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Reposted from NBBooks by psyched

Cross-posted from Real Economics.

The TPP has brought the issue of "free trade agreements" to the fore again, so I think it is time we looked honestly at what has happened to the three North American countries in the grand-daddy FTA, the North American Free Trade Agreement (NAFTA). Let's look at the Big Picture of what has happened since NAFTA  came into effect on January 1, 1994:

USA. In the 21 years since, the United States has devolved from a representative democratic republic with the most stable middle class and well paid working class in the world, into a plutocratic oligarchy, with the worst income inequality and the worst measures of social welfare of any western industrialized country, and a middle class that now lives a precarious existence, and a working class segments of which are now recording declines in life expectancies.

CANADA. Since NAFTA came into effect, Canada had regressed to a national economy dominated by an industry in resource extraction (oil and gas) - the traditional condition of colonial status. Certain circles in the USA now refer to Canada as "Texas of the north." Other reviews of the "success" of NAFTA in Canada have cited increased exports of beef, agricultural, wood and paper products, and mineral and mining products - all raw materials in which colonials typically specialize. The only advanced industrial sector to show growth has been automobile manufacturing - and this sector was already well established in Windsor, Ontario, immediately across the St. Clair River from Detroit.

MEXICO. Since the "blessing" of NAFTA, Mexico has fallen victim to the anarchy of ruthless, murderous illicit drug and criminal cartels. Ironically, one of the original arguments used by proponents of NAFTA was that increased trade would lead to more opportunities in the real economy for Mexican citizens, making it more difficult for drug cartels to operate in Mexico.

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Mon May 04, 2015 at 07:00 AM PDT

TPP: The Fascism Issue

by Letsgetitdone

If the Trans-Pacific Partnership (TPP) Agreement will, if implemented, and as I've argued elsewhere, result in the death of national and state sovereignty, constitutional separation of powers, and democracy, then what system and what principles will replace these things? Eric Zuesse answers that it will be Fascism. And implicitly, that we are going through an evolution from representative democracy to fascism and that trade deals like the TPP, the Trans-Atlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TiSA) mediate the transfer  “. . . of democratic national sovereignty to international fascist bodies that represent global corporate management. . . . ”

The motivation behind U.S. President Barack Obama’s trans-Pacific trade-deal TPP, and his trans-Atlantic trade-deal TTIP — the motivation behind both of these enormous international trade-deals — is the same, and Democratic U.S. Senators Elizabeth Warren and Sherrod Brown are correct: it is not at all progressive. It is instead to transfer political power away from the public in a democracy, and for that power to go instead to the international plutocracy (i.e., to go as far away from any national democracy as is even possible to go).

This is to be done by switching the most fundamental thing of all: the global power-base itself. Instead of that power-base being democratic votes of the national publics, who elect their political representatives who determine the laws and regulations, that national democratic political system becomes instead the exact opposite: the global aristocratic stockholder votes of the international plutocracy who elect the corporate directors of international companies, who will, in their turn, then be selecting the members to the international-trade-panels which, in TPP and TTIP, will, in their turn, be determining the rules and enforcements regarding especially workers’ rights, product-safety, and the environment.

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Most of the critical attention given to the Fast Track Trade Agreement legislation and to the associated Trans-Pacific Partnership (TPP) Congressional – Executive Agreement on mainstream corporate media and by politicians and establishment interest groups interacting with them in the beltway echo chamber, has focused on the likely or possible economic impacts of these. But relatively little attention has focused on sovereignty, constitutional separation of powers, or democracy impacts, which however are being covered increasingly well in alternative social media. See here, here, here, and here.

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People who support the Administration's efforts on the TPP have been known to reply to my posts on this subject by attempting to ridicule the scenarios I've presented as possible under the TPP Agreement as “out there” speculation of the tin foil variety that will never actually happen. For those who think that my examples of what is possible under the TPP are just this kind of speculation, please keep in mind that I don't have the proposed draft agreements to work from.

This is due to the President's decision to classify the drafts and seek Fast Track Authority before disclosing them more freely even to Congress for an up or down vote. However, there is no indication from anyone that the actual drafts of the agreement contain rules that would definitively prevent the possible very damaging consequences I've mentioned here for example.

Elizabeth Warren and Bill Black make clear why the secrecy and Fast Track Authority (FTA) itself are anti-democratic, and they also point out that some speculation, or at least educated guesses about what exactly is in the TPP, is forced upon us in order to carry on political debate before it is too late to have it because Congress has given up its constitutionally important debate, negotiation, and amendment capabilities to the Fast Track process.

