Which Is Truer: The American People Are Hurting Because of the Cost of Eggs or The American People Are Well Off If They Can Spend Thousands on Taylor Swift Concerts and All the Airline Seats Are Filled
by John Lawrence
Apparently, there's a cutoff point above which Americans are all enjoying the good life and below which Americans are sweating their next rent payment. Kamala needs to get a graph which shows where this cutoff point is. Then she needs to appeal to the majority of voters not just a minority of Taylor Swift concert goers or those that can't pay their rent. According to the Fed's 2022 Economic Well-Being of U.S. Households survey ..., 37% of Americans lack enough money to cover a $400 emergency expense, up 5% from 32% in 2021 and back to 2019 levels. That means that 63% of Americans can cover a $400 emergency with no problems.Ticket prices to concerts and sports events are not cheap, and they sell out well in advance. Will the real American please stand up? Everyone complains about the cost of groceries, but does that include those filling airline seats, going to professional football games and paying big bucks filling seats at numerous events. Which is it? So, Kamala needs not to make a mistake by only appealing to 37% of Americans. She needs to appeal to the other 63% as well or at least a majority including both segments..
So what are the 63% of Americans concerned with? Reproductive freedom, for sure. It's very American to not want government telling you what you can and cannot do. They are also concerned about the border, and that includes Democrats as well as Republicans. Kamala should get out in front of Trump on this issue. Here's a policy for you: The goal should be not one illegal border crossing while increasing legal pathways for immigration. It's very simple. Forget all the ifs, ands, buts, whereases and other considerations. KISS: Keep it simple, stupid. That's the only thing Americans can understand. They don't read. They are only involved in politics to the extent that it is entertaining them, especially Trump voters. Kamala should go ahead and do what she did yesterday - make bold policy proposals without worrying about how we're going to pay for it. Leave it to the wonks to get down in the weeds about that. Most Americans don't care about the weeds. They just want to know what she will be trying to accomplish - where her head's at. It's all about getting elected. Did Trump ever get down in the weeds? He can't even make a coherent policy proposal. Kamala should outflank him.
It was a bold stroke to agree with Trump about not taxing tips. She neutralized that Trump initiative. Let Trump complain that it was his idea first. Who cares? Kamala is outsmarting Trump. It doesn't take much intelligence to do that. She should continue to out smart, finesse, outflank and do whatever it takes to get elected no matter how much Trump or the press or the pundits complain that she's not doing what they think she should do. It's not about doing what the pundits want you to do. It's about doing what will resonate with the American people and will get you elected. There is nothing that says you have to have a complete budget drawn up and every item accounted for before the election. Republicans have been relying on the fact that it's not illegal to lie yourself into a position of political power. They have been doing it for years. I don't advocate that Kamala should lie and for the most part Democrats have not lied, but they should not worry about accounting for every jot and tittle of the policy proposals. And she should do what she thinks she needs to do to get elected not what the pundits think she should do like give news conferences. If she thinks news conferences will advance her position, then she should do them. If not, then she shouldn't and the timing of everything is up to her. It's that simple.
You know that Trump wants to make the Trump tax cuts permanent. These are the tax cuts that added $7 trillion to the national debt and primarily benefited the rich. Kamala should finesse this issue by taking it away from Trump. Here's how: make it part of her platform to keep the Trump tax cuts for the poor and middle class while sunsetting them for the rich. Even better use the money saved by sunsetting the tax cuts for the rich to give the poor and middle class an even bigger tax cut than the Trump tax cuts provided. The important thing is to get out in front of Trump on this issue. Let him respond to her. Trump will then be behind the eight ball on this and other issues. All Trump has to offer is personal attacks, and they seem to be falling flat with respect to Kamala. Her politics of joy seem to be winning, and the Democratic National Convention should add another boost to the Harris-Walz ticket.
CNBC has just reported: "[Harris'] policies include a ban on “corporate price-gouging” to lower the cost of groceries and prescription drugs, and they aim to expand affordable housing and cut taxes for the middle class." Of course nothing will happen unless Democrats also control both Houses of Congress. But that should not prevent Kamala or any other Presidential candidate from promising big things. The important words are "tax cuts for the middle class." Some of the other plans Kamala is espousing are "the first-ever federal ban on “corporate price-gouging” on food and groceries". Well, good luck with that. Good talking point though. Her other plans include encouraging builders to build starter homes and Federal help with down payments on a house. CNBC reported: "As the supply of entry-level homes expanded, the Harris plan would “provide working families who have paid their rent on time for two years and are buying their first home up to $25,000 in down-payment assistance, with more generous support for first-generation homeowners,” according to the fact sheet." $25,000 will not be much help for a down payment though. At 20% down, $25,000 would only provide a down payment on a $125,000 house. This might be possible in some parts of the country as real estate values vary a lot with region. However, in San Diego starter homes are around $1 million. It would be a non-starter.
Harris will also call for the U.S. to construct 3 million new housing units over the next four years. I don't think this would be very effective as long as those new houses are subject to the market. Market rate housing is the problem, not the solution. Preventing hedge funds from buying up houses and then renting them out would help the situation. Some mechanism must be found such that the average middle class family can afford to buy a house. The emphasis on affordable starter homes is a big deal. Democrats are also all about lowering the price of pharmaceuticals. We can thank Joe Biden for that. However, he won't get credit since that deal doesn't become effective for another year. The various other parts of Kamala's economic plan won't resonate all that well with the American public because they won't understand them. However, "tax cuts for the middle class" will resonate and will steal Trump's thunder. Let Trump complain, as he did with not taxing tips, that it was his idea first!
Tax Cuts for the Middlle Class; Tax Hikes on the Rich
by John Lawrence
The two issues Republicans have are tax cuts and border security. Don't cede these issues to Republicans. A majority of Americans want a secure border. This has nothing to do with LEGAL immigration or even with amnesty. Limiting amnesty to those applying for it legally does not require any changes in the law. What it does require is reinforcing the border so no one can get over it illegally. This would then require more resources devoted to reinforcing the border. In terms of tax cuts, Democrats have to stress tax cuts for the middle class paid for by tax hikes on the rich. Kamala should go right after these issues. She needs to be extremely tough on both of them. Let's face it: Democrats are going to vote for her no matter what. However, at this point in time, most voters are independents. She needs to co-opt Trumplican issues. And don't be too worried about a plan. Does Trump have a plan? No, he just asserts, "I will do this. I will do that." Kamala should take a page out of Trump's book. Just say, "I will do this. I will do that." She doesn't need to spell out HOW she's going to do it in detail. For sure, Trump doesn't.
Now that Joe Biden has dropped out of the race, he doesn't have to do two jobs - being President and campaigning - while Trump just has one - campaigning. That's why Mike Johnson wants Biden to resign: so that Kamala will be saddled with the responsibilities of President instead of devoting full time to campaigning. Democrats know what the Democratic agenda is in terms of providing for and addressing the needs of the middle class and the poor. But she has to address the sweet spot - where the majority of voters are and what the majority of voters are concerned about. Of course the abortion issue resonates well for Democrats and all Americans.
This whole thing about a short campaign season for Kamala is ridiculous. Most countries don't let political campaigns last more than a couple of months by law. In France political campaigns just last a couple of weeks. In Canada the longest political campaign was 74 days. In Australia, the longest political campaign lasted 11 weeks. In Japan campaigning is allowed for 12 days. In countries where campaigns are limited by law, elections aren't controlled by big money interests as they are in the US. The longer the campaign season, the more big money controls elections and politics. In the US, if we don't want the very rich to control elections, not only the campaign period, but also the amount of money spent on political campaigns needs to be controlled.
The US is becoming a neo-medieval society in which the majority have no hope of home ownership, but are destined to work paycheck to paycheck and be renters for life. This means no asset accumulation while their rents increase even with low inflation or target inflation of 2%. 2% target inflation means at least 2% rent increases over the course of a renter's life. In addition to not having any asset accumulation those living paycheck to paycheck are vulnerable to credit card and car payment debt so that they are supporting the banking system with interest payments for their entire life.
The two biggest issues are the economy and the border. Biden has to address these two issues effectively if he hopes to win the election. The way to neutralize Trump's appeal on these issues is essentially to co-opt Trump's positions. On the economy, Biden must come out for tax breaks for the middles class. He has already been talking about taxing the rich. Good, but this does nothing for tax relief for the middle class unless he explicitly comes out and say so. Americans are at least subconsciously accustomed to the fact that, f they elect a Republican President, they will get a tax cut. Problem is Republican tax cuts go mainly to the rich as they did during Trump's administration when he added $7 trillion to the national debt with his tax cuts. The fact that Biden wants to tax the rich should enable him to responsibly give tax cuts to the middle class without adding to the debt. He needs to simplify his messaging to the bare essentials as Trump does without getting down into the policy weeds.
Secondly, on the border, Biden's position is not strong enough. This vaunted "bi-partisan legislation" that Trump doesn't want passed is not strong enough. The correct position is that the goal should be not one illegal entry over the US border. This is the position of most countries after all. The US is spending too much money on 750 military bases in 80 countries being the world's policeman yet it can't control its own border! This is the height of ridiculousness. I hasten to point out that with effective border control the laws regarding amnesty would not have to be changed. Immigrants could still apply for amnesty albeit through legal channels. The ridiculous situation that anyone who sets foot on American soil illegally can apply for amnesty will have been effectively curtailed. This presupposes that enormous resources in terms of infrastructure and manpower will have to be redirected to the border. Well, how about closing some of those foreign military bases and using that money to beef up the border? The goal should be not one illegal entry, rather than hiring more judges. The bill entails: "The bipartisan Senate bill would add more than 1,500 new Customs and Border Protection personnel. Asylum Officers and Asylum Reform: Similarly, Asylum Officer staffing has remained stagnant over the last four years and there is an insufficient number of asylum officers to do initial screenings." This bill presupposes that immigrants will continue to enter the US illegally. It's the wrong approach, it's too complicated, the American people will not understand it. Trump will make that clear. Trump will state his case simply and directly in a way that a 12 year old can understand which is about the mentality of a lot of the American people. Biden has to out Trump Trump on this issue, but do it in a responsible way. If the goal is "not one illegal entry," then that can be coupled with increasing LEGAL immigration.
Thirdly, Biden has to end the two wars: Ukraine and Gaza. He is letting Netanyahu run all over him making him look weak. He has to demand an end to that war and impose a two state solution if necessary. He dos not need to state a lot of ifs, buts, whereases and wherefores. Simply state his position and what he intends to accomplish with all the might of US prestige and power. Trump will state his positions as if they will be fait accomplis no matter how impractical or unlikely they actually are in reality. Biden has to get a lot tougher and use the withdrawal of US resources from Israel if necessary. He is treating Israel with kid gloves. He has to be more evenhanded in his support for Gaza and Palestine. In Ukraine, the handwriting is on the wall. Biden's cold war mentality set up this proxy war between the US and Russia. He has to demand a cease fire with the lines being drawn between the areas that Russia and Ukraine now control. To be specific Russia would control Crimea, which they've controlled since 2014 without a peep from the Obama administration, and the Donbas region while Ukraine controls the rest. A plebiscite could later determine the eventual fate of the boundaries between the two countries. If Biden doesn't do something about a cease fire in each of these two wars, it could doom his Presidency for a second term. Americans are tired of these meaningless wars and the inability of the all powerful US, the world's policeman, to do anything about them.
In short Biden has to get tough. He needs to simplify his positions. It's not enough to criticize Trump as being too extreme. Obviously, the American people aren't buying it. He needs to finesse the main issues - economy, border and 2 wars - by saying that he will 1) give tax breaks to the middle class, 2) prevent even one illegal entry to the US and 3) end the 2 wars. If he does all three things, he will co-opt Trump on these issues and win the election. If he continues to advocate for the Senate border bill, let Netanyahu make a patsy out of him and call for taxing the rich without a concomitant tax break for the middle class, he will lose.
Right out of the gate Joe Biden's voice was clear and strong. Nothing mealy mouthed here. I'm sure he had been practicing his enunciation and articulation. It helped that the volume on the microphone had been turned up. That strong, loud voice reassured me and others that Joe Biden was not too old for the job. It helped too that he could overpower his hecklers. It made me a little nervous when he started to cough. Oh no, I thought, what if he has a coughing fit! But he held it together and his voice didn't waver towards the end as I might have feared.
Now as for the speech itself. Overall it was good, but one thing he and his speechwriters should have taken more seriously is that less is more. He tried to cram in too many details which probably went right over the heads of the people he most needs to persuade. For instance, the fact that Medicare can now negotiate for prescription drugs does save the taxpayers money, but it takes a real wonk to appreciate that point. All most Americans care about is does it save them money when they go to buy drugs at the pharmacy. Joe tried to rush through a lot of details that would have better left out of the speech. He was most effective when he slowed down and made a major point and an applause line. I think it was lost on most viewers especially the non-wonks that Joe Biden needs to persuade that he wants to extend the fact that Medicare can now negotiate drug prices to the negotiation of drug prices for everyone including those who are not on Medicare. These are big points, but the average American probably did not appreciate them. Again less is more. The part about shinkflation and capping credit card late fees at $8. was right on. This is the stuff most Americans can relate to - their petty pocket book issues.
I was happy that he went on about taxing billionaires and the wealthy and about how much money this would bring into the Treasury, but I wanted him to go further and say that he would use some of this money to give the middle class a tax break. The Republicans and especially Trump's big selling point is that he will give everyone a tax break! His base thinks that's great even though most of those tax breaks will go - like they have in the past - to the wealthy. Trump's base doesn't care as long as they get a paltry by comparison tax break. Biden should have taken that issue away from Republicans by emphasizing that, while he would tax the rich, he would give tax breaks to the middle class. He lost that opportunity by emphasizing how rich the Treasury would get by his taxing the rich. Who cares?
Finally, Biden was on top of his hecklers, the leader of whom was Marjorie Taylor Green. Biden should thank her for the opportunity to show he could fight back and take it to her. The hecklers were a godsend for Biden. I'm sure he was prepared. Now some Republicans are saying that Biden didn't respect decorum enough. Phooey! How much decorum does Trump respect? Zero. He calls people names. He breaks every rule of decorum in the books. Politics today is not what it was 50 years ago, even 10 years ago thanks mainly to Trump who has broken every rule in the book. I'm so glad that Biden was up to the situation and gave as good as he got thereby defeating the purpose of Marjorie Taylor Green which was to bully him and show he was weak. Biden took it to her, thank God.
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.
Inflation is a supply and demand problem. The Fed only sees it as a demand problem: there is too much demand. Therefore, it seeks to reduce the public's ability to demand by reducing wages and creating more unemployment. Problem is that businesses are short staffed. They are trying to hire more workers, not laying them off. There is no "industrial reserve army" of people competing for jobs. Businesses are competing for workers. The reason why prices are going up (hence inflation) is not that there is too much demand, but that there is too little supply. This is caused by supply chain problems which comes down to the fact that most things Americans consume are produced overseas, mainly in China. Also the sanctions on Russian gas and oil combined with Russia cutting off supplies even beyond the sanctions means that everything that is transported including consumer goods is even more expensive. The problem is that the US does not produce much of what it consumes. Again it's a supply problem. Container ships coming from China raise their rates because gas is more expensive. This makes the goods they transport more expensive. When the major things Americans consume come from China (consumer goods) and Russia (energy costs), America is at the behest of countries that it considers enemies. And so is Europe.
The traditional way of fighting inflation is for the Fed to raise interest rates and drive up unemployment. When unemployment increases, demand decreases because unemployed people don't have as much money to spend. In other words money is withdrawn from the economy. This is of course to the detriment of the unemployed people which are usually those on the lowest rung of the economic ladder. But as we've seen during the pandemic, those at the bottom of the economic ladder are usually those who are indispensable workers - grocery workers, agricultural workers, truck drivers, nurses, caregivers. The economy cannot function for anyone without their services. So the only way the Fed can achieve its goal is to drive businesses into bankruptcy. Then all those workers will be in the ranks of the unemployed and be forced to underconsume. Actually, the more that Americans consume, the more greenhouse gasses are created. Underconsumption could have a very salutary effect on the atmosphere and the environment.
Another way to withdraw money from the economy in order to reduce demand is to raise taxes. Again taxes are usually raised on the poor and middle class further immiserizing them. Congress refuses to raise taxes on the rich which Joe Biden has proposed doing. This would help inflation to some extent, but the rich don't consume basic items to the extent that the middle class and poor do. So in order to reduce demand to the point where it is more or less equal to supply, money must be taken out of the pockets of the poor and middle class. The other alternative is to increase supply. But since the US is dependent on supply from foreign suppliers, this is not that easy to do. Long range, the solution is for the US to make more stuff, but corporations have settled on a model of getting stuff produced where labor is cheapest and that means overseas.
Why is the Stock Market Surging in the Midst of Huge Unemployment
by John Lawrence
Simple answer is that the stock market has nothing to do any more with the Main Street economy. There are two economies: Main Street and Wall Street. There's the economy of rich investors, and the economy of the 90% who aren't investors. The stock market is dominated by large multinational corporations like Apple and Google, and is invested in by rich people from all over the world. As COVID has shown, we have a bifurcated economy. Secondly, interest rates for Treasury bonds are zero so why would an investor buy them when investing in stocks amounts to a self fulfilling prophecy? The more money going in, the greater the rate of return, and rich people are continuing to make huge amounts of money. Business Insider reported that billionaires saw their net worth increase by half a trillion dollars during the pandemic. All that money has to go somewhere. Meanwhile, middle class people with 401(k)s are draining them to meet expenses. Thirdly, the Federal Reserve has all but gifted rich investors trillions of dollars.
More than 1 in 4 Americans are raiding their retirement accounts after a coronavirus-related job loss. The unexpected loss in income is causing many Americans to tap their retirement savings just to make ends meet. And many people who lost a job — or have a spouse or partner whose income has declined — didn’t have much money saved in the first place. Half of Americans who were recently furloughed or let go have saved less than $500 for retirement in the past year — and 70% have saved less than $1,000, according to a report by fintech firm SimplyWise. Of those who have an individual retirement account, 401(k) plan or retirement savings account, 1 in 5 now plan to tap those funds. Of course rich investors don't suffer job losses because they don't have jobs other than managing their money. That they can do from home.
Some has been written about a K-shaped recovery from the pandemic. In a K-shaped recovery, the economic bounce-back is bifurcated like a "K": The wealthiest Americans are quickly rebounding, even thriving, while the middle- and lower-income set are not. As of the first quarter of 2020, the wealthiest 10% of American households owned 87% of all stocks and mutual funds, according to the Federal Reserve. So where does that leave the other 90%? Struggling. Waiting in line at food banks. Getting evicted and foreclosed on. Losing their small businesses in droves. The fact that a second relief package has not been implemented and in all probability won't be for another 2 months till after Biden takes office will hinder those people in the lower part of the K even more.
So what does this say about essential workers? Are rich investors essential workers? I don't think so. Are doctors and nurses? You bet. But they are being shafted by the American people who won't obey simple guidelines in the midst of a surge upon a surge in COVID. Many of them are committing suicide. Others will soon throw up their hands and quit their jobs rationalizing that their own families are more important than taking care of sick patients which puts them at risk. Multitudes of Americans traveled during the Thanksgiving holidays ignoring pleas to stay home. Now doctors and nurses will pay the price for those who exercised their "freedom" as Americans to ignore the pleas of others and only think of themselves. Even family members of these will pay the ultimate price. Another ghastly statistic: the US with 4% of the world's population has 19% of the world's COVID cases. An in November there were an average of a million new cases per week.
Having a President for the past four years who has dumbed down the American people has not been a big help in contributing to a better society for Americans or those in the rest of the world who had looked up to America. Now the question is to what degree the Biden administration can recover some semblance of American democracy and respectability among other world leaders and also economic equity for all Americans. A lot of it will hinge on whether or not Democrats will control the Senate after the two runoff elections in Georgia. If Republicans continue to control the Senate, we can expect four more years of gridlock and straitjacketing of Biden's ambitious agenda. This will be devastating for America and the world. The US will continue to diminish in importance in the world community. Economic inequality will be exacerbated, and global warming will get even worse as hurricane and fire seasons become normal year round events.
Joe Biden wants to bring the country together. Here are 3 programs guaranteed to do it. 1) Guarantee that every worker who loses his job in the fossil fuel industry, as the energy industry transitions to renewables, is guaranteed a job in the renewable energy industry including free retraining if necessary. 2) Free apprenticeship programs for electricians, plumbers and other occupations for which no robot can replace them. Let's change that white supremacist chant to "Robots will not replace us." 3) A huge build-up of a Habitat for Black Humanity program (open to participants of all races) in honor of Jimmy Carter who famously wields a hammer for Habitat for Humanity. At $171,000, the net worth of a typical white family is nearly ten times greater than that of a Black family ($17,150) in 2016. Gaps in wealth between black and white households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception. The black-white wealth gap reflects a society that has not and does not afford equality of opportunity to all its citizens.
Middle class Joe knows that the main way the middle class has built up wealth is through home ownership - equity in a home. This equity also facilitates the intergenerational transfer of wealth which the black community is notorious in lacking. Blacks are less likely to receive wealth transfers from parents than whites, and conversely, they’re under more pressure to transfer their own limited wealth to parents or relatives than whites. So whereas each white generation starts from somewhere above zero, each black generation is more likely to start from zero. A greater proportion of white adult children receive financial support from their parents than blacks in all three categories of parental support. The share of whites receiving financial support from their parents is 34% for higher education, 12% for home ownership, and 26% for other purposes. The comparable figures for blacks are 14%, 2%, and 19%, respectively.
