Sunday, May 17, 2015

Selective Rage

I saw this on my FaceBook feed a few days ago. I saw it as ill-informed, but not particularly aggressive. But I got to thinking about it and realize how it exemplifies the selectiveness of right-wing contempt and where it is directed. I think what did it for me was a comment from someone who declared: "This is one of those issues that puts a burr under my saddle." A common expression, but in this case quite revealing.

In the first place, it is curious that the poster's creator says Social Security is running out of money, as if that is a factual observation. It isn't, it is a Republican conceit, but I suppose the joke doesn't work unless you have been conditioned to ignore evidence.

I wonder if he, Mr. bur-in-my-saddle, is equally bothered by unending corporate subsidies? Or the bank bailouts, where there was clear evidence of criminality. Or the phenomenal waste at the Defense Department which, wouldn't you know it, gets little press.

Sadly, there are quite a few who get worked up if a single mother on food stamps buys anything other than gruel. but excuse or even cheer on the likes of Cliven Bundy, who is both a thief and a scofflaw. Actually, it is not sad; it is disgusting. That law and order stuff is for the poor and vulnerable. As Scythian philosopher Anacharsis famously observed: "Laws are like cobwebs; strong enough to ensnare the weak, but not the strong."

When pressed, some on the Right will admit Bundy is wrong, or they will insist they don't like to see waste anywhere. But that is usually not their visceral, instinctive reaction. And they usually have to be called out on their inconsistency. It is not something that comes to mind easily. If you don't think your rage is selective, name one US Army General you demanded to be held accountable for the $8.5 trillion dollars the Defense Department cannot account for.

When we do look at welfare so many fail to see the broader picture; welfare payments go disproportionately to working class neighborhoods. The money helps to buy essentials --and little else-- for children and the elderly. It is almost never a matter of cash out of your pocket and into the pocket of a some deadbeat, though you have been encouraged to believe this. The Republican Party has, in recent decades, made an art form out of putting carefully selected burrs under your saddle. Much involves stoking white working class resentment. This has both divided voters that once were Democratic constituencies, and has deflected criticism away from the overclass.

And that, of course, was always the intent. Republican politicians and operatives know their voter base. They realize those on the Right are tribal, fearful, and insular. They also know conservatives are bothered by someone else getting benefits, not just anyone, but those perceived as undeserving, as they define it. Those who express anger, irritation, or contempt for welfare recipients and for the poor in general are revealing their own authoritarian personality.

It is that authoritarian personality, coupled with an often breath-taking level of misinformation, that compels so many on the right, tea baggers and plutocrats alike (I'm looking at you, Donald Trump), to so frequently mischaracterize that which they despise, but refuse to understand. The result is an intellectual whipsaw of contempt for food stamp recipients but not massive Pentagon waste; for social security, but not Wall Street's pension plunder. They rally behind Wisconsin governor Scott Walker's effort to undermine teachers, but shrug when defense contractors routinely gouge the government and then pay themselves obscene salaries.

That's a lot of burrs that somehow go unnoticed.

Wednesday, May 6, 2015

Where the Money Goes

As some readers know, I have lamented the dominance of Wall before. I and certainly many others, have expressed disgust over the way Wall Street sucks money out of the economy. This is not mere rhetoric spewed from that swirling cacophony called the Internet. Let me provide a very specific example of what I mean when the Wall Street feeding frenzy is damaging America: the current practice of stock buybacks. It is a simple enough to understand, and why corporations might want to do it when warranted. What is not as obvious is the broader ramifications.

As you should know, publicly-traded companies become public by issuing stock, shares of which are available to anyone who cares to buy them. Said companies often issue additional shares from time to time as a way to raise capital, which is not debt, and in lieu of borrowing, which is. Over time, a company, call it Acme Widget, may have raised a great deal of capital by issuing a flood of stock. Companies like Acme may or may not have grown as a result.

However, Wall Street doesn't just want to see Acme make profits; what it really wants is for the stock price to rise and it cares little about how it is done. Rising stock prices are harder to come by if Acme has gazillions of shares floating around. On a per-share basis, earnings look better if Acme has, say, 300 million shares instead of three billion. Obviously they are not better, they only look better.

