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.

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.

 

Wall Street Should Reconsider Its Allies

By now it should be clear that Wall Street money was behind the rise of the Tea Party, a loose ragtag collection that felt empowered enough to attend rallies and hold misspelled signs as they vented and raged. Call them Wall Street's shock troops. It was a deft move; convince the middle class, at least enough of it- the white, disaffected, conservative, Republican-voting, mostly Southern portion, to howl against President Obama and how his radical Marxism was going to destroy the economy. But by all means ignore what Wall Street banks had been doing to the economy and how relentlessly wealth trickled upwards--out of the middle class communities, including those in reliably Republican Red states, and into the hands of banks and the investor class. That the investor class has been able to shield huge amounts of money from taxation, often sending it abroad where it did no good for the middle class communities that once held it, and how this is the primary driver of government debt; its all several dots that teabaggers refuse to connect.

Wall Street appears to be reassessing its strategy. It was never the investor class's intention that a right-wing, pseudo-populist Tea Party would actually win more than a token few seats in Congress. The intention was to deflect government from doing anything to rein in Wall Street's gravy train and to make sure rank and file Republican voters didn't start caring that Wall Street is corrupt and reckless. A couple more dots not connected.

Instead, we are now witnessing, once again, what happens when right-wing extremists, the perpetually-aggrieved sons of the South, actively undermine that which they cannot control. The South with its deeply undemocratic instincts on full display, has proven to us once again that this country has never truly been a united states.

Wall Street may have seriously misjudged Southern animosity towards government, the one that feeds and protects the investor class, but it also misjudged Barack Obama. The instinctive reaction to Democratic presidents, one that is seriously at odds with reality, and one that even the moneyed class makes, is that they are bad for business: They raise taxes and impose regulations. And everyone knows that doing that slows growth and kills jobs. "You can't tax your way to prosperity." "Government just gets in the way." The bromides are endless.

Sorting out whether such boiler-plate corporate talking points are actually true will have to wait for another post (Actually, the data is compelling: Wall Street is a blight on the US and Democrats have a better record on growth, job creation, and the budget). The point here is that corporate America, and especially Wall Street, have much for which to be thankful. In a more just and equitable world, one that believes that equal application of the law is not a mere slogan, many bankers and traders would be doing hard time and not printing their own "get-out-of-for-free" cards.

But prison terms and inadequate legal representation are for the poor and working class. White shoe lawyers, fines, and no admission of guilt are the quite acceptable cost of doing business for the wealthy. This is an arrangement that Obama need not have tolerated, but he did. And the re-imposition of regulations proven to be highly effective in the past, the ones that brought us decades of banking stability? Obama didn't go there either, to the utter dismay of many banking experts.

I don't expect teabaggers to figure it out, but Wall Street should know that energy production in the US has increased dramatically since Obama took office. Remember how Republicans told America that Obama would cave to environmentalists and implement job-killing energy legislation, all because of that hoax called global warming? How we would have $10/gal gasoline, and how it was all part of his socialist plan? The reality is this: "US oil output hit its highest level in 20 years in July in a power shift with big geopolitical consequences." And this: "U.S. To Become World's Largest Oil Producer, Overtaking Russia."

Wall Street knows this and benefits from it. Instead, it feared that Obama would raise their taxes to a level that still would have been lower than that under Reagan, implement sensible regulations that had been in place under Reagan, and, I don't know, uphold the law.

So right wing operatives, financed by Wall Street and others, told a gullible and poorly-informed America that Barack Obama was radically anti-business and therefore anti-American. Two easy marks: Teabaggers, who are predictable prey to fear, uncertainty, and doubt. And President Obama himself, who should have done more to put an end to Wall Street's plunder. If Wall Street were more honest, and if teabaggers were more educated, they would realize Barack Obama has governed like a moderate Republican. 

Dude, Where's My Pension?

One of the most egregiously inaccurate memes in America today is that there is a large class of takers/losers/slackers/Democrats who rake in money, benefits, and services they did not earn so they can continue an indolent lifestyle. They take it, as the story goes, from hard-working Americans, the ones who have jobs, pay their taxes, are pro-family, and vote Republican. I can hear it now: "This country would be fine if it weren't for certain of us getting what they don't deserve."

