Wednesday, April 26, 2006

the italian elections: round three

In the week since Italy's highest court confirmed the election victory of the left-leaning coalition headed by former Premier Romano Prodi, the situation has begun to stabilize somewhat, although perhaps only by Italian standards. While outgoing Premier Silvio Berlusconi has stubbornly refused to concede, most Italians appear to view the matter as settled, and attention has shifted to the formation of the new Cabinet which takes several weeks under Italian law. A potential bullet was dodged when Massimo d'Alema, yet another former Premier and a leader of the Democrats of the Left (read former communists) party abandoned his candidacy for leadership of the Chamber of Deputies in favor of Fausto Bertinotti, who doesn't even bother with the "former" part. The next big hurdle will be selection of the new President, a nominally ceremonial position but one with potentially enhanced power given the extremely tight balance between the dominant factions. While refusing Berlusconi's offer of a grand coalition--an offer many see as a ruse to prevent further action against his monopolistic media holdings--the incoming Government has suggested it may be willing to negotiate regarding potential presidential candidates, and indeed may have to given its narrow edge in both houses.

The most immediate problem facing the Prodi Government is the Italian economy. The voices of the IMF and various mega-economists have been added to those of foreign pundits suggesting that, unless Prodi takes radical action, the country may be headed for a downward spiral that would take it out of the Euro zone altogether in the next few years. While Prodi has promised an additional manovra (budget bill) and further changes, his room for maneuver may be limited by the more assertively left-wing elements of his coalition, who appear to see his victory as an occasion to settle accounts rather than govern the country in responsible fashion. The priorities that some have expressed--repeal of labor reform legislation, benefits for unmarried (including gay) couples, and break up of the Berlusconi media empire--suggest a classic left-wing rather than a moderate, coalition-building agenda. Rumored cabinet choices, including that of D'Alema (see above) for the foreign ministry, are generally competent but reflect an orthodox left-wing tendency.

A taste of the problems Prodi will face from his own backbenchers was provided on April 25, a national holiday which marks the country's liberation from Fascism in 1945. While Prodi, making an impromptu address to a Milan crowd, struck a moderate theme, other leftists were busy heckling the conservative mayoral candidate, Letizia Moratti, as she pushed her wheelchair-bound father--who had been deported by the Germans to Dachau--around town during the parade. The burning of an off-color Israeli flag by a group of autonomi (independent leftists) likewise did little to contribute to the holiday spirit. The situation became especially awkward the next day when Iraqi guerillas--the kind of people the demonstrators seem sympathetic to--killed three Italian peacekeepers in an ambush near Nassiriya. Prodi is very experienced, and seems to have a pretty good idea of what he wants to do to get the country back on track. The question is if anyone, including his own supporters, will give him the chance.

Wednesday, April 19, 2006

the italian elections: round two

When I last posted the left-leaning coalition headed by Romano Prodi appeared to have won a narrow victory in both the Chamber of Deputies and the Italian Senate, giving it the right to form a new Government and (presumably) get on with the business of running the country. I speculated Prodi would probably get the support of most Italians in the short run and "what happens next is anyone's guess." It is increasingly unclear that he will even get that far.

Two developments, neither of them entirely in Prodi's control, have contributed to this situation. The first is the continued refusal of Berlusconi to concede an election that by any ordinary standard he has already lost. When a recount confirmed Prodi's 20,000 vote margin in the Chamber and two-seat lead in the Senate, the outgoing Reform Minister, Roberto Calderoli, mounted an additional challenge claiming that 40,000 votes in one of the northern regions were incorrectly credited to Prodi, since the relevant list was presented in only one circumscription in supposed violation of the election law. (The two coalitions are each composed of several different parties, the alignments of which varied in certain geographic locations.) Even after the Court of Cassation's decision earlier today, which rejected this and other challenges to the election results, Berlusconi's lieutenants have refused to concede, raising the possibility of appeals to regional courts or perhaps to the legislature itself when it reconvenes. One additional possibility is to attempt to "flip" one or more Senators to the conservative line, perhaps in return for regional or even personal favors, a time-honored or at least old practice known as cambiare casacca (literally, to change or turn one's coat). What Berlusconi hopes to achieve by all this--a coalition Government, selection as the new, nominally ceremonial President of Italy (which would also make it difficult to prosecute him for additional legal offenses), forcing a deadlock followed by new elections--remains unclear although the damage to the country is not.

