The Teaspoon Model Versus Rupert Murdoch's Pirate Support Base

Burning the Midnight Oil for Breaking the Silicon Cage

Two weeks ago, I speculated on applying the "Teaspoon Model" to the problem of protecting small, niche, video streaming markets faced:

• on the one hand with Copyright Protection laws focused on protecting the cash flows of large media distribution middlemen; and,
  
• on the other hand, with a plague of bloodsucking bootleg streaming sites, surviving on miniscule revenue flows because they leech off of everyone - not just the creators of the work themselves, but also fansub and video-rip groups that make the content availbale for download, and free stream hosting sites for the streaming itself
  

Refer to the lovely Shakespeare's Sister for the teaspoon concept itself - the idea of this application is:

So this is what I was thinking. Perhaps a small, struggling company that wanted to reduce the density of the cloud of bloodsucking flies draining the work of the artists who create this material of market value could gain leverage not by trying to find the Super-Teaspoon - but by recruiting a supporting group, each armed with ordinary teaspoons.

There'd have to be at least one person at the company actually sending out the letters to the sites streaming the bootlegs - but they would be far more effective if backed up by ten or twenty people contributing a couple of hours a week tracking down where the material is located. Indeed, the "white hats" could drop in info on where to get the material legally while at the bootleg bloodsucker streaming sites, including the proliferating opportunities for legal free streams.

Tonight, I consider an experiment on the Teaspoon Model in action.



The Sunshine Experiment

What I did at the beginning of the week was to send an email for comment to NBC/Universal and Disney/ABC on whether they had any comment on the hosting of bootleg streams by FoxNews servers (specifically, MySpaceCDN and MySpace domains) in competition with legit streams from Hulu.com, their joint venture with NewsCorp:

Dear Disney and NBC/Universal,

I am sure that you are aware that there are severa reports of Hulu.com joint venture partner executives saying that Hulu.com will be forced to move to a paid content model.

As an economist engaged in research in the New Media Economy, I have been looking at the competition with legitimate streaming sites from bootleg streaming sites. These sites rely on off-site free hosts for their bootleg streams. My research of these hosts indicate that they collect stream links from anywhere they can find them, but that when videos are taken down, they upload videos to their preferred free video hosting site.

I was surprised to find that the preferred free video hosting site for these uploads at the bootleg site that I am data-mining for their streams is the MySpaceCDN servers, registered by 20th Century Fox, a subsidiary of NewsCorp, a joint venture partner for Hulu.com.

While I am sure that the administration of the MySpace servers takes down videos on receiving a DMCA notice, they do not appear to act on other forms of information to remove bootleg material competing against Hulu.com.

My working hypothesis is that in their business model, being pro-active in identifying and removing bootleg media streams in competition against Hulu.com is not worth the trouble, as it costs resources while the fact that MySpace is less aggressive in identifying and removing bootlegs than YouTube and Veoh attracts traffic to MySpace that might otherwise be at risk of moving to FaceBook.

However, I cannot find any public comment by their joint venture partners, Disney and NBC/Universal in particular, on the apparent contradiction of Hulu.com moving to a paid content model while one of the joint venture partners appears to have a tolerant approach to bootleg material streamed freely in competition with Hulu.com.

I include below the links to bootleg streams in competitition with the Hulu.com streaming shows "Naruto Shippuden" and "Bleach". You will note that these are two of the four most popular streams in the:
http://www.hulu.com/channels/Animation-and-Cartoons/Anime
channel. In my research, I am focusing on Anime as the anime fanbase have been early adopters of video media technologies from the 1980's and the first fan-subtitled animes circulating on VHS tape.

I previously brought some of the streams hosted at MySpaceCDN servers to the attention of the registered owners of these servers, to no effect. By contrast, a number of the Veoh.com links that this free streaming site links to have been removed in this past two weeks.

You can confirm for yourselves that the MySpaceCDN servers and other MySpace have in the past year become the dominant streaming source for both of these series, taking over from an earlier reliance primarily on video.google.com, and combined with a pattern of filling in for earlier individual shows that have been taken down at other streaming sites.

Note that the bootleg streaming site in received an order to Cease and Desist linking to bootleg FUNimation streams, or else there would be far more Hulu.com series represented at this site. I also include samples of series streamed from the legitimate streaming site "Crunchyroll", including both series currently airing in Japan and being simulcast at Crunchyroll, as well as examples from their back catalog.

I also include two examples of less popular Hulu.com series that are primarily hosted elsewhere.

Yours,

The Sunshine element was that I cc'd the email to the ownership and administration email of the MySpaceCDN domain as well as the various Violations, Support and DCMA email addresses I could glean of free video streaming hosts providing the bulk of the streaming that the bootleg anime streaming group relies upon.

And of course, the balance of the email was a list of over 580 links to bootleg anime streams. Less than a week later, 368 of those streams are no longer live.


The Video Streaming White Hats

What I found remarkable was that many of these video streaming hosts shut down almost all the clips in the list. And while I have not received a single email in response, there are a number of indications that this was in response to receipt of the email - for example, videos added after I compiled the original list are not taken down, or a link in a series accidentally omitted remaining live while all the surrounding videos that appears in the stream are taken down.

From the perspective of a small niche streaming site, directing a part of its narrow margins to paying license fees to the creators of the work, these are the real "white hats" - streaming sites that are pro-active about taking out the garbage, so that there is no need to go through the process of issuing Cease and Desist orders. If the four hosts in the White Hat Honor Roll continue to behave in this way, as small but determined fan support group could quickly teach bootleg anime leech sites to not even bother with any videos appearing on these sites:

• Veoh.com: 48 streams in the list, all 48 removed, for a 100% hit rate
• Imeem.com: 76 streams in the list, 75 streams removed, for a 99% hit rate
• Megavideo.com: 71 streams in the list, 60 streams removed - and of the remaining 11, 9 are directed to a domain that appears to be licensed to stream the material, for a 97% hit rate
• YouTube.com: 19 streams in the list, 16 down and 4 remaining up, for an 84% hit rate. For YouTube, all of the streams remaining up were from a single series. Given the attention that YouTube receives as the one-time Bootleg Video Central, this might be just the turnover that occurs with YouTube streams. On the other hand, with their automated video fingerprinting system, it may reflect the video producers that have signed in to have their content protected.
• Honorable Mention: Broadcaster.com had 17 streams in list, and I recorded 15 streams as unavailable. However, as this site comes up as "presently unavailable", the question is whether those other two streams are streaming from Broadcaster.com, or were instead already replaced by other streams between the time I harvested the links and the time I checked which episodes were still streaming.

The Hit and Miss Parade

However, there is also a substantial Hit and Miss parade, where a substantial number of the streams have been taken down, but a substantial number remain up, which may well indicate that the site is receiving official C&D notices from the rights holders. Some look like it lines up with the list of individual series, so that the rights holder may have been forwarded the list - others are in a more random pattern.

The Hit and Miss Parade includes:

• The MySpace.com domain itself had only 21 streams in the list, with 14 down and 7 remaining up, for a hit rate of 67%
  
• MySpaceCDN.com: 241 streams in the list, with 110 streams removed and 131 streams still up. However, of the 110 streams removed, 43 have special circumstances - for instance the streaming page was in the process of being updated, so it may have been an stream that was already down. Of the 191 streams with no special notes, 67 were removed and 122 remain up, a hit rate of 35%
  
• Guba.Com was very lightly used, of only 7 streams, 4 are down and 3 remain up, for a 58% hit rate

The Black Hats

The Black Hats are the sites that showed no turnover of files whatsoever. These are the sites that a fan-based Teaspoon Brigade will have to be collecting stream links and forwarding the streams to the rights holder for batch Cease and Desist orders to halt streaming of bootleg material:

• LiveVideo.com: 30 streams in the list, all 30 remain up, for a 0% hit rate. It should be noted that LiveVideo was omitted from the original cc list and was notified in a separate communication. However, while LiveVideo is one of the few sites that claim to accept communication regarding copyright violations from people other than the copyright holders, there is not yet any evidence that it acts on that information.
• Google.com: 85 streams in the list, 14 now down, 71 still up for a hit rate of 16% - and the streams still up include an extensive portion of the back-catalog of Naruto Shippuden, the most popular series streaming at Hulu.com. Google.com was the only recipient of a cc' that responded - with a form letter response regarding the information required for a formal copyright complaint, indicating that they glanced at the email and put it into the form-letter queue.
• SevenLoad.com: with only 8 streams in the list, this is either a host that gets around to scrubbing bootlegs eventually, or simply not a preferred host for the bootleg anime streaming site providing the information, but of those 8, only 2 went down, with 6 still up, for a hit rate of 25%.

