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Nederlog

 April 19, 2016

Crisis: Tax Havens, Sanders, Broken System, Taxing Finance, All-powerful Governments
Sections                                                                     crisis index
Introduction

1.
 Here’s a Way to Shut Down Panama Papers-Style Tax
     Havens — If We Wanted To

2. Bernie Sanders Can Win Over Conservatives
3.
Two Despised Frontrunners, Two Dying Parties and a
     Deeply Broken System: How Did We Get Here?

4. Why Isn’t Everyone In Favor of Taxing Financial
     Speculation?

5.
Saint or Sinner, Government Eyes Are Watching Every
     Move You Make
Introduction:

This is a Nederlog of Tuesday, April 19, 2016.


This is a crisis blog. There are 5 items with 5 dotted links: item 1 is about a quite possible way to shut down tax havens (but I consider it unlikely to be followed); item 2 is about Bernie Sanders and isn't very good; item 3 is about the probable choice out of two evils the Americans will have to make in November (but is a bit too speculative in April, for me); item 4 is about a column by Robert Reich, on taxing financial speculation (a very good idea, that is only supported by Bernie Sanders); and item 5 is a quite good though quite frightening article about the very probable fact that everyone seems to be by now spied on by secret governmental terrorists at least 20 times a day, all in the deepest secret, who pretend to do so to protect us from non-governmental terrorists, but in fact (whatever they believe) work for the rich and the powerful, and are out to destroy all real democracy ny destroying all real privacy.

1. Here’s a Way to Shut Down Panama Papers-Style Tax Havens — If We Wanted To

The first item is b
y Jon Schwarz on The Intercept:

This starts as follows:

IT WOULD HAVE been infuriating at any time of the year to learn about the massive tax evasion by the global 0.01 percent revealed by the Panama Papers leak. But it’s especially maddening for regular American schlubs to hear about it in April, just as we’re doing our own taxes.

According to estimates by Berkeley economist Gabriel Zucman in his book The Hidden Wealth of Nations, rich individuals and big corporations use various machinations to pay at least a third of a trillion dollars less than they owe every year. For everyone else, this translates directly into higher taxes, more national debt, and less government spending.

(..) Zucman makes a persuasive case that it wouldn’t be technically difficult to crush the tax haven industry. The enormous challenge would be mustering the political will — and not just in one country, but on a global level.

Tax havens serve two functions: tax evasion, which involves hiding assets and is illegal, and tax avoidance, which is done by multinational corporations in the open and is legal (since the same corporations have conveniently made sure the laws work that way). Eliminating them requires different strategies.

This is the beginning of a somewhat technical article, although the technicalities are little (and unmathematical), and it is about taxes, that most Americans must pay.

It is here mostly because I like the explanations, though I have to admit that I believe that Zucman's ideas, although they are technically and legally quite feasible, will not succeed because of (1) the opposition of the richest people, that also (2) now have considerable political support, that (3) seems to me to
be based mostly on corruption (often by lobbyists).

Also, points (2) and (3) seem to have been steadily built up from 1971 onwards (when it all started with the Powell-memorandum), and it seems to me that by now most American politicians are effectively bought, that is, they enact laws or deregulate existing laws not because this would please those who voted for them, but because this would please those who bought them.

But here are some of Zucman's ideas:

Based on the history of previous attempts to crack down on tax evasion, successful and not, Zucman argues that the U.S. and European Union could stop most of it with a two-pronged attack: concrete consequences for tax havens, and an international financial register.

I agree in principle, although, as I explained above, I think this is quite unlikely to happen given the existing "politics", that seem in fact mostly directed by rich donors to politicians, and not by the majority of the voters' desires.

Here is a basic explanation of the current U.S. tax system:

The U.S. has, by world standards, a peculiar corporate tax system. Multinational companies headquartered in the U.S. must pay an ultimate tax rate of 35 percent on all their profits earned anywhere on earth.