The second development relates to economic problems. In the midst of the maneuvers above a British newspaper suggested that, if Prodi followed his likely policies, the country would be headed out of the Euro zone within the next decade--a potentially huge blow to a country that regards the Euro membership as a signal of its arrival on the top tier of European nations. A further warning came today from the IMF which warned that Italy needed harsh measures to avoid an economic crisis. In a normal country such news would have no particular effect on the election outcome, but nobody has ever accused Italy of being normal, and the combination of political and economic pressures threaten to derail the nascent Prodi Government before it even takes office. The two issues are related, because Prodi will need support from the hard-line former communists, led by Fausto Bertinotti, as well as the "softer" ex-Marxists to maintain his coalition: parties whose priorities are unlikely to be budget cutting or similar measures wanted by the international business community. Already Bertinotti's faction has been calling for his election as President of the Chamber of Deputies, a position akin to Speaker of the House in the United States, which would be about as unmoderate a move as could be imagined at least in symbolic terms. There is also talk of repealing modest liberalizations of labor and other laws passed by the Berlusconi Government, and perhaps of increases in business or estate taxes (see my previous blogs on this subject).

Through this all Prodi has been a model of coolness, having been photographed jogging in Bologna and drinking espresso at a neighborhood cafe, all the while making statements of the "the people have spoken, I am awaiting Mr. Berlusconi's telephone call" variety. The danger is that his dolce vita approach may make him look weak and create an image of inevitability among the forces that seek, one way or another, to overturn the results of the election. My instinct remains that the Berlusconi strategy is an elaborate bluff and Prodi will succeed in forming a Government: indeed, it seems at least as likely to be that the the right as the left will spaccare (break in pieces) and that a left-leaning Goverment may remain in power for a substantial period. But the incompetence of the Italian left should never be underestimated, and something approaching half of the country will never really accept its legitimacy. The only sure thing is that Italy, which more than anything needs stability, is unlikely to get it anytime very soon.

Saturday, April 15, 2006

tax day 2006

Well, I am just getting off my 2005 tax return, a tougher task than usual given that we actually bought and sold a few things this year, and I earned at least 50 cents of income beyond my regular Rutgers salary. April 15 is always an interesting time for tax professors, because you get to see the other side of taxes, i.e., the victim's as opposed to the perpetrator's perspective which is what we are typically exposed to. Herewith, a few random impressions:

1. You understand what they mean about complexity when you try to do your own return. Take the alternative minimum tax (AMT), for example. The AMT basically requires you to recalculate every aspect of your tax liability from scratch, but it is accompanied by a five-page set of perfectly useless instructions, and the IRS website does not even list a publication explaining how it works in understandable language. I have been teaching tax for twenty years, and I would estimate that I have perhaps a 10 percent chance of getting it right (although about a 100 percent chance of owing it, since almost every useful deduction seems to have become a "preference item" for AMT purposes). Is everyone else using Turbotax, or are they simply getting it wrong?

2. It's true what they say: the system really is stacked against the ordinary person. We sold a couple of stocks and were happy to have it taxed, for the most part, at "only" 15 percent. Yet I still can't explain to myself (let alone my class) why the money I work for is taxed at 30 percent or more and the money I sit back and watch come in gets taxed at only half that. I know all the theories--incentive, lock-in, inflation, all the rest of it--but when I see it in writing, it still seems rather odd. It's especially bad, since the same people who are hit by this unfairness are likely to be the ones who have most trouble figuring out their returns (see #1 above)--not exactly an enviable combination.

3. Lest the above seem too liberal in orientation, I am reminded every year of how simply unpleasant it is to pay taxes, of the element of compulsion that lies behind it all despite our pious proclamations about the "voluntary" tax system. This is an element that we tax professors tend to ignore in our analyses: there is a big difference between paying for something of your own volition, however good or bad it may be, and paying for because somebody else says that you have to. We ignore this, I think, less out of ignorance than because there is no real way to quantify this effect: no way to say, well, I derive ten utiles out of the Government's use of my tax dollars but it really only five or six or seven because of the displeasure associated with the mandatory payment effect. I was once on a local talk show, and a caller seem confused about the difference between things his employer took from him (like pay cuts) and things that the Government took (like tax withholding). It occurred to me that, for him, there was no difference between them: they were both things he wanted that somebody else took from him; both elaborately rationalized forms of theft.