Moving Forward

One thing that is clear is that a 100% hit rate is by no means necessary in order for the Teaspoon Model to work in this particular shadowing fringe lying outside the US Anime market.

This is one key difference between this area and peer-to-peer downloading. With peer-to-peer downloading, if some well-organized crackdown was to miss a single potential seed, once the existence of that seed would made public, the community of those interested in the material would quickly re-create the copies.

With the leech bootleg streaming sites, what they offer is the organization and easy access to a stream from some central streaming site - if the stream is taken down, their only recourse is to either find another copy or to upload a copy of their own. But if they find another existing copy, that only helps hunt down the extant copies on streaming sites around the net, while far more time and effort is required to upload a new copy then is required to note the link address and report that information to the rights holder and streaming host.


The Puzzle Regarding MySpaceCDN - and One Possible Answer

It is still a puzzle that MySpaceCDN is not in the ranks of the White Hats. Indeed, if MySpaceCDN was to simply take down the bootleg streaming it does competing against Hulu.com, a NewsCorp Joint Venture, it would have shown a hit rate above 80%.

In Is Rupert Murdoch Picking His Partner's Pockets ..., I adopted the working hypothesis that the enterprises in Ol' Rupert's media empire are just Old Media Dinosaurs that just are incapable of reacting at the pace required to keep up in a field like this.

However, recent news will likely add fuel to the fire of the "Pickpocket" hypothesis. And that is that a lack of hits at MySpace is likely costing MySpace on the order of $100m. See, the purchase of MySpace was financed at a profit with an exclusive contract with google - except there were guarantees required MySpace's hit traffic:

MySpace Traffic Drop Costs News Corp About $100 Million, By Eliot Van Buskirk, November 5, 2009
The MySpace social media network’s traffic has dropped so much that it will fail to satisfy a minimum traffic level crucial to parent company News Corp’s three-year $900 million advertising deal with Google, inked in 2006, that made Google the exclusive search advertiser on MySpace — then the world’s most popular social network.

News Corp. executives bandied about three different estimates of how much of the Google’s $900 million MySpace will not take in, due to the shortfall, but a consensus emerged that the penalty will be in the neighborhood of $100 million.

As the Financial Times points out, this Google ad deal covered News Corp.’s estimated $580 million purchase of MySpace. The site’s failure to provide the deal’s minimum traffic level is bad news for News Corp., which otherwise reported a generally positive outlook due to its movie studio and cable channels, which currently generate 85 percent of the company’s revenue.
...

Under the PickPocket hypothesis, MySpaceCDN servers are not taking the aggressive, pro-active attitude to "taking out the trash", because it does not want to alienate users in the fight for market share with FaceBook. The story from Wired, however, casts a different light on the issue - the conflict between long-term, strategic goals and short-term revenue.

After all, MySpace has conceded defeat in the market space it once dominated, and is trying to leverage an advantage it build up for another market space:

Rather than compete against those social networking heavyweights, MySpace intends to double down on what has always been a core strength: the millions of artist pages on the site, which dwarfs the catalog of other music services, because it includes so many unsigned (and, for that matter, signed) bands. MySpace’s new strategy, already known before the earnings call, will be to realign the site as an entertainment destination rather than a place where people keep up with friends and family.

If the strategy works, it will likely involve MySpace leveraging video in addition to music. MySpace Video currently boasts over 20,000 music videos, television shows and other videos, but faces entrenched competition from YouTube that could be even fiercer than Facebook and Twitter are on the social networking side

In the short term, being more passive about copyright protection than YouTube and the main second tier video streaming sites will drive a larger number of hits in the direction of MySpace, reducing the penalty it faces in its advertising contract with google.

However, it is clearly not in NewsCorp's long term interest to encourage the proliferation of bootleg videos on its site. One the one hand, bootleg videos cannot attract the mainstream video ad-streaming that, at the very least, pays the web serving and video streaming bills for a video streaming site, so that whatever other income it attracts does not have to cover those basic operating costs. With MySpace's long term strategic direction, they need to encourage the creators of original work to use MySpace to publicize themselves - they certainly do not need to be streaming bootleg anime on behalf of leach sites where a link to MySpace does not even appear.

Indeed, if the MySpaceCDN servers were in the hands of a media empire that was not such an Old Media Dinosaur, anybootleg anime that it learned off streaming in competition against its own joint venture would be replaced with a short trailer advertising the legitimate stream on site - and a bootleg that was not streamed at the joint venture would be replaced by a trailer for MySpace as a video and music entertainment stop - an a Google link to search for legitimate streams and other legitimate sources of the anime title, to make Google happier with MySpace.

I am still skeptical that NewsCorp is deliberately adopting a passive attitude toward cleaning up the trash at MySpaceCDN, putting its financial interests in MySpace traffic ahead of the financial interest of its Joint Venture with NBC/Universal and Diensy/ABC - but the news that a shortfall of MySpace hits is costing Rupert $100m certainly does add to the plausibility of the alternative working hypothesis.

The candy store paupers lie to the share holders
They're crossing their fingers they pay the truth makers
The balance sheet is breaking up the sky
So I'm caught at the junction still waiting for medicine
The sweat of my brow keeps on feeding the engine
Hope the crumbs in my pocket can keep me for another night
And if the blue sky mining company won't come to my rescue
If the sugar refining company won't save me
Who's gonna save me?

Is Rupert Murdoch Picking His Partner's Pockets ...

... or is NewsCorp just an Old Media Dinosaur that cannot keep up?

Burning the Midnight Oil for Breaking the Silicon Cage
In Orange 5pm Wednesday, EST

Breaking the Silicon Cage is for breaking down those barriers that prevent us from leveraging the full potential of the netroots for progressive populist action - whether that involves using the internet for collaboration on works to be delivered live on the street, or breaking down barriers between different social networks on the internet itself.

The latter is what we have here. The progressive blogosphere, if people are to believe our words (though not always our actions) is an enemy of Rupert Murdoch and his Iraq-Invasion-supporting, Conservative-Politician-electing multinational media empire. We in the US know him primarily for the Faux News Channel, but in the UK and Australia they know him for his grossly biased newspaper oligopolies.

Now, if Progressives were indeed intent on taking power (something Cassiodorus questions), we would be eager to take any shots at Rupert Murdch's Media Empire that we could.

Now, I'm game, and a few others have expressed their interest, but for the most part the reaction of the blogosphere is a big, "why should I become outraged by that in particular". If the thousands of US service members and hundreds of thousands of lives disrupted - hundreds of thousands of Iraqis kills and millions of Iraqi lives disrupted - is too big a reason to grasp for being outraged at Rupert Murdoch and his media empire ... then be outraged for the mother (above right) of Cpl. Kareem Rashad Sultan Khan, Bronze Star, Purple Heart, killed in action in a War of Choice that Rupert Murdoch loudly banged the drum in favor of choosing.
__________________

Because rather than being serious in our antagonism with Rupert Murdoch and NewsCorp, rather than owning our antagonism, rather than recognizing that sometimes, some people are just committed to opposing almost everything you are committed to supporting and so much be attacked whenever they present a target of opportunity...

... it may well be that many members of the "progressive blogosphere" are only comfortable in acting when they have been manipulated into outrage. If someone else can push our buttons, and tick us off, then we can join in expressing outrage. If, on the other hand, we have to pursue our revenge against Rupert Murdoch's media empire with cold calculation, that's not the same. And, no, its not the same - it would be an indication that we are serious about taking power.

Because this is an issue that on its own merits is not likely to be a big button pusher in the progressive blogosphere. The eternal online temptation to sneer is too strong, and the opportunity to land a punch on the enemy is lost in the joy of being smugly superior to the line of the attack.


The Line of Attack

Because the line of the attack is US translations of Japanese anime. US distribution of bootleg anime has long been on the bleeding edge of the New Media economy, with VHS tape bootlegs of fan-subtitled Japanese anime series circulating in the 80's, early adoption of computer digital video in the 90's, and early adoption and a strong presence in peer-to-peer networked file sharing.

This was a fringe of the anime audience that the industry ignored in the US growth period of the 90's and early part of this decade. However, an industry that had become increasingly reliant on US licensing fees, with US sales reaching a peak of around $500m earlier in this decade, has been hit hard in the second half of this decade. The distribution of bootlegs through free streaming sites has cut growing swathes of the fanbase out of the audience for licensed work, and US sales have slumped to a figure closer to $350m.

Particularly hard hit have been the higher end US distributors that dub Japanese anime with US voice actors - considered essential for packaging a series for US broadcast, but representing a substantial fixed cost for a US distributor to take on with no guarantee of recouping the cost from increased sales. In the past few years, one long time US distributor, Central Park Media, has gone bankrupt, and another, ADV, restructured as Section 23 Films and spun off its dubbing division into a separate company.

OK, so what does this have to do with Rupert Murdoch?

