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Matters of Opinion

Atom bomb testWe now have a deal between Iran on one side and the United States, plus five other countries, on the other. Essentially, the agreement compels Iran to freeze its nuclear program for six months and to destroy its stockpile of near-weapons grade uranium, an amount almost enough to make one nuclear bomb. In return, the US and the five other nations will temporarily reduce, ever so slightly, the economic sanctions which have chopped Iran’s economy to a shambles.

Whether this is an careful first step toward a final agreement, or whether it is actually a scam carried out by crafty negotiators from Iran who have pulled the wool over the eyes of the stupid United States and five other stupid nations — that seems to depend on who is talking about it.

Israel’s ultra conservative Prime Minister Benjamin Netanyahu says it’s a “bad deal,” not a historic agreement, but a “historic mistake” that makes the world a more dangerous place. Or, as he put it in a Tweet the day after the agreement was reached, “Without continued pressure, what incentive does Iran have to take serious steps that actually dismantle its nuclear weapons capability?”

But Netanyahu’s Tweet misrepresents what’s going on: the slight easing of our economic stranglehold on Iran leaves a crushing array of  sanctions still in place. Nonetheless, conservative members of the Congress of the United States have voiced the same sentiments as Netanyahu, and some Democrats are also against it.

Yes, it may be that ministers from the United States, Germany, France, Great Britain, Russia and China, along with their nuclear authorities and security experts, have witlessly allowed themselves to be fooled by super sly negotiators from Iran. And now that Iran’s economy is falling apart and Iran’s president has come forward to negotiate,   it may be that, No, the current sanctions haven’t really worked, we have to add even more weight on their collapsing economy to really make sure the Iranians will be really truthful and really honest.

On the other hand, heaping on more sanctions at this point would end the negations and the Iranian nuclear program would then resume at full speed. And then what?

How To Judge Art Work

Silver Car Crash (Double Disaster)

Silver Car Crash (Double Disaster)

The art critic Blake Gopnik said that when it comes to a painting by Andy Warhol, the bigger the price of the work, the better it is as art. Gopnik is writing a book about Warhol and certainly knows what he’s talking about. Warhol began his artistic life as a commercial artist and in a sense he never ceased being exactly that. Whether it was a popular brand of canned soup or popular movie actress — you get the references, right? — it was something pop that was also big money.

Gopnik was talking about the 8-foot by 13-foot Warhol painting “Silver Car Crash (Double Disaster).” He went on to say, “If this thing goes for a hundred million bucks, it’s a kind of the apotheosis of what Warhol was all about — maybe everything that Warhol was all about.” Gopnik pointed out that Warhol had taken a scene of horrific tragedy — a demolished car with a dead body in it wrapped around a tree — and turned it into a glitzy commodity. And, said his biographer, “That’s what Warhol did with his own life, right? He turns himself into the ultimate commodity.”

Blake Gopnik’s assessment of the painting and the price it might fetch and what it all meant was  on the Marketplace Morning Report, broadcast by National Public Radio in the morning. Later the same day, the painting went on auction at Sotheby’s York Avenue salesroom and sold for $104.5 million, the highest price ever paid at auction for a Warhol. That beats the hundred million bucks that Gopnik was talking about. That makes this painting a very, very, very good work of art.

If You Got It, Don’t Flaunt It

Gold bars

Having a certain amount of money — and we mean a certain large amount — insulates the rich from the hardships suffered by the poor. The rich have been doing quite well since the end of the Great Recession. But they’re trying not to flaunt their wealth. The divide between the rich and poor is getting so large that, well,  if you’re rich, you can’t be too careful these days.

Luxury homes — let’s call them  mansions — have shrunk in size. It’s hard to believe, but Laurie Moore-Moore of the Institute for Luxury Home Marketing, says there’s a trend toward smaller mansions. Biggies in the fifteen to twenty thousand square foot range are becoming hard to sell.

In case you don’t know square footage, the average American home grewHouse size average US from 983 square feet in 1950 to 2,349 square feet in 2004.   As you rise above 2,349 square feet, you come first to what’s sometimes called a McMansion, and only if you continue to rise and get real interior acreage do you come to the true mansion. The McMansion is simply a bloated dwelling with an exterior style which mimics a French chateau or an Italian villa, whereas the true mansion looks more like an exclusive hotel. A true mansion would have, or used to have, eight or nine times the square footage of the average dwelling.

But for the rich, the new, post-recession size is smaller, around five thousand to seven thousand square feet. Modesty has become important to the wealthy. In terms of square footage, anyway. It turns out that the inside of these smaller mansions are packed with more luxuries. After all, you have to do something with that money, you can’t just give it away.

And No One’s To Blame?

Uncle Sam

Uncle Sam is pissed.

