American history), born in the 1980s, is now storming into the housing market after COVID closed their world for two years. Making matters worse, the Great Recession clobbered the construction industry, dramatically reducing the number of available houses to buy or rent.

Energy prices are soaring mostly because of Putin’s war (they were rising even in anticipation of it). So are food costs. (Russia and Ukraine together provide about one-quarter of all the planet’s wheat exports.)

Another culprit is the pricing power of big corporations. In a White House briefing last fall, National Economic Council Director Brian Deese noted that half of the overall increase in food prices is due to spikes in the cost of beef, pork, and poultry, which has fueled record profits among the four biggest producers that control most of the market. "It raises a concern about pandemic profiteering — about companies that are driving price increases in a way that hurts consumers who are going to the grocery store, and also isn't benefiting the actual producers — the farmers and the ranchers," Deese said.

Profiteering is occurring over much of American industry, as I’ve chronicled on these pages, here and here.

If you don't believe that corporations are taking advantage of their pricing power and inflation to raise prices, just listen to corporate executives themselves. The Chief Financial Officer of Constellation Brands, the parent company of Modelo and Corona beers, told investors in January that the company wants to “take as much as [we] can” from customers. (Publicly, however, the company has blamed rising material costs for their increased prices.) Here’s another: The grocery food brand Hormel saw a 19 percent increase in their operating income in the first quarter of 2022. Their CFO’s response to these soaring profits? “We’ve done a great job with our pricing.”

Of course corporate financial officers want to brag about profits. But if their corporations were actually competing against other corporations in the same industry, they’d absorb cost increases in order to keep their prices as low as possible so consumers didn't abandon them. Today, however, corporations have been raising prices even as they rake in record profits by coordinating price hikes with the handful of other big companies in their industry. That way, all of them come out ahead — while consumers and workers lose.

Raising interest rates won’t remedy any of this.

Which gets me back to trying to cool yourself down on a hot day by aiming a battering ram at your head. You won’t get cooler. You’ll only get a very bad headache. That’s exactly what the Fed will do to the economy if it sticks to its plan. The Fed’s rate hikes won’t remedy inflation. They will do the opposite. Since World War II, most Fed rate hikes have resulted in recession.

Over the longer term, it’s necessary to attack the pricing power of big corporations in America who are profiteering off the pandemic. For now, it’s best to ride out the perfect storm.

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Ukraine, climate change, and the common good Mar 24, 2022

Show notes

Joe Biden is in Europe today, consulting with NATO allies about how to ratchet up the pressure on Putin. I’ve been mulling how we might respond to Putin’s war not just by ratcheting up pressure but also by doing something positive for the world. As Europe and America cope with the energy problems resulting from the war, it strikes me that this is the perfect time to face the climate crisis and conserve energy. I think Biden should be asking Europeans and Americans to make this sacrifice. Let me explain.

United Nations secretary general Antonio Guterres said on Monday that the world is “sleepwalking to climate catastrophe” by continuing to rely on fossil fuels, and that nations racing to replace Russian oil with their own dirty energy are hastening the catastrophe. Guterres noted that the climate goals agreed to in Glasgow last year are being neutered by Putin’s war. The pollution that’s dangerously heating the planet continues to increase.

Joe Biden promised a rapid transition to clean energy in America but hasn’t started it yet. Legislation to accelerate America’s shift to renewables has been stalled in Congress, largely courtesy of West Virginia coal baron Joe Manchin. Biden has moved on to other priorities, such as containing Putin.

But climate change is completely entwined with Putin’s aggression. The world is experiencing the grave consequences of its dependence on oil from dictators like Putin, Venezuela’s Nicolás Maduro, and Saudi Arabia’s repressive regime.

So why not make Putin’s war into an urgent invitation to conserve energy? While Ukrainians are on the front line in the battle between democracy and tyranny, shouldn’t the rest of us be summoned to sacrifice in that battle by conserving energy? Shouldn’t we be asked to do everything we can -- from small acts such as turning off lights, traveling less, and reducing meat consumption to larger ones like switching to electric cars and putting up solar panels?

