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Surround the FCC! #SaveTheNet

Truthout - Tue, 05/13/2014 - 09:21

Surround the FCC! #SaveTheNet

Truthout - Tue, 05/13/2014 - 09:21

When Propaganda Meets Social Media

Truthout - Tue, 05/13/2014 - 09:06

Putin

Truthout - Tue, 05/13/2014 - 09:03

Armed Radicals

Truthout - Tue, 05/13/2014 - 08:59

Berlusconi deposto da un golpe ?

News From Mathaba.Net - Tue, 05/13/2014 - 08:17

L'ex ministro del tesoro americano Tim Geithner sostiene in un libro che Berlusconi subí un golpe nel Novembre 2011 orchestrato dall'UE. more... | PDA

Guilty Verdict For Occupy Activist An "Attack On Dissent"

The Real News Network - Tue, 05/13/2014 - 07:05
Attorney Kevin Zeese discusses how the judge hearing Cecily McMillan's case did not allow the defense to show images which would have proven that the activist was reacting to getting her breast grabbed

Links 5/13/14

Naked Capitalism - Tue, 05/13/2014 - 06:55

Everyone else’s life better than yours Daily Mash

A 71-Year-Old Man Built A Fully-Functioning Volkswagen Beetle Out Of Wood Business Insider

What Caused a 1300-Year Deep Freeze? Science Magazine

Antarctica Is Melting and There’s No Way to Stop it Gawker

Scientists Warn of Rising Seas as Antarctic Ice Sheet Melts New York Times

Second U.S. Case of Deadly Mideast Virus Found, CDC Says Bloomberg

Monsanto Meets its Match in the Birthplace of Maize Triple Crisis

How ‘Big Corn’ lost the ethanol battle to Philadelphia refiners Philly.com (Paul Tioxon)

“No Turning Back:” Mexico’s Looming Fracking and Offshore Oil and Gas Bonanza DeSmogBlog

Protect Canadians from FATCA NDP (Timothy S)

U.S. launches ‘manned’ intelligence missions over Nigeria to try to locate abducted schoolgirls from the sky Daily Mail

China data comes in weak MacroBusiness

U.S. Treasury’s Lew Urges China to Move to Market-Determined Exchange Rate

The Economist editorial: Thailand close to the brink; compromise needed Asian Correspondent

China presses housing panic button MacroBusiness

How the Greek Banks Secured an Additional, Hidden €41 billion Bailout from European taxpayers Yanis Varoufakis

Switzlerand: referendum may herald world’s highest minimum wage Guardian

Pfizer says its AstraZeneca vow over big UK presence is binding Financial Times. Right. Read the fine print.

A Deal to Dodge the Tax Man in America New York Times

Nuclear Talks Will Confront Iran Over Enriched Uranium New York Times

Ukraine

East Ukraine Votes For Independence As Reports Claim 400 Blackwater Troops In Country
DSWright, Firedoglake (Chuck L)

Ukraine separatists seek union with Russia Al Jazeera

Global Capitalism, the US Empire and Russian Nationalism Real News Network

In Ukraine, Donetsk People’s Republic lurches to life Globe and Mail

As Ukrainian separatists claim victory in vote, fears of all-out civil war mount Washington Post

EU Modestly Expands Russia Sanctions WSJ

Russia gives Ukraine gas payment deadline Telegraph

COMMENT: After referenda, a window of opportunity opens up in Ukraine BNE (Richard Smith). Even though this piece makes some useful observation, the emphasis on Russian meddling with no mention of US interference is frustrating.

Big Brother is Watching You Watch

Federal court rules that stiff driving posture is suspicious behavior Police State USA

Anti-surveillance mask lets you pass as someone else CNET (Nikki L)

Heartbleed bug still a threat after flawed patches IT Pro (Richard Smith)

About HR 3361, the NSA Surveillance Efficiency Act, AKA USA Freedom Act Marcy Wheeler

Report claims Anonymous will protest Glenn Greenwald for ties to PayPal billionaire Raw Story (Howard Beale IV)

Obamacare Launch

GOP goes quiet on ObamaCare The Hill

Only 8% Of Independent Voters Call Obamacare A ‘Success’ Business Insider

Security and Exchange Commission’s (SEC) “Neither Admit nor Deny” Settlements Continue to Draw Controversy National Law Journal (Adrien)

Barclays’ Fed lobbying efforts fall flat Financial Times. Just because they lobbied a lot does not mean they were necessarily good at it.

The New York Public Library Comes Around New Yorker. A rare bit of good news.

Class Warfare

As Hedge Fund Managers Rake In Record Pay Obama’s Economic Advisor Attacks Piketty DSWright, Firedoglake

US taxes and inequality FT Alphaville

Yul Brynner’s Tax Spat Augurs Rush to Give Up U.S. Passports Bloomberg. James R:

All articles (including this one) I’ve seen try to blow this into a huge issue. Yet as this article states, the number of people renouncing amounts to 0.05% of American expats (the “rush” of the article’s title), and I suspect disproportionately on lower-income folks who don’t have the resources to make this a non-issue for them. Meanwhile, well-known wealth offshoring continues unabated.

