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Opportunities for a Different Economy in 2011

by Brent Blackwelder

With last November’s election there are new governors, state legislatures, and a very different U.S. House of Representatives. The issues of budget cuts, tax reform, corruption, the global financial collapse and the rise in unemployment are high on the agenda. We have an opportunity to shape the debate on these issues and bring the steady state economy into the discussion.

Here are some of my ideas for 2011.

Public Education

We need to conduct a series of seminars or teach-ins across the country to challenge conventional economic thinking, to expose people to the concept of a steady state economy, and to find workable solutions to all the economic problems we face. If you would like a seminar or teach-in for your community or your college, please contact me. Such sessions would involve audience interactions with leading advocates of new economic approaches and would feature dynamic discussions of what a steady state economy would look like, how to accomplish a transition to such an economy, and opportunities for financial and economic reform this year.

Financial Corruption and Tax Evasion

Financial corruption is undermining all aspects of governance. Tax dodgers are depriving governments around the world of essential revenues. The result is less money for enforcement of health, safety, and environmental standards and reduction of many vital social services. It doesn’t take long under such conditions for citizens to lose faith in the ability of the government to provide security and other meaningful services.

We can work on two tasks in 2011 to address these problems. First, we can solidify important legislative gains made last year to curtail corruption, by making sure new regulations have strong provisions to prevent tax dodging (note: the Administration will be writing regulations to put new agencies like the Office of Financial Research into action). Second, we can demand new laws to force disclosure of clandestine owners of offshore tax havens. Those who want to be part of grassroots efforts on these issues should contact me.

Tax Reform and Budget Cuts

The last election featured headlines about growing deficits, massive cuts in federal spending, and the influence of Tea Party activists. Republicans are demanding spending cuts on the order of $100 billion but are short on specifics. At the same time, Democrats are angling to avoid big reductions in domestic spending.

The win-win solution to the pending impasse on budget cuts is to go after offshore tax havens and other tax dodges that are costing our country $100 billion a year. More and more people and corporations are moving money they earn in the U.S. to offshore havens where taxes are inconsequential. Goldman Sachs used this technique to reduce the percentage of its income going to taxes from 34% in 2007 to less than 1% for 2009. Exxon avoided paying U.S. taxes in 2009 even though it had billions in profits. The Task Force on Financial Integrity and Economic Development reports that 83 of the top 100 U.S. corporations have subsidiaries in tax havens. Such tax avoidance by multinational corporations not only hurts taxpayers, but also costs the governments of developing countries an estimated $160 billion per year, according to a new report by ActionAid. Tax avoidance by corporations is a major factor in keeping poor people poor around the world. For example, in Ghana, SABMiller’s subsidiary Accra Brewery is the second biggest in the country with over $40 million in yearly sales, but through clever accounting, it has paid no taxes the past two years. At the same time Marta Luttgrodt, who sells this beer at her small food and beverage stall near the brewery, must pay a number of taxes to the Ghana Revenue Authority or she will be closed down. ActionAid estimates that the taxes SAB Miller has avoided paying could have put 250,000 children in school in the countries where the company operates.  Click here for more on this story.

Great Educational Movie

For a captivating picture of the global financial collapse of 2008, the bailouts, and the behavior of big bankers and Wall Street firms, the movie Inside Job is a must-see. Inside Job provides a comprehensible and dynamic overview of the collapse in the U.S. and around the world. If you are not already infused with a sense of outrage over the criminal behavior of so many involved in the scandals, you will be after seeing this movie. Help spread the word.

Key Changes in the Tax Code

Tax reform will be a major topic for action this year. Progressives need to be on the offensive and demand a better taxation framework. It is our civic duty to see that our tax structure is fair, that people live up to their responsibility to pay taxes, and that tax incentives do not encourage undesirable activities. For example, the tax code should impose fees on pollution and on products that harm public health. Often the reverse is true. The government has subsidized the purchase of gas-guzzling hummers and delivery of junk food into public schools. We should push both political parties to eliminate all government subsidies for the fossil fuel industry. If you want to be part of the subsidy debate on energy, please visit Friends of the Earth.

We have lot of work to do to build a sustainable and fair economy. But we also have a lot of opportunities to minimize perverse subsidies, eliminate tax dodging, create meaningful employment opportunities, and put the brakes on the financial roller coaster that is being driven by speculators. Contact Dr. Brent Blackwelder to follow up.