But as has been so common as of late, redstate angst has been fueled and then redirected by those who jerk their nose ring. One wonders how unequal wealth has to get in this country before all of us, not just some of us, realize how jaw-droppingly wrong the "creators vs takers" mythology really is.

Wall Street continues to play the central role in the trickle-up of assets from the middle class to the one percent. One way not well publicized, no surprise, is how these financiers raid public pension funds.

First a prelude. You have undoubtedly heard how burdensome state and local pension funds have become and how the gap between funded and unfunded obligations continues to grow. It is this growing gap that has conservatives howling about how public employees, goaded on by their reckless unions, are destroying state finances. Underneath it all is the conviction that the teachers and other workers have padded themselves enormous nest eggs they not only don't deserve, but have to be paid by the rest of us. Teachers living high on the hog? Who knew?
  
That brings us to Matt Taibbi, a journalist among the best at getting at the facts and telling a great story, especially the kind oligarchs would prefer you didn't hear. In a recent Rolling Stone article, Taibbi relates how pension funds are being looted by Wall Street. There is a lot in it, including some background on Rhode Island Treasurer Gina Raimondo and her Wall Street-financed role in gutting her state's public pensions and how Rhode Island became a model now being inflicted on the rest of us.

I urge you to read it all, but I'll highlight several points here. Whiz-kid Raimondo helped push through state legislation a cynic would call "pension reform", but financiers call gravy. The new legislation has enabled Raimondo to turn over millions of dollars of pension assets to hedge funds, who have the unmatched ability to generate huge fees, regardless of performance. Worse, the hedgies are run by ideologues who sit on the board of the Manhattan Institute, a conservative think tank that promotes privatizing public pensions. Nice way to get paid.

One implication, as Taibbi notes, is that Rhode Island's public workers are losing control of their assets, where they are invested, and how hefty the fees might be.

The state's workers, in other words, were being forced to subsidize their own political disenfranchisement, coughing up at least $200 million to members of a group that had supported anti-labor laws. Later, when Edward Siedle, a former SEC lawyer, asked Raimondo in a column for Forbes.com how much the state was paying in fees to these hedge funds, she first claimed she didn't know. Raimondo later told the Providence Journal she was contractually obliged to defer to hedge funds on the release of "proprietary" information, which immediately prompted a letter in protest from a series of freaked-out interest groups. Under pressure, the state later released some fee information, but the information was originally kept hidden, even from the workers themselves. "When I asked, I was basically hammered," says Marcia Reback, a former sixth-grade schoolteacher and retired Providence Teachers Union president who serves as the lone union rep on Rhode Island's nine-member State Investment Commission. "I couldn't get any information about the actual costs."

 Taibbi goes on to say:

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn't just about money. Crucially, in ways invisible to most Americans, it's also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops - not bankers - as the budget-devouring bogeymen responsible for the mounting fiscal problems of America's states and cities.

Taibbi tells us that the looting began as early as 1974, with the passage of ERISA, the Employee Retirement Income Security Act. Not a bad law, as it was intended to protect retirement accounts in sundry ways. Unfortunately, congress saw to that a huge loophole exempted public pensions. And that is when the fun began. The loophole in ERISA is what has allowed politicians of all stripes to raid --they would say "borrow"-- public pensions to redirect funds to more immediate needs, some worthy, some less so. But this is the reason there are unfunded pension liabilities; it's easier to borrow than it is to pay back.

It is not unlike social security, which has grown an enormous surplus-- the opposite of what conservatives tell you--only to see it "borrowed." Paying back the unfunded pension plans, just as putting the money back into the Social Security Trust Fund, is indeed painful, but it is not because the funding requirements have been onerous. Wall Street and mostly Republican politicians want you to think they are, so you will acquiesce to the ongoing destruction of middle class pensions.  

This shit gets so depressing. What galls me is not just that Wall Street and the politicians it has bought continue to reshape the country to suit moneyed interests, it's that so many of us don't see it, or believe crap that tries to pin it all on unions, spending, deficits, or those "job-killing" regulations. People at the top, where the money and power are, have convinced people in the middle, where the votes are, that undeserving people at the bottom, where the misery is, are the problem.