One of the ways that the anime industry has been trying to cope with the rapid distribution of bootleg fansubs on streaming sites has been to make legitimate licensed streams available to fans, in a mix of ad and subscriber supported business models. Examples include Joost, with over 30 anime series available, and Crunchyroll, with over 100.

But of course, legitimate sites can only stream what they can license, while the bootleg streamers can stream anything they can find available on a free video stream host site. For example, Hulu.com focuses entirely on North American rights, and has a running fight with services that allow overseas access via US-based Internet addresses, while Crunchyroll.com faces constant irritation from overseas members when a show they want to watch is not available for streaming to their country.

And the bootleg streamers can survive on the miniscule revenues of web ads and donations, because they contribute nothing back to the creative artists, contribute nothing back to the "fansub" groups that translate and subtitle works as a community activity, and indeed do not actually do the streaming of the material itself.

The flipside of that, however, is that the bootleg streamers can only exist due to the tolerance of their activity by the free video stream sites or due to the ineffectiveness of enforcement efforts.

Which is what raises the question in the title: is Rupert Murdoch's MySpace video streaming tolerating bootleg anime streams, in order to attract more users in their ongoing fight with FaceBook (note if you click through to [http://www.joost.com/epg/us/shows/animation/anime/ Joost], you can sign in via Facebook) ... or is NewsCorp just an Old Media Dinosaur that is incapable of being fast enough on its feet to cope?

Because, as I began to document last week, and finished working out just this last weekend, Rupert Murdoch's MySpace servers, owned by 20th Century FOX, are the Pirate Support Base of preference of the particular bootleg streaming source that I have been datamining for stream host information.

In particular, looking at all series on the site that are available in a licensed free stream at either Hulu.com, Crunchyroll.com, or the AnimeNewsNetwork.com, the count of links as of 30-10-2009 by host server is:

• MySpaceCDN.com: 461, MySpace.com: 47, Total: 508
  
• imeem.com: 100
  
• google.com: 85
  
• megavideo.com: 81
  
• Source Hidden behind Local Link: 47
  
• LiveVideo.com: 39
  
• Veoh.com: 22
  
• YouTube.com: 18
  
• SevenLoad.com: 14
  
• TwitVid.com: 1
  
• Zoopy.com: 1
  

So in one part of his "trying to into the New Media Economy" strategy for his media empire, it turns out that Rupert Murdoch's MySpace is a major free streaming hosts for bootleg anime. Those in turn undermine the efforts of production houses and US distributors to provide US access to content shortly after Japanese airtime, while providing some income stream to keep the creative artists, producers, and translaters employed.

There is nothing that can be done to stop peer-to-peer file sharing, and so the market for DVD's is the market for people who want the DVD's. That genie is out of the bottle and cannot be put back in. But clearly, not everyone wants to or can work out where to download bootlegs, or how to get them playing on their system - that is why the bootleg streaming sites exist and attract an audience. There are those who prefers the simplicity of just browsing to a site and watching the show.

And that is the potential audience that Rupert Murdoch's MySpace is helping to divert away from the legitimate streaming sites.


The Pick-Pocket Thesis

One of Rupert's other ventures in trying to buy his way into the New Media Economy is Hulu.com, a free streaming joint venture between NewsCorp, NBC/Universal and Disney/ABC (there may be others - I'll be happy if you can add to that list of joint venture partners in the comments).

Which is where it gets weird, because when you look at the top four shows on Hulu.com by popularity, the list is topped by Naruto Shippuden - also available at Joost.com and Crunchyroll - with "Bleach" at number four. Hulu.com seems to be the sole source for legit streams of "Bleach".

Bleach is important for the bootleg streaming sites as well - in one it features as one of three series with direct links provided at the very top of every page.

And it is argued in some quarters that Hulu.com definitely needs more audience if it is going to be a successful venture. The Silicon Valley Insider at The Business Insider:

We have been skeptical that Hulu will receive enough of a revenue cut from its content and distribution partners to cover what we believe is a high cost structure. After conducting more research, we remain skeptical. It is not impossible that Hulu's model will work, but we continue to think it will be challenging for the company to turn a profit and build a sustainable business.

And there may be a fight over the business model brewing between NewsCorp on one side, and NBC/Universal and Disney/ABC on the other:

Here’s the skinny: A story on B&C’s Web site says Carey “hopes that it will move to a subscription model,” While Entertainment Weekly said Carey firmly stated the site would start charging in 2010. Whatever really happened, it was enough for a Hulu spokesperson to speak up — which hasn’t happened in the past over this issue — pouring cold water on the paid idea, at least for now:

Hulu’s mission has always been to help people find and enjoy the world’s premium, professionally produced content. We continue to believe that the ad-supported free service is the one that resonates with the largest group of users and any possible new business models would serve to complement our existing offering. There are no details or timelines to share regarding our future product roadmap.

So, if Rupert Murdoch and NewsCorp are trying to push Hulu.com into some form of subscriber model, and at the same time they are faced with the power-law distribution of social networks in their fight for market share against Facebook, the "Pickpocket" thesis is:

• NewsCorp tolerates bootleg video except when required by law to act, because it serves their interests, even if it undermines the interest of Hulu.com under its current business model.

After all, the argument would go, they are not entirely troubled by the prospect of that market model failing if they expect it to fail anyway. Why devote effort to protecting the market audience of a lost cause?


The Dinosaur Thesis

Only considering a single hypothesis leaves a risk of looking for confirming evidence and overlooking contradictory evidence. And there is, after all, a second hypothesis that should be considered.

Suppose NewsCorp is simply an Old Media Dinosaur, is competing against itself through simple incompetence, which is just one more signal that it is doomed to fall as the oligopolistic market structures in both press and broadcast media that it was built upon are torn apart as we build the New Media Economy.

One of the tests of the "tolerance" scenario is whether any action is taken when information is passed on by someone other than the rights owner. The streaming host is legally required to act on a Cease and Desist order from the rights owner - but they are certainly permitted to investigate and take action no matter what their source of information is.

And so I have been passing my results on to the various streaming sites, to see what their reaction is. Many of the "minor sources" above react quite quickly. Indeed, if I had taken the count a week earlier, the count of Veoh.com clips would have been 50% higher, amd from my exploration yesterday and today, the count would be substantially lower again today.

Some sites show a splash screen that content was taken down due to copyright infringement. Others, such as Imeem.com, simply bring up the embedded video player with no content for it to stream.

The most interesting reaction is that of MegaVideo. Many of the MegaVideo videos have been replaced by a "copyright infringement" take-down notice. However, at least two bring up an entry portal into the iReel.com site - which appears to be a site for licensed streams of movies and shows, and which might indeed have a license to stream that particular show.

Exploration of the "Bleach" show, where Hulu.com has exclusive streaming rights, shows that some but not all of the MySpaceCDN streams have been taken down. In particular, those links referred to in an email to the site registration owner and administrator at the end of last week seemed to be in the process of being taken down - but while sites like Megavideo.com and Imeem.com have a reaction time of a day or two - the reaction time for MySpaceCDN.com seems to be more in the range of a week or two.

So, myself, I lean toward the "Dinosaur" thesis. Indeed, it would appear that few streaming hosts are as well placed to replace streams of bootleg anime with a pre-packaged stream that advertises the series availability on Hulu.com. At the very least, they can get rid of bootleg streams of episodes that they are hosting in competition against themselves in a timely manner. However, in practice, they are clearly slower in reacting than Veoh.com, Sevenload.com, Imeem.com and Megavideo.com - I had inadvertently omitted LiveVideo from the cc: list of the email I sent to NBC/Universal Disney/ABC, but I would not be surprised of LiveVideo.com is also quicker on their feet than NewsCorp.

They might defend themselves that I am using the wrong email addresses to contact them, but on the other hand I am just using publicly available registration, copyright violation, or Terms and Conditions violations contact addresses.

Still and all, they are, slowly, reacting. They just do not seem to have the ability to react as fast as the little mammals scurrying around their feet.


So, What Are We Supposed to Do About It

In the end, while anime fans might feel compelled to work out why NewsCorp is acting the way it does, the progressive blogosphere really does not. Whether they are one of the biggest Pirate Support Bases in the US streaming anime market because they are pursuing a dishonest game against their Hulu.com joint venture partners, or because they are simply not as competent at shutting down bootleg streams as their smaller, nimbler, New Media Economy rivals ...

... they still remain one of the biggest pirate support bases, which is a great big glaring contradiction with NewsCorp's aggressive and noisy public attacks on "copyright piracy". Indeed, Rupert Murdoch (note that the picture at the right is not from the event itself) has just recently lectured the Chinese on the subject:

"The embrace of the digital is as vital to China today as its decision 30 years ago to take its place in the global economy," he said. News Corp owns Dow Jones & Co., which publishes The Wall Street Journal. "Chinese media and entertainment companies have a remarkable opportunity to expand their international influence and revenues." But Mr Murdoch said "piracy will make it difficult for them to generate the profits at home that would fuel growth abroad."