Despite Falling Revenues, Walmart Increases Pay for Top Execs Peter Van Buren, Firedoglake

Billionaires Are Just Different From You and Me Matt Stoller

Tim Geithner: More Banker Than the Bankers Noam Scheiber, New Republic

Geithner’s Other Ad Hominem Attacks on Barofsky Bill Black, New Economic Perspectives

What Confucius Teaches Those Who Want a Better World Ian Welsh. My one quibble is with his discussion of rituals. I associate them too strongly with cults and in-group behavior to regard them as benign.

Antidote du jour (mark w):

And a bonus! Richard Smith submitted this as an antidote, but I think it is yet another of his anti-antidotes:

See yesterday’s Links and Antidote du Jour here.
Categories: political economy

GCHQ's spy malware operation faces legal challenge

The Guardian (UK) NSA Files - Tue, 05/13/2014 - 06:47
Privacy International claims development of programs that remotely hijack computer cameras and microphones is illegal

GCHQ, the government's monitoring agency, acted illegally by developing spy programs that remotely hijack computers' cameras and microphones without the user's consent, according to privacy campaigners.

A legal challenge lodged on Tuesday at the investigatory powers tribunal (IPT) calls for the hacking techniques alleged to be far more intrusive than interception of communications to be outlawed. Mobile phones were also targeted, leaked documents reveal.

Continue reading...

The Economics of Apologies

Naked Capitalism - Tue, 05/13/2014 - 06:19

By Ben Ho, Assistant Professor of Economics, Vassar College. Cross posted from VoxEU

Apologies are often hard – that’s the point. An apology is due when trust is broken, and to restore trust the apology must be hard. This column discusses a model of apologies as costly signals with some recent experimental evidence.

Following the recent wave of apologies by politicians,1 celebrities,2 and in particular by firms,3 there have been numerous commentaries about the nature of apology – in particular how it is pointless and overused. Recent research in the social science of apologies can help us understand their logic, and shed light on the purpose of the rituals of repairing social transgression.

A market economy depends on the strength of weak ties, and only rational fools (Sen 1977) ignore the value of relationships in support of economic transactions (Granovetter 1973). But from time to time, mistakes are made that temporarily break these ties. Apologies work to restore such frayed relationships.

As a behavioural economist, my own research has focused on three goals, namely showing that:

• Apologies can have real economic consequences;

• Models based on economic incentives can explain how and when people give and receive apologies; and

• Economic theory can help us understand what it means when we say the words “I am sorry.”

Corporations frequently become the target of public outrage, like General Motors in its handling of recent safety issues and automobile recalls. The public apologies by GM CEO Mary Barra have come under attack and scrutiny. Do such apologetic words have any meaning? Lee et al. (2004) analysed annual reports from publicly traded companies and found that companies that admitted responsibility for bad earnings had higher stock prices one year later than those who did not.

Although compelling, Lee et al. can only establish a correlation between apologies and economic outcomes. In recent work, Elaine Liu and I find a causal link between doctors’ apologies and their patients’ inclinations to litigate (Ho and Liu 2011). At the time of writing, 36 US states had passed laws that encourage doctors to apologise. These laws are premised on two ideas:

• Doctors are often hesitant to apologise because they are scared of lawsuits.

• Patients most often sue out of anger, sometimes because their doctor never apologised.

By making a doctor’s apology to the patient inadmissible in court, these states hope to break this vicious cycle and improve the doctor-patient relationship.

By looking at malpractice claims in each state before and after the laws were passed, we find that after a state passes an apology law, malpractice cases settle 19-20% faster (especially in the most severe cases) and we see a 16-18% reduction in the number of claims filed.

This research was inspired by a model of apologies I developed in Ho (2012). The model studies a class of ongoing principal agent relationships where the principal and agent engage in repeat interactions, but the agent’s suitability is unknown to the principal, and contracts are incomplete. Relationships between a doctor and a patient, a home owner and a contractor, a politician and the electorate, and an investor and an entrepreneur all share these feature, and therefore they all rely on a degree of trust. From time to time, mistakes are made and that trust is broken.

The fundamental insight of the model is that for an apology to restore the broken trust, the apology must be hard. The idea is based on a key insight of game theory that finds that our ability to signal a desirable quality depends on the cost of performing that signal. Signaling theory has traditionally been applied in contexts such as explaining a peacock’s extravagant plumage or understanding the value of an expensive college degree. The work here applies the idea of signaling to apologies and human relationships.

When we are wronged, we all want the transgressor to apologise. However, often when they apologise, we punish them for it. We make them feel bad. The reason? If an apology were easy, it would no longer have any meaning.

This simple insight that apologies work to restore relationships but are costly for the apologiser has powerful implications borne out in experiments I conducted with students in a lab. Subjects played a simple investment game that depended on trust. If the investment failed, they were allowed to apologise for that failure. The theory and experiment both show that apologies should be more common in long relationships, more common early in a relationship, and more common when there is a better match between the two parties.

Some say these recent examples of public apologies followed by public jeering and humiliation are just a waste of everybody’s time. But it is precisely the public jeering and humiliation that make the apologies effective.

What does this research say about what makes for a good apology? Essentially, anything that makes the apology costly or difficult. Here are some types of apologies to consider:

• “I’m sorry about your grandmother’s illness”. Recognition of the pain is a start. Demonstrating that you at least have the empathy to recognise the damage caused and an acknowledgment that the rules that were violated.