Cheaper Still

Low wages are the prime reason the US economy continues to be sluggish for most of us. Suppressed income, of course, is not to be found on Wall Street, Corporate America, and the rentier class, but it has come to define much of the middle class even as the number of working poor continues to rise.

The US economy depends on consumer spending as the core of economic activity: if there is enough spending, it spurs GDP growth, if not, growth stagnates or even declines. We are, for better or worse, a consumption-driven economy. All economies are, to one extent or another, but the US is especially dependent on it.

For most of the post-war period, Japan, to give one comparison, has depended far less on consumer spending to fuel its own GDP growth. The difference was that Japan emphasized capital investment over consumption. Citizens there consumed less and saved more. All that capital investment created massive over production. That's where exports, disproportionately to America, came in. We consume, Japan saves and exports excess capacity. China and Korea have adopted this model.

Accordingly, some economists argue against policies that encourage savings. A dollar saved means a dollar not spent. While the argument is still made that Americans should save more, the counter argument says that doing so will only slow down the economy: Corporate America, small companies, and the employees that work for them all want everyone to buy their products and services. No customers means no sales, so no profits. It also means no employee paychecks and no tax revenues either.

All of which brings us to low wages; not jobs, not investment, not savings, not manufacturing capacity, but the wages Corporate America pays to the millions of jobs that already exist--it is those low wages are the at the heart of our national decay. Low wages are killing the American dream for many. Wages not only have not kept up with productivity for literally decades, but for many of us, wage declines are accelerating.

As compelling as it is, the specifics of America's evolution into a low-wage nation, complete with an overclass and mandated inequality, seem of little concern to many of us, even as we sense we have been victimized by a rigged system. It has taken years, decades actually, but the cumulative effects of neo-liberal, trickle-down policies, and their southern variation, what I call Dixification, have come home to roost.

Presidential Limits

It is difficult to overstate the steaming shit pile that was handed to Barack Obama on his first day of office. Those who choose to ridicule the President for pointing this out have forgotten the "yeah, that's right," chorus line that Republicans sang so heartily when Reagan took office and how he would fix all the terrible things Carter had done. They, and Reagan, knew what they were doing; every positive snippet of news was to accrue to Ronnie; any bad news was obviously the legacy of his Democratic predecessor.

Don't let your brain take the lazy way out on this. Don't say both parties do it and leave it at that. Both parties throw blame at their opponents, to be sure. but it is an insipid and unhelpful observation. Let's not forget that the federal budget deficit, the national debt, and the trade imbalance were all relatively modest when Reagan took office. Our infrastructure at that time was viewed around the world as excellent, and manufacturing played a proportionately far larger role. We had the world's largest current account surplus when Carter left office. When Reagan left, we had the world's largest deficit.

The point here is not to claim that Carter did such a wonderful job. But we must remind ourselves how much this country, and this economy, have changed in recent decades. When President Obama took the oath of office in a ceremony that Chief Justice Roberts screwed up, he faced the worst financial crisis since the Great Depression. He also inherited two long and costly wars that served little purpose except to get men killed and enrich defense contractors, as war always does.

But even if you support(ed) the war(s), and choose to not blame Bush (or Cheney), the point remains that the US fought those wars without paying for them. That much is indisputable. Instead, the horrendous costs, separate and addition to the Defense Department's already mammoth budget, were added to our federal debt. That was George Bush's decision, not Obama's.

And need I remind anyone that those wars came after Bush passed his huge tax cuts for the wealthy, thereby giving back the budget surplus carefully built up during the Clinton era when tax rates and economic growth were both higher.

The real point here is the severe constraints Barack Obama faced when he took office, many of which John McCain would have also faced had he won. Taxes, primarily for the rich, had been reduced so much early in Bush's tenure that it has become arithmetically impossible to meet our relatively modest social spending needs, our huge military appetite, our substantial and neglected national infrastructure, and also balance the budget. And this is on top of a massive trade deficit, a declining manufacturing base, and most jarringly, the fallout from Wall Street's casino capitalism.

