Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.
At the end of last year, just shy of the 11th hour in the fiscal cliff negotiations, President Obama made an offer that included a Republican-backed idea to cut spending by lowering the cost-of-living adjustment for Social Security benefits. The move shocked Congressional Democrats and dismayed Mr. Obama’s liberal base.
As the next round of deficit reduction talks gets under way, the administration seems determined to include the COLA cut in any new package of spending reductions. Rather than using the issue as a bargaining ploy, the administration appears to have embraced it as a worthy end in itself.
One of our favorite topics is moving money and jobs around the globe to avoid paying taxes. Seems nations are getting sick of being played against each other finally. Tax avoidance is on the table at the next G-20 meeting.
“The aggressive tax planning of the last 20 years was achieved with the complicity of governments themselves to cope with tax competition,” he says. “This mindset is seriously changing.”
Galvanising co-ordinated action, Britain, Germany and France have thrown their weight behind an urgent review of the international tax standards, which they say, faces “difficulty keeping up with changes in global business practices, such as the development of ecommerce in commercial activities”.
The potential reforms will start to take shape next month at a Group of 20 meeting in Russia, where the Paris-based OECD will release an interim report on tax. Governments are already locking horns with businesses over how far the measures will go.
The New York Times is on a roll amplifying how stagnant wages is one of the main reasons there are less tax revenues.
FEDERAL income tax rates will rise for the wealthiest Americans, and certain tax loopholes might get closed this year. But these developments, and whatever else happens in Washington in the coming debt-ceiling debate, are unlikely to do much to alter one major factor contributing to income inequality: stagnant wages. For millions of workers, wages have flatlined. Take Caterpillar, long a symbol of American industry: while it reported record profits last year, it insisted on a six-year wage freeze for many of its blue-collar workers.
Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.
We actually went into deep statistical details on wages in in this post with many graphs.
Anonymous Hacks MIT
When I read about Aaron Swartz's suicide, buried in the initial reports was sidelined blurb. MIT had Swartz arrested in 2011 for stealing Academic JSTOR journal articles. The hacker politic Anonymous group immediately hacked MIT's website in protest.
Swartz, a Reddit cofounder who championed open access to documents on the Internet, committed suicide on Friday. The 26-year-old was arrested in July 2011 and accused of stealing 4 million documents from MIT and Jstor, an archive of scientific journals and academic papers. He faced $4 million in fines and more than 50 years in prison if convicted.
Beyond the issue of copyright law and enforcement, that's one hell of a penalty for stealing a bunch of very overpriced articles written by others who frankly don't get a dime in royalties from the publications.
Schwartz's story of getting burned high tech corporate culture is something most can relate to as well. Matt Stoller writes about Schwartz's political activism.
Aaron also spent a lot of time learning how advocacy and electoral politics works from outside of Congress. He helped found the Progressive Change Campaign Committee, a group that sought to replace existing political consulting machinery in the Democratic Party.
Map the Fed
The Financial Times overviews some new research questioning the role of Central Banks.
The key issue at stake, Pozsar and McCulley argue, is that long-term debt cycles tend to produce diametrically opposed states of the world, in two different fields, which can be plotted as axes on a graph. Sometimes private sector creditors are in a “leveraging” mode; sometimes they are “deleveraging” instead. So too with public policy: sometimes fiscal policy is restrictive (via austerity); sometimes it is stimulative (ie governments are borrowing).
If you plot those two factors as two different axes on a chart, you get four quadrants, representing different points in economic history. When public and private activity is stimulative, there is a credit boom (which central banks need to rein in by damping inflation). When you have deleveraging in one sector, the pattern is mixed. But when both the private and public sector are deleveraging, there is often deflation and a liquidity trap: borrowers do not want to borrow, no matter how cheap money becomes, making monetary policy less effective.
So, Pozsar and McCulley argue that in this fourth quadrant we need to embrace a mental flip. Instead of considering central bank independence to be a good thing, because it prevents inflation, central banks need to lose that independence, and work under finance ministries instead. Monetary policy and fiscal expansion must both be stimulative, since loose money alone will not work. Thus the central bank needs to monetise the public debt by buying lots of government bonds, say, or take other steps to co-ordinate fiscal and monetary measures.
Universities are Corporate Marketing Centers
Not only are people going into debt to get a sheepskin, they are being taken over by corporations:
As public universities have been driven by budget-whacking lawmakers to seek ever-more private funding, schools that once prided themselves as being centers of free thinking are increasingly dominated by corporate-think, turning their institutions into sales centers.
"A lot of schools are taking a much more corporate approach," exulted a PRexecutive who works with top university administrators, marveling that "a CMO didn't even exist on most campuses 10 years ago."
Tax Avoidance Costs $3 Trillion Annually
So says this post on HuffPo.
Three trillion dollars a year. That's how much the wealthiest Americans avoid through the system of subsidies and schemes and sweet deals that deprive middle-class workers of their earned benefits. That's three times more than the deficit. That's enough for a full-time job for every middle-class household in America.
Civil Penalties Really a Joke
In case you've forgotten, civil penalties against businesses are tax deductible, an expense of doing business.
The dollar signs are big, but they aren’t as big as they look, at least for the banks. That’s because some or all of these payments will probably be tax-deductible. The banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks’ loads.
There is nothing new about corporations reaping tax benefits from payments made to remedy wrongdoing. Every so often, though, the topic stirs outrage. After the Gulf of Mexico oil spill, for example, BP received a $10 billion tax windfall by writing off $37.2 billion in cleanup expenses.
Debt Over, Now the Economy
Gee wiz, that austerity was fun, now let's focus on the economy:
European leaders declaring they’ve gained the upper hand in the three-year-old debt crisis are sharpening efforts to channel a rebound in financial markets to an economic recovery to chip away at soaring unemployment.
Even as euro-area chiefs call for more time to lock in a bailout package for Cyprus and elections loom next month in Italy, German Finance Minister Wolfgang Schaeuble said Jan. 11 that the single currency is “over the worst of the crisis.”
“Financial markets are starting to appear normal again,” Erik Nielsen, chief global economist at UniCredit SpA (UCG), wrote in a note to clients yesterday. He referred to European Central Bank President Mario Draghi’s Jan. 10 comments forecasting that the euro-area economy will climb out of recession this year.
Draghi’s six-month-old pledge to do whatever it takes to deliver the 17-member currency out of the crisis has been credited for declining yields and an easing in market turmoil. That’s given leaders more room to grapple with issues such as unemployment in Europe, which climbed to a record 11.8 percent in November, with every other Spanish youth out of work.
More Economics Site Rankings
Naked Capitalism has the chart and are #2. We ain't do that badly, in the top 50.