"Left Behind..."

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

“Forget Germany, Spain Is The Real Problem”, reads a headline. Eh… no. Germany is definitely the problem in Europe. Spain is a bit player. That doesn’t mean nothing major could happen in Spain in its fight with Catalonia, and soon, but Spain, like all EU nations, is a de facto province of Germany.

What matters in the end is how Brussels and Merkel deal with Spain. And while it’s tempting to say that perhaps Brussels, the EU, is the main European problem, the European Union is run exclusively by and for Germany, so that doesn’t work either.

The only thing that might work if you really want to find a bigger issue than Germany is if you would point at the role the incessant lies about economic conditions for people play. But that’s not a European issue, that’s global.

The talk about how economies are recovering, how there’s light at the end of the tunnel, and how any day now we’ll be back to where we were at some point in time that many can not even remember. But then, at least when it comes to Europe, that happy talk comes from Germany too, to a large degree. Just wait till Draghi starts cutting his QE.

You can try and tell people that they’re doing just great, using the media you control, and it’ll work for a stretch, if only because they want to believe it, badly, but when these same people can’t even feed their children while you make such claims, you will eventually lose their attention and support. The difference between beliefs and experiences.

If you’re a politician, you try to feed people what they want to hear, invariably an upbeat message, but there comes a time when you have to back it up. You can say that austerity is necessary, inevitable, and the only choice, and it will be beneficial to them, but austerity is one of those things that have a very limited best before date.

If you can only make employment numbers look good by creating a gig economy that takes away all their benefits, and their entire sense of security, they’re going to turn their backs on you. Because you’re lying.

Rising inequality is a one way street right up to the point where it turns into a dead end alley. Inequality breeds more inequality until it no longer can, until people say ‘I want that cake you are having because my kids are hungry. And I brought a pitchfork’.

That is where we’re at, and that is why Merkel lost some 25% of her votes. That is why there’s Trump and Brexit, and why an impossible candidate like Marine Le Pen in France gathered so much attention and support. It’s why eastern European countries will start fighting Brussels and Berlin much harder than they have to date, and why Berlin will fight back harder than it has. Poor Greece.

In the US, there’s only one party, and it divvies up the spoils of very rich campaign contributions. Bernie Sanders tried to circumvent this; not a chance. Trump succeeded. In Britain, there was no difference between left and right for a long time, and no alternative party either. That led to Brexit. In France, Macron started a whole new party from scratch and somehow got it funded (bankers?!). It wiped the left off the map.

The same happened in Holland, where like in France the right wing alternative was judged too unpalatable by too many. No left left. The leaders of Germany’s Alternative für Deutschland do not have the visibility for that yet. In Italy, Five Star have a good shot at the throne. Greece’s Syriza already overtook both left and right. In eastern Europe, right wing parties often didn’t even have to overthrow an existing order, they could just slide in.

The pattern is so obvious only those who stand to lose from acknowledging it end up not seeing it, or telling themselves it’s all just an incident. But it’s not, because the shrinking economies everywhere are not. When left and right, either in public or in practice, rule a country together and their promises don’t hold up, people will look for a way out. If far right is the only way available, they will pick that.

It’s not because they’re all nazis or something like that. But people do lean towards smaller units of organization, decentralization, when they get poorer. And despite all the talk of recovery, that is what most people have seen happen to their lives, while their leaders told them they’re just fine. So you get this kind of headline (and map) for the US (h/t Mish/ZH).

Large Parts Of America Are Being Left Behind

Economic prosperity is concentrated in America’s elite zip codes, but in an interesting report on Distressed Communities, from The Economic Innovation Group, it is increasingly clear that economic stability outside of those communities is rapidly deteriorating. As Axios noted, this isn’t a Republican or Democratic problem. At every level of government, both parties represent distressed areas. But the economic fortunes of the haves and have-nots have only helped to widen the political chasm between them, and it has yet to be addressed by substantial policy proposals on either side of the aisle. Economic Prosperity Quintiles.