One way to bridge the gap between scholars and taxpayers might be to spend just a little bit more time on tax forms, as opposed to statutes and regulations, in the basic tax course. I always require my students to complete a Form 1040 in the first week of classes, but after that it tends to get lost. How about a final exam in which students are given a Form 1040 and the IRS website, and told to compute the taxpayer's AMT? As long as they can't use Turbotax.

Tuesday, April 11, 2006

Politics, personality, and the Italian elections

Imagine the inverse of the 2000 elections: Al Gore and the Democrats--aided by a bizarre election law and the votes of overseas Americans--capture the Presidency and both houses of Congress, despite an effective tie or even a slight Republican majority in the popular vote. This scenario is more or less what Italian voters awoke to on the morning of April 11. Although projected winners by 4-5 points in the exit polls, the center-left coalition led by former Premier Romano Prodi ended up with a nailbiting margin of exactly one-tenth of a percentage point (49.8-49.7 percent) in the Chamber of Deputies and actually lost the popular vote for the Senate (50.2-48.9 percent). Yet under the "majority premium" clause of the new election law--ironically forced through by the Berlusconi Government over left-wing opposition--the coalition will be entitled to 340-plus seats in the Chamber as opposed to 280 or so for the conservatives, and is clinging to a 2-seat margin in the Senate thanks to the votes of overseas Italians which were counted for the first time. To top off the most extraordinary day in recent Italian history, the Government announced the capture of the country's most wanted Mafioso, who had been a fugitive since 1963, in the midst of the ballot counting.

While Berlusconi has questioned the results and called for a recount, the betting is that the country--exhausted by a bitterly divisive campaign and hammered by bad economic news--will give the new Government a chance to take office and see if it can mend a country "split in half" (spaccata in due) as one headline put it. What happens after that is anyone's guess. There has never been a truly stable left-wing Government in Italian history, a fact surely not lost on Berlusconi or his coalition partners, who were angling to pick up the pieces of his coalition even before the votes had been counted. In theory the best positioned to do so is the outgoing Foreign Minister, Gianfranco Fini, leader of the right-wing Alleanza Nazionale: but his party has never completely shed its Fascist origins, and others, including perhaps Berlusconi himself, will surely contest him for the position.

One likely result of the election is that Italy will return somewhat to the European mainstream, in both foreign and economic policy, as opposed to the defiant pro-Americanism of the Berlusconi regime. Yet to an outside observer, the most striking feature of the elections was precisely their American character. This was true both of the emerging party system--two large, equally sized coalitions albeit comprised of many competing individual parties--and of the voting patterns, with the left piling up large margins in its traditional strongholds in the center of the country (notably Rome, Tuscany, and adjacent areas) and the right doing better in the southern regions and the more enterprise-driven portions of the industrial north. Even the beleaguered exit polls, which predicted an easy left-wing victory only to be caught up in a tense all-nighter, were reminiscent of the Gore and Kerry debacles in the United States. (Many people apparently don't want to tell pollsters that they like either Bush or Berlusconi, for more or less obvious reasons). The paradox of globalization, in which rising anti-American sentiment is expressed through increasingly Americanized institutions, is nowhere better on display.

The tax policy effects of the election are difficult to predict, both because of questions surrounding the margin of victory and internal contradictions in the positions of both parties (see my previous discussions of this issue on March 25 and April 3). Prodi has spoken vaguely of various tax increases, including a 20 percent tax on financial income (now mostly taxed at a 12.5 percent rate), a new successions (inheritance) tax, and more aggressive pursuit of tax evaders. The narrowness of his victory may force him to trim such proposals, although it could also perversely make him more sensitive to pressures from his left-wing fringe, which has never really accepted the "low tax/high growth" formula it associates with the Berlusconi years. The effective collapse of the Government in France, which abandoned a modest liberalization of the labor laws in the face of student protests, is likely to embolden the left in this and other matters.

One thing is certain: few Italians, regardless of political persuasion, are likely to be terribly sad to see Berlusconi go. "The Knight," as he is called, headed the longest-serving Government since 1945 and provided an enterpreneurial, American-style governing model that shook the existing political sytem to its foundations. Yet he never entirely rid himself of the image of being something of a clown, an image that his country--perpetually struggling to estabish itself at the top rank of European powers--could visibly ill afford. Italians, who have an exquisitely keen sense of history, are already debating whether his departure is more like July 25, 1943, when the Mussolini Government collapsed, or September 8 of the same year, when the successor Badoglio Government announced a poorly conceived armistice with the Allies and the Germans proceeded to occupy the North and split the country in two. Let's hope that neither analogy proves accurate.

