Stripped from the fancy (and mystifying) jargon, quantitative easing (QE) simply means increasing the quantity of money supply, or easing credit conditions—in the hope of stimulating the stagnant economy. This is usually done by having central banks inject a pre-determined quantity of money into the coffers of commercial banks in return for the purchase of their financial assets, which consist largely of government bonds. Although it is typically done electronically, or on paper, its practical effect is the same as printing money.
This is supposed to be an expansionary monetary policy designed to promote economic recovery. The rationale behind the policy is that the addition of new funds to the capital base of the commercial banks (at or near zero interest rates) will enable them to, in turn, extend new credit to businesses and/or manufacturers at reasonably low rates so that they would, then, be encouraged to borrow, to expand, to hire and, therefore, create growth and prosperity.
While under certain circumstance (when money supply or capital markets are tight, interest rates are too high and effective demand or purchasing power is strong) this may work, under the current market conditions (where there is no shortage of capital, interest rate or the cost of borrowing is already low, and effective demand is very weak) it is bound to fail—as it has actually failed miserably.
Borrowing and investing in the production of goods and manufactures is weak not because there is a shortage of investible funds (corporations are sitting on more than $2 trillion in cash but not hiring) or because the cost of borrowing is too high, as is implicitly assumed by the QE gurus, but because the macro-level purchasing power is too weak and the uncertain market conditions do not warrant investment and expansion. Furthermore, corporations prefer to produce not at home but where the labor is cheapest globally.
Likewise, the reluctance on the part of banks to extend credit to manufacturers is not because they lack capital, but because they find it more profitable to invest in speculation, that is, in buying and selling of assets and/or securities such as bonds, stocks, commodities, real estate, currencies, and the like—destabilizing activities that tend to create asset price bubbles, inevitably followed by bursts. Parasites discovered a long time ago that it is easier to suck the existing blood out of the body of living organisms than producing it from scratch. Karl Marx used an even better metaphor to characterize parasitic finance capital: “The complete objectification, inversion and derangement of capital as interest-bearing capital. . . . It appears as a Moloch demanding the whole world as a sacrifice belonging to it of right.”
This explains why instead of increasing industrial production and raising employment the 1,200 billion dollars of money that the Federal Reserve Bank has pumped into the coffers of commercial banks through two rounds of QEs has simply resulted in further financialization of the economy; which goes to explain the significant bubbling of some asset prices of the past few years, especially the considerable rise in certain share prices as well as the drastic rise in the price of a number of important commodities such as rice, wheat, and oil.
By the same token, it also explains why the QE policy has further exacerbated income and wealth inequality, both in Europe and the United States, as it has helped only the financial elite without any help to the public. “The evidence suggests that QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it,” reports Dhaval Joshi, of BCA Research. Joshi further points out that real wages – adjusted for inflation – have fallen in both the US and UK, where QE has been used to promote growth. “The shocking thing is, two years into an ostensible recovery, [UK] workers are actually earning less than at the depth of the recession. Real wages and salaries have fallen by £4bn. Profits are up by £11bn. The spoils of the recovery have been shared in the most unequal of ways.” In Germany, meanwhile, where there has been no quantitative easing, real wages have risen.
It is not unreasonable, therefore, to conclude that the financial oligarchy is using QE essentially as a legal, policy tool to further enrich itself at the expense of everybody else. Not only were the Wall Street gamblers able to bail themselves out by means of $16 trillions of taxpayers’ dollars, but now they are also showering themselves with additional trillions of QE dollars to grow even richer and bigger.
Let us assume for a moment that, as the Federal Reserve and the government claim, QE is honestly designed to be an expansionary monetary policy intended to stimulate the economy. If so, why is then the government at the same time pursuing a fiscal policy that is contractionary, that is, moving in the opposite direction of the monetary policy by cutting social spending at all levels of the public sector?