Yet Biden has not even asked Americans to conserve. Political pollsters are telling him not to. Lee Maringoff, director of the Marist College Institute for Public Opinion, warns that Biden would face a backlash if he did. “People are becoming turned off to the whole notion of masks, so the message of personal sacrifice – having to alter their behavior in some way – gets into a freedom discussion that the White House doesn’t want to generate right now,” Maringoff says, echoing the views of other political operatives.

Rubbish.

Asking us to sacrifice is precisely what’s needed now. By asking Americans and Europeans to conserve, Biden would send a clear message that we’re in this together – not just the working middle class and poor who are now being shafted at the gas pump and on heating bills, but all of us duty bound to preserve both democracy and the planet.

Why not a “freedom discussion” focused on the true predicate of freedom: the necessity that we all sacrifice for it, as in John F. Kennedy’s famous Cold War message “ask not what your country can do for you, but what you can do for your country.”

The common good consists of our shared values about what we owe one another as citizens who are bound together in the same society—the norms we abide by, the sacrifices we make. A concern for the common good—keeping the common good in mind—is a moral attitude. It recognizes that we’re all in it together. If there is no common good, there is no society, no civilization.

If the current moment should show us anything, it’s how we tightly we are bound together. Like the ongoing global pandemic, the escalating crisis in Ukraine and the escalating impacts of climate change reveal in stunning clarity the necessity of common sacrifice for the common good. World leaders -- starting with the President of the United States -- should state this clearly and loudly, starting today.

What do you think?

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Six months, and all because of you Mar 22, 2022

Show notes

Has it been six months already? I hadn’t intended to write every day but with so much going on in the world, I had no choice.

One of my hopes when I began this newsletter six months ago was that you’d find sustenance here, particularly during these difficult times. The past six months have been grueling. I’ve felt the same anxieties many of you have felt, spilling over into some sleepless nights. Although the former guy is no longer in the Oval Office and the worst of the pandemic seems behind us (fingers crossed), the dark forces of authoritarianism, bigotry, and violence are still very much with us.

I’m getting to be an older man. I’ve served in several administrations. I’ve known and worked with many fine people. I’ve taught two (getting on three) generations of wonderful students. Along the way I have encountered spin, hype, falsehoods, and outright propaganda. But I’ve never before experienced such blatant attacks on the truth as we are now witnessing — both abroad and in America. Getting the truth out and showing what’s really happening is a vital part of what I’m trying to do here.

There is no simple solution, but part of the answer is to grow a community like you — people who believe in social justice, human rights, and democracy. Which is why I’m here and presumably why you are.

When I post on social media, it feels one-directional. Here it’s more like a conversation. I enjoy reading your comments and am moved by the stories of what brings you here. A few of you, like Jason, who had once been Republican, are drawn here because of arguments that you find logical and clearly expressed.

I'm a retired MD & lifelong Republican. I've been noticing a decline in ethics and reality in the Republican party for some time now but was especially stunned after the popularity of Sarah Palin. Then Trump seemed like Sarah Palin on steroids and was even more popular. Trump turned me into a Democrat though I've voted as an independent my entire life. (I've always voted for who I thought was the best person for the job regardless of party). I'm drawn to your posts because you seem to make complete sense and express it such a way as it's so easy to understand.

Others of you, like Patrick, a union member, are here because you want to understand how the economy really works.

I’m a member of the Teamsters Union and I appreciate your simple explanations of how the economy works. And your encouragement to have conversations with others who has a different perspective.

Some of you, like Valinda, have come because you want to make a difference, and you find here a community dedicated to telling the truth and preserving democracy.

Like so many others, I am frustrated with a status quo that the vast majority WANT to change, yet seem able to affect so little. Positive change seems so slow, and seems so quickly wiped out. I want to make a difference. I want to have contributed to making a more just and equitable society. Not to have simply grown increasingly bitter or apathetic. Living in Texas, it's particularly difficult to think lasting equality is achievable, and our governor, Abbott, terrifies me. He is as evil as the former guy, but far more capable of achieving his goals, and I suspect he has presidential aspirations. Forming a community aware of the implications of current events and dedicated to fighting growing authoritarianism is important to me. I am a former analyst in the Air Force; I worked to limit proliferation of WMD for 20 years. Now I am a retired/disabled veteran, a mother and grandmother. This is not the legacy I want to leave these new generations.

