Foreign Financial Account Reporting; Chemnitz Unrest

August, 2018

Berlin -- This week four members of American Voices Abroad (AVA) sat down for dinner in Berlin. One of our discussion topics was tax reporting of foreign financial accounts to the IRS.

We all have faithfully reported our accounts at German financial institutions, even when there has been no otherwise reportable need for it. This requires a separate form with a separate due date. The reported information can be used by the IRS to match up account reporting the U.S. requires of German institutions. The paperwork is sufficiently onerous that some German banks just refuse American customers.

But it was all worth it, we felt, in order to catch money-launderers and international criminals.

Then along comes the Paul Manafort trial. Indeed, his failure to report on the FBAR did him in, according to one juror who explained the jury's reasoning for convictions on eight counts of fraud. But the juror also said that Manafort would not have been discovered had it not been for the Robert Mueller investigation. She took a dim view of the Mueller probe and had actually hoped that Manafort could have been found not guilty.

So much for the little fish filling out all our paperwork to catch the big fish. Manafort brazenly flouted the law and the IRS let him do it. It's remarkable there was a conviction at all, given the presiding judge's rulings to prevent the prosecution from presenting evidence of Manafort's ostentatiously high-living. This does not inspire confidence in our tax-collection system.

Another discussion topic was the neo-Nazi uprising in Chemnitz and the role of Facebook in organizing it. Meanwhile, all over Berlin, in the streets and subways, Facebook is putting up posters that it is all about family and friends, not fake news. Events in Chemnitz, however, belie the advertising campaign. I wonder if those ads are appearing in Chemnitz as well.

It is no longer unthinkable to put controls on social media for national security purposes. Of course, more than neo-Nazis can use social media to organize. Around Hermannplatz in Berlin, thousands are gathering to protest the violence in Chemnitz. Good for our neighbors in Neukölln.



Drought

August, 2018

Berlin -- In the neighboring state of Saxony-Anhalt, the Elbe River at Barby is low because of drought. The ferry is not running, perhaps because of low water. Barby is one of the villages where, in 1945, Russian and American soldiers met at the Elbe, days before Berlin fell to end WWII in Europe. American forces remained on the left bank as German civilians and soldiers alike tried to cross the river to escape Russian attacks.

Westward the drought shows itself along the Autobahn as dust lowers visibility. Farmers working stubble fields for next year's wheat crop create huge dust clouds. (I hope the farmers are wearing masks.)

At Quedlinburg, at the foot of the Harz Mountains, a fountain in a town square is still. Up in the mountains, autumn is arriving prematurely as leaves are falling. One hopes that when the witches dance, they'll be careful with their fires.

Wildfires

August, 2018

Berlin -- It is cloudy today, and smoky from the wildfires that are burning south of the city. The summer has been extremely hot with no rain.

The forests surrounding Berlin are dry. The wildfires are difficult to fight because unexploded WWII ammunition poses a danger to firefighters on the ground. As fire progresses, explosions are set off.

Surely the fires will not reach Beelitz, a favorite place with a tree-top walkway over an abandoned sanitarium. But they could, and farther. Three villages have been evacuated.

Berlin's parks are brown and dusty. They are as hard as the cobblestone streets.



Germany and the Facebook Disease

August, 2018

Berlin -- An unsettling new research paper links Facebook usage in Germany with acts of violence against refugees. When Facebook usage is one standard deviation or more than average, such violence is fifty percent higher.

The findings do not apply to general internet usage, only Facebook.

There is no suggestion in the paper that this is unique to Germany. In fact, Germany has been more welcoming of refugees than most other countries.

Chancellor Merkel, known for her support of an accommodating refugee policy, survives under duress in part because she has no obvious successor. As a local Kreuzberg resident expressed it, "Who? Not anyone from the SPD, they have nothing to offer," and as for the CSU and Horst Seehofer, "that's just impossible."

If only there were an immunization for the Facebook disease.

Humboldt amid the Hohenzollerns

August, 2018

Berlin -- This city is full of ironies and contradictions: war and peace, ugliness and beauty, superstition and science.

Add another contradiction as the new Humboldt Forum is being completed. It is the centerpiece of the reconstruction of the massive old palace of the Hohenzollern royalty on Unter den Linden, in the heart of Berlin. The Humboldt Forum will house antiquities and artifacts acquired by German expeditions and colonizations.

The irony is that Alexander von Humboldt, among the world's greatest scientists and a native of Berlin, was anti-colonialist. When he met Thomas Jefferson in 1803, in Washington, at the end of Humboldt's exploration of the Americas, they agreed that the colonial system was destructive of peoples and their habitats. Humboldt was appalled at what Spanish colonial governments were doing to South and Central America. He soon would meet with Simon Bolivar in Europe and inspire him to revolution.