I have posted before on the overwhelming challenges Obama faced on inauguration day, challenges that would be huge even if Congress decided to, you know, work together and solve some problems. Unfortunately, President Obama has had to face an additional challenge that a President McCain would surely not have--unprecedented obstructionism. Along the way, Americans have come to learn, to their disgust or delight, the surprising flaws of our federal government and how determined ideologues can lay bare the constitutional limitations of the executive branch.

Republicans control only the House; Democrats control the Senate, despite all appearances, and, of course, the White House. And yet Dems in the House are helpless to stop the unending stream of bills that Tea Party reactionaries promote.  Well, you might say, Republicans control the House, so it figures they would dominate legislation. In the Senate, however, Democrats are in a clear majority, but it usually makes little difference because of the Senate's self-imposed 60 vote supermajority "requirement."

Thus, even flaccid and feeble legislation, mere tweaking, has little chance of being enacted. Anything that does pass is so watered down as to be useless. And that is not because most members of Congress, or even all Republicans always want to oppose the President; it is sufficient that only a determined minority, the Tea Partiers of the House and Senate, choose to obstruct, as they so often have. Let me put it this way: the seemingly intractable John Boehner would not be making those asinine, vapid, and breathtakingly stupid comments on economic policy if teabaggers in his party did not have such a tight grip on his nuts.

Historians are at pains to find a period when the flaws of the federal government were so transparent. Parliamentary governments around the world are taken back by the inability of America's two-party presidential system of government to tackle the most basic tasks, such as properly regulated banks, appropriate tax revenues, a modern infrastructure, and demographic well-being, such as on health care, child mortality, and housing. All of these are becoming a national embarrassment, instead of world-leading, as they once were.

We are now seeing with increasing frequency that even legislation large majorities of Americans want, such as background checks on gun purchases, cannot get passed. There are just enough Republican reactionaries in the House, sometimes helped out by pandering Democrats in the Senate (I'm looking at you, Max Baucus), to derail even the most popular legislation. This can happen, mind you, even when a majority of both houses of Congress and the president favor such legislation. This is not majority rule, it is not even checks and balances as the founding fathers envisioned. It is the tyranny of an ideologically-driven minority.

This is new territory for America.

Tax the Traders

Here is an idea that is slowly gaining ground, though I don't suspect our corporate-owned media wants to spend much time on it. As if Wall Street didn't hate him enough already, Eliot Spitzer recently made the case that Wall Street traders should be taxed.

As Spitzer says:

This one is not so new; it has been around for a long time, supported by a wide range of economists, including Nobel laureate James Tobin, as well as advocates, including Ralph Nader in the Washington Post this weekend, and elected officials: a tax on financial transactions. It will give us gobs of revenue. It will fall on a sector that has generated enormous and unwarranted profits for a very few, who at the same time have benefited from huge bailouts and regulatory help and largely escaped any responsibility for their central role in creating the financial cataclysm that we are still struggling with. 

Here is the idea: A tax of less than half a percent on every $100 of stock sales or sales of other financial instruments including bonds, derivatives, and options. The tax could raise anywhere from $170 billion to $350 billion per year depending how it was applied. Extend that over 10 years, and we are raising almost what the White House and Republicans agree needs to be raised in order to accomplish the objectives of a grand bargain.

The exact amount is open for debate; Spitzer says 1/2 of a percent per $100 of trade value. Others have said a flat 1% or $.10 per trade. The amount raised would be highly significant in each case. The key would be to set the tax at a low enough rate that small investors would hardly notice, but make it high enough so that high-frequency program traders on Wall Street would think twice about the speculative casino they have created. In other words, impose a tax that compels Wall Street to contribute more and take less, and at the same time encourage actual investing, and with longer-term outlooks.

Elliot Spitzer is spot-on when he concludes:

The application of this concept to the financial sector could solve our need for revenue, bring some sanity back into the financial sector, and give us a way to raise the revenue we need to run the government in a fiscally responsible way. Maybe this is the old idea that we need folks in D.C. to pay attention to again.