Who’s to blame for the government shutdown? The news analysts on radio and TV say, “There’s lots of finger pointing and plenty of blame to go around.”

Radio and TV people like to use phrases like  “lots of finger pointing” and “plenty of blame to go around.” The phrases don’t help us understand what’s going on, but we hear them just about every day. And it isn’t  sharp and insightful when news analysts call the current bitter dispute between Republicans and Democrats “bickering.”  Now they’re beginning to say that “both sides are digging in their heels” and “both sides refuse to compromise.” That doesn’t shed much light either.

Using those and similar phrases is intended to show that the media is even-handed and not taking sides, not saying that one side or the other is to blame for the shutdown. Honest media people strive for objectivity, and they really want to be even handed and balanced as they report what’s going on. But being balanced doesn’t mean reporting that both sides are equal in responsibility for shutting down the government. Being honest  in analyzing the situation  means saying who is responsible if, in fact, one side is responsible.

This current conflict between Republicans and Democrats has arisen because the Republican members in the House of Representatives want to defund the Affordable Care act – the law commonly called Obamacare. Republicans may be right or wrong about Obama care, but that’s beside the point – they don’t like it and want to kill it by starving it. House Republicans have sent more than 40 bills to the Senate, each one designed to kill Obama care. Each one has been flatly rejected by the Senate’s Democratic majority.

Ordinarily, when you’re outvoted — well,  you’re outvoted, so you move on. Or, when it comes to sending bills between the House and the Senate, if your bill is rejected, you try to modify it enough to get it accepted, or you move on to other matters. That’s not happening now.

What’s new here is that House Republicans have said that if they don’t get their way, if the Democrats in the Senate won’t agree with them, and if the Democrat in the White House won’t sign their bill into law, they won’t fund anything and the government will stay shut down. President Obama has called that legislative maneuver extortion and blackmail. Maybe the media can’t find words to substitute for “extortion” and “blackmail,” and maybe that’s why they can’t quite fix the blame.

College Costs Rise Faster Than Anything

On the PRS NewsHour, Judy Woodruff, talking with Mark Shields and Rich Lowry, asked Shields about the cost of college tuition nowadays.  Shields responded with his usual vigor, plus some interesting economic statistics.  Is there a problem with college costs today? His reply:

Mark Shields

Mark Shields

“I think it’s a real problem. To be very frank, since 2001 in this country,the cost of a four-year college, a public university, room and board, tuition, has gone up 73 percent, 73 percent in 10 years, between 2001 and 2011.  At the same time, the median household income in this country has dropped by $3,400. So, I mean, is it a problem? Is the cost of college a problem?”

Mark Shields’ figures are probably based on a recent report by  the National Center for Education Statistics.  The big picture is even more dramatic. (We would say worse, but we don’t want to discourage you.)  FinAid, an objective site devoted to information about college costs  and college financial aid, notes that “On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years.” In other words, if you have a nine-year-old child that you hope to send off to college, you — or you and your child — will be paying twice as much as you’d pay today.  Here’s a graph displayed by FinAid showing that for thirty years the cost of going to college has always risen faster than the general rate of inflation.Tuition IinflationBy the way, keep in mind that the graph displays the rate of inflation, so when the line turns down that doesn’t mean that the cost of college tuition declines; it’s still going up, but the rate at which it’s going up has slowed.

And, as if you needed any more bad news on this subject, here’s a chart showing that workers have been getting more and more productive, but their wages have remained essentially flat. In other words, workers have been getting better at turning out goods and providing service, but their income hasn’t risen and the cost of sending their kids to college has gone through the roof. Wages have been essentially flat for decades.Productivity vs Wages for last  13 years ECI is the abbreviation for Employment Cost Index, and ECEC is the abbreviation for Employer Cost for Employee Compensation. The chart comes from the Economic Policy Institute.

Ins and Outs in the MIddle East

Rabaa Square before and after military assault.

Rabaa Square before and after military assault.

There are always a couple of Republicans ready to help the President make difficult decisions. Right now the pair is Lindsey Graham and John McCain. Yes, that’s the same Senate pair who urged Obama to intervene in Syria, decrying the President’s “lack of leadership” in that conflict. Thus far no American men and women have died in combat over there,  due to our not being engaged in that utterly confused, horrific sectarian war. President Obama is showing leadership. He’s just not leading where McCain and Graham want to go.

Now Senators McCain and Graham are urging the President to “suspend U.S. assistance to Egypt and make clear to the current leadership of the country what steps we believe are necessary to halt Egypt’s descent into civil conflict and ultimately to restore our assistance relationship, which has historically served U.S. national security interests.” The statement continues, “The interim civilian government and security forces — backed up, unfortunately, by the military — are taking Egypt down a dark path, one that the United States cannot and should not travel with them.”

