California Free Press

Off the Top of My Head

What To Do About Religious Intolerance Leading to War

by John Lawrence

The current situation in the Middle East is a reminder that throughout history war has been religious based. Think of the wars in Europe between Protestants and Catholics or the Crusades which were wars between Christians and Muslims or the persecution of Jews throughout history. If we are ever to have peace in this world, religious tolerance is paramount. So there should be religious studies in schools at all levels, but not studies about one religion. Students should be required to study all the major religions which are Judaism, Christianity, Islam, Hinduism and Buddhism. Not only that, but students should be required to attend religious services in all these religions. Only by understanding the different religions can one develop a tolerance for them all. Only when we come to a time when it doesn't matter what religion a person espouses will we be able to all get along. It shouldn't matter what one's religion is. They shouldn't be perceived as "the other." All human beings need to get to the point where they are human beings first and their religion is a matter of indifference.

I think this can only be accomplished by an educational system in which a student becomes familiar with all the different religions, has friends who are members of different religions and comes to see that, regardless of one's religion, human beings are all basically the same. In other words all societies should become secularized. It would help greatly if all students were required to attend religious services of all the five great religions mentioned earlier. What is more important than peace on earth, and to accomplish this tolerance of all religions must be inculcated in students everywhere. Tolerance of other religions is more important than the beliefs of any particular religion. As long as one perceives that someone is a member of a different religion than their own and is perceived as "the other," there will be suspicion, fear, tension, hatred and war. World peace is something that needs to be worked at to be accomplished and understanding and tolerance of religion is a good place to start.

In addition to tolerance of different religious views, an uplifting of the economic circumstances of the world's poorest citizens will do more to create peace than anything else. War is often the result of the perceived superiority of living conditions of one group of people by another group. One group is the downtrodden and one group has all the advantages and is living the good life. Everyone in the world needs to be brought up to at least a decent standard of living before there will be peace in the world. So religious tolerance brought about by education regarding all the world's religions and attendance at all religious services combined with an all out effort to bring all the world's peoples up to a decent standard of living will do much to bring about world peace. These efforts have to be done at the same time that the earth itself must be protected from environmental degradation especially with regard to climate change. The old paradigm in which earth's resources were to be exploited without consequence, in which humans were told that they had "dominion" over earth's resources, must go to be replaced with an ethic not of exploitation but of respect for the planet and all its resources including its human resources.

Off the Top of My Head

Bidenomics: The US Finally Gets an Industrial Policy

by John Lawrence

The Republican policy that the government should be hands off regarding the economy is out the window. Trickle down is a failed policy. Bidenomics gets the government involved in crucial areas of the economy. The export of jobs to parts of the world where labor is cheapest is replaced with a policy of creating jobs within the US. Deregulation is replaced with regulations to protect the environment and combat climate change. The traditional Democratic alliance with unions is back in vogue. Bidenomics is all about building the economy from the middle out and the bottom up instead of from the top down. Bidenomics is about shaping the economy in a way that is propitious for the middle class and the environment. Infrastructure building is more important than accelerating the consumer economy. Putting our house in order is more important than giving away fattening goodies to consumers. People are being put to work doing jobs which actually make US society a better place instead of encouraging jobs in frivolous pursuits. This is not necessarily what the American consumer wants.The American consumer wants more money in their pockets so they can buy more gadgets and aspire to making millions as a pro athlete or an entertainer. They don't actually want to work at the good jobs Biden is creating building infrastructure or making semiconductors. CNN reported:

Trickle-down economics, which was at the heart of President Ronald Reagan’s policies and continues to be the guiding light of Republican lawmakers, typically revolves around tax cuts for the wealthy and large companies. Supporters say the benefits flow down to middle-class and working Americans, boosting economic growth more broadly. But many experts dispute the effectiveness of this practice at lifting all boats.

Biden argues that supply-side, trickle-down economics has cost jobs and hollowed out the middle class. He has long focused on that group of Americans, serving as chair of the Middle Class Task Force when he was vice president in the Obama administration.

“Folks, let me say it as clearly as I can: (The) trickle-down approach failed the middle class and failed America,” said Biden.

To fund Bidenomics, the president once again calls for ensuring the wealthy and large corporations pay their fair share of taxes.

The problem is that now that the American people have had  a good taste of Democratic programs, they want more: Republican tax cuts. They want their cake and eat it too. They know that Republicans will have no problem with the national deficits and debts as long as they come in the form of tax cuts. So from the American consumer's point of view they have got about all they can expect to get out of Bidenomics. Now they want a tax break to boot.

The Biden administration has focused on infrastructure, clean energy and semiconductors, Lael Brainard, director of the National Economic Council, said. The Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS Act each include direct funding and tax incentives for public and private manufacturing construction. Biden outlined how states will receive more than $42 billion in federal funding for high-speed internet service, which was part of the 2021 infrastructure law. It is aimed at bringing connectivity to more Americans and closing the digital divide. The administration is comparing it to President Franklin Delano Roosevelt’s Rural Electrification Act, which brought electricity to homes throughout the country. And 35,000 new projects – including roads, bridges and ports – have received funding through the bipartisan infrastructure law, the White House said.

E.J. Dionne Jr. said in the Washington Post:

Bidenomics has also gone global. One indicator is the exceptional and ongoing debate Sullivan’s speech provoked in proposing a “new consensus” to replace “a set of ideas that championed tax cutting and deregulation, privatization over public action and trade liberalization as an end in itself.” The old formulas, Sullivan argued, not only failed to address new problems; they didn’t work on their own terms.

“In the name of oversimplified market efficiency,” he said, “entire supply chains of strategic goods, along with the industries and jobs that made them, moved overseas.” The idea that freer trade “would help America export goods, not jobs and capacity, was a promise made but not kept.” He stressed the need for “a modern American industrial strategy” and the benefits of “moving beyond traditional trade deals to innovative new international economic partnerships.”

Can the dumbed down and self seeking American people even understand much less appreciate the great things that Bidenomics has brought forth? Biden has changed the narrative on taxes by repeating ad nauseum that he wouldn't raise taxes on anyone making less than $400,000 a year. Big idea: raising taxes doesn't mean raising taxes on everyone and a tax break does nor mean lowering taxes on everyone. The meme about raising taxes which Republicans have endeavored to attribute to Democrats ("tax and spend") and tax breaks which Republicans have endeavored to attribute to themselves has been change by Biden. "Tax the rich" has become the Democrats' motto thanks to Bernie Sanders and AOC.The immense inequality that Reaganomics has resulted in is being addressed by Bidenomics. The American people say "Ho Hum". They are more interested in spectator sports which is exemplified by the fact that news programs on TV are routinely bounced in favor of sports events. In short the American people don't appreciate Biden because they don't take the time to understand Bidenomics.

Biden has done much good for America and Americans. He is the least appreciated great President in American history. It's a reflection on the American people themselves that all they're interested in is their own personal situation. If they are well off, they could care less about social programs that help the poor. If they have a good job, they could care less about the unemployed. American have been taught to be totally selfish and not to care about the wider world or about the improvement of society in general. Corporations by law are only supposed to consider the financial well being of their share holders and nothing else. These attitudes in and of themselves preclude the concerns of minorities, whether racial or economic, because the US is a majoritarian society. In politics the majority rules. Concern about the welfare of minorities and of the world in general and in particular the environment is not a consideration. Meanwhile, global warming is taking out individual families who are victims of tornadoes or other particular manifestations of global warming on a daily basis. It has yet to sink in that perhaps concerns for larger interests than just ourselves might be a paradigm change we might have to make.

For the American people, it's not abut how much Biden has done, it's about how much have you done for me lately, Mr Biden, and, more importantly, how much more are you going to do? If there are many more carrots, then maybe I'll vote for you. Otherwise, I'll take the tax break Republicans are offering. The American national character is selfishness personified. Ayn Rand would be proud.

Off the Top of My Head

Can a Puma Be Raised to Prefer Plant Based Meat?

by John Lawrence

Actually, this is a good question. If meat eaters could be trained to eat plant based meat, they would no longer be predators. If lions can lie down with lambs, then maybe there is even hope for the human race. In fact some animals that would attack each other in the wild, when raised together as babies, become the best of friends. Anthony, the lion, was brought to “Keepers of the Wild” animal sanctuary as a sick cub after being auctioned off in Virginia, and Riley, the coyote, was rescued by Arizona game and fish. Both were just over one month old when they met. Coyotes and lions are social animals, and Riley and Anthony grew quite fond of one another almost immediately. So they grew up, not to eat each other, but to be friends. Does this portend some hope for the human race? If babies of all races, religions and nationalities grew up together, maybe they would continue to have mutually constructive relationships as adults. Perhaps this would be a way that world peace could be attained. No more predator and prey relationships. No more friend and enemy relationships. It's worth a try. It would be a great sociological experiment, and there is nothing weird about it. It would only entail play dates for children of all races, nationalities and religions as they grew up. As they grew older, they would grow into an age appropriate understanding of their friends' backgrounds. If animals can form these kind of relationships, probably so could humans.

After photographer Isobel Springett, took in an abandoned fawn, it was almost immediately adopted by Springett’s Great Dane, Kate. Pip clearly feels very strongly for her canine caretaker, and even though Pip joined a herd, she still finds time to spend with Kate. Perhaps animals can lead the way. Perhaps they can be the prime movers towards a more mutually beneficial society. Perhaps there would no more be predators and prey. What would this portend for the human race? One thing it portends is that, in order to end war and conflict, everyone would have to be adequately fed with a plant based diet. As long as some people have nothing and others have seemingly everything, there will always be war as the underdogs try to redress the balance. If everyone is relatively well off, the incentive for altering the status quo by violence and force is greatly diminished.

In a hidden realm at the end of the world, amidst the massive ice mountains of Chile’s Torres del Paine National Park, condors soar, colorful caracaras keep a sharp eye out for prey and vivid pink flamingos make a theatrical appearance. This kingdom is the stronghold of the puma, a large mountain lion that hunts for guanacos – cousins of llamas – as they roam from the valleys to the hillsides. Follow the fate of Solitaria, a female puma in her prime. The mother of four cubs, she hunts and teaches her young how to live in this extraordinary landscape. Narrated by Uma Thurman. This is a beautiful story about a successful huntress who is so tender and loving with her four kittens, but is relentless when it comes to the life and death struggle with guanacos. The guanacos must be eternally vigilant for any sign that there might be a puma lurking and stalking them. It's an athletic contest that occurs on a daily basis. Both kinds of animals must use their entire skill set to stay alive and to eat. Guanacos eat a plant based diet, and pumas eat guanacos. Could pumas raised from babyhood with baby guanacos grow up to see each other as friends instead of as rivals and enemies? Could pumas be trained to a plant based diet? The implications for human survival and the survival of the human species might be significant.

Off the Top of My Head

Biden: The Least Appreciated Great President in American History

by John Lawrence

President Biden has gotten more real work done for the American people than any President with the exception of Franklin D. Roosevelt. So why is his job approval rating so low - just 39%? Chalk it up to the fickleness of the American people. They don't know a great President when they see one. Biden has been able to do so much with much narrower margins in Congress than FDR had in all his terms as President. In fact Roosevelt had Democratic majorities in both the House of Representatives and the Senate from 1933 until his death in 1945, and in those days the filibuster was a speaking filibuster that delayed but didn't terminate legislation and so was of little consequence compared to the fact that today 60 Senators are required to pass any bill.

So what are some of Biden's accomplishments? The Inflation Reduction Act is a historic legislative achievement that lowers costs for families, combats the climate crisis, reduces the deficit, and finally makes the largest corporations pay their fair share. For the first time, Medicare is able to negotiate the price of certain high-cost drugs, a month’s supply of insulin for seniors is capped at $35, Medicare beneficiaries pay $0 out of pocket for recommended adult vaccines, and seniors’ out of pocket expenses at the pharmacy will be capped at $2,000 a year. Historically low unemployment at 3.5%. A manufacturing boom is occurring. Companies have announced nearly $300 billion in manufacturing investments in the United States. These investments are ensuring the technologies of the future are made in America, and bringing back supply chains from overseas. And they are creating good-paying jobs, including union jobs and jobs that don’t require a four-year degree. As part of the bipartisan CHIPS and Science Act, the Department of Commerce is overseeing $50 billion to revitalize the U.S. semiconductor industry, including $39 billion in semiconductor incentives. The first funding opportunity seeks applications for projects to construct, expand, or modernize commercial facilities for the production of leading-edge, current-generation, and mature-node semiconductors. This includes both front-end wafer fabrication and back-end packaging. The Department will also be releasing a funding opportunity for semiconductor materials and equipment facilities in the late spring, and one for research and development facilities in the fall.

President Biden signed the American Rescue Plan to change the course of the pandemic and jump start our economic recovery. The American Rescue Plan funded our successful vaccination campaign, safely re-opened schools for in-person learning, helped 200,000 child care providers keep their doors open, and delivered relief to American families. Biden forged a consensus and got the Bipartisan Infrastructure Law passed – a once-in-a-generation investment in our nation’s infrastructure. We are rebuilding our roads, bridges, ports, and airports, upgrading public transit and rail systems, replacing lead pipes to provide clean water, cleaning up pollution, providing affordable high-speed internet to every family in America, delivering cheaper and cleaner energy to households and businesses, and creating good-paying jobs – including union jobs, and jobs that don’t require a four-year degree.

President Biden signed into law the PACT Act – the most significant expansion of benefits and services for toxic exposed veterans in more than 30 years. This law also enables the Department of Veterans Affairs to move more quickly in the future to determine if illnesses are related to military service, and it offers critical support to survivors who were harmed by exposures. And, the law authorized 31 new clinical sites and provides VA several tools and resources to ensure effective implementation of the law. The Biden Administration announced debt relief of up to $20,000 for Americans earning less than $125,000 per year who had Pell Grants in college, and up to $10,000 for all other borrowers below that income threshold. More than 40 million borrowers stand to benefit from this action, and about 20 million would see their debt entirely wiped out - and nearly 90% of this relief will go to borrowers earning less than $75,000 per year. In early 2023, the Biden-Harris Administration announced a plan to provide millions of borrowers with more affordable monthly student loan payments through changes to income-driven repayment plans.

The U.S. is positioned to achieve our ambitious climate goals of cutting our emissions in half by 2030 and net-zero emissions by 2050. The President has taken executive action and signed legislation to develop clean energy at home, accelerate the adoption of electric vehicles, and reduce pollution that endangers overburdened communities. And, the President is lowering energy costs for families, creating good paying jobs, and ensuring America leads the global clean energy economy. The President also protected more lands and waters in his first year than any President since John F. Kennedy. President Biden took action to lower the cost of health care for millions of Americans. Right now, four out of five people who sign up for health insurance through the Affordable Care Act can find health care coverage for $10 a month or less and millions of Americans on Obamacare are saving an average of $800 a year. Since he took office, there has been a combined 50 percent increase in enrollment in states that use HealthCare.gov and the nation’s uninsured rate is historically low at 8 percent. Over 16 million Americans signed up for quality, affordable health coverage, the highest number ever produced in an open enrollment period.

So what are Biden's most significant achievements? In my opinion infrastructure and climate action lead the way. These areas have been neglected too long, and the Biden initiatives will just barely make amends. In and of themselves, they are probably insufficient, but they are a good start, a start that has been delayed too long. Changing the narrative on taxation, I think, is a major accomplishment. Making it clear that a tax bill does not have to apply to everyone. By not raising taxes on anyone making less than $400,000, an oft repeated phrase, the narrative has been changed from "tax and spend" to "tax the rich and spend on helping the poor and middle class". Deficit reduction doesn't mean necessarily to stop spending on social programs as it means getting more money into government coffers by taxing the rich. Inequality is out of control; taxing the rich ameliorates this situation. What Biden did to get us through the COVID crisis is remarkable. It could have been an economic disaster for everyone; it wasn't. Student debt relief was a great achievement although it is still not clear how that will play out in the courts.

The American people by and large don't appreciate all that Biden has done compared to what any Republican administration would have done. Clearly, Democrats are on the side of rationality and helping the American people. Republicans are on the side of winning at all costs and helping the rich. They don't give a damn about helping the American people especially the middle class and the poor. The Republican mantra of reducing the deficit and the debt would have you believe that it can only be done in one way, that is by reducing spending. No, it can also be done by taxing the rich which would also reduce inequality. But this is all the Republicans have, that and the discredited policy of tax breaks for the rich that have done little to "trickle down" and have greatly contributed to the national debt. Enhancement of Obama's landmark health care legislation is another major achievement although Obama deserves much of the credit. It's a testimony of what the Democratic party is able to achieve for the country. The fact that Biden accomplished so much in a bipartisan way is something few other politicians could have hoped to accomplish especially in the political environment that exists today.

My criticism of Biden has to do with the Ukraine war. On the one hand he has prevented it from becoming a world war as of yet. However, in the negotiations preceding the war, I believe more could have been done to prevent the war in the first place. By not acknowledging or being sensitive to Russia's concerns about the encroachment of NATO on its borders which started during the Clinton administration and was hastened by Secretary of State Madeleine Albright, Biden and other diplomats missed an opportunity to defuse the crisis. Their policy was a de facto attempt to bully Russia into accepting the fact that Ukraine would also become part of NATO. Now the US is entrenched in a policy of Ukraine "winning" and Russia "losing" instead of a policy of a negotiated settlement to end the war, a negotiated settlement which could have been had before the war even started IMHO, for instance, by delaying Ukraine's admission to NATO for a period of time during which Russia's security concerns might have been addressed. In effect Ukraine has become a vassal state of the US instead of its historic situation of being a vassal state of Russia.

Off the Top of My Head

Republican Presidents Have Been Mainly Responsible for Increases in the National Debt

by John Lawrence

The Reagan, George W Bush and Trump tax cuts are responsible for most of the US national debt. During the Trump administration, the debt increased by roughly $7.8 trillion, and The George W. Bush administration  enacted sweeping tax cuts that will have cost more than $8 trillion by the end of fiscal year 2023. The nation’s fiscal pictured changed in 1981 when President Ronald Reagan enacted the largest tax cut in U.S. history, reducing revenues by the equivalent of $19 trillion over a decade in today’s terms. Although Congress raised taxes in many of the subsequent years of the Reagan administration to claw back close to half the revenue loss, the equivalent of $10 trillion of the president’s 1981 tax cut remained. Donald Trump Built a National Debt So Big (Even Before the Pandemic) that it’ll weigh down the economy for years.

A series of massive, permanent tax cuts have created large federal budget primary shortfalls and continue to exert upward pressure on the debt ratio. In other words, the current fiscal gap—the growing debt as a percentage of the economy—stems from legislation that cut taxes, disproportionately for the very rich. While it is true that the Great Recession and legislation to fight it, along with the costs of responding to the health and economic effects of COVID-19, pushed the level of debt higher, these costs were temporary and did not change the trajectory of the debt ratio. If Congress wants to decrease deficits, it should look first toward reversing tax cuts that largely benefited the wealthy, which were responsible for the United States’ current fiscal outlook.

Therefore, taxes on the rich should increase while spending on the poor and middle class should also increase. Americans want both: social programs and reduced taxes. However, the gross inequality that exists between rich and poor begs the question: why raise taxes on everyone? Shouldn't the rich have their taxes increased while the poor and lower middle class have their taxes reduced? Of course, that 's the ideal solution. However, Republicans represent the interests of the rich so they would never agree to this proposal. They will continue to argue for increasing taxes on the poor while cutting spending that mostly benefits the poor and lower middle class. That's the American situation, writ large, folks. That's all you need to know to understand American politics. It's a struggle between rich and poor. The rich think they deserve all their money even if it runs to billions of dollars while the poor are only trying to get a foothold in the American Dream. The rich think the poor deserve their lot in life because they didn't work hard enough to overcome their poverty. The rich also believe in a meritocracy where they themselves are the winners who made all the right moves and worked the hardest. What's wrong with this picture?

Read "The Tyranny of Merit" by Michael Sandel.

Off the Top of My Head

The Solution to the Debt Crisis: Tax the Rich

by John Lawrence

Republicans want Biden to cut back spending. Democrats should want to increase taxation on the rich. The debt can be ameliorated either by reducing spending or increasing taxation. The debt is a result both of overspending and undertaxing. For all those who care about the size of the debt, they should be as concerned about undertaxing to the same extent they are concerned about overspending. Since the three wealthiest people in the United States — Bill Gates, Jeff Bezos, and Warren Buffett —now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households, the obvious culprit here is not overspending, it's under taxation of the rich. In addition to taxing the incomes of the rich, there needs to be instituted a wealth tax. Whoa, you say, this would discourage entrepreneurs who are responsible for inventing the next big thing which is what contributes the most to the American economy. We don't need another gadget; we need all hands on deck to fight global warming. This is being done by Joe Biden's infrastructure bill which is a government, not a private, solution. Private entrepreneurship is less important in a period of global warming than large scale government solutions. Therefore, discouraging entrepreneurship, except that which supports a solution to global warming, is actually a positive development.

America’s top 25 billionaires — a group the size of a major league baseball team’s active roster —together hold $1 trillion in wealth. These 25 have as much wealth as 56 percent of the population, a total 178 million people or 70 million households. The solution to government debt is to go where the money is and tap that. When asked why he robbed banks, Willie Sutton simply replied, “Because that's where the money is.” By the same token, the solution to the national debt is for the government to go where the money is: billionaires and Forbes 400 corporations. Americans don't need any new gadgets to spend their money on. In the World War II era consumption was both voluntarily and manditorily reduced in order to put more resources into the war effort. The war on global warming is even more important than World War II because, if we lose this war, the survival of the whole human species is at risk. Put simply we need to reduce consumption of the gadgets and entertainment provided by the private sector and increase expenditures on large scale projects which can ameliorate global warming. Of necessity those projects and that spending has to be initiated by government in cooperation with the private sector, but government has to lead the way and provide the money.

Income inequality is a major problem of American society. This problem can be resolved and the resources to prevent global warming provided for by taxing the rich. The problem is to reduce American consumption which is 70% of the US economy and increase government spending as long as that increased spending is spent on the solutions to global warming. At the same time the national debt can be reduced. The national debt in and of itself is not a problem, but interest on the national debt is. There are other solutions to decreasing the interest such as having the Fed create the money by quantitative easing. Instead of the Fed's depositing this money in the accounts of the big banks, it would deposit the money in the Treasury's account. "The whole idea of Modern Monetary Theory is that since a sovereign entity can borrow in its own currency, it can print more money when it needs to pay off all its debt. The central bank just needs to keep interest rates low," says Robert R. Johnson, professor of finance at the Heider College of Business at Creighton University. But there's the rub. As the Fed raises interest rates to control inflation, interest on the national debt also increases. That's why a mechanism needs to be found by which the Fed creates the money to run the government instead of the Treasury borrowing the money.

So in the meantime taxing the rich seems to be the best policy in order to bring the national debt down, to reduce economic inequality and to provide the money for government programs to combat global warming.

A Yacht By Any Other Name …

by Paul Krugman, New York Times

April 11, 2023

Inequality Ahoy! On the Meaning of the Superyacht.

Recently ProPublica, a nonprofit, independent newsroom that has partnered with The New York Times on occasion, released a remarkable report about the relationship between Justice Clarence Thomas of the Supreme Court and the conservative billionaire Harlan Crow. It turns out that over the years Thomas, who has portrayed himself as a man of modest tastes who likes to hang out in Walmart parking lots, has taken many lavish — and previously undisclosed — vacations at Crow’s expense. The ethical questions seem obvious.

Still, The Wall Street Journal lashed out at ProPublica, with an editorial headlined “The Smearing of Clarence Thomas.” The article accused ProPublica of using loaded language to create the appearance of a scandal. For example, the paper complained, ProPublica’s report called Crow’s 162-foot private boat, which has been featured in places like the website Superyacht Fan, a “superyacht.” Smear tactics!

Actually, according to a 2022 article in The New Yorker, any yacht over 98 feet long is considered a superyacht within the yachting community.

Which got me thinking about big yachts and what they tell us about the state of society.

When rich people can afford to buy and operate big yachts, they do. Indeed, yachts are a highly visible indicator of inequality, the concentration of income and wealth in the hands of the few. The Gilded Age was marked by a proliferation of ever bigger, ever more elaborately furnished yachts; when J.P. Morgan built a large steam yacht, its 1898 launch was featured in The New York Times.

Conversely, the Great Compression of income disparities that took place during the 1940s and made America a relatively middle-class society for the next four decades put an end to the first golden era of superyachts. In 1955 Fortune published a remarkable essay, “How Top Executives Live,” which stressed how modest their standard of living had become compared with prewar norms. Among other things, large yachts had “foundered in the sea of progressive taxation. … Today, 75 feet is considered a lot of yacht.”

Now superyachts are back. Indeed, according to that New Yorker article, we’re living through “the greatest boom in the yacht business that has ever existed.”

I’ve spent a lot of time over the years following debates over income and wealth inequality. Ever since inequality began rising in the 1980s, there’s been a sort of intellectual industry devoted to what one might call inequality denial, questioning the data showing a drastic rise in incomes and wealth at the top. Indeed, measuring things at the top can be technically tricky — the very rich are such a small group that they can be missed by random surveys, and their ability to engage in tax avoidance makes it hard to track them with tax data, too.

But if you had any doubts about whether we’re living in an era of extreme wealth concentration, comparable to or even surpassing the Gilded Age, the superyacht boom should quell those doubts.

The rise of superyachts also tells us some important things about the motivations and consequences of spending by the very rich.

First, why do the rich buy superyachts?

Boating — being out on the open water, experiencing nature up close — can be a source of great joy to many people. (Not me — I’m so prone to seasickness that I’ve been known to return my breakfast to the ecosystem while snorkeling.) But really big yachts, which amount to floating mansions, would seem to defeat the purpose, insulating their passengers from much of the maritime experience.

Indeed, that 1955 Fortune article suggested that top executives were just as satisfied with the downsized vessels of their day as a previous generation had been with huge yachts. “The specifications of the boat that interests the great majority of seagoing executives today are ‘forty feet, four people, $40,000.’ In this tidy vessel the businessman of 1955 is quite happily sea-borne.” (For the record, $40,000 in 1955 would be about $450,000 in 2022 dollars.)

Owning and operating a really big yacht is, however, as clear an example as you’re likely to find of Thorstein Veblen’s theory of conspicuous consumption — spending intended to demonstrate one’s wealth and status, rather than for the direct satisfaction it yields. Indeed, the New Yorker article suggests that demand for superyachts really took off once owning your own plane stopped being an effective status symbol: “Once it seemed that every plutocrat had a plane, the thrill was gone.”

Yachts, however, can always be made bigger, so there’s no obvious limit to the game. The status competition isn’t even purely implicit: Every year Boat International hands out the World Superyacht Awards, which supposedly honor “ingenuity and craftsmanship” — but obviously, size also matters.

In a way, it’s quite sad: Rarely in the course of modern history has so much wealth been concentrated in the hands of so few, yet much of that wealth is being expended on zero-sum games of one-upsmanship.

The other point, emphasized in a guest essay this week in The Times, is that superyachts are immensely destructive to the environment. To be fair, it’s not entirely obvious whether billionaires do more environmental damage with their superyachts than they would if they spent the same amount of money in other ways. But it’s possible: Shipping and aviation — presumably including superyachts and private planes — are notoriously hard to decarbonize.

And in general, while I’m not a degrowther who believes that we must shrink the economy to save the planet, curbing extravagant and destructive spending by the very rich could be part of the solution to climate change.

In any case, the rise of superyachts — regardless of whether they carry Supreme Court justices — is a highly visible indicator of the extreme economic polarization that is certainly a factor in the extreme political polarization that is tearing our democracy apart. And if you’re the kind of person who insists that calling superyachts by their name is somehow a vile smear, you’re part of the problem.

Off the Top of My Head

Biden Has Changed the Narrative on Taxes

by John Lawrence

One of the great things that Biden has done is to take the tax issue away from Republicans. Remember when George H R Bush said, "Read my lips. No new taxes." The conventional wisdom at that time was that if taxes were raised, they would be raised on everyone from Joe Six Pack to Warren Buffet. It was also conventional wisdom that tax cuts would apply to everyone from the very rich to the very poor. The American public was not sophisticated enough to know that Republican tax cuts, although they would apply to everyone, were much more favorable to the rich than they were to the poor. Now Joe Biden has completely altered that narrative. In Joe Biden's world tax increases apply only to the rich and tax cuts apply only to the poor. What a major paradigm shift! Biden has repeated his mantra so many times that he wouldn't raise taxes on anyone making less than $400,000 that now that scenario is starting to take hold in the American mind.