Trump supporters in the Rust Belt could rest assured that their means of livelihood will not be taken away from them as the country transitions from fossil fuels to renewables. Biden has assured workers that he will not ban fracking. Then it's a logical next step to guarantee those workers a job as the country transitions away from fracking. Leave it in the ground should be our motto, but just because we do that, there is no necessity for workers to suffer. Biden has said that he will create millions of new jobs in infrastructure and green industries. Then let's guarantee that the first workers to get those jobs will be old fossil fuel workers. Let's transition the workers as well as the source of energy. This will go a long way towards placating Trump supporters in Pennsylvania and Texas and also adding supporters to the Democratic party which more represents the interests of workers than does the Republican party.
Similarly, the Black Lives Matter Movement should embrace the Black Home Ownership Matters movement. When we talk about creating wealth, it's not in the context of Lamborghinis or yachts or multimillion dollar houses. We're talking about wealth on the order of the price of a middle class house. Wealth distributed among a large number of people not just ridiculous amounts of wealth of the 1% and billionaire class. Reducing economic inequality starts with an ambitious program to create wealth among the 99%. Debt reduction and forgiveness is also important especially for student loan debtors. Joe Biden can redeem himself here. Formerly known as the Senator from MBNA (MBNA is now a subsidiary of Bank of America), Biden voted for a provision to take bankruptcy protection away from student loan debtors. The senator was a key supporter of a bill -- the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" -- that actually made it harder for consumers to get protection under bankruptcy.
Joe Biden will resuscitate America's reputation in the rest of the world as he had a wealth of experience in dealing with foreign policy for 8 years in the Obama administration. He has to be careful both in how he treats black citizens and how he treats white former Trump supporters in order to build a coalition for the Democratic party. If he does it right, the Democratic party will predominate for a generation or more. The US dodged the bullet of fascism by voting Trump out of office. The US was heading down the rabbit hole of fascism and a second 4 years of a Trump administration would have sealed the deal. By the way including a public option in Obamacare would practically be a guarantee of a transition to Medicare for All. Many of Joe Biden's positions amount to the same as Bernie Sander's positions but in a less stark and abrupt way and for more care placed in the transition process. Let's hope that Democrats take control of the Senate with the two yet to be resolved Senate races in Georgia. Working across the aisles is nice, but Republicans have never backed away from using raw power to get their way. Democrats should follow that example also.
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.
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.
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.
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.
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.
One man has infinitely more power than any other individual in the whole world, and that man is Donald Trump, a narcissistic egomaniac whom the American people have entrusted with the fate of their country. His idea of America First is to bully other countries, friends and foes alike, into doing what he wants them to do which usually has more to do with his pet peeves than any notion of what would make the world a better place, much less in what might keep America safe. He is losing America;'s place as a trusted moral leader with the result that America is becoming a pariah if not a laughing stock among the world's leaders. Here's a guy with no governmental, much less diplomatic, experience whose idea of America first is America uber alles. America will tell the rest of the world how they can best serve America, and, if they don't like it, Trump will apply sanctions.
The predictable result is, whereas in the past the dollar was the most trusted currency in the world where everybody wanted to stash their savings, the dollar is rapidly being downgraded to a currency that has been weaponized, a currency used to sanction and intimidate individuals, businesses and nations alike. Other nations are beating a hasty retreat from the use of the dollar in doing business. Trump has used dollar sanctions to force regime change although it hasn't worked so far. He has used it to prevent a pipeline from being built between Russia and Germany although that won't stop the pipeline from being completed.
Trump has systematically ramped up pressure on Iran. Starting by withdrawing from the nuclear agreement followed by increasing sanctions followed by assassinating a beloved public figure, Trump has brought the US to the brink of another war in the Middle East. Iran, evidently, won't be cowed into submission by Trump's bullying tactics, but then those tactics have been used by other Republican Presidents and their neocon advisors for years with the result that the world has become a more dangerous and less safe place not only for Americans but for American allies, who are about at their wits' ends with him, as well.
While millions languish in refugee camps as a result of America's Middle East wars which have accomplished nothing except to give the military a workout, we are seeing more billions of dollars flushed down the drain to support those in the military-industrial complex who profit from war. Without a permanent war time economy, unemployment would soar as it did in the 1990s after the end of the Cold War when many employees of the aerospace corporations were laid off especially in southern California. But the US is flirting with economic disaster by taking on more debt each year at a time when the rest of the world is losing their appetite for US Treasuries. The Federal Reserve has come to the rescue by taking a large proportion of this debt onto its balance sheet signaling that they will be the buyer of last resort.
This is a remarkable solution since the Federal Reserve is keeping the economy afloat by printing money, and they've found out that, as long as they give this money to Wall Street and not to ordinary working people, this doesn't produce inflation. It just increases asset prices, namely, real estate and the stock market. This increases the wealth not only of the billionaire class but also of anyone owning a home or anyone who has a 401k from their job. It's the perfect solution because it can go on forever supposedly. It affects adversely poor people who find rents skyrocketing and who are not invested in a 401k, but the majority of the population, at least the voting majority, is probably pretty pleased with the performance of the economy as their wealth increases despite the increasing inequality gap between the very rich and the very poor. So money can continue to pour into the military-industrial complex producing a full employment economy with increasing GDP.
Former Fed Chairman Paul Volcker said famously that it was the job of the Fed to take away the punch bowl just as the party started to heat up because this caused inflation. But there is no inflation in the US now so it's the best of both worlds: the Fed just keeps adding punch to the punch bowl and many Americans - except the poor - are partying heartily.
The American Dream of Owning Your Own Home is Fast Fading
by John Lawrence, April 26, 2019
Single family homes are being bought up by hedge funds while young people entering the housing market have too much in student loan and credit card debt to afford to buy one. So they are in the position of renting from a hedge fund most of which are ruthlessly and relentlessly raising rents through the roof. Few if any college graduates these days will ever own their own homes unless they go into the FIRE sector of the economy: that's finance, insurance or real estate. The financialization of the economy has left little room for anyone else except celebrity athletes and movie stars to own real estate.
Single-family homes were one of the last bastions of investment freedom for the little guy.
Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital).
If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion.
And this is only the latest merger in an ongoing trend.
Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes.
And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.
At one point, Blackstone was reportedly spending $150 million a week on houses.
So is it any wonder that the middle class is disappearing? US Census Bureau statistics show that over the last decade there have been an increasing number of rental households and a decresing number of households which own their own homes. Sure we're approaching full employment, but most of the new jobs being created are for waitresses and bartenders. Wages are totally stagnant. They have about the same purchasing power as they did 40 years ago. Most wage gains have gone to the top tier of wage earners. Since 2000, usual weekly wages have risen 3% (in real terms) among workers in the lowest tenth of the earnings distribution and 4.3% among the lowest quarter. But among people in the top tenth of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).
So it's clear what's happening. Foreclosed on homes and distressed properties are being scooped up by the likes of Blackstone Group. Or in other words - Wall Street. The very financial firms that caused the 2008 financial crisis which caused many people to lose their homes to foreclosure are now buying up those homes and turning them into rental properties. Then they raise the rent. Home prices and rental prices are increasing by the day. Those lucky enough to own their own homes are prospering. Everyone else is faced with the situation of paying higher and higher rents. The money being poured into the economy by the Federal Reserve, which goes mostly to the rich like those operating hedge funds, raises asset prices across the board. This does not help the average wage earner who is having his rent go up or is trying to buy his first home.
And it doesn't have anything to do with his "touchy-feelyness." To think President Pussygrabber has the noive to accuse Joe Biden of invading someone's personal space! I guess now that's a mortal sin. Forgive me Father for I have sinned. I invaded somebody's personal space. Anyway that's not the reason Joe Biden shouldn't run. It has to do with the fact that Biden was instrumental in getting the law changed so that student loan debt is not dischargable in bankruptcy. His state of Delaware is loaded with financial corporations chartered there because conditions are so favorable for them. Joe is just too cozy with all these behemoths just as Hillary was too cozy with Wall Street. As a result of Biden's efforts for the financial industry, Americans now have about $1.56 trillion in student loan debt. Not to mention credit card debt.
Joe Biden needs to apologize. He's worthless as a Democratic candidate for President. His state, Delaware, is home to the credit card divisions of the major banks because of laws passed that favor them. In February 1981, he supported the Financial Center Development Act, legislation that dropped restrictions on interest rates and gave tax breaks and other accommodations to the burgeoning credit card sector. It’s that bill which is now credited with supporting ballooning credit card debt, and those are the roots of why most of the national banking companies with offices in Wilmington have their credit card divisions there.
So good old union supporting Joe has his hands dirty on both credit card debt and student loan debt. Elizabeth Warren is right. He should just step out of the national political scene. His time is past. Forget about his invading personal space. He has invaded most Americans financial space while supporting big banks and giving rich people advantages in the state of Delaware. Salon reported:
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed in April, 2005 by the U.S. Senate in a 74-25 vote, including the "yea" vote of Joe Biden, and was quickly signed by President Bush.
In light of what occurred in its wake, this law is easily one of the most disgraceful aspects of the Bush and Biden legacies. The harm it did to middle-class Americans, especially during the crushing events of the recession four years later, is immeasurable. The bill made it nearly impossible for average families to file Chapter 7 bankruptcy protection, also known as "clean slate" bankruptcies intended to discharge nearly all debts, a matter of a few years before they'd need it the most. The bill instituted an all new means test to determine whether debtors with insurmountable financial hardships earned enough income to pay back all or part of their unsecured debts, specifically credit debt. If they earned too much, a clean slate bankruptcy became impossible, and they'd be forced to file Chapter 13, which would force debtors to pay back their debt over a five-year timeline, thus legalizing neo-indentured-servitude to creditors.
Among other things, the bill also forced debtors to enroll in an "instructional course concerning personal financial management." The requirement still exists even though there's little evidence of its efficacy. Additionally, the bill made it more difficult to force creditors to stop harassing debtors for repayment after bankruptcy protection had been filed. As if all of this wasn't bad enough, the Biden-supported legislation prioritized credit card debt repayment over child support repayment, forcing women who are owed back support to negotiate with credit card companies over the debts owed by their exes. Furthermore, the term "debtor" was changed by the BAPCPA to "household" so that the new means test would take into account the total earnings of an entire household, rather than one debtor -- including, for example, a teen daughter's babysitting money.
Worse yet, the bill contained nothing to crack down on abusive practices by predatory lenders, including punitive interest rates and penalties.
Unforgivably, Joe Biden was one of the leading cheerleaders of the bill.
Joe Biden has his handprints all over the indebtedness of the middle class and the increasing split between the wealthy and everyone else. While the banks were bailed out and given free fiat money in the 2008 crisis, Americans were screwed and couldn't even file for bankruptcy thanks to Joe Biden with all his folksy charm. Don't be fooled by this guy. His time has gone. He is not the man for the job. Let him go back to hair sniffing and "pressing the flesh." Biden's son also had ties to the financial industry as reported by the NY Times:
Mr. Biden’s role in the bankruptcy debate and his ties to MNBA were immediately an issue for him after he was selected as Mr. Obama’s running mate in August 2008. A day after Mr. Biden was introduced as Mr. Obama’s choice, campaign aides acknowledged that Hunter Biden, his son, had a consulting arrangement with MBNA and that vetting the Bidens’ connections with the card issuer had been especially delicate in picking him for the ticket. Mr. Biden played down the relationship at the time, telling NBC’s Tom Brokaw that there was nothing inappropriate about his ties to MBNA.
One hand washes the other. Good 'ol Joe now can't pretend that he didn't play a leading role in the impoverization of millions of Americans and the creation of a neo-feudal society. Besides all the other advantages of doing business in Delaware, it is also a tax shelter.
There is no sales tax in Delaware. It doesn't matter if a company's physical location is in the state or not; as a Delaware corporation, no in-state purchases are subject to tax. Additionally, there is no state corporate income tax on goods and services provided by Delaware corporations operating outside of Delaware.The state does not have a corporate tax on interest or other investment income that a Delaware holding company earns. If a holding corporation owns fixed-income investments or equity investments, it isn't taxed on its gains on the state level.Delaware also does not have any personal property tax. There is sometimes a county-level real estate property tax, but that tax is very low compared to other states. Corporations can own their own office spaces and reduce the amount of property tax compared to other states.The state has no value-added taxes (VATs), it does not tax business transactions, and it does not have use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.
We need a true progressive like Elizabeth Warren or Bernie Sanders in the White House, not a pseudo, phony like the Clintons, Obamas and Joe Biden. Remember it was Bill Clinton who supported the overturning of Glass-Steagall which separated commercial from investment banking and precipitated the 2008 financial crisis.
Published on Friday, August 31, 2018 by Common Dreams
"Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress. He ignores the law, governs for the top one percent, and doesn't give a hoot about the rest of us."
"Hours after cheating millions of middle class workers, Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress," Rep. Bill Pascrell (D-N.J.) wrote on Twitter late Thursday. (Photo: Chip Somodevilla/Getty Images)
"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead." —Sen. Bernie Sanders
"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead." —Sen. Bernie Sanders"There are a lot of people that love it and some people that don't," Trump said of the plan, which would disproportionately reward the top 0.01 percent of Americans. "But I'm thinking about it very strongly."
Trump's Oval Office interview with Bloomberg came shortly after the president announced in a letter to congressional leaders that he is freezing a planned 2.1 percent pay increase for federal workers just ahead of Labor Day, claiming that "federal agency budgets cannot sustain such increases."
"Hours after cheating millions of middle class workers, Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress," Rep. Bill Pascrell (D-N.J.) wrote on Twitter late Thursday. "He ignores the law, governs for the top one percent, and doesn't give a hoot about the rest of us."
In a Facebook post responding to Trump's decision to cancel federal employees' pay raise—which was set to take effect in 2019—Sen. Bernie Sanders (I-Vt.) wrote that Trump is once again "making it clear he has no interest in supporting working people."
"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead," Sanders added. "Trump and his Republican friends in Congress didn't have any problem finding $1.5 trillion in tax giveaways for the wealthiest people and hugely profitable corporations, but suddenly they don't have enough money to pay fair salaries to hardworking public servants."
In a Twitter thread on Thursday, Seth Hanlon, a senior fellow at the Center for American Progress, detailed why indexing capital gains to inflation is "both terrible policy and illegal":
Here, tax economist Len Burman explains why indexing capital gains would worsen inequality (since millionaires pay 77% of cap gains taxes), would add to budget deficits, and open up new tax shelters for the wealthy. 2/https://t.co/JHS3ROyIq9pic.twitter.com/F7xAMJDEoa
The Penn-Wharton team also found that the proposal would cost up to $102 billion, with a stunning 63% of the tax benefit going to the top 0.1%, 86% going to the top 1%, and 95% going to the top 5%.https://t.co/xPKFKCQOdD 5/
Indexing capital gains by executive fiat is also totally illegal, as George H.W. Bush's Treasury Department and his Justice Department's Office of Legal Counsel determined in 1992:https://t.co/TIdgqLV3Sa 6/
The Republican Leadership Has Gotten Trump's Number
by John Lawrence
They can't control Trump's tweeting, but they can control everything else because they hold the purse strings. They control the money. They got their tax breaks for the rich which of course Trump was in favor of also all the while trying to make a case that this was really "tax reform" that would help the middle class. Then they had a celebration in which Mitch McConnell and Paul Ryan kowtowed to the Donald telling him how great he was. They wanted him to take full credit for something he had nothing to do with because ... well, they've got his number. Praise the hell out of him, let him spout off and blowhard all he wants. When it comes right down to it, they're in control. Trump is their useful idiot who will rubber stamp what they want, but take all the credit.
Other than that Trump is essentially reduced to issuing executive orders which was all Obama could do. So Trump now has the distinct pleasure of undoing all Obama's executive orders. The Generals will see to it that Trump doesn't do anything really stupid like start a nuclear war. They want to rev up old rivalries, but they don't want all out war. Just enough war to justify humongous defense budgets. That suits them perfectly. God forbid that peace should break out. There goes their money.
Trump's Russia connection will probably boil down to nothing more than a potential real estate deal or other business interests that would benefit the Trump empire. The business of America is business, and the business of the Trump administration is business that benefits the Trump administration. Much ado about nothing because the Mitch McConnells and Paul Ryans of the world have his back.
The best the Democrats can do is to keep harping on the fact that Trump and his fellow Republicans are not really in the business of helping the middle class. What they are doing and want to do more of is to help their own class - the rich. But Trump can spout off all he wants about creating jobs. The economy is not really in his hands, but he can put the best spin on economic events as they happen. Expect a big hole in the deficit similar to the one that occurred after the Reagan tax cuts. Then Reagan in a panic raised taxes. This bunch will probably revert to the "deficits don't matter" mantra. Well, they don't if the Fed can just print money.
Why a Universal Basic Income Won't Work in a Capitalist Society
by John Lawrence
In the 2008 financial crisis the central bank of the US, the Federal Reserve, bailed out the big banks with a policy of quantitative easing. That is it effectively printed money and gave it to the banks. It also kept interest rates near zero so the big banks could get all the money they wanted and lend it out at much higher interest rates to the middle class and the poor, thus creating a lot of debt which made banks and bankers rich. Salaries and bonuses related to the financial sector have never been higher while the US middle class and poor have never been mired in more student loan, credit card, car loan and mortgage loan debt.
Jeremy Corbyn, the British labor leader, has suggested quantitative easing for the middle class and poor which would amount to a Universal Basic Income (UBI). Since automation is replacing most of the good paying middle class jobs, it makes sense that, in order to keep the economy running, the Federal Reserve should just shovel some money to those in the 99% or 90%, at least, who have lost those good paying jobs.
But not so fast. First off the Federal Reserve is owned privately by the very banks who have profited from its policies. It is not a true central bank owned by the people. Second, the poor and middle class would spend their UBI on basic things like food, housing, clothes, education etc. This would not profit the big banks. It would take away from their profits because people would not be going into as much debt. Therefore, Wall Street would suffer. They only make money when people go into debt.
In a capitalist society such as the US, there is one alternative for the middle class and poor. In succinct terms it is "Join the Army." The military-industrial complex is huge and almost anybody can get in. They even train you and offer some other incentives. The military-industrial complex is one industry that is not competing with the big banks. So if you lose your good paying middle class job, there are plenty of jobs in the military. The USA trillion dollar defense budget sees to that. And there are plenty of enemies to go around and keep the military busy for years. The only threat is if peace broke out. Then the military-industrial complex and the whole US economy would collapse.
Published on Tuesday, November 07, 2017 by Common Dreams
"The GOP tax plan is a simple political statement about who matters more in American democracy: the heirs to hedge fund fortunes or everyone else in the country."
House Speaker Paul Ryan (R-Wisc.) and his colleagues have promoted their tax plan as a win for middle-class families, but analysis shows otherwise. (Photo: @ChicagoTribune/Twitter)
Critics of the Republican tax plan say it offers a crystal-clear view of which Americans matter to the Trump administration and the Party in control of Congress—and which don't. Despite an aggressive push to portray the proposal as a tax cut for middle-class Americans, according to a New York Times analysis, millions of middle-income families would pay more in taxes immediately—and many more would see their tax bills rise over time.
"The GOP tax plan is a simple political statement about who matters more in American democracy: the heirs to hedge fund fortunes or everyone else in the country," wrote Zach Carter in the Huffington Post on Monday. "Trump and the Republicans have chosen the dynasts."
The analysis by the Times, similar to one shown by the Institute of Taxation and Economic Policy (ITEP), finds that 45 percent of middle-class Americans would be paying more in taxes within a decade, even if they see some modest relief initially. As theTimes notes, it's "a striking finding for a bill promoted as a middle-class tax cut."
Due to the elimination of personal exemptions, which allows many taxpayers to deduct $4,000 per household member, the tax plan would immediately be costly for many families with children. According to the Times, "Fewer than 40 percent of middle-class families with at least three children would receive a tax cut under the plan, compared with nearly 80 percent of families without children."
Households with large medical bills would be hit hard in 2018 as well, following the proposal's elimination of medical expenses deductions. Overall, about a third of middle-class families would pay more in 2018 than they do now—far from the rescue package House Speaker Paul Ryan (R-Wisc.) portrayed the tax plan as last week.
"These are matters of justice, social prestige, and political power," Carter wrote in the Huffington Post, regarding the GOP's insistence on . "There is no economic law that governs how the $19 trillion [in national wealth] we produce each year must be distributed. Figuring out who should get how much of that $19 trillion is a political choice—and the Republicans’ choice is to give much of that money to a few hundred financial dynasties."
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License
Income and wealth inequality is only getting worse. It's not hard to understand why. Certain corporations have a lock on economic activity throughout the world. Mom and Pop operations have been forced out of business or have merged with the Big Guys. Artificial intelligence, automation, robots and computers have taken over many menial but used-to-be-better-than-minimum-wage jobs like check-out clerks, bank tellers and customer service operators. Other jobs have been off shored to cheaper labor jurisdictions.
The rest of us, college graduates included, have been reduced to being expendable appendages of the large corporate machines to be sucked in and spit out at their pleasure. When our skill sets are outmoded, we will be laid off and fresh talent will be acquired. The job pool is shrinking because the number of necessary jobs is shrinking. Today, there are approximately 1.2 million fewer jobs in mid-and higher-wage industries than there were prior to the 2008 recession, while there are 2.3 million more jobs in lower-wage industries. According to the Bureau of Labor Statistics most jobs in the next decade won't even require a college education. They are jobs that can't be done by robots: care givers, nurses, house cleaners, gardeners, retail.
Another reason for income and wealth inequality is that the US Federal Reserve's quantitative easing policy screws savers who get zero interest on their life savings while injecting money into the largest Wall Street banks. This money is siphoned off by wealthy investors and hedge funds. It never enters the real economy. It only encourages the average Joes and Janes to take on more debt. Ninty percent of the money supply is created by private banks who loan money into the economy through their policy of fractional reserve banking. As the money supply increases, so does debt.
