I found this via Cartalk, and half an hour later I’m still chortling and snorting to myself. You need to see this. From vimeo.com.

Running on Hope from Douglas Sarine on Vimeo.

You don’t have to believe me. The S&P says so. At the very heart of the supposedly free market, right there on Wall St., they’ve got no use for it. Standard & Poors announced a mass of ratings cuts for the biggest names in banking.

Bank of America and Goldman Sachs, … Barclays, HSBC, … Citigroup, … Morgan Stanley, Commerzbank, and UBS, [all] had ratings cut by one notch. …

But. But, but, but, and however,

it upgraded ratings on two Chinese banks, Bank of China Ltd. and China Construction Bank Corp. …

The upgrade for the Chinese banks has come at a time when there have been increased concerns about the health of the country’s banking sector. …

Analysts said while the Chinese banks were prone to the risk of accumulating bad debt, they still remain a safe bet.

“The key factor is that they are largely government owned, that means the risk to shareholders of these banks is quite low.”

Too funny. The joke is on me, thinking they believed all that free market eyewash.

I’ll say up front that I don’t know the answer. Everything that’s been tried up till now has real problems, so I’d like to throw some ideas out there. The current discussion about (the difficulty of) decision-making in the General Assemblies at #OccupyWallStreet is what jogged me to post.

Update, Nov. 16, 2011. Law enforcement is clearing out the encampments of #Occupy. That’s dictatorial, but it suggests a broadening of tactics, which would have been a good idea in any case. Too few people have the financial freedom to camp. Winter is unfriendly to campers. The Occupations could move to shift work. Groups of hundreds or thousands, whatever can be mustered, occupy for four hours, and then their replacements move in. 24/7/365. Also, come up with other actions people can take. Refusal to pay taxes (for the very brave), door-to-door explanation of ideas and suggestions for action, continuing to move money away from Big Finance, start by boycotting of the Koch Empire (Did you know they make Quilted Northern toilet paper? I didn’t either.) move on the boycotting the next worst nasties, and so on through a hundred things we could all help with.

That takes organization and the ability to make relevant decisions in real time. Neither of those can be achieved by General Assemblies. So exploring better ways to organize is more relevant than ever, unless the movement is to fall right back into old ways that haven’t proven resistant to cooptation.

It’s important to remember that democracy has to work all the time. Failure is not an option. When it fails briefly, governance ratchets toward anti-democratic. Before you know it there’s an undemocratic elite at work and you’re struggling with monopolies, or corruption, or wars. The fact that a method sometimes, or even often, works is not good enough.

So, first, democratic decision-making methods that sometimes fail:

• Direct popular majority vote. Sometimes called “tyranny of the majority” because it can be so anti-democratic in its treatment of large minorities.
• Indirect popular vote, e.g. Electoral College. If it has no real power, it has the same problems as direct popular vote. If it does have power, it’s liable to ignoring the will of the people, i.e. being anti-democratic, at the least, and corrupt at the worst.
• Super-majority vote. This is an attempt to prevent the exclusion of large minorities. In practice, it gives veto power to minorities, which is also anti-democratic. Decision-making becomes too slow and unwieldy to respond adequately to reality. (Look at California trying to deal with its budget mess.) Another effect in practice can be the formation of a much smaller group of real decision-makers who then use the official consensus process as window-dressing. (E.g. European Union in the current financial crisis, Spokes Councils in OWS General Assemblies.)
• Decision-making by committee. Another way of trying to achieve consensus decisions. The problems are that responsibility becomes spread too thin, and social dynamics play a larger role than the merits of the case. Both of those factors make it easy to take bad decisions.

Whenever large numbers of people have to come to a decision together, structural factors work anti-democratically. It’s not bad outside influences that corrupt the process (although they can). It’s decision-making by large numbers of people that doesn’t work. Since the will of large numbers of people is the essence of democracy, we have a problem.

Right now, the idea is that voters steer government. But voters are proving terrible at governing. Who wants to do all the homework involved? You have to know the issues, study the background facts, and evaluate implications. It’s a full time job, and most voters already have a full time job.

It’s much easier to tell when something is wrong. And it’s much easier to mobilize voters to throw the bums out.

The problem of preserving democracy should be approached from the other end. Instead of trying to steer government, voters should be smashing messes into small enough pieces to cart away. Preventing the ratchet toward elitism can only be done by continual corrections. Without them, the inevitable imperfections in any system will ultimately lead to failure. Voters are well-positioned to provide corrections. It’s hard to suborn such a large group. And, practically by definition, most of them won’t be part of the elite, so they won’t be blinded by class loyalties.