It's about time. The American public is starting to wake up to the reality that the very rich pay taxes at a lower rate than a nurse or a teacher or a fireman. If you're a hedge fund manager, you can take advantage of the 'carried interest' loophole to pay less than your fair share. As economic inequality has soared in the era of easy money, the very rich could take advantage of all sorts of games to make themselves even richer while most working people are living paycheck to paycheck. One way to restore some measure of equality is to increase taxes on the rich while cutting them on the poor. This idea was unheard of even a few years ago. Republicans rue the day when it was heard of thanks to Joe Biden, Elizabeth Warren and Bernie Sanders among others. Another way to restore some semblance of equality would be to tax wealth in addition to taxing income. People with assets, say, more than $50 million should pay a tax on their wealth while middle class and poor should be given help to start creating wealth for themselves. That would probably be something to do with home ownership since this is the way most middle class people have been able to create wealth for themselves.

However, it is becoming increasingly difficult for people of modest means to create wealth through home ownership because real estate prices have gone through the roof. It has become increasingly difficult for young people to come up with a down payment for a house, much less to make their monthly mortgage payments. The net result is that more and more people are forced into the situation of never owning property and being life time renters. This is the plan as private equity and hedge fund managers have accessed easy low interest money to buy up real estate and then rent it out so that the typical middle income young family is now renting a home from a hedge fund. NBC News reports: "The lack of supply of single-family homes has pushed up housing prices in many markets across the country — but would-be homebuyers find they are being outbid not just by other home seekers, but also by hedge funds." Hedge funds like the Blackstone group come in with all cash offers which are more attractive to sellers than the terms that average Joes and Janes can come up with. The Real Deal reports:

"Blackstone Group is planning to buy about 5,800 apartment units in San Diego for more than $1 billion.

"The New York-based private equity and investment firm has agreed to purchase 66 complexes across the city from the Conrad Prebys Foundation, according to the San Diego Union-Tribune. It also plans to make $100 million in improvements to the properties.

"With the deal, Blackstone will own 6,700 units in the Southern California city. It already owns $4.5 billion of assets in the city, including the Legoland theme park and the historic Hotel del Coronado.

"“We look forward to ensuring that these properties continue to provide the community with a high-quality rental option at a good value,” Blackstone Real Estate’s global co-head, Kathleen McCarthy told the Union-Tribune.""

According to the San Diego Union, "The deal makes Blackstone one of the biggest real estate holders in San Diego County." The writing on the wall is that, if you want to own a home, you have to move out of San Diego where the median home price is $855,000. For instance the median home price in Indianapolis is $229,900.

Off the Top of My Head

Problem of American Democracy: Will It Devolve to Tribalism?

by John Lawrence

The US was settled by western Europeans - white Anglo-Saxon Protestants. All the Founding Fathers and writers of the Constitution consisted of these folks. When the Europeans came here there were 100 million Native Americans. A few years later, due to war and disease, there were only 10 million. 90% of Native Americans were wiped out. African Americans were brought here as slaves and completely subjugated, first due to slavery and secondly due to Jim Crow laws up to 1965. So western Europeans predominated in the US right up to late in the 20th century. From the 1880s to the 1920s many of the immigrants were Eastern and Southern Europeans fleeing poverty. They were preceded by the Irish in the 1850s due to the potato famine. This was the era when the motto, "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore" really held true. Then in 1920 or thereabouts the door to immigration was slammed shut. The western Europeans who ran America were afraid that these new immigrants would outnumber them and take over. Tribalism had reared its ugly head. About the same time eugenics was elevated to the point that the Supreme Court allowed the states to sterilize people that they considered undesirable. In Virginia Carrie Beck was sterilized.

Now that African Americans have escaped the bounds of Jim Crow and other Persons of Color have come to predominate in many positions of power, the remnants of the western Europeans who controlled the US up until the last 30 years or so are feeling like they're losing their grip on power. Democracy, as it was set up by the WASP Founding Fathers, only worked when the citizenry were also predominantly WASPs.Although its ideals were lofty, it was never meant to include African Americans, Native Americans, Latin Americans or other Persons of Color from around the world. The point could be made that democracy only works when it is enacted completely within one tribe, and, when other tribes are incorporated into the community, it doesn't work so well. What is happening today is that the WASP tribe is losing its grip on power, and so is attempting to put democracy aside and just revert to a society in which WASPs hold the reins on power. That is what the Republican party and especially the election deniers are all about.

Election deniers and conspiracy theorists are simply using a dog whistle because they just can't come out and say that what thy are really about is reverting to a tribal state in which they maintain the power that WASPs have always been accustomed to. Donald Trump is just the symbol of this.Election denying is just a euphemism for white western European power. The harsh reality is that the remnant WASPS would rather have an autocracy that they control rather than a true democracy consisting of African Americans and other Persons of Color. They don't want the true history of the US which includes other harsh realities taught in class rooms. The history they want taught is circumscribed to include only Washington, Jefferson, Franklin, Lincoln and other WASPs but certainly not the realities of African and Native Americans and what happened to them at the hands of the WASPs.

So now what is at stake is the creation either of a true democracy which includes as full citizens and people allowed to enter positions of power those of African descent and other Persons of Color. What is at stake is a true Rainbow Coalition. The alternative is what the election deniers are trying to bring about which is an antidemocratic autocracy in which the descendants of WASPs prevail. That is basically what the Republican party represents - the descendants of WASPs. This is predominantly what the US has always been controlled by up till recently, and they want to continue in that mold. That's why the culture wars are heating up and what is taught in school is so important. If history is taught in such a way that it includes the realities of all Americans and not simply WASP Americans, it is taught in such a way that it does not reflect so favorably on WASP Americans. If non WASPS are given full citizenship or even if they are compensated for some of the inequities they have experienced in the past, this is threatening to the WASPs who would like to maintain the facade that they are good people and have always been good people. What is at stake is which version of reality will predominate in American society and who will be allowed into the Sanctum Sanctorum of American political power. Either the US becomes a true democracy or it reverts to a tribe controlled by the descendants of WASPs only.

Off the Top of My Head

Don't Be Fooled: The Chinese Communist Party Has Taken Capitalism to a Whole New Level

by John Lawrence

In 2021, Forbes listed Beijing with the most billionaires at 100 people, followed by New York City with 99 billionaires, and Hong Kong in third place with 80 billionaires. Does this sound like communism? But it is not traditional capitalism either. China has eliminated poverty among its 1.5 billion people while traditionally capitalist countries like the US tolerate large rates of poverty and homelessness. In the US in 2020, there were 37.2 million people in poverty, approximately 3.3 million more than in 2019. There were also 580 million people homeless living on the streets in unsanitary conditions. This is the price we've been taught that Americans have to pay in order for us to live in a free capitalist country. So what is the difference between the US version of capitalism and the Chinese version? It is basically that the Chinese central government directs the tools of capitalism while in the US there is little or no government direction. Whatever any individual can devise as a way to make money is acceptable. In China the government directs capitalist entrepreneurialism and energy. So Chinese society is much more unified; American society is much more diverse.

Stability and cohesiveness is very important to the Chinese government and Chinese society in general. That's why dissidents are cracked down upon. Their attitude is why risk the great progress Chinese society has made and is making in order that a few people can speak freely and perhaps create a dissident movement which could bring it all down around their ears. Hence the crackdown in Hong Long. Hence the crackdown on the Uighurs. Xi fears that what happened to the Soviet Union could happen to China. It could fall apart. The US tolerates unlimited amounts of free speech with the result that the US is a very unstable society as witnessed by the January 6 insurrection. The US came very close to a ooup d'etat and an overthrow of the elected government. The US definition of freedom is leading to a society which maximizes freedom at the expense of stability and cohesiveness while the Chinese limit freedom in the interests of stability and cohesiveness. Which model is better? The world is watching.

Perhaps there is a middle ground between Chinese authoritarianism and US anarchy. Is this the social welfare democracies of Scandinavia? Perhaps. While the US has divided itself into 2 tribes at total odds with each other, China has become not only very prosperous but they are all, for the most part, on the same page. They are unified while the US is divided. Perhaps China has overdone the limitation of individual freedom, but most Chinese would probably trade off some loss of freedom for the huge increase in prosperity that the average Chinese is experiencing. Would Americans trade off some loss of freedom in order to get out of the malaise they are experiencing? Even though there are more rich Chinese than rich Americans at least in terms of the relative numbers of billionaires, there are no poor Chinese while the economic divide in the US grows bigger with every passing day.

The question Americans have to ask themselves is is a society teetering on the brink of collapse worth the American definition of freedom or could perhaps a slightly less free society, say one with a corresponding ethic of social responsibility, lead to a better society in terms of a better and more humane quality of life for the greatest number of citizens? Has America taken the concept of individual freedom too far at the expense of social cohesiveness?

How Wealth Inequality Spiraled Out of Control

by Robert Reich

Wednesday, November 3, 2021

Elon Musk’s wealth has surpassed $200 billion. It would take the median U.S. worker over 4 million years to make that much.

Wealth inequality is eating this country alive. We’re now in America’s second Gilded Age, just like the late 19th century when a handful of robber barons monopolized the economy, kept wages down, and bribed lawmakers. 

While today’s robber barons take joy rides into space, the distance between their gargantuan wealth and the financial struggles of working Americans has never been clearer. During the first 19 months of the pandemic, U.S. billionaires added $2.1 trillion dollars to their collective wealth and that number continues to rise. 

And the rich have enough political power to cut their taxes to almost nothing — sometimes literally nothing. In fact, Jeff Bezos paid no federal income taxes in 2007 or in 2011. By 2018, the 400 richest Americans paid a lower overall tax rate than almost anyone else.  

But we can not solve this problem unless we know how it was created in the first place.

Let’s start with the basics.

I. The Basics

Wealth inequality in America is far larger than income inequality. 

Income is what you earn each week or month or year. Wealth refers to the sum total of your assets — your car, your stocks and bonds, your home, art — anything else you own that’s valuable.Valuable not only because there’s a market for it — a price other people are willing to pay to buy it — but because wealth itself grows. 

As the population expands and the nation becomes more productive, the overall economy continues to expand. This expansion pushes up the values of stocks, bonds, rental property, homes, and most other assets. Of course recessions and occasional depressions can reduce the value of such assets. But over the long haul, the value of almost all wealth increases.

Lesson: Wealth compounds over time.

Next: personal wealth comes from two sources.The first source is the income you earn but don’t spend. That’s your savings. When you invest those savings in stocks, bonds, or real property or other assets, you create your personal wealth —  which, as we’ve seen, grows over time. 

The second source of personal wealth is whatever is handed down to you from your parents, grandparents, and maybe even generations before them — in other words, what you inherit. 

Lesson: Personal wealth comes from your savings and/or your inheritance.

II. Why the wealth gap is exploding

The wealth gap between the richest Americans and everyone else is staggering.
In the 1970s, the wealthiest 1 percent owned about 20 percent of the nation’s total household wealth. Now, they own over 35 percent. 

Much of their gains over the last 40 years have come from a dramatic increase in the value of shares of stock. 

For example, if someone invested $1,000 in 1978 in a broad index of stocks — say, the S&P 500 — they would have $31,823 today, adjusted for inflation. 

Who has benefited from this surge? The richest 1 percent, who now own half of the entire stock market. But the typical worker’s wages have barely grown. 

Most Americans haven’t earned enough to save anything. Before the pandemic, when the economy appeared to be doing well, almost 80 percent were living paycheck to paycheck.

Lesson: Most Americans don’t make enough to save money and build wealth.

So as income inequality has widened, the amount that the few high-earning households save — their wealth — has continued to grow. Their growing wealth has allowed them to pass on more and more wealth to their heirs. 

Take, for example, the Waltons — the family behind the Walmart empire — which has seven heirs on the Forbes billionaires list. Their children, and other rich millennials, will soon consolidate even more of the nation’s wealth. America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers pass on, somewhere between $30 to $70 trillion will go to their children over the next three decades. 

These children will be able to live off of this wealth, and then leave the bulk of it — which will continue growing — to their own children … tax-free. After a few generations of this, almost all of America’s wealth could be in the hands of a few thousand families.  

Lesson: Dynastic wealth continues to grow.

III. Why wealth concentration is a problem

Concentrated wealth is already endangering our democracy. Wealth doesn’t just beget more wealth — it begets more power. 

Dynastic wealth concentrates power into the hands of fewer and fewer people, who can choose what nonprofits and charities to support and which politicians to bankroll. This gives an unelected elite enormous sway over both our economy and our democracy.

If this keeps up, we’ll come to resemble the kind of dynasties common to European aristocracies in the seventeenth, eighteenth, and nineteenth centuries.

Dynastic wealth makes a mockery of the idea that America is a meritocracy, where anyone can make it on the basis of their own efforts. It also runs counter to the basic economic ideas that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

Finally, wealth concentration magnifies gender and race disparities because women and people of color tend to make  less, save less, and inherit less.
The typical single woman owns only 32 cents of wealth for every dollar of wealth owned by a man. The pandemic likely increased this gap. 

The racial wealth gap is even starker. The typical Black household owns just 13 cents of wealth for every dollar of wealth owned by the typical white household. The pandemic likely increased this gap, too. 

In all these ways, dynastic wealth creates a self-perpetuating aristocracy that runs counter to the ideals we claim to live by.

Lesson: Dynastic wealth creates a self-perpetuating aristocracy.

IV. How America dealt with wealth inequality during the First Gilded Age

The last time America faced anything comparable to the concentration of wealth we face today was at the turn of the 20th century. That was when President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy.

Roosevelt’s answer was to tax wealth. Congress enacted two kinds of wealth taxes. The first, in 1916, was the estate tax — a tax on the wealth someone has accumulated during their lifetime, paid by the heirs who inherit that wealth. 

The second tax on wealth, enacted in 1922, was a capital gains tax — a tax on the increased value of assets, paid when those assets are sold.

Lesson: The estate tax and the capital gains tax were created to curb wealth concentration.

But both of these wealth taxes have shrunk since then, or become so riddled with loopholes that they haven’t been able to prevent a new American aristocracy from emerging.

The Trump Republican tax cut enabled individuals to exclude $11.18 million from their estate taxes. That means one couple can pass on more than $22 million to their kids tax-free. Not to mention the very rich often find ways around this tax entirely. As Trump’s former White House National Economic Council director Gary Cohn put it, “only morons pay the estate tax.”

What about capital gains on the soaring values of wealthy people’s stocks, bonds, mansions, and works of art? Here, the biggest loophole is something called the “stepped-up basis.” If the wealthy hold on to these assets until they die, their heirs inherit them without paying any capital gains taxes whatsoever. All the increased value of those assets is simply erased, for tax purposes. This loophole saves heirs an estimated $40 billion a year.

This means that huge accumulations of wealth in the hands of a relatively few households can be passed from generation to generation untaxed — growing along the way — generating comfortable incomes for rich descendants who will never have to work a day of their lives. That’s the dynastic class we’re creating right now.

Lesson: The estate tax and the capital gains tax have been gutted.

Why have these two wealth taxes eroded? Because, as America’s wealth has concentrated in fewer and fewer hands, the wealthy have more capacity to donate to political campaigns and public relations — and they’ve used that political power to reduce their taxes. It’s exactly what Teddy Roosevelt feared so many years ago.

V. How to reduce the wealth gap

So what do we do? Follow the wisdom of Teddy Roosevelt and tax great accumulations of wealth. 

The ultra-rich have benefited from the American system — from laws that protect their wealth, and our economy that enabled them to build their fortunes in the first place. They should pay their fair share. 

The majority of Americans, both Democrats and Republicans, believe the ultra rich should pay higher taxes. There are many ways to make them do so: closing the stepped up basis loophole, raising the capital gains tax, and fully funding the Internal Revenue Service so it can properly audit the wealthiest taxpayers, for starters. 

Beyond those fixes, we need a new wealth tax: a tax of just 2 percent a year on wealth in excess of $1 million. That’s hardly a drop in the bucket for centi-billionaires like Jeff Bezos and Elon Musk, but would generate plenty of revenue to invest in healthcare and education so that millions of Americans have a fair shot at making it. 

One of the most important things you as an individual can do is take the time to understand the realities of wealth inequality in America and how the system has become rigged in favor of those at the top — and demand your political representatives take action to unrig it. 

Wealth inequality is worse than it has been in a century – and it has contributed to a vicious political-economic cycle in which taxes are cut on the top, resulting in even more concentration of wealth there – while everyone else lives under the cruelest form of capitalism in the world. 

We must stop this vicious cycle — and demand an economy that works for the many, not one that concentrates more and more wealth in the hands of a privileged few. 

Off the Top of My Head

The Infrastructure Bill and How to Pay for It Are Two Separate and Distinct Issues That Have Nothing to Do With Each Other

by John Lawrence

We know that the US government does not have to tax in order to spend since the US has a sovereign currency (See Modern Monetary Theory), and the Federal Reserve can just place the requisite amount of money for the infrastructure bill in the Treasury's account at the Fed. The problem is that, according to US law, if there is not enough money in the Treasury's account to pay for stuff, it must issue and sell Treasury bonds to make up the difference. These bonds then contribute to the deficit which is added to the national debt. We also know that the national debt never needs to be paid off, but Treasury bonds do need to be paid when the holder asks for the money when they come due. In addition interest does need to be paid on them. If the Fed keeps the interest rate for Treasuries at zero, this is not a problem. So why would anyone purchase Treasury bonds if they get zero interest? Well, countries that peg their currencies to the dollar (like China) need dollars in order to conduct business. Besides if someone comes to them with a basket full of renminbi and asks for US dollars, they have to be able to pay them the dollars and accept the renminbi. So there is always a market for US Treasury bonds. Even if there wasn't, the Fed would end up purchasing them and taking them onto its balance sheet where they would essentially disappear into a black hole never having to be paid back.

So what is the problem with just having the Fed create the money and place it in the Treasury's account without "paying for" it with taxes. No problem really. Joe Biden just wants to kill two birds with one stone. The first bird is the money for infrastructure. The second bird is doing something about the widening economic inequality by taxing the rich. There is no actual need to issue Treasuries in the first place except that US law requires it. The money could just go directly on the Fed's balance sheet without the intermediate step of selling Treasuries. There are however some good reasons for not taking too much advantage of this possibility. One is inflation. As more money floods into the economy through deficit spending, inflation could heat up whether or not the money comes from taxes. The other issue is that as other countries accumulate more and more Treasury bonds with or without interest being paid on them, they start to have the ability to use those dollars to purchase US assets. It's not inconceivable that a particular country - let's say China - couldn't accumulate enough Treasuries to buy up cities.

New York City has the most valuable real estate in the U.S. at $2.8 trillion — slightly more than the entire GDP of the United Kingdom for 2019. In fact, this is greater than the GDP of all but just five countries — India, Germany, Japan, China and the United States. The value of New York is comparable to the combined market value of tech giants Apple and Microsoft. China owns about $1.1 trillion in US Treasuries. If they demanded it all tomorrow, the Fed would have no problem paying them, but then they could buy up more than a third of New York City or almost all of San Francisco valued at $1.3 trillion. This could eventually become a problem so it would be better not to even make up the difference by issuing Treasuries in the first place. The alternative is for the Fed just to create the money and place it in the Treasury's account as authorized by Congress without the Treasury having to sell bonds to make up the difference between the amount of taxes and the amount of the authorization.

Then the issue becomes inflation. There is already wage inflation as employers are forced to pay more for employees, for a number of reasons, thus raising the price of products and services. This is "good" inflation since wage earners have not seen an increase in their income for 40 years. There is also "bad" inflation in that the increasing wealth of the upper 10% , and especially the upper 1%, is causing asset inflation in terms of the increasing cost of real estate and rent. Asset inflation is also happening in the stock market although it's hard to see how this is a bad thing except for the fact that about 50% of the people don't own stocks so that gap between rich and poor is only increasing. The third form of inflation occurs when there is too much money chasing too few goods and services. This could be caused by too much deficit spending. The fourth kind is the "super bad" inflation known as hyperinflation. This is the kind of inflation that affected the Weimar republic in Germany before the Second World War and also affects poor countries. It also recently affected Greece because Greece gave up its sovereign currency when it adopted the euro. Hyperinflation occurs when a country needs to borrow money from the capital markets subject to increasing interest rates. As their economy declines interest rates go up until finally they are paying more in interest than their economies can keep up with. The US can never be put in this position since it never has to go to the capital markets to borrow money. The Federal Reserve can just issue whatever money is needed and can set its own interest rate since the US dollar is a sovereign currency.

So while there are limits to the amount of prudent deficit spending, one of them is not paying for it through taxes. The US Federal government never has to tax in order to spend. It can pass a bill to build infrastructure with the only limitation being the physical and material resources that are available to do it.

https://www.cnbc.com/video/2019/03/01/stephanie-kelton-explains-modern-monetary-theory.html

 

Off the Top of My Head

How to Pay For Infrastructure

by John Lawrence

Modern Monetary Theory (MMT) points out that neither social programs nor tax cuts need to be "paid for." A government such as the US with a sovereign currency can issue the money without having to tax first. Taxes are only necessary to control inflation. The biggest amount of inflation in the economy right now is the inflation of billionaires' wealth assets because their increases in wealth are not taxable. The IRS only taxes workers' incomes, not billionaires increasing asset wealth. That's why economic inequality is growing by leaps and bounds, and we need a wealth tax. But as for infrastructure, the Fed can just create the money in the Treasury's account at the Fed with a few keystrokes on a computer like it did when it bailed out Wall Street in 2008.

In The Deficit Myth, Stephanie Kelton writes (circa 2015):

"No one [on Capitol Hill] questioned the significant need for infrastructure investment. A trillion dollars, while ambitious, would have only taken a bite out of the problem. No one blanched at the price tag, but there was considerable debate about whether (and how) to pay for it.

"Before I tell you about that debate, it's important to understand what those words mean to lawmakers and their staffers on Capitol Hill. In truth, there is only one way to pay for anything. All federal spending is carried out in exactly the same way - that is, the Federal Reserve credits the appropriate bank account(s). But in Washington speak, you "pay for" your spending by showing that you can "find" enough money to cover the cost of whatever it is you're proposing to spend. It's all a game, really, and it's rooted in the flawed mental model [that the government needs to tax and/or borrow before it spends] that holds back so much of our potential. To avoid adding to the deficit, lawmakers look for ways to cover the costs of their proposed spending without borrowing. That means they usually go looking for new tax revenue."

As Kelton points out, the US doesn't need to tax before it can spend. Biden's wanting to pay for infrastructure by taxing the rich is not necessary to pay for infrastructure per se, but it is necessary to get unbounded economic inequality under control.

Kelton continues:

"So back to the debate over the trillion-dollar infrastructure ill. The conversation began with staffers being asked whether we thought a so-called pay-for should be attached to the bill. It was my first week on the job, so I was relieved when another staffer spoke up first. "No," this person began, "I think we should just do it as a clean bill." A clean bill meant writing a spending bill that didn't include any language abut how to pay for it. Another staffer agreed, and soon I echoed their sentiments. Our country desperately needed to make these investments. There was clearly enough fiscal space to do it, and infrastructure is one of the things that has traditionally enjoyed bipartisan support. Since the GOP was in control of the Senate, we reasoned, the bill would need at least some support from Republicans to pass. [Ha. Ha] Proposing a tax increase would guarantee defeat. Not everyone agreed. Another staffer objected that the press wouldn't take the legislation seriously unless it specified exactly how it would be paid for. In the end, the bill included a proposal to raise revenue by closing a variety of tax loopholes that overwhelmingly benefit the rich. Needless to say, the legislation did not pass. Meanwhile, the latest ASCE [American Society of Civil Engineers] report card shows how deferred maintenance is catching up with us, as the cost of our needed improvements has climbed to a whopping $4.59 trillion."

Is it deja vu all over again? Is it gridlock or spinning our wheels as infinitum? Is it Republicans thinking it is more important to defeat Obama's and now Biden's agendas than it is to prevent bridge collapses?

Kelton's point is that the US doesn't really need to "pay for" anything by taxing first or finding the money first. "In 2017, a 1215-page bill, known as the National Defense Authorization Act, sailed through the Senate with a vote of 89-9. The White House had requested $700 billion, but the Senate had authorized $737 billion, kicking in another $37 billion without hint of concern about where to "find" the money. They simply voted in an overwhelmingly bipartisan way to increase the Pentagon's discretionary budget."

Yet the Pentagon budget has not protected us from international ransomware attacks nor domestic terrorists. May I submit that the money is misspent and misdirected? Instead of going where the money is really needed it goes to the vested interests in the military-industrial complex who continue to justify war in order to line their own pockets.

Kelton continues: "That might seem like a double standard. As Congresswoman Alexandria Ocasio-Cortez put it, "We write unlimited blank checks for war. We just wrote a $2 trillion check for the GOP tax cut, and nobody asked those folks, 'How are they going to pay for it?' She's right. Somehow, there's always money for war and tax cuts. For just about everything else, however, lawmakers are expected to show that they can "pay for" their spending."

As MMT has shown, the US government does not need to tax or borrow in order to spend. Taxation is necessary to control inflation, to extract money from the economy if there is too much of it out there chasing too few goods or services. Right now there is too much money out there in the hands of billionaires that should be extracted in order to prevent runaway financial inequality. But it is not necessary to tax before money can be spent on infrastructure or anything else. There are limits, and the limits are the material and human resources that are available to soak up that money by providing constructive economic activity like building infrastructure. Hyperinflation like what happened in the Weimar Republic or even Greece cannot happen in the US because the US never has to go to the capital markets to borrow money at prevailng interest rates. The US central bank, the Fed, issues whatever money is necessary to pay US bills and that includes any money appropriated by Congress whether for war, tax cuts or building infrastructure.

https://www.youtube.com/watch?v=a9pAPIUYXxQ

 

Off the Top of My Head

Republicans Represent a Diasporized Ku Klu Klan

by John Lawrence

America First was also a credo of the white supremacist Ku Klux Klan organization. This assertion rated true by Snopes. Now Marjorie Taylor Greene and Matt Gaetz are embarking on an "America First" tour of the USA. It seems that the US can not get over its racist past. Republicans are basing their party on lies like that Trump won the election. Maybe the biggest lie was the one Thomas Jefferson wrote when he penned the preamble to the Constitution: All men are created equal. That was patently a lie because Jefferson himself was a slave owner as was George Washington and many of the other Founding Fathers.Obviously, Native Americans were not created equal. Neither were African Americans. So why did Jefferson create the first BIG LIE which Trump and the likes of Marjorie Taylor Greene are only perpetuating. On the other hand the sentiments embodied in Jefferson's preamble can be seen as aspirational and that is the tack the Democratic party is taking at the present time. Let's make this a country where all men, women and children are in fact created equal.

The Ku Klux Klan has become normalized in the Republican party which pretends to exemplify our Anglo Saxon heritage. So let's just go back to the era of King George, why don't we? Republicans could change their name to the Tory party. The term Tory or "Loyalist" was used in the American Revolution for those who remained loyal to the British Crown. Since early in the 18th century, Tory had described those upholding the right of the King over Parliament. During the war of independence, particularly after the Declaration of Independence in 1776, this use was extended to cover anyone who remained loyal to the British Crown. The US has already become a neo-feudal society with great wealth concentrated in the upper one percent, and great poverty concentrated among black and brown people. "America First" is just a slogan for perpetuating the idea that those who are superior by dint of their having acquired great wealth should be the nobiity and the lesser among us should just be content with their lot of a few crumbs from the table. They surely shouldn't be given de facto equal rights despite the fact that the Constitution says that they were created equal.

A diaspora is a spreading out of a people or a philosophy. The Ku Klux Klan used to be concentrated mainly in the South. The Republican party is still based there, but the philosophy has metastasized to include white supremacists in the heartland as well. "Republican" is a more respectable name for a philosophy that bears an eerie resemblance to that of the Ku Klux Klan. "America First: really means "white people first." Let's just keep the example that white people were the ones that first officiated over the construction of a so-called democracy, one that denied women, African Americans and Native Americans the vote. The only reason they let in eastern and southern  Europeans was that they needed their labor power. Asians were discriminated against and even put in concentration camps during the Second World War. What has been consistent about America is the fact that white people have held the reins of power ever since the country began. African Americans, who have been here as long as white people have, were first enslaved and then subjected to Jim Crow laws. Native Americans were herded onto reservations.