The answer is that while from the viewpoint of national or public interests the two policies contradict each other, they are quite consistent from the viewpoint of Wall Street gamblers; both the supposedly expansionary monetary policy and the brutally austere contractionary fiscal policy serve the nefarious interests of the financial aristocracy. It is hard to believe that economic policy makers do not see the obvious: that their monetary and fiscal policies contradict each other. But, then, it is perhaps not so much a matter of economic knowhow or policy expertise as it is of wicked preferences and warped loyalties to the powerful special interests to be served.
The tax plan of Republican candidate Herman Cain is the best current example of the real agenda of the GOP. It is a masterpiece of marketing, with its simple “9-9-9” label being reminiscent of a two-for-one pizza special. It would lower all Federal income tax rates to a single 9-percent rate, set the corporate rate at 9 percent, and levy a national sales tax of 9 percent. It has the sort of meretricious simplicity that appeals both to the simple-minded and the mainstream media. True to its “horserace” philosophy of covering politics, early on most of the the press declared Cain’s plan a brilliant campaign move without making any effort to evaluate its substantive merits.
Bruce Bartlett, formerly an economist in the Reagan and George H.W. Bush administrations (and a fellow Republican apostate), analyzed the 9-9-9 tax plan. His conclusion: it decreases revenue as it drastically cuts the taxes of the wealthy and – here’s the kicker – raises taxes on the least well-off. And it does not in fact tax all income at 9 percent (so much for its appealing tripartite simplicity): it lowers the capital gains and dividend rates to zero. Generally, the richer the individual is, the more likely his income is to be derived from capital gains and dividends, which are already taxed at less than half the top marginal income tax rate. This current inequity in the tax code accounts for the fact that the 400 richest Americans have been paying an average effective Federal income tax rate of 17-18 percent since passage of the Bush tax cuts: little more than half the effective rate they had paid since the early 1990s – even as their combined income quadrupled. Cain’s plan would sharply increase this disparity.
The usual rationale for reducing tax rates on capital below the rates on labor – and Cain abolishes them entirely – is that capital gains and dividends are “double taxed,” that is, the corporation that pays them out is taxed, and the recipient is taxed. But this is a smokescreen. The American revenue system is about taxing individual legal entities. Taxes on an individual, be he a wager-earner or sole proprietor of a business, are only levied once; that said, all income from whatever source (unless it is specifically exempt) is taxed in those cases. Corporations, on the other hand, pay rates on profits, a narrower category whose definition is more susceptible to creative bookkeeping. This is how GE can pay zero Federal taxes in a given year; yet that does not preclude its shareholders from realizing capital gains. Those GE shareholders are individual entities who are legally separate from the corporations whose shares they own. They are taxed once on the investment income they receive.
While Bartlett did not do a net estimate of the total revenue change, it appears to me that just executing the tax cuts in only the second phase of Cain’s three-phase plan would result in gross revenue losses of over a trillion dollars per year (so much for the GOP’s abiding concern for the deficit). The plan’s revenue raisers, on the other hand (including its Federal consumption tax with no allowance for deductions, even for food), would fall disproportionately on the non-rich and would in any case be unlikely to make up the revenue loss.
As Bartlett describes it, the Cain plan would eliminate deductions to corporations for the workers they hire. Therefore, Corporate America would have even less incentive to hire workers than now, when they are sitting on close to $2 trillion in cash. They would have all the more incentive to park their loot at a commercial bank (which would in turn park the deposits at a Federal Reserve bank), or arbitrage sweat labor overseas. On the other hand, according to Bartlett’s reading, corporations could borrow money to pay shareholder dividends and deduct the expense!
The Tax Policy Center did a distributional analysis of Cain’s plan. The Center’s conclusion: “A middle income household making between about $64,000 and $110,000 would get hit with an average tax increase of about $4,300, lowering its after-tax income by more than 6 percent and increasing its average federal tax rate (including income, payroll, estate and its share of the corporate income tax) from 18.8 percent to 23.7 percent. By contrast, a taxpayer in the top 0.1% (who makes more than $2.7 million) would enjoy an average tax cut of nearly$1.4 million, increasing his after-tax income by nearly 27 percent . . . a typical household making more than $2.7 million would pay a smaller share of its income in federal taxes than one making less than $18,000.”