And a very similar headline appears in the Guardian in a report about the German election.

‘A Lot of People Feel Left Behind’: Voters on the Far-Right Surge in Germany

Sarah, 37, teacher, Bonn: “A lot of people feel left behind. They are looking for scapegoats. It is the easy way to deal with problems. The AFD makes use of this feeling. With the grand coalition, there was no real debating culture left. The CDU went too much into the middle, leaving the right out. Just like the SPD under Schröder left the left-wing out.”

Perhaps a lot of those who voted for Trump, and Brexit, Le Pen, Wilders, the AfD, are not so much looking for scapegoats, they’ve identified those as their incumbent politicians; they’re instead looking for a way away from them. All these people who feel left behind base that feeling primarily on their deteriorating economic circumstances. And if the only alternative they have rants, against foreigners and immigrants, they’ll go with that.

Angela Merkel pushed over 1 million refugees and immigrants down the German population’s throats. She never asked their opinion. But many Germans are not doing any better than many Americans or French or British. So the consequences of such things are predictable. You have to explain, you have to communicate with your people. Just saying ‘we can do this’ is not enough. No more than ‘change we can believe in’ was. It’s just hollow.

Merkel lost ‘only’ 25% of her votes. Because Germans know what right wing is, and what it can do. Germany is not full of nazis, no more than America is. Both countries just have a lot of people who feel trapped in a web of lies, and their existing and alleged democratic systems offer no way out of that web.

All these countries, the people and their politicians, have the tendency to see their situations as somehow unique, but they’d be much better off looking at what they have in common with others.

The only solution is to tell people the truth, that the incumbent political class has screwed up badly because of limited brain capacity and unlimited greed, and that they should elect people next time who are both smarter and less sociopathic. But that is not something that comes voluntarily, that takes a battle. And it tends to end careers, and lives.

That is what we can expect. In many different shapes and forms, but all for the same underlying reasons. You can’t fool all of the people all of the time, you can’t even fool a majority for long. You can only fool a limited number of them for a limited amount of time.

Well, time’s up.

Why We're Doomed...

Authored by Charles Hugh Smith via OfTwoMinds blog,

The point is the present system cannot endure.

Despite all the happy talk about "recovery" and higher growth, wages have gone nowhere since 2000--and for the bottom 20% of workers, they"ve gone nowhere since the 1970s.

Gross domestic product (GDP) has risen smartly since 2000, but the share of GDP going to wages and salaries has plummeted: this is simply an extension of a 47-year downtrend.

Last month I posted one reason Why We"re Doomed: Our Economy"s Toxic Inequality (August 16, 2017). The second half of why we"re doomed is stagnant wages. Why do stagnating wages for the bottom 95% doom our status quo? As I noted yesterday in Why Wages Have Lost Ground in the 21st Century, our system requires ever-higher household incomes to function--not just in the top 5%, but in the top 80%.

Our federal social programs--Social Security, Medicare and Medicaid--are pay-as-you-go: all the expenditures this year are paid by taxes collected this year. As I have detailed many times, the so-called "Trust Funds" are fictions; when Social Security runs a deficit, the difference between receipts and expenses are filled by selling Treasury bonds in the open market--the exact same mechanism ther government uses to fund any other deficit.

The demographics of the nation have changed in the past two generations. The Baby Boom is retiring en masse, expanding the number of beneficiaries of these programs, while the number of full-time workers to retirees is down from 10-to-1 in the good old days to 2-to-1: there are 60 million beneficiaries of Social Security and Medicare and about 120 million full-time workers in the U.S.

Meanwhile, medical expenses per person are soaring. Profiteering by healthcare cartels, new and ever-more costly treatments, the rise of chronic lifestyle illnesses--there are many drivers of this trend. There is absolutely no evidence to support the fantasy that this trend will magically reverse.

Costs are skyrocketing and the number of retirees is ballooning, but wages are going nowhere. Do you see the problem? All pay-as-you-go programs are based on the assumption that the number of workers and the wages they earn will both rise at a rate that is above the underlying rate of inflation and equal to the rate of increase in pay-as-you-go programs.