At the beginning of the 1830s, nearly 125,000 Native Americans lived on millions of acres of land in Georgia, Tennessee, Alabama, North Carolina and Florida–land their ancestors had occupied and cultivated for generations. By the end of the decade, very few natives remained anywhere in the southeastern United States. Working on behalf of white settlers who wanted to grow cotton on the Indians’ land using black slaves as labor power, the federal government forced them to leave their homelands and walk hundreds of miles to a specially designated “Indian territory” across the Mississippi River. This difficult and sometimes deadly journey is known as the Trail of Tears.

So get the picture? All men, let alone women, were not created equal in fact despite Jefferson's words which he didn't really believe himself. At best they were aspirational. Well how long do some people have to wait for aspirations to become realized? Joe Biden's administration is trying to correct some of these historical wrongs which go back to the BIG LIE that was embodied in the US Constitution with the flowery words of Thomas Jefferson. Today Trump supporters like Marjorrie Taylor Greene and Matt Gaetz with their America First tour are only trying to perpetuate the BIG LIES that go back to the beginning of the country. They didn't start with Trump. He only exemplified them, and now Republicans are doing their best to carry on that American tradition.

Off the Top of My Head

Joe Biden's Trillion Dollar Budget Plan

by John Lawrence

Don't worry about how to pay for it. Any nation with a sovereign currency (let alone the world's reserve currency) and a floating exchange rate can never go bankrupt. The Federal Reserve can issue the money. In fact in the real world this is exactly how it works for any budgetary legislation passed by Congress and signed by the President. Let's say, for example, Biden's $2 trillion infrastructure plan is signed by him into law. The US Treasury has an account at the Federal Reserve bank. Let's say there is only a trillion dollars in that account. What happens next is that the Fed just augments the Treasury's account by a trillion dollars by means of a few keystrokes on a computer. Bingo the government now has all the money it needs to spend on infrastructure. It didn't have to receive tax money in advance of the money it needed to spend. At the same time the Treasury Department creates a trillion dollars worth of Treasury bonds and sells them to the primary dealers who are required by law to buy them. These are mainly big Wall Street banks. These banks sell the bonds in the secondary market. If they can't find enough buyers, the Fed "adds liquidity to the market" by taking the Treasuries onto its balance sheet in return for marking up the Wall Street banks accounts at the Fed with the appropriate amounts of cash. Now everybody is happy. The US government has the money it needs in its Treasury's account at the Fed. The Wall Street banks have plenty of liquidity in their reserve accounts at the Fed, and the amazing thing is that it didn't require any money from additional taxes.

Another amazing thing is that most politicians are totally ignorant about how government financing actually works. The Republican Governor of Ohio, Mike DeWine gets on TV and opines about the fact that the US is going into too much debt and how will our grandchildren ever pay it off. "Here in Ohio," I'm paraphrasing," we have to pay our bills and pay down our debts. Every household has to be fiscally responsible and pay their debts." Well households and states are in a different category from the Federal government. They actually do have to pay their debts. So what he is claiming is a half truth. States and households cannot issue a sovereign currency whereas the Federal government can. States and households use the Federal government's currency. The big lie, however, is that the US government has to pay off its debts. It never does, and no entity can force it to do so. The other constraint that Larry Summers and others worry about is inflation or currency devaluation. Inflation could be a problem, and that problem, should it arise, can be dealt with by sucking money out of the economy by means of taxes. Biden's plan to tax the rich will suck some of their superfluous wealth out of the economy thus forestalling inflation while tending to reduce the runaway economic inequality that is now threatening democracy in the US.

The Federal government is not like a household or a state. Households and states actually do have to pay back the money they borrow plus interest. That's why it's so important that the various COVID rescue plans provide the states and municipalities with money. Otherwise, they could become financially insolvent and go bankrupt like Orange County in California did a few years ago. Birmingham, AL also got itself in hot water and went bankrupt. Countries in the Euro zone have the same problem as states in the US. They gave up their sovereign currencies when they joined the EU. So now countries like Greece and Italy have to beg the European Central Bank for relief, relief they could have provided for themselves if they had retained their sovereign currencies like Britain did. Britain will not have any problem with financial shortages because, like the US, its government can issue whatever currency is deemed necessary to weather any storm.

So in addition to the Big Lie that Trump won the election, politicians of both parties are perpetrating another Big Lie that the US actually has to borrow the money to pay for Biden's trillion dollar infrastructure and safety net programs. Some politicians, like Bernie Sanders and AOC, actually know the truth, and, evidently, they have convinced Joe Biden thereof as well although they won't actually come out and say it to the media: the US government can just issue money into the private economy. It doesn't need to borrow it or even tax for it in advance in order to spend. So the real policy of the Biden administration is not tax and spend. It's spend and maybe tax later, but target those taxes on the wealthiest among us. As opposed to the Republican philosophy of giving tax breaks to the wealthy and taking the social safety net away from the poor.

Off the Top of My Head

The Stock Market is Too Big to Fail

by John Lawrence, April 2, 2021

Just as the big Wall Street banks are too big to fail, so now is the stock market. The stock market will never take another radical dive downward because the Federal Reserve won't let it. The way the economy is shaping up Treasury bonds, which hardly pay any interest, are just a safe place to store your money and also for foreign nations which need the world's reserve currency (the US dollar) to have a savings account because they need dollars to conduct business. There is no worry that the US will have to pay off the trillion dollars in Treasuries that China owns because they need those dollars to do business with the US and other nations. If they did want to dump all their Treasuries for some reason the Fed could just create the money to pay them and effectively take the Treasuries on its own balance sheet.

So the stock market is the only game in town for those who want to actually "invest" their money. There is so much 401(k) money in the stock market that that is reason enough to never let it fail. Instead it will continue on its merry way upward while the Fed keeps interest rates at approximately zero so that not much in the way of interest will have to be paid on US debt. There is no reason to fear that Joe Biden's $2 trillion infrastructure plan will bankrupt the US. Since the US dollar is a sovereign currency, the Fed can print as much money as it wants. If international investors don't want to buy this debt, it ends up on the Fed's balance sheet which is an effective black hole from which it never has to emerge.

Then why is there all this kibuki theater about "how to pay for it," the $2 trillion infrastructure plan I mean. It's just that most Americans including most Congressmen are under the illusion that a country with a sovereign currency like the US faces any constraints in paying for anything. Well, there is one constraint - inflation. This is probably of little concern as long as the money is targeted at the lower middle class an the poor which haven't seen wages rise in 40 years. The real inflation in the economy is the asset inflation that the rich are mostly responsible for. That includes the stock market and real estate. Inflation in the stock market will be carefully controlled by the Fed. We've seen that the stock market moved up even during the pandemic. The real problem is inflation in the real estate market which has made housing unaffordable for many. It continues to get worse as the extra dollars the wealthy have to invest are driving up prices. That's why it makes sense to tax the rich ostensibly to pay for the infrastructure bill. The real reason, however, is that inequality is getting out of hand in the American and the world economy. Taxing the rich is the only effective means to reduce inequality to a reasonable level. It will also help to bring inflation in the real estate market under control.

The real problem that Biden's infrastructure bill will have to deal with is changing the nature of the US economy. When the economy was in full employment under Trump, there were still 4% unemployed. 5% unemployment is considered "full employment," but that still leaves about 15 million people out of work. Biden's infrastructure plan will put those 5% back to work. It had been considered by conservative neoliberal economists that 5% unemployment was necessary to ward off inflation, but that theory has been debunked by Modern Monetary Theory. While inflation will still be a concern with all of Biden's stimulus spending, the main concern is restructuring the US economy from an entertainment economy to a constructive labor economy. Trump's economy was arguably a full employment economy (except for the 4% unemployed), but it was an economy the jobs of which were mainly in the entertainment and military industries. In other words, in my opinion, it was an economy based on false unbeneficial values. An economy based on labor participation rebuilding American infrastructure will be an economy based on necessary and fundamentally beneficial values. This might mean that some of those presently employed in frivolous industries might be incentivized to change jobs. Reducing the entertainment and military sectors while increasing those employed rebuilding infrastructure would be, in my opinion, be a good thing.

 

Off the Top of My Head

Biden's Infrastructure Initiative: Don't Worry About How To Pay For It

by John Lawrence, March 30, 2021

Even Republicans agree that there is a need to upgrade the infrastructure of the US. But they don't want to raise taxes to pay for it. Good news! You don't need to pay for it with tax money. The US dollar is a sovereign currency. That means that the central bank, in this case the Fed, can just create the money. In fact this is how it's always been done. The deficit is just an accounting regime. Money created by the Fed need never be paid back. It just goes on the Fed's balance sheet. This is a fact known and agreed to by most economists but many politicians and the American public are totally ignorant of this basic fact about how the economy works. Modern Monetary Theory has attempted to explain it in books like "The Deficit Myth" by Stephanie Kelton. So why does Biden also propose tax increases on the rich to pay for it? These are really two separate issues. Taxes need to be raised on the rich to try to bring into balance the skyrocketing financial inequality that has been occurring, not to pay for the infrastructure bill. Why do politicians including President Biden continue to perpetuate the myth that appropriations bills need to be "paid for." Why don't they just come out and say the truth - that a nation with a sovereign currency can never run out of money?

When just a few people own most of the wealth, we're back in a neo-feudal society where the rich control the political process, and the rest of the people are merely peons who don't really have a stake in the society at all. The Republican attempts to change the voting laws to suppress the minority vote is a way to cement that fact in American society. That's why it's so important to liberalize the voting laws so that every American citizen is encouraged to vote, not discouraged from it. So the infrastructure initiative is really two or even three pronged: rebuild infrastructure such as roads, bridges, ports, rail lines, airports and broadband thus putting millions back to work in good paying jobs. Secondly, to build back better in the sense that, insofar as possible, address the problem of global warming, and, thirdly, to make a first step in addressing economic inequality. All these things are important.

The only thing to watch out for while spending all this money is inflation, and some economists like Larry Summers are already sounding alarm bells over that. By taxing the rich and corporations money will be sucked out of the economy thus tending to reduce inflation. If sucking money out of the economy reduces inflation, then the sucking must be addressed to those areas where excess money really exists: namely, the rich and corporations who have been getting away with murder for years under both Republic and Democratic administrations. Forbes reported that "The 3 Richest Americans Hold More Wealth Than Bottom 50% Of The Country." Forbes ought to know. Perhaps with Biden's plan to tax the rich, it'll take 10 of the richest to equal the bottom 50%'s share. As for inflation, so much money in so few hands has already produced asset inflation in the form of rising housing and rent prices making it problematic for the young and the poor to support themselves especially at a minimum wage that hasn't increased in 50 years. What Summers doesn't understand is that the inflation that has occurred has been in the money that has been made by the rich which is actually wealth inflation, not in the form of wage inflation of the poor and middle class. Therefore, in turning this process around Biden's infrastructure bill is actually pointing the American economy in the correct direction.

Off the Top of My Head

How to Throw Republicans for a Loop: Biden Should Propose Tax Breaks for the Middle Class and Tax Increases for the Rich

by John Lawrence, February 25, 2021

The proper use of taxation is to reduce income and wealth inequality. Instead Republicans use tax breaks to primarily benefit the rich. Democrats should modify this playbook. The increasing income and wealth inequality among American citizens cries out for redress. Robin Hood needs to come out and play. There's no law that says tax breaks have to go primarily to the wealthy or be based on some proportionate percentage over all incomes. Democrats should get into the tax break game too. We know that taxes aren't necessary to fund the government. Sure they're part of it, but the government can spend whatever Congress authorizes regardless of whether or not there is money from taxes to pay for it. The shortfall is made up with Treasury bonds most of which end up on the balance sheet of the Federal Reserve just like the Fed used Quantitative Easing (QE), a fancy name that signified that the Fed issued trillions of dollars to bail out the Wall Street banks in 2008. In that case the Fed took MBSs (Mortgage Backed Securities), most of which were worthless onto its balance sheet as "collateral." The Fed can lend money to any entity it likes as long as it takes collateral onto its balance sheet. Much of this collateral is worthless such as defunct MBSs and even old bicycles!

In the article, "Modern Monetary Theory and the Changing Role of Tax in Society," by Andrew Baker and Richard Murphy, published online by Cambridge University Press we find the following:

"Tax is traditionally viewed as the main funding mechanism for government spending. Consequently, social policy is often seen as something determined and constrained by tax revenue. Modern Monetary Theory (‘MMT’) presents a reversal of the tax-spend cycle, by identifying a spend-tax cycle. Using the UK as an example, we highlight that one of MMT’s most important, but under-explored, contributions is its potential to re-frame the role of tax from both a macroeconomic and social policy perspective. We use insights on the money removal, or cancellation function of taxes, derived from MMT, to demonstrate how this also creates possibilities for using tax to achieve social objectives such as mitigating income and wealth inequality, increasing access to housing, or funding a Green New Deal. For social policy researchers the challenge arising is to use these insights to re-engineer tax systems and redesign social tax expenditures (STEs) for creative social policy purposes."

MMT is a game changer. Conventional thinking is that government can only spend money collected from taxes. But that is not how the system really works. As a sovereign currency, the Fed can just create US dollars with a few keystrokes on a computer. The budget deficit and national debt just become accounting entries on the Fed's balance sheet. We are not mortgaging our children's and grandchildren's future. This is money that never needs to be paid back, that our children never need to pay back. China is not holding this debt over our heads; China could be paid back tomorrow if need be. The US government operates on a different set of principles than the US states, European countries in the Euro zone, and households. All these entities do need to pay back loans. The US government does not because it can just create or issue the money which is how the Fed operates on a daily basis. Even local banks create money when a loan is taken out without the need for deposits. They just have to have collateral - usually 10% of deposits - in their reserve account at the Fed. So money can just be created by the Federal Reserve, but, obviously, it does not do so willy nilly. Like alcohol, this facility must be used responsibly. So that is what the debate should be about, not the size of the deficit or the national debt.

The national debt was a problem when the US dollar was on a gold standard. The US promised to redeem dollars - paper currency - for gold up until 1971. Obviously, there was not enough gold if, all of a sudden, China, let's say, wanted to take all its US dollars and demand gold at $35 an ounce. But in 1971 President Nixon took the US off the gold standard. He said the US would forevermore not redeem US currency for gold. At that point the US dollar became a "fiat" currency. That means that a dollar was worth a dollar just because the US government said it was. The US dollar did not become immediately worthless. People continued to use it, and it continued to retain its value vis a vis other currencies. In fact it's the world's reserve currency as Nixon made a deal with the Saudis only to accept payment for oil in US dollars. That alone meant that the other countries of the world needed US dollars if for no other reason than to buy oil. As a matter of fact today most business dealings of foreign countries are settled in US dollars. So the US dollar has a bright future at least for now.

The conclusion is that US households, businesses, US states and European nations that use the Euro need to pay back loans when they borrow money. A nation with a sovereign currency such as the US, the UK, Japan, China and others creates its money when its central bank issues it by means of keystrokes. No one can demand repayment or exchange of dollars for gold or anything else. If China wants to be paid back for the Treasury bonds it holds, the money in its Treasuries (savings) account at the Fed will be debited and credited to its checking account at the Fed. It's as simple as that. That money can be exchanged for Chinese currency on the open market at the prevailing exchange rate. But probably the Chinese would want to keep much of their financial assets in dollars rather than renminbi since their currency is pegged to the dollar and many of their business dealings are settled in dollars.

Off the Top of My Head

Mitch McConnell: "Loony Lies and Conspiracy Theories are Cancer for Republican Party"

by John Lawrence, February 3, 2021

Now even the leader of the Senate Republicans is admitting the Republican party is a joke. They've got nothing besides idol worship and rabbit holes. What do they stand for? White supremacy, bellicose machoism, xenophobia and solipsism masquerading as the American Dream. They stand for nothing except greasing their own palms and staying in power. McConnell at least and a few other principled Republicans like Liz Cheney, Mitt Romney and John Kasich actually are trying to reconstruct the Republican party based on conservative principles. Their problem is that their base is a bunch of wahoos that can't get enough of being entertained by Donald Trump or Marjorie Taylor Greene. Fantasy trumps reality for them.

The point is that in realistic terms the Republican party has nothing to offer. In a world that cries out for cooperation among great powers, they stand for bellicose machoism and bullying. In world where private enterprise is incapable of solving major outstanding problems like climate change and the pandemic, their emphasis on small government falls flat. In a world where it is becoming clear that taxes alone are not necessary for government spending, their pejorative negative hurled at Democrats - "tax and spend" - is meaningless. Their attempts at pulling the wool over Americans' eyes are becoming dispelled. Their fiscal policies have only served to increase economic inequality - to make the rich richer and the poor poorer. So what have they got? A base composed of looney tunes and no nothings and a head composed of the rich and powerful. It doesn't compute.

Republicans want to hearken back to a nostalgic past where black lives didn't matter, white people occupied all positions of prominence, Native Americans were extras in western movies and the concept of global warming had not even been formulated and was not on anybody's radar. They want things like they used to be. Well a lot has changed since then, whatever your definition of "then" is.  Forever wars are draining government finances that could be used in more productive ways. Global warming needs a MEOW solution - the Moral Equivalent of War. This calls for a large amount of government spending. It is becoming more evident, thanks to the exposition of Modern Monetary Theory, that the US government can never run out of money because the US dollar is a sovereign currency which can be created by a few keystrokes at the Fed. Even regular banks create money when they loan money for mortgages, auto loans etc. They don't need to have deposits before they make loans. It's called fractional reserve banking, and it's backed up by the US central bank, the Federal Reserve, which clears checks and is the loaner of last resort.

Government spending should not, however, represent fiscal profligacy or imprudence. The government should spend money responsibly which it has not been doing with spending on forever wars and tax breaks for the rich. IMHO Republican supported government spending has not been responsible spending. Fiscal conservatism should mean that money should solve actual problems and make the lives of most Americans better. So if Republicans want to be the party of fiscal conservatism in the future, they should be concerned that deficit spending does not lead to inflation or deflation, rather than just minimizing government spending other than on defense and tax breaks. Let's see if Republicans want to reformulate themselves on responsible terms or do they just want to continue to be the party of the rich.

Off the Top of My Head

Republicans' New Definition of Socialism: Any Government Program That Would Help Black People

by John Lawrence, February 2, 2021

Republicans are worried that the US will become a socialist country. The public sector will come to dominate the private sector. Well, the private sector has been helpless at solving the big outstanding problems: global warming and the pandemic. If the private sector could solve these problems, well, that would be great, but they're not capable of doing it. Therefore, government is left by default to deal with global warming and the pandemic as well as a host of other systemic problems like health care, poverty, economic inequality and racism. So what does capitalism stand for at this point: fossil fuel dependency and business as usual which means more and more income and wealth inequality. With capitalism there is no "we" there, only an accumulation of "I"s.

What Modern Monetary Theory (MMT) has shown is that the Republican accusation of Democrats - "tax and spend" - is a discredited misnomer because US government spending does not depend on taxation. In fact a Green New Deal and Medicare for All could all be accomplished without increasing taxes on anyone. That's because the US central bank aka the Federal Reserve can just create money with a few keystrokes on a computer the way it did to save the banking industry during the Great Recession when it gave the Big Banks several trillion dollars without any consequences whatsoever for deficit spending or increased taxes to pay for it. This facility should be used responsibly, however, just like the use of alcohol. Used irresponsibly this money creation facility could increase inflation.

So what is the responsible use of government spending? Obviously, during a pandemic and incipient global warming, it would be responsible for the government to spend money to solve these huge worldwide problems which not only affect the US, but affect the whole world. One of the lessons of this situation is that, if we want to contribute to the solution of global warming, we must become friends with the world's biggest GHG emitter which is China. China and the US are the world's first and second largest GHG emitters and the first and second largest economies. We can't afford not to be partners in the solution of this problem. China and US continued rivalry even amounting to a Cold War will guarantee that the earth is destroyed as a habitable living place for humans. So we have no other choice. Either we can continue our petty squabbles with China or we can cooperate with them to solve problems. We are truly all in this together. Either we hang together or we hang as nations separately.

The second lesson of MMT is that Medicare for All (M4A) could be part of the solution for global warming. If M4A were to be implemented, the US could have a much better health care system with better outcomes health wise at a far cheaper price. This has been shown in study after study. What's more M4A would be deflationary in financial terms. Deflation as well as inflation is bad for the economy. The fight against global warming would be inflationary because of the huge expenditures that must be made so it could offset the deflation caused by M4A. In fact we find in How to Pay for the Green New Deal, working paper 931 by Yeva Nersisyan and L. Randall Wray:

"To be clear, we do recognize that implementation of the GND will shift spending from the private sector to the government sector. However, unless there is an a priori reason to believe this would—by itself—be inflationary, we take the position that in the general case it makes no difference in terms of inflation whether the dollar spent to hire resources comes from the government or from the private sector, which is also the method used by Keynes. As Stephanie Kelton says, cash registers do not discriminate. Indeed, as we report below, there is strong evidence that at least in the healthcare sector a dollar of government spending buys more care than a dollar of private spending—so shifting toward government as the single payer would produce disinflationary pressure."

So while the US government can create as much money as it needs for a GND by means of the Federal Reserve's money creation powers without increasing taxes, the need to forestall inflation could be offset by M4A which would in addition provide a health care system with better outcomes for Americans at a lower price. The only reason then to raise taxes would be to diminish economic inequality which could be ameliorated by only taxing the rich.

Off the Top of My Head

Taxing the Rich Will Lessen the Need for Deficit Spending

by John Lawrence, January 29, 2021

Billionaires are upset because their hedge fund ploys in the Wall Street casino went awry when a group of average Joes countered their short sales of GameStop. Oh the tears that were shed. Billionaires losing millions gambling? Outrageous! Bernie Sanders tweeted: "Oh look, another billionaire is mad that he might have to pay more taxes while children in America go hungry and veterans sleep on the street. Cry me a river," Joe Biden's $1.9 trillion COVID relief bill will mean a lot of deficit spending which can be offset, however, by taxing these billionaires. A financial transaction tax would raise $2.4 trillion over the next decade—"enough to make public colleges tuition free and cancel student debt."

Casino Capitalism Lesson 1: Selling short. Here's how billionaire hedge fund managers planned to make a killing. They knew that GameStop was losing money and probably going out of business. GameStop closed 321 stores in 2019 alone and planned on closing even more stores by the end of 2020. So knowing that GameStop's stock was going down (it didn't take a big brain to figure that out), they sold its stock short. What that means is that they "borrowed" the stock from people that already owned it. Then they sold the stock at its value at that time. Some time later when they would have to "return" the stock to those they borrowed it from, they planned to buy it back at a lower price (it having gone down in the meantime) and pocket the difference. One might ask why the original owners of the stock would loan it in the first place since they must have known that the stock would be worth less when it was returned to them.

However, a group of "amateur" investors foiled the plans of the billionaires by buying GameStop stock thereby bidding up the price making it worth more when the short sellers had to return it, not less. That would mean that the short sellers would lose money instead of making money. That's when the billionaires cried, "Ouch!" Then the "amateurs" who bid up the stock could sell it at the higher price and make money. Woo Haa! Leon Cooperman, whose net worth is estimated to be around $3 billion, sniffed that "the reason the market is doing what it's doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates." In other words average people trading stocks are making the money that billionaires like him should have made. Boo Hoo!

Modern Monetary Theory maintains that all the money for the COVID relief bill could be raised from deficit spending because deficits don't matter without any need for increased taxation. Yet it would be prudent to raise taxes on the mega rich in order to decrease economic inequality which represents an enormous chasm between the billionaire class and everyone else. A new report found that the world’s 2,153 billionaires have more wealth than 4.6 billion people, underscoring the degree of global inequality. This would also offset any decrease in the value of the dollar that large deficit spending might bring about. In The Deficit Myth by Stephanie Kelton, she points out that the Federal Reserve which creates US dollars can never run out of money since the US dollar is a sovereign currency, but there is a concern about inflation if too much money is created which doesn't have a productive purpose in the economy. Since so many are unemployed and since there is a huge infrastructure deficit, this is not in danger of happening any time soon. There is no lack of money for government programs since they don't depend on tax flows, and money created by the Federal Reserve that ends up on the Fed's balance sheet never has to be paid back.

While the Fed can create as much money as it likes to bail out the banks without Congressional approval, which it did during the 2008 banking crisis, money created for government spending, such as the $1.9 trillion COVID relief bill, must have Congressional authorization. Fortunately, there is a process known as budget reconciliation which only requires a majority vote and the Democrats have the majority in the Senate. Therefore, the COVID relief bill cannot be filibustered by Republicans which they surely would do if they were in the majority. So it's clear that Republicans only represent the interests of the rich who will contribute to their campaigns and enrich them in return as long as they vote to nullify everything that might help the average person or raise taxes on them.

Off the Top of My Head

Why Joe Manchin is Crucial to Biden's Climate Plan

by John Lawrence, January27, 2021

Joe Manchin is a conservative Democrat from West Virginia, probably the most conservative Democrat in the Senate. So why would Joe, who has already signaled his opposition to getting rid of the filibuster, and represents a coal mining state, go along with Biden's climate plan? The answer is that Biden's plan for converting to renewable energy will create a helluva lot of jobs in West Virginia transitioning all those coal related jobs to renewable energy jobs. Make no mistake. Joe Manchin will become a team player after these assurances of massive job creation in West Virginia. Similarly, Biden will target other fossil fuel generating states and communities with massive renewable energy projects so that workers in the fossil fuel industry will be placated and mollified. They will become his biggest fans as millions of good paying, union jobs are created for them. The oil industry's attempts to push back will be futile. They can save money by not lobbying because it won't get them anywhere. Joe Biden holds all the cards.

The genius of going all out for climate change is that Biden is making it an issue of job creation. Not that climate change in and of itself is not the main issue of paramount importance. It's just that reframing it as a jobs issue will take the air out of the oil industry profiteers who are making millions off of the status quo. They like things just the way they are despite the global warming catastrophe that awaits us if we don't act post haste. Joe Biden: "When I think of climate change, I think of jobs." Making John Kerry a Climate Change Envoy to the rest of the world is important because climate change cannot be forestalled within the borders of the US alone. There must be a coordinated, cooperative effort, and, in particular, China, Russia and India must be brought into the deal. What, you mean we can't afford to have any more enemies? We must make friends out of enemies using diplomacy rather than the bullying tactics of the Trump administration if we and the rest of the planet are to survive. Yes and it will nullify the ratinale of the bloated military-industrial complex. Instead of defunding the police, we should defund or reduce the funding of it to help pay for the Green New Deal.

So how are we going to pay for it? That seems to be the outstanding question. Thankfully, we have a former Chairman of the Federal Reserve as Treasury Secretary, Janet Yellin. She knows where the bodies are buried, so to speak, at the Fed. She knows that taxes do not have to be raised to pay or it, at least taxes on the poor and middle class. Taxes on the rich need to be raised, but more to reduce inequality than to pay for the response to climate change. Modern Monetary Theory has demonstrated that the US can never run out of money because it is a sovereign currency issuer. The Fed, as Janet Yellin well knows, can just create the money with a few keystrokes on a computer. This power, however, cannot be used irresponsibly. Inflation must be dealt with, and there are a number of arrows in the Fed's quiver to do this as was done during the build-up to WW II. As Stephanie Kelton has pointed out in her book The Deficit Myth, deficits don't matter. They are simply an accounting entry on the Fed's balance sheet. An unlimited amount of money was available when the banking crisis that caused the Great Recession in 2008 occurred. The Fed doesn't need tax receipts in order to create money which can then be transferred to the Treasury's account at the Fed. However, such transfers do have to be authorized by congress whereas the bank bail-outs did not require such authorization since the Fed is the loaner of last resort to the banks. The Fed can provide liquidity to the banking system whenever it thinks that that is prudent.

In the How to Pay for the Green New Deal the authors write: "Further, in what follows we do not assume that we need to raise taxes simply because government spending rises. The position we take is that taxes should be raised to fight inflation that would result from excess demands on resources. We would not raise taxes merely to balance spending with tax revenue. If more spending does not generate inflationary pressure, we do not need to raise taxes. In any event, we argue below that tax hikes are not necessarily the best way to counteract inflationary pressures should they arise." So tax increases are not necessary to fund a Green New Deal except possibly if the increased government spending would cause increased inflation, but there are other tools available to deal with inflation. Tax increases on the rich, however, are necessary in order that inequality doesn't get even worse than it is now. A recent report showed: "At $4.1 trillion, the total wealth of America’s 660 billionaires is two-thirds higher than the $2.4 trillion in total wealth held by the bottom half of the population, 165 million Americans." Creating new jobs to fight global warming ill help to mitigate both the climate crisis and the inequality crisis, but taxes on the rich will both decrease the need for money creation by the Fed and help to fund a Green New Deal.