So much for the policy; what of the political strategy? At first I wondered: did Herman Cain dream this plan up himself? If not, who whispered it in his ear, and what interests did that person represent? Now we know: Rich Lowrie, a Cain economic advisor who lives in Gates Mills, Ohio, a village of 2400 inhabitants east of Cleveland, and one of the wealthiest suburbs in the country. Lowrie’s day job is as an investment advisor, and he has been involved with such groups as the Koch brothers-funded Club for Growth and Americans for Prosperity. His plan has had substantive input from long-time Republican operatives Arthur Laffer (who, with his Laffer Curve, is one of the fathers of the current generation of crackpot right-wing economists), and Steve Moore, a pioneer in the operation of 501(c)4 organizations that promote the political views of billionaires while remaining tax-exempt.
Still, it is a little surprising that after the greatest financial meltdown in 80 years, widespread unemployment and destitution, and rising public anger over the greatest income disparity in America since the 1920s, a declared presidential candidate would tout a plan that would raise taxes on low and moderate income-earners while drastically reducing them on the wealthy. Potential Republican primary voters are notoriously tolerant of lunatic-fringe nostrums, but one would think even they might blanche at a plan that would raise taxes on the majority of them.
But, at least so far, not a bit of it. Cain surged in the polls after unveiling his tax plan. According to the mainstream media, he surged because of it. The underlying causes of this phenomenon would make a fascinating case study in psychopathology. Nevertheless, one suspects that Cain will begin to sink in the polls now that the big media have finally begun to evaluate 9-9-9 and as his rivals start to chip away at his front-runner status. Still, Cain’s tax plan is a startling illustration of how to use kamikaze tactics to advance a political agenda.
In the case of other policies with substantial fiscal (and social) consequences, for instance the privatization of Social Security, right-wing think tanks fronting for billionaires have worked for decades to mainstream heretofore politically unthinkable policies by endlessly repeating simple, misleading memes and touting faked “analysis.” Eventually they succeed in changing the debate and dragging the Washington Consensus (regardless of what the country at large thinks) in the direction of serving our ever-more-entrenched plutocracy.
Viewed in the light of how he advanced the GOP’s tax agenda, Cain is not a “vanity” candidate or a joke, even if he has no realistic chance of winning. His strategic purpose would appear to be to normalize bad policy and shape the Beltway’s hive mind gradually to accept a tax system with few major precedents – save that in France’s ancien régime, where the aristocracy was exempt from taxes while the poor were squeezed. And we all know how well that historical episode ended.
While Cain’s lowering of taxes on the wealthy is a well-known formula in the GOP’s playbook, the really interesting and heretofore less well-known aspect of his plan was its increase in taxes for the working poor. Republicans have of late become quite uncharacteristically enamored of raising taxes, but not on the rich. They are targeting the less well-off.
The first public laying of the groundwork for the idea of taxing low-income earners came in a November 2002 Wall Street Journal editorial page comment. The working poor, less well-off retirees, and others who do not pay Federal income taxes were “lucky duckies.” The Journal followed up with two additional editorials using that infantile phrase.
Most Republican office holders did not yet come out publicly to make the Journal’s argument. But a few, like Jim DeMint and Orin Hatch, occasionally commandeered the Senate chamber to denounce a tax policy that has allegedly allowed almost half of Americans to avoid paying Federal income taxes.
Since Obama’s election, Republicans have amped up the “soak the poor” theme. They are strangely lukewarm about maintaining a payroll tax cut, despite the fact that it would increase the purchasing power of tens of millions of Americans who would have no choice but to recycle the money into the economy in order to buy necessities. Strange behavior indeed from a party that never met a tax cut it didn’t like.
And now Rick Perry is said to be producing a flat tax, one likely to be similarly regressive in the manner of 9-9-9, even if differing in details. The normalization of bad policy continues.