... while he himself owns one of the biggest Pirate Support Bases for anime streaming in the Internet!

So the reason number one for the progressive blogosphere to make a big noise about it is simply that its a vulnerable point.

And if its publicized broadly enough, NewsCorp will have to take action to shut the Anime Pirate Support Base. If it is pushed hard enough to be picked up by any of the mess media, NewsCorp will have to come out denying that it is intentional, and declaring that they will take steps to shut down what they had no idea was happening.

After all, whether they are doing it because they are a Pickpocket or because they are an Old Media Dinosaur, they have to pretend to be a New Media Not-Pickpocket once the question is asked publicly enough.

But then there is the question - do they just shut down the streaming they are doing in competition with themselves? If they decisively defend their own streams, but do not take the same decisive action to stop infringing on the rights of Crunchyroll.com, Joost.com, or the AnimeNewsNetwork, then we have them on the hook for another kick of the story.

And then if we force them to take decisive action to shut down the Anime Pirate Support Base for all legitimate streaming anime - well, then we win. If the solution requires ongoing organized action by anime fans in defense of the modest income streams available from free streaming, as I suggested in The Teaspoon Model - that's for the mature segment of the anime fanbase to take on. The progressive blogosphere would declare victory and move on.

OK, now suppose that we raise a ruckus but not enough to make the Dinosaur move its feet. We still will have been on the right side of trying to defend the livelihoods of the creators, against the Digital Millenium Copyright Act which is of course biased toward the big media middlemen. And, indeed, whether we force Murdoch to act or not, any ammunition we can give to any of his enemies is a good thing. After all, much of the evil that Murdoch does is in the realm of propaganda, and if he does not change MySpace's status as a primary Anime Pirate Support Base, that is something to snipe at him with every time he sounds off on the issue of copyright.

And win or lose, working in coalition in support of the growth of a New Media Economy is a useful networking exercise. After all, these are people with skills that the blogosphere needs very badly when we hit the campaign trail. We have got an ocean of words, but to get through to more than 30% of the electorate, we need effective moving images with sound. And the fans of the section of the New Media Industry we would be coming to the aid of here - include numbers of people with effective image creation and video production skills.

Well, at least, if progressives are serious about pursuing power. If being "progressive" is about sitting on the sideline and complaining, not so much.

If you are interested in joining the fight, keep a watch out for the "PirateCorp" tag, do what you can to publicize the direct actions in the fight, and to push the story into the media.

And if you can come up with additional / better direct actions than the Friday download-a-thon, be sure to pipe up.

The rich get richer, the poor get the picture
The bombs never hit you when you're down so low
Some got pollution, some revolution
There must be some solution but I just don't know
The bosses want decisions, the workers need ambitions
There won't be no collisions when they move so slow
Nothing ever happens, nothing really matters
No one ever tells me so what am I to know

You wouldn't read about it, read about it
Just another incredible scene, there's no doubt about it

Celebrating the Fall of the American Empire

Burning the Midnight Oil for the Next American Revolution
crossposted at Docudharma, ProgressiveBlue, MyLeftWing, and Agent Orange

As people look back to the decade just past, and as we look ahead to the long, hard job ahead of us, many people describe the decade in many different ways - tumultuous, chaotics, catastrophic, liberating, tragic, joyous - but it seems that nothing recycles so easily as a phrase, and so the punditry online seem to have settled on The Roaring Teens.

But consider how it could have all gone so badly wrong, had the American Empire not collapsed. Whether you were thrilled or dismayed by the Roar in the Roaring Teens, consider what might have happened to our revived Republic had history taken a different turn in the aftermath of the Currency Collapse of 2011.

It is this perspective I wish to offer, since I can recall the New Year of 2010 arriving, and I feared much of what did in fact happen in 2011 - and yet because I did not see the possibility of the liberation of our nation from our self-imposed shackles of Empire, I did not for a minute imagine what the decade would bring.
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The Currency Crisis

I recall people at the time writing about the risk that China would "unload" US Savings Bonds, as if China had bought the Savings Bonds as an investment. The reality was, of course, that they bought the bonds to keep the US$ expensive and the yuan cheap (well, to keep the renminbi cheap, in those days before full convertability).

The other reality, which was tracked by a different set of people with a different set of interests, was domestic Peak Coal for China. Late in the Do-Nothing Noughties, people heard promises from China that they would reduce carbon emissions and invest in carbon neutral technologies, but did not put two and two together: the speculation regarding peak domestic coal for China was very real, and was coming much faster than outsiders were allowed to understand.

And so, silently, stealthily, China shifted its "currency basket peg" away from the US$ and to the Euro and Yen and Pound Stirling and Swiss Franc and Australian Dollar. It was not entirely off the radar, but since they moved the peg itself to keep the yuan/US$ rate from moving very far, very fast, it was lost in the noise of the countless phony emergencies generated by the typical "news" infotainment of the Do-Nothing Noughties.

And it maybe that they would not have acted quite as they did, but the Federal Reserve controversy of the summer of 2011 broke out, starting as a gambit aiming for some advantage in some long forgotten policy fight over whether to do too little, too late, both, or nothing at all. And they were faced with the choice of whether to keep sliding their peg - and what they knew that would mean for domestic inflation, given their need for dramatically larger coal imports from the United States to tide them over as they kept ramping up their New Energy power sources.

And of course, with the limp US recovery from the recession barely over, compared to the strong European and Japanese recoveries, as far as maintaining their export surge, the Euro and the Yen were where it was at ... the US market didn't seem nearly as important as the possibility of buying cheap coal from Americans desperate to earn foreign exchange. It seemed very much as if the growth opportunities in the American market were behind China, not ahead.

And so, they stopped shifting their peg.

They, of course, had not been so short-sighted that they forgot their southern flank. Indeed, the currency basket peg had been developed by Singapore, and its spreading use across ASEAN in 2010 had seemed to be a technical issue, when it was not described as a "response to US pressure".

And while India was not "in on it", there were Indian officials who were watching their rival and sometime adversary more closely than many others, and had already started arguing the case for the switch. In the face of the dramatic fall of the US$ in the summer of 2011, India adopted a currency basket peg with an unspecified but clearly only token US$ component.

Five years before, the world had been roughly half floating and half pegged, and the pegs were mostly to the US$. By the fall of 2011, the world was half floating and half pegged to hidden baskets that very clearly had very few US$ in them.

As Jon Stewart asked, "Why do they call it floating when all we are doing is sinking?" - leading, lest we forget, to calls for his resignation and return to the Comedy Channel from the ever more strident and ever less relevant conservative movement.


What happened was not inevitable

This is not to refresh anyone's memory - all of this is quite familiar. It is to bring the events to the forefront and ask, what if we had clung to Empire in the face of this crisis?

It seems so obvious today. Our ability to afford what turned out to be over a thousand foreign bases had been eroding for decades. And now, with a dollar trading at €0.34, ¥46, £0.32, 0.40 Swiss Franc, A$0.57 - the costs were exploding.

(Actually, take a moment and reflect on that - ten years ago, most of those would have been quoted as how expansive or cheap they were in US$, not how expensive or cheap the US$ is in the hard currencies of the world.)

And so the wise heads of the two establishment parties put together an austerity budget that would allow the US to continue paying the exploding costs of these establishments - and the consensus cracked.

It started with a filibuster in the Senate by some faction pursuing some narrow partisan advantage, as was normal for the decades just past. And so it was bounced over to the House.

But Congressmen are skittish, and the new Congressmen on both sides of the aisle from the "kick the bums out" wave of 2010 were in no mood for a grim austerity budget. The radicalized right wing of 2010 entered another of their rages on "wasting our money protecting German wealth from the damn Russkies". A bloc of Democrats who had held on by the fingernails in 2010 based on an uptick in "Green Jobs" were not about to cut back on their lifeline.

The so-called "Progressives" of the day, a motley mix of progressives, social liberals, and moderate Wall Street Democrats, fractured in the Great Defense Budget fight (wasn't it LIVE-FREE? In those days, if the name sounded good, that was supposed to replace actual sound legislation). So did the smaller Populists. But the balance from both took up the war cry of the radical right wing fringe.

They hit on covering the budget black hole - under the arcane rules of the day - by withdrawing from Europe by May 8, 2015, the 70th Anniversary of Victory in Europe day. Some clever soul called it the "Seventy Year Itch for a Real Victory Parade", quickly shortened to "The Victory Parade Strategy", and by then the dam had broken.