• “I’m sorry – I will never do it again”. Often people will offer forgiveness for the first transgression, if the transgressor accedes to being held to a higher standard in the future. As the saying goes: “Fool me once, shame on you; fool me twice, shame on me.”

• “I’m sorry – I am an idiot”. Admitting your own incompetence means you give up some of your reputation in exchange for forgiveness. Tiedens (2001) find that voters liked Bill Clinton more after seeing a video of him apologise about the Lewinsky scandal, but then they became less likely to want to vote for him because they think he is less competent.

• “I’m sorry – here are some flowers”. The more expensive the better. Offering reparation for the harm done is a way to a pay a tangible cost to make up for the mistake.

• “I’m sorry – it wasn’t my fault”. This is perhaps the least effective as it is the least costly to say. But it could work if you can prove it wasn’t your fault in a way that is costly to fake.

Of course, much more remains to be done to understand this complex social institution, but this analysis offers a start. As for any shortcomings in what I write here, my apologies.

__________________

1 President Obama for healthcare.gov, Governor Christie for the George Washington Bridge scandal.
2 Shia LaBoeuf for plagiarism, Ted Nugent for racism.
3 General Motors for its safety issues, Netflix for its pricing, Apple for its Maps, JP Morgan for its regulatory mishaps.

See original article for references

Categories: political economy

New Zealand: the Shell Company Incorporation Franchises (II) (and Ukraine)

Naked Capitalism - Tue, 05/13/2014 - 04:48

In our first post in this series, we reminded readers of the nearly complete demolition, by the New Zealand Company registrar, of the GT Group and Company Net shell company incorporation franchises in New Zealand.

In the second post, we highlighted another franchised shell incorporator, Unicredit, incidentally trampled by the NZ Registrar’s giant Monty Python foot as it descended on the shell companies created by GT Group and The Company Net.

That was semi-good work by the Registrar, but The Company Net had another deal going, with another incorporator, and the Registrar, despite a frenzy of striking off back in 2011, didn’t clean it all up. This post gives the background to that deal, and should make it pretty obvious why these particular shells matter. Subsequent posts will round out the picture and bring it up to date.

Once again, the stooge directors recorded in the New Zealand register are the indicators.

Their names are Juri Vitman (associated with one NZ company), Erik Vanagels (associated with 318 NZ companies), Voldemar Spatz (associated with 360 NZ companies), and Inta Bilder (associated with 897 NZ companies). All the New Zealand companies the stooges purportedly directed were originally incorporated by The Company Net. They all have Latvian addresses; Erik Vanagels (who may be two people of the same name, father and son perhaps; no-one’s quite sure) often has an address in Panama, as well as his Latvian one.

Here is their pedigree, from a 2011 article by Graham Stack, then of Business New Europe, fittingly entitled “Massive Ukrainian government money-laundering system surfaces”:

What do Ukrainian tank exports to Kenya, flu vaccine imports from Oregon and oil rig imports from Wales all have in common? They are all deals carried out by the same shell companies that are linked to a small set of Latvian directors. A scandal is unfolding in Ukraine that could be dubbed Vanagels-gate as more details of dodgy and outright illegal deals using a string of shell companies emerges, which can be traced directly back to the upper echelons of the Ukrainian government.

According to an investigation conducted by bne, Vanagels and Gorin – together with Latvian colleagues such as Juri Vitman, Elmar Zallapa and Inta Bilder – preside over a sprawling network of companies with Baltic bank accounts that have extensive dealings with the Ukrainian state, covering everything from arms exports to machinery imports.

The “Ukrainian government” mentioned here is the Yanukovych one, recently turfed out either by neo-Nazis and the CIA, or by concerned freedom-loving citizens, depending on which Manicheism you subscribe to.

The back story of the network that shows up in this group of New Zealand shell companies just grows and grows. For a 2012 baseline, try this Swiss summary of the trail left in Ukraine, Russia, Moldavia and Rumania by one of these stooges, Erik Vanagels (I was tempted to make the prose more English, but resisted):

The Vanagels connectio’s role is only coming to light recently as the Latvian and Ukraine local press starts digging out more and more information. The network’s activity can be traced back over a decade to the establishment in the mid-1990s. Evidence suggests this connection laundered money for an amount of 10 to 100 billion $ around the world and those media information are only the ones that have come to light so far. This will catapult the value of the Erik Vanagels™ tradmark higher than the one of Apple! The Vanagels connection has been recently quoted in the media related to the following major allegued criminal cases:

