Tuesday, August 9, 2016

“Entrepreneurs at the Government Trough,” LeadStories.com 8/8/16.

Entrepreneurs at the Government Trough

As the spat between Hilary Clinton and Donald Trump revealed, neither is willing to admit what’s really going on when one declares bankruptcy. Clinton and her speech-writers deserve credit for the clever line that Trump’s books always end in Chapter Eleven, a nod to the Internal Revenue Service’s code that lets both individuals and corporations ask for the legal protection of the courts to reorganize their debts and see to what extent they can repay any of them.

What neither presidential candidates disclose is the tax benefits accrued by bankruptcies or any kind of declaration of losses from legal investments. When regular citizens—the 99%--lend money to uncle Vinny’s latest get-rich scheme, they are just out of luck (unless all the proper investment documents have been set in place). The best they can hope for is that Vinny will buy them a drink at some point or put a good word for them with the local boss or the friendly neighbor. Besides that, they have no prayer. 

But the legitimate investor as an individual or through a Limited Liability Company who puts money in a losing proposition is aided by the government and given full deduction of the amount invested against present and future good and profitable investments (thereby reducing the tax liability). Perhaps this is the way the government would like us to increase our “propensity to invest,” take risks, and maybe fund a great innovation; perhaps it’s also an indirect a sanction for greedy behavior that may or may not contribute to the growth of the economy.

We value entrepreneurs; we lionize them in books and films as courageous heroes and heroines whose visionary zest makes us all proud to be Americans. It’s these brave investors who take advantage of new technological innovations by way of underwriting the ideas of their ingenious inventors. We are led to believe that they are, after all, the engines that feed the entire economy. But should their poor or unfortunate decisions be underwritten by the rest of us, the run of the mill workers and consumers who live paycheck to paycheck?
So, the government isn’t only incentivizing entrepreneurs to invest in new or old ideas and industries, make them more efficient or bring their ideas to fruition, but it also gives them all a pass—another incentive—when they simply make mistakes or are just plain foolish. Could this lead to reckless investment behavior? Are we encouraged to take greater risks because the actual costs (after deductions) is mitigated? Would it do the same for those driving too fast and surviving a dangerous ride? 

When American capitalists, like Trump himself and all those millionaires funding Clinton, smugly explain to the rest of the country why they are better than the rest of us, why they deserve a bigger piece of the pie, they forget to acknowledge that they too are the beneficiaries of government largesse, that they have their own privileged welfare safety nets. This is not to say that there is a big difference between the government coming in and bailing out a losing investment (or the large banks a few years ago) and having business protections in place to allow for the orderly unraveling that does not place big creditors above small creditors. Is your investment secured? Will it meet the legal criteria for protection?

Admittedly, these safety nets don’t come in the form of food stamps or any such embarrassing forms of financial support, but in point of fact are they that different? If you are rich and can afford to invest in a scheme or a new invention, do it on your own! Why do you expect the government to clean up the mess and allow you to fully deduct your mistake?

Some would argue that the mistake merely reduces their net income and taxable base…it is merely a deduction like the cost of steaks for a restaurant, and depending on the tax bracket that is the amount they deduct. 

Perhaps it’s the same screwed up logic that lets property owners deduct the interest on their mortgages but doesn’t allow renters to deduct their rents: owners of private property deserve government subsidies, while those renters, even if they need it more, are left by the tax code to fend for themselves. This is probably why the incredible two-home deduction is in place as well, benefitting the very few who own two homes, probably applicable primarily to congressional representatives who have to live in D.C. part of their time (and write these laws) and all their wealthy donors.

Next time we hear politicians quibble over the size of the government and its role, we should remind the disputants that they should start by eliminating all unfair subsidies that benefit the already rich at the expense of those who remain poor no matter how hard they work. And speaking of work, has either presidential candidate really worked the way their potential constituents have been for years? Receiving $250,000 for a speech to Wall Street is hardly “work” when compared to the minimum annual wage of around $15,000; the same goes for licensing agreements from one’s brand in comparison to those who actually clean and serve in all those hotel and resort properties.