The administration fought it, the Pentagon Establishment fought it, but first a wave of primaries were won on promises paid for by retreating from this or that piece of foreign soil, and then a wave of general election victories won, on both the right and the left, and there was nothing to do but to accommodate it. The new House would not fund the foreign bases, and there was no way to make them.


Why Did We Ever Fear a Currency Collapse?

What is important to recall, as we look back at this glorious throwing aside of the shackles of Empire, is that it could have all come undone. A disaster, another Lyon Bombing, except in LA, and it might have all come apart.

Instead, the second impact of the great Current Collapse was felt. Fewer foreign students came to the US hoping to win a US green card - but when foreign students compared US Universities to the cost of foreign study at British or German or French or even Australian Universities, they kept coming, and then started coming in larger numbers.

Most of the rest of the world was not seriously affected by the Currency Collapse - it was, indeed, a US Dollar Collapse. The Canadian Dollar and Mexican Peso suffered collateral damage, but most countries were largely unaffected.

And so US machine tool exports boomed - often to unexpected locales and in competition with Chinese rather than European or Japanese producers. Foreign film-makers came to California to film movies set in Berlin and Paris and London and Sydney - to save on production costs. Japanese and German industrial software firms set up offshore branches in Silicon Valley in California and the Information Corridor in Massachusetts.

The US slipped toward into a recession in 2011, but was pulled out again in 2012 by the export surge.

A critical part of the Victory Parade coalition had been from Great Lakes and Midwestern states battered by two decades of import-for-profits "globalization", clinging desperately to the slender reed of hope offered by so-called "Green Jobs". Those policies seemed like more too little, too late on their own. But they met the rising tide of US$ oil prices, the wave of Chinese take-overs of US coal companies aiming at shifting US coal to export markets, the export boom, and US production capacity started growing at headlong rates.

And that relentless growth in investment, of course, was a big part of the Roar in the Roaring Teens.


But It All Might Never Have Happened

But count the number of ways it could have failed to happen. Suppose that the Federal Reserve controversy was successfully hushed up and papered over, as the Great Bank Robbery of the Noughties was first papered over with a flood of liquidity, then turned into an economic crisis, then finally lost sight of in the relentless generation of new mini-emergencies from the adrenaline addicted infotainment media of the era.

Suppose that the Currency Collapse had not happened in the aftermath of a "kick the bums out" election, or suppose that the "kick the bums out" sentiment had not spilled out the way it did to hit Congressmen in both parties.

Suppose that the Progressives or Populists in the House had held together, and held together on the basis of support for the Austerity Budget, which would have thrown the US into a deep recession and, so close to the previous one, quite possibly a "Not Nearly So Great" Depression.

Suppose that the Lyon Bombing had happened in LA, or St. Louis.

And its not like the new media in 2011 played the positive role that it now remembers. The heady days of 2013 and 2014 cast a rosy glow back to 2011 - but in 2011 itself, the new media were "going ballistic", as we used to say. The sky was falling, it was the administrations fault, the Republicans fault, the Democrats fault, an evil plot by the Chinese, an evil plot by the Illuminati using the Chinese as their cover story.

Once the breakthrough was made, the new media played a useful role in the wave election of 2012, and once that election was won, an even more useful role in winning more useful than useless "peace dividends".

Indeed, I have encountered peace activists who blame the early flailing around of the New Media for the "lost opportunity of 2011".

The "Victory Parade", after all, primarily involved Eurasia. We left Japan, but not Australia. We left Europe, but our presence in southern Africa grew. Most Caribbean states would be hard pressed to pin point the fall of the American Empire, since it feels like no such thing in Jamaica or Trinidad. Even today, the Department of the Navy oversees the largest navy on the face of the globe,dominating the Caribbean, west and south Atlantic, the east and south Pacific. The Department of War oversees bases on four continents.

And of course, Climate Chaos presses us ever harder. Certainly, we seem better placed to address it than it ever seemed we would, especially following the nationalization of US coal mines, and the "Two Centuries of Coal" conservation strategy that followed.

But all but the most incurable optimist will now admit that "better placed than before" may well end up being barely good enough for many and simply not good enough at all for many as well.

Still, nearing retirement, I am above all things a Pragmatist with a Capital P. Compared to the total mess that we could have made of things - and the total mess we would have made of things, if we had continued down the course set in the Kamikaze Nineties and the Do-Nothing Noughties - we are in far better shape than we had any right to expect.

And so, reflect on what damage could have been done if, instead of bringing down the Empire - the Empire we could not call be name while it lasted - we had wasted the Teens on a hopeless effort to save it. If not in Depression we would be teetering toward it. If not at war, we would have been lurching toward it. If not in climate hell, we would have been slipping inexorably toward it.

So tonight, let us raise a glass of near-export quality sparkling wine, and give a rousing toast for the Fall of the American Empire.

Midnight Oil: Forgotten Years

Few of the sins of the father,
are visited upon the son
Hearts have been hard,
our hands have been clenched in a fist too long
Our sons will never be soldiers,
our daughters will never need guns
These are the years between
These are the years that were hard fought and won

Contracts torn at the edges,
old signatures stained with tears
Seasons of war and peace,
these should not be forgotten years
Still it aches like tetanus,
it reeks of politics
How many dreams remain?
this is a feeling too strong to contain

The hardest years, the darkest years,
the roarin years, the fallen years
These should not be forgotten years
The hardest years, the wildest years,
the desperate and divided years
We will remember, these should not be forgotten years

Our shoreline was never invaded,
our country was never in flames
This is the calm we breathe,
this is a feeling too strong to contain
Still it aches like tetanus, it reeks of politics
Signatures stained with tears,
who can remember
We've got to remember

The hardest...
Forsaking aching breaking years,
the time and tested heartbreak years
These should not be forgotten years
The blinded years, the binded years,
the desperate and divided years
These should not be forgotten years,
remember

Putting the Vicious Health Insurance Dogs on a Leash

Burning the Midnight Oil for the Next American Revolution

From one of my comments in buhddydarma's most excellent diary:

I'd liken it to a vicious dog behind a fence. Given access to the fence, he will worry it and try to dig under it, or hang out by the gate and eventually get out. Like a group of corporation with massive profits locked behind a regulatory wall, who will eventually find a way to get a loophole put into the wall.

Tie the dog up in the yard so he can't get at the fence, the combination is more effective than either alone.

A robust public option works like the leash tying the dog up. The corporate insurance companies cannot squeeze too much harder than the public choice without losing market share, so it will be much harder for them to organize to break the regulations in the health care exchanges.

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Don't get confused by the "five percenters". This was President Obama trying to mollify the Republicans and also make the extremists look ... like extremists.

But in the preliminary CBO analysis of HR3200, which is where the 5 percent seems to come from, this really is a rhetorical trick designed to make a robust public choice sound less effective than it would be. And if we lose sight of how effective a robust public choice could be, we will not fight hard enough to (1) get it in the bill and (2) kill phony substitutes.

Through to 2019, HR 3200 is scored as adding 11m through Medicaid (since I'm blogging in genteel poverty, I'm one of those), 2m through employer provided insurance, and 30m through the exchanges, with 6m switching (comparing 2019 projection w/out to 2019 projection with) from non-employer provided health care primarily into the exchanges, for a net increase in 37m.

Everyone in the health insurance exchange benefits from the public choice - even those with private insurance. So that is 30m beneficiaries, which is:

• 100% of those in the public exchanges
• 80% of the increase in coverage
• 60% of citizens and documented migrants w/out coverage
• 50% of all people residing in the US w/out coverage

And, yes, 10% of those projected to have insurance after the reform. But the majority of the gap between the percentages in that list and "10% comes from including those people projected to continue to receive employer-based health insurance.

Their stake in the reform is supposed to be reforms that protect what they already have.


Don't get lost in CBO projections

Of course, this is all simply CBO projections. Don't forgot what you know about how our politics and economy really works when wading through the CBO numbers.

And so that brings us right back to the vicious dog model of corporate health insurance. If there are corporate insurance only health exchanges, we all know full well that we will be fighting ongoing battles over corporate health insurance companies trying to open the health insurance exchanges to precisely those people where the public subsidy is more lucrative to their bottom line than employer-provided health insurance.

And if we win some, we will surely lose some.

And so the CBO projection will, of course, fall far short of the entries into the health insurance exchanges and it will be far more than 30m suffering directly because there is no robust public choice in the health insurance exchanges.


Who would a progressive deny this protection to?

Of course, one reason for using percents is that using millions make it seem a bit brutal to say, "a mere 30 million will suffer if we lose the fight on the public option, so lets throw those poor losers to the hounds".

The candy store paupers lie to the share holders
They're crossing their fingers they pay the truth makers
The balance sheet is breaking up the sky
So I'm caught at the junction still waiting for medicine
The sweat of my brow keeps on feeding the engine
Hope the crumbs in my pocket can keep me for another night
And if the blue sky mining company won't come to my rescue
If the sugar refining company won't save me
Who's gonna save me?