That is, if a corporation makes money in a foreign country with a corporate tax rate of 10 percent, it must pay the IRS an additional 25 percent on its profits booked in that country. But to make things even more complicated, it only has to pay that additional tax when it brings the profits back to the U.S. If it keeps the profits overseas, it can postpone paying the tax bill indefinitely — which is why U.S. corporations are now holding over $2 trillion in profits in other countries.

This creates two obvious incentives for U.S.-based multinationals.

First, they’re continually tempted to engage in corporate “inversions,” in which they move their formal headquarters to a country with lower tax rates — even as their factories, workers, and customers stay in the same places.
(...)
Second, they tend to engage in accounting chicanery to make it appear as if their profits were “earned” by foreign subsidiaries in countries with low corporate rates. This is a particularly attractive strategy for internet companies, whose value is largely non-material. For instance, Google licensed its highly profitable search and advertising technology to a subsidiary in Bermuda, where the corporate tax rate is zero percent. Google “pays” that highly profitable subsidiary billions in royalties each year.
Clearly, this is theft and it is enabled by the extra-ordinary silly-or-evil notion
(I think it is evil, but it may have been smuggled into U.S. law by underhanded trickery [1], although I do not know that) that the profits of U.S. firms are only taxable "when it brings the profits back to the U.S.": That really invites theft.

There is a solution to this, that is provided by Zucman:

However, there’s a feasible solution suggested by Zucman (and many others): Completely throw out our current corporate tax system and begin using something far simpler called “formulary apportionment.”

Formulary apportionment starts by discarding the weird fiction that a multinational corporation’s subsidiaries are separate companies. Instead, it treats the corporation as what it is, one unitary company, with one unitary amount of profit. Next, a formula based on the location of three concrete factors — the corporation’s payroll, physical capital like factories, and sales — is used to apportion percentages of the multinational’s profits to the different countries in which it operates. The IRS would get 35 percent of the U.S. apportionment.

There is considerably more in the article, which I found interesting and that is recommended, but I think Zucman's ideas, while quite interesting and probably practicable, have no chance of being tried - that is, except if Bernie Sanders is the next president.

It so happens that the next item is about Bernie Sanders:

2. Bernie Sanders Can Win Over Conservatives

The second item is
by Alexander Reed Kelly on Truthdig:

This starts as follows:

Many of my liberal friends are scared. They read in media depictions of the political rise of Donald Trump confirmation that the other half of their country is just as bad as they feared it was: ignorant, hateful, reactionary and bent on turning the nation into a Miller-soaked theocratic state. The conservative hordes rise against us, they warn. To stop them we must nominate Hillary Clinton.

Hm. To me it seems Kelly's "liberal friends" are prejudging the issue, simply because Sanders hasn't been defeated. I agree that he may be defeated, and
I also agree that if he is, people who are "liberal", "progressive" or indeed not very rich, should vote for Clinton, simply because the Republicans are awful in a way that has not been shown in a long time (and although I agree that Clinton is a bad choice compared with Sanders).

Then there is this:

Over the past six months, I discussed this election with almost everyone I met. This wasn’t a scientific study, but the fact that many conservatives I spoke with—such as the owner and dishwasher, both of them ex-cops, of the restaurant beneath my apartment, a pilot, a contractor and a striving middle manager of a local energy utility—came to favor a previously unknown New England socialist over the candidates of their own party suggests to me that 1) with respect to the breadth of his appeal, Bernie Sanders is a kind of Democratic candidate unprecedented in our era, and 2) the dilettante analysts in my liberal circle don’t grasp the character of their fellow Americans as well as they think they do.

Hm. I agree with 1) but not with 2), for Kelly seems to miss that his research also is by a dilettante. And besides, my - fairly confident - guess is that most of the "liberal friends" of Kelly are less interested in whatever dilettante research they engaged in, as in reading outcomes of the polls, and I agree that while Bernie Sanders did very well, he still is behind Clinton in the polls.