If 95% of the households are earning less money when adjusted for inflation, and their wealth has also declined or stagnated, then how can we pay for programs which expand by 6% or more every year?

The short answer is you can"t.

The budgets of state and local governments also expand every year as citizens demand more services, infrastructure requires costly maintenance and upgrades, and the overall costs of providing government services rises (soaring healthcare premiums are a major driver of higher government expenses). How can households pay higher property and sales taxes if their incomes are going nowhere?

Stagnant wages = stagnant income tax revenues.

Then there"s the consumer economy that depends on ever-higher consumer spending. If wages are stagnant, how can households spend more money? The conventional answer is: we"ll blow asset bubbles in stocks, bonds and housing, and households can spend this newfound wealth.

Nice theory, but only the top slice of American households own enough of these assets to matter. Feast your eyes on these two charts of skyrocketing income and wealth inequality. This chart shows that the majority of income growth is now concentrated in the top 1/0th of 1%, and most of what"s left has gone to the top 5%. This is the only possible outcome of financialization and central-bank inflated asset bubbles.

Here"s another look at the same dynamic, but excluding capital gains, which flow to those who own most of the assets, i.e. the top 1%: the bottom 90% lost 10% in the decade 2002-2012, the top 5% gained 6% and the very top of the wealth-power pyramid, the top 1/100th of the 1%, gained 76%.

The conclusion is sobering: wages/salaries are no longer an adequate means to distribute income or paid work. Our system is broken at the deepest levels--not just economically broken, but socially broken as well. Clinging to this broken model and filling the widening gap between the super-wealthy and everyone else with more debt will doom the system.

This is why I"ve proposed a new way to organize production, consumption, work and income in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All.

The point is the present system cannot endure. Borrowing trillions of dollars to paper over this failure won"t work for much longer. We need a new system, or we"re well and truly doomed.

Two New Totalitarian Movements: Radical Islam And Political Correctness

Authored by A.Z.Mohamed via The Gatestone Institute,

• The attempt in the West to impose a strict set of rules about what one is allowed to think and express in academia and in the media -- to the point that anyone who disobeys is discredited, demonized, intimidated and in danger of losing his or her livelihood -- is just as toxic and just as reminiscent of Orwell"s diseased society.


• The main facet of this PC tyranny, so perfectly predicted by George Orwell, is the inversion of good and evil -- of victim and victimizer. In such a universe, radical Muslims are victimized by the West, and not the other way around. This has led to a slanted teaching of the history of Islam and its conquests, both as a justification of the distortion and as a reflection of it.


• Thought-control is necessary for the repression of populations ruled by despotic regimes. That it is proudly and openly being used by self-described liberals and human-rights advocates in free societies is not only hypocritical and shocking; it is a form of aiding and abetting regimes whose ultimate goal is to eradicate Western ideals.

Political correctness (PC) has been bolstering radical Islamism. This influence was most recently shown again in an extensive exposé by the Clarion Project in July 2017, which demonstrates the practice of telling "deliberate lies while genuinely believing in them in order to forget any fact that has become inconvenient" -- or, as George Orwell called it in his novel, 1984, "Doublespeak."

This courtship and marriage between the Western chattering classes and radical Muslim fanatics was elaborated by Andrew C. McCarthy in his crucial 2010 book, The Grand Jihad: How Islam and the Left Sabotage America.

Since then, this union has strengthened. Both the United States and the rest of the West are engaged in a romance with forces that are, bluntly, antagonistic to the values of liberty and human rights.

To understand this seeming paradox, one needs to understand what radical Islamism and PC have in common. Although Islamism represents all that PC ostensibly opposes -- such as the curbing of free speech, the repression of women, gays and "apostates" -- both have become totalitarian ideologies.