Sunday, April 09, 2006

I blog, therefore . . .

After a month or two of blogging, I have come to reflect upon the influence of the medium on the legal academy and society, in general. While there are many blogs and they differ in many ways, it is possible to make several generalizations about them, and to identify some discernible effects that they have had in a relatively short time. I can't make the Harvard conference on the subject (in itself a sign of blogs' growing impact), so herewith some random thoughts:

1. Community.--It's probably the most overused word in the academy, but blogs have done a great deal to restore the sense of academic community above and beyond any one institution. In this sense, they represent a significant advance over e-mail or ordinary websites, which can be used to transmit information but don't promote organized discussion in quite the same way. E-mails are like radio announcers reading their copy on television: an old way of communicating that is simply transported to a new medium. Blogs are something new.

2. Conservatism/contrarianism.--Perhaps because those already in control of institutions have less need of them, blogs tend to be counter-cyclical: mostly liberal in politics (which is controlled by conservatives), disproportionately conservative in academics (which is run by liberals). It is also perhaps no accident that many of the most successful blogs originate on the West Coast, which is far from the traditional academic centers but light years ahead in technology and the star culture. An example of blogs' power is the resistance to the ABA "diversity" standards, which would be much harder to organize in their absence.

3. Comedy.--Blogs have restored some of the humor to, well, a pretty humorless subject. Postings on Supreme Court cases are interspersed with musings about good TV shows or the latest exploits of the blogger's cat. Even the most serious bloggers are not immune.

One last thing that amazes me about blogs is how many people actually read them. I think it is fair to say that I have a fairly obscure blog, but my very first post got me a response from somebody in Houston who has clients in India, while a post about Sweden and the Holocaust netted an overnight comment from a website devoted to . . . Swedish antisemitism. The linking and cross-linking between blogs vastly enhances this effect: my post about diversity in law school hiring, which was attacked by another member of my own faculty, was soon posted on four or five different blogs, in one case including my picture (unfortunately up to date) in case anyone who saw me in a restaurant wanted to let me know how they felt. One always has to be careful what one says: even e-mails, I've been told, shouldn't say anything you wouldn't want to read in the N.Y. Times the next morning. With blogs, you don't even have to wait that long.

There but for the grace of God . . .

A book by two German authors has detailed Nazi plans to exterminate the Jews of Palestine if the Axis powers had won the Battle of El Alamein and proceeded into the Middle East. According to the authors (Klaus Michael Mallmann and Martin Cueppers), an SS battalion based in Athens was to follow Field Marshal Erwin Rommel's forces into Palestine, using mobile gassing vans of a kind earlier utilized in Poland to kill the half-million or so Jews in the territory, who were concentrated in a number of large cities (primarily Tel Aviv) and a few hundred agriicultural settlements. The Germans also expected substantial cooperation from Palestinian Arabs, one of the most extreme Arab personalities, Haj Amin El-Husseini (the Mufti of Jerusalem), having been a longtime guest of the Nazis and sharing with them a strong desire to see the Jews eliminate before the postwar era. The plan was foiled by the Axis defeat at the hands of primarily British forces at El Alamein, and the subsequent surrender of German and Italian forces in North Africa (1943). Whether by accident or design, the story was reported in an Italian newspaper (La Repubblica) opposite another story about American preparations for a possible assault on Iran, which many in the Administration view as a contemporary equivalent to Nazi Germany, at least where the Jews are concerned.

Tuesday, April 04, 2006

Sweden, the Holocaust, and the persistence of national stereotypes

The trouble with most people, a wit is supposed to have commented, isn't the things that they don't know, but that so much of what they do know isn't true. I thought of this quotation while reading a story in today's on-line edition of the Israeli newspaper Ha'aretz originally posted by Reuters news service. The story cited a new study suggesting that Sweden, which has a reputation for independence and tolerance, applied substantial portions of the German Nuremberg Laws in Swedish territory before and during the Second World War, for example requiring Swedes who wished to marry "aryan" Germans to prove that none of their grandparents belonged to the Jewish race. The study also found that Swedish newspapers suppressed reporting about the Holocaust, the German occupation of Norway, and other unfavorable news about Nazi Germany, and that cultural links between the two countries flourished throughout the Nazi era. While Sweden to some degree redeemed its reputation by accepting 7,000 Jews from occupied Denmark--and by Raoul Wallenberg's historic assistance to the Jews of Hungary--the country's record is thus decidedly mixed; even after the war it retained a sizable antisemitic element.