Now consider Clinton. Even among liberals her name is synonymous with Wall Street, and Wall Street is not synonymous with optimism for the future. The FBI continues to investigate her conduct at the State Department, and her family’s multi-billion-dollar philanthropic network means she’s conspicuously entangled with the world’s glittering, begrudged oligarchy. Do you believe her campaign is positioned to overcome the conservative distrust that a right-wing attack machine captained by Trump, Ted Cruz or John Kasich will relentlessly inflame among the masses?

And again hm: I don't know what the Republicans will do, and again I say that the best but by no means infallible instrument are the polls. (And these suggest
Clinton will win against Trump and against Cruz.)

3. Two Despised Frontrunners, Two Dying Parties and a Deeply Broken System: How Did We Get Here?

The third item is
by Andrew O'Hehir on AlterNet:

This starts as follows:
To paraphrase a great American poet of the 1980s, this is not our beautiful house. We get a tiny breather in the political calendar this week, and it’s a useful moment to take half a step back from the most chaotic and disordered presidential campaign in living memory and ask ourselves the big question: What in the name of Jiminy Cricket is going on here? I spent the week digging into the past for clues to the strange dynamics of the present: To be clear, I did not conclude that Donald Trump is a new Hitler or that Bernie Sanders is a new Lenin, only that the parallels and the discontinuities were instructive.
I like stepping back and trying to get some survey. And by the way: While I quite agree Bernie Sanders is far from a new Lenin, it seems that (i) half of the Americans see 'fascist undertones' in Trump's campaign, while (ii) a quite highly standing public intellectual like Robert Reich also concluded that Trump is a fascist. And while I don't think these opinions prove the case they argue, I think they are quite serious, and they also do have a point.

Then there is this:
Despite the unkillable Whack-a-Mole candidacy of Sanders — who, as I argued this week, has channeled an insurgent and quasi-revolutionary class-consciousness that other politicians didn’t even know existed — we are likely to end up with a general-election campaign between the two least popular major-party nominees in political history.
Hm. First, Sanders has not been defeated (yet). And I support Sanders until he is definitely defeated, simply because he is by far the best presidential candidate (in my opinion). Second, having made the first point, I concede that is it more likely - here and now - that Clinton will win the nomination (though this would be a considerable set-back). Third, we have arrived at the great impopularities of the leading candidates (here taken as Trump and Clinton):
Donald Trump was viewed favorably by just 24 percent of the voters surveyed, and unfavorably by 57 percent, making him by far the least-liked major-party frontrunner since CBS began asking this question in 1984.

Who’s in second place, in this historic sweepstakes of hate? Hillary Clinton, in the same poll: She was viewed favorably by 31 percent and unfavorably by a mere 52 percent.
OK, but it still is early days, and these numbers will certainly change, and probably considerably, once it is known who will be the presidential candidates.

The article ends as follows:

If Hillary Clinton wins in November, it won’t happen because America has gotten over sexism or because the Democrats have forged a pathway to the future. It will be because she was nominated by the party that is dying slowly and somewhat politely, rather than the one that just blew itself up in public with a suicide vest. It will happen because many people will conclude they’d rather have a president they don’t particularly like or trust, but who is pretty much a known quantity, than a third-rate comic-book supervillain. Of such choices, history is made.
Well... first, this anticipates the outcome of the presidential election, which is pretty early in my eyes. Second, if Clinton will win, I agree she probably wins
because she "
is pretty much a known quantity" and is not "a third-rate comic-book supervillain".

4. Why Isn’t Everyone In Favor of Taxing Financial Speculation?

The fourth item i
s by Robert Reich on his site, who poses a relevant question:

This starts as follows:

Why is there so little discussion about one of Bernie Sanders’s most important proposals – to tax financial speculation?

Buying and selling stocks and bonds in order to beat others who are buying and selling stocks and bonds is a giant zero-sum game that wastes countless resources, uses up the talents of some of the nation’s best and brightest, and subjects financial market to unnecessary risk.