  1. The Faina vessel Case – Ukraine / Sudan – Illicit Arm Trading

  2. The Chernomoreneftegas Case – Ukraine – Gov. Corruption

  3. The flu vaccines Case – Ukraine – Gov. Corruption

  4. The Ukrspetseksport Case – Ukraine – Illicit Arm Trading

  5. The Rockford Funding Case – Latvia – Financial Fraud

  6. The Moldavian Cases – Moldavia / Romania – Gov. Corruption / Fraud

  7. The Hermitage Capital Management Case – Russia / Switzerland – Massive Money Laundering

  8. The Trade Construction Company LLC Case – Russia – Financial Fraud

  9. Hoa Le Duc’s Mafia Case – Romania / Vietnam / China – Organized Crime

  10. The EURO 2012 Case – Ukraine – Corruption

  11. The Mexicam Sinaloa Drug Cartel Case – Mexico – Organized Crime / Drug

  12. The GT Group Case – North Korea / Iran – Illicit Arm Trading / Terrorism financing

  13. The ex.ua file-exchange Case – Ukraine – Massive Internet Piracy

  14. The forextime.com Case – Russia / New Zeeland / Nigeria – Money Laundering / Financial Fraud

The bolding is mine. Mindful of the sheer volume of NZ company registrations in which these stooge directors turn up, never mind many more overseas, that $10Bn to $100Bn estimate is perfectly plausible (though terribly hazy), especially since the back story continues to grow, as we will see in our next post.

So who’s behind this network of shells and stooges? A further article by Inga Spriņģe, of the Latvian journal Re:Baltica, and Graham Stack, (he seems to pop up all over the place), from October 2012, pieces it together :

…in Vanagels case, it proved surprisingly easy to trace the company incorporation firm using his name. In June 2010, the London High Court of Justice handed down a judgment related to a lawsuit brought by the oil giant Shell against a former employee who was an oil trader from Latvia in relation to wrongful dismissal.  The judgment mentions Erik Vanagels as the Latvian director of the company.  Shell fired the oil trader over allegations of accepting kickbacks.  The court records show that payments were made to the account of a company incorporated in the British Virgin Islands of which Mr Erik Vanagels was the nominee shareholder and director.

In the judgment, the oil trader from Latvia cited the company which “sold” the British Virgin Islands-registered company to him together with Vanagels.  The company is located in Rīga and in Smilšu Street, which is seen as the financial centre of Latvia.  Indeed, it is located right opposite the now-fallen symbol of financial might in Latvia – the Parex Bank.  Right nearby are the Latvian Finance Ministry and the State Revenue Service, both of which are supposed to be engaged in making sure that people pay their taxes fairly.

There is a largish bronze plaque outside the door of the small two-floor office building at Smilšu Street 18.  It reads “International Overseas Services (IOS)”.

Spriņģe and Stack keep digging:

IOS was initially known as International Offshore Services, and its office in Latvia was registered in 1998.  The address of the parent company is in the United States, and its representative in Latvia is an American resident.  And yet the investigation by journalists painted an entirely different picture.  The fact is that the senior officials of IOS are much closer – in Ireland and right here in Latvia.

The IOS homepage www.ioserv.com, offers more information.  It shows contact addresses in Rīga, London, Kyiv and Moscow.  At the same time, however, the company also claims to be represented at other major financial centres in the world – Cyprus, Ireland, Panama, New Zealand and the US city of Wilmington, Delaware.

Via the history of a local basketball team (investigators Spriņģe and Stack are on fire!) they find a local called Poišs who gives them a clue about IOS’s MO:

Poišs says that IOS operates on the basis of franchising and probably does not have any single owner.  Poišs is very familiar with the man who has represented IOS in Latvia for many years, the Irish resident Phillip Burwell.

“Represented”: Spriņģe and Stack brush aside this little misdirection. In their account, Burwell is the central figure:

It seems that several Latvian banks used IOS services, because for many years, the company was one of the largest and most trustworthy sellers of offshore companies in Latvia.  That was true at least until 2005, when the United States declared that Latvian banks were being used to “launder” major amounts of illegal funds and demanded that a stricter bank oversight system be implemented.  After this, Scandinavian banks became far more demanding, while others hired US lobbyists to ensure Latvia’s elimination from the blacklist.

The first bank to hire US lobbyists was the Parex Bank, with which Burwell had very close links.  Parex was located on the opposite side of the street from the IOS office in the heart of Old Rīga, and from the very beginning, the bank’s business was largely focused on services rendered to non-residents.  Representatives of the current management of Parex confirmed to investigators that Burwell was a partner of the bank.  He provided new clients and often served as a nominal director himself.  This means that Burwell knew and offered guarantees about the true owners of offshore companies.

The reader is encouraged to remember the very close Parex Bank/Burwell connection for just a few paragraphs longer.

Burwell is not just in Latvia, either; he also incorporates in Panama, Ireland and the UK:

Phillip Burwell claims that he left IOS, the company which establishes offshore companies, in 2003, but documents which we have suggest that he is still active in this area of business.  One document that we found during our investigation is a bill from his business partner in Dublin.  The bill is addressed to the IOSG Secretaries company, which is registered in Panama, and it relates to several companies that were registered in England last year.  Burwell’s E-mail address is shown as the contact address for the Panamanian company.  Some of these companies have already submitted annual reports to the British Company Register.  The documents show that all of them are owned by two other offshore companies which for many years were platforms from which Burwell established other offshores (Milltown Corporate Services; Ireland and Overseas Acquisitions).  The nominal representatives of both companies are the Latvians Vanagels and Gorins.