The study, which incidentally was done in Sweden, is only the latest of a series of revelations that cast doubt on much of the conventional wisdom regarding the Holocaust era, most of them in a negative direction. I am personally most familar with Italy, which has an image as having been largely hospitable to Jews in the Fascist era--an image that, sadly, is not always consonant with the truth. Thus, while a relatively small portion of Italian Jews died in the Holocaust ("only" 20 percent,) this had a lot to do with the Germans' late start (fall 1943) and the timely arrival of the Allies and was only partially due to assistance from the Italian population as is commonly believed. Moreover the Italian Race Laws, which were enacted in 1938 and excluded Jews from Italian schools, universities, and many kinds of employment--as well as preventing "mixed" marriages and other offenses to racial hierarchy--were enforced with far more severity than is usually admitted, as Michele Sarfatti and others have pointed out in some detail (I also have an upcoming book on the subject). The whitewashing of this era reached a sort of peak, or perhaps nadir, in the movie "Life Is Beautiful" which portrayed a Jewish mother and child as somehow surviving Auschwitz in a work brigade. In fact the Jews of Rome arrived at Auschwitz on a Saturday (Shabbat) afternoon and nearly all, certainly the women and children, were dead a few hours later.

The Italian case is only one example of how postwar politics affect the perception of prewar and wartime realities. For example, the Netherlands have a reputation for great tolerance, but had an even more dubious record than Italy: there were a large number of Dutch Nazis and the deportations were accomplished with a very small number of German troops. (Anne Frank was betrayed by Dutch people, not Germans, as is commonly believed.) By contrast France, which is universally reviled for antisemitism, had a rather mixed if hardly inspiring record, the outcome depending on time and place and whether French or "foreign" Jews were involved. Misperceptions also persist with respect to religion: while the Catholic Church is rightly condemned for not doing more to prevent the Holocaust, the record of the German Protestant churches was in fact far worse, as numerous studies have demonstrated.

The point is not that everyone is an antisemite, but that one has to be very careful about letting today's politics dictate one's understanding of past events, or letting essentialist stereotypes take the place of critical analysis. In my research on Italy, I have found that people's behavior toward the Jews depended more on their institutional interests (the Interior as opposed to the Finance Ministry, the judiciary as opposed to the bureaucracy, and so on) than on their ethnic or class status and perhaps even their level of personal antisemitism. I suspect that this was equally true of (say) South Africa under apartheid, the American South under the Jim Crow laws, etc. This is not to say that racism is not evil or that their are no moral choices to be made under a racist regime. But the choices were complex and difficult, and easy characterizations about "good" or "bad" nationalities merely recreate the evil we wish to prevent.

Monday, April 03, 2006

italian elections and taxes--round two

The second round of debates between Prime Minister Berlusconi and his left-leaning challenger, Romano Prodi, took place tonight in Rome. When not insulting each other--Prodi said at one point that Berlusconi "cites figures like a drunk person" while Berlusconi called his challenger a "useful idiot of the left"--the two gave taxation and fiscal policy an even higher profile than in their previous meeting. Prodi in particular defended his proposals for a new successions (estate andgift) tax, saying it would apply only to multi-millionaires (sound familiar?) while Berlusconi retorted that the left wanted to set the middle and working classes against each other. The two also traded quips regarding the ever-huge problem of Italian tax evasion, Berlusconi saying that the problem "could not be resolved with the clinking of handcuffs" and Prodi suggesting that even a third of the alleged 200 billion Euro tax gap would serve to balance the Italian budget. Both candidates agreed that the murder of a small boy near Parma, which has riveted Italian TV viewers for the past weeks, was generally speaking a bad idea. Prodi has also defended his proposals for a streamlined tax on financial income (blogged here a few weeks ago) against charges that they would unfairly punish the holders of BOTs (a form of treasury bills) and other small savers.

In his closing statement, Berlusconi dropped a potential bombshell in proposing the abolition of the ICI, a local real estate tax, on first-time homebuyers, although he did not say where the revenue from the tax--a major financing source of local governments--would be made up.

The elections are scheduled for April 9.