To answer the opening question:

It seems to me all of Bernie Sanders proposals get a lot less discussion than they deserve, and the main reason is the collapse of the American free press, that changed from a quite varied and quite independent set of free investigators of power into a quite similar and quite dependent set of copyboys and copygirls of "the news" the American government provides to them (with some extras thrown in to keep the readers amused).

Also, since I have now been following the crisis since September 1, 2008, and have written nearly 1200 articles on it (which you can read all by way of the
crisis index) I think I am quite certain that the above reason is the main reason, that also explains why Sanders is much less on the main media than Trump, Clinton and Cruz.

Here is Reich's presentation of Sanders' plan to tax the banks:

Wall Street Insiders who trade on confidential information unavailable to small investors don’t improve the productivity of financial markets. They just rig the game for themselves.  

Bankers who trade in ever more complex derivatives – making bets on bets – don’t add real value. They only make the system more vulnerable to big losses, as occurred in the financial crisis of 2008.    

All of which makes Bernie Sanders’s proposal for a speculation tax right on the mark.

He wants to tax stock trades at a rate of 0.5 percent (a trade of $1,000 would cost of $5), and bond trades at 0.1 percent.

To me, that sounds like an eminently reasonable idea - and I am less talking about the actual percentages than about the idea that bankers may be taxed for doing business:

Another big plus: Given the gargantuan size of the financial market and the huge volume of trading occurring within it every day, this tiny tax would generate lots of revenue.  

Even a 0.01 percent transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years, according to the nonpartisan Tax Policy Center.

Sanders’s 0.5 percent tax could thereby finance public investments that enlarge the economic pie rather than merely rearrange its slices – like tuition-free public education.

After all, Americans pay sales taxes on all sorts of goods and services yet Wall Street traders pay no sales taxes on the stocks and bonds they buy.

Which helps explains why the financial industry generates about 30 percent of America’s corporate profits but pays only about 18 percent of corporate taxes.

For that is one reason why some tax on the bankers makes eminent moral sense: Because unlike most other Americans they pay no tax on their gambles.

Would this idea not be too radical or too new? No, not at all:

It’s hardly a radical idea.

Between 1914 and 1966, the United States itself taxed financial transactions. During the Great Depression, John Maynard Keynes urged wider use of such a tax to reduce excessive speculation by financial traders. After the Wall Street crash of October 1987, even the first President George Bush endorsed the idea.

The article ends as follows (apart from the very last bit):

So why is it only Bernie Sanders who’s calling for a financial transactions tax? Why aren’t politicians of all stripes supporting it? And why isn’t it a major issue in the 2016 election?

Because a financial transactions tax directly threatens a major source of Wall Street’s revenue. And, if you hadn’t noticed, the Street uses a portion of its vast revenues to gain political clout.

Yes, indeed. And also because the free press is mostly dead, which means that
the press you do probably read does no longer inform you impartially and objectively, but instead does so partially and subjectively, and the message they carry and further is what the rich want the people to believe, regardless of its veracity or decency. (They also will loudly deny this, and carry "in proof" a few articles by a few somewhat radical not completely shut up journalists. Basically, they are lying. [2])

And this is a recommended article.

5. Saint or Sinner, Government Eyes Are Watching Every Move You Make

The fifth and last item is by John Whitehead on Washington's Blog and originally on the Rutherford Institute:

This starts as follows:

“The way things are supposed to work is that we’re supposed to know virtually everything about what [government officials] do: that’s why they’re called public servants. They’re supposed to know virtually nothing about what we do: that’s why we’re called private individuals. This dynamic – the hallmark of a healthy and free society – has been radically reversed. Now, they know everything about what we do, and are constantly building systems to know more. Meanwhile, we know less and less about what they do, as they build walls of secrecy behind which they function. That’s the imbalance that needs to come to an end. No democracy can be healthy and functional if the most consequential acts of those who wield political power are completely unknown to those to whom they are supposed to be accountable.” ― Glenn Greenwald

Yes, indeed - and in fact I would say that the last statement: "No democracy can be healthy and functional if the most consequential acts of those who wield political power are completely unknown to those to whom they are supposed to be accountable" allows far too much to "democracy".