The Obama administration has repeatedly made it’s objections quite clear to the generals in Egypt and the President has already held back a shipment of aircraft and has most recently canceled a joint military exercise with Egypt. The generals  see the Muslim Brotherhood as a threat to their very existence and — no surprise — they haven’t changed course to satisfy the U.S.

As the Senators point out, “our assistance relationship” with Egypt “has historically served U.S. national security interests.” That assistance began when, under the guidance of President Carter, Egypt and Israel signed a peace treaty and — again, no surprise — Israel urgently wants that aid to continue.   We’re giving 1.2 billion in assistance; other states in the Arabian Gulf area are giving a total of ten times as much. No one thinks that our cutting off aid will cause Egypt to change it’s current use of force to suppress the Muslim Brotherhood.

Egypt’s military appears to have massacred civilians.  On the other hand, the Brotherhood appeared to be subverting a fragile democratic Egypt to a radical Islamic caliphate. The U. S. isn’t in charge of events and apparently can’t even influence them much, but if we cut off aid to Egypt we’ll have played our last card and we’ll no longer be in the game at all.  It’s easy for Senators McCain and Graham to call for pious action, especially if the goal is to demonstrate our nation’s purity.  But Egypt presents us with a confused, ugly mess when inaction and watchfulness is best.  We’re free to act later.

Horizontal line This week the Pope and the President of the United States said that it was time we paid attention to the great inequality of income among people. The Pope was speaking in a favela in Brazil, the President in Galesburg, Illinois. The papacy doesn’t have the military power it once had — Joseph Stalin once derisively asked, “How many divisions has the Pope?” — but the Pope is assumed by around 1.2 billion Catholics to have powerful friends in high places. And President Obama is Commander in Chief of the most powerful military machine on the planet. So maybe something will get done about economic inequality. Possibly….. OK, maybe never.Horizontal line

Student Loans – the Cost of Borrowing

Belushi & college jerseyThe House of Representatives recently passed legislation which gives college students a hand up and also slaps them in the face. On one hand, the legislation stops student loan interest rates from doubling, but on the other hand it ties the interest rate to the rate on 10-year Treasury notes – a rate which is already rising. This is a Republican bill, and it passed largely along party lines.

Currently, 7.4 million students with federal Stafford loans pay 3.4 percent interest, but the rate will double to 6.8 percent if Congress doesn’t do something about it. Democrats nailed the rate to 3.4 percent when they controlled the House. Republicans tried to raise the rate last June, but the public outcry was so loud that they backed down and extended the old rate for one year.

Well, here we are a year later and Republicans have decided it would be dandy to allow the interest rate to be reset annually. Interest would be the same as on a 10-year Treasury note, plus an additional 2.5 percent for the Stafford loans. The non-partisan Congressional Budget Office projects rates on Stafford loans will rise to 5 percent in 2014 and 7.7 percent in 2023. Stafford loans for college kids would be capped at 8.5 percent, and loans for graduate students and parents would have a top of 10.5 percent.

TransUnion, the credit information company, estimates that on average students graduating this year will leave college with a $24,000 debt along with their new diplomas. Fidelity, the financial services corporation, estimates the average student loan debt is closer to $35,000 per graduate.

The economist Joseph Stiglitz, a Nobel laureate,  writing in the New York Times, pointed out a couple of  dismal distinctions between the United States and other countries: “America is distinctive among advanced industrialized countries in the burden it places on students and their parents for financing higher education. America is also exceptional among comparable countries for the high cost of a college degree, including at public universities.”

Print Books versus E-books

Joyland bookcoverStephen King has decided to publish his forthcoming book as a print publication, not an e-book. This is news in the book biz. It’s news because e-books are surging and publishers are wondering out loud whether the old fashioned books — you known, the kind that are printed on paper and bound in covers, sometimes in real cloth covers — are going the way of the quill pen. Furthermore, and most important,  Stephen King was one of the first best selling authors to sell a fresh work as an e-book.

Stephen King has sufficient star power to make those kinds of decisions. Usually, it’s the mega-publisher who decides which way to send a book to market, but King is a mega-mega-author. Way back in 2000, when e-books were a new phenomenon, King let Riding the Bullet  come out as the first mass e-book. It was so popular, the servers hosting the book crashed. In fact, it was so successful that he released his next book from his own website and let his readers pay on the honor system. Not all his readers were honorable. King is big enough to sustain that kind of hazard.

And now Stephen King is releasing Joyland exclusively in print  as a $12.95 paperback. Does this signal a change of heart about e-books on the part of the writer? Probably  not. The new Joyland  is  an old-fashioned, hard-boiled mystery novel and he choose to publish it through Hard Case Crime, which has been publishing hard-boiled crime stories since 2004, issuing them in retro covers. It’s the kind of book that you’d want to publish the old-fashioned retro way, without intending to make a statement about e-books and the future of publishing.