The Robust Public Choice Made Simple

Burning the Midnight Oil for the Next American Revolution
crossposted from The Hillbilly Report

\From some online dictionary somewhere:

Robustness is the quality of being able to withstand stresses, pressures, or changes in procedure or circumstance

So: (1) Public Choice

"No Taxation without Representation". Every single person facing an individual mandate must be provided with the choice of a publicly administered plan. Otherwise the government is forcing the citizen to pay without the elected representatives of the citizen controlling the spending.

You want to put a trigger on the public option. Fine, except the exact same trigger applies to the individual mandate.

You want to restrict access to the public option to some smaller group? Fine, except the same restriction applies to the individual mandate.

The system is not politically legitimate if it requires payment to for-profit commercial corporations.

(2) Robust

It cannot be lumbered down with any restrictions not faced by private insurers.

State by state public options? Really? You are really prepared to restrict the corporations to firms with no commercial activity across state lines? If they are free standing state by state public options, it has to be state by state for profit corporations. Oh, not allowing UHC into the exchanges defeats the purpose of lining private pockets at the public expense? Yeah, kind of thought so.
_________________________

The hard question is how to accomplish it. It would seem that it is necessary for the House Bill to include language that specifically states that the public choice does not face any restrictions not faced by commercial corporations with plans in the exchange, and explicit language that nobody can be subject to a mandate unless they have access to the public choice.

With that language in there, a conference report stripping it out would require a provision doing the dirty work. That provision could be struck by the House when the conferees report.

That is, a conference report included the laundry list of amendments to each sides bill to make them the same bill, and while no new amendments can be offered, AFAIU, a chamber has the right to strike a provision.

That might result in a second conference, but so be it: it seems highly likely that the Senate conferees will not believe that the House progressive caucus will really, truly stand up for what were, after all, the very first "progressive" principles in our history as a nation-state - until they, in fact, do so.

Midnight Oil "Dreamworld" video

Axelrod: Government by Consent of the Corporation

crossposted to The Hillbilly Report, ProgressiveBlue, Docudharma, MyLeftWing, and Daily Kos at about 1pm EDT.

David Axelrod made the case for insisting on the public option if there is an individual mandate to buy from health insurance exchanges, on the Rachel Maddow show last night (segment page). Of course, he thought he was making a different case:

And there is an incentive for the insurance industry to go along and not try to fight these, and that is that there is going to be a larger insurance market, and they have to make that calculation, but we are prepared to do it easy or do it hard, we want to make it work for consumers.

One reading of Axelrod is:
"M'lords, the peasants are getting restive, and if you want to avoid a revolt or other crisis - say, a majority of the House of Representatives elected without being beholden to your largesses - you have to make concessions. However, make the calculation - in some versions of this reform, because of the greater number of peasants you will be taxing in your domains, you will be better off."

Now, make the calculation. There is a given set of restrictions on the insurance companies. There are, however:

• Subsidies to the purchase of insurance to those presently priced out of the market
• "Pay or play" provisions to penalize firms that do not offer comprehensive health insurance
• Individual Mandates to penalize individuals that do not obtain health insurance

Even without an individual mandate, the system can set to "expand the market" by directing the "pay" side of "pay or play" into the individual's account at the health insurance exchange, up to, say, the Social Security payroll income tax threshold, after which it the balance goes to fund Medicaid.

And as Ezra Klein has noted, there are expected savings in the medical system as part of the reforms that the CBO will not include - that the CBO will not "score" - because in the view of the CBO they are not certain enough. And the CBO does this all the time - they famously massively overstate the cost of cap and trade air pollution control systems, for example. But there is an approach that can bring these savings onto the table:

Health policy experts David Cutler and Judy Feder, however, have an innovative proposal for making them count. In a paper for the Center for American Progress, they argue for the implementation of "failsafe" policies — crude, surefire interventions — that will kick in if the expected savings don't manifest. Limiting the growth of Medicare payments, for instance. Increasing the excise tax on insurers. Moving the public plan towards Medicare rates.

You can think of a dozen with little trouble. But if you kept them looming behind the curtain — the Oddjob to your Goldfinger — in the event that the expected modernization savings didn't manifest, it would make the anticipated savings visible to CBO, and free up money for affordability

The question, then, is, what is the basic deal being pursued? A system to benefit the individual citizen, with accommodations to "legitimate interests" of commercial corporations - or a system to benefit the commercial corporations, with accommodations to "legitimate interests" of individual citizens?

Is the "health care crisis" that 100,000 people a year are dying preventable deaths, or that the health care and health insurance cost explosion is interfering with other corporations in their pursuit of profit?

Is this a government that derives its legitimacy from consent of the governed citizen, or consent of the governed corporation?


Fighting Back Against Our Taxation By Corporations

At one time, this government was founded on a principle of No Taxation without Representation. And, yes, those taxed and not represented outnumbered those taxed and represented, initially - but we made progress on that. We reached the point where the largest single cause of taxation without representation was the taxed not bothering to show up to vote.

But, no matter how the CBO scores it, a premium paid to purchase a health insurance policy that the government coerces us to buy, is simply a different form of taxation. And if there is no publicly administered plan in that exchange, that is a tax directed to the private government of a corporation, governed under the formal principle of one dollar, one vote, and often governed in fact by a class of senior executives, both in the management of the firm, and in the network of interlocking directorates managing strategic policy for the industry.

Now, some progressive make the simplest possible argument: no public option, no bill. But I do not. I have seen this song and dance long enough to know that if it comes down to no public option, no bill - enough "progressive" Congressmen will cave to allow passage.

However, there is a more powerful and still simple argument that can be made: No Public Option Means No Individual Mandate.

   No Captive Markets

And a powerful argument to be made to, and by, Progressive Congressmen, because the individual mandate is likely to be the single most unpopular element of the bill, and is at the same time the very strongest point for Republicans to craft a reactionary populism ... and it is the strongest point because it would be a reactionary populism based on a kernel of truth, which is that Government by Consent of the Corporation is not seen as legitimate government outside the corporate elite.


They Do Not Even Try To Hide What They Are Doing

Clearly, last night, the script was written. A public option will be included in the House bill. It will not be included in the Senate bill. It will be killed in Conference. The argument will be made - indeed, the talking points by Axelrod gives us the entire argument that will be made - that the resulting bill will be better than nothing.

So, what to do? Well, just like the tea party warm-ups to the August Town Hall Heat Wave, we know what is coming. What say, unlike the tea party warm-ups to the August Town Hall Heat Wave, we get ready for it this time.

We know precisely what we need to do at that point: strike the individual mandate provisions, and leave the rest of the conference report intact. The House, after all, can do that. Double blue dog dare the "Blue Dog" Senators to stand up on the Floor of the Senate arguing in favor of the individual mandate, arguing for corporate taxation without representation.

After all, the individual mandate is "just one part of the bill" - its not worth losing everything else that is in the bill just to get the individual mandate through.

Bring the worm infested core of this rotten political system into full public view on the floor of the Senate, and see whether they blink.

Because of the Progressive Caucus of the House starts to exercise the true weight of their numbers, they can pass health care reform again next year, and make the Senate run on that issue - in 2010, in 2012, in 2014 if necessary.

A member of the Progressive Caucus who stands up to the Insurance Corporations and says "No" to an individual mandate to buy corporate insurance is in a safe seat. The main "risk" will be "losing" them to the House if they pursue a move into the Senate to take the fight into enemy territory.

Which means that this can be an issue that every single Senator in the US Senate will have to face, no matter when they are scheduled to run.

Unless they take it off the table by passing a bill that respects the rule:

• No Public Choice = No Citizen Mandate

The corporations view us as their playing field:
    We need to teach them to try to level us at their peril.

The following is the context of the above quote, where Axelrod lays out the script (not an official transcript and I am not a trained stenographer, so apologies for any glitches)

... His point was this, though. If we can pass a bill that brings long awaited insurance reforms to people who need them - most people in the country have insurance, this would help them greatly - and help those who don't have insurance today get it at a price they can afford, and also reduce the overall cost of the system, that would be a historic achievement, and that is our goal, that is what we are pointing to, and we ought not make one individual element of that so important that it dwarfs that greater goal.

Maddow: I think that part of the reason that progressives have imbued the idea of the public option with so much importance is because of the fear that there will be a mandate without serious reform, that attempts to regulate the insurance industry won't be effective. And when the President moves from his position in the campaign, which was that he was against individual mandates, to being for individual mandates now, there is concern that regulation of the insurance industry won't make insurance less junky, less resented, as it is now, and we'll all be forced to buy something that isn't very good, that will just pad the insurance companies pockets. Is there sequencing there? Is there a guarantee that the reforms work before individuals are forced to buy coverage?