Americans are generous in overlooking this duo of free-loaders; maybe they believe they can be like them one day. But the rate and gap of wealth and income inequality is getting bigger, not smaller as time goes by. And the opportunity to climb up the ladder is getting slimmer every year. Inequality.org reminds us that “America’s top 10 percent now average nearly nine times as much income as the bottom 90 percent.” Similarly, “America’s top 1 percent, for instance, holds nearly half the national wealth invested in stocks and mutual funds.” This is where Occupy Wall Street (remember them?) and the Tea Party (still in full force in the House of Representatives) are in agreement: between big banks and big government bailing them out, what is left to the average American worker? 

So, when the two candidates tell us they hear us, that they care about the plight of the working men and women of this country, let us ask them to describe the hardship of the working poor of America, the Walmart employees who still need food stamps and Medicaid to finish the month. Instead of ignoring them or simply using them as a rhetorical tool, let’s ask them to start their speeches by pointing out the hypocrisy of the rich and their callous use of government welfare. Let them begin with a confessional moment before they promise the rest of us a better future.

Monday, June 6, 2016

"Are We Doomed? Donald Trump's 'Conservatism' Without Ideology Is Dangerous!" LeadStories.com, 6/5/16

Sweet melodies of the Imagination: On Political Leadership

While some pundits compare Trump’s style and political swagger and outright racism to fascist leaders from Stalin to Mussolini and Hitler, a more apt comparison is to what American political leadership looked like during the Cold War.

The glory days of WWII were over, and one of the great sociologists of the time, C. Wright Mills (1916-62), concluded his landmark book, The Power Elite (1956), with this to say: “America—a conservative country without any conservative ideology—appears now before the world a naked and arbitrary power, as, in the name of realism, its men of decision enforce their often crackpot definitions upon world reality.”

Though referring to the leadership of the 1950s, the notion of “crackpot definitions” seem appropriate in the current political climate, where our yesteryear enemies are now our friends in the Middle-East and vice versa, and where the embargo on arms-sales to Vietnam has been lifted.

Mills continues to say that “the second-rate mind is in command of the ponderously platitude.” This assessment could be levelled against the presumptive presidential nominees of both the Republican and Democratic parties, as well as any of the foreign policy wonks in Washington or those offering their informed opinion on television networks.

But if the scathing critique of the non-ideological conservative tenor of Republican politics makes some liberals smile with self-confidence, beware of what comes next: “In the liberal rhetoric, vagueness, and in the conservative mood, irrationality, are raised to principle.” What was true in the 1950s is still true today, some sixty years later. Have we learned nothing from hallow expressions and rhetoric of liberals and conservatives alike? Have both 
parties done nothing to get beyond their respective platitudes?

For Mills, echoing Eisenhower’s warnings about the military-industrial complex, an unholy alliance has evolved in the 20th century between “privately incorporated economy”—or what we call today the privatization of public institutions, “the military ascendancy”—or what we perceive today as the sacred cows of the military budget, and “the political vacuum of modern America”—or what is claimed today in the name of outsiders challenging the political establishment.

The “political vacuum,” as any scientist will readily testify about vacuum in general, is bound to be filled at some point. For us, this is the empty verbiage of Trump’s announcements coupled with the idle promises of Sanders and Clinton. It’s a vacuum because no real and substantive political debate is afoot: no candidate is digging deeper into the soul of American politics with its checkered past and manifest destiny. Ideology isn’t a rant against this or that target, but a sustained examination and of the logic of ideas that inform our political economy. No political leader is engaging the public at this level of public discourse.

American political leadership then and now is saddled with moral insensitivity and even irresponsibility, forgetting who is being represented and led and who requires protection and support. If the same logic of the 1950s that saw the confluence of power in the hands of economic, military, and political elites remains intact today, we are in trouble. Trump’s and Sanders’ ascendancy is merely a symptom of a deeper illness. That illness in American political discourse is infested by media and commercial distractions that collapse celebrity fascination with real life.

If the only models of success in America remain wealthy celebrities—whether entertainers, world-class athletes, or billionaires who determine policy priorities as if they were elected officials—we are indeed doomed. To where has the decent American disappeared? What about hard-working Americans sustaining a modicum of integrity in the face of financial hardships? What about the celebrated American ingenuity that already made America great for decades?

This is no plea for nostalgia, since the historical record of American slavery and slaughter of Native Americans remains a stain on our national past. But it is part of the fabric of myths we have weaved over two centuries so as to inspire future generations. What we need today is neither false nostalgia of a happier past nor empty promises of a rosy future; instead, we need to work on the conditions under which every American is in fact an integral part of the American landscape.