Some of you tell me you enjoy my drawings, such as the Sunday caption contest. Some of you say you are getting a lot out of my Friday class on Wealth and Poverty. Many of you have offered helpful feedback (thanks, and keep it coming!).

Whatever your reason for joining me on these pages, I’ve been overwhelmed by your enthusiasm and your kindness — and mostly by your determination to create a better world. Thank you. (And a special thanks to Kara Segal and Heather Lofthouse for their help and insights along the way.)

But rather than make assumptions, please tell me: What does bring you here?

Also please let me know how these pages can be even better: Don’t hold back on suggestions and constructive criticism!

Finally, thanks to so many of you who have joined this community as paying subscribers. If you have found these pages useful but are not a paid subscriber, please consider becoming one (or giving a gift subscription) so we can do even more. And please share this newsletter with others.

My abiding thanks,

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Why Trump, Putin, Xi and other dictators make disastrous decisions Mar 21, 2022

Show notes

Here’s the paradox: The higher you rise in any hierarchy, your decisions are likely to have larger and larger consequences. Yet the higher you rise, the harder it is to get accurate feedback about your decisions.

I’ve worked with several presidents. All have made big blunders. I’ve also known and written about CEOs of big corporations who have made terrible mistakes. In every case, they had flawed systems for getting useful, accurate, and reliable feedback.

Donald Trump (whom I didn’t work with but watched his every move) had no reliable feedback. Why? Because he surrounded himself with toadies and sycophants who didn’t dare tell him the truth. He demanded that everyone around him confirm his preferred self-image of invincibility. His White House was filled with fawning lackeys (he fired anyone who didn’t grovel). He refused to hear bad news. He rejected the validity of negative media coverage.

As a result, Trump made among the dumbest decisions of any American president in history -- suppressing evidence of a potential crime, asking a foreign power for help with his reelection, inciting an attack on the Capitol. Some might say that all this was inevitable; it was built into his character. But his key character flaw was his unwillingness to hear anything negative. None of his horrific acts was necessary. Trump could have accomplished any number of goals far more easily had he not kept digging himself into ever-deeper holes. He was his own worst enemy.

Vladimir Putin is in a similar position. He has isolated himself and banned dissenting voices. He has placed obedient lapdogs even in the Fifth Service, which is supposed to provide him intelligence. So, like Trump, Putin has no reality check. According to a new report by a respected independent reporter with sources inside the Kremlin, the Fifth Service was “afraid of angering” Putin, so “simply told him what he wanted to hear.”

As a result, Putin’s attack on Ukraine has backfired terribly — on him. He badly overestimated the Russian military and underestimated Ukraine’s capacity to resist. Instead of weakening NATO, his attack has strengthened it. And now that the world’s democracies have cut off Russia’s access to the world banking system, Russia’s foreign exchange reserves have become nearly worthless.

Dictators like Putin are particularly vulnerable to inaccurate feedback. Instead of independent truth-tellers, they’re often surrounded by truth-deniers. Rather than experts and investigative journalists, their world is filled with pseudo-scientists and propaganda. In place of a free press, they have agitprop and disinformation.

Or look at China’s Xi Jinping. Why would he decide to enter into a “no limits” partnership with Moscow on the eve of Putin’s disastrous military campaign? Talk about blunders. Xi’s alliance with Russia has undermined China’s reputation and aggravated concerns among its neighbors about China’s global ambitions. It’s already prompted Taiwan to strengthen its defenses and pushed other regional powers such as Australia and Japan to declare their own interests in Taiwan’s security.

Trump, Putin, Xi — these men aren’t stupid. What’s stupid is their systems for making decisions. They don’t include naysayers. They have no way of eliciting, recognizing, or assessing useful criticism. All are trapped in halls of mirrors that reflect back at them what they want to see and hear.

The inverse relation between how high people rise in a hierarchy and the accuracy of the feedback they receive can be overcome if a leader aggressively seeks out dissenting views.

But it’s almost impossible to find dissenting views in a totalitarian system where dissent is often punished. One of the great virtues of a democracy is its multiple feedback loops – its many channels for expressing alternative viewpoints and voicing uncomfortable truths. After all, American democracy stopped Trump from doing even more damage than he did.

Yet when people like Trump, Putin, and Xi make terrible decisions, the world suffers. Worse: Putin and Xi have the power to blow up the world.

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