Humboldt gave us a unified view of the natural world; he was the "inventor of nature," as the title of a new biography* of Humboldt suggests. He is, of course, honored in Berlin with the eponymous university and around the world with countless Humboldt-named places. But when the Humboldt Forum opens next year in Berlin, it would be well to remember his anti-colonialist convictions.

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* The Invention of Nature: Alexander von Humboldt's New World, by Andrea Wulf.



Germany, Turkey, Russia

August, 2018

Berlin -- The atmosphere here seems tense, and not just because the German government coalition could break apart at any moment. Added to the problem are new strains on the Turkey-Germany relationship, what with a popular soccer star enflaming the sport's fans about national loyalties and a drastic drop in the value of Turkey's currency. Will Berliners of Turkish heritage be called upon to send Euros to their relatives in Turkey? Will that be seen as propping up Turkey's leader Erdogan?

Then there is the meeting this weekend, just north of Berlin at Meresburg, between Chancellor Merkel and President Putin, hastily called. Surely one topic will be Turkey's financial condition. Merkel will press Putin not to make it worse; Putin will say he won't, if Germany relaxes sanctions against Russia. Sensible American guidance will not be forthcoming.

I remember less tense days, south of Berlin at Wünsdorf, when Russians, Germans, and Americans mixed easily at the Soviet Officers club. It was 1991; I was invited to lunch along with other members of a local historical club. Was Putin present? I've often wondered, since he was posted back then as a KBG agent in East Germany. The Russians were about to depart Germany, their relocation paid for by the German government.

Putin has said the breakup of the Soviet Union was a calamity, a humiliation. That will be the backdrop of the Meseburg meeting.





Iron Triangles: Part VIII

August, 2018

Washington -- The for-profit higher education sector's "Iron Triangle" grip at the U.S. Department of Education is squeezing ever tighter. Now the White House is overtly getting involved.

The key triangle individuals have been moving through the revolving door of interest groups and the Department for many years. Strada (formerly USA Funds) leader William Hansen was instrumental, as Deputy Secretary in 2002, in giving for-profit schools "safe harbors" against oversight, after which they experienced boom times. (Consumer fraud likewise soared.) Diane Auer Jones is closely associated with the for-profit sector and has not recused herself from Department decisions dealing with the for-profits.

The target of the new squeeze is the nation's higher education accreditation system. The integrity of federal programs under the Higher Education Act relies on a "triad" of enforcers: the federal Department of Education, the states, and accrediting bodies. The Department has already been captured by the interests it is supposed to regulate, and it is trying its best to emasculate the states through its policy of federal "preemption." Only the accrediting bodies remain to be dealt with.

Ordinarily, there would be two countervailing forces against this attempt to undermine accreditors.

One would be Congress, where majorities of both Democrats and Republicans would be bulwarks against diminishing the role of states and accreditors. Now, however, Republicans like Lamar Alexander, the Senate authorizing committee chairman, are eager to view integrity as just so much red tape that needs to be cut.

The other countervailing force would be higher education institutions themselves, public and non-profit, which need the confidence of students, families, taxpayers, and alumni in the value of their teaching, research, and public service. Accrediting bodies are creatures of these institutions. They will not welcome an attempt to undermine accreditation by having it taken over or replaced by people and companies who see billions in federal higher education spending as just another opportunity to cash in for themselves, although that is the driving force behind the tightening grip.

Lamentably, the higher education establishment has not distinguished itself historically in standing up for integrity over opportunism. Some of the weaker higher education systems in both the non-profit and public spheres have repeatedly welcomed lower standards; often they have prevailed over the interests of the nation's leading colleges and universities.

Another test is now upon the nation's higher education leadership.





William Jennings Bryan and Populism

August, 2018

Washington -- New York Times columnist (and Nobel prize winner) Paul Krugman has sent many of his millions of readers to look up William Jennings Bryan if they want to know who is and who is not a "populist."

The problem with Krugman's linked Bryan-bio is that, at the end, it disparages Bryan wrongly and gratuitously by alleging "shallowness and ignorance of science and archaeology."

Bryan was the founder of the modern Democratic party, of which there is little dispute. A progressive, he paved the way for the election of Woodrow Wilson and was the force behind constitutional amendments approving the federal income tax, direct election of U.S. senators, and women's suffrage. At the end of his life, he fought the teaching of evolution, memorialized in the play and movie Inherit the Wind.

It is the movie version of Bryan that seems to be the source of the "shallowness and ignorance" description.