Off the Top of My Head

K Shaped Recovery Calls For K Shaped Tax Structure

by John Lawrence, January 4, 2021

It has been well documented that the rich have gotten richer during the pandemic while the poor have gotten poorer. Over a roughly seven-month period starting in mid-March – a week after President Donald Trump declared a national emergency – America’s 614 billionaires grew their net worth by a collective $931 billion. Although the CARES Act led to a diminution of poverty in the early stages of the pandemic, poverty rates have risen since then to around 17% of the population. Among blacks and Hispanics the poverty rate is closer to 25%. The one thing that has benefited minority groups is the fact that for the first time many of them were able to vote by mail because of the pandemic. Before the pandemic many poor voters were not likely to stand in line on a week day to vote thus losing a day's pay. While the many techniques of voter suppression used by the Republican party kept the votes of blacks and Hispanics to a minimum, the last election proved that voting by mail allowed many more poor and especially black voters to cast a ballot

After Joe Biden is finally in office, we will see an increase in programs that will benefit poor and minority communities many of whom are essential workers who sacrificed in many ways to keep the economy going. While the rich got richer during the pandemic, it became clear that poor essential workers should be making more money while rich inessential workers deserve less. However, the results were the opposite of that. People invested in financial assets and people who could work from home by and large did well economically during the pandemic while those workers, without whom the economy would have come to a grinding halt, were working for minimum wage in many cases. Signs went up at nursing homes "Heroes work here", but what they forgot to add was the phrase "at minimum wage." Nursing homes are staffed with CNAs, Certified Nursing Assistants, who make little more than the minimum wage.

The K shaped recovery refers to the fact that the rich got richer while the middle class working from home did well while the bottom half of the economy, the lower half of the K, did worse financially. In any event the tax structure should reflect that fact in order to diminish economic inequality. The rich should be taxed more while the poor and lower middle class should be taxed less and actually subsidized. This is the enlightened purpose of taxation - to reduce economic inequality. According to Modern Monetary Theory, taxes are not important for raising money for government expenditures because the Federal Reserve can make any amount of money available to the government by means of a few keystrokes on a computer. Stephanie Kelton writes:

"But taxes are important in other ways. As the World Inequality Report notes,'the income-inequality trajectory observed in the United States' is partially explained by 'a tax system that grew less progressive.' Taxes can be used to curb astronomical accumulations of wealth. That's important precisely because the wealthy use their money to amass power and influence over the political process: they've rigged the tax code in their favor; they've rewritten labor laws, trade agreements, rules governing patents and protections, and much more. They've made public policy serve their economic interests."

This accumulation of economic and political power by the wealthy has been somewhat redressed recently by mail voting which tends to serve the interests of the poor and lower middle class. If it remains in effect, the voter suppression techniques of the past, used mainly by Republicans to suppress the African American vote, will have been counteracted with the result that the interests of the poor and lower middle class will have been elevated at the expense of the rich.This is what Donald Trump is so mad about - that the pandemic caused a revolution in mail in balloting at his expense. This is largely why he lost, and he's mad as hell about it. So what. The Republicans had it coming. Maybe the pandemic was a blessing in disguise at least in this respect.

Off the Top of My Head

How Joe Biden and the Democrats Can Attract Trump's Base to Their Side

by John Lawrence, November28, 2020

Aside from the entertainment value of the Trump Presidency, his main appeal and the main appeal of Republicans in general is that they stand for reducing taxes. Democrats can co-opt this issue. Here's how: before the next election, they announce that, if elected, they will reduce taxes on everyone making less than $400,000. Joe said he wouldn't raise taxes on that group, but he didn't go far enough. He needs to reduce taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump's base, I assume, are people making less than $400,000. They are attached party wise to the wealthy Republicans who make up the top 1% with whom they have nothing in common economically. How will Joe pay for this? Simple: the money raised by raising taxes on the rich, making corporations pay their fair share, closing loopholes like the "carried interest" loophole and a financial transactions tax (FTT). And it wouldn't have to balance out equally. In other words the money raised in increased taxes on the rich would not have to equal the money spent on tax breaks for everyone making less than $400,000. It would represent the destruction of the Republican meme: "Democrats will raise your taxes."

The Federal budget need not balance out exactly. It hasn't done that since President Clinton balanced the budget in 2001. He had budget surpluses for fiscal years 1998-2001, the only such years from 1970-2020. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget. Since then Republicans, supposedly the guarantors of fiscal conservatism, have deficit spent by means of tax cuts going mainly to the rich. Even before Clinton, Reagan deficit spent with tax cuts in the 1980s. This meme that Republicans represent tax cuts and fiscal conservatism needs to come to an end and be exposed by Democrats for what it is. Evidently, the middle class Republican voters are satisfied with a meager tax cut and don't mind that the rich are getting a more hefty one. That's why Democrats have to take over this meme by giving tax cuts to the middle class and tax raises to the rich. This is the only way finally to get economic inequality under control.

Modern Monetary Theory and the Federal Reserve's own history prove that Deficits Don't Matter. The US dollar is a sovereign currency. The Federal Reserve can just print money and spend it into the economic system without adding it to the national debt. This is exactly what Abraham Lincoln did during the Civil War when he printed greenbacks instead of borrowing the money at interest which would have created huge debts for the United States. So there are two ways that money can be created by the Fed. 1) They can buy US Treasury bonds which would require Congress to deficit spend. 2) They can just print the money and pour it into Federal coffers. This does not add to the national debt but goes on the Fed's balance sheet. The bottom line is what is the money to be used for? If it's for a good cause like building green infrastructure and creating jobs in the process if the economy is less than fully employed, it probably won't create inflation. If it's just a gift to people in an already fully employed economy, it will most definitely create inflation or even hyper inflation.

So in the long run deficits do matter in the sense that, if the money is spent frivolously, inflation and potentially a loss in the value of the dollar on international markets could occur. However, if the money is spent constructively on building and repairing of infrastructure and other useful purposes, deficits won't matter. It boils down to prudent and responsible spending by government. Is Congress up to this task? Is the Fed? At this point a deal between the Executive branch and the Fed would seem more appropriate than running the whole thing through Congress where political ambitions of one party or the other can get in the way. The problem is that there is no consensus in Congress unless one party holds control over both Houses and the Presidency. Barring that, each party will try to limit the other party's spending goals which are tax breaks for the rich (Republicans) or government spending on social programs (Democrats). One way to break this stalemate is for Democrats to be the party of tax breaks for the 99% and tax increases for the 1% while maintaining their commitments to the social safety net.

Off the Top of My Head

It's Almost Thanksgiving: Let's Talk Turkey

by John Lawrence, November 14, 2020

So what are Republicans saying about a Biden administration? That the progressive wing of the Democratic party will push him too far to the left. Well, what exact policies would be "too far to the left"? Defund the police? That's just a radical slogan that means about as much as "Lock her up." In other words it means nothing in terms of either Biden's agenda or progressives in the Democratic party. Reform the police - that would be more like where the Democratic party actually stands. As far as Medicare for All, Biden favors Medicare for All Who Want It. I guess there are those Republicans who so love their employer based health insurance that they are terrified by the possibility that it might be taken away from them and replaced with something better. So Biden's position is go ahead and keep it. He just wants to make it possible that those who do want it will be able to have it or a public option which amounts to the same thing.

So Republican concerns amount to whipping up a bunch of meaningless hysteria just like Trump has always done. It's his stock in trade. So what about the Green New Deal? Who could object to creating jobs to build infrastructure and combat global warming? Oh maybe it's that they fear their taxes will go up? There's actually no reason why anyone's taxes should go up based on the realities as they exist in the 21st century. The government has shown that any amount of money can be found and spent to bail out banks or to add to the debt to give people tax breaks. Trump's tax cuts added a trillion dollars to the debt. Quantitative easing and the money to bail out the big banks amounted to several trillion dollars and yet it has had no adverse effect on inflation or anything else. Modern Monetary Theory has shown that Deficits Don't Matter whether those deficits originate from bailing out the banks or a Green New Deal or Biden's Green Deal which is more or less the same. Expect Republicans to cry bloody murder any time government threatens to formulate a program to combat global warming or to create jobs for poor people or to raise wages for essential workers to $15. an hour.

Money spent constructively on infrastructure or other things will never cause inflation. What will cause inflation is money that is pissed away frivolously or unconstructively. Reorienting out priorities can and should be done even if deficit spending is required to do it. When the economy is rebalanced, it eventually will mean that the rich will have to pay their fair share of taxes in order to reduce inequality. That's the main thing that Republicans are afraid of - that eventually the rich will have to pay their fair share of taxes. In the meantime economic history since 2000 has demonstrated the fact that, if trillions of dollars were found to bail out the banks and give tax cuts to the rich, trillions of dollars can be found to repair and rebuild infrastructure and prevent the world from the disaster of global warming. Private enterprise has done nothing but accelerate global warming because private enterprise consists of the fossil fuel industry. Private enterprise profits from pollution that it doesn't have to compensate for. Therefore, it's up to government to balance out what private enterprise seems incapable of doing. That's not to say that private enterprise is unimportant. It does some things very well, some things that government does not do well. It's a matter of finding the correct balance between private enterprise and government enterprise.

Does any fossil fuel worker object to working in the renewable energy industry providing they are guaranteed a job in that industry? I don't think so. There's no one that loves fossil fuels per se or just because they are fossil fuels. They are not like Scrooge who just loves the look and feel of money. Are there people who so much like the look and feel of oil that they can't bear the thought of working in an industry that doesn't pollute the planet? There are new industries coming - a straw with the look and feel of a plastic straw that biodegrades and doesn't stay in the ocean for hundreds of years like the plastic straw does. These straws are being manufactured today. If government can assist in the ramping up of this private enterprise - Newlight Technologies - we will be all better off except for the plastic straw manufacturers which are using mainly robots to produce their straws so there are not that many jobs involved there.

Huntington Beach, California-based Newlight produces an ocean-degradable biopolymer called PHB using air and greenhouse gas. Newlight's methods are supported by more than a decade of research and development as well as an extensive patent portfolio. Newlight's Series F finance round coincides with the commissioning of a new commercial-scale production facility in California called Eagle 3 and the launch of branded products including a line of cutlery and drinking straws for the food-service industry. Newlight's foodware products deliver a unique level of material safety and certified sustainability, resulting in high-performance, ocean-degradable foodware that works for people and the planet. 

Government can provide an assist to private enterprise as long as that enterprise is headed in a new direction which doesn't pollute and which doesn't produce greenhouse gasses. Which is more important - hanging onto the familiar past or striking out in a new direction that saves the planet and makes it better for our grandchildren? Are we pioneers and adventurers like our ancestors or what?

Off the Top of My Head

Expand Habitat for Humanity in Honor of Jimmy Carter

by John Lawrence, November 11, 2020

The best way to build wealth among poor people is to expand a program that gets them into a house. The debt industry profits off of poor people whether it's Payday lenders, student loan debt, car loan debt, credit card debt or mortgage debt. The debt industry, aka the banking industry, profits off of poor people's debt. That's why the poor need to build wealth which will also close the economic inequality gap. Home ownership is the main way the middle class builds wealth which is then intergenerationally transferable. Habitat says "In fiscal year 2019, we helped more than 7 million people, and an additional 2.3 million gained the potential to improve their housing conditions through training and advocacy." It's not clear how many new houses that 7 million figure represents because they also help people by doing housing improvements. Looking at Habitat's Form 990 reveals some interesting data. They have annual revenues of approximately $300 million. Revenues less expenses for FY 2018 was about $13 million. Without doing an exhaustive analysis of this Form 990, it would seem that $13 million is a paltry amount of money to build new homes if in fact it all went to building new homes. It is to be noted that the CEO made about $400,000. They also seem to spend an enormous amount on advertising and fundraising.

A government program based on the Habitat model could magnify the number of new affordable homes built per year and could be combined with AmeriCorps which is already working with Habitat. Government service building affordable homes should be an alternative to military service with comparable benefits. One drawback of Habitat is that it does not serve homeless or low income families who can't afford a modest mortgage. So a government program based on the Habitat model should look at improving on the Habitat model. Another thing is that Habitat claims to be a "Christian organization." Does that mean that religiously nonChristian families are not eligible? A government program should not have connections to a particular religion but should be open to people of all or no religions. It should be nondenominational. The people who eventually own the homes have to put in a certain amount of "sweat equity." This is good because it makes the homes more affordable. A program based on FDR's Civilian Conservation Corps could employ youths in public service for 2 years building houses in return for free college education and other benefits. These homes need to be solarized and be built in such a way as to be non-emitting of greenhouse gasses.

The best way to co-opt Trump voters is to offer them economic opportunities. Promised economic opportunities (promised but not delivered) are the thing that pushed Trump over the top in 2016 in the rust belt states. A program of building houses ala Habitat not only would help poor people, who are disproportionately minorities, but would tend to placate poor whites who are mainly Trump voters. That's why programs helping the poor can't be labeled "Black Lives Matter" programs. They can't be just for black people although black people would disproportionately benefit. To design a program only for black people would further alienate Trump voters. Bringing this country together, as Joe Biden has professed he wants to do, means that all programs to help people must of necessity be color blind. Another benefit is that people who contribute to public service in AmeriCorps or the Peace Corps will tend to vote Democratic because they will have seen how Democratic programs have benefited not only themselves but other people as well.

Many people who join the military do so for the benefits and because they have no better prospects after high school. Military service for 5 years gains them a free college education plus many other generous benefits, even a pension. They also get brainwashed to vote Republican. Even those working in the military-industrial complex are brainwashed to vote Republican. As a college graduate the jobs available to me were mainly in the military-industrial complex. Once there I was pressured to vote Republican because it was believed that Republicans would expand funding for the military and hence the military-industrial complex. It was thought that a Democratic administration would cut funding for the military-industrial complex and we could be RIFd (Reduction in Force). Expanding programs in the peace industry should have the opposite effect. I left the military-industrial complex many years ago fortunately, and my economic future doesn't depend on future funding it. Many others are not in the same position.

As the nation transitions from fossil fuels to renewables, it's important that workers in the fossil fuel industry have a path to transition to new jobs. The same holds true in transitioning workers in the military-industrial complex to the peace-industrial complex. It's also important to give young people the possibility of serving their country in a way that contributes to peace and economic stability with comparable benefits instead of serving in the military. The peace industry (like building houses here and abroad) needs to become more important than the war industry. The issue of global warming in particular means that all nations of the world must cooperate and foster a spirit of cooperation while putting their antagonisms aside. Peace, renewable energy, economic development for poor and middle class people need to replace a power structure that fosters political antagonism among the nations of the world. Jimmy Carter not only wields a hammer for Habitat for Humanity in his nineties, but also put solar panels on the roof of the White House (which Ronald Reagan took down). If we had had Jimmy Carter for a second term and Al Gore instead of George W Bush (with his fossil fuel loving vice President, Dick Cheney), we would be further along the path toward replacing fossil fuels with renewable energy and further along the path of dealing with global warming.

Off the Top of My Head

Increase Taxes on the Rich. Reduce Taxes on the Middle Class

by John Lawrence, October22, 2020

Finally, the Democrats are getting smart. Republicans have won on one issue: reducing your taxes. Unfortunately, they reduce them a lot more on the rich than they do on the middle class. So now Joe Biden has introduced some nuance. Can the American people comprehend it? Reducing taxes on everyone making less than $400,00 per year and raising them on everyone making more than $400,000. What a great idea! What took them so long? It's absolutely necessary if we want to decrease economic inequality which is out of control. So Joe Biden would increase taxes only on the upper 1%. To be among the upper 1%, a family needs an income of $421,926. In terms of wealth the upper 1% owns 38.5% of the nation's wealth. The upper 1% owns more wealth than the bottom 90%. The bottom 80% of Americans are net debtors. Debt is negative wealth; that should be obvious, but many Americans are financially illiterate. Financial literacy should be a course in high school. Wealth and income are two separate but related issues. Middles class Americans who own homes pay a wealth tax: property taxes. Rich people don't pay wealth taxes on most of their assets which are in stocks and bonds.

Wealthier Americans don't spend all their income on consumption. A portion of it just goes to add to their wealth. Middle class and poor Americans spend all their income on consumption, even going into debt to consume. So the wealthy extract rent and interest from the middle class and the poor who devote a huge share of their incomes to rent and interest. Now more than ever, Americans are drowning in debt. Prior to the Great Recession of 2008, many Americans were struggling to keep their heads above water. When the bubble burst, those with the most debt were left drowning in a sea of financial insolvency. While the country has since recovered financially, the COVID-19 pandemic is threatening to derail the economy once more. In order to diminish not only income inequality but wealth inequality, policies should be undertaken to tax both the wealth and income of the wealthy while encouraging the middle class and poor to build wealth and get out of debt. A small financial transactions tax would tax the wealth of the rich which is mostly comprised of stocks and bonds and real estate. If every stock trade were taxed, this would create a huge pool of money which could be spent in more constructive ways than simply adding to the wealth of the rich.

While the rich can go bankrupt and bail themselves out with golden parachutes, most struggling student loan debtors have no such option. The laws preclude them from going bankrupt. They cannot discharge their debts in bankruptcy. In addition to student loan debt, most middle class people who own a home have a lot of mortgage debt. So they don't really own the home; the bank does. They have the privilege of making payments on a home which include a lot of interest. If they are successful in paying off their mortgage, they will have an asset which represents wealth. This is the main way the middle class creates wealth for itself. Unfortunately, this wealth takes a life time to create so is unavailable to most middle class people until it's too late to enjoy it. The good thing though is that their children can inherit it. This represents an intergenerational transfer of wealth so that their children or grandchildren start out not from zero, where most children of the poor start out, but from a positive accumulation of wealth no matter how small.

Since most Americans overconsume and under save in many cases by necessity but in some just by predilection, they have nothing to fall back on when there is a disruption in the economic system like a pandemic. Since American GDP is predicated on 70% consumption, the American economy cannot stay out of recession if people stop consuming. That's why the Republican controlled government, understanding this, came up with the CARES Act. It was not so much out of a concern for the middle class and the poor as it was a consideration to keep up consumption which is essential to maintaining GDP and hence a necessary economic statistic. A Joe Biden administration will get the economy back on the right track which will increase the income and wealth of the poor and middle class while diminishing that of the wealthy. Financial literacy should make clear the importance of not going into debt but of creating wealth no matter what your income statistics are at the beginning of this process.

Off the Top of My Head

Quantitative Easing = Printing Money

by John Lawrence

In her book, "Deficits Don't Matter," author Stephanie Kelton makes the case that we don't have to worry about deficit spending. That's when the US government spends more than it takes in in taxes. So in a sense taxes don't matter either at least as far as balanced budgets go. The US dollar is a sovereign currency. This means we don't have to ask anyone's permission to print money. The US dollar was taken off the gold standard in 1971 under President Nixon. It is a fiat currency meaning that it is not backed by anything other than the word of the US government. The US has experienced the phenomenon of printing money to bail out the banks in the Great Recession of 2008. As of September of this year, the Fed's balance sheet was $7.1 trillion. As of January 2008, the Fed's balance sheet was less than $1 trillion. That means that the Fed has printed money to the tune of over $6 trillion since 2008. Yet there has been no inflation in the US economy which is the danger a lot of economists had predicted from printing so much money.

The Federal Reserve bank can print US dollars just by a few keystrokes on a computer. Approximately $3.5 trillion was printed to bail out the banks during the Great Recession. Another $2.5 trillion has been printed so far to deal with the COVID pandemic. The question arises that, if the Fed can print money any time it wants, why can't there be Quantitative Easing (QE) for the people? In other words, if the Fed can bail out the banks, why can't it bail out the homeless, why can't it bail out the $4 trillion deficit in infrastructure spending, why can't it bail out the hungry and the poor? The answer is that it can do all those things, but this tool, QE, for that is what it is - a tool - should be used judiciously. It should be used to accomplish useful and necessary goals. It should not be used frivolously. It should be used in conjunction with other tools like tax policy. It should be used to promote a full employment economy and achieve socially useful goals.

Tax policy should be used to raise most of the money needed for government spending, and it should be used to redress the balance of the high amount of inequality in the American economy. Taxing the wealthy both in terms of income and wealth while giving tax breaks to the middle class and poor while implementing policies to help them build wealth is one of the major things US Federal tax policy should do. Additional money can be obtained by reducing the bloated military and military-industrial complex budget. If, however, there are additional goals that should be met like hastening the switch to renewable energy or a fuller safety net for the American people, then QE for the people should be implemented. The goal is to have a balanced and useful economy, one that promotes net zero carbon emissions, one that promotes sustainable development on other parts of the world, one that hastens the day when no child goes hungry or uneducated, one that reduces financial inequality.

It has already been demonstrated that deficits don't matter because the Great Recession of 2008 was quelled by the Fed's policy of printing money with no adverse effects on the economy. We have seen again the salubrious effects pf printing money or QE, if you want to call it that, during the COVID pandemic during which another $2.5 trillion has been printed so far. There is no reason why any country that has a sovereign currency like the US does cannot print money. Since the US dollar is the world's reserve currency, other countries and individuals are willing to buy up most if not all of US debt. But if they didn't buy up any of it, the Fed could still take it - or as much as necessary - on its balance sheet. In other words the fact that other countries are buying US debt means that the Fed doesn't have to print as much money. Any country with a sovereign currency can do the same even if their currency is not much in demand on world markets. Since the US dollar is used a lot in world trade, other countries need a supply of US dollars and are willing to buy US debt to get them.

There is no reason why any American should go hungry or be homeless or lack health care. Speaking of health care, Medicare for All would not eliminate private health care as some have suggested. Even with Medicare some doctors refuse to see patients because they don't like the reimbursement Medicare provides. There would be a private market for the wealthy who would just pay out of pocket to doctors who refused to accept Medicare patients. The wealthy don't even need health insurance. It could not be made illegal for such a market to exist. So even though everyone would have health care under a Medicare for All plan, the wealthy would still hire private and presumably better doctors at their own expense.

The policy of the Fed's buying US debt, which is equivalent to printing money, should be used wisely and the money not wasted.  QE for the people combined with the fact that deficits don't matter should lead to a more productive society providing that those additional tools and resources are used in a constructive way and not used to further militarize the society and the world. Any tool can be used for good or for ill. QE for the people could be used for a more healthy, beneficial and well balanced society for all people, could eliminate poverty in the US and the world, bring US infrastructure into the modern era and combat global warming and future pandemics.

Off the Top of My Head

There is No Such Thing as a National Solution to a Global Crisis

by John Lawrence, October 9, 2020

The Bill and Melinda Gates foundation announced its 2020 Goalkeepers report with the above words. COVID-19 has killed more than 850,000 people worldwide. Every year until this one the world has made progress towards reducing poverty and disease. Notice the Gates foundation emphasis on the world as one coherent unified organism rather than just on US national boundaries. The pandemic knows no national boundaries. Until it's stamped out worldwide, the US is vulnerable. The foolishness of spending a trillion dollars a year on the US military which was powerless to do anything about the pandemic has been demonstrated. International cooperation is crucial to ending this pandemic, as well as others which are likely to follow, and reducing the conditions of poverty and disease in the world which breed war and terrorism. When will the US get its priorities straight?

The Goalkeepers report tracked 18 indicators included in the United Nations’ Sustainable Development Goals (SDGs). In recent years, the world has improved on every single one. This year, on the vast majority, we’ve regressed.There is also a worldwide recession that the military and military-industrial complex is powerless to do anything about. The US is not an island. Pandemics, global warming - these are problems affecting the whole world not just the US. Nations that have the resources need to assist other nations that don't have the resources. That means that the developed world has to help the developing world to combat these problems: disease, poverty, weaponization, global warming.

In 2015, 193 world leaders agreed to a series of 17 ambitious goals to end poverty, fight inequality, and stop climate change by 2030. The Global Goals are within our reach, but we must remain committed—embracing what works and addressing what doesn’t, while holding ourselves and others accountable. In 2016 President Trump dropped out of global cooperation with his America First policy. That has gotten the US nowhere. Whichever countries handle the pandemic intelligently are going to come out of the recession as world leaders. That won't be the US unless Joe Biden gets elected and is able to turn the shambles of Trump's response to the pandemic around.

The first and most important goal is ending poverty. Eradicating poverty is not a task of charity, it's an act of justice and the key to unlocking an enormous human potential. Still, nearly half of the world’s population lives in poverty, and lack of food and clean water is killing thousands every single day of the year. Together, we can feed the hungry, wipe out disease and give everyone in the world a chance to prosper and live a productive and rich life. The second goal is zero hunger. Hunger is the leading cause of death in the world. Our planet has provided us with tremendous resources, but unequal access and inefficient handling leaves millions of people malnourished. If we promote sustainable agriculture with modern technologies and fair distribution systems, we can sustain the whole world’s population and make sure that nobody will ever suffer from hunger again.

The third goal is good health and well-being. Over the last 15 years, the number of childhood deaths has been cut in half. This proves that it is possible to win the fight against almost every disease. Still, we are spending an astonishing amount of money and resources on treating illnesses that are surprisingly easy to prevent. The new goal for worldwide Good Health promotes healthy lifestyles, preventive measures and modern, efficient healthcare for everyone. The fourth goal is quality education. Education liberates the intellect, unlocks the imagination and is fundamental for self-respect. It is the key to prosperity and opens a world of opportunities, making it possible for each of us to contribute to a progressive, healthy society. Learning benefits every human being and should be available to all.

The fifth goal is gender equality. Gender bias is undermining our social fabric and devalues all of us. It is not just a human rights issue; it is a tremendous waste of the world’s human potential. By denying women equal rights, we deny half the population a chance to live life at its fullest. Political, economic and social equality for women will benefit all the world’s citizens. Together we can eradicate prejudice and work for equal rights and respect for all. The sixth goal is clean water and sanitation. This will require major infrastructure development. It's not rocket science. The techniques involved are well known in the developed world. One in three people live without sanitation. This is causing unnecessary disease and death. Although huge strides have been made with access to clean drinking water, lack of sanitation is undermining these advances. If we provide affordable equipment and education in hygiene practices, we can stop this senseless suffering and loss of life.

Actually I would put clean water and sanitation right up there with ending poverty. It would put an end to many of the diseases that occur in the underdeveloped world. The emphasis on healthy living and basic creature comforts needs to spearhead the use of resources worldwide. That means that developed nations have to give back to the underdeveloped ones instead of putting their further enjoyment and well being first which is the gist of America First. Global cooperation to combat global problems needs to take precedence over preparations for war and bullying other nations by the most powerful ones. The negligence and incompetence with which Trump has treated the COVID pandemic, the withdrawal of the US from universal institutions, almost assures that the US will assume a secondary status in the world unless the next administration can make up for the damage Trump has done and set us on a new and more constructive course.

Off the Top of My Head

Let's Talk About the Communist Bogieman

by John Lawrence, October 8, 2020

After the vice Presidential debate last night Trump called Kamala Harris a communist. Let's be clear: communism is a system in which the government owns all property and makes all economic decisions. Let's also be clear about this: nowhere in the world today does communism exist. Not in Russia. Not in China. Not in Cuba. In Russia private ownership of enterprises and property had essentially remained illegal throughout the Soviet era, with Soviet communism emphasizing national control over all means of production. In the 1990s, during the Presidency of Boris Yeltsin, there was  large-scale privatization of Russia's state-owned assets, particularly in the industrial, energy, and financial sectors. Privatization shifted Russia from the Soviet planned economy towards a market economy, and resulted in a dramatic rise in the level of economic inequality. It facilitated the transfer of significant wealth to a relatively small group of oligarchs.

In China private property and state owned enterprises co-exist. According to the NY Times: "Today, the private sector contributes nearly two-thirds of the country’s growth and nine-tenths of new jobs, according to the All-China Federation of Industry and Commerce, an official business group." In fact the reason why China has pulled 800,000 people out of poverty in the last 40 years is that the economy has been partially privatized. There are more billionaires in China than in the US. Many people in China went from being poor to middle class due to the privatization of the housing market. So although China is still ruled by the Chinese Communist Party, its government is communist in name only. They should probably eliminate the word "Communist" from the party's name.

Now consider Cuba. In 2010, Cuban leaders Fidel and Raul Castro made the decision to abandon the old Soviet model of centralized planning. In 2011, new laws were enacted to expand the right to private property. In 2019, a new Constitution was approved which officially recognizes the right to private property, while also reconfirming the central government's authority over the regulation of production and land.