Wall Street Banking Giants Create Most of the US Money Supply
Fractional reserve banking is a simple concept that has become more complicated and convoluted as it has evolved over the years. In its simplest terms, if a bank takes in a deposit of $100 from 10 people or $1000 total, it loans out $900 of that keeping $100 back as a reserve in case someone wants their deposit back before the principal and interest on the loans start flowing in. Their premise is that not everyone will demand their deposit back at the same time. If, however, everyone does want their money back at the same time, there could be a run on the bank unless the bank can borrow the money from some other entity like another bank or the Federal Reserve
Thus money is created by the bank with a few keystrokes on a computer and is fed into the economy as debt. The banks are at the top of the food chain since they create the money and loan it out on interest. Thus the US economy is a debt based economy. Bad things happen when people all demand their money back at the same time or collective debt becomes so big and untenable that it can't be paid back. This is what happened in the 2008 financial crisis when mortgages were given to people who couldn't pay them back and hence defaulted. Eventually this whole financial structure, which was a house built upon sand instead of a rock, to use a Biblical metaphor, collapsed.
It is to be noted that when a bank creates money, it is not backed by gold. Nixon took us off the gold standard in 1971. Money not based on anything but the government's say so is called fiat money. Thus all money created by private banks is fiat money, and, although the government says it is all good, it is the private banks that actually create it, not the supposedly democratically elected government.
The Federal Reserve has also been involved in money creation recently with a process called quantitative easing (QE). When the government needs money beyond the revenues it takes in by means of taxes, it goes into debt by issuing bonds. Sometimes those bonds are bought by Joe and Jane Average Investor or sometimes by other countries like Japan. However, much of the time they are bought by Wall Street banks. Then the Federal Reserve turns around and pays cash for those bonds taking them off the hands of the big banks. The result is that the banks end up with more money and the loans disappear on the Federal Reserve's balance sheet which is sort of like a black hole. Effectively, the government never has to pay those loans back.
Quantitative Easing for the People
There is another way that money could be created and injected into the economy. It might be called quantitative easing for the people (PQE) as Britain's Leader of the Labor Party, Jeremy Corbyn has termed it. He proposes to give the Bank of England a new mandate to upgrade the economy to invest in new large scale housing, energy, transport and digital projects. The investments would be made through a National Investment Bank set up to invest in new infrastructure and in the hi-tech innovative industries of the future.
The money creation (or printing if you like) would entail the government issuing a bond that a National Investment Bank would buy. Then the central bank would take that loan on its balance sheet in return for cash that the bank would then use to pay for infrastructure. The end result is that the government would owe the central bank the amount of the loan, but because the central bank is a financial black hole, it would never have to pay.
In Addition to Pocketing the QE, Wall Street Bankrupts Cities
The City of Los Angeles is paying a Wall Street bank $200. million annually in fees just to manage its money. The Huffington Post revealed:
LOS ANGELES, CA- At a lively downtown rally in front of the Bank of NY Mellon in Los Angeles, the Fix LA Coalition unveiled a groundbreaking research report, entitled "No Small Fees: LA Spends More on Wall Street than Our Streets," revealing that Wall Street charges the City of Los Angeles more than $200 million in fees. Coalition members called for action to reduce the high fees and put that money back into neighborhood services. After the rally, Fix LA Coalition members delivered the report to elected officials in City Hall.
In addition LA like a lot of cities that have gone bankrupt (Birmingham, Alabama for instance) has been snookered into interest rate swaps that end up costing much more money than if they had kept the original loan at the original rate. Then to get out of these toxic deals, they have to pay a substantial "termination fee."
Lisa Cody, SEIU 721 Research Analyst and report co-author stated: "Based on what we know, there are some concrete steps we can take to save LA millions. For example, we can start with Mellon Bank to renegotiate a 'swap' deal that was supposed to save the city money, but is instead costing LA almost $5 million a year. To fix this toxic deal, the bank wants $24 million more in fees. In 2012, NY Mellon charged the city $26 million in termination fees for another swap they had sold us that turned out to be a terrible deal for LA."
LA is not the first and probably won't be the last to be tricked into engaging in a fancy derivative deal that was way over the heads of the city employees that were talked into it by Wall Street hit men. If they had formed their own Public Bank of Los Angeles, they could not only have avoided being ripped off, but they could have actually made money and then be in a position to fix all those potholes they've been screaming about. And they could have created their own money supply the way Wall Street does it: fractional reserve banking.
In August 2014 the Fix LA coalition released the following statement:
Los Angeles Becomes Largest U.S. City to Take Action on Toxic Bank Deals; Unanimous Vote Requires City to Renegotiate or Terminate Multi-Million Dollar Interest Rate Rip-Off on Behalf of Taxpayers
Unanimous City Council vote sends strong message to Bank of NY Mellon, Wall Street: LA is not your ATM
The Los Angeles City Council voted 14-0 Wednesday to renegotiate or terminate without penalty a toxic swap deal the City entered into with two Wall Street banks, Bank of New York Mellon and Dexia. The measure, advanced by Fix LA, a coalition of clergy, unions and community groups aligned to restore city services and expand middle class jobs in the public sector, could save the City as much as $138 million. The International Business Times, noting the significance, reported that Los Angeles is now the largest city in the nation "to challenge ballooning Wall Street levies that accompany similar interest rate swap deals throughout the nation."
The motion further calls on the banks to return unfair profits and fees paid since 2008, estimated at more than $65 million to date. The deal costs taxpayers $4.9 million annually.
Los Angeles is now spending $290 million a year in financial fees or more than the entire city budget for maintaining its vast array of streets and highways. LA isn't the only sucker to enter into an interest rate swap in 2007 which was essentially a bet that interest rates would not fall below 2%. Then when the Federal Reserve, with its policy of QE, lowered interest rates to zero, LA and many other jurisdictions found themselves on the wrong end of a bet and were forced to shell out much more than they would have if they had kept the interest rate on the original loan.
The next sucker: Puerto Rico. Puerto Rico ran itself into debt and then tried to make up for it with interest rate swaps. Recent credit downgrades allowed Wall Street to demand hundreds of millions more in short-term lending fees, credit-default-swap termination fees, and higher interest rates. Between 2012 and 2014, Puerto Rico paid nearly $640 billion to terminate swaps in addition to $12 million annual swap payments. As a result Puerto Rico is in the same situation as Greece - borrowing money in order to make debt payments which is the same as borrowing money on one credit card to make the payments on another.
The Chicago Public School Teachers' Pension and Retirement Fund has brought suit against 10 of Wall Street's biggest banks including Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America for colluding to prevent the trading of interest rate swaps with the result that it cost the Fund more money.
If these jurisdictions - whether they be cities, counties or states - formed public banks as the state of North Dakota did, there would be no outflow of cash to Wall Street. Money would stay at the local level and could be used to support local businesses and create jobs repairing and building infrastructure.
An Infrastructure Bank Would Mean Good Jobs in a Much Needed Enterprise
If the government creates money and puts it in an infrastructure bank, that money would be spent into the economy by creating jobs to build and repair infrastructure. Thus good jobs would be created at the low and middle parts of the economic spectrum. This money would have a multiplier effect as the job holders would spend their paychecks on the necessities and luxuries of life. American GDP is based on 70% consumer spending so that would go up. Thus the democratically elected government - not private banks - would be in charge of creating the money supply and it would be to the advantage of average workers not high end financiers. Since the big banks are the current recipients of the QE largesse, that money goes into the pockets of billionaires in various ways and drives wealth and income inequality.
Or the government, instead of the private Wall Street banks, could create money itself directly and inject it into the economy in a variety of ways as Abraham Lincoln did when he had the American government create and spend greenbacks into the economy. This money, therefore, does not create debt as money created by private banks and loaned into the economy does. It's a bottom up rather than a trickle down method. Problem is that most money created today does not trickle down into the real economy.
Australian blogger Prof. Bill Mitchell agrees that PQE is economically sound. But he says it should not be called “quantitative easing.” QE is just an asset swap – cash for federal securities or mortgage-backed securities on bank balance sheets. What Corbyn is proposing is actually Overt Money Financing (OMF) – injecting money directly into the economy.
Mitchell acknowledges that OMF is a taboo concept in mainstream economics. Allegedly, this is because it would lead to hyperinflation. But the real reasons, he says, are that:
It cuts out the private sector bond traders from their dose of corporate welfare which unlike other forms of welfare like sickness and unemployment benefits etc. has made the recipients rich in the extreme. . . .
It takes away the ‘debt monkey’ that is used to clobber governments that seek to run larger fiscal deficits.
So the government could just create money and inject it into the economy in one of two ways: directly to the people in the form of a basic guaranteed income or through an infrastructure bank that creates jobs. In the first instance money would be transferred directly to people to bolster consumption. In the second case jobs would be created that would get needed work done. Or a combination of both could be used.
A third way of reducing income inequality would be to redistribute money from the 1% to the 99% through the tax code. This is the method that Bernie Sanders advocates. Taxes on wealth and financial transactions would provide additional monies which could be transferred to the 99% through social programs such as Medicare-For-All, or it could be given directly in terms of a deposit to checking accounts as was done in the Economic Stimulus Act of 2008. Money was deducted from tax liabilities or deposited directly to American citizens.
The Concept of a Basic Guaranteed Annual Income
The concept of a Basic Income in the U.S. goes back to Thomas Paine, one of the driving forces for independence and reducing inequality during the American Revolution. More recently, it’s been supported by very non-liberal individuals like Fredrick Hayek, Milton Friedman, and Richard Nixon. This would eliminate poverty in one fell swoop. All the anti-poverty programs could be rolled into one with much fewer administrative costs. Just as Medicare-For-All would simplify and reduce medical costs, a basic guaranteed income would amount to Social-Security-For-All. The state of Alaska already has such a program called the Alaska Permanent Fund which hands out money to each resident on an annual basis. In 2015 each man, woman and child received $2,072.00. For a family of four that was a nice basic income of approximately $8000. Sweet!
In the Netherlands a number of cities are experimenting with a basic income after the city of Utrecht announced that it would give no-strings-attached money to some of its residents. Tilburg, a city of 200,000 inhabitants close to the border with Belgium, will follow Utrecht’s initiative, and the cities of Groningen, Maastricht, Gouda, Enschede, Nijmegen and Wageningen are also considering it. A recent study conducted in 18 European countries concluded that generous welfare benefits make people likely to want to work more, not less.
In Switzerland, the necessary 100,000 signatures have been obtained for holding a referendum on whether Swiss citizens should receive an unconditional basic income of €2,500 per month, independently of whether they are employed or not. Other countries such as Finland and Catalonia are also moving in the direction of a no-strings-attached guaranteed income. This would do more to reduce inequality and poverty than perhaps any other measure.
If Tilburg’s basic income project gets the green light from Netherland’s state secretary of social affairs, the town will provide an extra paycheck to a pilot group of 250 people starting in January 2016, Tillburg officials said. The city has not confirmed the amount of the stipend, but in Utrecht checks will range from around €900 ($1,000) for one adult to €1,300 ($1,450).
Although the classic basic income theory proposes universal payments across the population, the two Dutch experiments will only focus on residents who are already recipients of social assistance. Those in the program will be exempt from the severe job-seeking requirements and penalties in Dutch law.
Authorities aim to test how citizens react without that sword of Damocles over their heads. Will the money encourage them to find a job or will they sit on their couches comfortably?
A guaranteed income could be means tested. Why not? Rich people don't need an extra $1000. a month. It would reduce poverty, increase consumption and bolster GDP. Rich corporations would probably increase the price of staples as people had more money to buy them causing inflation. That's why the behemoth world wide franchise operations need to be broken up so they don't collude to raise prices on staples thus defeating the purpose of the basic income. With fiat money entering the real economy instead of the billionaire economy, inflation could become a concern.
Hyperinflation is always a concern when fiat money is created. When that money is spent by consumers, it will still wind up in the hands of a few major corporations, and that would be a problem. They could just keep raising prices. That's why breaking up those large behemoths by using the Sherman Anti-Trust Act is important. Money can also be pulled back by the government by taxation if inflation threatens to get out of hand.
As Ellen Brown says: "Thus there are many ways to recycle an issue of new money back to the government. The same money could be spent and collected back year after year, without creating price inflation or hyperinflating the money supply."
However, when fiat money ends up in the pockets of billionaires as has been the case with QE, inflation is not a concern because it doesn't enter the real economy and prices don't rise. Income inequality though becomes a major concern as does the influence of big money on the political system. Billionaire money has bought and paid for the political system through lobbying and campaign donations with the result that the US is effectively no longer a democracy but a plutocracy.
What’s really scary is the general acceptance of a status quo in which most people are getting poorer and poorer, even while recent studies demonstrate that so-called “trickle-down” economics actually means an upwards flow of income until it stagnates as hoarded wealth. This stymies wealth creation in the economy, as the Institute for Policy Studies concluded after using standard economic multiplier models to show that every extra dollar paid to low-wage workers adds about $1.21 to the US economy. If this dollar went to a high-wage worker it would add only 39 cents to GDP. In other words, if the $26.7 billion paid in bonuses to Wall Street punters in 2013 had gone to poor workers, GDP would have risen by some $32.3 billion. ...
One of the main advantages of a universal basic income is that it would free people from the tyranny of the job market in which they are mere commodities by guaranteeing the most basic human right of all, that of material existence.
With inequality increasing some way or ways must be found to redress the balance. The alternative is to wake up and find ourselves in a neo-feudal society controlled by a few behemoth corporations employing only a few high level people at good wages. The rest of the population would be employed in low level service type jobs and live in relative poverty. What money they had would be spent in the troughs of the giant corporations and end up in the pockets of the 1%. Even if the 99% were given money to spend, it would still end up there - in the pockets of a few. An infrastructure bank funded by government created fiat money would provide people with decent jobs in which workers could maintain a sense of dignity and improve the quality of the nation's infrastructure at the same time.
In addition recipients of a basic income should have to give something back in terms of creating a better life for poor people around the world. Instead of armies with guns and weapons which have cost trillions and produced mainly negative results, a Peace Army could help poor people around the globe attain at least a minimally acceptable lifestyle in terms of clean water and sanitation, adequate nutrition, energy and education.
Installing solar around the world will not only provide energy for people who don't have anything but the most primitive kind while cleaning up the environment at the same time. The commitment of rich nations to help poorer nations convert to renewable energy could be manifested by funding unemployed and underemployed Americans to help build such infrastructure around the world.
It's not good for people to be idle. If they have no other job, they should at least be required to perform community service. If they have another job so that the basic income is just a supplement, this would be the ideal situation.
Income inequality will only increase as long as Wall Street banks control the money creation process, and the rest of US citizens keep going into debt whether it be with mortgages, student loans, car loans or credit cards. Local jurisdictions should take back the money creation process from Wall Street by creating their own public banks. Then the people will have the say in who gets the QE.
Presidential aspirants in both parties are talking about saving the middle class. But the middle class can’t be saved unless Wall Street is tamed.
The Street’s excesses pose a continuing danger to average Americans. And its ongoing use of confidential corporate information is defrauding millions of middle-class investors.
Yet most presidential aspirants don’t want to talk about taming the Street because Wall Street is one of their largest sources of campaign money.
Do we really need reminding about what happened six years ago? The financial collapse crippled the middle class and poor — consuming the savings of millions of average Americans, and causing 23 million to lose their jobs, 9.3 million to lose their health insurance, and some 1 million to lose their homes.
A repeat performance is not unlikely. Wall Street’s biggest banks are much larger now than they were then. Five of them hold about 45 percent of America’s banking assets. In 2000, they held 25 percent.
And money is cheaper than ever. The Fed continues to hold the prime interest rate near zero.
This has fueled the Street’s eagerness to borrow money at rock-bottom rates and use it to make risky bets that will pay off big if they succeed, but will cause big problems if they go bad.
We learned last week that Goldman Sachs has been on a shopping binge, buying cheap real estate stretching from Utah to Spain, and a variety of companies.
If not technically a violation of the new Dodd-Frank banking law, Goldman’s binge surely violates its spirit.
Meanwhile, the Street’s lobbyists have gotten Congress to repeal a provision of Dodd-Frank curbing excessive speculation by the big banks.
The language was drafted by Citigroup and personally pushed by Jamie Dimon, CEO of JPMorgan Chase.
Not incidentally, Dimon recently complained of being “under assault” by bank regulators.
Last year JPMorgan’s board voted to boost Dimon’s pay to $20 million, despite the bank paying out more than $20 billion to settle various legal problems going back to financial crisis.
The American middle class needs stronger bank regulations, not weaker ones.
Last summer, bank regulators told the big banks their plans for orderly bankruptcies were “unrealistic.” In other words, if the banks collapsed, they’d bring the economy down with them.
Dodd-Frank doesn’t even cover bank bets on foreign exchanges. Yet recent turbulence in the foreign exchange market has caused huge losses at hedge funds and brokerages.
This comes on top of revelations of widespread manipulation by the big banks of the foreign-exchange market.
Wall Street is also awash in inside information unavailable to average investors.
Just weeks ago a three- judge panel of the U.S. court of appeals that oversees Wall Street reversed an insider-trading conviction, saying guilt requires proof a trader knows the tip was leaked in exchange for some “personal benefit” that’s “of some consequence.”
Meaning that if a CEO tells his Wall Street golfing buddy about a pending merger, the buddy and his friends can make a bundle — to the detriment of small, typically middle-class, investors.
That three-judge panel was composed entirely of appointees of Ronald Reagan and George W. Bush.
But both parties have been drinking at the Wall Street trough.
In the 2008 presidential campaign, the financial sector ranked fourth among all industry groups giving to then candidate Barack Obama and the Democratic National Committee. In fact, Obama reaped far more in contributions from the Street than did his Republican opponent.
Wall Street also supplies both administrations with key economic officials. The treasury secretaries under Bill Clinton and George W. Bush – Robert Rubin and Henry Paulson, respectfully, had both chaired Goldman Sachs before coming to Washington.
And before becoming Obama’s treasury secretary, Timothy Geithner had been handpicked by Rubin to become president of Federal Reserve Bank of New York. (Geithner is now back on the Street as president of the private-equity firm Warburg Pincus.)
It’s nice that presidential aspirants are talking about rebuilding America’s middle class.
But to be credible, he (or she) has to take clear aim at the Street.
That means proposing to limit the size of the biggest Wall Street banks; resurrect the Glass-Steagall Act (which used to separate investment from commercial banking); define insider trading the way most other countries do – using information any reasonable person would know is unavailable to most investors; and close the revolving door between the Street and the U.S. Treasury.
It also means not depending on the Street to finance their campaigns.
The American Dream is the ideological underpinning of the middle class. Now that the middle class is disappearing, it no longer makes sense as historically defined. Thom Hartmann (Rebooting the American Dream) and Hedrick Smith (Who Stole the American Dream) have defined the American Dream as a good job at good wages plus benefits. They bemoan the fact that this has pretty much gone by the wayside in today's world. Well, it's time to get over it because the conditions that gave rise to middle class prosperity in America from 1945 to 1980 are not coming back.
The era in which the economic rewards from rising productivity were widely shared between workers and owners is over. Those good jobs resulted from the fact that unions put pressure on corporations. Private sector union membership reached a peak of about 35 percent of the labor force in the 1950s. Today union membership, especially in the private sector, has fallen off to less than 10%. The decline of the middle class mirrors the decline in union membership. Today in a globalized economy, corporations employ workers wherever in the world they can get them for cheapest.
During the heyday of the middle class, it was possible to own a house, a car, eat out once a week, take a vacation once a year, send a child to college without going into debt, have health care and a pension that would pay out monthly benefits for life - all in a one job family in which the wife could stay home with the children and make pies and cakes. Then Reagan was elected President in 1980 and the War on the Middle Class began. Taxes that had been progressive during the middle class era became regressive. Instead of the transfer of tax money from rich to poor, the opposite started to occur. According to Thom Hartmann this was the single biggest factor in impoverishing the middle class.
When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today's dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical "raw capitalism," what we call "Reaganomics," or "supply side economics," our nation's largest employer is WalMart and they pay around $10 an hour.
This is how quickly capitalism reorients itself when the brakes of regulation and taxes are removed - this huge change was done in less than 35 years.
The deunionization of America, a globalized work force and regressive taxation have all combined to decrease the middle class and undermine the American Dream. There is no use trying to get the conditions back that supported that dream. It ain't going to happen. However, it is possible to develop a new Weltanschauung or world view that doesn't have anything to do with trying to recreate the conditions that led to middle class prosperity in the past. This involves letting go of many of the assumptions that were productive in the past but today are completely dysfunctional.
One of these assumptions is that, if we prepare ourselves as students for a job, some benign employer will hire us. Under this assumption it's the employer's job to provide jobs for us, the employees. I call this employee consciousness wherein most people aspire to be employees, to work for somebody else. Today most employers have no responsibility whatsoever to their employees. Employees are hired "at will" which means they can get rid of you for no reason at all. So rather than get laid off at the age of 50 because some whippersnapper can do a better job than you can at half your pay rate, you're better off being self-employed from the start of your career. Create your own job. It'll be harder at first, but, as the years go by, you'll be much better off especially if you gear yourself from the very beginning to be your own boss and not delegate the job of bossing you to someone else.
Another assumption is that a college education is essential to a middle class lifestyle. No longer true. Today a college education is just a precursor to a lifetime of debt. Instead of starting off life debt free which was the case for most college students from World War II until Reagan's election, college students today start off life with a debt equal to a first mortgage. Better to start a career just out of high school and not waste four years in college for what amounts to a worthless piece of paper.