Well, uh, there, uh, no individual's going to be forced to buy coverage, in the sense that there's going to be a hardship exemption, if they don't want to buy coverage. It's also a fact that when people don't have coverage and get sick, its a burden to the rest of us, so what he said is that everybody has to take responsibility.

But our goal is to make sure that the insurance system works better for everybody, people who have it and people who don't have it and will have it, and we believe these insurance reforms can and will work, and I think there's a broad consensus that they can and will work, but Rachel, we, uh, this whole system is going to be phased in over a period of time, and obviously if things are not working for consumers, we're going to make adjustments. The whole goal here is to bring security and stability to people - and they don't have it today, they can be dumped if they get sick, that happens all the time, if they have a pre-existing condition they don't get insurance, that's a standard policy in the insurance industry, out of pocket costs, you know the largest single cause of bankruptcy are health related issues, if you cap out of pocket costs, you can stop that. And there is an incentive for the insurance industry to go along and not try to fight these, and that is that there is going to be a larger insurance market, and they have to make that calculation, but we are prepared to do it easy or do it hard, we want to make it work for consumers.

Enough of the Warm-Up Act ...

Enough of the warm-up act, now for the headliners.

Midnight Oil: Blue Sky Mine video clip

My gut is wrenched out it is crunched up and broken
A life that is led is no more than a token
Who'll strike the flint upon the stone and tell me why
If I yell out at night there's a reply of bruised silence
The screen is no comfort I can't speak my sentence
They blew the lights at heaven's gate and I don't know why

But if I work all day at the blue sky mine
(There'll be food on the table tonight)
Still I walk up and down on the blue sky mine
(There'll be pay in your pocket tonight)

The candy store paupers lie to the share holders
They're crossing their fingers they pay the truth makers
The balance sheet is breaking up the sky
So I'm caught at the junction still waiting for medicine
The sweat of my brow keeps on feeding the engine
Hope the crumbs in my pocket can keep me for another night
And if the blue sky mining company won't come to my rescue
If the sugar refining company won't save me
Who's gonna save me?

Aint Gonna Study War No More

Burning the Midnight Oil for the Arc of the Sun

I guess its natural, as an advocate for transport cycling and for transport systems like High Speed Rail, light rail, and Quality Buses that support cycle transport, that among the enemies of our long term national interest, that I tend to focus on the Oil Patch and their allies.

But, what would our economy be like if we didn't study war no more?

Consider just official Federal Defense Spending, in 2005 dollars and as a Percent of GDP (to closest 0.1%) (BEA):

• 1995: $476.8b, 5.2%
• 2000: $453.5b, 4.0%
• 2005: $589.0b, 4.7%
• 2008: $659.4b, 5.0%

You can see right there why it was necessary to have Bush rather than Gore elected as President in 2000, and why the two candidates on the Democratic side in favor of expanding the size of the army were the two finalists in the Democratic primary contest to clean up for the mess that Bush made of things.

Direct Federal spending on "Defense" goods and services was heading south of 4%, and that could not be tolerated.

Suppose we transitioned to a cap on "Defense" spending of 3%. That would be plenty for naval forces to defend sea lanes, though maybe not for maintaining the current level of amphibious assault forces ... it would be plenty for air forces for continental defense, though of course we might have to scale back on overseas air bases ... it would be plenty for armed forces for continental defense, though of course we might have to scale back on overseas air bases.

It would, indeed, be plenty to retain the biggest military force on the face of the planet. Just not necessarily enough to allow us to invade one country while planning to invade another one.

And at the present size of GDP, it would be about $400b in direct government Defense spending, which would free up about $260b annually to invest in actual national defense.


What would we be giving up

There is one thing that we would certainly have to give up under this plan: the Carter Doctrine:

The region which is now threatened by Soviet troops in Afghanistan is of great strategic importance: It contains more than two-thirds of the world's exportable oil. ...

This situation demands careful thought, steady nerves, and resolute action, not only for this year but for many years to come. ...

Meeting this challenge will take national will, diplomatic and political wisdom, economic sacrifice, and, of course, military capability. We must call on the best that is in us to preserve the security of this crucial region.

Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.

The Persian Gulf is in Dar Islam, on the faultline in the biggest structural conflict within Dar Islam, between Shia and Sunni, southeast of a rising China, northeast of a rising India, southwest of a European continent slowly developing the accouterments of a nation state, and south of a Russia ruled by an oligarchy well versed in using foreign policy adventurism to distract from domestic authoritarianism.

And what is the Carter Doctrine? That we must maintain sufficient military force to assure access to the Oil of the Person Gulf for the global oil market, because if the supply is cut off, the price will go through the roof.

And then look at the Price Tag of that policy ... given that there is no other geopolitical challenge that we face that we could not meet with the military force that can be maintained on a budget of 3% of GDP ...

... $260b/year is a conservative estimate. Its just the economic cost of government purchases of "Defense related" Goods and Services. It entirely omits the economic commitment to a perpetual trade deficit in the Energy sector. It entirely omits the economic commitment to the "strong" (which is to say, anti-export) dollar exchange rates required to maintain the global base network of over 700 foreign bases. It entirely omits the economic cost of directing so much of our government spending into the destruction of global production capacity.

Greatest of all, it entirely omits the social cost of the militarization of US society.

So, $260b is a conservative price tag.


And what is the Real Cost of the Carter Doctrine

These are real resources of the nation being directed into the Military-Industrial sector of the economy. The question, then, it what kind of National Defense could we buy for $260b/year in terms of Energy Self-Sufficiency?

I have sketched some of these before in various forums:

we can spend $75b per year over the next six years to electrify the Dept. of Defense "STrategic RAil Corridor NETwork - STRACNET. That requires capital funding, but only when oil is cheap ... in the context of expensive oil, bonds to electrify STRACNET are readily self-funding through user charges. A form of crude oil import tariff that slides off as crude oil approaches $80/barrel would suffice to "fund" that. Or else, we can simply deficit spend for that ... since cutting off 10% of our demand for petroleum imports is an investment that pays for itself in multiple ways.

We can spend $75b per year over the next decade to build local electric transport corridors ... from trolley buses and Rapid Streetcars through conventional Light Rail and commuter heavy rail all the way to the mass transit niche for the biggest cities. Fund those projects on an 80:20 federal match, include both direct and indirect impacts on Energy Independence and Congestion Relief, and there will be no difficulty finding projects that justify the public investment. And, again, we can simply deficit spend for that ... if we can spent $1T+ on trying and failing to gain access to the last big pools of cheap crude oil in the world, we can definitely spend $750b on permanent alternatives to crude oil based transport.

We can spend $5b a year over six years on Electricity Superhighways to connect our main regional consumption grids to renewable resource areas. We can spend $20b a year on electric inter-urban transport over the next decade, from Express HSR through Regional and Emerging HSR to electric stopping trains. We can spend $25b a year on interest subsidies for Connie Mae finance for decentralized CO2 emission reduction and energy efficiency improvements, repaid out of the reduction in operating costs, on an ongoing basis.

And that's just $200b over the next six years, $120b over the decade. There's $60b left to add, rising to $140b by the middle of the next decade. If I was looking for a single program in addition to those sketched above, I would consider a wholesale conversion of our agricultural production subsidies and price supports into ecosystem conservancy payments for agricultural practices that preserve and rehabilitate the life support capacity of our continent.


Cost / Benefit Analysis

Lessee: for $260b a year, spent over a long enough time span, we can reach oil independence and Energy Self-Sufficiency. Meanwhile, even at the present levels of the military budget, we cannot guarantee that we have the military capacity to keep the Straits of Hormuz open. A couple of supersonic cruise missile strikes on a carrier task group and a couple of supersonic cruise missile strikes on some oil tankers, and the Straits shut down.

This really is the stage before the running of the numbers, where you work out which options allow you to reach the objective and which do not. The above may not be the preferred option, but its on the list for evaluation. Meanwhile, the Carter Doctrine does not reach the objective of Energy Security, so it does not get on the list for evaluation.


Conclusions

Waddya think, I can reach any conclusions here without your help? That's crazy talk.




Midnight Oil - My Country Video Clip

Beware of Geeks Bearing VATs

Burning the Midnight Oil for a Brawny Recovery also posted at My Left Wing, cross-posted to ProgressiveBlue, Docudharma and more TBA

If you wander around the fringes of economic discussion on these Interwebs, you may encounter sites extolling the wondrous vitrues of the VAT. "If only we would adopt a massive VAT, our two decade long decline in manufacturing output would be gone, and we would be an exporting powerhouse once again." ... well, no, that would be a stereotyping of the argument. A real sample of the claims sound more like this, from tradereform.org:

I Squared R Element Company is in Akron, New York. It makes industrial heating elements which are used for many processes to make other things, including glass and computer chips. The company was the low bidder on a contract to export to China.