So if the accusation that Kamala is a communist is ridiculous, what about socialism? There is not one definition of socialism. Many of the western democracies like France, Germany, the UK and Sweden, which are US allies, have been governed by democratic socialist parties. These societies have market economies including the encouragement of entrepreneurialism, but also have a government provided social safety net including universal health care, free or inexpensive education from pre-K through college, allowances for child care, elder care etc. Sweden's government even owned a hamburger chain until recently and owns Sweden's state-run alcohol monopoly Systembolaget. The democratic socialism advocated by Bernie Sanders and others is nothing more than a model based on Sweden where there are high taxes on the wealthy which provide a government sponsored safety net for the middle class and the poor. Today there is one more reason why there should be a strong social safety net: global warming. It is clear that private enterprise is not up to the job of reducing greenhouse gas emissions to zero within a reasonable amount of time, reasonable meaning before the earth becomes uninhabitable.

Today in the US we  have a nominal capitalist or free market economy, but even in this economy the government institutes the rules within which the economy operates. The rules are set up and tweaked by those in power, those who have the money to hire lobbyists to convince legislators to write the rules in their favor, namely large corporations and the very wealthy. Don't be fooled by the meme that the powerful don't want government regulations. They do want regulations, but regulations that favor their interests and not the interests, necessarily, of the average person who doesn't have the resources to influence legislation by hiring lobbyists.

Today Kamala Harris and other Democratic progressives are really taking the realistic middle ground when they advocate for government policies which will mitigate and reduce climate change and provide a social safety net for the American people. This goes against the interests of the oil and gas industry to be sure. To advocate for universal health care is to advocate for the health care system that Canada and all our allies already have in pace. To advocate for policies that reduce the out of bounds economic inequality by taxing the rich and spending the money on raising the economic level of the poor and lower middle class only makes sense. None of these policies make Kamala Harris a communist since communism doesn't even exist in the world today. Formerly communist countries have given way to hybrid economies in which private enterprise and state owned enterprises coexist with, in the case of China, private enterprise having been the significant factor in improving the lives of the Chinese middle class.

Today, the US has gone way overboard towards an economy controlled by the rich and powerful in their own interests. Economic inequality has gotten way out of hand. The balance needs to be redressed and only a government which uses its authority to diminish the economic power of the wealthy and augment the power of the poor and middle class can provide the necessary change. Good paying jobs can be created which address infrastructure and climate change needs. So more or less a Green New Deal or whatever else you want to call it is necessary. Too bad that Republicans have gone out of their way to demonize that name as they've gone out of their way to demonize Obamacare or any other initiative progressive Democrats put forth. That is their stock and trade - not discussing the merits but demonizing the name.

Off the Top of My Head

COBID-19 More Deadly for Those Suffering from Pre-Exisitng Condition of Inequality

by John Lawrence, August 17, 2020

The rich have gotten even richer since March 15 when COBID shut down the economy. House prices are soaring. The stock market is going up. Apple is close to being valued at $2 trillion. The total wealth of US billionaires has soared $685 billion since the middle of March to a combined $3.65 trillion. Rock-bottom interest rates have triggered a home sales boom for some as those with the money have no problem snapping up good deals. Meanwhile, unemployment is approaching depression era levels. The lower half of society economically was holding on as long as their unemployment was being boosted by $600. a month. Now it seems Trump and Mitch McConnell are satisfied the economy is doing good enough without that stimulus even as they write off the poorer half of the population.

About 30 million people, about 20% of the work force, are unemployed. They will soon be joining the ranks of the homeless which are swelling on a daily basis. Their only hope is that Trump will not be reelected in November. Only the higher paid professionals are able to work from home. For them the pandemic is only an inconvenience. Their income keeps on rolling in. “It’s white-collar professionals who are able to work from home. In some ways, this is a sign that the economy is just officially split in two,” Glenn Kelman, chief executive of property company Redfin, told NPR last week.

The Guardian reports:

“We are all in this together” may be the rallying cry for the pandemic but the truth is the poor, and particularly people of color, have been devastated by coronavirus and its attendant recession while the wealthy have weathered it and in some cases made huge gains. Research into previous recent pandemics from economists at the International Monetary Fund suggests it’s a trend that may continue even after the outbreak abates.

So the outcome of the pandemic may be that the rich will get even richer. Those who can work from home will still be doing OK while the bottom 20-30% will probably be even worse off. Most of these people are black or brown. The homeless population will increase to perhaps a million people as more renters are being evicted while rents are still going up.

More jobs are being automated as the pandemic drags on. Robots can come to work every day and never get sick. So the robotization of American society is accelerating due to the pandemic at a greater pace than it would have otherwise. As jobs for the most disadvantaged segment disappear, money needs to be pumped into those families or else they will end up on the streets. Either the government must create jobs if the private sector can't supply them or a Universal Basic Income (UBI) needs to be implemented as Andrew Yank suggested.

 

 

 

 

 

 

 

 

 

 

 

 

Off the Top of My Head

#GreenNewDeal + #BlackLivesMatter = #TheWayForward

Affirmative Action for Blacks, Latinx and Native Americans in a Green New Deal

by John Lawrence, June 29, 2020

Living with the COBID pandemic could be the new normal. Assurances of a vaccine by the end of the year might be meaningless. Here's why: for many viruses including HIV, Ebola, malaria and tuberculosis there are no vaccines available despite years of study and years of effort to develop one. It took 100 years from the first polio epidemic in the US until a vaccine wiped out polio. Just as the Trump administration misled the American people in minimizing the effects of COBID including that things would normalize after we "flattened the curve" and giving dates by which we could "open up", they misled us by raising expectations that a vaccine would be available by the end of the year. Read the book, "Spillover", if you want authoritative scientific information about viruses and how long vaccine development takes if ever.

So, if the pandemic is something we have to live with indefinitely which could well be the case, the economy, in the way it existed before the pandemic, would never be coming back. So how do we create a new economy which works for the American people which, arguably, it was not working before the pandemic despite quasi full employment. Number 1: we refund the CDC and WHO which are the major institutions dealing with viruses and pandemics. Trump tried to defund CDC, and he did defund WHO in the midst of the pandemic. Politifact reported: "As for funding, there’s no question that the Trump administration sought to cut key CDC budget categories. But thanks to Congress, that funding was restored and even increased in bills that Trump ultimately signed." He had better luck and actually did defund WHO.

The biggest thing that could be done to minimize the bad outcomes for this and future pandemics is to get rid of Donald Trump as President of the US. A Democratic President would refund the CDC and WHO. The second thing would be to take a page out of FDR's book by reinstituting the Reconstruction Finance Corporation (RFC) which financed the New Deal including many infrastructure projects. In fact the Federal Reserve could finance a #GreenNewDeal without even tweaking the law. With the Special Purpose Vehicles (SPVs) it is now resorting to, it is financing debt relief not only for banks but for hedge funds, private equity funds, bankrupt corporations and even rich individuals. It is taking trillions on its balance sheet with quantitative easing. The SPVs require deal making with the Treasury Department. It would be a very small step for the Fed using a SPV to fund a Green New Deal. The US is about $4 trillion in arrears on infrastructure rebuilding and development. Instead of just bailing out bankrupt institutions the Fed could take a more positive role and actually fund productive development. By the way the RFC actually made money on repayment of loans and user fees as opposed to the Fed which just swallows US debt.

If no vaccine is found for COBID in a timely manner, the whole economy should be restructured because many businesses are not coming back. Many including Herz, J. Crew, Neiman Marcus and Chesapeake Oil have already filed for bankruptcy. A Green New Deal could take up the slack reducing the GDP from 70% consumerism to 50% which would be in line with the EU consumption component of GDP while increasing government investment by 20%. That would represent a full employment economy but it would be reoriented from consumption to building green infrastructure.

Minority hiring for a Green New Deal could be along the lines of affirmative action with African Americans, Latinx and Native Americans being hired first. This would go a long way to reduce inequality in America while being a form of reparations in light of the fact that slave labor built much of this country and Jim Crow redlining was responsible for the fact that black families have not been able to accumulate wealth at the same rate as white families. #BlackLivesMatter plus a #GreenNewDeal could help to restore the balance while at the same time creating a full employment economy.

Off the Top of My Head

Instead of Helping American Workers, the Fed Prints Money and Swallows US Debt

by John Lawrence, June 25, 2020

The Federal Reserve is printing trillions of dollars and buying US government debt. The market for US Treasury bonds is a hard sell these days because they pay so little interest: 1.37% for a 30 year bond, less than the inflation rate. China is dumping its Treasuries. It will probably accelerate the rate of dumping if tensions between the 2 countries continue. China was the US' largest creditor till recently when Japan took over that role. While the Federal Reserve has set interest rates effectively at zero, credit card companies are still charging as much as 30% interest which creates a huge number of Americans debtors especially when you throw in student loan debt which stands at $1.5 trillion. In fact, revolving consumer credit card debt reached nearly $1.1 trillion at the end of February 2020, according to the Federal Reserve G19 Report. Americans were paying as much as $121 billion in interest and fees combined by the end of 2019. That's no surprise since the Federal Reserve reported in February 2020 that the average interest rate on credit cards reached an astronomical 16.61%. While billionaires can borrow money at zero percent interest, average Americans pay 16% and up.

The effect of zero interest rates on savings accounts and Treasury bonds is to force everyone into the stock market which, although we're in a recession bordering on depression, continues to go up. It is totally divorced from reality; it wouldn't go down even in a depression like it did during the Great Depression. The Fed is keeping it artificially pumped up because so much American wealth is at stake there.

The Fed is buying Treasuries and mortgage backed securities (MBSs) to the tune of trillions of dollars. Wolf Street reported:

In March (2020) and April combined, the Fed monetized 100% of the additional Federal debt. Over the two-month period of March and April, the US government increased its debt by $1.56 trillion (most of it in April); and over the same two-month period, the Fed bought $1.56 trillion in Treasury securities (most of it in March) and thereby monetized 100% of the additional pile of debt during the two-month period.

The Fed is just swallowing all kinds of debt which is enriching the richest Americans and foreign banks even more. Problem is this forced feeding of cash by the Fed is not trickling down to the American people. It is not creating jobs. Now the Fed is creating even more ways to monetize debt by creating Special Purpose Vehicles (SPVs). These SPVs can buy assets the Fed is not allowed to buy, and they can lend to entities and rich individuals to buy certain assets. Under the arcane Federal Reserve Act, these SPVs require taxpayer backing from the Treasury Department to protect the Fed from losses. The SPVs can buy asset backed securities (ABSs) on a non-recourse basis which means that, if there are any problems, taxpayers take the losses. Indirectly via its Special Purpose Vehicles and its Primary Dealers, the Fed can buy even old bicycles, as long as taxpayers take the losses.

Wolf Street reported:

These ABS can be backed by credit card loans, auto loans, student loans, equipment loans, floor plan loans, insurance premium finance loans, some loans guaranteed by the Small Business Administration (SBA), and eligible loans on receivables. The loan amounts will be “equal to the market value of the ABS less a haircut and will be secured at all times by the ABS,” the Fed says.

A little history on Term Asset-Backed Securities Loan Facility (TALF) : At the end of 2010, under orders from Congress, the Fed released data on over 21,000 transactions it performed during the Financial Crisis, which revealed among many other outrageous acts, that the Fed lent to well-connected individuals and all kinds of hedge funds and others under its TALF program so that they would buy certain assets, such as these consumer loan ABS, drive up their prices, sell them to pension funds and others later for a huge profit, and pay back the loans to the Fed.

These well-connected individuals included John A. Paulson, Michael Dell, Christy K. Mack (wife of former Morgan Stanley CEO John Mack), Kendrick R. Wilson III (former Goldman executive and top aide to Hank Paulson Jr.), H. Wayne Huizenga (founder of AutoNation and Waste Management), Jonathan S. Sobel (head of Goldman’s mortgage department), etc. Some very wealthy people made a lot of money off the Fed’s bailout programs even as workers and the economy was in deep trouble.

So the Fed is paying John Paulson money by means of an SPV. Paulson is the guy who bet against the subprime mortgage market in 2007 and made one billion dollars in one day. Goldman Sachs had to pay him off, but eventually due to all the legerdemain in the financial markets, it was French and German taxpayers that paid him for his astute bet. That's casino capitalism at its best. Now he has direct access to the Federal Reserve's money printing press. Why? When there are so many poor and unemployed people in the US, why is the Fed intent on only bailing out financial markets, meaning rich people? Suffice it to say that the Fed is able to buy most anything from rich people and monetize their debt. Because of this and the fact that the rich can borrow at zero percent interest, they engage in risky bets. If they win, they pocket the money. If they lose, the Fed bails them out at zero percent interest.

Compare this with how the situation was dealt with during the Great Depression. Instead of force feeding wealthy people with interest free cash and adding trillions to the US National debt, FDR created the Reconstruction Finance Corporation (RFC). The original legislation establishing the RFC did not limit it to lending to financial institutions; it was also authorized to provide loans for railroad construction and crop lands. In other words it created jobs for average Americans. An amendment passed in July 1932 allowed the RFC to provide loans to state and municipal governments. The purpose of these loans was to finance projects like dams and bridges, and the money would be repaid by charging fees to use these structures. To help with unemployment, a relief program was created that would be repaid by tax receipts. Under the New Deal, the powers of the RFC were greatly expanded. The agency now purchased bank stock and extended loans for agriculture, housing, exports, businesses, governments, and disaster relief. The RFC actually made money on these loans.

So the RFC could actually create jobs for average working people (and not just for hedge fund managers) doing constructive things like building houses and infrastructure. Part of the New Deal was the Works Progress Administration (WPA) relief program which made the federal government by far the largest employer in the nation. A Green New Deal would create money much as the Fed does with a few keystrokes on a computer, but, instead of just providing liquidity to banks, hedge funds and rich people, it would provide money for productive jobs paid for by the government. The government needs to be employer of last resort in order to recreate a full employment economy.

A Green New Deal would convert the American economy from a fossil fuel dependent economy to one fueled by renewable energy. In so doing it would provide good paying jobs for those in American society who have been left out or left behind. The Fed should monetize the $3 trillion backlog in American infrastructure repair and rebuilding. Making the Fed a public bank instead of a bank whose main purpose is to swallow US government debt and give money to rich people in order to provide "liquidity" would go a long way to reducing inequality and bringing the American poor including minorities into the middle class. IMHO the COBID pandemic will insure that the old economy based on 70% consumerism is not coming back. The new normal will be based on government spending to create a Green New Deal or will sputter along at about half its former level.

Off the Top of My Head

The Power Structure Wants the Discussion Circumscribed to Systemic Racism, Not Systemic Inequality

by John Lawrence, June 17, 2020

Let's just talk about systemic racism and not about an economic system in which a few people control all the wealth and the rest get crumbs from the table. The power structure does not want the discussion extended into that area. Let's just integrate black people into the system so that they are not disproportionately poor, only poor proportionally to their percentage of the population. Blacks compose 12% of the American population. 27% of black people are in poverty so the good old American way is to reduce the percentage in poverty to 12%. Then blacks would be proportionately and not disproportionately poor. That's the American way. Don't question systemic poverty and inequality; Confine the discussion to systemic racism.

The American way is to have a few rich people among every ethnic group and then to use this as an example that anyone can get rich in America. So what if the majority are poor. It's more important that you have examples of huge wealth among black people, and that is certainly the case today. American black billionaires on the 2019 Forbes list included American investor Robert Smith with $5 billion, businessman David Steward with $3 billion, media mogul Oprah Winfrey with a net worth of $2.5 billion and American sports executive Michael Jordan with $2.1. There are 615 billionaires in the US; only 6 are black so to be proportionate we'd need about 74 more black billionaires.

Blacks comprised 13.6 percent of the U.S. population according to the 2010 Census, but account for only 1.4 percent of the top 1 percent of households by income. Whites are the overwhelming majority of the top 1 percent of households by income, comprising 96.2 percent. There are 18.6 million total millionaires in the US, but only an estimated 35,000 are black. That may sound like a lot, but the U.S. population of millionaires is 76 percent White. Blacks, Hispanics and Asians make up about 8 percent each. So problem solved if we add another 4% to the black millionaires list. Then they would be proportionately rich at least at the million dollar level.

Many black athletes and entertainers are millionaires or multi-millionaires. Take the NBA, for example, in which 80% of the players are black. The total annual revenue of the NBA is $8.7 billion of which about 50% goes to the players. Since there are 30 franchises with 15 players per franchise, there are 450 active players. That means that the share of NBA revenues going to black NBA athletes is ($8.7 billion)x(1/2)x(.8) = $3.48 billion or an average of $7.7 million per black player. Bingo! The NBA has created way more black millionaires than it has created white ones. That's for sure.

This is the thinking of the power structure, mainly the Republican power structure which is not threatened by having a few more black millionaires and billionaires. However, they are threatened when you talk about everyone, black or white, having a living wage, everyone, black or white having decent housing, medical care and free public education from pre-school through college. They are threatened by talk of taxing the wealthy, taking from the rich and giving to the poor, as it were. That would be socialism much like the People's Republic of France or the People's Republic of Germany or even the People's Republic of Sweden. The power structure can't tolerate that kind of debate. Let's just make black people equal in the number of millionaires, but not change anything else. Then all the poor blacks and whites, for that matter, can aspire to pull themselves up by their own bootstraps as many of their counterparts have done.

Whatever happens we can't change the system to make it inherently more equal, inherently more naturally producing of equal outcomes. Instead, it must produce inherently unequal outcomes so that those who make it in the system will feel like they have really accomplished something and can serve as role models for others to strive harder. Republicans recoiled at all the hippies in the 60s who were having too much fun and not working hard enough. They were even getting free tuition in the California University system and elsewhere. On August 23, 1971, prior to accepting Nixon's nomination to the Supreme Court, Lewis Powell wrote a memo to the US Chamber of Commerce entitled "Attack on the American Free Enterprise System," an anti-Communist and anti-New Deal blueprint for conservative business interests to retake America from the hippies and left wingers. It was based in part on Powell's reaction to the work of activist Ralph Nader, whose 1965 exposé on General Motors, Unsafe at Any Speed, put a focus on the auto industry putting profit ahead of safety, which triggered the American consumer movement. Powell saw it as an undermining of the power of private business and an ostensible step towards socialism.

So they changed the system to criminalize all sorts of behaviors mainly involving drugs so they could incarcerate mainly black people and so they could saddle mainly white people with a ton of student loan debt. Then they would have to work hard paying off their debt instead of partying, surfing, having free love and doing drugs. Well, it certainly has worked. In 2014, African Americans constituted 2.3 million, or 34%, of the total 6.8 million correctional population. About 1 in 3 black boys will have served some time in the penal system during their lifetimes. Profits are up for the private penitentiary corporations and American millenials are buckling at the knees from the weight of $1.5 trillion in student loan debt. So if the percentage of black people in prison gets down to 12%, then this should make the American system non-racist? Wouldn't it be better to eliminate the root causes of incarceration which have to do with poverty and get the incarceration rate down to zero for everyone?

Off the Top of My Head

Is Police Reform Enough?

by John Lawrence, June 10, 2020

The people in power, the status quo, thinks they can contain the Black Lives Matter movement to just police reform. They just don't want any profound changes to the system that go beyond police reform. So let black football players kneel all they want, but they just need to keep playing so the profits keep coming. Remove a few Confederate statues, rename a few military bases, but don't challenge the trillion dollars a year spent on the military. Defund the police, but, whatever you do, don't defund the military. Don't remove any of the US military bases that exist in almost every country of the world. The United States maintains nearly 800 military bases in more than 70 countries and territories abroad. Do we really need military bases in Germany and Japan?

So pass a few laws about police reform, but don't threaten the power structure in this country. Throw black people a few bones, and maybe the whole BLM movement will quiet down and just go away. Then we can get back to business as usual and rich people can get on with the job of getting insanely richer. Inequality will remain the same. Those in power will stay in power. Legal bribery in terms of lobbying will remain in effect. That's the way business is done in this country. Needless to say poor people can't afford to hire lobbyists. Political reform will be off the table as will economic reform.

The American version of capitalism will continue to reap rewards for the billionaires while the Chinese version of capitalism will continue to bring people out of poverty and build infrastructure in many parts of the world. While the US polices and sanctions, the Chinese are winning friends and influencing people, much as Dale Carnegie suggested. It's no longer a question of capitalism vs communism. Every country in the world, including the US is some combination of both. Some countries just implement their version more effectively. The US implements its economic system in such a way that it favors the rich and condones the rest to debt servitude including middle class people strapped with student loan debt which they don't have a prayer of paying off. Don't worry payday lenders are only reaping 400% interest.

So will the BLM movement just die away satisfied with the result of police reform - no more chokeholds, no more no knock warrants, a few other things if Republicans go along which they probably won't at the Federal level. The Democrats can pass all the legislation they want. It is meaningless if it never passes the Senate and gets enacted into law. It is just spinning their wheels. It's gridlock; it's not democracy. It's democracy hamstrung; it's democracy rendered impotent. It's a political system which will patronize the BLM movement and give it a few ineffectual reforms, more lip service than anything. The real profit making infrastructure will not change. Perhaps they will absorb a few black people into the power structure by giving them a few more positions on corporate boards, but the power structure itself will not change. Poor and homeless people will stay poor and homeless. even if a few escape their dire situations. The media will highlight some black person who escaped poverty and made a million dollars. See you too could do it if you only had the gumption. This is the message they will send. Just pull yourself up by your own bootstraps as so many others have done. Systemic inequality will still remain even if systemic racism doesn't. The only mistake the recent looters made was not forming a hedge fund before they started looting.

Off the Top of My Head

Racist Economics

by John Lawrence, June 8, 2020

Is it racism when the schools in predominantly black neighborhoods are worse than schools in predominantly white neighborhoods? Schools in many parts of the country are funded with local property taxes. It stands to reason that property values in poor neighborhoods are less than property values in rich neighborhoods, and, therefore, property tax revenues and hence school funding is less. So the worse schools are found in poor "predominantly black" neighborhoods. A word you hear often these days is "predominantly". Nothing is totally black and white, but, when black people are affected in a way that is greater than their percentage of the population, one could say it is a "predominantly black" situation. When police arrest black people at a greater rate than they do white people, we could say that the police are a racist institution.

It has been said that the only mistake that the looters at the current protests made was that they didn't form a hedge fund first before they started looting. Martin Luther King said, “The black revolution is much more than a struggle for the rights of Negroes. It is forcing America to face all its interrelated flaws—racism, poverty, militarism, and materialism. It is exposing the evils that are rooted deeply in the whole structure of our society. It reveals systemic rather than superficial flaws and suggests that radical reconstruction of society itself is the real issue to be faced.” Republicans have breathed a sigh of relief that so far the Black Lives Matter movement has had little to say about poverty, economic inequality, militarism and materialism. Some though are getting to the heart of the problems in our society that affect us all but affect black people "disproportionately."

Writing in the New Yorker Keeanga-Yamahtta Taylor said:

The [1992] uprising in L.A. shared with the rebellions of the nineteen-sixties an igniting spark of police abuse, widespread violence, and the fury of the rebels. But, in the nineteen-sixties, the flush economy and the still-intact notion of the social contract meant that President Lyndon B. Johnson could attempt to drown the civil-rights movement and the Black Power radicalization with enormous social spending and government-program expansion, including the passage of the Housing and Urban Development Act of 1968, which produced the first government-backed, low-income homeownership opportunities directed at African-Americans.

By the late nineteen-eighties and early nineties, the economy was in recession and the social contract had been ripped to shreds. The rebellions of the nineteen-sixties and the enormous social spending intended to bring them under control were wielded by the right to generate a backlash against the expanded welfare state. Political conservatives argued that the market, not government intervention, could create efficiencies and innovation in the delivery of public services. This rhetoric was coupled with virulent racist characterizations of African-Americans, who relied disproportionately on welfare programs. Ronald Reagan mastered the art of color-blind racism in the post-civil-rights era with his invocations of “welfare queens.” Not only did these distortions pave the way for undermining the welfare state, they reinforced racist delusions about the state of black America that legitimized deprivation and marginalization.

The 1990s saw Democrats agreeing with Republicans that problems in the black community were largely caused by overly generous social programs. President Bill Clinton promised to "end welfare as we know it." Senator Joe Biden jumped right on board the push to reduce welfare programs by saying, "“the culture of welfare must be replaced with the culture of work. The culture of dependence must be replaced with the culture of self-sufficiency and personal responsibility. And the culture of permanence must no longer be a way of life.” Biden championed the 1994 “crime bill” that pledged to put a hundred thousand more police on the street, called for mandatory prison sentences for certain crimes, increased funding for policing and prisons, and expanded the use of the death penalty. By the 1980s Ronald Reagan decried "welfare queens."

Taylor continues:

So, though Biden desperately wants us to believe that he is a harbinger of change, his long record of public service says otherwise. He has claimed that Barack Obama’s selection of him as his running mate was a kind of absolution for Biden’s dealings in the Democrats’ race-baiting politics of the nineteen-nineties. But, from the excesses of the criminal-justice system and the absence of a welfare state to the inequality rooted in an unbridled, rapacious market economy, Biden has shaped much of the world that this generation has inherited and is revolting against.

More important, the ideas honed in the nineteen-eighties and nineties continue to beat at the center of Biden’s political agenda. His campaign advisers include Larry Summers, who, as Clinton’s Treasury Secretary, was an enthusiastic supporter of deregulation, and, as Obama’s chief economic adviser during the recession, endorsed the Wall Street bailout while allowing millions of Americans to default on their mortgages.

Biden was chiefly responsible for the 2005 bill that took away bankruptcy protection from student load debtors (presumably disproportionately black). Credit card companies, many of whom are headquartered in Biden's state of Delaware, have been major Biden campaign contributors. Biden was known as the Senator from MBNA. Biden should just turn over the Democratic nomination to Bernie Sanders who has been on the right side of issues which are now coming to the forefront in American life.

Taylor continues:

In 1968, King, in the weeks before he was assassinated, said, “In a sense, I guess you could say, we are engaged in the class struggle.” He was speaking to the costs of the programs that would be necessary to lift black people out of poverty and inequality, which were, in and of themselves, emblems of racist subjugation. Ending segregation in the South, then, was cheap compared with the huge costs necessary to end the kinds of discrimination that kept blacks locked out of the advantages of U.S. society, from well-paying jobs to well-resourced schools, good housing, and a comfortable retirement. The price of the ticket is quite steep, but, if we are to have a real conversation about how we change America, it must begin with an honest assessment of the scope of the deprivation involved. Racist and corrupt policing is the tip of the iceberg.

We have to make space for new politics, new ideas, new formations, and new people. The election of Biden may stop the misery of another Trump term, but it won’t stop the underlying issues that have brought about more than a hundred thousand COVID-19 deaths or continuous protests against police abuse and violence. Will the federal government intervene to stop the looming crisis of evictions that will disproportionately impact black women? Will it use its power and authority to punish police, and to empty prisons and jails, which not only bring about social death but are now also sites of rampant COVID-19 infection? Will it end the war on food stamps and allow African-Americans and other residents of this country to eat in the midst of the worst economic crisis since the Great Depression? Will it finance the health-care needs of tens of millions of African-Americans who have become susceptible to the worst effects of the coronavirus, and are dying as a result? Will it provide the resources to depleted public schools, allowing black children the opportunity to learn in peace? Will it redistribute the hundreds of billions of dollars necessary to rebuild devastated working-class communities? Will there be free day care and transportation?

In short we need good paying union jobs (Green New Deal) that will deal with the issue of climate change (Green New Deal), forgiveness of student loan debt (the least Biden can do since he was largely responsible for creating the situation), Medicare for All (since hospitals in black neighborhoods compare unfavorably with those in white neighborhoods), public housing (to end homelessness and guarantee everyone the right to have a roof over their head). If we want to solve the problem of institutional racism in this country, we need to address the fundamental problems of economic inequality. Where do we get the money? Not only by defunding the police which claim the lion's share of local budgets, but by demilitarizing the bloated military-industrial complex and taxing the rich at 1955 levels (91%). The Federal Reserve can always take a few more trillion on its balance sheet; it has taken trillions on its balance sheet already and given the money to the big banks. How about Quantitative Easing for the people? Economic inequality is a problem which affects black people disproportionately (there's that word again), but the solution of which will contribute to the benefit of white people as well.