The totalitarian nature of radical Islamism is more obvious than that of Western political correctness -- and certainly more deadly. Sunni terrorists, such as ISIS and Hamas -- and Shiites, such as Hezbollah and its state sponsor, Iran -- use mass murder to accomplish their ultimate goal of an Islamic Caliphate that dominates the world and subjugates non-Muslims.

The attempt in the West, however, to impose a strict set of rules about what one is allowed to think and express in academia and in the media -- to the point that anyone who disobeys is discredited, demonized, intimidated and in danger of losing his or her livelihood -- is just as toxic and just as reminiscent of Orwell"s view of a diseased society.

These rules are not merely unspoken ones. Quoting a Fox News interview with American columnist Rachel Alexander, the Clarion Project points out that the Associated Press -- whose stylebook is used as a key reference by a majority of English-language newspapers worldwide for uniformity of grammar, punctuation and spelling -- is now directing writers to avoid certain words and terms that are now deemed unacceptable to putative liberals.

Alexander recently wrote:

"Even when individual authors do not adhere to the bias of AP Style, it often doesn"t matter. If they submit an article to a mainstream media outlet, they will likely see their words edited to conform. A pro-life author who submits a piece taking a position against abortion will see the words "pro-life" changed to "anti-abortion," because the AP Stylebook instructs, "Use anti-abortion instead of pro-life and pro-abortion rights instead of pro-abortion or pro-choice." It goes on, "Avoid abortionist," saying the term "connotes a person who performs clandestine abortions."

"Words related to terrorism are sanitized in the AP Stylebook. Militant, lone wolves or attackers are to be used instead of terrorist or Islamist. "People struggling to enter Europe" is favored over "migrant" or "refugee." While it"s true that many struggle to enter Europe, it is accurate to point out that they are, in fact, immigrants or refugees."

To be sure, the AP Stylebook does not carry the same weight or authority as the Quranic texts on which radical Islamists base their jihadist actions and totalitarian aims. It does constitute, however, a cultural decree that has turned religious in its fervor. It gives a glimpse, as well, into the intellectual tyranny that has pervaded liberal Western thought and institutions.

The main facet of this PC tyranny, so perfectly predicted by Orwell, is the inversion of good and evil -- of victim and victimizer. In such a universe, radical Muslims are victimized by the West, and not the other way around. This has led to a slanted teaching of the history of Islam and its conquests, both as a justification of the distortion and as a reflection of it.

As far back as 2003, the Middle East Forum reported on the findings of a study conducted by the American Textbook Council, an independent New York-based research organization, which stated:

"[Over the last decade], the coverage of Islam in world history textbooks has expanded and in some respects improved.... But on significant Islam-related subjects, textbooks omit, flatter, embellish, and resort to happy talk, suspending criticism or harsh judgments that would raise provocative or even alarming questions."

Thought-control is necessary for the repression of populations ruled by despotic regimes. That it is proudly and openly being used by self-described liberals and human-rights advocates in free societies is not only hypocritical and shocking; it is a form of aiding and abetting regimes whose ultimate goal is to eradicate Western ideals. The relationship between the two must be recognized for what it is: a marriage made in hell.

Watch Live: Speaker Paul Ryan To Deliver "Major Speech" Calling For Permanent Tax Reform

In what is being hailed as a "major speech," which means just about nothing to ordinary Americans living outside the D.C. bubble, House Speaker Paul Ryan is expected to call for permanent tax reform in 2017 in remarks to be delivered to the National Association of Manufacturers.  According to the Washington Examiner, Ryan will report that the GOP intends to introduce and pass a joint tax bill in the fall of this year.

"We are going to get this done in 2017. We need to get this done in 2017.  We cannot let this once-in-a-generation moment slip."

"Transformational tax reform can be done, and we are moving forward. Full speed ahead."

The @HouseGOP plan for tax reform will create more jobs & increase wages, putting American workers & families first. https://t.co/TgaUyqc4WJ

— Paul Ryan (@SpeakerRyan) June 20, 2017

One component of Ryan"s tax plan, the so-called border adjustment provision, has become very controversial even among his Republican colleagues. It has elicited fierce opposition from retailers and other industries that fear it would result in higher taxes on imported products. In effect, the border adjustment would work by exempting export sales from companies" taxable income, but disallowing the deduction of the cost of imported goods from taxable income.