Next, Graham Stack pops up at the Organised Crime and Corruption Reporting Project, six months later, to add an American connection, more Irish and Latvian detail, and another unreliable-looking denial from Burwell:

International Overseas Services is a Virginia private corporation founded in 1996, which owns subsidiaries in Riga, Kiev and Moscow that sell offshore companies. Latvian company records list, Philip Burwell, or in Irish, Pilip Boireil, as the company’s representative in Latvia.  The corporation originally listed as its address Sandford Road in Dublin, Ireland but in 2007 changed it to the same address in Dublin, Virginia in the United States. There is no Sandford Road in Dublin, Virginia.

Burwell (Boireil) also figures as the representative in Latvia of Offshore Management International, a company registered from 1999 until 2003 at the same address as Feldmanis’ OMI.

Feldmanis in an interview said that the initials OMI did not stand for anything. According to testimony in from a 2010 Ukrainian court case, in 1999 through 2003 Parex Bank sent clients needing offshore companies to Offshore Management International registered at the same address as Feldmanis’s company OMI.

According to representatives of post-nationalized Parex Bank, Burwell was director of companies that received loans from Parex before nationalisation that the bank now suspects were hidden loans to the former shareholders Kargins and Krasovickis.

Burwell is registered with the Irish Ministry of Justice as a company services provider, trading as PB Consult, although IOS itself is not registered in Ireland at all. In an interview in Dublin, Burwell acknowledged knowing Gints Poiss for about 20 years and having some common business interests with him, being close to the former Parex owners, and having met most of the proxy directors. But he denied that he currently has any connection either to the proxies or to the company IOS as of 2003.

However, documents show that Burwell signed as president of the Virginia corporation International Overseas Services in 2010.

Via Duncan Campbell of The Sunday Times, April 2013, who has the additional assistance of the ICIJ’s Offshore database, we have still more: it looks as if that Swiss summary from 2012 is out of date:

Burwell also helped to create a company for Mukhtar Ablyazov, the Kazakh billionaire accused of looting the BTA bank in Kazakhstan of $5bn. The company, Loginex Projects LLP, was among a number of companies that were allegedly used to move $1bn illegally from the bank.

Burwell said the financial ransacking of the bank was considered “the biggest fraud” in history. He created Loginex Projects LLP, but said he did not know it would be used for laundering. Burwell also set up offshore companies for the son of Valery Kargin, one of the founders of Parex, Latvia’s largest private bank.

The bank collapsed in December 2008. Kargin and a fellow director were sued for having “enriched themselves at the bank’s expense”.

Armed with this mass of connections and unconvincing disavowals, we return at last to New Zealand and The Company Net. By now it really shouldn’t seem particularly outrageous to suggest that when The Company Net registered all those Vanagels, Spatz and Bilder companies, it was acting, knowingly or not, as Burwell’s franchisee. If the thousandfold coincidence of stooge directors somehow isn’t enough, an utterly spectacular spot by Graham Stack, at the OCCRP again, backs up the claim in a whole new way:

In October 2008, a New Zealand registration agent made a number of filings to the New Zealand company register, on behalf of companies using Vanagels, Gorin and other Latvian proxies.

The filings notified the register that one Latvian proxy director Inta Bilder would replace another Latvian proxy director Voldemar Spatz for a batch of 18 shell companies owned ultimately by Unihold Ltd, which listed as its director Vanagels.

The paperwork filed by the NZ company services provider still bore the fax headers from the name of the company who ordered the change in proxies.  That company was Parex Bank of Riga.

That New Zealand registration agent was The Company Net, and the document with the Parex fax header is still sitting on the New Zealand registry, here. The connection between Burwell and Company Net, via the stooge directors, is now augmented by the connection between The Company Net and Parex and Burwell.

But The Company Net stopped registering offshore shell companies in mid-2011, and the New Zealand Registrar struck off loads and loads of its creations, so, what’s the point of rehashing all of this?

For a start, there’s the grim topicality of the “West”‘s facilitating role in the looting of Ukraine, where the connection to these very offshore companies is direct; see Ben Judah’s piece, quoted in our recent post:

East European corruption fighters are discovering that Western countries and their systems of offshore economies have enabled the colossal theft of their countries’ resources. Bubbling up from beneath the surface of both the Russian opposition and the Ukrainian Maidan is a new sense of disdain for the West…

This is what happened to Daria Kaleniuk at Kiev’s Anti-Corruption Action Centre. The director of one Ukraine’s most important NGOs battling corruption spent years investigating how corruption actually works. But the more she learned, the more she viewed both America and the European Union as hypocrites.

Kaleniuk explains:

What we found was that the money stolen in Ukraine was heading into British and European tax havens and hidden using shell companies inside the European Union. This was very uncomfortable to find out. What we felt is the Western elites were being hypocritical to us—preaching anti-corruption but allowing this offshore world to flourish.

In  posts to come, we develop a nuts-and bolts view of these very looting mechanisms; mechanisms which, in Ben Judah’s phrase, sank Western soft power. The relevance of the story told by the New Zealand register continues to grow, and it’s time to bring it up to date.

Categories: political economy

ObamaCare Post-Victory Lap Cooldown

Naked Capitalism - Tue, 05/13/2014 - 04:18

The captains and the kings depart, the tumult and the shouting dies, and we and the press have weeks ago moved on from the days of Democratic triumphalism over ObamaCare’s 8 million sign-ups; from ObamaCare’s exhortation that Democrats be “proud” that the ranks of the insured are now about 2% below pre-depression levels. So now is the time to start framing questions for how successful ObamaCare is as policy, now that the original — and absurdly lowballed — metric for success has been met. (That the press was helpfully complicit in accepting sign-ups as a metric for success is one of Obama’s many public relations triumphs.)