Off the Top of My Head

Black Lives Matter: Police Reforms Benefit Whites as Well

by John Lawrence, June 7, 2020

No more "carotid restraints" or chokeholds is a police reform caused by the Black Lives Matter movement, but obviously it applies to whites as well. We don't know how many of the 237 times Minnesota police used chokeholds, blacks were targeted, but probably like all police violence it was disproportionate. Police reforms such as ending "no knock warrants" also obviously apply to whites as well as blacks. The point is that what black people are demanding in terms of police reform doesn't just affect black lives. It affect all lives.

So why stop with just police reform? How about prison reform.Though African Americans and Hispanics make up approximately 32% of the US population, they comprised 56% of all incarcerated people in 2015. African Americans are incarcerated at more than 5 times the rate of whites. The imprisonment rate for African American women is twice that of white women. Although only a small percentage are in prison for minor drug offenses, marijuana possession in small quantities should be made legal on a national basis. Many are in jail awaiting trial. Every day, 465,000 people are held in local jails even though they have not been convicted; legally, they are presumed innocent. Many are there because they cannot afford bail.

Let's not stop at prison reform. How about political reform? Mail-in ballots should be legalized and encouraged in every state. How many poor people can afford to take time off from work to go and vote? These people are probably disproportionately black, but it would help poor people who are white as well. Let's make the election of President be based on popular vote and not the electoral college. Let's do away with the filibuster which prevents legislation from being passed democratically. Let's limit the power of the leader of the Senate to even stop legislation from being introduced. Make it mandatory that legislation created in the House be debated and voted upon in the Senate. Let's outlaw lobbying which lets the richest and most powerful individuals and corporations determine the political agenda.

How about economic justice? That was basically Bernie Sanders' agenda. Let's eliminate poverty and homelessness in the US. Blacks are disproportionately poor and homeless, but there are plenty of poor and homeless whites as well. Instead of spending a trillion dollars a year on the military and military-industrial complex, instead of wasting money on fruitless wars, let's have a Green New Deal and rebuild American infrastructure while at the same time creating hundreds of thousands of good paying jobs. Let's cancel student loan debt which disproportionately affects blacks, but whites will benefit too. Let's have Medicare for All instead of an outrageously expensive health care system which is twice as expensive as any other country's while producing only half as good results.

You get the picture? All the reforms which could come from the Black Lives Matter movement will also bring those same reforms for whites, browns and any other colors. Let's protest to change the course of this whole country for all citizens. Then we have to help the rest of the world with a Green New Deal if we want to create a habitable planet for our children and grandchildren. Black people are leading the way for social justice, for political and economic justice, justice which will turn this country around and help turn this planet around. Let's keep on going.

Off the Top of My Head

A Jobs Program for Inessential Workers
by John Lawrence, April 30, 2020

Turn inessential workers into essential workers by putting them to work building green infrastructure. This is essential work that is not getting done. Much of the previous inessential work they did is better left undone even in a recovery. It is still inessential. It'll always be inessential compared to what needs to be done in creating and building green infrastructure. Building out solar and wind renewable energy could employ thousands if not millions of people. Repairing roads, bridges, waterways, clean water systems, airports, railroads and all other infrastructure could employ millions. This is essential work that has remained undone despite the fact that the American Society of Civil Engineers has given the US a D rating for infrastructure. High speed rail needs to be built. The widespread adoption of electric cars has to be mandated, and construction of a national electric vehicle charging network to power them has to be built.

Unemployed people still need jobs. Mark Cuban said on CNN this morning that there should be a jobs program similar to that of the New Deal. He is exactly right although he didn't make the necessary connection about the essential work that's still being left undone and the inessential work that doesn't need to be done even in a recovery. Forget Cuban's sports and entertainment enterprises. I hate to tell you that they are basically inessential. What is essential is greatly expanding the public health undertakings of the Federal  government which has been totally behind the curve in this pandemic.

We must ask ourselves what is essential and not go back to a new normal in which all the inessential businesses of the past are brought back just in order to provide employment to the millions who have lost their jobs. The pre-pandemic economy was 70% consumerism. The economy post epidemic should be much less a consumerist economy and much more an investment economy. The four components of gross domestic product are personal consumption, business investment, government spending, and net exports. Of these government spending must be ramped up to provide the essential jobs in infrastructure building as well as in the areas that the pandemic has made clear are indeed essential: health care, education, transportation, agriculture.

Government spending must go up; personal consumption must go down. It's as simple as that. As for business investment, it's a lost cause as business will only do what's profitable for itself as has been made abundantly clear. Investment in fossil fuels and plastics which the big oil companies are making is only destructive to a green economy, not constructive. As far as exports are concerned, the dollar has already been weakened as much as it could possibly be by zero interest rates, so increased exports, although desirable, are not likely to happen any time soon.

Private enterprise knows only one thing in terms of the economy "reopening": get back to consumer spending. It ain't going to happen. People are still afraid of the virus. The pandemic is not over. They will use their money to pay off debts instead of going in debt to the hilt like they are used to. People will save their money instead of entertaining themselves to death. Why? Maybe they have learned their lesson that a high employment economy predicated on the fact that people will always have a job and always have a prepensity to consume is just a chimera. Rather than living paycheck to paycheck, I hope people will understand that there may come a rainy day, and they need to save for that. That lesson has really been brought home by the coronavirus pandemic.

The true heroes are essential workers not the military. The military itself was brought to its knees by COBID-19. There is a lesson there. It's more important to spend our collective money on preparing for the coming pandemic of global warming than on a bloated military. It is more important to house the homeless and guarantee the economic rights of shelter and health care to all Americans as in the 1948 UN Declaration of Human Rights. It is more important to help people all over the world escape from extreme poverty because poverty breeds health crises which then can spread all over the world. It's more important to make peace with our rivals rather than try to control them with military threats and sanctions.

May the next President (and I hope to heaven that it's not Donald Trump) see the light of a more rational, compassionate and humane world, one more concerned about the health and welfare of all the world's peoples. I hope Governor Cuomo's values of being tough, smart, disciplined and most importantly loving spread to every corner of US and world society, and we get on with essential business instead of the inessential business of amusing, entertaining and consuming ourselves to death.

Off the Top of My Head

When The Pandemic Is Over, The World Must Come Together

by John Lawrence, April 28, 2020

These are the fateful words of Mikhail Gorbachev, Nobel Prize Laureate and the first and only President of the Soviet Union. Recently, he recalled how the threat of nuclear war was reduced by the treaties in the 1980s made possible by his friendly relationship with Ronald Reagan. Writing in Time magazine, he said, "The leaders of the U.S. and the Soviet Union declared that a nuclear war can never be won and must never be fought." Despite the fact that the Cold War was declared to be over, the neocons running foreign policy today have been doing their best to create another one. The pandemic has made it clear that there are more important challenges than U.S.-Russian rivalry, and that the world has more to gain by cooperating even with supposed enemies or rivals than it does by perpetuating idiotic animosities. We have common enemies that affect us all with the coronavirus pandemic being just one of them.

Gorbachev mentioned "poverty and inequality, the degradation of the environment, the depletion of the earth and the oceans." Global warming is an existential threat that must be addressed now or there won't be a habitable earth left to fight over. "We have so far failed to develop and implement strategies and goals common to all mankind." Not only that the U.S. under Trump has retreated from any kind of cooperation with the other nations of the earth even our supposed allies. Instead U.S. foreign policy has been based on ordering other nations around as if we were the supreme bully. Trump's latest blunder is to defund the World Health Organization (WHO) in the middle of a pandemic.

"Progress towards the Millennium Development Goals, adopted by the U.N. in 2000, has been extremely uneven." The U.S. under Trump does not really support the U.N. in any way because it wants to be the ruler of nations not part of an organization that attempts to have a forum for the cooperation of nations. The United Nations Millennium Declaration, signed in September 2000 commits world leaders to combat poverty, hunger, disease, illiteracy, environmental degradation, and discrimination against women. The Eight Millennium Development Goals are:

• to eradicate extreme poverty and hunger;
• to achieve universal primary education;
• to promote gender equality and empower women;
• to reduce child mortality;
• to improve maternal health;
• to combat HIV/AIDS, malaria, and other diseases;
• to ensure environmental sustainability; and
• to develop a global partnership for development.

I had never even heard of the Eight Millennium Development Goals although I think I'm pretty well informed. All of the media time spent on Trump's self-serving bragging could have been better spent informing us about this WHO program. But instead the media spends its time either chastising Trump's stupidity or praising his glory depending on which channel you watch. He has changed from campaign rallies to hour long daily commercials for himself.

"What we urgently need now is a rethinking of the entire concept of security. Even after the end of the Cold War, it has been envisioned mostly in military terms." Yes, military hubris crowds out any prospect of peace let alone a prospect of eliminating extreme poverty. Bill Gates is singlehandedly doing his best to eliminate poverty and disease in the world. He basically is a one man United Nations surrogate. He presciently tried to warn us of the pandemic in a Ted talk. Now he is spending millions of his own money on developing a coronavirus vaccine. There are some good people in the world - even billionaires. That I am sure of. It's just that not a lot of them occupy positions of power in the U.S. government.

Gorbachev continued: "The overriding goal must be human security: providing food, water and a clean environment and caring for people's health. To achieve it, we have to develop strategies, make preparations, plan and create reserves. But all efforts will fail if nations continue to waste money by fueling the arms race. I'll never tire of repeating: we need to demilitarize world affairs, international politics and political thinking."

Gorbachev is calling on national leaders to cut military budgets by 10% to 15%. It is not enough. The mindset, even among Democrats, is that we need a huge military to defend ourselves from perceived threats and perceived enemies. They don't have the mindset that they could make the world a better place by defusing tensions among nations that they perceive as threats. It might start by apologizing to Iran for overthrowing their democratically elected leader Mossaddegh and installing the brutal Shah. That would go a long way to establishing a peaceful relationship with Iran. It could start there. Instead the U.S. only fuels tensions by applying sanctions and carrying on like the rest of the world should bow down to the almighty dollar.

Why Are Working People Forced to Sacrifice for the Common Good But Not the Titans of Capitalism?

Published on Sunday, April 26, 2020

by Common Dreams

Why is it that lawmakers can order workers to stop working, and small business owners to lock their doors, but not order landlords, bankers, and Wall Street investors to also suspend their activities?

by Scott Klinger

 

24 Comments

Larry Kudlow, the director of Trump's National Economic Council. (Photo: Gage Skidmore / Flickr)

When I was a child, I heard my parents say that when we save our money it works for us. I remember having to dress up in my church clothes when I went to the bank to deposit my birthday checks or money I saved from my allowances. 

These ideas that banks and Wall Street are secular versions of church, and that money works for everyone are deeply at play in our society today. 

In the name of protecting the common good, Governors across the country have ordered people to stay at home, and all non-essential worksites shuttered. But aside from some states adopting short-term bans on evictions and foreclosures, no leaders have gone further in ordering the financial economy to “stop working” and set aside the primacy of their business interests for the common good by forgiving rents and waiving mortgage interest while deferring mortgage principal payments. 

"If federal leaders and state governors fail to demand that banks and Wall Street pause too, efforts to shore up families with stimulus checks and business owners with paycheck protection, will be undermined, as those funds will pass quickly through the hands of families and into the already full pockets of Wall Street, deepening inequality and increasing the pain of the many, for the benefit of the few. "

The shut-down of much of our economy has thrown millions out of work and into a perilous place, because while much of the human economy of workers working, small businesses serving, and people shopping for their everyday needs, has been all but stopped, financial services firms continues to work hard, collecting monthly rents, mortgages and other debts. Some small business owners—restaurateurs, hair salons, clothing, book and hardware store owners have received government loans to keep paying their workers, they’ve received no similar protection from landlords demanding their monthly rent while their businesses are closed.  This will wind up sinking many of the businesses we depend on and love. As the little virus attacks people’s bodies, the bigger disease of an overly powerful corporate capture of our economy continues to wreak havoc on families, small businesses, and communities long after the health crisis is resolved. 

If federal leaders and state governors fail to demand that banks and Wall Street pause too, efforts to shore up families with stimulus checks and business owners with paycheck protection, will be undermined, as those funds will pass quickly through the hands of families and into the already full pockets of Wall Street, deepening inequality and increasing the pain of the many, for the benefit of the few. 

As families scramble to get together their monthly mortgage payments, banks continue with business as usual. Last week, Federal Reserve Chairman Jerome Powell was asked by the David Wessell of Brookings Institution whether Big Banks would be allowed to continue to distribute tens of billions of dollars annually as shareholder dividends (half of which go to people in the top 1%), he replied, “That’s a perfectly normal thing in our capitalist system.” Normal has been thrown out the window for workers and small business owners, it should be for the titans of our economy as well. 

Why is it that Governors can order workers to stop working, and small business owners to lock their doors, but not order landlords, bankers, and Wall Street investors to also suspend their activities, to pause as labor and the commercial sector have? Why do people have to sacrifice but not the owners of capital? 

Some landlords have demonstrated compassion and solidarity with their tenants. New York City landlord Mario Salerno is one of them. At the beginning of April, tenants in each of Salerno’s 18 Brooklyn apartment building found notes taped to the door saying: “Due to the COVID-19 pandemic affecting all of us, I am waiving rent for the month of April, 2020. Stay safe, help your neighbors and wash your hands!!! Thank you, Mario.” When asked by the New York Times about the hundreds of thousands of dollars he stood to lose as a result of the rent forgiveness, Salerno said that was not important: “My concern is everyone’s health. I told them just to look out for your neighbor and make sure everyone has food on their table.” More landlords could follow Mr. Salerno’s example if they knew the mortgage payments that they owed on their rental properties could be deferred. 

In contrast, forty large corporations, many of whom are controlled by Wall Street private equity funds, have bought up more than two million units of rental housing in the United States. So, far all have been silent on the issue of rent forgiveness. Most picked up their properties, often at fire sale prices and with the help of federal government assistance, after the 2008 housing crisis. Unless these powerful firms are ordered to put public health and family well-being before corporate profits, they are likely to again swoop in and extend their control of America’s housing stock even further as millions of families and smaller landlords lose their homes and businesses. 

Ordering landlords and mortgage holders to change the terms of their contracts is not unprecedented. Following the 2008 housing crash, the Federal Home Ownership Refinance Program (HARP), gave mortgage holders the right to renegotiate their federally backed mortgages on more affordable terms. Its success allowed many families to keep their homes. 

I haven’t gotten dressed up to go to the bank in more than half a century, it is time our leaders stop treating Wall Street like a church, and to instead demand the same sacrifices of capital that they have of workers and merchants.

Scott Klinger is Senior Equitable Development Specialist at Jobs with Justice and an Associate Fellow at the Institute for Policy Studies.

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Off the Top of My Head

How the World Could Change When the Current Crisis is Over

by John Lawrence, April 26, 2020

Perhaps we will rethink what is essential and what is inessential. Here's my list of what is essential: 1) Health care; 2) Food; 3) Water; 4) Sanitation (Waste water and trash collection); 5) Education; 6) Transportation; 7) Electricity; 8) The Internet; 9) Grocery stores. 10) Elder care.11) Police, Fire and Paramedic services. Here are some things that are considered inessential now: 1) Spectator sports; 2) Spectator music events; 3) Parades; 4) Conventions; 5) Bars; 6) Restaurants; 7) Barber and beauty parlors; 8) Tattoo parlors; 9) Political campaign events; 10) Large parties like wedding receptions.

Everyone can come up with their own list of what they consider to be essential and what they consider to be inessential. In my opinion the least essential of inessential services are tattoo artists. There are a lot of products and services in our mass consumer culture which are also frivolous and have nothing to do with what is essential or beneficial to human well being.. It seems that the most essential workers are the least paid while the least essential are well paid indeed. Is advertising really essential? You can look up everything you might want or need online using google or amazon. Why do you have to have some irrelevant product or service pounded into you by TV advertising? It's a historical relic. I record most programs so that I can fast forward through the commercials. If I watch a live program, I put it on pause while I do something else for awhile, and then I fast forward through the commercials. In my opinion everything advertised on TV, especially pharmaceuticals, is inessential. They should be prescribed by a doctor. It's the doctor's business to know which pharmaceuticals you need, not yours.

Are hedge funds essential? Is jewelry essential? Are the products of the wedding-industrial complex essential? Many people are having weddings during the pandemic without paying the tens of thousands of dollars that current weddings fashioned by the wedding-industrial complex demand. There are many frivolous consumer items which advertising insists that people need that they don't really need, that are completely inessential. Some are nice to have, but inessential, and some are downright destructive to peoples' health and welfare.

The most essential activity at this time in history is saving the planet from global warming. Production of renewable energy alternatives is absolutely essential. The provision of green infrastructure is absolutely essential. Fossil fuels need to be left in the ground. Getting rid of plastics which pollute the oceans and other waste products that aren't biodegradable is absolutely essential. Rethinking payscales for essential workers like agricultural workers and grocery store workers is essential. If these are the most essential workers, they should be paid more. The same goes for doctors, nurses, certified nursing assistants, the CNAs who do most of the caregiving at nursing homes. CNAs make little more than minimum wage and yet they are exposed to the coronavirus. What this means is that so much that is really essential now is either being ignored or very little money is being allocated to it while huge amounts of money are being allocated to fruitless and frivolous activities.

The most fruitless activity is war and the provoking of war. The trillion dollar annual budget of the military-industrial complex has been shown to be fruitless and meaningless when the real war is against a virus. Unhealthy conditions in poverty stricken areas of the world including refugee camps can breed disease which affects the whole world including "privileged" people in the more advanced nations. Poverty and disease need to be eradicated in all parts of the world. The military cannot do that. Oh, they can be repurposed a little bit to help out with a pandemic, but they can not really do the job that needs to be done. In particular they are vulnerable to the pandemic themselves and all of the weapons of war cannot protect them. The real war needs to be against poverty and disease which are the breeders of war and pandemics. The real war needs to be against global warming. The real essential workers are construction workers who need to be constructing advanced green infrastructure.

What is clear is that real essential workers need to be paid more which argues for a lessening of economic inequality. So much of the wealth is held by people who are absolutely inessential to the health, welfare and betterment of people all around the world. A Green New Deal needs to be prioritized. Wealth needs to be taxed to pay for it. New York state needs to tax Wall Street to make up for its budget deficit. Priorities, priorities. The helping professionals and care workers need to be given more respect and money. Taxing inessential workers like hedge fund managers is what needs to pay for it.

Inequality and the Coronavirus

Published on Tuesday, April 21, 2020

by TomDispatch

Or how to destroy American society from the top down.

by Rev Dr Liz Theoharis

 

4 Comments

The dual crises of pandemic and inequality are revealing ever more clearly how the descent into poverty is helping to destroy American society from the inside out. (Photo: Andrew Burton/Getty Images)

My mom contracted polio when she was 14. She survived and learned to walk again, but my life was deeply affected by that virus. Today, as our larger society attempts to self-distance and self-isolate, my family has texted about the polio quarantine my mom was put under: how my grandma fearfully checked my aunt’s temperature every night because she shared a bedroom with my mom; how they had to put a sign on the front door of the house that read “quarantine” so that no one would visit.

Growing up with a polio survivor, I learned lessons about epidemics, sickness, disability, and inequality that have forever shaped my world. From a young age, I saw that all of us should be valued for our intrinsic worth as human beings; that there is no line between the supposedly deserving and the undeserving; that we should be loved for who we are, not what we do or how much money we have. My mom modeled for me what’s possible when those most impacted by inequality and injustice dedicate their lives to protecting others from what hurts us all. She taught me that the dividing line between sickness and wellbeing loses its meaning in a society that doesn’t care for everyone.

Here’s the simple truth of twenty-first-century America: all of us live in a time and in an economic system that values our lives relative to our ability to produce profits for the rich or in the context of the wealth we possess. Our wellness is measured by our efficiency and -- a particular lesson in the age of the coronavirus -- our sickness, when considered at all, is seen as an indication of individual limitations or moral failures, rather than as a symptom of a sick society.

About 31 million people are today uninsured in America and 14 states have not even expanded Medicaid under the Affordable Care Act. The healthcare system is seemingly structured in defiance of the people it should serve, functioning as yet another way to maximize profits at the expense of millions. In this coronavirus moment, many more Americans are finally awakening to the bitter consequences, the damage, wrought when even a single person does not have access to the resources he or she needs to live decently or, for that matter, survive. With the spread of a pandemic, the cost to a nation that often treats collective care as, at best, an afterthought should become apparent. After all, more than 9,000 medical workers, many not adequately protected from the disease, have already contracted it.

For decades, both political parties have pushed the narrative that illness, homelessness, poverty, and inequality are minor aberrations in an otherwise healthy society. Even now, as the possibility of a potentially historic depression looms, assurances that the mechanics of our economy are fundamentally strong (and Covid-19 an unexpected fluke) remain commonplace. And yet, while that economy’s productivity has indeed increased strikingly since the 1970s, the gains from it have gone to an increasingly small number of people (and corporations), while real wages have stagnated for the majority of workers. Don’t be fooled. This crisis didn’t start with the coronavirus: our collapsing oil and gas industry, for instance, points to an energy system that was already on the brink and a majority of economists agree that a manufacturing decline had actually begun in August 2019.

The Cost of Inequality

It should no longer be possible to ignore the structural crisis of poverty and inequality that has been eating away at American society over these last decades. Historic unemployment numbers in recent weeks only reveal how expendable the majority of workers are in a crunch. This is happening at a moment when it’s ever clearer how many of the most “essential” tasks in our economy are done by the least well-paid workers. The ranks of the poor are widening at a startling clip, as many more of us are now experiencing what dire insecurity feels like in an economy built on non-unionized, low-wage work and part-time jobs.

In order to respond to such a crisis and the growing needs of millions, it’s important to first acknowledge the deeper history of injustice and pain that brought us all here. In the last years of his life, Martin Luther King, Jr., put it well when he said that “the prescription for the cure rests with an accurate diagnosis of the disease.” To develop a cure not just for this virus but for a nation with the deepest kind of inequality at its core, what’s first needed (as with any disease) is an accurate diagnosis.

Today, more than 38 million people officially live below the federal poverty line and, in truth, that figure should have shocked the nation into action before the coronavirus even arrived here. No such luck and here’s the real story anyway: the official measure of poverty, developed in 1964, doesn’t even take into account household expenses like health care, child care, housing, and transportation, not to speak of other costs that have burgeoned in recent decades. The world has undergone profound economic transformations over the last 66 years and yet this out-of-date measure, based on three times a family’s food budget, continues to shape policymaking at every level of government as well as the contours of the American political and moral imagination.

Two years ago, the Poor People’s Campaign (which I co-chair alongside Reverend William Barber II) and the Institute for Policy Studies released an audit of America. Its centerpiece was a far more realistic assessment of poverty and economic precariousness in this country. Using the Census Bureau’s Supplemental Poverty Measure as a baseline, which, among other things, measures family income after taxes and out-of-pocket expenses for food, clothing, housing, and utilities, there are at least 140 million people who are poor -- or just a $400 emergency from that state. (Of that, there are now untold examples in this pandemic moment.)

As poverty has grown and spread, one of the great political weapons of politicians and the ruling elite over the past decades (only emphasized in the age of Trump) has been to minimize, dismiss, and racialize it. In the 1970s, President Richard Nixon’s “Southern Strategy” coded it into Republican national politics; in the 1980s, in the years of Ronald Reagan’s presidency, the fabricated image of “the welfare queen” gained symbolic prominence. In the 1990s, President Bill Clinton’s welfare “reforms” enshrined such thinking in the arguments of both parties. Today, given the outright racism and xenophobia that has become the hallmark of Donald Trump’s presidency, "poor" has become a curse word.

It is, of course, true that, among the 140 million poor people in the U.S., a disproportionate number are indeed people of color. The inheritance of slavery, Jim Crow, never-ending discrimination, and the mass incarceration of black men in particular, as well as a generational disinvestment in such populations, could have resulted in nothing less. And yet the reality of poverty stretches deep into every community in this country. According to that audit of America, the poor or low-income today consist of 24 million blacks, 38 million Latinos, eight million Asian-Americans, two million Native peoples, and 66 million whites.

Those staggering numbers, already a deadweight for the nation, are likely to prove a grotestque underestimate in the coronaviral world we now inhabit and yet none of this should be a surprise. Although we couldn’t have predicted the exact circumstances of this pandemic, social theorists remind us that conditions were ripe for just this kind of economic dislocation.

Over the past 50 years, for instance, rents have risen faster than income in every city. Before the coronavirus outbreak, there was not a single county in this country where a person making a minimum wage with a family could afford a two-bedroom apartment. No surprise then that, throughout this crisis, there has been a rise in rent strikes, housing takeovers, and calls for moratoriums on evictions. The quiet fact is that, in the last few decades, unemployment, underemployment, poverty, and homelessness have become ever more deeply and permanently structured into this society.

Covid-19 and the Descent Into Poverty

Over the years, one political narrative has been trumpeted by both parties: that we don’t have enough to provide for every American. This scarcity argument has undergirded every federal budget in recent history and yet it falls flat when we look at the 53% of every federal discretionary dollar that goes to the Pentagon, the trillions of dollars that have been squandered in this country’s never-ending war on terror, not to speak of the unprecedented financial gains the wealthiest have made (even in the midst of the current crisis). Of course, this economic order becomes a genuine moral scandal the moment attention is focused on the three billionaires who possess more wealth than the bottom half of society.

Since the government began transferring wealth from the poor to the very rich under the guise of “trickle-down” (but actually gusher-up) economics, key public institutions, labor unions, and the electoral process have been under attack. The healthcare system has been further privatized, public housing has been demolished, public water and sanitation systems have been held hostage by emergency managers, and the social safety net has been eviscerated.

In these same years, core government functions have been turned over to the private sector and the free market. The result: levels of poverty and inequality in this country now outmatch the Gilded Age. All of this, in turn, laid the groundwork for the rapid spread of death and disease via the Covid-19 pandemic and its disproportionate impact on poor people and people of color.

When the coronavirus first became a national emergency, the Fed materialized $1.5 trillion dollars in loans to Wall Street, a form of corporate welfare that may never be paid back. In the following weeks, the Fed and a congressional bipartisan stimulus package funneled trillions more in bailouts to the largest corporations. Meanwhile, tens of millions of Americans were left out of that CARES Act: 48% of the workforce did not receive paid sick leave; 27 million uninsured people and 10% of the insured who couldn’t even afford a doctor’s visit have no guarantee of free or reasonably priced medical treatment; 11 million undocumented immigrants and their five million children will receive no emergency provisions; 2.3 million of the incarcerated have been left in the petri dish of prison; three million Supplemental Nutrition Assistance Program recipients saw no increase in their benefits; and homeless assistance funds were targeted at only about 500,000 people, although eight to 11 million are homeless or housing insecure. Such omissions are guaranteed to prove debilitating, even potentially lethal, for many. They also represent cracks in a dam ready to break in a nation without a guaranteed living wage or universal healthcare as debt mounts, wages stagnate, and the pressures of ecological devastation and climate change intensify.

Recently, news reports have made it far clearer just where (and whom) Covid-19 is hitting hardest. In New York City, now the global epicenter of the pandemic, for instance, the areas with the highest rates of positive tests overlap almost exactly with neighborhoods where the most “essential workers” live -- and you undoubtedly won’t be surprised to learn that most of them are poor or low-income ones, 79% of them black or Latino. The five zip codes with the most coronavirus cases have an average income of under $27,000; while, in the five zip codes with the least, the average income is $118,000.

Across the Black Belt of the southern states, the poor and black are dying from the coronavirus at an alarming rate. In many of those states, wages are tied to industries that rely on now interrupted regular household spending. They also have among the least resources and the most vehement anti-union and wage-suppression laws. That, in turn, leaves so many Americans all that more vulnerable to the Covid-19 crisis, the end of which is nowhere in sight. Chalk this up, among other things, to decades of divestment in public insitutitions and the entrenchment of extremist agendas in state legislatures. The Black Belt accounts for nine of the 14 states that have not expanded Medicaid and for 60% of all rural hospital closures.

Nor are these the only places now feeling the consequences of hospitals being bought up or closed for private profit. In Philadelphia, for instance, Hahnemann Hospital, which had served that city’s poorest patients for more than 170 years, was recently bought and closed by a real-estate speculator who then attempted to extract a million dollars a month from the local government to reopen it. Now, as the coronavirus ravages Philadelphia, Hahnemann’s beds sit empty, reminiscent of the notorious shuttering of New Orleans’ Charity Hospital in the wake of Hurricane Katrina in 2005.