There are many jobs that can be done with just training acquired either at high school or during the high school years that end up paying more than those that require a college degree and which can be easily outsourced. Think local service type jobs rather than jobs with national or global pretensions. Plumbers, electricians and many other service jobs are more remunerative in the long run than jobs for which you need a college degree, and, instead of being laid off at the age of 50, you will have an asset - your business - which is salable at the age of 50.
The only good non-self-employed jobs are unionized jobs in the public sector. For instance New York City sanitation workers make around $90,000 a year. Becoming a garbage man is the most coveted job in the city. Over 90,000 people applied last year for the job of carting away NYC's garbage, but they only hire about 500 a year. It's actually harder to become a sanitation worker in New York City than it is to get into Harvard. Starting salary is about $34,000, but with overtime it averages about $47,000 the first year. After 5.5 years the salary jumps to an average of $89,000. This compares with an average salary for New York teachers which is $68,000.
Since sanitation workers also operate New York City's snow plows, there is ample opportunity for overtime pay. They also get 10% more for night shifts, double time for Sundays, 25 vacation days a year and unlimited sick leave. Sanitation workers in NYC have a very good health care plan and excellent pension benefits. And it's all because they have a very strong union. You can retire in 20 years. 71% of all government workers in New York state are unionized. That's the difference that unionization has made, and it explains the lack of wage growth in the deunionized private sector.
For those unwilling or unable to be self-employed or unable to win the lottery to become a NYC sanitation worker, consider a two year associate's degree from a community college which by the way President Obama wants to be free. Good luck with that. If wishes were horses, then beggars would ride. There's a wave of people with two year degrees in applied science earning as much or more in their first year after graduation than four year college graduates. According to collegemeasures.org, these two year degrees from a technical college are worth more in the job market than bachelor's degrees. In Texas the earnings difference between 2-year technical college graduates vs those with a bachelor's degree was on average $11,000. In Virginia it was $2000 and in Colorado it was $7000.
In Colorado the community college tuition is about $3600 per year, but the median wage for graduates in their first year of employment is $53,000, a significant cost/benefit advantage over four year colleges. Red Rock Community College near Denver has a water quality management program which almost guarantees graduates a good job since the City of Denver needs 1800 water quality workers in the next few years.
That portion of the American Dream that promised a lifetime pension after working for 30 years has been totally vitiated. The defined benefit pension which promised a fixed monthly amount for life has been replaced by the defined contribution pension or 401(k) in which the employee funds and manages his own retirement account. This might as well be called the undefined benefit pseudo pension as there is no guarantee that the amount of money in your account on retirement will last a lifetime. So what good is it if you find at the age of 85 that you've run out of money. We'll be seeing a lot of 85 year olds reduced to living on the streets since corporations have pulled the rug out from under the defined benefit plans. Now the employee, not the corporation, takes all the risk in the stock market.
401(k)s are do-it-yourself pensions. You invest your own money in the stock market in the hopes that your expertise in managing your portfolio will result in an adequate pension. Unfortunately, most employees have little expertise in that area. Hedrick Smith writes:
[The advent of 401(k)s] was a monumental transformation for the American middle class. "When the 401(k)s came in, there was a sea change, a huge shift in who was paying for retirement,"observed Brooks Hamilton. "In the old system, employers put up most of the money - 89%. The employees contributed 11%. Those figures are from the Department of Labor. Fast-forward to the 401(k) system and today, employees are paying more than half - 51% - and the companies, 49%. So there was a huge shift in costs from employers to employees - hundreds of billions of dollars."
The average employee has far less in his or her 401(k) than what will be needed over a lifetime especially if he or she lives into their 90s which is becoming increasingly common. The typical nest egg of those in their 60s with a 401(k) who are nearing retirement is around $79,000 according to The Center for Retirement Research at Boston College. This is far less than required to live a middle class lifestyle for the average life span.
Retirement specialists like Brooks Hamilton and Alice Munnell question whether, in this turbulent economy, the task of financing retirement is too fraught with risk and too complicated for most average Americans, especially the millions who are gun-shy about financial markets.
So one of the advantages of employeehood, a secure retirement, has been taken away. Rather than live off a fixed sum of money at retirement, you need to do what the rich do: live on the return from your investment not the investment itself. It's up to you to acquire your own wealth from which to pay yourself a monthly stipend from the return on that wealth. That's the only way it will last as long as you need it. If you have a fixed pot of money like that which the 401(k) provides and you live off of it, you will be consuming your own seed capital. On the other hand if you own a rental which pays you $1000 a month in rent, that goes on in perpetuity and you can will that asset to your heirs. In other words you will never run out of money. Most of those depending on 401(k)s have the middle class mindset that you live off your life savings. This mindset and assumption needs to be changed. They will run out of money at some point unless they die quickly after retirement.
It is better to acquire property development skills like carpentry, plumbing, electrical etc in high school so that you can add value to a piece of property and rent it out thus acquiring a life time cash flow. You can't add value to a stock portfolio and it is subject to the vagaries of the market including bubbles and subsequent crashes. That's where self-employment in the building trades is invaluable. You can build wealth by adding value. And all the learning tools are readily available in the library or on the internet. The ancillary benefit of learning one or more trades is that you can build wealth on the side in addition to earning a living.
Thom Hartmann and Hedrick Smith are good analysts but their solutions amount to wanting the Federal government to bring back the good old days by creating good jobs at good wages. Yeah, it would be nice to have the Federal government put up $2 trillion to repair or rebuild infrastructure. It's just not going to happen. The Federal government and a lot of state governments have been captured by rich billionaires and corporations that have more economic power than most countries and they don't want it to happen. It would be nice to tax the rich and transfer money to the poor. It's not going to happen. So despite the imprecations of Bernie Sanders, Elizabeth Warren and other voices crying out in the wilderness, their solutions are just pipe dreams.
Wishing does not make it so. We're in a totally different environment than the one after World War II when veterans could go to college and buy houses with veterans' benefits. Today most jobs are being reduced to Wal-Mart type service jobs. But you can still make good money in a service job providing it's a self-employed service job and you're servicing the local economy.
Forget about STEM (Science, Technology, Engineering, Math) jobs. A few short years after graduating from college, skills in those areas will be obsolete and corporations will let you go because you will be deadwood. They want recent college graduates. Cutting edge skill sets don't benefit America as some would suggest. They only benefit American corporations which have absolutely no loyalty to their employees or in fact to America. They are doing everything they can including moving their headquarters out of the US to avoid paying taxes. Instead of being concerned about global competition and America's winning, be concerned about the local economy and contributing to it while at the same time earning a living and creating wealth for yourself. If an enterprise requires a number of workers to make it viable, form it as a cooperative and share the profits.
Alaska is a land of rugged individualists - Republicans all the way. However, a little known fact is that Alaska taxes the oil and gas corporations operating there and distributes the proceeds on an annual basis equally among every man, woman and child living in the state. The biggest farce of all is that Tea Party touter, Governor Sarah Palin, slapped an excess profits tax on the state's oil companies in 2008, the year she ran for vice-President alongside John McCain, so that every person in Alaska received a dividend of $3269 that year. That was a pretty good haul for a family of four: $13,076. For Palin's family - husband Todd, sons Track and Trig and daughters Bristol, Willow and Piper - it came to an even better haul - $22,883!
Let me be clear. I am totally in favor of institutions like the Alaska Permanent Fund and think they should be extended to the entire US which would guarantee every American citizen a basic income which would come from things we all own in common like oil and mineral deposits, the electromagnetic spectrum and the air we breathe. But someone like Palin, who presided over a plan that taxed corporations and distributed the proceeds to each citizen of Alaska while at the same time taking humungus speaking fees to egg on the Tea Party with anti-tax, anti-socialist and free market rhetoric, is nothing but a super hypocrite, someone beyond the pale - in.
Jay Hammond, the Governor of Alaska from 1974 to 1982 is the father of Alaska's Permanent Fund. He conceived and then persuaded voters and legislators in a state of rugged individualists to adopt the world's first dividend paying fund of the sort that American forefather Thomas Paine envisioned. Paine in his pamphlet Agrarian Justice proposed a guaranteed basic income, a precursor of Social Security. Although supposedly ideologically opposed to such a plan, Alaskans approved it and it has proved to be a big success and very popular despite the state' s supposed rugged individualistic ethic. They thought it was a pretty good idea to get a check for over $1000. in the mail every year or, as is done today, a direct deposit wired into their bank account.
Since 1980 the fund has grown from $900 million in assets to over $44 billion today. It has paid yearly dividends to Alaskans that have regularly exceeded $1000. As Hammond conceived it, it enabled Alaskans to benefit from the many natural resources they owned in common rather than let private corporations, who are in the business of exploiting those resources, be the only beneficiaries.
The dividends from Alaska's fund have stimulated the economy from the bottom up rather than from the top down and have virtually eliminated poverty within the state. Alaska is economically one of the most equal states in the union.
But Palin is such a hypocrite. When asked by Sean Hannity about the inconsistency of her actions as Governor and her rhetoric as the queen bee of the Tea Party, Palin said "What we're doing up there is returning a share of resource development dollars back to the people who own the resources. Our constitution mandates that as you develop resources, it's to be for the maximum benefit of the people, not the corporations, not the government, but the people of Alaska." Very well, but then why all the rhetoric that extolls private over public interests and lowering as opposed to raising taxes on corporations?
Contrast this with what Palin told a Tea Party crowd on September 4, 2011: "So, to make America the most attractive and competitive place to do business, to set up shop here and hire people here, to attract capital from all over the globe that will lead to an explosion of growth, instead of chasing industry offshore, I propose to eliminate all federal corporate income tax." I suppose this doesn't include the Alaska Permanent Fund user's fee because it is not strictly speaking a tax. It's a user's fee! The fees charged the oil and gas corporations operating in Alaska are owed to the owners of the resource who happen to be the citizens of Alaska. This defies those like Tea Party activists who would privatize everything. But Palin would privatize everything as long as it was not her ox that was being gored!
Palin's rhetoric extolling the free market economy and lowering taxes on corporations flies in the face of the reality in her own state of Alaska. Her mouth is disconnected from her reality on the ground. The fact of the matter is that Alaska's reality should be extended to all citizens of the US who are the true owners of America's resources. There should be a permanent fund which collects monies owed to the American people and distributes them to every man, woman and child. Right now public resources rightfully owned by the American people are being privatized and profited from by large corporations feeding an ever increasing inequality. Royalties from the extraction industries are not anywhere near as high as they should be. They should go into a people's fund. Norway imposes a 50% tax on oil extraction which is put into its sovereign wealth fund which provides pensions and benefits for the Norwegian people. Of course, fossil fuel resources should be left in the ground in order to forestall global warming but that's a subject for another day.
The disconnect between right wing rhetoric and left wing reality is seen not only in Alaska but in Kentucky where the Kentucky version of Obamacare known as Kynect is hugely popular for what it accomplishes for the citizens of Kentucky. But on the rhetorical level Kentuckians all hate Obamacare. Mention Obamacare and they will lapse into a dither of denunciation. It is pretty pathetic that people will get so worked up over a name while loving a service provided as long as you call it by a different name.
As Peter Barnes points out in his book, With Liberty and Dividends for All, nothing is realized for the benefit of the people from the electromagnetic spectrum which is given away free to corporations. Nothing is realized for the co-owners of the system (us) that protects intellectual property and supports the financial system. A financial transaction tax (or user's fee if you prefer) could partially fund a dividend for the American people. Money creation, supposedly the province of the Congress, has been delegated to private banks who do it by the process of fractional reserve banking and for their own private profit. It should be done by the representatives of the American people, as specified in the Constitution, with the profits going to the American people via a sovereign wealth fund instead of to the private banks.
Co-ops and other forms of common ownership by worker/owners should make a portion of profits directly payable to worker/owners instead of holding the profits or spending them in common for them. This spreads the wealth rather than holding it in trust. A public bank could distribute its profits as dividends to the public that owned it instead of all the profits from banking going to Wall Street.
Rich people live off of dividends paid to them in one form or other from their accumulated wealth. Public wealth is owned by the citizens of the US collectively. To receive a dividend from their co-owned wealth would tend to ameliorate the growing inequality of wealth ownership in the US and supplement middle class incomes. Every citizen should be in a position of deriving at least a part of their income from co-owned wealth, especially since income from jobs is going downhill due to automation and outsourcing. It would eliminate poverty, provide a basic income guarantee, stimulate the economic system from the bottom up and restore the middle class.
Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.
Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.
Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power.
These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino.
Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.
Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.
And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.
Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.
Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.
What happens next?
There are two endings to this fable. You have to decide which it’s to be.
In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination.
The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”
And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).
But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back.
The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.
Just a fable, of course. But the ending is up to you.
Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.
Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150% for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.
Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.
Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.
Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.
In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.
Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!
George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:
In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:
Table 3 - 2002 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $14,967
15.0% $14,967 $58,246
27.0% $58,246 $140,752
30.0% $140,752 $214,464
35.0% $214,464 $382,967
38.6% $382,967
In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:
Table 4 - 2003 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $17,072
15.0% $17,072 $69,265
25.0% $69,265 $139,810
28.0% $139,810 $213,039
33.0% $213,039 $380,409
35.0% $380,409
After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.
In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.
Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.
Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.
The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.
The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.
Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.
But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.
Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.
So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.
But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate).
Presto. America’s wealth gap – already wider than the nation’s income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.
Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn’t we be aiming higher than a “Buffet tax” on the incomes of millionaires?
There should also be a surtax on the super rich.
Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets. They figure it would generate $70 billion a year, or $750 billion over the decade. That’s half the savings Congress’s now defunct Supercommittee was aiming for.
Instead of standing empty-handed while Santorum and Romney dominate the airwaves with their regressive Social Darwinism, Democrats need to be reminding Americans of what’s happening in the real economy – and what needs to happen.
The wealth gap is widening into a chasm. A surtax on the super rich is fair — and it’s necessary.
Economic cheerleaders on Wall Street and in the White House are taking heart. The US has had three straight months of faster job growth. The number of Americans each week filing new claims for unemployment benefits is down by more than 50,000 since early January. Corporate profits are healthy. The S&P 500 on Friday closed at a post-financial crisis high.
Has the American recovery finally entered the sweet virtuous cycle in which more spending generates more jobs, more jobs make consumers more confident, and the confidence creates more spending?
On the surface it would appear so.
American consumers in recent months have let loose their pent-up demand for cars and appliances. Businesses have been replacing low inventories and worn equipment. The richest 10 per cent, owners of approximately 90 per cent of the nation’s financial capital, have felt freer to splurge. Consumer confidence is at a one-year high, according to data released on Friday.
The U.S. government has not succumbed entirely to the lunacy of austerity. Republicans in Congress have just agreed to extend both a payroll tax cut and extra unemployment benefits, and the US Federal Reserve is resolutely keeping interest rates near zero.
Yet the US economy has been down so long that it needs substantial growth to get back on track – far faster than the 2.2 - 2.7 per cent projected by the Federal Reserve for this year (a projection which itself is likely to be far too optimistic).
A strong recovery can’t rely on pent-up demand for replacements or on the spending of the richest 10 per cent. Consumer spending is 70 per cent of the US economy, so a buoyant recovery must involve the vast middle class.
But America’s middle class is still hobbled by net job losses and shrinking wages and benefits. Although the US population is much larger than it was 10 years ago, the total number of jobs today is no more than it was then. A significant portion of the working population has been sidelined – many for good. And the median wage continues to drop, adjusted for inflation. On top of all that, rising gas prices are squeezing home budgets even more.
Yet the biggest continuing problem for most Americans is their homes.
Purchases of new homes are down 77 per cent from their 2005 peak. They dropped another 0.9 per cent in January. Home sales overall are still dropping, and prices are still falling – despite already being down by a third from their 2006 peak. January’s average sale price was $154,700, down from $162,210 in December.
Houses are the major assets of the American middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now “underwater”, owing more to the banks than their homes are worth on the market.
Optimists point to declining home inventories in relation to sales, but they’re looking at an illusion. Those supposed inventories don’t include about 5 million housing units with delinquent mortgages or those in foreclosure, which will soon be added to the pile. Nor do they include approximately 3 million housing units that stand vacant – foreclosed upon but not yet listed for sale, or vacant homes that owners have pulled off the market because they can’t get a decent price for them. Vacancies are up 1m from 2006.
What we’re witnessing is a fundamental change in the consciousness of Americans about their homes. Starting at the end of the second world war, houses were seen as good and safe investments because home values continuously rose. In the late 1960s and 1970s, early baby boomers got the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs.
Trading up became the norm. Homes morphed into automatic teller machines, as baby boomers used them as collateral for additional loans. By the rip-roaring 2000s, it was not unusual for the middle class to buy second and third homes on speculation. Most assumed their homes would become their retirement savings. When the time came, they’d trade them in for a smaller unit, and live off the capital gains.
The plunge in home values has changed all this. Young couples are no longer buying homes; they’re renting because they’re not confident they can get or hold jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They can’t relocate to find employment. They can’t retire.
The negative wealth effect of home values, combined with declining wages, makes it highly unlikely the US will enjoy a robust recovery any time soon.
Under these circumstances it’s not enough to rely on low interest rates and make it easier for homeowners who have kept up with their mortgage payments to refinance their underwater homes. The Administration should also push to alter the federal bankruptcy law, so homeowners can use the protection of bankruptcy to reorganize their mortgage loans. (Few will actually do so, but the change would give homeowners more bargaining power to get lenders to voluntarily alter the terms.) A second possibility if for the Federal Housing Administration to offer to take on a portion of a household’s mortgage debt in exchange for an equitable interest in the home, of the same proportion, when it is sold. Such debt-for-equity swaps could help homeowners now struggling to keep up with their mortgage payments, while not adding to the federal budget in future years when housing prices are expected to rise.
But whatever is done will not affect the fundamental change that’s come over Americans with regard to their homes. It’s not clear what will take the place of houses as the major investments of the American middle class.
[I wrote this for the Financial Times, where it appears today]
A cushion of reliable income is a wonderful thing. It can help pay for basic necessities. It can be saved for rainy days or used to pursue happiness on sunny days. It can encourage people to take entrepreneurial risks, care for friends, or volunteer for community service.
(Credit: Rifqi Dahlgren under a Creative Commons license from flickr.com)
Conversely, the absence of reliable income is a terrible thing. It heightens anxiety and fear. It diminishes our ability to cope with crises and transitions. It traps many families on the knife’s edge of poverty, and makes it harder for poor people to rise.
There’s been much discussion of late about how to save America’s declining middle class. The answer politicians of both parties give is always the same: jobs, jobs, jobs. The parties differ on how the jobs will be created — Republicans say the market will do it if we cut taxes and regulation. Democrats say government can help by investing in infra¬structure and education. Either way, it still comes down to jobs with decent wages and benefits.
It’s understandable that politicians say this: it was America’s experience in the past. In the years following World War II, we built a solid middle class on the foundation of high-paying, mostly unionized jobs in the manufacturing sector. But those days are history. Today, automation and computers have eliminated millions of jobs, and private-sector unions have been crushed. On top of that, in a globalized economy where capital can hire the cheapest labor anywhere, it’s no longer credible to believe that America’s middle class can prosper from labor income alone.
So why don’t we pay everyone some non-labor income — you know, the kind of money that flows disproportionally to the rich? I’m not talking about redistribution here, I’m talking about paying dividends to equity owners in good old capitalist fashion. Except that the equity owners in question aren’t owners of private wealth, they’re owners of common wealth. Which is to say, all of us.
One state—Alaska—already does this. The Alaska Permanent Fund uses revenue from state oil leases to invest in stocks, bonds and similar assets, and from those investments pays equal dividends to every resident. Since 1980, these dividends have ranged from $1,000 to $2,000 per year per person, including children (meaning that they’ve reached up to $8,000 per year for households of four). It’s therefore no accident that, compared to other states, Alaska has the third highest median income and the second highest income equality.
Alaska’s model can be extended to any state or nation, whether or not they have oil. Imagine an American Permanent Fund that pays dividends to all Americans, one person, one share. A major source of revenue could be clean air, nature’s gift to us all. Polluters have been freely dumping ever-increasing amounts of gunk into our air, contributing to ill-health, acid rain and climate change. But what if we required polluters to bid for and pay for permits to pollute our air, and decreased the number of permits every year? Pollution would decrease, and as it did, pollution prices would rise. Less pollution would yield more revenue. Over time, trillions of dollars would be available for dividends.
There’s been much discussion of late about how to save America’s declining middle class. So why don’t we pay everyone some non-labor income? I’m talking about paying dividends to equity owners in good old capitalist fashion. Except that the equity owners in question aren’t owners of private wealth, they’re owners of common wealth. Which is to say, all of us.
And that’s not the only common resource an American Permanent Fund could tap. Consider the substantial contribution society makes to publicly traded stock values. When a company like Facebook or Google goes public, its value rises dramatically. The extra value derives from the vastly enlarged market of investors who can trust a public company’s financial statements (filed quarterly with the Securities and Exchange Commission) and buy or sell its shares with the click of a mouse. Experts call this a ‘liquidity premium,’ and it’s generated not by the company but by society.
This socially created wealth now flows mostly to a small number of Americans. But if we wanted to, we could spread it around. We could do that by charging corporations for the extra liquidity that society provides. Let’s say we required public companies to deposit 1 percent of their shares in the American Permanent Fund for ten years, up to a total of 10 percent. This would be a modest price not just for public liquidity but for other privileges (limited liability, perpetual life, constitutional protections) we currently grant to corporations for free. In due time, the American Permanent Fund would have a diversified portfolio worth trillions of dollars. As the stock market rose and fell, so would everyone’s dividends. A rising tide would truly lift all boats.
There are other potential revenue sources for common wealth dividends. For example, we give free airwaves to media companies and nearly perpetual (and nearly global) copyright protection to entertainment and software companies. These free gifts are worth big bucks. If their recipients were required to pay us for them, we’d all be a little richer.