Ain’t We Got Fun?

Flappers in 1920sMaybe you’ve heard the old song, “Ain’t We Got Fun?”   (This is really a post about economics and we want to talk about the lyrics to “Ain’t We Got Fun?”  We promise to play the song at the end of this post, if that’s what you’re here for.  So stay with us, please.)

The lyrics were written by Raymond Egan and Gus Kahn back in 1921.  The words tell us about the newly married couple in the cottage next door who are pursued by bill collectors from the grocer, the butcher and the landlord. Despite their poverty, the couple sings these lines:

Ev’ry morning, ev’ry evening,
Ain’t we got fun?
Not much money, Oh, but honey,
Ain’t we got fun?

As the song goes on we hear its most famous lines:

There’s nothing surer,
The rich get rich
And the poor get children.
In the meantime, in between time,
Ain’t we got fun?

Or, as it says further along:

There’s  nothing surer,
The rich get rich
And the poor get laid off.

Of course, “There’s nothing surer,” leads us to the rhyming word “poorer,” for which the lyrics substitute “children” or “laid off.” But what’s unsung is what we already know: The rich get rich while the poor get poorer. That’s capitalism in a nutshell. You probably know that, too.

Foreign Affairs magazine recently published a lead article called “Capitalism and Inequality” by Jerry Muller. Muller believes that “Inequality is an inevitable product of capitalist activity, and expanding equality of opportunity only increases it — because some individuals and communities are simply better able than others to exploit the opportunities for development and advancement that capitalism affords.”

You might pause here to reread and relish Jerry Muller’s use of polysyllables — half a dozen five-syllable words in a single sentence. Anyone can say that capitalism produces inequality, but not many can say it like that. And saying it that way almost makes you forget what it means.

Maybe you’ve seen the 1987 movie Wall Street. (No, we’re not going to play you the movie.) It starred Michael Douglas in an Oscar-winning performance as Gordon Gekko, a corrupt Wall Street insider whose most famous line is “greed, for lack of a better word, is good.” What might be overlooked is Gekko’s declaring, at another point in the movie, that the upper one percent own 50 percent of the country’s wealth. That was back in 1987. But the rich keep getting richer and today the upper one percent own 80 percent of the country’s wealth. That’s what Jerry Muller’s polysyllables mean.

The subtitle of Muller’s Foreign Affairs article is “What the Right and the Left Get Wrong.” In his view, those on the right who want to weaken Social Security and other safety-net programs, need to know that “major government social welfare spending is a proper response to some inherently problematic features of capitalism.” And, of course, those on the left should learn that “to redistribute income from the top of the economy to the bottom” has serious drawbacks, that “preferential treatment to under performers, may be worse than the disease,” and “even continued innovation and revived economic growth will not eliminate or even significantly reduce socioeconomic inequality and insecurity.” All of which makes a fine 21-page defense of the status quo.

There’s great sense of even-handedness in the article. After all, the author points out that both left and right get it wrong when they try to change the way things are arranged just now. The rich get richer and the poor get poorer, and there’s nothing to be done about that except to keep a safety net out there to catch the poorer acrobats – about 40 percent of the population today – as they come crashing down. And nothing can be done about it because capitalism is a fact of nature, like the furnace of the sun or the rotation of galaxies. But capitalism isn’t part of the natural order of things.

Capitalism is a creation of humankind and it can be changed for the better. That may be obvious to you, but it’s not clear to most of the people in Congress. One of the inevitable features of capitalism is the emergence of monopolies. At least is used to be. Nowadays, we have laws against monopolistic behavior, and when a company is judged to be a monopoly it can be told to break itself up and sell away parts of itself. Anti-monopoly laws don’t injure capitalism, they improve it by helping to create competition and spur innovation.

There’s a legend that Henry Ford — a very rich auto maker, not a bomb-throwing radical — improved his worker’s wages so that they could afford to buy a Ford motor car. Of course, no one is compelled to follow Henry Ford’s  apocryphal  example. Indeed, it’s still possible to allow a capitalist economy to go freely on it’s inevitable path — the rich get richer, the poor get poorer, the richest of the rich ascend to unimaginable wealth, the middle class descends to abject poverty and the entire society collapses along with the economy. Ain’t we got fun? No, not when that happens.

OK, we promised you a song, and you’ve been patient,  so here it is. Click the arrowhead in the middle and enjoy the old song:

More Notes

Tim Carmody, in his excellent piece, "How Haiti Became Poor", notes that President Trump's racist policies and vulgar language have sullied the word "shithole" which used to be one of the all-time great swear words. He's right. It's another terrible power this careless President wields.