Right, but don't hold your breath. The investor class and the politicians they control are not into doing the right thing, they are into money and power. For them, the current system works well.

The Road to Plutocracy

The United States once generally adhered to economic policies that were pretty common sense on their face: We believed in economic democracy, not oligarchy, we believed that severe maldistribution of wealth was not just fundamentally unfair, but unsustainable and dangerous. For generations we properly regulated banks and we had few banking issues as a result.

When the US fought wars, we paid for them in part with steeply progressive--and temporary--tax rates. It was obvious to us and to our trading partners that manufacturing and a modern infrastructure were the bases of economic strength; banks should only play a supportive role. Moreover the US generously supported public universities, which returned the favor by providing us with scientific and technological preeminence. Economic doctrine and history both informed mainstream policies.

We once understood that a strong middle class was essential to overall prosperity as well as the foundation of democracy and free elections. As part of the social contract, industry generally worked with labor, offering wages that were in line with ever-rising productivity. There was little vilification of labor unions at a time when membership was far higher. Corporate dividends and government interest were paid overwhelmingly to Americans and not to neo-mercantilists in Asia and shadowy investors in the Cayman Islands. While the wealthy have always benefited the most, dividends and interest payments in the past were mostly pumped back into local communities. In other words, debt and equities were held almost entirely by Americans. Recipients spent this unearned income within the US, largely in their own communities. That which they saved went into a local banks and credit unions, not Wall Street. This whole process helped grow the economy and stabilize neighborhoods.

We would have been aghast at the idea that massive, intractable trade deficits would arrive and be accepted with surprisingly alacrity. That banks would be allowed to once again trade in securities, take wild, highly-leveraged bets with other people's money, dominate the political process, and virtually insulate themselves from legal accountability. Because of compliant politicians who now have all the money they need to stay in office, the big banks and other stars of Wall Street have been able to maximize gains to themselves, and spread losses onto others, primarily tax payers. This includes companies that have been propped up by taxpayers. It's a sweet deal for the investor class; get the middle class to foot the bill, while dividends and capital gains go overwhelmingly to the investor class. It is, at its simplest, a rigged financial system that has privatized the gains and socialized the costs.

It is all coming undone, though not by the middle class, not by local banks, not by unions, and certainly not by gays, secularists, feminists, immigrants, or Democrats trying to rein in a bloated defense budget. But we have been assured repeatedly that minimal regulations are good because unfettered financial markets will make the best decisions, that they allocate capital most efficiently. Neo-liberalism fetishizes minimal regulations, free and unmonitored movement of capital, low taxes, and free trade.That same neo-liberalism has been a cheerleader for policies that have hollowed out our industrial base, turned the economy over to a rapacious financial system, have put us into deep debt to Japan, China, and elsewhere. In the process, dividends and interest payments that used to stimulate the American economy now stimulate theirs.

Now we are told to spend freely, with few admonishments to save more. Our economic system is now deeply dependent on middle class consumers willing to endlessly consume, a process that is far less beneficial than in decades past because so much of what we buy is imported. Part of the massive earnings enjoyed by our trading partners is now used to finance US debt. The Reagan administration set us on this course of indebtedness because it knew foreign governments had piles of US dollars, and because conservatives in our own government refused to allow a level of taxation that would pay the bills. The 1% are now able to avoid taxation on income that would have been taxed in the past; taxes that would have helped to pay for the Iraq war, which has gone unpaid, and such things as maintaining a modern infrastructure.

Most of the middle class is in serious debt. Families will not and should not spend freely if their job security is in question. Many have experienced wage reductions as they move from one employer to another. An ever-growing proportion of American families realize they cannot simultaneously save enough for retirement, pay for basics, including health care, rising food and energy prices--especially in the face of no commensurate wage increases-- and also set aside for their children's needs, including college tuition. This is not a sudden condition; it has been building for decades.

The right wing and other intellectual thugs want you to believe that it started with President Obama. They hope you don't notice the policies they are espousing are the same ones that have been largely in place for most of the last 30 plus years.