Banks are another large recipient of our collective largesse. I’m not talking about bail-out funds; I’m talking about the hugely valuable right we give banks to create money out of nothing. Banks do this (with our generous permission) by lending roughly seven times the money customers deposit (this is called ‘fractional reserve banking’); they then charge interest on these magically minted dollars. This gift to banks is justified on the grounds that it injects needed cash into the economy, but a comparable boost could be achieved by giving people new government-issued dollars — for example, by wiring money to their bank accounts — and limiting bank lending to money actually on deposit. Fresh money would then trickle up through households rather than down through banks.
Regardless of its revenue sources, the mechanics of an American Permanent Fund would be simple. Every U.S. resident with a valid Social Security number would be eligible to open a Shared Wealth Account at a bank or brokerage firm; dividends would then be wired to their accounts monthly. There’d be no means test — and no shame — attached to these earnings, as there are to welfare. Nor would there be any hint of class warfare — Bill Gates would get his dividends along with everyone else. And since the revenue would come from common wealth, there’d be no need to raise taxes or cut government spending. All we’d have to do is charge for private use of common wealth and feed the resulting revenue into an electronic distribution system.
How large should dividends be? The amounts paid would vary from year to year just as corporate dividends do. But the system should be designed so that dividends supplement rather than replace labor income. One good guide is Warren Buffet’s rule for bequeathing money to children: give them “enough to do anything, but not enough to do nothing.” We could also bear in mind that the higher the dividends, the stronger the middle class and the smaller the gap between the richest 1 percent and everyone else.
The United States isn’t broke, as some Republican say; we’re a very wealthy and productive country. The problem is that our wealth and productivity gains flow disproportionately to the rich in the form of dividends, capital gains, rent and interest. If we want to remain a middle class nation, that needs to change. Jobs alone won’t suffice. We need to complement wages with non-labor income from the wealth we all own. That would truly make us an ownership society.
This work is licensed under a Creative Commons License
LINDSTROM, Minn. — Ki Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government.
He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party campaign of a neighbor, Chip Cravaack, who ousted this region’s long-serving Democratic congressman.
Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice.
There is little poverty here in Chisago County, northeast of Minneapolis, where cheap housing for commuters is gradually replacing farmland. But Mr. Gulbranson and many other residents who describe themselves as self-sufficient members of the American middle class and as opponents of government largess are drawing more deeply on that government with each passing year.
Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income.
Older people get most of the benefits, primarily through Social Security and Medicare, but aid for the rest of the population has increased about as quickly through programs for the disabled, the unemployed, veterans and children.
The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.
And as more middle-class families like the Gulbransons land in the safety net in Chisago and similar communities, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.
The expansion of government benefits has become an issue in the presidential campaign. Rick Santorum, who won 57 percent of the vote in Chisago County in the Republican presidential caucuses last week, has warned of “the narcotic of government dependency.” Newt Gingrich has compared the safety net to a spider web. Mitt Romney has said the nation must choose between an “entitlement society” and an “opportunity society.” All the candidates, including Ron Paul, have promised to cut spending and further reduce taxes.
The problem by now is familiar to most. Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue.
The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.
Americans are divided about the way forward. Seventy percent of respondents to a recent New York Times poll said the government should raise taxes. Fifty-six percent supported cuts in Medicare and Social Security. Forty-four percent favored both.
Support for spending cuts runs strong in Chisago, where anger at the government helped fuel Mr. Cravaack’s upset victory in 2010 over James L. Oberstar, the Democrat who had represented northeast Minnesota for 36 years.
“Spending like this is simply unsustainable, and it’s time to cut up Washington, D.C.’s credit card,” Mr. Cravaack said in a February speech to the Hibbing Area Chamber of Commerce. “It may hurt now, but it will be absolutely deadly for the next generation — that’s our children and our grandchildren.”
But the reality of life here is that Mr. Gulbranson and many of his neighbors continue to take as much help from the government as they can get. When pressed to choose between paying more and taking less, many people interviewed here hemmed and hawed and said they could not decide. Some were reduced to tears. It is much easier to promise future restraint than to deny present needs.
“How do you tell someone that you deserve to have heart surgery and you can’t?” Mr. Gulbranson said.
He paused.
“You have to help and have compassion as a people, because otherwise you have no society, but financially you can’t destroy yourself. And that is what we’re doing.”
He paused again, unable to resolve the dilemma.
“I feel bad for my children.”
Middle-Class Blues
Mr. Gulbranson has tried several ways to make a living in the storefront he bought from his father in 1979. He ran a gift shop, then shifted to selling jewelry. Nine years ago, he moved the gold scales to the back and bought equipment for screen-printing clothing. Through it all, he has never made more than about $46,000 in a year.
Meanwhile, the cost of life — and of raising five children — has climbed inexorably.
“I used to go out and try to have a meal at Perkins, which is a restaurant here, and get out of the store with $5,” Mr. Gulbranson said. “And now it’s probably up to $10.”
In recent years he has earned so little that he did not pay federal income taxes, although he still paid thousands of dollars toward Medicare and Social Security. The earned-income tax credit is intended to offset those payroll taxes, to encourage people with lower-paying jobs to remain in the work force.
Mr. Gulbranson said the money covered the fees for his children’s sports leagues and the cost of keeping the older ones on the family’s car insurance.
“If we didn’t get these government things, then probably my kids could not participate in some of the sports they do,” he said.
Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.
The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis.
It also reflects the deterioration of the middle class. Chisago boomed and prospered for decades as working families packed new subdivisions along Interstate 35, which runs up the western edge of the county like a flagpole with its base set firmly in Minneapolis. But recent years have been leaner. Per capita income in Chisago excluding government aid fell 6 percent on an inflation-adjusted basis between 2000 and 2007. Over the next two years, it fell an additional 7 percent. Nationally, per capita income excluding government benefits fell by 3 percent over the same 10 years.
Mr. Gulbranson’s business struggled as other companies, particularly construction firms, stopped ordering logo-emblazoned shirts. In 2009, the family claimed the earned-income credit for the first time on the advice of their accountant, who was claiming it for herself. The share of local families claiming the credit climbed 33 percent between 2000 and 2008, the most recent year for which data are available.
To make extra money, Mr. Gulbranson refereed 40 soccer games on Tuesday and Thursday nights last fall. His wife sold clothes at equestrian events and air-brushed novelties at craft fairs, driving around the country with a one-ton trailer hitched to a 20-foot van.
Their difficulties, Mr. Gulbranson said, have made it hard to imagine asking anyone to pay higher taxes.
“I don’t think most people could bear to pay more,” he said.
Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.
“I don’t demand that the government does this for me,” he said. “I don’t feel like I need the government.”
How about Social Security? And Medicare? Can he imagine retiring without government help?
“I don’t think so,” he said. “No. I don’t know. Not the way we expect to live as Americans.”
A Starring Role
Bob Kopka and his wife often drive to the American Legion hall in North Branch on Thursday nights, joining the crowd gathered in the basement bar for the weekly meat raffle. Almost everyone present relies on the government to pay for their medical care.
Mr. Kopka, 74, has had three heart procedures in recent years. His wife recently had surgery to remove cataracts from both eyes.
Without Medicare, Mr. Kopka said, the couple could not have paid for the treatments.
“Hell, no,” he said. “No. Never. She would have to go blind.”
And him?
“I’d die.”
Few federal programs are more popular than Medicare, which along with Social Security assures a minimum quality of life for older Americans.
None are more central to the nation’s financial problems. The Congressional Budget Office projects that government spending on medical benefits, even taking into account the cost containment measures in the 2010 health care law, will rise 60 percent over the next decade. Then it will start rising even more quickly. The cost of caring for each beneficiary continues to increase, and the government projects that Medicare enrollment will grow by roughly one-third as baby boomers enter old age.
Spending on medical benefits will account for a larger share of the projected increase in the federal budget over the next decade than any other kind of spending except interest payments on the federal debt.
Medicare’s starring role in the nation’s financial problems is not well understood. Only 22 percent of respondents to the New York Times poll correctly identified Medicare as the fastest-growing benefits program. A greater number of respondents, 27 percent, chose programs for the poor. That category, which includes Medicaid, is slightly larger than Medicare today but is projected to add only half as much to federal spending over the next decade.
Medicare’s financial problems are much worse than Social Security’s. A worker earning average wages still pays enough in Social Security taxes to cover the benefits the worker is likely to receive in retirement, according to an analysis by the Urban Institute. Social Security is still running out of money because the program must also support spouses who do not work and workers who earn lower wages. But Medicare’s situation is even more dire because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement.
A woman who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer.
Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for.
But many older residents in Chisago say this problem belongs to younger generations. They paid what they were told; they want to collect what they were promised.
Some, like the Kopkas, have savings they can tap. Mr. Kopka still owns the landscaping business he started after leaving the Navy in the early 1960s. He and his wife own a three-bedroom home on three acres, valued by the county at $153,700. The mortgage is paid. They hope to pass the house to their children.
Others have nothing else. Barbara Sullivan, 71, moved last year to the apartments above the Chisago County Senior Center in North Branch. Waiting on a recent Friday for the hot lunch, which costs $3.50, she watched roughly 20 people play bingo for prizes including canned soup and Chef Boyardee pasta.
“Most of the seniors around here are struggling to make it,” she said.
She counts herself among them. She lives on $1,220 a month in Social Security benefits and relied on Medicare to pay for an operation in November.
She believes that she is taking more from the government than she paid in taxes. She worries about the consequences for her grandchildren. She said she would like politicians to propose solutions.
“We’re reasonable people,” she said. “We’re not going to say, ‘Give it to me and let my grandchildren suffer.’ I think they underestimate seniors when they think that way.”
But she cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry.
“Without it, I’m not sure how I would live,” she said. “With the check I’m getting from Social Security, it’s a constant struggle on making sure that I pay my rent and have enough left for groceries.
“I haven’t bought a Christmas present, I haven’t bought clothing in the last five years, simply because I can’t afford it.”
Keeping a Promise
Representative Cravaack often says he entered politics to lift the burden of debt from the shoulders of his two sons.
“I vision that I open up their backpacks and I put in a 50-pound rock and zip it back up again,” Mr. Cravaack told the Minnesota Freedom Council in October 2010. “And I say, ‘Sorry, son, you’re going to have to hump this the rest of your life.’ Because that’s exactly what we’re doing to our national debt right now to our children.”
Mr. Cravaack, a 53-year-old Navy veteran and a retired pilot for Northwest Airlines, was grounded by sleep apnea in 2007. He and his wife, an executive at the drug company Novo Nordisk, decided he would stay home with their sons. He soon became the first man to serve as president of the Chisago Lakes Parent Teacher Organization.
In August 2009, while driving the children to North Branch, he heard a talk radio host urging people to protest President Obama’s health care legislation. Mr. Cravaack and about two dozen others spent more than two hours the next day in Mr. Oberstar’s North Branch office before a staff member told them the congressman would not meet them. The rejection convinced Mr. Cravaack that Mr. Oberstar should be replaced. One of the other protesters, a woman who had taken her six children to the office, became Mr. Cravaack’s campaign scheduler.
Two weeks after speaking to the Freedom Council, he beat Mr. Oberstar by 1.6 percentage points, or 4,407 votes. Voters in Chisago, the southern tip of an expansive district, provided the margin of victory.
“We have to break away,” Mr. Cravaack told supporters, “from relying on government to provide all the answers.”
Mr. Cravaack has said he drew unemployment benefits during a furlough from Northwest in the early 1990s. He did not respond to several requests for an interview, nor to an e-mail with questions about his views and about whether his family has drawn on other benefits programs. This account is based on a review of his public statements.
Shortly after arriving in Congress, Mr. Cravaack voted with a vast majority of House Republicans for a plan to remake Medicare by providing money to its beneficiaries to buy private insurance. Senate Democrats have rejected that plan.
But Mr. Cravaack has also consistently said the government should not reduce its largest category of spending — benefits for the current generation of retirees. He also says he does not support cuts for people who will turn 65 over the next decade.
“If you’re 55 years and older, you don’t have to listen to this conversation because we have to keep those promises,” Mr. Cravaack told The Daily Caller last April. “People like myself, 52, if you’re 54 or younger, we’re going to have a conversation.”
Tomorrow, Tomorrow
The government helps Matt Falk and his wife care for their disabled 14-year-old daughter. It pays for extra assistance at school and for trained attendants to stay with her at home while they work. It pays much of the cost of her regular visits to the hospital.
Mr. Falk, 42, would like the government to do less.
“She doesn’t need some of the stuff that we’re doing for her,” said Mr. Falk, who owns a heating and air-conditioning business in North Branch. “I don’t think it’s a bad thing if society can afford it, but given the situation that our society is facing, we just have to say that we can’t offer as much resources at school or that we need to pay a higher premium” for her medical care.
Mr. Falk, who voted for Mr. Cravaack, said he did not want to pay higher taxes and did not want the government to impose higher taxes on anyone else. He said that his family appreciated the government’s help and that living with less would be painful for them and many other families. But he said the government could not continue to operate on borrowed money.
“They’re going to have to reduce benefits,” he said. “We’re going to have to accept it, and we’re going to have to suffer.”
One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.
But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.
Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.
Chisago has shifted over 30 years from dependably Democratic to reliably Republican. Support for the Republican presidential candidate has increased relative to the national vote in each election since 1984. Senator John McCain won 55 percent of the vote here in 2008.
Residents say social issues play a role, but in recent years concerns about spending and taxes have predominated.
Voters in the North Branch school district have rejected increased financing for local schools in each of the past three years. In 2010, the district switched to a four-day school week, striking Monday from the calendar to save money.
Some of the fiercest advocates for spending cuts have drawn public benefits. Many, like Mr. Falk, have family members who rely on the government. They often cite that personal experience as the reason they want to cut government spending.
Brian Qualley, 49, has a sister who survived a brain tumor but was disabled by its removal. The government pays for her care at an assisted-living facility. Their mother scrapes by on Social Security.
Mr. Qualley said that the government should provide for those who need help, but that too much money was being wasted. Mr. Qualley, who owns a tattoo parlor in Harris, north of North Branch, said some of his customers paid with money from government disability checks.
“They’re getting $300 or $400 tattoos, and they’re wearing nice new Nike shoes that I can’t afford,” he said, looking up from working a complicated design into the left leg of a middle-aged woman. “I guess I shouldn’t say it because it’s my business, but I think a tattoo is a little too extravagant.”
But Mr. Qualley said he did not want to reduce benefits for the current generation of retirees. Rather, he said his own generation should get less, because they have time to prepare. This is a common position among the young and healthy in Chisago.
Mr. Qualley said he was saving some money for retirement, although, he added, “I don’t have a 401(k) or anything like that.”
“I also have a job that I don’t necessarily ever want to — or have to — retire from,” he said.
What if his hands start to shake as he gets older?
“Actually,” he said, the electric needle falling silent in his hand, “it’s my shoulders and neck that bother me most.”
Safety in Numbers
Barbara Nelson has little patience for people who say they will not need government help. She considers herself lucky she has not, and obligated to provide for those who do.
“Catastrophes happen in life,” she said, sitting in a coffee shop in Taylors Falls. “To be so arrogant that you think it won’t happen to you, that somehow you’re going to be one of the special ones, I disagree with that.”
Ms. Nelson, 61, who describes herself as a centrist Democrat, also dismisses the claim that people cannot afford to pay more taxes.
“Anyone who can come into a coffee shop and buy coffee is capable of paying more,” she said. “If someone’s life can be granted, in terms of adequate health care, if that means I give up five cups of coffee a month, that is a small price to pay.”
Gordy Peterson, 62, who has used a wheelchair for 30 years since a construction accident, has reluctantly reached a similar conclusion.
“I’m a conservative,” he said by way of introducing himself. He built his own house before his injury and paid for it in cash. He still thinks the government should operate that way. He never intended to depend on federal aid and said he sometimes felt guilty about it.
But for the last three decades, he has received a regular check from the Social Security disability insurance program, and Medicare has helped to pay his medical bills.
“Here I’m getting money, and everybody is struggling,” he said. “Even though it ain’t no cakewalk for me.”
Mr. Peterson used a workers’ compensation settlement to buy a farm that he managed with his brother-in-law, who is mentally handicapped and also on government disability.
“He was my legs, and we worked it,” Mr. Peterson said.
They grew corn, soybeans and rye, and even kept steers for a while. In good years they earned enough to live on. In bad years they lived on the government’s checks. Life would have been very difficult without them, he said.
Mr. Peterson, an easygoing man who looks down when he thinks and smiles sheepishly when he offers an opinion, looked down after completing the story of his own dependence on the safety net.
“It’s hard to beat up on the government when they’ve been so good to you,” he finally said. “I’ve never really thought about it, I guess.”
Lately, the government has been very good, indeed. The county, with federal financing, bought a corner of Mr. Peterson’s farm to build a new interchange for Interstate 35. He used the money to open a gas station at the edge of the farm in 2008 to serve the traffic that rolls off the new ramp. The business is prospering, and he no longer worries that he will need to depend on Social Security.
“But you can’t take that away,” he said. “My own sister has only Social Security. That’s all. That’s all she’s going to have. And if you take that away from her, Christ, she’d be a street person. I don’t think we can cut them off on that.”
How about higher taxes?
Maybe a little higher, he said. Maybe.
“I’m glad I’m not a politician,” he said. “We’re all going to complain no matter what they do. Nobody wants to put a noose around their own neck.”
There's not much that comes out of conservative mouths these days that I find agreeable. However, Republican Governor of Indiana Mitch Daniels, in his rebuttal to President Obama's State of the Union Speech, mentioned an idea for saving the government money which I heartedly (I won't say whole- heartedly) endorse. He said:
"There is a second item on our national must-do list: we must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three quarters of a century respectively, it’s not surprising that they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too.
“Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us. Now, we can’t, so the dollars we have should be devoted to those who need them most. [ed. note: Amen!]
...
"It’s absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. ... The better course is to stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth."
First I should add that there is $2.5 trillion in the Social Security Trust Fund so it is not exactly in dire need of reform and also eliminating the cap on income on which people pay Social Security and Medicare taxes will bring in additional money. Medicare, on the other hand, is in dire need of reform, but increasing the amount on which the rich pay into the system in Medicare taxes will help to fix that.
But why do liberals, like Thom Hartmann, disagree with the sentiment "to stop sending the wealthy benefits they do not need"? By Hartmann's convoluted logic we must continue to make payments to the rich just so they won't eliminate payments to the poor and middle class. Thom Hartmann says that this would be the "camel's nose under the tent" for those who want to destroy Social Security and Medicare. His logic is the same as those who say we must give tax breaks to big corporations just so they will continue to provide jobs. Means testing according to him will give Republicans all the leeway they need to eliminate Social Security and Medicare altogether. Bullshit! They don't need the pretext of "means testing" to accomplish that. Hartmann doesn't realize that all social programs in the US are under attack by the right wing and the only thing standing in the way of their entire elimination is the determination of the middle class and Democratic politicians to fight for their continuance and even expansion.
So liberals will resist even a rational idea for reform because it might lead to the complete destruction of these venerable programs? Let me tell you something. Their nose is already under the tent. They don't need this pretext for wanting to destroy Social Security and Medicare. Why they have already boldly proposed privatizing both of these programs. Check out Paul Ryan's plan, "The Path to Prosperity" (for the rich). For liberals or progressives to oppose a rational idea just because it comes from someone that I for one disagree with on everything else he is trying to do, like destroying unions in the state of Indiana, is utter irrational nonsense. It goes under the same principal of not giving subsidies and tax breaks to highly profitable corporations like the oil companies.
President Obama is proposing an alternative minimum tax for millionaires. Why not apply this alternative minimum tax to corporations? Why should Exxon and GE actually get back taxpayer dollars and pay absolutely nothing in? There should be an alternative minimum tax for them too. By the same token senior citizens who have retirement incomes in the $100,000. range or higher don't need another $1000. a month in social security benefits. The money would be better spent by giving it to people whose only retirement income is social security and whose social security income places them below the poverty line. If you are getting $10,000. a month in retirement income, you don't need another $1000. a month in Social Security. It's absolutely ridiculous. By the same token, you don't need Medicare either. You're perfectly capable of buying a gold plated private health insurance policy which the rich would probably do anyway since the finest doctors (unfortunately) do not even accept Medicare patients.
To take a truly conservative approach to government spending is to make everyone (including corporations which according to the Supreme Court are people) pay their fair share and to not receive government benefits which they don't deserve. By definition they don't deserve government benefits if they are fantastically wealthy in the first place although the rich have hired lobbyists whose main goal is to provide them with government benefits at the expense of the poor and middle class. This has turned the goal of reducing government spending on its head. According to them (in defiance of the hypocritical words that come out of their mouths) there is no government spending so large that goes to the wealthy that should be eliminated. Their goal is to shower government benefits on the rich while denying them to the poor. That's why there is so much inequality in the US - because they have been actively promoting it regardless of the hypocritical words they say. They are only for reducing the size of government when it comes to reducing government programs and subsidies which benefit the poor and middle class.
The top 1% of Americans own 40% of the nation's wealth. The bottom 80% own 7%. The top 1% take home 24% of the nation's income. In 1976 they took home just 9%. Their share of national income has almost tripled in just over 30 years. How was this accomplished? Not by hard work, but by incessant lobbying to change laws that benefit the rich like the 1999 Financial Services Modernization Act and the Commodities Futures Modernization Act of 2000 that overthrew Glass-Steagall leading to the merger of commercial and investment banks, unregulated derivatives, credit default swaps, collateralized debt obligations and all the other paraphernalia of the financialization and globalization of the US economy. Leveraged buyout artists or vulture capitalists like Mitt Romney can give $100,000,000. to each of his five sons without paying any gift tax while ordinary middle class folks pay taxes through the nose. On Romney's income of $21 million last year, for which he did no work to earn it, he paid less than 14% in taxes while most middle class folks are taxed in the 30% range. Romney also paid practically nothing in Social Security or FICA taxes. If he had paid FICA taxes on all his income, this would have helped to bail out Social Security and Medicare right there.