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To really appreciate what a travesty the TPP is, and the scandal of the failure of our Congress to reject it, and the “Fast Track Authority“ sought for it, out of hand, I'm going to list 23 negative consequences that would likely follow from it. Any one of these, would, by itself be sufficient for any representative of the people, Senator or Congressperson, to vote to kill it. I'll offer this list in the form of stanzas appropriate for a chant, except for the starting point in the list.

The tune of the chant that might be used is the tune used for Dayenu, the passover seder chant in which Dayenu means “It would have been sufficient,” where the reference is to all the things the almighty is purported to have done for the Israelites on their way out of Egypt and during their wanderings in the Sinai. I'm sure the President is familiar with this chant since he has had seders at the White House more than once. I'm also sure that he never envisioned using Dayenu to highlight the horrors of one of his favorite projects, the passage of “Fast Track Authority,” the TPP, and other “free trade” agreements such as the TTIP, and the TISA, all of which would get “Fast Track Authority” if the present bill passes.

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Right now the US fulfills the three essential conditions for monetary sovereignty: 1) it issues its own non-convertible currency, 2) which it allows to float on international currency markets; and 3) it owes no debts in any currency other than dollars. Because it is monetarily sovereign, and can always meet its obligations the US can never be forced into insolvency.

It can become insolvent due to Congressional decisions such as failing to raise or repeal the debt ceiling, or Executive decisions such as failing to use its platinum coin minting authority to fill the public purse and then pay its bills once it has reached the debt ceiling. But again, it cannot be forced into solvency by external financial or economic factors that are beyond the control of the Federal Government (including the Congress).

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We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, . . .
This, of course, is from the Declaration of Independence, one of the sacred texts of American politics and political theory. When the consent of the governed is superceded, or is not given due to force or manipulation, then that is tyranny and illegitimate, because no powers of such a government are or can be just.

So, let's ask, based on what we know about the proposed Trans Pacific Partnership Agreement from leaks of current drafts, and also based on the proposed procedures for enacting it, and those for exiting the agreement, is it true that the TPP, if passed, would have the consent of the governed and hence be legitimate? Or would it be an instance of imposition of tyranny on the American people and also on the people of other signatory nations?

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There are two words that describe the Republicans' Senate Budget Committee's proposed budget: “dishonesty” and “austerity” for most Americans. Let's deal with the dishonesty part first. In due course, the austerity will be apparent.

The Senate Budget Committee's statement, entitled “A Balanced Budget That Supports Economic Growth and Expands Opportunity for Hardworking Americans,” claims to support stronger economic growth, and provide greater opportunity. We might well ask “how much growth” “growth for whom” and “opportunity for whom?”

Certainly not for me and thee, since the Senate budget projects substantially decreased Federal outlays over the decade 2016 – 2025, compared to the CBO baseline budget. This decreased Federal spending comes from:

– continuously slower growth than the CBO baseline in non-defense discretionary Federal programs (13.2% increase over the decade vs. a 24.2% increase in the baseline); and

– continuously slower growth in mandatory spending (Social Security, Medicare and other health programs, food assistance, unemployment support, other entitlement spending) (33.9% vs. 56.3% for the baseline).

Meanwhile, the Senate plan calls for slightly increased defense spending over the period compared to the baseline (24.4% vs. 23.9% increase).

That's right with these levels of projected spending we're looking at austerity for the poor, the young, the aged, and the middle class, since all the programs they benefit from will undergo a continuing squeeze for the Senate's budget plan.

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In addition to the House Budget Committee and OMB budget plans and 2016 – 2025 projections fiscal policy followers have also recently been graced with the effort of the Congressional Progressive Caucus (CPC) proposing their budget plan and 2016 – 2025 projections. The CPC budget proposal is interesting because it is definitely not intended to be an austerity budget. Instead, its authors consciously try both to achieve the goals of “fiscally responsible” low deficit budgets while turning away from austerity and towards achieving full employment, renewed economic growth, economic stability, a strengthened social safety net, greater economic equality, an improved infrastructure, and transportation system, improving the health insurance system beyond the Affordable Care Act, a greener economy, improved education and other progressive goals.