For when all inhabitants of a country are spied upon in everything they do by secret services from anywhere, and they also are denied all information about these activities, and most information about what their governments do, the inhabitants do not live anymore in something I would call "a real democracy".

And this is the case. Here is more by John Whitehead:

Government eyes are watching you.

They see your every move: what you read, how much you spend, where you go, with whom you interact, when you wake up in the morning, what you’re watching on television and reading on the internet.

Every move you make is being monitored, mined for data, crunched, and tabulated in order to form a picture of who you are, what makes you tick, and how best to control you when and if it becomes necessary to bring you in line.

Simply by liking or sharing this article on Facebook or retweeting it on Twitter, you’re most likely flagging yourself as a potential renegade, revolutionary or anti-government extremist—a.k.a. terrorist.

All of this is very probably true, and we owe that knowledge to Edward Snowden.

And besides (while this is not treated here), next to many different government secret services that your government allows to spy on you (as it does itself, for "everyone may be a suspect"), there also are the many commercial dataminers who plunder your privacy with the same aim of forming "a picture of who you are, what makes you tick", but not with the ultimate aim of controlling you, but with the aim of selling you all kinds of things.

I think that is also dirty and also should be forbidden and made impossible by unbreakable encryption of any communication between two computers. It is theft, it is spying, it is the destruction of all privacy, and it will or already has killed a free and democratic society.

Back to the article:

Yet whether or not you like or share this particular article, simply by reading it or any other articles related to government wrongdoing, surveillance, police misconduct or civil liberties is enough to get you categorized as a particular kind of person with particular kinds of interests that reflect a particular kind of mindset that might just lead you to engage in a particular kinds of activities.

Chances are, as the Washington Post reports, you have already been assigned a color-coded threat score—green, yellow or red—so police are forewarned about your potential inclination to be a troublemaker depending on whether you’ve had a career in the military, posted a comment perceived as threatening on Facebook, suffer from a particular medical condition, or know someone who knows someone who might have committed a crime.

Yes, indeed. And your mail may be surveyed, and you may simply not get a lot of mail that is directed at you (as I think may be the case with my mail - but then I may not know anything about the superhumans who secretly spy on me, and neither may you nor anyone else who - "merely" - belongs to the public).

Incidentally, because both of my parents were communists for over 40 years; and because my grandfather was a communist too, I am certainly known to the Dutch and other secret services, even though I am not a communist since I was 20. (And I care a lot less than might have been the case otherwise, because I
have no children and hardly any family.)

Then there is this:

When the government sees all and knows all and has an abundance of laws to render even the most seemingly upstanding citizen a criminal and lawbreaker, then the old adage that you’ve got nothing to worry about if you’ve got nothing to hide no longer applies.

Actually, "the old adage that you’ve got nothing to worry about if you’ve got nothing to hide" anyway is completely false: Everybody has some things to hide; nobody knows all or most of the laws that apply to one; and in any case
"the old adage" only applies to people without brains, without individuality, without personal interests; and with a completely conformist and careerist personality - and even they may find that "the government" (in fact: any
government) knows far more about them than they themselves do.

There is this about the values of privacy:

When people talk about privacy, they mistakenly assume it protects only that which is hidden behind a wall or under one’s clothing. The courts have fostered this misunderstanding with their constantly shifting delineation of what constitutes an “expectation of privacy.” And technology has furthered muddied the waters. However, privacy is so much more than what you do or say behind locked doors. It is a way of living one’s life firm in the belief that you are the master of your life, and barring any immediate danger to another person (which is far different from the carefully crafted threats to national security the government uses to justify its actions), it’s no one’s business what you read, what you say, where you go, whom you spend your time with, and how you spend your money.

Unfortunately, privacy as we once knew it is dead.

George Orwell’s 1984—where “you had to live—did live, from habit that became instinct—in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized”—has become our reality.