Capital gains is how the rich make their money and they are taxed right now at half the rate that the middle class is taxed. Here is the history:
In the 1970s under President Carter capital gains were taxed at 40%. In the 1980s under President Reagan they were lowered to 20% and under George W Bush they were lowered to 15%. All this was done under the noses of the middle class while they were sleeping or watching football on television. What me worry? Meanwhile lobbyists for the rich were hard and persistently at work. It's pretty clear that Democratic Presidents have raised capital gains taxes while Republican Presidents have lowered them.
A true conservative would want to conserve the safety net while insuring that the rich pay their fair share. Instead all they talk about is lowering taxes (primarily on the rich) while eliminating government programs which primarily benefit the poor and middle class. If they want to reduce the size of government a good place to start would be to reduce the size of the bloated military-industrial complex. Presdident Obama is already striking a populist tone with his talk about an "alternative minimum tax" on millionaires while Defense Secretary Leon Panetta is busy ending wars and reducing the size of the military-industrial complex. They should follow up by embracing Social Security and Medicare reform and by reducing or eliminating payouts of all kinds to the rich. They should also enact a Financial Transactions Tax to be used for debt reduction so that the banks can pay back their fair share to the taxpayers who bailed them out.
When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.
But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.
However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.
Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.
“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.
“If it’s the pinnacle of capitalism, we should be worried.”
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.
“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”
Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.
To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers — including G.M. and others — that have shrunk as nimble competitors have emerged.
Greenspan's Fraud is the title of a book by Dr. Ravi Batra. In light of what's currently happening in Washington regarding the extension of the payroll tax cut, it is prescient. Greenspan engineered an increase in the payroll or FICA or Social Security tax in the 1980s at the behest of then President Ronald Reagan which effectively raised taxes on the poor while Reagan cut the income tax and effectively lowered taxes on the wealthy. The ostensible reason for this increase in payroll tax was a crisis in funding Social Security 35 years out (sound familiar). Republicans worked themselves and the American public up into a lather over a non-existent Social Security crisis. The real purpose of this supposed crisis was to shift the tax burden from the rich to the poor just as it is with Republicans today who don't really want to extend the payroll tax cut engineered by President Obama. Instead, they have pledged Grover Norquist not to raise taxes except ... they might make an exception for the payroll tax. In other words their pledge is to not raise taxes on the rich while they have no problem with raising them on the poor. They are showing their true colors ... again: protect the finances of the rich while exploiting those of the poor and middle class. Such was the brilliance of Greenspan's plan in the early eighties that hardly any Americans knew or realized what he was actually up to including the Democrats who went along with it. Personally, I've been self-employed since 1976, and I never realized that Greenspan had doubled my FICA taxes in 1983 so that I ended up paying higher payroll taxes than rich people paid in capital gains tax. Such is the reality of Republican subterfuge.
From Greenspan's Fraud, the book:
Greenspan's economics has extracted trillions of dollars in taxes from the American middle class and sharply enriched the rich, who are essentially people like himself and his friends - multimillionaires, politicians, and businessmen. ... His policies have led to the pooring of America as well as the world, while a tiny minority has raked in millions, even billions, in profit. He may be a legendary figure in the eyes of many, but when you carefully explore what he has wrought, the aura of public reverence around him can evaporate quickly.
This book will show that because of Greenspan's beliefs or support for certain policies, family income and real wages have declined for a broad swath of Americans, while CEOs have earned millions in stock options and capital gains; US manufacturing has been decimated and the country is saddled with more than half a trillion dollars of trade deficit per year; nearly two million lucrative jobs have vanished since 2000, and millions of people have been downsized.
In December 1981 President Reagan selected Greenspan to chair a blue ribbon commission to "save" social security. When it became obvious that the Federal budget deficit was ballooning due to Reagan's 1981 tax cuts, Greenspan ginned up the Social Security crisis which allowed the payroll tax to be increased, and, since Social Security and the general fund had been part of the unified budget since 1969, the increase in revenues from the increased payroll taxes masked the Federal budget deficits due to Reagan's tax cuts. In simple terms the excess revenues from social security taxes offset the deficit in the general fund due to Reagan's tax cuts. But rather than raise the income tax, which would have increased taxes disproportionally on the wealthy, Greenspan's plan was to raise the payroll tax which is a tax primarily on the poor and middle class. In addition Greenspan also later proposed cutting benefits for social security beneficiaries.
The Reagan-Greenspan theology required that the income [taxes] remain small even if it became necessary to coax money out of the destitute because this is essentially what the commission proposed in 1983. Instead of the general budget that actually faced a massive deficit, the commission insisted that the Social Security Trust Fund faced a giant shortfall, some 30 to 75 years in the future, when baby boomers would retire in large numbers. Never mind that in 1983 itself, the Trust Fund's receipts began to rise because of increasing employment, while the general budget suffered an even larger deficit of $208 billion.
In fact, by the end of the year, the Fund earned a small surplus. But the Greenspan commission relied on "forecasts" that showed a gargantuan deficit looming in the Fund, not five to ten years hence, but more than half a century later. It proposed eliminating the Social Security deficit expected from 1983 all the way to 2056 by overtaxing workers in advance, and generating an adequate surplus in the process.
So the money taken in in payroll taxes which was not used to actually make payments to social security recipients was transferred to the general fund and used to defray the budget deficits brought about by Reagan's tax cuts on the wealthy. In place of the money so used non-marketable Treasury bonds of an equivalent amount were placed in the Social Security Trust Fund (SSTF). Today they amount to $2.5 trillion. This is the amount owed to the SSTF by the general fund. Every year the surplus payroll tax revenues were spent in the general fund and IOUs of a similar amount were placed in the SSTF. The surplus dwindled over the years until today more money is actually being paid out to Social Security recipients than is being taken in in payroll taxes. That means that those non-marketable Treasury bonds in the SSTF must be cashed in and money taken from the general fund to make up the difference. Hence the general fund must accumulate an even larger deficit or it must raise taxes to make up the difference. This is why Republicans are again insisting that Social Security is in crisis. Pay-go demands that the amount paid out from the general fund to make up the difference between what is received in payroll taxes and what is paid out be paid for. Republicans want to make up the difference, as Greenspan wanted to do years ago, by cutting benefits. What they don't want to do is to raise income taxes on the wealthy to do so. Instead of honoring the special non-marketable Treasury bonds in the SSTF which would require either higher deficits or raising the income tax, Republicans want to cut benefits either by raising the retirement age or cutting the cost of living allowance. More extreme right wing Republicans, such as Paul Ryan, want to privatize social security so that the IOUs in the SSTF never will have to be honored. Both Paul Ryan and Alan Greenspan are devotees of Ayn Rand whose philosophy consisted mainly of unadulterated greed and to hell with the poor and middle class.
But Greenspan reserved his most draconian tax increase for the self-employed.
The Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by a 1977 law. Today, [2005] a full-time minimum-wage earner, working for 2000 hours annually at a wage of $5.15 per hour, earns about $10,000 annually On that she has to pay a Social Security and Medicare tax of 7.65 per cent, or $765. which leaves her with $9,235. Add to this a state and local sales tax averaging 8% in big cities, and she forks over another $739 to meet her minimum consumption.
This sum of over $1500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness.This is why the commission's tax propopsals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.
A worse outcome awaited for those working for themselves. Today [2005], a self-employed individual earning $30,000 a year, has to pay nearly 15% in Social Security taxes. Once $4500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.
The Social Security or FICA tax is regressive; there are no deductions or exemptions. It's a flat tax that everyone, rich or poor, pays at the same rate. And it is only paid on the first $106,000. of income. All income over that amount is tax free as far as FICA taxes are concerned. This is why it's essentially a tax on the poor and middle class while the income tax which has higher tax rates for higher income earners is progressive and hits the rich more than the poor although today the highest tax bracket is 35% for income over about $380,000. That means that millionaires and billionaires pay income tax at the same rate as someone earning $380,000. There are no higher tax brackets for the truly rich.
Greenspan convinced his fellow commissioners and Congress to go along with his scheme and his proposals were enacted as Social Security Amendments in 1983. Greenspan's proposals also guaranteed that the maximum taxable wage base (which today is $106,000) would increase year after year so that Social Security taxes would increase on an annual basis. The reality of the situation is that the payroll tax increases of 1983 have been used primarily to fund the tax cuts of wealthy individuals and corporations. They don't want to give up the financial benefits they gained by having payroll taxes reduce their income taxes for 38 years. So they are in the process of reducing social security benefits by a combination of raising the retirement age, scaling back cost of living adjustments or possibly raising the payroll tax rates. The point is that there is no Social Security crisis if the non-marketable Treasury bonds in the SSTF are honored which is essentially the social contract entered into in 1983 by Greenspan and Reagan. If in fact these Treasuries were marketable instead of unmarketable bonds, they could be redeemed on the open market by the SSTF. In that case they would simply be rolled over by the Treasury Department and effectively become part of the ever increasing deficit and national debt. Alternatively, revenues could be sought from other sources most likely the income tax which has been kept low for decades due to the pilfering of the SSTF by the general fund.
Since Congress controls the rules regarding Social Security, they can change them at any time without any recourse by the American people. This means that they can bypass the implied contract to reimburse the IOUs in the SSTF with impunity effectively finessing the whole situation. A better way to place more money in the SSTF would be to lift the $106,000 cap on income subject to the Social Security tax meaning effectively that the rich would pay Social Security tax on all of their income, the same way the poor do.
What a difference 40 years makes! The New Left radicals of the sixties treated the middle class with about as much respect as Rush Limbaugh treats liberals. The middle class was put down, demeaned and vilified. Today the protest movement is all about defending the beleaguered middle class. The middle class and the treatment thereof is the axis on which turns the raison d'etre of the two movements. It's why the movement of the sixties failed and why the Occupy Wall Street Movement may very well succeed in radically restructuring the US government and economy.
First of all in the sixties the protest movement was basically a cultural rather than a political movement despite the attempts of the New Left to make it political. The protest was mainly an anti-war movement combined with cultural overtones. It was the Age of Aquariius. There was a big change coming because Bob Dylan and the Beatles told us there was. It was Blowin' in the Wind. If you didn't wear bell bottoms and grow your hair long you were not part of the movement. Magic was in the air. But when it came right down to it, the Beatles didn't want a revolution because after all they were making too much money. So was relatively speaking the middle class, Nixon's silent majority. They were pretty well off in the sixties and early seventies. They just wanted the US out of Vietnam so their sons wouldn't have to be drafted. Hardly anyone had a student loan. College was relatively free compared to today.
Where I went to school at the University of California San Diego in the late sixties, tuition was free. There was a $73. a quarter incidental fee, and I rented a room for $40. a month. Middle class wages came with benefits - a pension and health care. Wives didn't have to work outside the home to make mortgage payments. I bought my first home for less than what you pay for a mid range car today. There were no adjustable rate mortgages. Everybody had it pretty good. Is it any wonder that the vast middle class did not join the radicals in their attempt to foment a revolution? People were too well off. And the cultural aspects were easily co-opted by commercial interests. You want tie dye. Hey, we'll sell it to you. You want bell bottoms. You can find them at Macy's.
The put down of the middle class was mainly a put down of middle class mores. Things like staying a virgin until you were married, buying ticky tacky houses in tract developments, having to go to church on Sunday, participation in the Rotary club. People didn't want to buy their Grandfather's Oldsmobile. So capitalist society geared up to sell them something else. You want long hair. Hey there's the Broadway musical, Hair. Down to here. Down to there. The same old imperatives to sell, sell, sell - only updated for a new generation. The Students for a Democratic Society were isolated because what people really wanted was new mores to replace their parents' mores. They didn't want to do away with capitalism. Capitalism had been very, very good to them.
Today the situation is different. The middle class is under siege. Far from putting down the middle class, today's Left is trying to defend it. The right wing is reduced to trying to defend the very wealthy, the upper 1%, using their vast wealth for TV advertising and smoke and mirrors. The 99% have lost the prosperity of the sixties. The Occupy Wall Street Movement is aimed right at the heart of capitalism - Wall Street. College tuition at UCSD is over $13,000 today. Along with room and board, books and other expenses, the cost for a year of college education at UCSD is almost $30,000. A far cry from when I was paid to go there as a graduate student with a research assistantship and expenses were minimal. One of my classmates even took flying lessons with the money that was left over from his assistantship. No one went into debt to go to college. Student loans were unheard of. People could work their way through college as I did as an undergraduate on the co-op plan where I worked for a quarter and went to school for a quarter. People could work their way through college with a waitressing job at Howard Johnson's.
Foreclosures are running rampant. People are being forced out of their homes even though the banks don't have the proper documentation to prove ownership. People whose homes are underwater, meaning they owe more than their homes are worth, are stuck there not being able either to refinance or to sell. Their choice is to go on paying exhorbitant mortgage payments every month or to walk away to an uncertain fate and ruined credit. 50 million people have no health care. Jobs are hard to come by. Recent college graduates are lucky to get a job as a barrista at Starbucks. Teachers, firemen, librarians and policemen are being laid off in droves. Manufacturing has moved to China. The middle class is under attack. That is the difference between the demonization of the middle class in the sixties and the attempt to save the middle class that is happening today.
Ed Schultz who has a talk show on msnbc was the first person I know that made a point of defending the middle class, long before it became fashionable, on his previous radio talk show. Now everyone is jumping on the bandwagon. Why? The upper 1% owns most of the wealth and makes most of the income, and they are accelerating their financial predominance. The bankers on Wall Street, having been bailed out by middle class taxpayers and the Fed to the tune of trillions of dollars, are giving themselves even larger bonuses today than they were before the financial crisis which they precipitated. Unions are under attack in Wisconsin, Michigan, Florida and elsewhere where Republican governors and legislatures are in control of state governments. The American Dream has turned into the American Nightmare for masses of people. People are waking up to the fact that government has been taken over by the large corporations who pay politicians, all the Republicans and a number of Democrats, to do their bidding. 30,000 lobbyists swarm Capitol Hill. They are not there to protect the interests of the middle class. They are there to curry financial favors for the upper 1%. Their money floods TV with ads favoring their politicians and their interests. Money runs politics and the American government.
The American government is gridlocked and dysfunctional. Republican filibusters kill any legislation President Obama would like to get enacted to create jobs, forestall the student debt crisis, or help underwater home owners. So now he is trying to get something done by executive orders, but so far it's just frittering around the edges. He needs to make much bolder moves by executive order such as starting an infrastructure bank and reincarnating FDR's CCC and WPA. If the American divided government continues on its present path it will inevitably be replaced by a more functional political system such as a parliamentary system or some system that can't be gridlocked and obstructed to death. Republican intransigence is just making the need for a different system of government more obvious. And it's not about replacing the American government with socialism or communism. It's about replacing a democratic system that doesn't work or only works in the interests of the rich with another democratic system that works in the interests of the middle class. As far as an economic system, there is not a country in the world that has a purely socialistic or communistic system. Even China's economic system is a synthesis of communism and capitalism. So no one in his right mind is advocating replacing capitalism with pure socialism or pure communism. There are societies which have adopted the best features of a number of disparate systems to create societies that are democratic both politically and economically. Economic democracy, in which the middle class is predominant and not beholden to the big banks which sit at the beating heart of American capitalism, is indeed a real possibility. The Occupy Wall Street Movement will eventually have to demand radical changes in the American system in order even to accomplish its minimal goals. Bankruptcy protection for student loans, which was taken away by the Bankruptcy Act of 2005 will have to be reestablished, and that will be an arrow aimed at the heart of capitalism and in particular Wall Street. But what was changed six years ago can be changed back. It's not so set in stone. It's a fight worth fighting.
So the New Left radicals of the sixties were way ahead of their time in wanting a political and economic revolution. The vast middle class was too comfortable and well off to support such a major change. Cultural revolution was co-opted and amounted to nothing. Today, however, with more and more income and wealth flowing upward to the 1% leaving the 99% further and further in the dust, with a political system which is wholly owned by the wealthy, with poverty at record levels and more and more people falling out of the middle class, there is the possibility of a true political and economic revolution in the US which would take back democratic control in favor of the vast majority and create a fairer and ultimately more prosperous society.
by Senator Bernie Sanders, the Guardian, October 7, 2011
It's time for us to end the financial oligarchy so destructive to our economy. If a bank is too big to fail, it is too big to exist
An Occupy Wall Street protester in New York City. Photograph: Amy Sussman/Corbis
The protest movement called Occupy Wall Street has struck a nerve. The demonstrators' goals may be vague but their grievances are very real. If our country is to break out of this horrendous recession and create the millions of jobs we desperately need, if we are going to create a financially-stable future, we must take a hard look at Wall Street and demand fundamental reforms. I hope the protesters provide the spark that ignites that process.
The truth is that millions of Americans lost their jobs, their homes and their life savings because of the greed, recklessness and illegal behavior of Wall Street. Even Federal Reserve Chairman Ben Bernanke agreed when I questioned him this week at a joint economic committee hearing that that there was "excessive risk-taking" by Wall Street. Bernanke also said the protesters "with some justification" hold the financial sector responsible for "getting us into this mess", and added, "I can't blame them."
The demonstrators and millions of sympathetic Americans understand that odds are stacked in Wall Street's favor because of the extraordinary economic and political clout of the big banks. Believe it or not, the country's six largest financial institutions (Bank of America, CitiGroup, JP Morgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs) now have amassed assets equal to more than 60% of our gross domestic product. The four largest banks issue two-thirds of all credit cards, half of all mortgages, and hold nearly 40% of all bank deposits. Incredibly, after we bailed out the behemoth banks that were "too big to fail", three out of the four are now even bigger than they were before the financial crisis.
Not only do these financial institutions have enormous economic clout, their wealth makes them an extremely potent political force. From 1998 through 2008, in order to achieve their goal of repealing Glass-Steagall and other financial regulations, they spent more than $5bn on lobbying and campaign contributions. They also spent hundreds of millions to water down last year's Dodd-Frank reform bill. After the law was passed, hundreds of millions more were spent to repeal provisions and weaken regulations. They never give up.
Where do we go from here? How do we convert the protesters' enthusiasm into concrete results?
For starters, we should break up the giant financial institutions. Left to their own selfish devices, Wall Street bankers will continue to gamble with other people's money. Sooner or later, when their bets go wrong, they will come back to Congress asking to be bailed out again. Why not nip that in the bud? There also is a sound economic argument against too few owning far too much. The idea that six giant financial institutions can exert such enormous control over the economy should frighten anyone who believes in a competitive free-market system. Good Republican presidents like William Howard Taft and Teddy Roosevelt broke up Standard Oil, the railroad trusts and other huge monopolies a century ago.
Now is the time for us to end the financial oligarchy that has been so destructive to our economy. If a bank is too big to fail, it is too big to exist.
Wall Street reform also must address the powerful and secretive Federal Reserve. A Government Accountability Office audit that I requested found that the central bank provided $16tn in revolving, low-interest loans to every major financial institution in this country, multinational corporations and some of the wealthiest people in the world. The Fed even helped bail out other central banks around the world. When Wall Street was on the verge of collapse, the Fed acted boldly. Today, with the middle class collapsing, the Fed must act with equal vigor.
Under emergency provisions already in law, the Fed has the authority to provide low-interest loans to small businesses that are starving for capital so that they can create the millions of jobs our economy needs. It should do so. The Fed also has authority to make credit card issuers stop bilking consumers with sky-high fees and interest rates of 30% or more. Especially in a recession, working people use credit cards to stretch their paychecks for basic needs. Usury is already regarded as a sin in the eyes of every major religion. It should be a crime. The Fed has the authority to limit interest rates and fees. It should do so.
The Occupy Wall Street demonstrators are shining a light on one of the most serious problems facing the United States: the greed, recklessness and power of Wall Street. Now is the time for the president and Congress to follow that light – and act. The future of our economy is at stake.
President Obama can get on the stump and promise action to create more jobs, tax the rich, defend the middle class, have the government provide more Pell grants, take care of children in poverty, whatever... But he need not say all that because, even if he's reelected, he can provide none of it unless the Democrats have a majority in the House and a filibuster proof majority in the Senate which translates to 60 Senators. If the statistics in Congress don't align, Mr. Obama will accomplish exactly nothing even if he gets four more years. Therefore, the most honest campaign speech he can make is "If you elect a majority of Democrats in the House and 60 Democrats in the Senate, I will give you x number of jobs on Day 1 of my second term. Otherwise, you will get nothing but gridlock for the entirety of my second term because the Republicans in Congress will block everything I propose." All this emphasis on what Mr. Obama can or cannot do is ridiculous if he doesn't have the power to do it, and the only way he will have the power to do anything is if he has a Democratic Congress and a filibuster proof Democratic Senate. Mr. Obama has shown that he is not bold enough to defy convention, and the conventional wisdom is that the executive branch in and of itself can do nothing except fight wars and plead with Congress.