The CPC proposes to do that in two ways First, by raising Federal revenues from 17.5% of GDP in 2014 and 2015 to 20.2% of GDP in 2016, and then more gradually to 21.5% in 2025, while raising Federal outlays from 20.3% of GDP in 2014 to 22.6% in 2015, and 23.7% in 2016, then stays in the range from 22.3% to 23.1% for the rest of the period. Since they also assume GDP growth rates in the neighborhood of 4.1% of GDP to 4.5% year after year over the period, these assumptions imply freed up funds the caucus believes are necessary to support its programmatic changes.

And second, the CPC budget also tries its best to maximize the fiscal multipliers of its various programs, while minimizing the negative fiscal multipliers of its tax programs for raising revenue as a percent of GDP. Since low levels of deficit spending are adhered to in the CPC budget, the fiscal impact of its government outlays is lessened greatly by the negative effect of the rising tax revenues.

According to an analysis of the CPC budget by the Economic Policy Institute (EPI), “A fiscal multiplier of 1.4 has been assigned to government spending provisions, and a fiscal multiplier of 0.5 has been assigned to tax provisions.” (p. 24) The EPI report also says (p. 10):

Although tax increases are contractionary in current conditions, the economic impact of a dollar of government spending (as shown by the fiscal multiplier) is about four to seven times higher than the economic impact of a dollar of revenue (Bivens and Fieldhouse 2012). Since much of the revenue would be raised from upper-income households and businesses (which have relatively low marginal propensities to consume and thus particularly low fiscal multipliers even among tax changes) and used to finance high bang-per-buck job creation measures, the relatively small fiscal drag from raising revenue would be more than mitigated by the other budget policies.
The Bivens and Fieldhouse report dealing, partly, with fiscal multipliers is here.
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In my last post I asked this same question about the House Budget Committee. As my readers saw in that one, the attempts at deficit reduction leading to budget balance were so severe that they implied that if the House budget were followed, and if the economy did not collapse before the decade projection period ended due to a collapse of aggregate demand, then private sector deficits would be produced in every year from 2017 – 2025. In addition, since the budget provided for severe cuts to federal spending designed to benefit poor people and the middle class, it was likely that the private losses from this budget would be concentrated on the people who can least well absorb them.

In this post, I'll review the sectoral financial balances implications of the White House/OMB projections to see how they compare to those of the House Budget Committee. I'll begin by repeating the explanation of sectoral financial balances basics I included in my earlier post.

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It never ceases to amaze me that those who offer budget plans and projections never take into account the reality that their projections must be consistent with implications of trends in sector financial balances for their projections. This is a simple lesson that those playing the fiscal responsibility game never seem to learn. Certainly this is true of the Republican House Budget Committee, as we'll see.

The Sector Financial Balances (SFB) model is an accounting identity, and these are always true by definition alone. The SFB model says:

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.

The terms refer to balances of flows of financial assets among the three sectors of the economy in any specified period of time. Why must there be flows? Because the three sectors trade financial assets with one another. So, the equation says that the sum of all the balances of flows for the three sectors of the economy is zero, because, since there's only so much in assets traded in any time period, the positive balance(s) of one or more sectors relative to the others must be matched by the negative balance(s) of the other two sectors.

So, for example, when the annual domestic private sector balance is positive, more financial assets are flowing to that sector, taken as a whole, than it is sending to the other two sectors.

Similarly, when the annual foreign sector balance is positive, more financial assets are being sent to that sector than it is sending to the other two sectors.

And when the annual government sector balance is positive, then it is getting more in financial assets from the other two sectors combined than it is sending to them.

Conversely, when the private sector balance is negative, the private sector is sending more to the other two sectors than it is getting from them, and so on for each of the other two sectors.

Now let's apply this to the House Republicans' Federal budget projections from 2016 – 2025, as in Table One, just below.

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Wikileaks did us all another service yesterday by releasing the “Trans-Pacific Partnership Agreement (TPP): Investment Chapter Consolidated Text,” and collaborating with the New York Times to get the word out. Jonathan Weisman wrote the story for the New York Times. Apart from providing a very high level and very selective summary of what the chapter says, the article contains talking points used by proponents and opponents of the TPP. I think a close commentary on the article and associated issues would be useful. So here it is.

An ambitious 12 nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document.
Why are we negotiating the TPP at all? Why is it the business of the Representatives of the people of the United States in Congress to support agreements that will mitigate the political risks borne by American businesses who chose to invest in other nations, as well as the political risks borne by foreign corporations, who choose to invest in the United States? Why is it their business to provide protection against such risks to foreign corporations beyond the protections we provide to our own corporations?
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