And absurdly — pathetically — lowballed ObamaCare’s initial triumph has been. Here’s what CBO projected for sign-ups in 2012:

CBO and JCT now estimate that the ACA, in comparison with prior law before the enactment of the ACA, will reduce the number of nonelderly people without health insurance coverage by 14 million in 2014 and by 29 million or 30 million in the latter part of the coming decade, leaving 30 million nonelderly residents uninsured by the end of the period (see Table 3, at the end of this report). Before the Supreme Court’s decision, the latter number had been 27 million.

Does 14 look like 8 to you? Did I not get the memo? (Now, you can get to 14 million if you also count those who bought private insurance before the deadline, but (1) that’s not how CBO did its calculations, and (2) that says nothing good about the quality of ObamaCare’s site(s) or its policies.)

And there’s a lot else we don’t know. No matter what the Democrats say, all the coverage numbers are still soft. Health Affairs:

Previous coverage status. One question the [HHS summary enrollment] report does not answer is how many of those who chose a plan were previously uninsured. Information on insurance coverage was only collected from FFM applicants who requested financial assistance, and only was only requested as to current insurance coverage at the time of application. Of the 5.18 million individuals who applied for financial assistance and selected a plan in the FFM, 695,011, or 13 percent, indicated that they were insured at the time of application.

HHS acknowledges, however that this number probably undercounts the number of individuals who had coverage prior to applying to the marketplace, and notes that New York has reported that 30 percent of enrollees had prior coverage while Kentucky reported 25 percent. The report also notes Gallup, Rand, and McKinsey data reporting that over half of marketplace enrollees had prior insurance coverage, but observes that Rand, Urban, and Gallup have reported a significant drop in the number of uninsured Americans during the open enrollment period. It will be some time before we know how many uninsured Americans have been covered through the marketplaces.

So, the Democrats are taking a victory lap without having actually crossed the finish line (and after somehow having worked the refs to turn a 140-yard dash into an 80-yard one). Alrighty then. Nevertheless, ObamaCare is, as the “gold standard of medical journalism” NEJM puts it, in a display of realpolitik stunning for anyone who took the Hippocratic Oath, “here to stay.” They explain:

As long as Obama remains in office, he would surely veto any repeal law, and a veto override is inconceivable. Come 2017, outright repeal will remain unlikely for three reasons. First, all major parts of the ACA except the individual mandate [1]are popular — including the insurance-market reforms, the subsidies to make insurance affordable, closure of the drug-benefit “doughnut hole,” and the incentives [although the mandate has been postponed] for most employers to provide affordable insurance as a fringe benefit. Second, lawmakers who support repeal will not want to snatch insurance coverage from an estimated 37 million people who will be insured thanks to the ACA in 2017. Third, repeal would cut into the sales and profits of health care providers and suppliers of all stripes.

Shorter: By 2016, rent seekers will have fastened their sucking mandibles into the body politic sufficiently to make them very hard to dislodge.

Finally, the administration has, yet again, ruled out single payer, at Sylvia Burwell’s confirmation hearings for HHS head. So, the Republicans now have nothing to say, and they’re not saying it:

House Republicans have no scheduled votes or hearings on ObamaCare, signaling a shift in the party’s strategy as the White House rides a wave of good news on the law.

Not a single House committee has announced plans to attack the healthcare law in the coming weeks, and only one panel of jurisdiction commented to The Hill despite repeated inquiries.

GOP campaign committees also declined to say whether they will launch any new efforts on the law.

Truly pathetic. And after all that frothing and stamping. How times did these bozos try for repeal in the House? 42? So, it falls to those in the wilderness to the left of the Democrats to ask questions. Here they are:

  1. How Many Lives Will ObamaCare Save?
  2. What is the Actuarial Quality of the ObamaCare “Pool”?
  3. Will People Be Satisfied with Their Plans Once They Use Them?
  4. What Will Happpen to Employer-Based Insurance?
  5. What About the Back End?
  6. What About Single Payer?

Let’s take each question in turn.

1. How Many Lives Will ObamaCare Save?

Surely the question of lives saved is more important, from a policy perspective, than sign-ups, which involve, after all, filling out a form and making a payment (ka-ching!). And we have a new study from the Annals of Internal Medicine:

Changes in Mortality After Massachusetts Health Care Reform: A Quasi-experimental Study

Background: The Massachusetts 2006 health care reform has been called a model for the Affordable Care Act. The law attained near-universal insurance coverage and increased access to care. Its effect on population health is less clear.

Objective: To determine whether the Massachusetts reform was associated with changes in all-cause mortality and mortality from causes amenable to health care.

Design: Comparison of mortality rates before and after reform in Massachusetts versus a control group with similar demographics and economic conditions.

Setting: Changes in mortality rates for adults in Massachusetts counties from 2001 to 2005 (prereform) and 2007 to 2010 (postreform) were compared with changes in a propensity score–defined control group of counties in other states.

Participants: Adults aged 20 to 64 years in Massachusetts and control group counties.