Bryan was in fact quite well read on evolution and the science of the 1920s. Evolution at that time was understood to comprehend "social Darwinism" (survival of the fittest, including in economics) and eugenics. The textbook that Bryan opposed taught eugenics as science, including the hierarchical rankings of different human races, with Caucasians at the top, superior to all others. This was contrary to Bryan's lifelong work.

Bryan was a world-traveller and followed foreign affairs closely. He was Wilson's first secretary of state. His wife, Mary Baird Bryan, a lawyer and student of German, read German language newspapers to him. Bryan was well aware that the eugenics movement in the United States was being taken up by German institutions and political movements, and was alarmed by it.

Germany in the 19th century had given America its model* of higher education; America in the early 20th century gave Germany eugenics. We know what happened next.

This side of Bryan, his abhorrence of xenophobia, is seldom acknowledged. Progressives are calling for a remake of the movie.**

Bryan is also in the news as his statue, along with that of J. Sterling Morton, is being removed from the U.S. Capitol. It is a benign recall, at least in the case of Bryan, as the Nebraska legislature has chosen Willa Cather and Standing Bear to represent the state henceforth in the Capitol's statuary hall. As the statues come back to Nebraska and are relocated, it would be a good time to review the legacies of Bryan and Morton, both Democrats but political enemies. Morton was a Bourbon Democrat, a southern sympathizer, a foe of Bryan, and is now becoming the subject of more scrutiny. It may have been only a matter of time before Morton had to go.

Krugman has the right person in Bryan to contrast with today's so-called populists, but it would be even better if the real Bryan was correctly portrayed.

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* The University of Berlin model of teaching combined with research was first emulated by Johns Hopkins University, from which it spread rapidly across America.

** If there is a remake, it should also stick to Scopes trial testimony in which Bryan, speaking on archaeology, reveals himself not to be a biblical literalist, as he takes the offensive against Darrow's mistaken assumption that he is. Where Darrow got the better of Bryan was in ending the trial quickly with a guilty plea, preventing Bryan's attack on eugenics, which Bryan had planned for his closing. A remake could also make the point that evolution as now taught is more firmly grounded than it was in Bryan's time, as evolutionary theory has adapted to accommodate Mendelian genetics, is now accepting the emerging field of epigenetics, and has shed its ugly past association with "social Darwinism" and eugenics.

Time to Restrain the U.S. Department of Education

July, 2018

Washington -- The time has come to restrain the U.S. Department of Education from its course of systematically undermining consumer and taxpayer interests in higher education.

Having gutted the "borrower defense" rule, which protects defrauded students against unscrupulous institutions, the Department is now about to eliminate the "gainful employment" rule, which requires institutions to demonstrate that their graduates can get jobs, or face loss of institutional eligibility for taxpayer-supported student financial aid.

All of which means more financial ruin for many students and families who will be victimized, and more taxpayers who will be simultaneously cheated.*

The best way to restrain the Department is to restore the integrity of the "triad" that determines institutional eligibility, which includes accreditation bodies and state governments as well as the federal government.

Excessive reliance on federal standards has led us to this sorry situation. Why would we think that federal officials are not subject to conflicts of interest and corruption? The recent exposé in The Atlantic should not come as a surprise to anyone who has been watching the Department for the past two decades.

The links in the triad that can restore integrity most quickly and effectively are state governments. Consider this: if state governments had been required to put up matching funds of their own to qualify institutions in their states for federal student aid eligibility, would we now have the interest-group ("iron triangle") takeover of the Department that has taken place? No. State governments approve shoddy schools when it costs them nothing, when all the aid is federal.

The time has come -- actually it is long past due -- for Congress to restore and reinforce the original checks and balances in the Higher Education Act, to engage the states as was originally intended through the mechanisms of cooperative federalism. The original Campus-Based aid programs and the State Student Incentive Grant (SSIG) program all had matching requirements, so as to engage the states through their own budget processes.

It is all well and good that many state attorneys general have now stepped up through their consumer protection divisions to try to protect their citizens from fraud and abuse perpetrated through federal student aid. But this is no remedy compared to getting integrity back into the programs in the first place.

The Higher Education Act is before Congress right now, for reauthorization. To me, there can be no higher priority than restraining the Department through the mechanisms of federalism. Democrats should not wait for the 2020 election to sweep corrupt officials out of power, which election may not go their way in any case. Republicans should be put on the spot about their principles: do they believe in federalism or do they approve of a Department that tries to undermine federalism at every opportunity – witness Secretary Betsy DeVos's attempt to pre-empt jurisdiction over student loan servicers.

James Madison, in Federalist 51, wrote: "In the compound republic of America, the power surrendered by the people is first divided between two distinct governments, and then the portion allotted to each subdivided among distinct and separate departments. Hence a double security arises to the rights of the people."

Has Madison's vision come and gone?