Steady State Economics and the New Congress

by Brent Blackwelder

My New Year’s wish is for everyone to see the movie Inside Job. It’s a dynamic overview of the people, forces, and philosophy behind the global financial crisis and the ensuing bailouts of the “too-big-to-fail” banks and investment firms. Inside Job shows how pervasive the corruption of the global financial system has become. The movie singles out various Democrats and Republicans as being part of the problem, but it also contains scenes of some keen Congressional investigators such as Senator Levin of Michigan, Chairman of the Permanent Subcommittee on Investigations, who is shown grilling the heads of the big banks and exposing the kinds of swindles that took place.

Advocates of the steady state economy should be working more closely with the cutting-edge organizations fighting global corruption because the corruption and its attendant bribery of public officials is undermining governance around the world.

The ongoing economic depression is the very time steady state advocates should be pushing for a totally different way of proceeding, a way to avoid the boom and busts of the past. We need to blow right by the typical politicians pushing their pet hackneyed ideas for getting the economy moving.

We don’t want to return to the same spot we were in, only to have a new round of speculators crash the economic system and undermine governance. It is important, therefore, to force decision makers in Congress and the Executive Branch to think about a paradigm shift and what a steady state economy would look like.

One obvious approach is to continue increasing the teach-ins, symposiums, and conferences that feature this deep economic debate. CASSE (the Center for the Advancement of the Steady State Economy) can provide the names of experts to university groups, religious congregations, and public interest organizations who want to host events to educate their members and the public about new economic models.

Rallies and demonstrations can help make a difference in awareness and can stimulate Congress to conduct hearings. For example, Tea Party activists demonstrated repeatedly this past fall at Republican primaries to protest the deficit and the gridlock in Congress and to push for tax cuts. Many were bankrolled by powerful right-wing interests, and they got a lot of press. Advocates of big economic change need to think about doing more demonstrations to raise awareness and force Congressional oversight into new economic models of sustainability.

For example, on the United Nations Anti-Corruption Day, December 9, I organized a demonstration outside the headquarters of the U.S. Chamber of Commerce. The U.S. Chamber has been a large force pushing growth at all costs and is well known for its anti-sustainability positions. But what is not so well known is the Chamber’s opposition to those trying to clean up global corruption and improve governance.

On behalf of the Tax Justice Network with participation by Common Cause, Public Citizen, and Friends of the Earth, we paraded in front of the U.S. Chamber and laid out the charges against it. For example, the Chamber is seeking to weaken the Foreign Corrupt Practices Act and is blocking efforts to abolish offshore tax havens, which contain vast sums of money (about $20 trillion) that go untaxed by any jurisdiction.

In addition to protests, rallies, and teach-ins, there may be other opportunities to confront the new Congress to get a deeper economic discussion going. Here are a couple of possibilities. Given the stated desire of most of the 97 new Members to cut federal spending, Congress should be challenged to eliminate the subsidies for polluting industries, especially for fossil fuels. The last Congress unfortunately continued the big subsidy for corn ethanol that will cost several hundred billion dollars by the year 2022. The new Congress could reverse this decision, and it could cut the agricultural commodity subsidies that benefit agribusiness and undermine organic food production. The challenge is to make the Congress vote and then we can tabulate the results and expose any hypocrites.

Many advocates of a steady state economy criticize gross domestic product (GDP) for failing to give an honest indication of the well-being of the nation. In 1989 Senator Robert Kasten (R-Wisconsin) added an amendment to the Commerce Department appropriations bill that required the Department to product an index of gross sustainable production in addition to the usual GDP. The provision became law and the Commerce Department started implementation, but in the mid-1990s the fossil fuel lobby forced the removal of this modest requirement. Perhaps as part of truth-telling to the American public, Congress could reinstate this provision.

I have suggested several measures of offense, but in 2011 we may have to work significantly on defense. For example, more bailouts may be proposed without any serious reform conditions. Keep in mind the inability of Congress to resist bailing out too-big-to-fail corporations.

For example, take the bailout of General Motors and Chrysler by the last Congress and the Obama administration. Why wasn’t a provision added to prohibit these companies from suing state or federal governments? GM got bailed out and then sued the State of California over clean car standards.

The Obama administration could have insisted on binding conditions for the production of better mileage vehicles similar to Toyota’s Prius and provided for government fleet purchases of high-mileage vehicles. Dan Akerson, CEO of General Motors, recently told the Economic Club in Washington: “We commonly refer to the geek-mobile as the Prius…I wouldn’t be caught dead in a Prius.”

Let’s make sure that Obama and the new Congress don’t continue rescuing fossilized corporations that stubbornly cling unsustainable policies of the past.