Measurements: Annual county-level all-cause mortality in age-, sex-, and race-specific cells (n = 146 825) from the Centers for Disease Control and Prevention’s Compressed Mortality File. Secondary outcomes were deaths from causes amenable to health care, insurance coverage, access to care, and self-reported health.

Results: Reform in Massachusetts was associated with a significant decrease in all-cause mortality compared with the control group (−2.9%; P = 0.003, or an absolute decrease of 8.2 deaths per 100 000 adults). Deaths from causes amenable to health care also significantly decreased (−4.5%; P < 0.001). Changes were larger in counties with lower household incomes and higher prereform uninsured rates. Secondary analyses showed significant gains in coverage, access to care, and self-reported health. The number needed to treat was approximately 830 adults gaining health insurance to prevent 1 death per year.

This is actually very good news! Translating that into English and doing the arithmetic:

The absolute numbers are also striking. The Congressional Budget Office estimates that ACA will reduce the ranks of uninsured adults by something like 20 million people. I rather heroically extrapolated the authors’ 1/830 estimate to the entire uninsured population across the U.S. This back-of-the-envelope calculation implies that ACA will prevent something like 24,000 deaths every year. That’s almost the number of Americans who die in auto crashes. It’s more than the number who die of AIDS or the number who are murdered every year.

I can’t imagine why the Democrats don’t make this figure a key talking point; they are, after all, perfectly happy to talk about a lesser number of excess deaths in Republican states that didn’t expand Medicaid. Perhaps it’s because ObamaCare, when fully implemented, will only cover half the uninsured, raising the unpleasant question of why Obama and the Democrats, in their signature domestic initiative, are willing to throw 24,000 other lives under the bus?

Of course, with single payer — “Everybody in, nobody out” — this question wouldn’t even arise.

2. What is the Actuarial Quality of the ObamaCare “Pool”?

Again, the numbers are soft, and surely vary randomly (like everything else in ObamaCare) from state to state and even county to county. But we’re beginning to get reports. From North Carolina:

Blue Cross was one of only two companies to offer plans in North Carolina through the online marketplace, and as of May 1, 232,000 people were on Blue Cross marketplace plans. Seventy percent of them didn’t have coverage through Blue Cross previously, the company said.

Initial Blue Cross projections called for 50 percent of the marketplace customers to be 34 years old or younger, but after the enrollment period ended on March 31, the company found that only 32 percent of the people who signed up under the federal health care law fit that profile. Forty percent are ages 35 to 54, and 29 percent are 55 or older.

Younger customers are usually coveted by insurers because they are healthier and can balance out the spending of older customers who consume more medical services. But Blue Cross said even the younger customers who signed up for coverage through the online marketplace are sicker than one would expect.

Thirteen percent of enrollees ages 18 to 34 reported experiencing chronic pain as part of a Blue Cross self-assessment, compared with 8 percent for the age group as a whole. Seven percent have diabetes, compared with 4 percent of the group as a whole, and 24 percent said they have depression, compared with 14 percent for the group as a whole.

“The frequency and types of care ACA customers receive and the conditions for which they are being treated are key factors that will determine future premiums,” Blue Cross said in a statement.

So, as long as North Carolina citizens don’t get sick and don’t use services, their premiums won’t go up. Good to know. Of course, with single payer, this issue doesn’t arise.

3. Will People Be Satisfied with Their Plans Once They Use Them?

First, we should take into account the possibility that Obama’s marketers over-sold the people who signed up in the last minute surge. CJR points to a question that never got asked or answered:

Why are enrollees changing their minds? In the push to get enrollees to sign on the dotted line, sales pitches from the White House and its allies may have overpromised. In the days before the deadline, for example, Organizing for Action, a group that sprang from the president’s reelection campaign network, tweeted like crazy. One example: “For Jake, $15 a month on health care fits into his budget.” But, what did Jake have to pay out-of-pocket? Probably a lot! That wasn’t part of OFA’s sales pitch, which had the flavor of those shoddy sales practices that once drove state attorneys general nuts but now seem perfectly acceptable in the context of selling Obamacare. When people find out they aren’t getting what they bargained for and must pay high amounts of cost-sharing, buyer’s remorse can set in, and they junk their coverage. Reporters should find some of these people and talk to them.

“Reporters should,” but will they? This story, on ObamaCare in NH — therefore with a 2016 subtext — doesn’t get around to mentioning ObamaCare’s narrow networks until paragraph 23, which reads:

To be sure, Obamacare faces unique challenges in New Hampshire. Just one insurance company in the small state offered insurance policies through the program this year, and the insurer doesn’t cover healthcare in 10 of the state’s 26 hospitals, deficits Shaheen and Shea-Porter have been working to fix.

Monopolies with narrow networks are hardly unique to NH. Is it too much to ask that reporters — most of whom have employer-based insurance — pay some attention to the actual policies that ObamaCare sells?

Once again, of course, single payer doesn’t have this problem. Shaheen and Shea-Porter wouldn’t have to be working to “fix” anything.

* * *

I’ll cover the remaining three questions tomorrow. If you’ve got experiences with ObamaCare, or the health care industry, to share, please do so in comments!