Cain has never bothered to put together a proper campaign organization. Given that his campaign is spending tens of thousands of dollars of scarce funds to buy copies of his auto-hagiography, it is possible that his whole candidacy, like that of Donald Trump or Sarah Palin, is mainly a bid to boost his personal income: book sales, speaking fees, a gig as a Fox News commentator. As year chased weary year in the pizza pie business, Cain no doubt grew tired of being a huckster for his own brand of ketchup sauce and easer-like mozzarella on a soggy cardboard crust; he wanted to augment his income in the more respectable realm of ideas. The Club for Growth, Americans for Prosperity, Americans for Tax Reform, and all the other front organizations for billionaires would agree: regardless of what happens to his candidacy, Herman Cain has succeeded in the world of ideas.
Mike Lofgren is a former professional staff member of the House and Senate Budget Committees. He retired this year.
Oh please. When did CNN ever run an article like this, on the difficulty of adjusting to daily life for a newly-released prisoner, about any of the three-quarters of a million Palestinians imprisoned by Israel since 1967?
Looking pale, thin and emotional, Gilad Shalit was reunited with his family Tuesday after more than five years in captivity. Now he faces what is likely to be a bewildering few days, weeks and months as he readjusts to a life of liberty.
While no one yet knows exactly what he went through, other captives’ experiences give an insight into his likely state of mind — and suggest that although he has his freedom, other challenges lie ahead…
Let’s get some perspective here. It might be true that “no one yet knows exactly what he went through”, but the mere fact that he was able to walk to freedom after a quick once-over by Israeli doctors gives us a pretty good idea of some of the things he didn’t go through.
For example, we know that he wasn’t tied up by his captors and beaten so viciously that his testicles had to be surgically removed. Benan Oudeh was 15 years old when that happened to him at the hands of Israeli soldiers who accused him of throwing stones, during the first intifada:
The Defense Ministry a few days ago gave NIS 2.4 million to 28 Palestinians who were tortured by the Israel Defense Forces and the Shin Bet security service. The payment was made after an out-of-court settlement was reached with the plaintiffs, who agreed that suits brought to the Tel Aviv Magistrate and District courts would be turned down.
One of the plaintiffs, Benan Oudeh, 31, of Qalqilya, arrested a few years ago for throwing stones, told Haaretz yesterday that his testicles were beaten so badly in the interrogation room that they had to be amputated…
— Out-of-court deal awards Palestinians NIS 2.4 million; Ha’aretz, 1 Feb 2006..
And we know, for example, that he wasn’t tied up then violently shaken over and over again by captors who thought shaking was a convenient means of torture because it left no marks, but forgot that if done too violently and for too long it leads to brain damage, coma and death. Which is how ‘Abd al-Samad Harizat, one of 8,000** Palestinian prisoners to undergo “violent shaking”, was killed by members of the Israeli General Security Service during the Oslo “peace process”:
‘Abd al-Samad Harizat, a 30-year-old computer expert from Hebron, was arrested around midnight on 21 April 1995 and fell into a coma soon after 4pm on 22 April; he died on 25 April without regaining consciousness. Physicians for Human Rights sent an expert, Professor Derrick Pounder, to observe the autopsy, carried out by two Israeli forensic pathologists. The autopsy found that ‘Abd al-Samad Harizat had died from ”violent shaking” which had caused a sub-dural haemorrhage within the skull. Pressure from the lawyer of the Harizat family later obtained information about his interrogation: he had been shaken 12 times between 4.45am and 4.10pm, 10 times by holding his clothes and twice by holding his shoulders. “There is no doubt whatsoever about the cause of death; it’s very clear he has died from unnatural causes, and that he has died from torture”, said Professor Pounder.
— Amnesty International, Human Rights in Israel and the Occupied Territories, 1 September 1998
And we know for sure that Shalit wasn’t left paraplegic by interrogators from the Israeli General Security Service who systematically tortured him, then told him: “Now you are paralyzed, as we promised”. Which is what happened to Luwaii Ashqar, while he was a prisoner at the Kishon detention facility, during the second intifada:
“We have to make you do a little sports,” the Shin Bet interrogator said, launching four successive days of questioning accompanied by brutal physical torture. The result: Luwaii Ashqar can no longer stand on his feet. He sits in his wheelchair, dressed in a fashionable quasi-military suit, super-elegant, new Caterpillar-brand shoes on his paralyzed feet. ..