If this means rethinking economic relations, let us redesign our marketplaces; if this means reallocating some of the defense budget to health care, we can easily manage to do it; and if this means invigorating our political imagination, then we must embrace it.

If political candidates can inspire our economic and political imagination, then they are doing us all a great service. But when they do so while villainizing segments of the population, we are in the danger zone of past fascist regimes. Fear mongering and venting pent-up anger and frustrations are not the only means by which to inspire people. The sweet melodies of the imagination are much more powerful.

Friday, June 3, 2016

“Deciding between legality and morality,” The Colorado Springs Business Journal, June 3-9, 2016, p. 22.

It’s Legal, but is it Moral?

The Panama Papers, which disclosed numerous off-shore bank accounts of the rich a famous, haven’t made much of a splash here compared to the ongoing media adulation or disgust with Donald Trump.

In addition to an amazing feat of secrecy held together across national boundaries, these papers revealed a systematic sheltering of capital in a country that offers tax haven for those refusing to pay taxes on the interest generated by their fortunes. 

The names of Russia’s President, Iceland’s Prime Minister, and the British Prime Minister were exposed; some demurred, some resigned because of public outcry. Not much public respond in the US.

Why is there no outrage in the US? Why has there been no pressure on the likes of Apple who have been stashing the profits they have made in the US in countries like Ireland? Is American tolerance of corporate maleficence entrenched?

Perhaps the answer is in the complicated relations between moral norms, social conventions, and the legal systems they engender.

Academics have portrayed this complex relationship in a linear model: first come moral norms, the ones found in religious texts like the Bible with its Ten Commandments, next come social conventions based on them, whether tribal or eventually within civil society, and finally there are rules and laws that make up the legal system of nation-states.

The trajectory from moral norms to the legal system is reassuring so that we can always trace our laws—however confusing—to some moral foundation, some deep principles, like equality (all humans ought to be treated equally as ends and never as means) or liberty (humans should be able to do anything they want so long as they don’t hurt others’ ability to do the same).

This trajectory doesn’t always obey a linear progression. For example, by the time women’s liberation took hold in the case of Roe v Wade in 1973 and was nationally implemented, the 1980s came along and a whole new conservative sensibility emerged.

Examples like this don’t simply challenge the linear trajectory assumed by academics, but also explains the incessant debates about abortion and other hot-button social issues we hear about in the media: the law follows too slowly social changes.

There is also another critique of the linear model (morality-->social conventions-->law): not all moral principles or social norms ought to be part of the legal system altogether.
For example, we may find prostitution immoral or anti-social behavior, but should we attempt to legislate its demise? Can we? The same goes for modesty and marriage: should there be laws about them? Why not leave such matters to one’s conscience or religious commitments?

What becomes obvious is that some relations shouldn’t be a matter of law, but a matter of civic decency. Being courteous to your clients and vendors should be obvious to you, if you want to develop lasting relations with them.

Likewise, business cheating or even theft should be self-policed out of existence rather than because you worry about being caught. Besides, there aren’t enough laws on the books to account for all potential business mischief. Would anyone want more laws?

Domino’s Pizza was recently sued by the New York Attorney General (USA Today 5/24/16) because of exploitation; workers cleaned and prepped their stations without clocking their time-cards. This violation of common decency and fairness should never have happened. Will only a lawsuit stop such practice?

Is the business world only focused on profits at all costs? Recent economic models, such as the Knockoff Economy or the Sharing Economy, suggest that hybrid market models are much more effective in the long-run. There is a limit to how much profits can be squeezed out of any business model and there is much to gain from peer-to-peer exchanges, even remixing others’ ideas.

It is a sad state-of-affairs if the only moral boundaries we recognize are those of the law. Our daily behavior should be centered on our moral and social convictions, on the religious ideals of charity and generosity, caring for the community as a whole. As members of our own community, its overall well-being is our business, too.

Especially for those who want limited government or no government regulation at all, the Panama Papers and Domino’s Pizza remind us that it’s not about the law but about greed. When greed is packaged as freedom, when selfishness is couched in a principled manner, one wonders what moral principles one knows; they are definitely not those found in the Bible or Secular Humanism.

As the sociologist C. Wright Mills intoned, “Laws without supporting moral conventions invite crime, but much more importantly, they spur the growth of an expedient, amoral attitude.” (1956)

Raphael Sassower is professor and chair of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com