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* The cost of repealing the gainful employment regulation is estimated by the Department of Education itself at $4.7 billion. This represents federal money that will be spent on Pell grants at institutions that would otherwise lose their eligibility, and in defaulted federal student loans.








Decision Time on the Cooperative Extension Service

July, 2018

Lincoln -- Let me preface this post with a few kind words about the Cooperative Extension Service, because a few paragraphs down there will be unkind words.

Extension is an important part of my life. I was a charter member of the Rock Creek Ranchers 4-H Club (its first president, actually), made up of farm boys around Davey. We're still in touch six decades later and the club is still going. I remember unloading cattle for the county and state fairs at the north dock of the old 4-H barns at the fairgrounds in Lincoln, with the help of county agents Emery Nelson and Cyril Bish, and later with Allan Boettcher. My father's farming methods were admired by county agents, who brought foreign visitors to our farm to demonstrate good Nebraska farming practices. My mother was a leader of a county home extension club, as was my aunt, who graduated from the original NU "School of Agriculture" in 1922. Home extension agents and graduate students visited our family as part of their nutrition research, circa 1949. Growing up, I seldom missed a Tractor Power and Safety Day demonstration at the Ag Campus in Lincoln.

Later, in my professional work, I came to admire the funding model of the Cooperative Extension Service: a combination of federal, state, and local funds, with policy input from each level. This is "cooperative federalism" at its best. Many other government programs could benefit from adopting this model.

But in more recent times, I've heard grumbling about the Extension Service, that its role has been taken over by agribusiness salespeople who know more about their subjects than do Extension agents. I've experienced disappointment along these lines myself, when I consult Extension NebGuides that parrot a manufacturer's line and even refer readers to the company. One farmer asked me why he should be paying taxes for a service that others are providing free, if it's all the same information. The same is happening in other states, too.

There is no better analysis of what is happening to the Extension Service than a 2015 paper written perceptively from the inside. It tackles these and other difficult questions. It makes a case that Extension agents are needed to train the salespeople, but notes honestly that the company reps are out to make profits, not to watch out for broader public goods that range all the way from environmental protection, to rural health and nutrition, even to the economic viability of the agriculture sector. Not to mention that the salespeoples' services are not really free. The paper even looks at the possibility of ending Extension as we have known it, or putting it on a fee basis, or privatizing it.

The 2018 U.S. Farm Bill, now in conference committee to iron out differences between House and Senate versions, will give the Extension Service a reprieve. The Senate version (a bipartisan product) is the better of the two, by far, but its fate is uncertain due to ideological warfare and unprecedented political positioning in the House.

Neither the Senate nor House bill offers a vision for the Extension Service to meet the challenges of the times. Some of us working on the bills as citizens have tried to advance the idea of unleashing the Extension Service to combat the nation's obesity and diabetes epidemic, and to lend a hand in developing jobs and businesses in local and regional food markets that are poised to take off with the right direction and support.* Growing demand for healthy food can help repopulate rural America.

These suggestions have been politely applauded, then ignored in the rush to address issues more politically salient and more amenable to immediate monetizing by those who feed at the farm bill trough.

One of the strengths of Extension, however, is that it does not depend entirely on federal leadership. The State of Nebraska itself could step up and unleash the Extension service, with its formidable infrastructure, to tackle Nebraska problems that current agribusiness, health care, and non-profit interests can't or won't.

The next governor should convene a summit, within state government, of the state's Economic Forecasting Advisory Board, the Tax Commissioner, the directors of Agriculture, Health, and the Budget Division, the Vice Chancellor for IANR, and the Dean of Extension to develop a vision for the Extension Service and a budget to support and deliver it. The summit would deal with realities such as the need for agricultural diversification in view of the loss of international markets for traditional Nebraska products; and with the largely unacknowledged fact that exported U.S. processed foods have spread an obesity and diabetes crisis across the globe.

Here's one summit discussion topic: “Feeding our nation well, not the world badly.” This would require an integrated view of Extension's nutrition and production mandates, now sorely lacking; and require getting the Nebraska farm economy positioned to maximize comparative advantage, where it is now not. The decline of the agriculture economy in the state is beyond serious; it is an imminent crisis.

Three decades ago my friend and former colleague Hans Brisch,** then an NU vice president, convinced the state to invest $50 million in new state support for NU research. He got a conservative governor's attention and the funds sailed through the legislature because it was seen as essential to the future of Nebraska. Something similar could be done again with the right leadership, because the need is even greater.
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* We also have been advocating for increased conservation and soil health measures, and to consider topsoil loss a national infrastructure priority.

** Dr. Brisch (1940-2006) went on to become Chancellor of the University of Oklahoma, where he left a great legacy.