In fact, lessons from the catastrophe of Katrina resonate heavily today, as the poor suffer and die while the rich and their political allies begin to circle the ruins, seeing opportunities to further enhance their power. After Katrina, many poor and black residents of New Orleans who had to evacuate were unable to return, while the city became a laboratory for a new onslaught of neoliberal reforms from health care to housing. One state legislator was overheard telling lobbyists, “We finally cleaned out public housing in New Orleans. We couldn’t do it, but God did.” It hardly takes a stretch of the imagination to envision similar braggadocio in the post-coronavirus era.

Inescapably Bound Together

The dual crises of pandemic and inequality are revealing ever more clearly how the descent into poverty is helping to destroy American society from the inside out. In a remarkably brief span of time, these crises have also highlighted our collective interdependence.

One of my earliest memories is of helping my mom walk when I was younger than my youngest child is now. As we slid down the wintry streets of Milwaukee, Wisconsin, my small hand in hers, she suddenly fell and I went down alongside her. I had been unable to keep us from crashing to the ground.

And yet, even when I couldn’t do what needed to be done alone, I recognized, with the clarity that perhaps only a child can have, how much we as a family (and, by extension, as a people) were inescapably bound together -- that when one of us falls, so many of us fall. And that’s why, whatever Donald Trump or Jared Kushner or the rest of that crew in Washington and across the country may think, we can no longer tolerate leaving anybody out.

Hasn’t the time finally come to reject the false narrative of scarcity? Isn’t it time to demand a transformative moral agenda that reaches from the bottom up?

If the wealthy were to pay a relatively modest amount more in taxes and we shrank our war economy to support the common good, then universal health care, living wages, and a guaranteed income, decent and affordable housing, strong programs for the poor, and even more might finally be within reach. This crisis is offering us a striking demonstration of how an economy oriented around the whims of the rich brings death and destruction in its wake.

A society organized around the needs of the poor, on the other hand, would improve life for all of us -- and especially in this Covid-19 moment, exactly this might be possible.

Rev Dr Liz Theoharis is co-chair of the Poor People’s Campaign.

© 2020 TomDispatch.com

'Biggest Coronavirus Stimulus of All': Richest Man in the World Jeff Bezos Now $24 Billion Richer Amid Pandemic

Published on Wednesday, April 15, 2020

by Common Dreams

 

"Our society cannot sustain itself when so few have so much, while so many have so little," said Sen. Bernie Sanders.

by Jessica Corbett, staff writer

 

22 Comments

CEO and founder of Amazon Jeff Bezos participates in a discussion during a Milestone Celebration dinner September 13, 2018 in Washington, D.C. (Photo: Alex Wong/Getty Images)

Amplifying fresh critiques of wealthy inequality that have mounted throughout the coronavirus pandemic, Amazon founder Jeff Bezos—the world's richest man—has added nearly $24 billion to his already massive fortune in 2020 as virus-related lockdowns across the globe have forced people to stay inside and fueled increased e-commerce demand.

Explaining the source of a nearly 5% jump in Bezos' net worth Tuesday, Forbes reported that Amazon stock surged 5.3%, "hitting a new record close of $2,283 per share. The stock is now up over 20% so far this year, outpacing the benchmark index (the S&P 500 is down over 12%)."

Turns out Jeff Bezos has got the biggest coronavirus stimulus of all ... https://t.co/10BrXbnIZ6

— Will Tooke (@willtooketv) April 15, 2020

Bezos was worth $138 billion as of Tuesday, according to the Bloomberg Billionaires Index. He is Amazon's CEO and president, and owns an 11.2% stake the e-commerce giant, which has come under fire for how it has treated workers during the outbreak.

While Bezos tops the index, Fortune noted that the 18th spot now belongs to his ex-wife MacKenzie, "who was left with a 4% stake in Amazon as part of the couple's recent divorce settlement. Her net worth has climbed $8.2 billion to $45.3 billion."

The index updates followed a Forbes report from Saturday about how "market gains led to a combined $51.3 billion boost for 10 of the world's billionaires since the market closed a week ago, on April 2." Bezos gained $6.8 billion in that time, an increase second to only that of Amancio Ortega of the Spanish fast-fashion retailer Inditex.

Sen. Bernie Sanders (I-Vt.), a longtime labor rights advocate and foe of millionaires and billionaires, tweeted the Forbes report Wednesday and highlighted how the wealth increases of Bezos and other billionaires contrast with the millions of Americans who have lost their jobs because of the ongoing public health crisis.

$33.4 billion. That's how much the wealth of Jeff Bezos and six other billionaires increased last week while millions of Americans were filing for unemployment.

Our society cannot sustain itself when so few have so much, while so many have so little. https://t.co/XwlhIXTMzS

— Bernie Sanders (@SenSanders) April 15, 2020

As Common Dreams reported last week, U.S. unemployment claims during the pandemic have soared to 16.8 million, which one economist noted "is a mind-boggling 2,500% increase over the pre-virus period."

That contrast between U.S. billionaires and the nation's newly unemployed was also pointed out on Twitter Wednesday by Public Citizen, which cited the Forbes report.

Billionaire wealth increases last week:

Jeff Bezos: +$6.8B

Mark Zuckerberg: +$6.2B

Warren Buffett: +$5B

Elon Musk: +$4.2B

Larry Ellison: +$4B

Larry Page: +$3.6B

Bill Gates: +$3.6B

Meanwhile, more than 16 million Americans have filed for unemployment in the past month.

— Public Citizen (@Public_Citizen) April 15, 2020

While millions of people across the United States have lost their incomes due to COVID-19, Amazon has filled 100,000 new jobs since March and plans to add 75,000 more "to help meet customer demand and assist existing employees fulfilling orders for essential products," according to a Sunday blog post on the company's website. The retailer has "increased pay for hourly employees by $2/hour in the U.S., C$2/hour in Canada, and €2/hour in many E.U. countries."

Amazon has "made over 150 process updates to help protect employees—from enhanced cleaning and social distancing measures to piloting new efforts like using disinfectant fog in our New York fulfillment center," the blog post said. The company is also building a lab to test its front-line workers for COVID-19 and has "distributed personal protective gear, such as masks for our employees, and implemented temperature checks across our operations worldwide."

However, workers at Amazon warehouses and Whole Foods Market—the grocery chain acquired by Amazon in 2017—have expressed fear and frustration about working conditions, and accused the company of not doing enough to protect employees. Just this week, Amazon also elicited condemnation for firing three workers who publicly criticized the company's pandemic response and treatment of employees.

"Instead of firing employees who want justice," Sanders tweeted Tuesday, "maybe Jeff Bezos—the richest man in the world—can focus on providing his workers with paid sick leave, a safe workplace, and a livable planet."

The safety of Amazon facilities in the midst of a pandemic has raised particular alarm. According to Business Insider:

More than 74 U.S. warehouses alone have now reported cases of the virus, and concerns from workers about safety and sanitation have ballooned, leading to employee walkouts and protests.

On Tuesday, Business Insider broke the news that Amazon had seen its first warehouse worker death, an operations manager who worked at the company's Hawthorne, California warehouse. The man died on March 31.

Some Amazon employees told Business Insider that they feel they have to choose between paying their bills and risking the health of themselves and vulnerable family members.

"I was grateful at first for the unlimited [unpaid time off] and $2 increase, but as things got worse and the virus was spreading more and more, it didn't matter. I don't want to be there, but I need the income," said one worker who cares for an elderly relative. "The stress of bringing it home to him makes me physically ill."

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The System: Who Rigged It, How We Fix It

by Robert Reich

Tuesday, March 24, 2020

The coronavirus has starkly revealed what most of us already knew: The concentration of wealth in America has created a a health care system in which the wealthy can buy care others can’t. 

It’s also created an education system in which the super-rich can buy admission to college for their children, a political system in which they can buy Congress and the presidency,  and a justice system in which they can buy their way out of jail. 

Almost everyone else has been hurled into a dystopia of bureaucratic arbitrariness, corporate indifference, and the legal and financial sinkholes that have become hallmarks of modern American life.

The system is rigged. But we can fix it.

Today, the great divide in American politics isn’t between right and left. The underlying contest is between a small minority who have gained power over the system, and the vast majority who have little or none. 

Forget politics as you’ve come to see it – as contests between Democrats and Republicans. The real divide is between democracy and oligarchy.

The market has been organized to serve the wealthy. Since 1980, the percentage of the nation’s wealth owned by the richest four hundred Americans has quadrupled (from less than 1 percent to 3.5 percent) while the share owned by the entire bottom half of America has dropped to 1.3 percent [Saez & Zucman]. 

The three wealthiest Americans own as much as the entire bottom half of the population. Big corporations, CEOs, and a handful of extremely rich people have vastly more influence on public policy than the average American. Wealth and power have become one and the same.

As the oligarchs tighten their hold over our system, they have lambasted efforts to rein in their greed as “socialism”, which, to them, means getting something for doing nothing.

But “getting something for doing nothing” seems to better describe the handouts being given to large corporations and their CEOs. General Motors, for example, has received $600 million in federal contracts and $500 million in tax breaks since Donald Trump took office. Much of this “corporate welfare” has gone to executives, including CEO Mary Barra, who raked in almost $22 million in compensation in 2018 alone. GM employees, on the other hand, have faced over 14,000 layoffs and the closing of three assembly plants and two component factories.

Our system, it turns out, does practice one form of socialism – socialism for the rich. Everyone else is subject to harsh capitalism.

Socialism for the rich means people at the top are not held accountable. Harsh capitalism for the many, means most Americans are at risk for events over which they have no control, and have no safety nets to catch them if they fall.

Among those who are particularly complicit in rigging the system are the CEOs of America’s corporate behemoths. 

Take Jamie Dimon, the CEO of JPMorgan Chase, whose net worth is $1.4 billion. He comes as close as anyone to embodying the American system as it functions today.

Dimon describes himself as “a patriot before I’m the CEO of JPMorgan.”

He brags about the corporate philanthropy of his bank, but it’s a drop in the bucket compared to his company’s net income, which in 2018 was $30.7 billion – roughly one hundred times the size of his company’s investment program for America’s poor cities. 

Much of JP Morgan’s income gain in 2018 came from savings from the giant Republican tax cut enacted at the end of 2017 – a tax cut that Dimon intensively lobbied Congress for.

Dimon doesn’t acknowledge the inconsistencies between his self-image as “patriot first” and his role as CEO of America’s largest bank.
He doesn’t understand how he has hijacked the system.

Perhaps he should read my new book.

To understand how the system has been hijacked, we must understand how it went from being accountable to all stakeholders – not just stockholders but also workers, consumers, and citizens in the communities where companies are headquartered and do business – to intensely shareholder-focused capitalism.

In the post-WWII era, American capitalism assumed that large corporations had responsibilities to all their stakeholders. CEOs of that era saw themselves as “corporate statesmen” responsible for the common good.

But by the 1980s, shareholder capitalism (which focuses on maximizing profits) replaced stakeholder capitalism. That was largely due to the corporate raiders – ultra-rich investors who hollowed-out once-thriving companies and left workers to fend for themselves.

Billionaire investor Carl Icahn, for example, targeted major companies like Texaco and Nabisco by acquiring enough shares of their stock to force major changes that increased their stock value – such as suppressing wages, fighting unions, laying off workers, abandoning communities for cheaper labor elsewhere, and taking on debt – and then selling his shares for a fat profit. In 1985, after winning control of Trans World Airlines, he loaded the airline with more than $500 million in debt, stripped it of its assets, and pocketed nearly $500 million in profits.

As a result of the hostile takeovers mounted by Icahn and other raiders, a wholly different understanding about the purpose of the corporation emerged.

Even the threat of hostile takeovers forced CEOs to fall in line by maximizing shareholder profits over all else. The corporate statesmen of previous decades became the corporate butchers of the 1980s and 1990s, whose nearly exclusive focus was to “cut out the fat” and make their companies “lean and mean.”

As power increased for the wealthy and large corporations at the top, it shifted in exactly the opposite direction for workers. In the mid-1950s, 35 percent of all private-sector workers in the United States were unionized. Today, 6.4 percent of them are.

The wave of hostile takeovers pushed employers to raise profits and share prices by cutting payroll costs and crushing unions, which led to a redistribution of income and wealth from workers to the richest 1 percent. Corporations have fired workers who try to organize and have mounted campaigns against union votes. All the while, corporations have been relocating to states with few labor protections and so-called “right-to-work” laws that weaken workers’ ability to join unions.

Power is a zero-sum game. People gain it only when others lose it. The connection between the economy and power is critical. As power has concentrated in the hands of a few, those few have grabbed nearly all the economic gains for themselves.

The oligarchy has triumphed because no one has paid attention to the system as a whole – to the shifts from stakeholder to shareholder capitalism, from strong unions to giant corporations with few labor protections, and from regulated to unchecked finance.

As power has shifted to large corporations, workers have been left to fend for themselves. Most Americans developed 3 key coping mechanisms to keep afloat.

The first mechanism was women entering the paid workforce. Starting in the late 1970s, women went into paid work in record numbers, in large part to prop up family incomes, as the wages of male workers stagnated or declined. Then, by the late 1990s, even two incomes wasn’t enough to keep many families above water, causing them to turn to the next coping mechanism: working longer hours. By the mid-2000s a growing number of people took on two or three jobs, often demanding 50 hours or more per week.

Once the second coping mechanism was exhausted, workers turned to their last option: drawing down savings and borrowing to the hilt. The only way Americans could keep consuming was to go deeper into debt. By 2007, household debt had exploded, with the typical American household oweing 138 percent of its after-tax income. Home mortgage debt soared as housing values continued to rise. Consumers refinanced their homes with even larger mortgages and used their homes as collateral for additional loans.

This last coping mechanism came to an abrupt end in 2008 when the debt bubbles burst, causing the financial crisis. Only then did Americans begin to realize what had happened to them, and to the system as a whole. That’s when our politics began to turn ugly.  

So what do we do about it?

The answer is found in politics and rooted in power.

The way to overcome oligarchy is for the rest of us to join together and form a multiracial, multiethnic coalition of working-class, poor and middle-class Americans fighting for democracy.

This agenda is neither “right” nor “left.” It is the bedrock for everything America must do.

The oligarchy understands that a “divide-and-conquer” strategy gives them more room to get what they want without opposition. Lucky for them, Trump is a pro at pitting native-born Americans against immigrants, the working class against the poor, white people against people of color. His goal is cynicism, disruption, and division. Trump and the oligarchy behind him have been able to rig the system and then whip around to complain loudly that the system is rigged.

But history shows that oligarchies cannot hold on to power forever. They are inherently unstable. When a vast majority of people come to view an oligarchy as illegitimate and an obstacle to their wellbeing, oligarchies become vulnerable.

As bad as it looks right now, the great strength of this country is our resilience. We bounce back. We have before. We will again.

In order for real change to occur – in order to reverse the vicious cycle in which we now find ourselves – the locus of power in the system will have to change.

The challenge we face is large and complex, but we are well suited for the fight ahead.

Together, we will dismantle the oligarchy.

Together, we will fix the system.

Off the Top of My Head

China Out Capitalizes Capitalist Nations

by John Lawrence, March 23, 2020

Who would have thunk it? China has taken capitalist financial methods to the next level with the result that it is progressing more rapidly in material abundance and a consumer society than the proto-capitalist nations of the world: the US and Europe. Sure, politically, they are an authoritarian nation. But that expedites their development since all institutions are on the same wavelength. In particular their central bank, the People's Bank of China (PBC) funds infrastructure projects all over the world. This keeps China a full employment society. They put all the Chinese people to work building infrastructure which expands the money supply in a very widespread way. Essentially the PBC provides loans for all these projects which means it creates the money just as US banks do when they create loans or the Federal Reserve does when it provides "liquidity" to the markets through quantitative easing (QE).

The Federal Reserve has actually expanded the range of market interventions it can do. It used to be that the Fed could only set interest rates. That was it. Now it can buy corporate bonds, state and local bonds and give money directly to corporations to keep them afloat. In fact it can act more like the PBC which interacts directly in the Chinese economy. The Fed can take debts directly onto its balance sheet where they may remain forever. This is exactly what it did in the 2008 financial crash. It provided cash directly to banks in return for mortgage backed securities and Treasury bonds thus providing liquidity to the banks so that they would not go under. Now the banks are well capitalized, and, since they know that the Fed stands ready to bail them out again, they have no worries. In fact the term "bail them out" is actually a misnomer at this point. It can be replaced with "provide them with cash" as necessary.

There was an interesting interview on 60 Minutes with Neel Kashkari, Obama's Assistant Secretary of the Treasury, who was in charge of the Troubled Assets Relief Program (TARP) during the Great Recession. He noted that TARP, which was supposed to help out actual people with their mortgages did not go far enough. They were too stingy with it, and not very many people got helped. He says that this prolonged the recession. Instead of being stingy as they were, they should have been "overly generous." That is the lesson he learned. So now in the coronavirus recession, his advice is that the Fed should be overly generous in providing relief to actual everyday people and not just to banks. At this time the banks are doing very well, thank you.

It is well known that money is created by the banks themselves when they create a loan which they do with a couple of keystrokes on a computer. Why is this possible? Because money has no relationship to gold or any other precious metal any more. That's why it's called "fiat money." So what bankers and economists are realizing (which has been the secret of China's success all along resulting in their bringing 800 million people out of poverty in 40 years) is that the US central bank, the Federal Reserve can do the exact same thing. It can create fiat money just like the banks do, like Wall Street does. The only concern is that money so created would lead to inflation, but, as Kashkari noted, there was no inflation even after the Fed created trillions of dollars in 2008 most of which went directly to bankers, hedge funds and rich individuals and not to the average American. Now Kashkari, who is President of the Minneapolis branch of the Federal Reserve, is saying that the Fed could provide liquidity to the American people and not just to the banks. How this will probably happen is by Congress passing a bill on the "fiscal side" as they say. Then they will sell more Treasury bonds to cover the increased deficit. Wall Street banks will buy them since other countries are decreasing their purchase of US debt, and then the Fed will provide liquidity (cash) to Wall Street taking the Treasury bonds onto its balance sheet where they will reside forever probably. This is why the national deficits and debt are no problem because the Fed can print money to cover them ad infinitum. It's as if the Fed provided money directly to the US economy, but, by law, they have to do so indirectly.

Ellen Brown understood this possibility long before Neel Kaskari had his "awakening."

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. Typically, if the businesses cannot repay the loans, neither the banks nor the businesses are put into bankruptcy, since that would mean losing jobs and factories. The non-performing loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government, and the loans were created on the banks’ books in the first place (following standard banking practice globally).

Precisely! So no need to worry about another Great Recession or Depression. The US could effectively provide a Universal Basic Income (UBI) to its citizens indefinitely as Andrew Yang proposed.

As observed by Jeff Spross in a May 2018 Reuters article titled “China’s Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing. Beijing will come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

There is no reason why the US could not emulate China. From an economic point of view QE or a UBI would not be inflationary as long as the dollars provided to the system were either invested in new plants and equipment, infrastructure or consumption. What is needed now is about $10 trillion worth of Green Infrastructure, a Green New Deal funded indirectly by the Fed. This money can be provided to the American people and not only rich billionaires as was done in 2008 and as China is providing directly to its workers who are kept busy building infrastructure in the Belt and Road initiative. It would also ease economic inequality and not induce inflation as long as the money is widely distributed.

Off the Top of My Head

The Federal Reserve's Role is to Bail Out Wall Street, Not the American People

by John Lawrence, March 21, 2020

The purpose of the Federal Reserve is to bail out the banks, not to bail out you. During the Great Recession of 2008, the Fed gave trillions to the banks. The average Joe that couldn't pay his mortgage lost his home to foreclosure. Banks only keep a portion of their money as reserves. They create loans out of thin air. If someone can't make payments on a loan, the bank will foreclose. If the loan is secured by property, that property will become the bank's property. If at the same time more people want to take their deposits out of the bank than the bank has in reserves, the bank is in trouble. That's where the Federal Reserve comes in. It floods the bank with liquidity meaning the cash to pay out to the bank's customers who want their money back. At the same time the Fed may take the bank's non performing loans onto its balance sheet. No one cares if the Fed has a bunch of non performing loans on its balance sheet. They can just stay there ad infinitum.

What happened during the Great Recession was that, thanks to financial instruments called derivatives, banks were liable for a lot more money than simple mortgages and other retail loans. They had committed to covering bets like interest rate swaps or collateralized debt obligations (CDOs) without understanding the liabilities they had agreed to. Derivatives represent gambles. A hedge fund will bet that an underlying security will go up or go down. When they win their bets, as they did in 2008, mainly due to foreclosures, it is similar to a run on the bank only a lot more money is at stake. Certain banks and financial institutions did not have the money to pay off the bet. So the Fed stepped in and paid off the bet for them. This was how the financial crisis was resolved. All the gamblers were made whole by the Federal Reserve. All the bets were paid off and very few financial institutions had to go out of business. Lehman Brothers was one institution that did go bankrupt and was liquidated.

The Fed can control how much money is sloshing around in the economy by raising or lowering the prime interest rate. That's the interest rate a bank pays to borrow money. The bank then charges the average Joe a lot higher interest rate, and they make money on the spread. Obviously, the Fed doesn't want the retail banks to make foolish loans that won't be paid back because then it will have to bail out the banks that made such loans. However, this is exactly what led to the 2008 financial crisis. The banks were making "liar loans" base on stated income. A waitress could go into the bank and just state her income was $125,000. a year. There was no checking. She was given a mortgage to buy a house. Then, when she couldn't make the payments on the house, the bank foreclosed. When the bank couldn't resell the house and get its money back, the bank's reserves were diminished and finally it couldn't meet its obligations. That's when the Fed stepped in with more liquidity. The Fed just created money out of thin air the same way the banks created money for loans, and flooded the banking system with it.

Average people lost their homes and their jobs, but investors and gamblers who had bet that the economy would collapse were paid off. This is the solution that Obama oversaw that was created by his protege Tim Geithner, Obama's Secretary of the Treasury. Now the question might be asked why the gamblers who had bet that the economy would fail were paid in full because the Federal Reserve created the money out of thin air to pay them while there was no money created to bail out the American people who had lost their homes and their jobs. Why was their no money created to alleviate the suffering? That's because that's not the Fed's job. The Fed's job is to bail out the banks. Hedge fund manager John Paulson made an estimated $2.5 billion during the crisis by betting against the housing market.

It doesn't take a genius to see that the US might have better spent its money by more widely distributing the trillions that the Fed created rather than paying off a hedge fund manager to the tune of a couple billion dollars, but again that's not the Fed's job. It should have been Obama's job to step in and demand that investor/gamblers not be paid, and that the Fed's trillions of dollars that it created go to the average John and Jayne that lost everything. But that's not how things work in the US capitalist economy. The Fed is not beholden to the American people. It's only beholden to the banks, and even there, it can decide which ones it wants to fail (Lehman Bros.) and which ones it wants to bail out (every other bank).

The trillions of dollars created by the Federal Reserve in its Quantitative Easing (QE) program go directly into the hands of investors meaning rich people. This does not "trickle down" to the American public. So it's no mystery why economic inequality is increasing, why the rich are getting richer and the poor are getting poorer. Much is made about how the Federal Reserve is "independent" from the Federal government. That's because it is a privately owned, wholly owned subsidiary of the big banks. It is literally owned by Wall Street and it's only beholden to Wall Street. It only serves the American public in the sense that it keeps the financial system operating smoothly supposedly.

Consider the alternative. A public bank, one beholden to the American people or its representatives, would have been able to direct the money flow at least partially to the direct alleviation of suffering of the American people during a recession or a depression. The Reconstruction Finance Corporation served the role during the Great Depression of getting money directly to state and local governments and to the American people. It supported banks as well, but the monies also flowed directly into the economy without having to take the form of loans created by the Wall Street banks. It was more hands on in bailing out certain industries.

A public bank, such as exists in North Dakota, can make loans directly to people and small businesses. It doesn't deal in fancy derivatives and is accountable not to the banking system but to the people in general. In North Dakota's case it's accountable to the people of North Dakota to whom it returns its profits. The Central Bank of the United States could be a public bank on the national level which would replace the Federal Reserve with the mandate of supporting the American people directly as well as the banking structure. It would not deal in derivatives which only benefit hedge funds and drive inequality.

The coronavirus could induce another Great Depression depending on how long it lasts. However, don't expect the Federal Reserve to protect the American people although it will protect Wall Street. No investor/gambler need fear losing their money. In fact the John Paulsons of the world, who have probably already taken out fantastic bets that the economy will go down, stand to make billions supplied of course by the Federal Reserve which will create the money out of thin air. This sloshing around of money will be scooped up by the billionaire class. Then the Federal government will come through on the fiscal side to supply aid of some sort to the American people while adding all this money to the national debt.

Off the Top of My Head

“These billionaires, the top 1%, they’re probably crapping their pants.”

by John Lawrence, February 23, 2020

Thanks to the internet and Google, I couldn't locate who is responsible for that quote. However, Bernie Sanders' campaign for President of the United States is not only a campaign, but it's also a community organizing event at the same time. He is organizing the community of voters that will turn out for him. In that sense it is a political revolution. It's all about turning out the vote. Whoever turns out the most voters in their behalf will win the election. The establishment, both Democratic and Republican, doesn't want Bernie Sanders to win. In particular the Democratic party is set up in such a way as to rig the nominating process. Bernie will probably not have enough delegates to win on the first ballot.

So the Democratic party has invented this way that they can eliminate any candidate who is not mainstream enough to their tastes. It's called superdelegates. According to Wikipedia:

In American politics, a “superdelegate” is an unpledged delegate to the Democratic National Convention who is seated automatically and chooses for themselves for whom they vote. These Democratic Party superdelegates (who make up slightly under 15% of all convention delegates) include elected officials, party activists and officials.

Democratic superdelegates are free to support any candidate for the presidential nomination. This contrasts with pledged delegates who are selected based on the party primaries and caucuses in each U.S. state, in which voters choose among candidates for the party's presidential nomination. On August 25, 2018, the Democratic National Committee agreed to reduce the influence of superdelegates by generally preventing them from voting on the first ballot at the Democratic National Convention, allowing their votes only in a contested nomination.

Bernie may not have the 1991 pledged delegates to win on the first ballot although he will probably have the most pledged delegates by then. That means that Democratic National Committee (DNC) party officials who constitute the 764 superdelegates will be eligible to vote on the second ballot. Also the pledged delegates are unpledged on the second ballot. This whole process adds to the confusion of who will win the Democratic nomination as there are two wings of the Democratic party - the progressive wing led by Bernie Sanders and Elizabeth Warren and the moderate wing comprisng Joe Biden, Amy Klobuchar, Pete Buttigieg and now Mike Bloomberg. Will these wings combine pledged votes so they can stand behind the nomination of one candidate? Or can they according to DNC rules?

What no one wants (except perhaps Republicans) is a slugfest at the Democratic National Convention. A brokered convention is one where party elites will probably dictate whom the nominee will be. These are the superdelegates who can vote on the second ballot. It seems clear they don't want Bernie Sanders. But if Bernie goes into the convention with a substantial plurality, a substantial lead over the other contestants, will the Democratic party elite have the nerve to take the nomination away from him? And will then the whole progressive wing of the Democratic party stay home on election day, or, worse yet, turn out and vote for Trump?

It seems clear that the voters want change in America. That's why they voted for Trump who was a disrupter on the right of the political spectrum. Bernie is also a disrupter, but on the Left. It seems clear to me that the people don't want the same ol same ol as represented by the Democratic party's moderates like Joe Biden. They want radical change. There must be radical change just on the issue of climate change alone or else planet earth is destined to be a not very habitable home for human beings and other animals. Cockroaches will probably survive, and maybe someday they will evolve into more intelligent beings. That will be the outcome if Trump is reelected.

Off the Top of My Head

In America the Majority Rules and Devil Take the Hindmost

by John Lawrence

This is a partial rebuttal of Frank Thomas' article today. I agree with Frank totally, but I'm going to act as devil's advocate. Articles have been written about how 40% of Americans couldn't afford a $400. emergency without borrowing the money or selling something. I hasten to point out that that statistic implies that 60% of Americans could afford a $400. emergency and 60% represents a majority of Americans. America is a democracy not by, of and for the people as Frank says, but a majority in the sense that the majority rules and the winners take all. It doesn't matter that 40% don't have a roof over their heads or can't put food on the table if it comes to that. If 60% are relatively well off, Trump will win the next election.