"While acknowledging that the particular mechanism must be sorted out with the administration, he will argue that we must fix the current incentive for American companies to move abroad, make things overseas, and then sell them back into America — which costs us jobs," his office said. Ryan will also stress that the U.S. needs a more competitive tax system after years of being disadvantaged.

"We are actually unique in the world in the way we discourage capital from coming back to America and how we incentivize off-shoring jobs," he"ll say. "This is not the kind of exceptionalism we should aspire to…We must think differently, so that once again we make things here and export them around the world."

We will also eliminate many of the loopholes used by the wealthy and well-connected, helping to lower the tax rates for American families.

— Paul Ryan (@SpeakerRyan) June 20, 2017

Meanwhile, Republicans will have to pass their tax package via a continuing resolution to take advantage of their simple majority in the Senate, a procedural move that will prevent Democrats from blocking it. Under such a procedure, the tax package cannot add to long-term budget deficits. 

That said, in order to take advantage of the procedure, Republicans in the House and Senate must pass a budget resolution.  And while that may sound simple enough, the Republican party is bitterly split over spending levels for the military and various domestic programs.

Of course, major tax reform has been a key agenda item for Republicans for quite a while and only time will tell whether it is possible or, as John Boehnor would say, just a bunch of Republican "happy talk."

Boehner Bashes Trump: "Everything He's Done Is A Complete Disaster"

Trump"s massive tax reform plan is "just a bunch of happy talk" exclaimed former Speaker of the House John Boehner during a keynote address at an energy conference today adding that "everything else he’s done (in office) has been a complete disaster."

As The Hill reports, Boehner gave a keynote address at KPMG’s annual Global Energy Conference, where he said his faith in the passage of a tax code overhaul is fading.

“I was a little more optimistic about it early in the year; now my odds are 60/40,” the Ohio Republican said, according to energy-sector news publication RigZone.

“The border adjustment tax is deader than a doornail. Tax reform is just a bunch of happy talk.”

“Everything else he’s done (in office) has been a complete disaster,” the Ohio Republican said, according to the publication.

“He’s still learning how to be president.”

Additionally, Boehner said that while Republicans would fix some problems of Obama’s law, repeal and replacement is “not going to happen.”

 He added, “Republicans never ever agree on health care.”

Boehner said he’s been friends with Trump for 15 years, but still has a hard time envisioning him as president. He also said Trump shouldn’t be allowed to Tweet overnight.

As AP adds, the former Speaker also hit back at some House Democrats’ calls for Trump’s impeachment...

“Talk of impeachment is the best way to rile up Trump supporters,” he said.

“Remember, impeachment is not a legal process; it’s a political process.”

David Schnittger, a spokesman for Boehner, confirmed the comments on Friday. Boehner made it clear he’s happier now that he’s left Capitol Hill.

“I wake up every day, drink my morning coffee and say, ‘Hallelujah, hallelujah, hallelujah,’” he said, according to Rigzone.

And unsurprisingly, Boehner said he doesn’t want to be president.

“I drink red wine. I smoke cigarettes. I golf. I cut my own grass. I iron my own clothes. And I’m not willing to give all that up to be president,” he said.

Bizarro World: Some Republicans Now Defending "Failing" ObamaCare

For months now we"ve warned, as have many prominent Republican legislators, that Obamacare is on the verge of collapse (see "Obamacare On "Verge Of Collapse" As Premiums Set To Soar Again In 2017"). 

It"s not that shocking really as the fundamental concept behind the legislation made it doomed from the start.  The idea was that, out of an abundance of compassion for their elders, young, healthy millennial families would fork up $10s of thousands of dollars each year to purchase health insurance they didn"t really need.  Those premiums would then be used to subsidize care for the elderly who consume more than their "fair share," to quote Obama.