It is, in any event, a laughably ignorant concept to argue that Obama is even in a position to have anything more than a modest effect, for good or bad. The conditions that most people and the government are now in are far larger and intractable for any president to handle. It has taken America 30+ years to get here, it cannot be turned around in four years, not when Bush handed Obama a shit storm and two unpaid wars, not when Republicans oppose him on every substantive point, and not when those same Republicans are able to exploit what we now see are serious shortcomings in the structure of our system of government.

It has taken the US decades to drift into the present condition. During this time the wealthy have garnered ever more of the wealth, paid ever decreasing taxes for it, run corporations that have earned more, paid lower wages, have been taxed less, and have more freedom to move capital around the world, and fewer obligations to middle class families. This is as the wealthy have always wanted it, and it is what today's Republican Party wants. Their biggest concern is that President Obama would do something to stop this inexorable trend towards plutocracy.

Feckless

We heard a lot of criticism directed at President Obama when gasoline prices started to climb earlier this year. Republicans, knowing how easily many voters can be manipulated, thought they had a campaign issue: just remind everyone that gas prices are going up, ignore the complex set of factors that explain the rise, especially Wall Street speculators, and just blame the President.

They lined up at the mic to do just that:
      In February, Senate Minority Leader Mitch McConnell made the laughably inane claim that “This President will go to any length to drive up gas prices and pave the way for his ideological agenda.”
      In March,  Mitt Romney declared, “He gets full credit or blame for what’s happened in this economy, and what’s happened to gasoline prices under his watch..."
     In April, House Speaker John Boehner said, “The president holds the key to addressing the pain Ohioans are feeling at the gas pump and moving our nation away from its reliance on foreign energy. My question for the president is: what are you waiting for?”

As it turned out, Boehner didn't have long to wait. Now that gas prices are falling, he and other Republicans have grown silent. Romney said Obama deserved credit, as well as blame, for what has happened. That is simplistic nonsense, of course; the fact that Congressional Republicans have spent three years obstructing the President apparently is not a factor for Romney. Let's be clear on that point: you may agree with Republican tactics and say the Dems must be stopped, etc., but you cannot later ignore the Republicans' role in the Washington logjam and pretend it wasn't a factor.

In any event, Romney is a little slow about giving Obama "full credit" on gas prices. Now one might say that Obama doesn't deserve much credit or blame: The White House inherently has few short-term options on oil prices and cannot be expected to simply step in and ratchet down gas prices. American presidents do not have that kind of power.

But that doesn't mean Obama didn't have some options, or that he didn't use them.

What's that? You didn't hear all about it? And some people still think our corporate-owned media has a liberal bias. To make a bad situation worse, the White House has done a poor job of sharing Obama's message and accomplishments. It's as if he believes the media is an honest broker and is motivated to get the full story out. Peter Cohen, writing for Forbes, captures this frustrating imbalance:

When he was running for President in 2008, Barack Obama struck me as a gifted orator. But now that he’s running for re-election, it feels to me that the messaging power of his political opponents is like Hurricane Katrina blowing against a chipmunk’s squeal. So I am confident that a piece of excellent news for drivers resulting from a little-noticed policy from Mr. Obama will get no attention at all from the media.

In April, I predicted that President Obama’s $52 million plan to increase the margin requirements and otherwise tighten the screws on oil speculators — who borrow huge sums to bet on the direction of oil without taking delivery — would cut oil prices by 10 percent. He’s beaten that prediction, and the lowered price of gasoline has added $78.4 billion to its consumers’ spending power.

Cohen has much more to say on the specific steps Obama has outlined to combat high prices, including:

  --Increase by a factor of six Commodity Futures Trading Commission (CFTC) surveillance and enforcement staff “to better deter oil market manipulation,

  --Boost 10-fold, to $10 million, the civil and criminal penalties against “firms that engage in market manipulation,

  --Give the CFTC authority to increase the trader margins — the amount of their own capital that traders must set aside for each bet...

These and other factors, including increased domestic oil production, have driven down oil and gasoline prices. Cohen puts it in human terms:

So just how much has Mr. Obama stimulated the economy through his April crackdown on oil speculators? Well, if my experience is any indication, the answer is quite a bit. After all, I was paying about $4.05 a gallon for mid-grade back then and this week the price had fallen to $3.49.