As for how to implement it, votes could be held every so often (once a year?) to recall hopeless administrators or reverse decisions that people feel aren’t working out. (That and all the ideas here are more completely discussed in Re-imagining Democracy, Government, Decision-making.)

Voters might — I think would — be able to provide course corrections, but that still means somebody has to hold the actual steering wheel. Somebody has to do the business of government, so there is the question of how any decisions get made in this system.

To answer that it’s worth thinking about what government actually is. (When it’s not a pot for personal power and riches.) Government is a lot of tedious housekeeping for the social good, in other words for no direct benefit. It’s cleaning up other people’s messes and sorting out stupid fights and trying to come up with rules to keep the messes and fights to a minimum. It takes very skilled, knowledgeable, and fairly unselfish people to do that.

The bad news is that we’re terrible at finding those people. The good news is that I don’t think we have to.

What we’ve done so far is used a purely random system. The lottery may be genetic, as in hereditary monarchies, or it may be by self-selection, as it is in democracies. (There are no job-related qualifications to run for office. Anyone can play.) And even though the random systems produce plenty of charlatans and failures, we have survived. So randomness, by itself, need not be feared.

If we improved the pool from which random selections are made, we might improve the whole process. We could still have the democratic advantages of randomness for preventing elitism, and yet reduce the disadvantage of having complete amateurs running the show.

I think it’s actually easy to come up with an improved selection process.

Let people self-select to put themselves in the pool and list their background showing their administrative abilities. People would then review the pool to winnow it to those who actually have successfully administered something, whether it’s the yearly school fair or an aluminum smelter. It could work somewhat like rating schemes on the web. Readers would rate some limited number of resumes.

One big difference is essential, however. Other people’s ratings should not be visible. It’s important for the ratings to be independent, otherwise they immediately fall into confirmation of the earliest favorites. The ratings should be purely a pass-no pass based on whether the candidate has the experience they say they have. Candidates for positions requiring special knowledge would be reviewed by people with the relevant education or work experience.

The process would be most convenient if computerized, but even without computers, all you’d need is central locations for the lists, like public libraries or meeting places, to make it work. If it turns out people can’t be bothered with ratings voluntarily, it could be a jury duty type of obligation.

The administrator would then be randomly selected, i.e. by lottery, from the candidates still in the pool after that. The pool could be refreshed on an ongoing basis, and numerous administrators could be drawn from each relevant pool. In other words, you wouldn’t go through the whole process every time the community needs a municipal dogcatcher.

The administrator would stay in as long as they kept doing a good job by various metrics, or until the voters chucked them out. Administrators at higher levels, such as state, province, or nation, could be chosen from the pool of those who’d done a good job (as evidenced by no recalls or few complaints) at a lower level.

There are several advantages to that system. Anyone can play, and yet there are some job-related qualifications. There are no unrelated job qualifications, such as being rich or looking good on television. People who prove incompetent can be ousted on a regular basis. There are no obvious points at which an elite group of insiders could develop. And it could even be easy to ensure that administrators reflect the composition of the general population by limiting the lottery to candidates who meet gender or racial criteria.

Of course, there are bound to be disadvantages, too. They’d become evident if the system was tried.

Ideally, it would be a method that allows competent administrators to do the tedious work of government without at the same time hijacking it for themselves.

Or, in an OWS context, it could identify order-keepers and finance officers and media relations experts who could approach their work with experience and professionalism. But their actions would be subject to public scrutiny. They’d operate in the open, not in a clique, and they’d be subject to recall if they did their jobs badly. I see a system of randomly selected, knowledgeable, responsible individuals who are answerable to the group as a much more democratic solution to the problem of unwieldy General Assemblies than the formation of inner Spokes Councils who have power because they took it.

What the system doesn’t do is decide overall policy. People still have to agree on the social contract, the constitution, on some statement of principles. In an OWS context, people still need to decide whether they care about non-financial inequalities, like sexism. Or whether they care about the use of violence. Or meetings held at times when the people who are the point of the meetings can’t attend.

Once there is a statement of principles, however, the function-or-be-fired system does show the way toward finding people to actually carry out those principles in practice, and to getting rid of them if they don’t.

Good for Mississippi for voting that garbage down.

But it’s a bit flabbergasting that a question of basic rights is being voted on at all. What’s next? A vote on keeping slaves?

Because, you know, the right to your own life is fairly basic. It’s why you can kill someone in self-defense.

Except, apparently, if you make the mistake of living while female. Think about ectopic pregnancy for a minute. It occurs when the fertilized egg starts to develop outside the womb. It has a very high fatality rate without treatment, higher than most forms of untreated plague, for instance. According to our Christian Taliban, if someone saves your life in that case, they’ve committed murder. In their minds, it’s like removing the feeding tube from a dependent patient.