Unfortunately, the basic math skills of our young millennials turned out to be better than the Obama administration had planned for and they figured out they were better off just paying the Obamacare tax to the IRS than paying the larger Obamacare "tax" associated with buying a service they never use.  This "adverse selection bias" left risk pools way worse than insurers planned, which drove premiums even higher, which forced even more young people to ditch their insurance and the cycle will continue until the system ultimately fails.

In fact, as we pointed out last week, Knoxville, TN could be ground zero for the Obamacare explosion as it"s 40,000 residents live in a county that has been left with no healthcare options for the 2018 plan year after Humana pulled out of exchanges there.

And, with the fate of Obamacare all but sealed, you can imagine our shock to learn that several House Republicans are now apparently warming up to the legislation.

One such person is Patrick McHenry of North Carolina who says that any efforts of the Trump administration to lure votes from the Freedom Caucus by relaxing rules to allow insurance providers to charge people with pre-existing conditions higher premiums would be a "bridge too far" for some more moderate Republicans.  Per The Hill:

Rep. Patrick McHenry (R-N.C.), the GOP’s chief deputy whip, said Wednesday that the Freedom Caucus"s calls for states to be able to apply for waivers to repeal pre-existing condition protections are “a bridge too far for our members.”

Those ObamaCare protections include what is known as community rating, which prevents insurers from charging higher premiums to people with pre-existing conditions, and guaranteed issue, which prevents insurers from outright denying coverage to them.

McHenry spoke in personal terms about the importance of keeping in place those Affordable Care Act (ACA) provisions, contained in Title I of the law.

“If you look at the key provisions of Title I, it affects a cross section of our conference based off of their experience and the stories they know from their constituents and their understanding of policy,” McHenry said.

“My family history is really bad, and so my understanding of the impact of insurance regs are real, and I believe I"m a conservative, so I look at this, understand the impact of regulation, but also the impact of really bad practices in the insurance marketplace prior to the ACA passing,” he continued. “There are a lot of provisions that I"ve campaigned on for four election cycles that are part of the law now that I want to preserve.”

Meanwhile, other Republicans are also supporting ObamaCare"s expanion of Medicaid and the so-called "minimum coverage" mandate that, among other things, requires men to pay for maternity benefits...and while it may now be customary for our snowflakes to "choose" their own gender, we"re pretty sure that biology doesn"t actually work that way. 

Many Republicans from states that accepted ObamaCare’s expansion of Medicaid are supporting keeping it.

A group of Republican senators, including Sen. Cory Gardner (R-Colo.), the chairman of Senate Republicans’ campaign arm, last month objected to a draft of the House GOP repeal bill because it did not “provide stability and certainty for individuals and families in Medicaid expansion programs or the necessary flexibility for states.”

The House bill would effectively end the Medicaid expansion starting in 2020. Rep. Chris Smith (R-N.J.) warned that change “affects so many of our disabled individuals and families, and the working poor.”

Republicans had long derided ObamaCare’s “essential health benefits,” which mandate 10 health services that insurance plans must cover. They have said, for example, that men should not be forced to pay for plans that cover maternity care.

But now some Republicans are speaking up in favor of those requirements, including the chairman of the powerful Appropriations Committee, Rep. Rodney Frelinghuysen (R-N.J.).

“In addition to the loss of Medicaid coverage for so many people in my Medicaid-dependent state, the denial of essential health benefits in the individual market raise serious coverage and cost issues,” Frelinghuysen wrote in a statement last month announcing he would oppose the House GOP repeal bill.

House Republicans even touted an amendment on Thursday that they said would bring down premiums by the government helping to pay for the costs of high-cost enrollees. That program is very similar to one that already existed in ObamaCare, called “reinsurance.”

Of course, it"s looking increasingly likely that former House Speaker John Boehnor was right about Republicans and healthcare all long when said that the idea of a quick repeal and replace was just "happy talk....Republicans never ever agree on health care."