Sure now it seems Obama has gotten over his predilection for appeasing the Republicans in Congress realizing that it's absolutely futile to believe in "compromise" with that bunch of jive turkeys. Today he's talking tough, but he's resigned to doing nothing. Might as well start campaigning now for 2012 because nothing will be getting done by government until after the election a year from now. But nothing will get done even then if Mr. Obama doesn't have an agreeable Congress to go along with him, and, reading the tea leaves, it doesn't seem that Democrats will be elected in large numbers unless Democrats including Mr. Obama start making that clear now. Congress has a low approval rating, 12%, which tells the American people "throw the bums out," the good ones along with the bad. In other words the American people will throw out the baby with the bath water unless they start to discriminate between Republicans and Democrats in Congress and start to realize that the blame for nothing getting done lies with the REPUBLICANS IN CONGRESS and not just with some kind of generic CONGRESS. Americans are simple minded. You have to spell it out for them. The campaign of 2012 is not just for the Presidency as if that were the all important thing. No, it's for the Presidency AND Congress combined, and, if the right balance isn't achieved, that is to say a Democrat in the White House and a Democratic controlled House and Democratic controlled filibuster proof Senate, then the American people might as well say bye-bye to solving the deficit problem by taxing the rich and solving the jobs problem by government direct creation of jobs.
The fact of the matter is that corporations and the wealthy are sitting on $2 trillion in cash. They could hire more workers if they wanted to without any additional tax breaks or loans from Wall Street, but they obviously don't just want to hire workers for the sake of hiring workers. They will only hire workers if it adds to their bottom line. A lot of Democratic oreiented economists like Reich and Krugman are saying they will only hire workers if there is more demand so, therefore, we need to use Keynesian economics to pump money into the economy to create demand. However, why would corporations hire more workers even if there were more demand when instead they could make more capital investment in automated and computerized machines? If they are given economic incentives, they will preferably use the money to invest in robots and other computer driven equipment to increase output like they've been doing for the last 20 years. They have driven up productivity not by hiring more workers but by investing in intelligent machines and laying off workers. There is no reason to believe they will do anything different even if demand suddenly increases. Therefore, Obama's economic advisers are full of you know what. Nothing the government can do in the way of giving incentives to corporations to hire more workers will actually work because it makes more sense to them to invest in capital equipment which can work 24 hours a day and doesn't require expensive health insurance.
So where does that leave the government's role in creating jobs even if, come 2012, there should happen to be elected by some miracle a Democratic President and a Democratoc Congress. As I see it, it only leaves one alternative: direct job creation by the Federal government as was used during the Great Depression when FDR created jobs with the Civilian Conservation Corps and the Work Projects Administration. And money has to be funneled off of the most profitable upper few percent of the population who have obtained the lion's share of the national income over the last 30 years in order to make this possible so that the nation doesn't go even more deeply into debt. Class war, anyone? It comes down to taking from the rich in order to dole out welfare benefits or taking from the rich in order to put the poor and lower middle class to work in CCC and WPA type jobs. Lord knows, there's tons of work both in conservation (think environmental rehabilitation) and infrastructure repair and development so that direct government job creation in those areas would be anything but make work. Jobs in those areas are much needed and vital to the overall economy not to mention the general welfare of the people. And private enterprise will never create those jobs unless it is given contracts to do so by the government which would entail much more money in order to build in large profits to the private sector which are not necessary if government provides the jobs directly. Think about all the money that has been wasted by lavishing it on private contractors in Iraq and Afghanistan.
Obama's economic team including Fed Chairman Bernanke seems to think that the key to getting the economy moving is to make interest rates so low that loans will be easy to get as if the only thing holding the private sector back from expanding and hiring workers is the ease with which they can get a loan. But this is belied by the fact that the corporations don't need loans to expand: THEY ARE ALREADY SITTING ON $2 TRILLION IN CASH. Why do they need to borrow money? Duhhh! How stupid are these people? They are deluded to think that the only way things get done in this economy is to create more debt. Why would I borrow money to do something if I am sitting on all the cash I would ever need to do it and more? Obama made the mistake of taking advice from Larry Summers and Tim Geithner, Wall Street types who think the only way to get the economy moving is to cater to Wall Street and appease the rich by giving them even more favors: deregulation and lower taxes. This top down approach hasn't worked. That should be obvious by now! Instead the rich are richer than ever, more and more money has been funneled to the top 2% and middle class interests have been neglected. People have lost their homes who shouldn't have had to if the government had acted in their interests. Now investors are sueing the big banks because they were screwed. But what about the people who lost their homes to foreclosure? Little if anything is being done in their behalf.
All in all, it's not all about Obama. If he's not elected in 2012 and Republicans run the table, God help us. The US will become a nation of serfs and a small class of economically powerful and dominant aristocrats. The safety net will be eliminated and more and more people will become homeless and die on the streets for lack of health care. Children's growth will be stunted and they will become increasingly ignorant and uneducated. The country will be by, for and of the rich and powerful. Better to have Obama reelected and a Republican Congress which will mean nothing will get done for four more years, but even that is better than sliding back into another Dark Age. The best scenario, however, would be that Democrats control the Presiency and Congress. This would also guarantee that a liberal would be appointed to the Supreme Court when a vacancy occurs which is very likely in the next 5 years and which would tilt the balance there from the conservative oriented majority which now obtains. If such were the case, then America might well be back on the path towards being a sane and progressive nation again instead of the repudiation of Enlightenment values it was founded on which it is now in danger of becoming.
From Julianne Escobedo Shepherd’s post / AlterNet / August 9, 2011
MoveOn has created a new petition to protest the debt deal and apparent fact that barely anyone in Congress cares about job creation. From a press release:
In the wake of the debt deal that does nothing to create jobs, and fails to make corporations and the rich pay their fair share, MoveOn.org and Rebuild the Dream today announced the new Contract for the American Dream. The Contract, born out of the new American Dream Movement, is a progressive economic vision crafted by 125,000 Americans who came together online and in their communities, and put forth their ideas to get the economy back on track. Members of the American Dream Movement will take the Contract directly to Congress during the August recess to demand “Jobs Not Cuts,” beginning with hundreds of actions around the country on August 10th.
MoveOn rally outside Cong. Hunter's office, August 2, 2011. Photo by Grok Surf.
There are 3 actions in San Diego County tomorrow, Wed., August 10th, at local Congressional offices. See here. There are events at Bilbray’s, Hunter’s, and Susan Davis’ offices. Go to link for times and locales.
The Times ad is worth reading—it lays out several solutions for both job creation and repairing the economy—though the August 10th actions seem to be more imperative than the petition, per se (see: London).
Here’s the Contract for the American Dream:
[ See below for the full text of the Contract and then click here to sign your name to it.]
MoveOn crowd outside Hunter's office, Aug. 2, 2011. Grok Surf.
”I have a dream. It is a dream deeply rooted in the American Dream.” –Rev. Dr. Martin Luther King, Jr., 1963 March on Washington
We, the American people, promise to defend and advance a simple ideal: liberty and justice… for all. Americans who are willing to work hard and play by the rules should be able to find a decent job, get a good home in a strong community, retire with dignity and give their kids a better life. Every one of us—rich, poor or in-between, regardless of skin color or birthplace, no matter their sexual orientation or gender—has the right to life, liberty and the pursuit of happiness. That is our covenant, our compact, our contract with one another. It is a promise we can fulfill—but only by working together.
Today, the American Dream is under threat. Our veterans are coming home to few jobs and little hope on the home front. Our young people are graduating off a cliff, burdened by heavy debt, into the worst job market in half a century. The big banks that American taxpayers bailed out won’t cut homeowners a break. Our firefighters, nurses, cops and teachers—America’s everyday heroes—are being thrown out onto the street. We believe:
AMERICA IS NOT BROKE. America is rich—still the wealthiest nation ever. But too many at the top are grabbing the gains. No person or corporation should be allowed to take from America while giving little or nothing back. The super-rich who got tax breaks and bailouts should now pay full taxes—and help create jobs here, not overseas. Those who do well in America should do well by America.
AMERICANS NEED JOBS, NOT CUTS. Many of our best workers are sitting idle, while the work of rebuilding America goes undone. Together, we must rebuild our country, reinvest in our people and jump-start the industries of the future. Millions of jobless Americans would love the opportunity to become working, tax-paying members of their communities again. We have a jobs crisis, not a deficit crisis.
To produce this Contract for the American Dream, 131,203 Americans came together online and in their communities. We wrote and rated 25,904 ideas. Together, we identified the 10 most critical steps to get our economy back on track and restore the American Dream:
INVEST IN AMERICA’S INFRASTRUCTURE. Rebuild our crumbling bridges, dams, levees, ports, water and sewer lines, railways, roads and public transit. We must invest in high-speed Internet and a modern, energy-saving electric grid. These investments will create good jobs and rebuild America. To help finance these projects, we need national and state infrastructure banks.
CREATE 21ST-CENTURY ENERGY JOBS. We should invest in American businesses that can power our country with innovative technologies like wind turbines, solar panels, geothermal systems, hybrid and electric cars, and next-generation batteries. And we should put Americans to work making our homes and buildings energy efficient. We can create good, green jobs in America, address the climate crisis, and build the clean energy economy.
INVEST IN PUBLIC EDUCATION. We should provide universal access to early childhood education, make school funding equitable, invest in high-quality teachers, and build safe, well-equipped school buildings for our students. A high-quality education system, from universal preschool to vocational training and affordable higher education, is critical for our future and can create badly needed jobs now.
OFFER MEDICARE FOR ALL. We should expand Medicare so it’s available to all Americans, and reform it to provide even more cost-effective, quality care. The Affordable Care Act is a good start and we must implement it—but it’s not enough. We can save trillions of dollars by joining every other industrialized country—paying much less for health care while getting the same or better results.
MAKE WORK PAY. Americans have a right to fair minimum and living wages, to organize and collectively bargain, to enjoy equal opportunity and to earn equal pay for equal work. Corporate assaults on these rights bring down wages and benefits for all of us. They must be outlawed.
SECURE SOCIAL SECURITY. Keep Social Security sound, and strengthen the retirement, disability, and survivors’ protections Americans earn through their hard work. Pay for it by removing the cap on the Social Security tax, so that upper-income people pay into Social Security on all they make, just like the rest of us.
RETURN TO FAIRER TAX RATES. End, once and for all, the Bush-era tax giveaways for the rich, which the rest of us—or our kids—must pay eventually. Also, we must outlaw corporate tax havens and tax breaks for shipping jobs overseas. Lastly, with millionaires and billionaires taking a growing share of our country’s wealth, we should add new tax brackets for those making more than $1 million each year.
END THE WARS AND INVEST AT HOME. Our troops have done everything that’s been asked of them, and it’s time to bring them home to good jobs here. We’re sending $3 billion each week overseas that we should be investing to rebuild America.
TAX WALL STREET SPECULATION. A tiny fee of 1/20th of 1% on each Wall Street trade would raise tens of billions of dollars annually with little impact on actual investment. This would reduce speculation, “flash trading,” and outrageous bankers’ bonuses—and we’d have a lot more money to spend on Main Street job creation.
STRENGTHEN DEMOCRACY. We need clean, fair elections—where no one’s right to vote can be taken away, and where money doesn’t buy you your own member of Congress. We must ban anonymous political influence, slam shut the lobbyists’ revolving door in D.C. and publicly finance elections. Immigrants who want to join in our democracy deserve a clear path to citizenship. We must stop giving corporations the rights of people when it comes to our elections. And we must ensure our judiciary’s respect for the Constitution. Together, we will reclaim our democracy to get our country back on track.
From time to time, someone under 30 will ask me, "When did this all begin, America's downward slide?" They say they've heard of a time when working people could raise a family and send the kids to college on just one parent's income (and that college in states like California and New York was almost free). That anyone who wanted a decent paying job could get one. That people only worked five days a week, eight hours a day, got the whole weekend off and had a paid vacation every summer. That many jobs were union jobs, from baggers at the grocery store to the guy painting your house, and this meant that no matter how "lowly" your job was you had guarantees of a pension, occasional raises, health insurance and someone to stick up for you if you were unfairly treated.On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
Young people have heard of this mythical time -- but it was no myth, it was real. And when they ask, "When did this all end?", I say, "It ended on this day: August 5th, 1981."
Beginning on this date, 30 years ago, Big Business and the Right Wing decided to "go for it" -- to see if they could actually destroy the middle class so that they could become richer themselves.
And they've succeeded.
On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
It was a bold and brash move. No one had ever tried it. What made it even bolder was that PATCO was one of only two unions that had endorsed Reagan for president! It sent a shock wave through workers across the country. If he would do this to the people who were with him, what would he do to us?
Reagan had been backed by Wall Street in his run for the White House and they, along with right-wing Christians, wanted to restructure America and turn back the tide that President Franklin D. Roosevelt started -- a tide that was intended to make life better for the average working person. The rich hated paying better wages and providing benefits. They hated paying taxes even more. And they despised unions. The right-wing Christians hated anything that sounded like socialism or holding out a helping hand to minorities or women.
Reagan promised to end all that. So when the air traffic controllers went on strike, he seized the moment. In getting rid of every single last one of them and outlawing their union, he sent a clear and strong message: The days of everyone having a comfortable middle class life were over. America, from now on, would be run this way:
* The super-rich will make more, much much more, and the rest of you will scramble for the crumbs that are left.
* Everyone must work! Mom, Dad, the teenagers in the house! Dad, you work a second job! Kids, here's your latch-key! Your parents might be home in time to put you to bed.
* 50 million of you must go without health insurance! And health insurance companies: you go ahead and decide who you want to help -- or not.
* Unions are evil! You will not belong to a union! You do not need an advocate! Shut up and get back to work! No, you can't leave now, we're not done. Your kids can make their own dinner.
* You want to go to college? No problem -- just sign here and be in hock to a bank for the next 20 years!
* What's "a raise"? Get back to work and shut up!
And so it went. But Reagan could not have pulled this off by himself in 1981. He had some big help:
The AFL-CIO.
The biggest organization of unions in America told its members to cross the picket lines of the air traffic controllers and go to work. And that's just what these union members did. Union pilots, flight attendants, delivery truck drivers, baggage handlers -- they all crossed the line and helped to break the strike. And union members of all stripes crossed the picket lines and continued to fly.
Reagan and Wall Street could not believe their eyes! Hundreds of thousands of working people and union members endorsing the firing of fellow union members. It was Christmas in August for Corporate America.
And that was the beginning of the end. Reagan and the Republicans knew they could get away with anything -- and they did. They slashed taxes on the rich. They made it harder for you to start a union at your workplace. They eliminated safety regulations on the job. They ignored the monopoly laws and allowed thousands of companies to merge or be bought out and closed down. Corporations froze wages and threatened to move overseas if the workers didn't accept lower pay and less benefits. And when the workers agreed to work for less, they moved the jobs overseas anyway.
And at every step along the way, the majority of Americans went along with this. There was little opposition or fight-back. The "masses" did not rise up and protect their jobs, their homes, their schools (which used to be the best in the world). They just accepted their fate and took the beating.
I have often wondered what would have happened had we all just stopped flying, period, back in 1981. What if all the unions had said to Reagan, "Give those controllers their jobs back or we're shutting the country down!"? You know what would have happened. The corporate elite and their boy Reagan would have buckled.
But we didn't do it. And so, bit by bit, piece by piece, in the ensuing 30 years, those in power have destroyed the middle class of our country and, in turn, have wrecked the future for our young people. Wages have remained stagnant for 30 years. Take a look at the statistics and you can see that every decline we're now suffering with had it's beginning in 1981 (here's a little scene to illustrate that from my last movie).
It all began on this day, 30 years ago. One of the darkest days in American history. And we let it happen to us. Yes, they had the money, and the media and the cops. But we had 200 million of us. Ever wonder what it would look like if 200 million got truly upset and wanted their country, their life, their job, their weekend, their time with their kids back?
Have we all just given up? What are we waiting for? Forget about the 20% who support the Tea Party -- we are the other 80%! This decline will only end when we demand it. And not through an online petition or a tweet. We are going to have to turn the TV and the computer and the video games off and get out in the streets (like they've done in Wisconsin). Some of you need to run for local office next year. We need to demand that the Democrats either get a spine and stop taking corporate money -- or step aside.
When is enough, enough? The middle class dream will not just magically reappear. Wall Street's plan is clear: America is to be a nation of Haves and Have Nothings. Is that OK for you?
Why not use today to pause and think about the little steps you can take to turn this around in your neighborhood, at your workplace, in your school? Is there any better day to start than today?
P.S. Here are a few places you can connect with to get the ball rolling:
Everyone is talking about how to get the economy moving again and how to create jobs. President Obama talks about "winning the future." This means more education, more entrepreneurialism, more new industries, more new products for consumers to buy. Surely, all this new economic activity is exactly what we need or is it? Since the GDP of the US is dependent on consumers consuming to the tune of 70% of the entire economy, it stands to reason that for the economy to expand, consumers need to consume more. But wait a minute. We are already stuffed to the gills with products rammed down our throats by TV advertisers. Maybe what we need is less consumption. Americans are already experiencing an epidemic of obesity. We should be consuming less fast food. But that would bring the profits of McDonald's down. They might even have to lay off employees. Their stock might plummet. Wal-Mart offers us a plethora of cheap crap made in China. But if we stopped buying it, Wal-Mart's profits would go down, their stock price would tumble and the Dow Jones average might even find itself in bear market territory. Everyone agrees that this would be terrible for the economy. But it might be good for the citizens.
I say we need to participate less in the market economy and be more self-subsistent. This would result in a decrease in GDP, but an increase in citizen independence. The more we rely on ourselves to fulfill our needs, the less we rely on the market economy and the better off we are when that economy goes kerflooey. The recent economic meltdown was all about Wall Street and their shenanigans. It was of paramount importance to bail out Wall Street and then all good things would follow. Such was the conventional wisdom. Only good things didn't follow. People's homes were foreclosed on en masse even when banks couldn't prove that they held title to the houses. Main Street, the middle class - they were not protected at all. The culprits who caused the crisis were bailed out. The average citizen who lost his job and his house and maybe even his wife was not bailed out at all. In fact Republicans are doubling down on destroying what remains of the safety net which might have helped these unfortunates to maintain the skeleton of a half way decent way of life. Congress has continued to sponsor and uphold legislation that encourages corporations to outsource jobs. The budget is to be balanced on the backs of the poor and middle class and not by asking the rich to contribute a little more. We are rapidly retreating to the Dickensian era where to ask for a little more porridge was to be answered with a "certainly not!"
What we need is not more consumption of cheap Chinese produced crap or even newly minted crap from our own entrepreneurs. What we need is a better system of distributing the immense amount of stuff that we are already capable of producing. And in particular we are in need of a more widely distributed system of ownership so that profits redound to the average citizen and not to the upper .1% who are becoming immensely wealthy far beyond their needs while the poor and middle class are being reduced to penury and poverty. What we need is a government that looks out for the little guy, not one who is all for the competitive struggle to produce more and more goods and win the future that way. How about winning the future by taking back our ability to be self-sustaining? We need to return to an era when people produced a large amount of their own food by growing it themselves instead of relying on the marketplace of consumer provided food by large agricorporations which use pesticides, herbicides and hormones to provide us with food which in most cases will not kill us right away. That will take place in 30-40 years when cancer sets in. But in a lot of cases of e coli and salmonella brought on by filthy conditions for animals in factory farms, it will kill us or sicken us immediately. So profits are concentrated in the hands of a few corporations instead of being widely distributed which would take place if there were widespread family gardening which also produces healthier foods. If everyone farmed to some extent, we would all be better off but GDP and corporate profits would decline because we wouldn't be participating to such a great extent in the market economy.
Sociologists decry the fact that in many parts of the world people are living on $2. a day. But those in this category that are rural may in fact be 98% self-subsistent. In other words they are providing for their own needs without participating in the market economy or are only participating to the tune of $2. a day. On the other hand the urban poor who are living on $2. a day may not be in a position to be self-subsistent, and they are truly poor because they have to meet all their needs by means of the market economy and $2. a day doesn't go very far. Just recently many Americans met probably 75% of their needs without participating in the market economy. Take my grandparents, for example. My Grandfather lived and worked on a small dairy farm. They had chickens and hogs and a large garden. So they provided perhaps 90% or more of their own food instead of buying it at the market. They sold milk into the marketplace in exchange for dollars which they used to purchase what they could not provide for themselves. Instead of buying oil or gas, my grandfather farmed with horses and he grew the fuel that they consumed with the result that he did his own energy production and did not have to depend on Exxon Mobil or Chevron for energy. And as a bonus horses did not pollute. Since chemicals were not available, his farming was organic by default. He learned carpentry and built his own buildings with the result he didn't have to hire a contractor. They were largely self-sufficient and self-subsistent. Of course, they made their own clothes instead of buying them in a store. Women had a whole variety of functions within the household instead of vying for jobs in the marketplace, another way in which they were self-sufficient. They actually weathered the Great Depression quite well since they weren't dependent on the market economy. Even my parents who had government jobs as teachers, the kind that Republicans are attacking today, raised chickens and had a really large garden from which they provided much of their own food. And women used to bake instead of buying prepared foods.
So maybe the answer to the economic malaise that we find ourselves in today will be solved not by creating new industries to manufacture more and better stuff but by figuring out ways to be less dependent on the marketplace and more self-sufficient. Profit centers need to be more widely dispersed instead of profits ending up in the hands of the Fortune 400. Think about it: when you participate in the market economy, the money you spend ends up in the hands of a very few and select group of corporations and wealthy individuals and families. These individuals, families and corporations have effectively captured government through their paid lobbyists so that government operates solely in their interests. Jefferson envisioned a country of independent yeoman, small farmers and craftsmen. In today's America, there are hardly any such people. Instead most rely on a job to provide them with income which they use to provide for all their needs by purchasing goods and services in the marketplace. As more and more people lose their jobs because the jobs are outsourced or are replaced by automated machines, there is no place to go but down. But the self-employed, the self-sufficient and self-subsistent will be able to provide for themselves and their families irregardless of what is happening in the marketplace. Those absolutely dependent on wages to make a living are already becoming neo-serfs needing two or three minimum wage jobs to make a go of it. The worst off are dependent on charity.