NOTES

[1] ObamaCare without the individual mandate is Hamlet without the Prince. In a stunning display of either incompetence or kayfabe-like complicity, the Republicans have never made the idea that forcing people to enter a marketplace is wrong — which eventheliberals, at least of few of them, might have agreed with — a key talking point in their attack. Instead, they relied on the knee-jerk appeal of “ZOMG!!! Socialism!!!!” which was plainly false, and then on the collapse of the Federal Exchange, betting the farm that the administration couldn’t resolve a public relations issue by calling on the tech dudes in its base, the creative class. #FAIL.


Categories: political economy

Awakened by the Palestinian Intifada - Ali Abunimah on Reality Asserts Itself (1/5)

The Real News Network - Tue, 05/13/2014 - 04:05
Mr. Abunimah, founder of Electronic Intifada, says after the Israeli 2006 invasion of Lebanon and the 2008 attack on Gaza, he knew what he had to do

Piketty’s Wealth Tax is Real, and It Works

Naked Capitalism - Tue, 05/13/2014 - 02:03

By Rumplestatskin, a professional economist with a background in property development, environmental economics research and economic regulation. Follow him on Twitter @rumplestatskin. Cross posted from MacroBusiness

As the Piketty-train rolls on it leaves behind it a trail of confusion in economic circles about the proposition to reduce inequality via a global wealth tax.

Economic thinking, it seems, floats on the political tide. The authors of this paper in 2006 noted that:

…at present there appears to be little interest in the net wealth tax. In recent years this tax has been practically excluded from any discussion or doctrinal debate on tax reforms, and over time has fallen into disfavour.

Eight years and one financial crisis later, the tide has turned dramatically in favour of using the tax system as a tool for creating a desirable wealth and income distribution.

Many sceptics, however, argue that a wealth tax, either national or globally, is technically or politically infeasible. The basic reasoning is as follows:

…it is impossible within the U.S., never mind the world, as the top 0.1% own the political machinery. Why would anyone who owns the political process agree to tax themselves?

It’s a good question. But it merely suggests we look deeper at the heart of the matter. I like to use one of Matt Bruenig’s favourite lines, “imagine people did things they already do”, as a starting point.

The point being that if the top 0.1% control the political system, then it should be impossible at all points in time to tax wealth.

Unless you are Spain, and it’s 1977. Or France and it is 1981.

Both these countries brought in annual taxes on wealth, with progressive scales just like income taxes. In France 1.5% of tax revenue came from their wealth tax in 2007, while in Spain around 0.5% of tax revenues are raised from such taxes.

Indeed most countries already raise about 5% or more of tax revenues from direct taxes on property, which is essentially a wealth tax on a slightly narrower definition of wealth.

Not only are wealth taxes possible, they are already a feature of the tax system in most countries.

Implementing a shift towards greater taxes on wealth merely requires a minor tweaking of tax rates and/or qualifying assets for taxes that already exist. The institutional machinery is already in place.

The question of the political power of the wealthy is certainly valid. But this merely provides guidance on likely political avenues for change. The obvious follow-up question is, what political circumstances led to the implementation of current wealth taxes?

I’m no expert here, and I’d appreciate any detailed accounts of the political climate at the time, especially in France and Spain. But it seems that the wealth tax was part of the French Socialist’s Party’s platform in the 1981 Presidential elections; which the right-wing party abolished in 1986, for it to be reinstated just two years later.

At first glance it appears that breaking the link between political power and the interests of the very wealthy, via democratic processes, is one successful political path for change.

It may even be of some assistance, politically, if the economic profession would stop pretending to debate the possibility of things people already do. Wealth taxes are certainly possible and are effective tools for reducing inequality.

Another wildly successful tax on wealth is the inheritance tax. Inheritance taxes are again real things, that real countries have, but that fell victim to the political tide of the 1970s in the Anglosphere.

At their peak in 1968, taxes on inheritance made up 3.1% of Australian tax revenue, or 0.6% of GDP. In the UK inheritance taxes were 1% of GDP in the same year.

The chart below shows the massive shift away from such taxes at exactly the time inequality began to skyrocket across the Anglosphere:

Australia, the UK and US all went through a political change in the 1970s that saw a dramatic reduction in revenue raised from this source, with Australia and the US abolishing inheritance taxation altogether in 1989.

Germany and France maintained these taxes, which have generated an increasing share of revenue since the 1970s. Australia however, chose to forgo this progressive tax and in doing so has forgone significant public revenues. Last year alone the revenue from an inheritance tax levied as per 1968 would have raised over $9 billion.

Not surprisingly countries that reduced or removed inheritance taxes saw the most rapid rise in inequality since the 1980s. Below I use the data from Alvaredo, Atkinson, Piketty and Saez’s World Top Incomes Database to show this relationship:

The top 1% share of income shoots up in the 1980s in the UK, US and Australia, while staying steady in France, and also Germany (at least till the late 1990s).

Once again the political tide is in favour of taxing wealth. The economic debate, however, is settled. Wealth taxes reduce inequality. Most countries already implement taxes on wealth to some degree, either through annual or inheritance taxes, and have institutional mechanisms in places to administer the them. The sceptics do raise an important political question, but we should learn from history and see that democratic processes, in which economists play a part, can provide avenues for change.

Categories: political economy
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by Dr. Radut