Data from Mastercard SpendingPulse shows that U.S. retail sales grew by 3.4% this holiday season, with online shopping rising by 18.8% over 2018. If there is such great inequality in the US with the implication being that Americans are faring so poorly, how do you account for this? How come year upon year Americans are spending more money on Christmas? Somebody must have money to spend, and, since the US' GDP is 70% based on consumer spending, well, it seems that the majority of Americans has the money to spend. Sure not everyone is well off. 500,000 people are homeless, but Republicans don't care about a minority of people who can't share in the American dream. As long as 60% can, that represents a majority, and in American politics the majority rules.

This is what Democrats don't get. Americans don't care how wealthy Jeff Bezos and Bill Gates are. They don't care that 3 Americans own as much wealth as the bottom half of Americans. They only care that the top half plus one (a majority) has the money to spend to live a decent consumer oriented life filled with the latest techno gadgets and other goodies. Do Americans care that some Americans go bankrupt because they can't pay their medical bills? No, as long as they, the majority, don't have any such problems. If they come down with some horrible illness that bankrupts them, then all of a sudden they will care, but, until they do, they will be happily in the majority of Trump voters who think America is doing just fine.

However, there are a few choke points at which the majority of Americans will join the minority demanding change. The main two are the stock market and a major war. Roughly one half of Americans are invested in the stock market through their 401k plans. This means that their wealth and future wealth is dependent on the stock market. Steve Vernon, a researcher at the Stanford Center on Longevity, points out in a 2018 report: “This survey shows that roughly half of households have access to a work-based plan — and so that half is more likely to be ‘the haves’ and the people who don’t have a work-based plan are more likely to be ‘the have nots.’” Exactly. Half of Americans, a veritable majority, have done very well as the stock market has exploded going from 10, 428 in 2009 to 28, 538 in 2019. That represents a pretty good accumulation of wealth for a majority of Americans. Not as much as Jeff Bezos has, to be sure, but better perhaps than their parents had.

So.... what if the stock market crashed as it did in 2008 and as it has done many times before. All of a sudden the majority of Americans are affected by one sudden cataclysmic event. A major war could have the same effect, and with a nutcase at the helm, it's not a foregone conclusion that a major war won't happen, and, as Trump says, "It will be over very quickly." Maybe so, but that would probably facilitate a major upheaval of the global monetary system and a crash in the stock market. The global monetary system is already under much stress as sanctions have been used to weaponize the dollar. Dedollarization proceeds at a great pace, and at some point, this will crack the dollar as the world's reserve currency. Then all bets are off for increased Christmas sales.

There are other potential choke points that are on the horizon as well. Student loan debt is now at $1.5 trillion. This mainly affects young people as does the global warming problem. If enough young people see their future as excluding them from the American Dream, they will eventually rebel en masse as young people are rebelling all over the world. But so far the number of Americans affected by climate change - those who have lost their homes to wildfires or floods or seen their insurance coverage skyrocket or be denied altogether -  are very much in the minority. And student loan debt is being borne very stoically ... so far.

America is a majoritarian society. That's what Bernie Sanders and Elizabeth Warren don't get. It is also a "devil take the hindmost" society. According to Grammarist: "Devil take the hindmost is a phrase that describes a situation in which someone thinks only of himself and his own interests, leaving others to deal with their own fates. Hindmost is an adjective that describes the person who is the furthest from the front or the one who is in the back of a line or group. The idea behind the meaning of the saying devil take the hindmost is of a group of people being pursued by the devil. The people who take care of themselves and run away with no thought about the others who may be slower or lagging behind, will be safe. It is believed that devil take the hindmost was a popular proverb during the 1500s."

This is a perfect description of American culture. Far from "we are all in this together" as Frank suggests we should be, Americans are all out for themselves, and, as long, as the majority are buying more and more Christmas gifts, year upon year, the majority of Americans will have a surfeit of stuff and they won't care how rich the wealthy get compared to themselves nor will they care how many suffer from homelessness or go bankrupt from medical bills.

Another Look at Thomas Piketty’s “Law of Inequality”

by Frank Thomas

Utilizing massive historical documentation, Thomas Piketty argues that as returns to invested capital outstrip the rate of economic growth, income from wealth grows faster than the economy – concentrating more and more money and power in the hands of a few. As these returns are reinvested, inherited wealth will grow faster – concentrating even more money in fewer hands. In Piketty’s thinking, wealth inequality rises exponentially as it adds unearned income to earned income. In short, once the returns on capital exceed the real growth in wages and output, as has been happening since 1950, then inevitably the stock of capital will rise at a faster rate. The process is made worse by the rise in exorbitantly paid executive managers where the rise in pay has nothing to do with real merit but rather a self-serving greed to keep up with the other rich. When incomes from capital become more concentrated than incomes from labor – e.g., today, the wealthiest 10% earn almost the same amount of income as the rest of the country – personal income distribution will also become more unequal. So far, this is not an earth-shaking economic revelation.

No one can deny the fact that those at the bottom and increasingly those in the middle are doing poorly while those in the top 10% are grabbing an increasing fraction of our nation’s income (see: I. TABLES 1, 2 Piketty & Saez and II. RECENT RELATED TABLES 3,4,5)

PIKETTY & SAEZ REPORT 2013 – TABLES 1,2

___________________________________________________________________________

TABLE 1: US Real Income Growth by Groups 1993-2012 (Includes Wage/Investment Income)

	Ave. Family Income	Top 10% Incomes	Bottom 99% Incomes	% of Total Growth(Loss)Earned by Top 10%
Full Period 1993-2012	17.9%	86.1%	6.6%	68%
Clinton Expansion 1993-2000	31.5%	98.7%	20.3%	45%
2001 Recession 2000-2002	-11.3%	-30.8%	-6.5%	57%
Bush Expansion 2002-2007	16.1%	61.6%	6.8%	65%
Great Recession 2007-2009	-17.4%	-36.3%	-11.6%	49%
Recovery 2009-2014	6.0%	31.4%	0.4%	95%

_______________________________________________________________________________

SOURCE: Piketty and Saez: 2003 data updated to 2012

TABLE 2: U.S. Overall Real Average Income Growth: 1970 - 2000

	Number of People	Average Income	1970-2008 %Change
TOP 0.1%	15,000	$5.6 Million	+385%
TOP 0.1 - 0.5%	610,000	$878,100	+141%
TOP 0.5 – 1%	762,000	$443,100	+90%
TOP 1% - 5%	6.0 Million	$211,500	+59%
TOP 5% - 10%	7.6 Million	$127,200	+38%
BOTTOM 90%	137.2 Million	$31,300	-1%

__________________________________________________________________________________

SOURCES: TABLE 1 – Piketty and Saez; TABLE 2 – The World Top Incomes Data Base, U.S. Treasury Department, U.S. Census Bureau, Sloan School of Management, Piketty and Saez, etc.

SOURCES: TABLE 2 - The World Top Incomes Data Base; The Washington Post; Sloan School of Management; U.S. Treasury Department; U.S. Census Bureau; Piketty and Saez, etc.

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Computations are based on family market income including realized capital gains (before individual taxes). Incomes exclude government transfers (such as unemployment compensation and social security) and non-taxable fringe benefits. Incomes are inflation-adjusted using the Consumer Price Index.

The 4^th column shows the fraction of total real family income (loss) captured by the Top 1%. For example, from 1993 to 2012, average family income grew by 17.9%, but 68% of that growth went to the Top 1% while only 32% went to the Bottom 99%. During the 2009-2012 recovery, income concentration for the Top 1% returned to its huge pre-recession level and then some. Average family income grew only 6%, but 95% of that growth was grabbed by the Top 1% while practically zero went to the Bottom 99%. The Top 1% have about fully recovered from their loss during the 2007-2009 Great Recession, but the Bottom 99% are still sitting with their loss.

In my view, Piketty’s major innovative breakthrough in economic thinking is that the forces at play creating an obscene outsized societal income and wealth inequality – as has been occurring in the U.S. for past 30 plus years – self-reinforce and self-perpetuate inequality to new levels, fostering societal stratification and instability in which people are not moving forward together. Ordinary people are being more and more separated from those with economic and political power.

Unless these forces are reined in and income/wealth distribution becomes fairly balanced as was the case for 30 years after WWII, concentrated asset wealth will continue to benefit the rich and debt will continue to overwhelm the middle class and poor as the latter spend beyond their means to keep up. An economy like the U.S. – that is so dependent on 70% consumption, very low savings (vs. 58% consumption in Europe and 10-12% savings), stagnant wages, and maxing-out credit card debt to achieve a reasonable GDP growth – inevitably ends up reducing both consumer expenditures and economic growth and increasing personal debt levels – driving the next Great Recession where the rich will again come out on top.

Part of the self-perpetuating enriching process of the few stems from a political system that is poisoned and warped by the influence of big money – a system giving inordinate power to those at the top. And the warping process is getting worse as the wealth of the top 10% grows larger. Those at the top take advantage of their market and political power not only to limit redistribution but also to shape the rules in their favor in order to increase their own income and wealth at the expense of the rest.

Let’s be clear: this paper is not about arguing for a system of equality of income and wealth, a favorite line of dogmatic conservatives. It’s about recovering a system we once had of equality of opportunity, a decent wage and fair play, i.e. a rising economic tide that brings the standard-of-living of all citizens “commensurably” forward … precisely the opposite of what one sees happening in TABLES 1 and 2. During the 2009-12 recession recovery, the wealthiest 1% captured 95% of income growth, while the bottom 90% became poorer.

If the above doesn’t confirm a process that is phasing out the middle class, what does? Most Americans have seen their incomes sink or stagnate while incomes of the top 1%, 5% and 10% have come about at the expense of those below. The median income (adjusted for inflation) even for households of individuals with a bachelor’s degree or higher fell by a tenth from 2000 to 2010. (see: http://www.census.gov/hhes/www/income/data/historical/household/).

U.S. family members are working up to 60 hours a week and using credit card debt to maintain their standard of living. The average real minimum wage of $10.69 has steadily declined from 54% of average real hourly earnings of $19.85 in 1968 to 36% of real average hourly earnings of $20.31 today based on a real minimum wage of $7.25 in 2013. (Source: Congressional Research Service, “Inflation and the Real Minimum Wage,” Jan. 8, 2014). Shockingly, the U.S. average CEO salary has exploded exponentially from 44 times the average worker salary in 1974 to over 300 times, in 2013. In sharp contrast, the EU average CEO salary has been relatively stable at 44 times the average worker salary in 1974 to 50 times today. The wealthy lost some of their wealth in the Great Recession as stock prices declined, but the 1% wealthiest now hold 240 times the wealth of the typical American – twice the ratio in 1962 and 1983 when the numbers were already sky-high at, 125 to 1 and 131 to 1, respectively.

A hollowing-out of 80% of working Americans is in process where mobility upward has been at a standstill, with nearly rock bottom wages, few benefits, and labor rights.

Piketty’s main thesis is about pure capitalism’s inevitable, automatic creation of an ever expanding income and wealth concentration for the few and relative stagnation of incomes and wealth for the rest. His thesis revolves around what is termed “The first fundamental law of capitalism,” which incorporates Piketty’s following economic values for determining inequality:

(a) = the share of capital incomes in national income

(r) = the rate of return, in real terms, on capital

(g) = the rate of growth of the economy

(B) = the ratio between capital income and national income

Piketty’s historical studies show that the (B) ratio was a very high 7 in the UK and France, 6 in Japan, and 5 for the U.S. prior to WW I. During the next 50 years through 1975, the (B) ratio dropped precipitously to about 3.5 in the UK and Europe and to below 4 in the U.S., the latter helped by much higher marginal tax rates, a labor-friendly atmosphere, higher inheritance taxes, etc., causing a far more equitable personal income and wealth distribution. In the last 35 years, the (B) ratio has soared back to levels corresponding to those before WWI.

The first fundamental law of capitalism says that the share of capital incomes in national income, (a), is equal to the rate of return on capital, (r), times the ratio between capital income and national income (B). Concerning this law, Piketty’s brilliant finding is that when the rate of return on capital (r) is permanently above the rate of growth of the economy, (g), then the share of capital in national incomes, (a), increases. This, in combination with an increasing ratio between capital income and national income, (B), will drive the share of capital in national income to new high peaks thereby also intensifying income and wealth inequality to a more dangerous level.

Just as climate change from accelerating CO2 emissions is intensified by positive feedbacks, so is wealth concentration intensified by a positive feedback. Piketty clarifies this feedback in simple language. As capital’s share in national income increases, capital owners become wealthier. Assuming they do not consume the entire return on their capital, they will have savings to reinvest to further increase their wealth share. This is in sharp contrast to the bottom 90% of the working population which has most of its capital tied up in homes and some in stocks, bonds or small proprietorship businesses. Their small annual capital gains are mainly used to maintain personal living standards.

In a recent interview, Piketty illustrated what one person called his “First law of inequality,” and its inevitability under capitalism with the following example:

“Imagine a hypothetical village from centuries ago where neither the population nor the economy was growing. …. Even in a zero-growth society, however, assets that helped people to produce goods – also known as “capital” – had value. In our hypothetical village, a large farm might produce $10,000 worth of crops in a year, yielding $1,000 in profit for its owner. A small farm might have the same 10% rate of return on $1,000 in annual crop sales, yielding $100 in profit. If the large farmer and small farmer each spent all their money every year, the situation could continue ad infinitum, and the rate of inequality in the village would NOT change.

But one of capital’s greatest advantages is that its owners can make enough income to spend some of their money, save and eventually reinvest the rest. If the large farmer saved $500 of that $1,000 profit, he could buy more capital assets, which would bring in more profit. Perhaps a few owners of small farms had small debts to pay, and one of the large farmers bought them out. Eventually, the owner of the expanding farm might find himself owning land that yielded $1,500 or $2,000 in annual profit, allowing him to put aside more and more for future capital acquisitions. Less stylized versions of this story have been playing out for centuries.”

As the interviewer noted, “The fact that the rich earn enough money to save money allows them to make investments (many times at low capital gains tax rates) that other people cannot afford. And the investments often bring in a positive return on capital generally higher than the rate of economic growth.” This capitalistic process efficiently creates income and wealth inequality. Piketty describes this relationship, when the rate of return on capital exceeds the rate of growth of the economy, as (r) exceeds (g).

Will (r) Always Exceed (g)?

Piketty cynically thinks the marginal return to capital will not decline. In his opinion, global competition for capital and the financial sophistication to find new, productive uses for capital will all help to keep the return on capital (r) at a higher level than (g). Unless this is checked by appropriate taxation and by aggressive establishment of worker-owned enterprises, including public banks and credit unions for start-up and expanding small businesses, then a continuing high (r) spells Big problems ahead for the economy, for quality-of-life and societal stability.

Right now, despite slower job growth, Europe’s advanced economies are far better balanced in the functional, fair distribution of income and wealth as well as recycling of national income for social well-being. Here, tax rates progress substantially for personal taxable incomes in the highest tax bracket. The Netherlands is a typical example of this. The maximum Dutch tax rate for incomes above $80,000 (Euro 55,991) is 52% compared to a U.S. maximum tax rate of 39.6% on income above $425,000 for a head of household. The Dutch tax rate on savings and investments is 30% compared to a far lower U.S. capital gains tax rates. Further, U.S. Top 1%, 5% and 10% income earners can divert much income into relatively low capital gains with tax rates varying from 0% for those in the 10% to 15% brackets up to 20% for those in the highest 39.6% tax bracket. This has helped accelerate U.S. wealth concentration to the highest levels in the world for top 10% income earners – with the possible exception of Saudi Arabia or Dubai.

A U.S. societal transformation to shared ownership and public banking will help diversify rather than concentrate wealth. Such an approach roots the incomes and wealth it generates back to communities and regions – as opposed to transferring profits, assets and resources away from Main Street communities to Wall Street’s multinational corporations and their global shareholders.

As the IMF has stated recently, “Policies that reduce inequality have a more benign effect on growth than once thought.” In fact, they will spur growth by putting more money in middle class pockets to save and consume without relying so heavily on debt to maintain a decent living standard.

Bruce Frohnen sums up well the macro-micro inequality issue in his essay, “Economic Inequality and the Hypocrisy of Power, May 2014” – where implicitly he argues against both dogmatic societal individualism and dogmatic government interference.

“The issue is not how we shall make everyone equal. We can’t do that, though we can hand tyrannical power over to those who promise to do it for us. The question is how we can establish and maintain a decent social structure that ties, however loosely, the garnering of great wealth to the promotion of the general welfare while limiting evil conduct in the pursuit and use of wealth.

As Aristotle recognized, more than 2,000 years ago, a successful polity must have a strong middle class. People who have a substantial stake in the economy while still having to work within it are necessary for that economy’s stability. Such folk also are necessary for political and social stability because they thrive, not on ‘creative destruction’ (which is, after all destructive) but rather on hard work (editor: fairly compensated for value contributed) aimed at steady, inter-generational improvements.”

Frank Thomas

The Netherlands

May 20, 2014

ECONOMIC POLICY INSTITUTE 2018 – RECENT RELATED TABLES 3, 4

(Wage Data Excludes Investment Income)
TABLE 3: Average Annual Real Wages, By Wage Group : 1979 – 2017 (2017 $Dollars)

					% INCREASE AFTER
					GREAT RECESSION
WAGE GROUP	1979	2007	2016	2017	1979-17	2009-17	2016-17
TOP 0.1%	$622,000	$2,876,700	$2,551,900	$2,756,900	343.20%	29.80%	8.00%
TOP 1%	$279,300	$715,000	$693,000	$718,000	157.30%	19.00%	3.70%
TOP 0.1%	$148,100	$262,400	$293,600	$299,800	102.50%	14.30%	2.10%
TOP 90th to 99th %	$96,800	$140,700	$151,600	$152,500	57.40%	8.60%	0.10%
Bottom 90%	$29,600	$34,500	$35,800	$36,200	16.70%	5.40%	1.00%

SOURCE: TABLES 3 and 4: Economic Policy Institute (EPI) analysis of Kopczuk, Saez, and Song and Social Security Statistics.

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TABLE 3: These disparities in wage growth show that the TOP 0.1% and TOP 1% reached the highest wages ever in 2017. TABLE 4 shows how these disparities have given rise to a major change in the share distribution of wages by wage groups since 1979. The EPI October 2018 report shows this:

TABLE 4: Changes in Wage Groups’ Shares of Total Wages: 1979 – 2017

WAGE GROUP	1979-2017 Wage Threshold			1979-2017 % Share of Total Wages
	1979	2007	2017	1979	2007	2017
TOP 0.1%	$622,000	$2,876,700	$2,756,900	1.6%	5.7%	5.20%
TOP 1%	$279,000	$715,600	$718,800	7.3%	14.1%	13.40%
TOP 5%	$148,100	$262,300	$299,800	19.40%	26.50%	28.00%
TOP 90th to 99th	$96,800	$140,700	$152,500	22.8%	24.9%	25.7
SUB-TOTAL TOP 10%				30.10%	39.0%	39.10%
BOTTOM 90%	$29,600	$34,500	$36,200	69.90%	61.0%	60.90%

In essence, TABLES 1 – 4 show that 90% of American workers are entrapped in an ever increasing bare-living wage lifestyle under our more capitalistic market model of shareholders and executive salaries first, workers’ wages and job security second. Simultaneously, the BOTTOM 90% of workers are squeezed by extremely high healthcare, college, housing costs that have been increasing on average 3-5% yearly over past 4 decades. This has taken place while real wages for 90% of our worker population have averaged a Tiny 1% growth rate 1970-2008 and 2007-2017, as well documented by Piketty and EPI’s research. U.S. social redistribution of government revenues to the BOTTOM 90% wage group is, to say the least, a far cry from that of most EU countries.

Same applies to LOW U.S. progressive tax rates on exceptional annual taxable wage incomes above $400,000 and $5 million or more – compared to Europe’s average progressive tax rate of +- 51% on wage income above +-$90,000 at current exchange rate. This compares to a very LOW U.S. progressive tax rate of 37% on an annual wage income above $500,000. U.S . social redistribution of government tax revenues to the BOTTOM 90% is to say the least, if not a joke, a far cry from that of the advanced EU countries.

Technology changes have lowered consumer prices, but that has not offset the year-by-year brutal structural impoverishment of our middle and lower worker groups. Little wonder our Income/ Wealth Gap has now gone to a point today where CEO wages since 1979 have soared from 55 times the average worker wage to over 310 times now and still rising – vs. 54 times in most EU countries today. Another reality is that EU quality healthcare coverage and college facilities are available for ALL citizens and students at a yearly cost less than one-third of U.S. Costs.

ZUCMAN & SAEZ REPORT 2019 – RECENT RELATED TABLE 5

TABLE 5: 1970-2018 TOP 1% vs. BOTTOM 50% Average Incomes After Taxes/Transfers

Research by Gabriel Zucman of Stanford University and Emmanual Saez has just been published by the Washington Post today showing that the three richest Americans hold more wealth than 160 million Americans who form the bottom 50% of the population.

Their 1970-2018 study confirms the huge wealth gap that Piketty’s wealth data and the Economic Policy Institute’s wage data show in TABLES 1, 2,3, 4 of my report.

Zucman and Saez’s data show how staggering and shocking the scale of income/wealth inequality is increasing per individual in top brackets. The TOP 1% wealth triples from $328,800 in 1970 to $1,152,200 in 2018. In contrast, the Bottom 50% of working people are taking home just $8,000 more per year in 2018 than they did in 1970.

Here are new data results highlights (after taxes and transfers) :

• For the Top 1%, average income has risen by $800,000 since 1970 or 100 times the growth of the Bottom 50%

• For the Top 0.1%, it has risen by $4 million or 5 times larger than 1970.

• For the Top .01%, it has risen by $20 million or 7 times larger than 1970

• For the Bottom 50%, it has risen by just $8,000 in 2018 than in 1970.

Zucman, as Pikitty/Saez concluded, reports that two trends are reinforcing each other: “There has been the rise in market income inequality – the rise in pretax income inequality. At the same time, the tax system has been much less progressive at the TOP of the income distribution.” As noted in my past reports, Trump’s tax cuts went predominantly to the Top 10% class and corporations - while the Bottom 90% got tax cuts that amounted to bread crumbs.

As one commentator observed, “It is no longer meaningful to rely on GDP” as a measure of general economic well-being, since the benefits of economic growth are by far no longer being shared among all Americans as they were in previous years between WWII through the late 1970s. The huge cuts in progressive tax rates going disproportionately to the Top 10% earner class then began under Reagan.

TABLE 5 shows Zucman/Saez’s 1970-2018 average After Tax growth in incomes per decade, including transfers. It’s pretty obvious the net income increases in Top 1%, 0.1% and .01% Income Groups was nearly exponential 1980-2010 while slowing after the Great Recession.

TABLE 5: 1970-2018 Real Ave. Income Growth by Income Group - After Taxes & Transfers

	Bottom 50%	50-90%	Top 10%-1%	Top 1%	Top 0.1%	Top .01%
1970	$19,640	$44,200	$91,400	$328,800.00	$1,011,400.00	$3,689,300.00
1980	$22,040	$47,900	$100,700	$368,200.00	$1,186,300.00	$4,139,300.00
1990	$22,500	$55,300	$122,300	$614,200.00	$2,279,000.00	$8,176,800.00
2000	$26,400	$67,150	$160,800	$886,700.00	3520100	$14,141,200.00
2010	$25,970	$67,600	$162,700	$1,044,800.00	$4,870,500.00	$23,706,200.00
2018	$27,640	$75,900	$187,500.00	$1,152,200.00	5174600	$24,178,500.00
GROWTH	$8,000	$31,700	$96,100	$823,400.00	$4,163,200.00	$20,489,200.00
Percentage Increase 1970-2018	40.7%	71.70%	105.10%	250.40%	411.60%	555.40%

_________________________________________________________________________

TABLE 5a: 1970-2018 Per Decade % Increases in Real Ave. Income by Income Group

1970-1980	12.20%	8.40%	10.20%	12.00%	17.30%	12.20%
1980-1990	2.10%	17.20%	15.00%	87.6%	92.10%	97.50%
1990-2000	17.30%	21.40%	31.50%	44.4%	54.40%	72.9%
2000-2010	-0.90%	0.70%	1.20%	17.8%	38.40%	67.60%
2010-2018	6.40%	12.30%	15.20%	10.20%	6.20%	2.00%

SOURCE: Gabriel Zucman and Emmanual Saez, Dec. 2019

Frank Thomas Dec. 5, 2019 The Netherlands

Final Edit: Dec 16, 2019

'Staggering' New Data Shows Income of Top 1% Has Grown 100 Times Faster Than Bottom 50% Since 1970

Published on Monday, December 09, 2019 by Common Dreams

by Julia Conley, staff writer

"The bulk of a generation of economic growth has been captured and concentrated in a few hands, and many people have barely seen any of it."

New data released Monday explains the numbers behind Sen. Bernie Sanders' often-cited statistic that the three richest Americans hold more wealth than the 160 million people who make up the bottom 50% of the population.

Washington Post columnist Greg Sargent published what he called "stunning" findings from Stanford University economist Gabriel Zucman, showing how both an explosion in annual earnings by the rich and an increasingly regressive tax structure have combined to allow the top 1% of Americans' wealth to triple over the past five decades.

Meanwhile, working people are taking home just $8,000 more per year than they did in 1970.

In what Sargent called "the triumph of the rich, which is one of the defining stories of our time," the richer a household is, the more its take-home wealth has grown in the past 50 years.

New data:

For top 1%, average income has risen by $800,000 since 1970.

For top 0.1%, it has risen by $4 million.

For top .01%, it has risen $20 million.

Bottom 50%? $8,000.

All this is *after taxes and transfers.*

Great work from @gabriel_zucman:https://t.co/iaxntlHdvl

— Greg Sargent (@ThePlumLineGS) December 9, 2019

The top 1% of earners make an average of more than $1 million per year after accounting for taxes they pay, a 50-year increase of more than $800,000—100 times the growth rate of the bottom 50%.

The wealth of the top .1% is five times larger than it was in 1970, while that of the top .01% is seven times larger, at over $24 million in 2018.

Zucman and fellow economist Emmanuel Saez, his co-author of the new book "The Triumph of Injustice," provided a chart showing how each group of earners' take-home pay has changed since 1970. The wealthiest Americans' assets skyrocketed by millions of dollars even in the first decade of the 21st century—when people in the bottom 50% saw their average take-home income decrease.

For middle-income earners since 1970, income-plus-effective tax rates have gone from $44,000 to about $75,000—a greater increase than those in the bottom 50% of earners, "but still their income growth rate has been very low," Zucman told the Post.

Zucman, who with Saez advised Sen. Elizabeth Warren (D-Mass.) on her Ultra-Millionaires Tax, emphasized that both the explosion of yearly income at the top and the effective tax rates of people in all income brackets must be taken into account to understand the massive wealth gap.

"You have two trends reinforcing each other," Zucman told the Post. "There has been the rise in market income inequality—the rise in pretax income inequality. At the same time, the tax system has become much less progressive at the top of the income distribution."

"People have this idea that government redistribution has upset some of the rise in inequality, but essentially that's not the case," the economist added.

Zucman's findings were revealed two months after New York Times columnist David Leonhardt published a graphic showing how in 2018, for the first time in U.S. history, the 400 richest Americans paid less in taxes than any other income group.

The richest Americans have benefited from numerous changes to tax laws and enforcement in recent decades, Sargent wrote, "including domestic and international tax avoidance, the whittling away of the estate and corporate taxes, and the repeated downsizing of top marginal rates."

Tony Annett of the Center for Sustainable Development at Columbia University wrote that Zucman's research shows how "it is no longer meaningful to rely on GDP" as a measure of economic well-being, since the benefits of growth are no longer being shared among all earners as they were in previous eras.

With this kind of distribution, it is no longer meaningful to rely on GDP, not even accounting for its other deficiencies. GDP became a widely used measure of economic well-being at a time when the benefits of growth were shared widely. https://t.co/IIL5EYMMGy

— Tony Annett (@tonyannett) December 9, 2019

Seth D. Michaels of the Union of Concerned Scientists described Zucman's findings as showing how many people of his generation have seen the bulk of economic growth "captured and concentrated in a few hands."

even if you know that inequality is increasing, the scale is staggering to consider. the bulk of a *generation* of economic growth has been captured and concentrated in a few hands, and many people have barely seen any of it. https://t.co/XldPkUoIM9

— Seth D. Michaels (@sethdmichaels) December 9, 2019

"The tiny number of people raking in the overwhelming majority of the last 40 years of economic growth are distorting the economy and the political system like a black hole, everything falling toward their interests at high speed," Michaels wrote.

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