We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.
Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast.
It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:
2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast. Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?” Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950. America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little. The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families. The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day. 14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive. Unfortunately, this is not just a temporary situation for American workers. As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.
Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.
The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.
The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry
The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .
These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.
As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.
For the past few months, we’ve been witnessing an inspiring, genuinely grass-roots rebellion of average Americans against corporate/financial profiteers savaging our collective well-being for their narrow, private gain.
It’s most powerful manifestation came in Wisconsin, where tens of thousands demonstrated outrage over atrociously arrogant, callously cruel Republican efforts to eviscerate organized labor.
As welcome as this explosion of populist protest has surely been, its amorphous spontaneity and incomplete cohesion evince a weakness that needs correction.
Much greater unity is required, stronger links between separate communities and regions are necessary, and a national people-before-profits agenda has to be drawn up, disseminated, and implemented.
In the interim -- as an effective programmatic counter to constant rape by marauding monopolists is being formulated -- it’s crucial to put forward an overriding progressive theme, expressed tersely in strong language well suited for street chants and bumper stickers, that every fair-minded citizen possessing a good heart can immediately, enthusiastically embrace.
That’s why “Make the wealthy pay to save the USA!” should figure prominently in everything we say or write about the profound systemic injustice under which increasing multitudes of our fellow citizens -- and we ourselves -- painfully suffer.
Most adult Americans are either workaday wage-earners or worked-a-lifetime retirees. They’re the folks to whom ‘government of the people, by the people, and for the people’ should properly apply.
It’s in clear furtherance of their welfare and common good that elected officials are duty-bound to constructively act, as our societal first priority. But just the opposite is happening.
Crony capitalist speculators who tanked our economy through their enormous greed and malfeasance are being shielded by conservative extremists like Scott Walker, Paul Ryan, and the Tea Party.
They would rather decimate collective bargaining, Social Security, Medicare, and Medicaid before eliminating unfair tax loopholes and havens for billionaires.
Constantly putting Wall Street ahead of Main Street is simply wrong. It’s also as socially unsustainable as similarly unfair practices were when ancient empires fell.
Appropriately taxing the mega rich and corporation -- together with ending ill-advised wars and curbing costly militarism -- could fix the deficit moving forward.
Our country’s been damaged long enough by those who treasonously owe primary allegiance to the Almighty Dollar.
As mass poverty and deprivation worsen, while fat cats unconscionably rake in more stolen booty, no reasonable person can fail to agree with what’s just been stated.
More importantly, no conservative can present a countering argument without clearly exposing the elitist, self-serving social irresponsibility that Republicans are afflicted with as if by a diabolical moral disease that’s completely contrary to both Golden Rule Christian teachings and key American ideals that they hypocritically profess to cherish.
We can’t lose if we gather in growing numbers in all venues of public expression to relentlessly speak (shout) these words with an insistent, unified voice:
Make the wealthy pay to save the USA!
Dennis Rahkonen, from Superior, Wisconsin, has been writing progressive commentary with a Heartland perspective for various outlets since the Sixties
Last night President Obama and congressional negotiators cut a deal to keep the government running, cutting “$38.5 billion under current funding levels, per Republican demands,” and $78 billion below what Obama called for in his initial 2011 budget.
Yet as Republicans and Democrats continue to battle over the deficit within a political framing that includes taking aim at Pell Grants for low-income students — which Obama preemptively proposed to cut, calling summer grants “too expensive,” while Republicans want far deeper cuts than that — Head Start funding, and other programs from Main Street Americans, there is one group of Americans that seems to be getting away without having any sacrifices demanded of them: the very richest.
As this chart from from Wealth for the Common Good shows, the top 400 taxpayers — who have more wealth than half of all Americans combined — are paying lower taxes than they have in a generation, as their tax responsibilities have slowly collapsed since the New Deal era as working families have been asked to pay more and more:
There have been a handful of proposals by congressional progressives to once again put requiring more sacrifice from the luckiest among us back on the table. The Congressional Progressive Caucus recently unveiled a “People’s Budget” that would boost taxes on the wealthiest Americans, returning them to levels closer to where they were under Ronald Reagan’s first term — hardly socialism.
Yet these proposals have yet to gain steam, and the budget debate in Washington appears to revolve completely around cutting spending for Main Street Americans who’ve already been asked to pay too much during the recession. That’s why there’s a Main Street Movement demanding fair sacrifice and standing up for the great American middle class. Whether it succeeds may determine the fate of most hard-working Americans for a generation to come.
by Jeffrey Sachs, Economist and Director of the Earth Institute, Columbia University
Just when it seemed that all of Washington had lost its values and its connection with the American people, a bolt of hope has arrived. It is the People's Budget put forward by the co-chairs of the 80-member Congressional Progressive Caucus. Their plan is humane, responsible, and most of all sensible, reflecting the true values of the American people and the real needs of the floundering economy. Unlike Paul Ryan's almost absurdly vicious attack on the poor and working class, the People's Budget would close the deficit by raising taxes on the rich, taming health care costs (including a public option), and ending the military spending on wars and wasteful weapons systems.
There are now four budget positions on the table. Far to the right is Paul Ryan's plan, an artless war on the poor that would take a meat-cleaver to Medicaid (health care for the poor), food stamps, support for child care, the environment, and the rest of government other than the military, Social Security, and Medicare (that is, until 2022, when the slashing would begin on Medicare coverage as well). Ryan would keep taxes below 20 percent of GDP (specifically, 19.9 percent of GDP in 2021), at the cost of destroying entitlements programs and other civilian spending.
Then there is President Obama's budget, which is really a muddled proposal in the center-right of the political spectrum. It would keep most of the Reagan-era and Bush-era tax cuts in place. Like the Ryan proposal, Obama's tax proposals would keep total taxes at around 20 percent of GDP. The result is a major long-term squeeze on vital programs such as community development, infrastructure, and job training. Also, Obama's plan never closes the budget deficit, which remains as high as 3.1% of GDP in 2021.
In the progressive middle is the People's Budget. Like Ryan's plan, the People's Budget would cut the budget deficit to zero by 2021, but would do so in an efficient and fair way. It would close the budget deficit by raising tax rates on the rich and giant corporations, while also curbing military spending and wrestling health care costs under control, partly by introducing a public option. By raising tax revenues to 22.3 percent of GDP by 2021, the People's Budget closes the budget deficit while protecting the poor and promoting needed investments in education, health care, roads, power, energy, and the environment in order to raise America's long-term competitiveness. The People's Budget thereby achieves what Ryan and Obama do not: the combination of fairness, efficiency, and budget balance.
The fourth position is the public's position. The Republicans often say that they want Congress to respect the voice of the people. The voice of the people is crystal clear. In one opinion surveyafter the next, the public says that the rich and the corporations should pay more taxes. The public says that we should tamp down runaway health care costs through a public option, one that would introduce competition to drive down bloated private health insurance costs. The public says that we should get out of Iraq and Afghanistan and reduce Pentagon spending. (Just yesterday, Defense Secretary Gates let loose the predictable Pentagon canard that we should stay in Iraq if the Iraqi government asks for it. Better yet, we should respond to what the American people are asking for: to bring our troops home).
The fact is that the People's Budget is the public's position. That's why it is truly a centrist initiative, at the broad center of the U.S. political spectrum. Ryan reflects the wishes of the rich and the far right. Obama's position reflects the muddle of a White House that wavers between its true values and the demands of the wealthy campaign contributors and lobbyists that Obama courts for his re-election. Many Democrats in Congress have also gone along with the falsehood that deficit cutting means slashing spending on the poor and on civilian discretionary programs, rather than raising taxes on the rich, cutting military spending, and taking on the over-priced private health insurance industry. Only the People's Budget speaks to the broad needs and values of the American people.
The current budget negotiations have been a dialogue among the wealthy. The big debate has focused on which programs for the poor should be axed first. There has been no discussion of raising taxes on the rich, and quite the contrary, the White House and the Republican leadership agreed to further tax cuts last December. Obama has repeatedly expressed regret at slashing community development, energy support for the poor, and other programs, but he is not fighting the trend, only regretting it.
Most of Washington has stopped listening to the people. Campaigns are now so expensive that most politicians do anything to court the favor of the rich. Yet ultimately the public will prevail. Twice before in American history -- during the Gilded Age of the 1880s and in the 1920s, just before the Great Depression -- big corporate money effectively owned Washington. But in both eras great progressive leaders (including the two Roosevelts, Theodore and Franklin) came along to restore the true meaning of American democracy: a government truly of the people, by the people, and for the people. With public protests against government by the rich now spreading in Wisconsin, Ohio and beyond, and with the launch of the People's Budget by the Congressional Progressive Caucus, a great national movement to restore American democracy has begun.
It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.
Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.
Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.
The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)
Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.
It’s just the opposite for super rich.
The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.
Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.
The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.
If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.
If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.
Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)
And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.
But don’t the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here’s the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.
Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.
All the President has to do is connect the dots – the explosion of income and wealth among America’s super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.
This shouldn’t be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.
The President has the bully pulpit. But will he use it?
One of the organizing principles of the conservative movement revolves around always cutting taxes and resisting any moves towards raising revenues. Hundreds of conservatives have even signed Grover Norquist’s pledge to never, under any circumstances, support a tax increase.
Gov. Nathan Deal (R-GA) made tax cuts a major part of his campaign promise last fall. In an ad put out by his campaign in February 2010, Deal bragged about running on “tax-cutting policies.” Watch it:
Now that Deal is Governor, the state legislature is currently drafting major tax legislation. Deal has been a guiding hand in the negotiations over the bill, and stands behind the latest version of the bill being debated among senate and house legislators. The bill does, as Deal promised, cut many taxes.
For example, it lowers the state personal income tax rate from 6 to 4.5 percent. Yet at the same time, the bill is being touted as being revenue neutral — meaning that revenue has to come from somewhere. Georgia Republicans, under the leadership of Deal, have decided to make up the difference by eliminating a whole host of tax exemptions and increases in sales taxes. The end result? Georgians making over $180,000 would see steep tax cuts while middle class Georgians making between $20,000 and $180,000 would see tax hikes. This chart compiled by the Atlanta Journal-Constitution’s Jay Bookman using data from Georgia State University’s Fiscal Research Center illustrates this:
While negotiations over the tax bill are far from over, it appears that Deal and his Republican colleagues are standing behind a template that is becoming all too familiar for right-wing legislators: cut taxes on the wealthiest Americans and then demand that middle class and working class Main Street Americans pay out more in tax hikes or in reduced spending to health care, education, and other important investments. As ThinkProgress previously reported, at least a dozen states are currently pursuing corporate tax cuts while at the same time increasing burdens on working families.
Update Georgia Politico's Brett Johns has more details about how the GOP's plan is sizing up to slam the middle class and enrich the already wealthy
Police estimate 5,000 to 8,000 teachers, nurses, Teamsters, electricians, actors and others marched to support their peers in Wisconsin and oppose any similar organized-labor restrictions in California.
Alarmed by recent union losses in a Wisconsin labor battle, thousands of organized workers marched through downtown Los Angeles on Saturday, vowing to fight a similar fate here in cash-strapped California.
Police estimated between 5,000 and 8,000 people attended the protest, which ended in a packed rally at Pershing Square. The event comes in response to the Wisconsin Legislature's approval of a bill this month that curtails the collective bargaining rights of many unions and follows a weeks-long battle.
Marchers cheered speakers such as Teamsters General President James P. Hoffa; Maria Elena Durazo, secretary-treasurer of the Los Angeles County Federation of Labor; and Mahlon Mitchell, president of the Professional Fire Fighters of Wisconsin.
The Wisconsin bill, which was signed by Republican legislators without the support of Democrats, exempted firefighters and other public safety workers. However, Mitchell told the crowd that his union still opposes the action.
"This is a direct attack" on all unions and the entire middle class, Mitchell shouted, warning that similar policies could soon be introduced by politicians in California, which is grappling with an estimated $26-billion deficit. "An injury to one is an injury to us all!"
Mitchell's words were met with loud cheers, chants and beating drums. Flags and placards waved in the air, many of them bashing wealthy corporations and conservative politicians.
Protester Ruben Najara, 49, said he has been working at the Los Angeles Department of Water and Power for just over two decades. A Covina resident who holds an associate's degree from a trade college, Najara said the union job has given him a secure, working-class life and the ability to comfortably raise three children.
He said he fears that on the heels of the Wisconsin law, union collective bargaining power will be steadily eroded throughout the country. "We are willing to make concessions," he said. "But you have to have two sides at the table to bargain."
The march began just outside Staples Center, which served as a staging area for thousands of union members. Leading much of the procession was a sea of burly, black-shirted Teamsters. Behind them, stretching back several city blocks, were nurses, telephone technicians, electricians, truckers, screenwriters, actors, longshoremen, teachers and others.
Among those who showed up to voice support were a group of parents whose children attend Eagle Rock Elementary — a facility they said suffered from inadequate funding.
"Enough is enough," said Amanda Millet, who has two kids at the school. "This year we stand to lose some of our best teachers, the very best. It's amazing that the teachers and their union are being blamed for what is happening with the economy right now.... I see a lot of very nice new buildings housing the LAUSD administration. They should get out of those offices and see what's happening at a school like ours, a place that needs to keep all the good teachers it can."
As these conservatives are cutting these services for hard-working middle class Americans, they are claiming they are acting out of need for “shared sacrifice.” Yet at the same time, the right continues to advocate for massive tax cuts for the wealthiest among us.
Rep. Jan Schakowksy (D-IL), along with a number of her progressive congressional colleagues, has introduced a plan that demands real “shared sacrifice.” Her plan, The Fairness in Taxation Act, calls for creating new tax brackets for the richest Americans, starting at a 45 percent rate for people whose income is $1 million. Her bracket would impose the highest rate — 49 percent — on billionaires.
A chart provided by her congressional office demonstrates that asking the wealthiest among us to pay a little more would actually save more money than all of the House Republicans’ cuts to domestic spending combined. House Resolution 1, which gutted funding on Pell Grants, low-income housing aid, community health centers, and other important programs for Main Street Americans, cut a total of $61 billion. Meanwhile, Schakowsky’s plan saves $78.9 billion, considerably more:
In an interview with ThinkProgress, Schakowsky said that she is “hoping” to build enough momentum within Congress to make her proposal the main alternative to the conservative slash-and-burn budget effort, saying that it is a “winner” for Democrats, both politically and on policy grounds. She said that the House Progressive Caucus is planning to do a road show in the summer to campaign on tax justice and endorsed the Main Street Movement that is defending the middle class across America:
THINKPROGRESS: You’ve mentioned a few times the grassroots movement that’s going on…that’s something that we here at ThinkProgress have dubbed the Main Street Movement, all around this country we’re seeing working families rise up. [...] I wonder if you’ve and your colleagues on the Progressive Caucus have thought about similar kinds of tactics [to the Tea Party], a road show, holding rallies, trying to engender grassroots momentum around your proposals.
SCHAKOWSKY: Well, the Progressive Caucus is planning a road show this summer. This will be a central theme of that. [...] But I think this needs to be bigger than that. [...] I like the idea of branding, I like the idea of the Main Street Movement, and I think it is beginning to seriously come together. I think all of the pieces are out there to put this together right now. This is a moment. I want to capture it right now by introducing this legislation that clearly states an alternative that is very popular.
Listen to it:
Indeed, taxing the super-wealthy is quite popular. A March 2 NBC News/Wall Street Journal poll found that 81 percent of Americans prefer taxing the wealthiest Americans more as their top choice for deficit reduction, while less than a third of Americans endorsed policy options like cutting funding to education and health care.
Update ThinkProgress commenter Jay Kimball used IRS data to put together the following graph showing how the richest 1 percent of Americans is nearly earning more money than they ever have while they are paying the lowest taxes in decades:
A crowd armed with signs gathers at a rally in Lansing on Wednesday, March 16, 2011, to protest Gov. Rick Snyder's budget. / SUSAN TUSA/ Detroit Free Press
After Thousands March in Michigan, Recall of Governor Floated
Yesterday, thousands of Main Street Movement protesters marched on the Michigan Capitol to protest Gov. Rick Snyder’s (R) constitutionally flawed assault on Michigan workers. Michigan’s voters, however, can do far more than simply make their displeasure known to Snyder and his allies in the state legislature. Michigan’s constitution is unusually easy to amend, and Snyder and his allies become eligible for a recall in just over three months.
More than 5,000—and the crowd is growing—Michigan union, community, education and other activists are on the Lansing Capitol grounds and inside the state House this afternoon to protest Gov. Rick Snyder’s (R) new “financial martial law.”
The Detroit Free Press reports that the crowd chanted “Take Michigan Back” as UAW President Bob King told the crowd, “This is one day in a long battle.”
Michigan Main Street Movement Protesters March Against Gov. Snyder’s “Financial Martial Law” Bill
Although Wisconsin Gov. Scott Walker’s (R) anti-union crusade has received the biggest headlines, Michigan Gov. Rick Snyder (R) is poised to sign an even more drastic assault on working Americans into law. Last week, the Michigan legislature passed a “financial martial law” bill that allows Snyder to appoint “emergency financial managers” with the power to terminate collective bargaining agreements:
Contracts & Collective Bargaining Agreements. The bill would authorize the emergency manager to reject, modify, or terminate one or more terms and conditions 0f an existing contract.
After meeting and conferring with the appropriate bargaining representative and, if in the emergency manager’s sole discretion, a prompt and satisfactory resolution were unlikely to be obtained, the emergency manager could reject, modify, or terminate one or more terms and conditions of an existing collective bargaining agreement.
There’s a pretty serious problem with this power grab, however — invoking it would violate the Constitution. The Constitution forbids state laws “impairing the Obligation of Contracts.” This provision provides a robust limit on a state’s ability to dissolve contracts between the government and a private party. As the Supreme Court explained in United States Trust Co. v. New Jersey, state laws impairing such contracts must be “reasonable and necessary to serve an important public purpose.”
The bill does contain some language requiring the emergency manager and the state treasurer to determine that they are not violating this constitutional limit before a collective bargaining agreement can be blown up, but Snyder’s own budget gives the lie to any claim that an assault on working Americans is “necessary” to ensure that Michigan governments can pay their bills. Snyder proposed a massive $1.73 billion business tax cut even as he was arguing that his anti-union power grab was necessary to restore the state’s fiscal balance.
The consequences of Snyder’s actions could be stark. If a state is free to break contracts whenever they feel like it, than no one will agree to do business with the state. Investors will refuse to buy the state’s bonds, and state contractors will demand all payments upfront out of fear that the state will accept their work and then tear up the contract requiring the workers to be paid. Creditors will charge the state enormous interest rates to secure against the risk that the state will just waive its hand and make its obligation to repay go away.
In other words, Snyder is so determined to chip away at collective bargaining, he’s demanded a power that he cannot constitutionally use and that would drive his state into an even deeper financial hole if he ever tried.
Did I hear correctly that Wisconsin passed legislation aimed at eliminating the bargaining rights of workers? If true, it’s clear the ultra-right is determined to turn America into a governing autocratic anachy with the common folk being common servants at slave wages to serve the viscious avarice of the Kochs and like company. If this isn’t symptomatic of the war being declared on working class Americans, then I don’t know what is. It’s the Republican game plan of shifting the blame, shame, and pain onto the middle-class for systemic economic breakdowns caused by the upper class. I’m very sad for my country!
That the money-influenced bought Gov. Scott Walker and his promotion of ending the basic rights of unions to represent workers as a way to reduce a state deficit he helped create is disgusting beyond words. The situation we have now of other crony Republican Governors humping this solution to structural deficit problems – whose primary origin lies in other directions – reminds me of the film, “Saving Private Ryan” in WWII. George Marshall initiated the assignment of an Army Ranger team to rescue Private Ryan since his three brothers had already been killed in battle actions. The code name given this very dangerous mission by the rescue team was “FUBAR.”
FUBAR meant, “F****d Up Beyond All Recognition.” This is exactly how I would describe the state of our governmental affairs today in handling deficits and a steady trend – that has been accelerating the last three decades (see my study of historical job growth) – of destroying and minimum-wage Wall-Marting of middle class jobs.
Wisconsin is setting a destabilizing societal divisive precedent of entrenching the upper 10% class that owns +85% of all wealth while placing all other blue-collar Americans in a fight to simply economically survive, and this struggle is only made worse without fair, effective union representation. Is this what thousands of Private Ryan common folk soldiers nobly fought and died for in WWII? An expanding Have and Have Not Divide making us all ultimately the LOSERS ?
People, including the President, will get just what they deserve if they cannot muster the courage to stand up to the monied-interests’ rape of our democracy by, among other ways, eliminating the average working man´s collective bargaining rights for obtaining a decent standard of living and job growth prospects. Until people unite and say, “Enough is Enough,” cannibalizing middle-class social nets such as Social Security and Medicare/Medicaid will be next on the ultra-right’s hit list. Gov. Scott Walker´s trampling on worker-bargaining rights in concert with job and benefit cut threats is just more nails in the coffin on America’s already sad state of social-cultural cohesion and equity for ALL citizens.
Yes, the right word for our current chaotic, brain-dead approach to “Saving Our Nation’’ and solving in a banking, fiscally and economically balanced, creative fashion (like North Dakota) the nation’s short and long-term structural deficits can also best be described as “FUBAR: F****d Up Beyond All Recognition.”
Benjamin Disraeli (British Prime Minister and Novelist, 1804-1881) long ago principally captured admirably our race to institutionlizing an increasingly morally corrupt, massively class divided society based on money and survival of the fittest:
"Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by a different food, are ordered by different manners, and are not governed by the same laws." "You speak of -- " said Egremont, hesitatingly, "THE RICH AND THE POOR."
On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