What to do? Acme could use its profits on R&D, or on new equipment, two mainstays of stable growth. Or Acme could buy back shares of its stock. This has some ramifications. Apologists will tell you Acme is investing in its future, and buybacks should be seen as a mark of confidence. That is risible nonsense. What does Acme get by blowing its earnings on its own stock? Companies like Acme are now spending big money, billions of dollars in some cases, buying (back) something that is not a productive asset. Cash spent on buybacks is cash not spent on increased wages, new technologies, or something corporate America could really use; higher quality products and processes. But buybacks enrich the investor class, which insists that maximizing shareholder value should be a corporation's overriding objective. If they get rich, then, well, that's it.

There is, finally, a growing recognition that American capitalism, with its obsession of stock buybacks, is toxic to this country's long-term health. At MarketWatch, not exactly the New Left Review, Rex Nutting writes:
Many factors have been blamed for the plummeting fortunes of the American middle class: globalization, technology, deregulation, easy credit, the winner-take-all economy, and even the inevitable tide of history. 
But one under-appreciated factor is a pervasive business model that encourages top managers of American corporations to loot their company for short-term gains, depriving those companies of the funds they need to build and enlarge, and invest in their workers for the long haul. 
How do they loot their company? By using large stock buybacks to manage the short-term objectives that trigger higher compensation for themselves. By using those stock buybacks to manipulate the share price, which allows them to use inside information to time their own stock sales. By using buybacks to funnel most of the company’s profits back to shareholders (including themselves).
Upper management at publicly traded companies is highly incentivized to enrich the already rich, most of whom are passive investors and have nothing to do with those companies except that they own shares. CEOs have garnered enormous wealth in recent decades because they also own many shares. Their role helps explain the corporate America's felt need to aggressively engage in stock buybacks. CEOs generally don't get multi-million dollar paychecks; that's for professional athletes. They get big paychecks, to be sure, but the really big money comes from stock options, though with a catch. Generally the stock has to appreciate in value up to a pre-determined amount, and within a certain time frame. Therein lies the short-term thinking in so many American companies that focus on their stock instead of on their products, customers, and employees.

This unproductive but highly addictive practice plays out as such: CEOs know that if they can get or keep the stock price at a certain level, their previously awarded stock options can be exercised. He, or occasionally she, sell those shares on the open market. The result is a windfall of cash, sometimes many millions of dollars. And this is an ongoing process: stock options awarded, work the stock, cash in, fresh stock options, repeat and enrich yourself.

Most shares the CEOs care to sell end up in the open market, where they tend to weigh down the price of the stock. That won't make investors happy, nor the CEO, who hopes for more stock options in the future. That's where the stock buybacks come in. CEOs and compliant corporate boards are only too happy to accommodate them, for they, CEOs, others in upper management, boards and investors alike stand to benefit.

The situation is complicated only somewhat by dividends. CEOs and investors alike are more inclined to keep their shares if the company pays a dividend. Fine, you say, except that dividends can get very expensive. Again, this is cash that could have been plowed into productive assets. But once dividends are paid, they are gone forever and they go mostly to the hedge funds, investment banks, and the rest of Wall Street, as well as the CEOs.

It is essential that voters understand the damage being done. Corporate America extracts profits from the working- and middle-class. That is as it always has been. And that is not the problem since customers, that's us, get something in return. The difference now is that those profits are not finding their way back, in the form of increased wages, to middle America. To reiterate, corporate America is on a buyback frenzy to please investors, and it is using money that in the past went to increased wages and capital improvements.  Instead, the use of stock options and buybacks ensures that an ever-increasing portion of capital sifts upward to the very top, where it remains in control of the .01%. Even the rich are beginning to recognize the recklessness.

It is the antithesis of the intellectual asininity called "trickle-down." Indeed, it is an ongoing debate whether neoliberalism's warriors were ever ideologically naive enough to buy into the trickle-down argument, or they simply figured we were.