However, the company lost the bid. Why?

I squared R was told it did not include, in its bid, China's 10% customs duty or the 17% value added tax(VAT) that must be paid at the border.

All our goods pay a 17% VAT at the Chinese border. And the uninformed say we are a high cost producer. Chinese exporters also get a 17% VAT rebate, i.e. they get paid to export.

And, yes, I have picked out this quote to pick on VAT-uber-alles advocates, precisely because it focuses on the part of the argument that is simply wrong.

The protection against imports is the tariff, not the VAT. The Chinese company that beat out the producer in that other Akron also has to pay 17% VAT on its production. If omitting the 17% VAT alone was what made the Akron, NY producer the "low bidder", its simply lying to call them the low bidder ... its like two different companies in the same state competing for a contract, and one claiming to be the low bidder because they left sales tax off their bid, which the other company included.

That element of VAT advocacy is nothing but hypocritical posturing at some stage along the line ... though not necessarily on the part of a particular VAT advocate, since it may well be that a particular VAT advocate has been misinformed by hypocritical posturing polluting their sources of information.


VAT and Trade

The other part of VAT that is raised is the export rebate (again from tradereform.org:

Companies are put out of business because of VAT subsidies. Foreign exporters are paid to export, in the form of VAT rebates. The products are relieved of tax burden.

This is the real effect of VAT on trade. A natural side effect of heavy, regressive, indirect taxes is that it increases the costs of exports. That is true of VAT, over-taxing for Social Security or other payroll taxes, retail sales taxes, (hidden) wholesale sales taxes, stamp duties ... its a general effect of heavy indirect taxes.

Now, from the perspective of the wealthy, a massive benefit of heavy indirect taxes is that those with freely disposable income can normally duck out on paying the indirect taxes if they direct their income to wealth accumulation instead of consumption. So if the poor, who spend all of their income, are paying 20% of their income in indirect taxes, the very wealthy, who devote much of their income to perpetuating their status as a member of a stable aristocracy of wealth, would only pay 10% if they only consume half of their income, and the more of their income they devote to accumulating wealth and economic power, the less of their income is subject to tax.

Further impoverishing the working poor, and pushing the shrinking middle class toward poverty ... well, them's the hazards. However, from the perspective of the wealthy, there is a downside ... that nasty trade effect.

However, the WTO permits indirect taxes to be rebated on exports. We do this in the US for some of our indirect tax burden ... indeed, we do it on a state by state basis, with sales taxes assessed in one state one payable by residents of that state. But if a particular municipality in Ohio has a total of 7% of state, county and city sales taxes, any exports from Ohio to China have a 7% "export rebate".

VAT is as easy to rebate as retail sales taxes, because of the way it works. Each business pays VAT on its inputs, and collects VAT on its sales, and hands over to government the difference between what it collected and what it paid. In other words, the government receives the VAT on every step in the production chain on the increase in the value of sales over the value of outlays.

Since each step of the way, the VAT that is owed is a simple percentage of the sale price, computing the amount to rebate at the border is straightforward.

By contrast to China and most of Europe, in the US our biggest indirect taxes are payroll taxes, and we do not have a mechanism in place to rebate the payroll taxes.

The rebate of indirect taxes on exports ... that's the trade effect of a VAT. Claiming that there is an impact on the import side is as silly as if a Chinese firm claimed we had unfair protection against Chinese products because "The Wal-Mart between Kent and Ravenna in Ohio charges sales tax on imports!!!".


Pushing Progressive Options Out of the Frame

Now, if the US wishes to pursue the neo-mercantalist policies of China, most of Southeast Asia, and etcetera ... what would that policy package be?

• Peg our currency at a steep discount, for exchange rate stability and competitive advantage
  
• Levy steep indirect taxes on domestic consumption, and rebate those taxes on exports
  
• Maintain protective imports and discriminatory trade practices for those industries that we are trying to develop

Some of the people pushing for the VAT would happily accept that full package. Others, however, might criticize it.

The progressive critique is that neo-mercantalism is an effort to export our unemployment overseas by pursuing trade surpluses, at the expense of the standard of living of the majority of the our population. Some few at the top will benefit from successful neo-mercantalist policy, while for the majority of the population, its a policy of taxing domestic consumers to finance infrastructure used for domestic production and export production alike.

And just like old-fashioned mercantalism, neo-mercantalism only works if there are countries that are in a position to run sustained trade deficits. After all, one country's exports is another country's imports - so the whole world cannot run a global trade surplus with itself. If everyone pursues a trade surplus, then on average half must fail.

Back in the days of "paleo-mercantalism", that country running the perpetual trade deficits was Imperial Spain, possessor of two mountains of silver in Mexico and Peru, which could be acquired by merchants in other European nations by selling things to wealth Spaniards, and then used to buy into the lucrative Asian carrying trade. More recently, it has been trade deficits by the United States as we have progressively hollowed out our industrial capacity while maintaining consumption on the back of credit extended to us ... as a side effect of the cheap currency policy.

But one reason the world experienced a financial crisis is that the US was in a financially fragile position, where our financial sector did not have the resilience to withstand a nasty shock ... which came in the form of an oil price shock. And if the US is the country chasing trade surpluses ... how then plays the trade deficit role we used to play?

While balanced trade can be sustainable over the long term, trade surpluses for all is strictly impossible, They are more than unsustainable, they cannot happen in the first place. So a policy regime in which economic success requires trade surpluses is a policy regime that, by definition, dooms at least half of the economies in the world to failure.

The corporatist critique of that policy package is different. Pegging the currency at a steep discount undermines the economic strength of corporations earning income in that currency. Further, it makes the maintenance of a 700+ strong foreign base network more difficult, and so undermines the coercive force that can be deployed in support of corporate economic power. And protective tariffs in high income nations undermines the ability of large transnational corporations to benefit from their relative advantage in operating cross-border production systems.

So the only element from the neo-mercantalist policy package that seems appealing to the corporatist is the VAT itself.

Of course, when we read David Brooks extolling the virtues of the VAT in the NYT ... we can be confident that it is not in a policy package including an exporters exchange rate for the US$, nor one that includes a general revenue tariff on all imports.


Naive populism deployed against the interests of the populace

This is not to say that a VAT is an unambiguously bad thing. Any tax is an element of a tax structure, and what matters is the shape of the entire tax structure. This is, of course, itself a critique of much VAT advocacy, which treats the VAT as a good thing in and of itself, no matter what the context.

Consider two different scenarios:

• (1) A VAT is put into place in order to avoid restoring capital gains taxes to a two-tier structure, placing a SSI levy on incomes in excess of $250,000 and simplification of the personal income tax structure to close loopholes used primarily by those earning over $250,000
  
• (2) A VAT is put into place that is large enough to eliminate the 12%+ payroll income tax that funds Social Security and Medicare

These two VAT's have quite different impacts, both in terms of trade and in terms of impact on the working poor and the middle class.

In the first scenario, the relative tax burden is shifted onto the working poor and middle class. A VAT of, say, 10%, taken on top of the 12%+ payroll income tax, would mean that the working poor would be paying 22%+ of their income in taxes. And the rebate of the VAT is primarily a way to increase indirect taxation without making the trade impact worse ... there is no substantial trade loss from a two-tiered capital gains tax or from closing income tax loopholes, and a payroll tax on incomes over $250,000 is not going to affect the decision whether production facilities should be located in the US or some other country.

In the second scenario, the relative tax burden is shifted away from the working poor and the middle class. VAT is levied on all "Value Added", and not on wage and salary "Value Added" alone. This is a net progressive impact, and its stronger then the regressive impact of shifting the tax burden off of production for export ... so over-all, its a net progressive change.

Now, which of the two do you think David Brooks is really arguing for ... using VAT to shift more of the tax burden onto the working poor and shrinking middle class, or using VAT to shift the tax burden off the working poor and shrinking middle class?

Naive VAT advocacy which overstates the trade benefits of the VAT and is, underneath that, founded on the impossibility of all countries replicating the trade surpluses of China ...

... that form of VAT advocacy plays into the hands of the corporatist version of VAT, where VAT is used because we have started to reach the limits of sales tax and payroll tax, and some other mechanism is needed to drive regressive indirect taxes up still further.

There is no way to achieve a progressive use of VAT if the political alliance that is formed in support of VAT includes the paymasters of the David Brook's of the world ... because under that political alliance, VAT will be use as a regressive tool. And once the machinery of VAT collection is put into place, and people become accustomed to it, it becomes entrenched ... it is far easier to defend against VAT used in a regressive way than it will be to restructure the system once it is in place.

So Beware of Geeks Bearing VATs.