Yes, indeed. It is especially this: "It is a way of living one’s life firm in the belief that you are the master of your life, and barring any immediate danger to another person (which is far different from the carefully crafted threats to national security the government uses to justify its actions), it’s no one’s business what you read, what you say, where you go, whom you spend your time with, and how you spend your money."

And that is no longer possible if you know that there is an enormous secret dossier on you, that contains far more information about yourself than you recall, and that may include many kinds of things your government does not like to be there.

In fact, you don't know. But the reason is that everyone who does not belong to the government or the leading politicians is treated as if he or she is a sub-human or a slave without any right on any privacy, and all of whose private information, of any kind whatsoever, may be freely and secretly stolen by any secret service from any country that gets access to your phone or to the cables your computer uses (which is pretty easy, for those with
enough money and power, like governments).

There is this on "ordinary life at present":

Consider that on any given day, the average American going about his daily business will be monitored, surveilled, spied on and tracked in more than 20 different ways, by both government and corporate eyes and ears. A byproduct of this new age in which we live, whether you’re walking through a store, driving your car, checking email, or talking to friends and family on the phone, you can be sure that some government agency, whether the NSA or some other entity, is listening in and tracking your behavior.

I think this is true, and I do not think that is the ordinary life of a free human being: it is the life of slave of the government, it is the life of a dimwitted victim of the dataminers; and it is that way basically because the majority of all politicians everywhere have betrayed the people they lied to they would "serve".

Then there is this, that guarantees or will guarantee even more spying on you:

The “internet of things” refers to the growing number of “smart” appliances and electronic devices now connected to the internet and capable of interacting with each other and being controlled remotely. These range from thermostats and coffee makers to cars and TVs. Of course, there’s a price to pay for such easy control and access. That price amounts to relinquishing ultimate control of and access to your home to the government and its corporate partners. For example, while Samsung’s Smart TVs are capable of “listening” to what you say, thereby allowing users to control the TV using voice commands, it also records everything you say and relays it to a third party, e.g., the government.

The article ends as follows:

This is the creepy, calculating yet diabolical genius of the American police state: the very technology we hailed as revolutionary and liberating has become our prison, jailer, probation officer, Big Brother and Father Knows Best all rolled into one.

Thus, to be an individual today, to not conform, to have even a shred of privacy, and to live beyond the reach of the government’s roaming eyes and technological spies, one must not only be a rebel but rebel.

As Philip K. Dick, the visionary who gave us Minority ReportBlade Runner, advised:

If, as it seems, we are in the process of becoming a totalitarian society in which the state apparatus is all-powerful, the ethics most important for the survival of the true, free, human individual would be: cheat, lie, evade, fake it, be elsewhere, forge documents, build improved electronic gadgets in your garage that’ll outwit the gadgets used by the authorities.

There is no gray area any longer.

I think this is a very good article, which I strongly recommend, but I do not quite agree with the ending: While the first paragraph seems to me - quite bitterly, also - true, I don't think this leaves much hope for rebels.

I believe rebels have hardly a chance against the enormous forces of a state
that knows everything there is to know about anyone
.

And "we" have created such states, or at least the beginnings of such states.

--------------------------
Notes

[1] By "underhanded trickery" I mean the widely popular schema in the Senate that consists in attaching all manner of ludicrously bad bills to some bill that has to pass.

[2] Personal note: I have read "the Dutch intellectuals' paper" NRC-Handelsblad from 1970-2010 (for forty years, including the years I lived in Norway) and I did not have many complaints all that time (till ca. 2008). Then the paper got sold; a new - Belgian - editor was nominated; and by the end of 2010 it had gotten so bad, that I stopped reading it. These days - six years later, still under that editor - it is worse again. I don't think it will ever be better in my life, and I think that was a considerable loss, for it was, for almost all of the forty years that I've read it, a decent paper, and it is not anymore - and not by far! - what it was for the forty years from 1970-2010.

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