Was there a judgment by the High Court of Justice? There was. It banned precisely the types of torture he underwent: the “banana posture,” the “shabah” (body stretching with hands tied to a chair), “invisible” blows and the “frog posture” (being forced to stand for hours on the toes in a crouching position) – all the way to a vicious kick to his chest that bent his body backward while he was tied to a chair with his arms and legs, and which was the probable cause of the partial paralysis of his legs.
Throwing up with the vomit entering his nostrils, losing consciousness and being given only saltwater to drink, relieving himself in his pants, not sleeping or resting – all of that for four consecutive days and nights.
What does the interrogator Maimon tell his children when he goes home? What do Eldad and Sagiv tell their wives about their daily labors before they turn in? That they tortured another helpless prisoner until they turned him into a cripple? That they beat this charming young man brutally and that at the end of the interrogation he was tried for only marginal offenses? And where is the Supreme Court, which in 1999 prohibited precisely the chain of torture that Luwaii Sati Ashqar, 30, who was married three years ago, underwent in the Kishon detention facility?
– Now You are Paralyzed, as we Promised; Ha’aretz, 16 Jun 2007.
So whatever “challenges lie ahead” for Gilad Shalit, we can be sure they’re not challenges of quite the same magnitude as those faced by thousands of Palestinians like Benan Oudeh, ‘Abd al-Samad Harizat, and Luwaii Ashqar, none of whom ever got a sympathetic retrospective from CNN. Because, whatever he endured in captivity, Gilad Shalit at least endured it as an Israeli soldier in the hands of Hamas, and not as a Palestinian prisoner in Israel.
** Eight thousand, according to Israeli former Prime Minister Yitzhak Rabin.
Following last month’s decision by the Museum of Children’s Art (MOCHA) in Oakland, California, to shut down an art exhibition of drawings by Palestinian children in Gaza, one of the child artists included in the exhibit has illustrated his response to being censored.
Translated from Arabic in Ali’s picture: “The Exhibit is Closed” written across top. “It’s my right to draw” in child’s speech bubble.
What is your name? Ali Hassan Al-Baba
How old are you? 12 years old
Where do you live? Deir El-Balah, Gaza
How many siblings do you have? Four sisters and three brothers
Please tell us about your drawing:
I’ve drawn the gallery featuring Palestinian children’s artwork. The art shows the bad things that Zionists do to Palestinians, but then the Zionists came and shut it down.
Please tell us about your family:
I am the oldest child of a simple family. My father works and is our only source of financial support. Our home was hit by an air strike but it is now patched up with metallic plates (zingo). It is a small house and the number of my family is big, but I thank God for everything we have.
What do you want to be when you grow up? I want to be an engineer so I can rebuild every house that Israel has destroyed.
Even though the original exhibition was shut down — following sustained intimidation from local and national pro-Israel lobby groups — Ali’s artwork, and the artwork of the other children, has found a new home in a gallery space around the corner from MOCHA in downtown Oakland. The exhibit will be open until the end of November, and MECA has all the information on its website.
JENIN — Four people were injured by fragments of Israeli ammunition after troops fired into the air while a funeral procession passed through a gate in the separation wall in the northern West Bank on Saturday.
Mourners from Dhaher al-Malih, a Palestinian village cut off from the West Bank behind Israel’s separation wall, tried to pass through a gate to bury Fathi al-Khatib in a cemetery near Tura, in the Palestinian West Bank.
The party had permissions, a Ma’an correspondent said, but when they refused an order from Israeli forces to pass through the separation wall checkpoint one-by-one, troops fired into the air.
Four men were injured by shards of ammunition, including three sons of the deceased man.
Abdullah, Muhammad, and Mustapha al-Khatib, as well as Ahmad Qabha, suffered light injuries and received medical attention on the scene, a Ma’an correspondent said.
An Israeli army spokeswomen said the group arrived “four hours ahead of their scheduled crossing time and believed they were barred from crossing.”
“They approached the soldiers in a manner that made them nervous so in line with army protocol the soldiers fired in the air, lightly injuring two Palestinians, who did not need treatment.”