Women are feeding tubes to them. And we, in all seriousness, go around voting on whether women are more than that or not.

Cry, the not-so-beloved country.

As far as I can tell, if corporations and the top 1% paid anything like a fair share of taxes, budget problems would melt away.

I feel a bit like the recent physicists who seemed to find faster-than-light neutrinos in their data. (There’s the big difference that I’m an amateur at taxes, and they’re anything but amateurs at physics.) But, like them, I’m so boggled by the results that I want to throw it out there for people to pick apart.

Let’s begin at the beginning. The current US deficit is around $1.5 trillion per year. Current US GDP is around $14 trillion per year. Current yearly tax revenues are near $1.1 trillion (IRS pdf, 2008 numbers). In better years revenue is higher, deficits are lower.

An aside: Those numbers are smaller than the multiple trillions of cuts the Super Committee throws around. That’s because they say they need to come up with money for ballooning future costs of social insurance. (The powers-that-be didn’t seem to be worried about the future when tax cuts were implemented.) I don’t consider those future costs a real issue. Social Security doesn’t have any real problems. National health care costs could be cut in half with Medicare for All, based on the evidence from all the industrialized countries that do have national health care systems. (Link is to Congressional Research Service, 2004, pdf. See e.g. Table 1, Fig. 1, Fig. 2.) So Medicare for All is the place to start for anyone who is actually concerned about future costs, and not some other agenda.

Further, a healthy deficit level is said to be around 2% of yearly GDP. In addition to other considerations, the ability to buy US Treasury bonds and bills is an important factor in global finance. Zero deficit means the end of that whole asset class, which is not a Good Thing. One wants a sustainable and easily carryable deficit, and 2% is a conservative estimate of that level. Two percent of $14 trillion is $280 billion. (I saw this most clearly expressed somewhere in Krugman’s writing, but all I can find right now is a passing reference here.)

So the yearly shortfall, in round numbers, is $1.2 trillion ($1.5T deficit – 0.280T healthy deficit).

If Fortune 500 corporations actually paid tax on their corporate profits, there’d be much less freeloading from that end. When even Marketwatch headlines “Big Profits, Zero Taxes” you know it’s not a small issue. It’s hard (for me) to find unequivocal numbers on how much difference that would make to revenue, but there are fairly clear data on corporate tax payments as a share of GDP. It’s now at a recent all-time low of 1% of GDP. Moving that back to 4%, about where it was in the 1960s would bring in an extra $480 billion (1% of GDP = $160B, 3% = 480B).

That would entail ending all the corporate loopholes, such as income-shifting in transnationals to whichever tax haven suits them that year, as well as ending special tax breaks for wildly profitable industries such as oil and finance. It would involve adding necessary new taxes, such as a financial transaction tax that would have other beneficial social consequences by slowing down market trading velocity. And it would involve raising rates on large corporations.

Then, the other task is to raise taxes on the top 1%. According to the IRS (pdf), in 2008 the top 1% was composed of households making an average of $1.2 million per year. Their effective tax rate is 20% ±5% (CBO pdf, Table 3), and at that rate they contributed well over $350 billion in tax revenue. (For instance, in 2009 the top 1% contributed 36.7% of total income taxes. That proportion is typical during the last decade, plus or minus a few percent. Total income tax revenue in 2008, the last year for which I could find complete IRS data, was $1.081 trillion. 36% of 1.081T = $389 billion.) If their tax rates went to 60%, there would be an extra $700 billion revenue.

So, $700 billion plus $480 billion approaches $1.2 trillion, pretty much the entire yearly shortfall of $1.2 trillion.

That doesn’t pay down the debt. Nor does it provide funds for essential projects such as switching to clean, sustainable energy. But those are one-time charges, as it were, not permanent features of fiscal balance, which I gather is what the Super Committee is worrying about.

Raising taxes on the megarich is not the same as taxing the middle class. It’s not even taxing the upper middle class, such as the heart surgeons and mid-size successful business owners. It involves only having the massively wealthy corporations and households pay something vaguely like their fair share. What’s more, it wouldn’t make a bit of difference to their lifestyles. For an income of $1.2 million per year, that tax increase would drop them from living on $80,000 per month to living on $40,000 per month. They could still jet to Paris for the weekend. Anybody who feels deprived living on $40,000 per month needs therapy, not tax breaks.

All this is something to think about while the news covers the new super ways the Super Committee has found to shred the safety net. Nor is this just a classic “Don’t tax him, don’t tax me. Tax the fellow behind the tree.” The fellow behind the tree has been tax cheating for far too long, and it’s time to rebalance. If the megarich paid their fair share, we could have a future that was more than collapsing bridges and work on their plantations.