That 56 cents a gallon decline would amount to me saving about $582 a year — assuming that I fill up my 20 gallon tank once a week. But if the AP is right, that same 56 cent a gallon drop would add $78.4 billion to U.S. GDP.

That’s not much for a $15 trillion economy, but it represents a 1,508 percent return on Mr. Obama’s $52 million investment, in two months.

In the final analysis, I notice a double standard. Republicans attack Obama for not doing something about high gas prices. He, in fact, did something, including increased drilling and permit approval. Not a sound of approval from his critics, and not much coverage in the media. In the spring, Obama also outlines his plan to rein in speculators. By the first day of summer oil prices were off 21% from their April highs.

Republicans blame Obama for not doing something about gas prices even as they insist government should stay out of free markets. He does something, brings down prices, and they call it government meddling. Weren't you the guys blaming him for not doing anything?

Feckless assholes

The American Dream

This is a TED video worth watching. For those who think that talk of the increasingly hideous inequality in the America is just the politics of envy, class warfare, or some other ignorant talking point, you will notice some inescapable details; facts, empiricism, and methodology. You will also be at pains to explain why you think the USA is number one, as so many mindlessly believe.

Bear in mind while you watch this video that Mitt Romney's two favorite campaign promises are to provide even greater tax cuts to the rich, and to overturn Obamacare. And he has repeatedly made clear that he would not do anything to rein in the Wall Street banks. If you think those are good ideas, you are likely to learn something from this.

For more information on the speaker, Richard Wilkinson, and what his research so compelling demonstrates, visit The Equality Trust.
 “If Americans want to live the American dream, they should go to Denmark.”

Impressive

You've got to hand it to Republican Party operatives. After more than 30 years of constant effort, conservatives within the party, media, the judiciary, and in the corporate world, have managed to turn upside down much of what the public thought it knew about government, unions, taxes, and even teachers.

I make a distinction between Republicans and conservatives that some may see as unnecessary; are not Republicans and conservatives synonymous? Pretty much, at least in 2012, but it would be difficult to overstate just how far to the right the Republican Party has lurched; a process that began, to the dismay of millions of moderate and liberal Republicans, with the nomination of Barry Goldwater in 1964. The cleansing process picked up rapidly in the 1980s and 1990s, with numerous watershed moments, such as the arrival of Newt Gingrich and the politics of destruction. As testimony to Republicans' new approach to governing, many will recall that the Party was able to keep Whitewater in public view, with the help of a stupidly compliant press, for literally years on end, only to have the process finally wind down having demonstrated no presidential malfeasance.

From the judicial standpoint, it was a waste of time and taxpayers' money. But upholding the law had nothing to do with it. The objective was to vilify a Democratic President, obstruct his agenda and ability to govern, and convince the public that conservatives stood on principles. The never-ending rush to spin the story helped feed the narrative that liberals are not to be trusted. Even today people will refer to Whitewater as a scandal, forgetting that there was no wrongdoing, despite years of investigation. It was only a scandal because the Republican hierarchy kept claiming it was. And many will be surprised when reminded that the 12 years of Reagan and Bush saw a dramatically greater number of actual convictions, not accusations, than in the eight years of Clinton. If the reality goes against what you had heard and "just assumed," it is because Republicans worked hard to make it so, for they have shown a superior ability to get their ideas into the media and into people's heads. They dominate most narratives because they understand how to make their messages simple and emotional. What sounds implausible or even ridiculous at first becomes accepted as truth if repeated enough. All propagandists understand this. This why Republicans have said for decades they, against all evidence, are the party of personal responsibility, fiscal prudence, and limited government. Voters who don't study the facts have come to accept this narrative.

And now we see Republican spin taken to new heights, creating a parallel world of logic and reason. They have managed what should have been impossible in a sane world of evidence, facts, and reason; divert enough of the electorate's, and the media's, attention away from the Wall Street banks and turn the middle class against itself. Significant numbers of Americans now think that public workers earn too much, are lazy and irresponsible, and are a drain on our fragile economy.Too many show an infantile understanding of economics by buying into Republican rhetoric that teachers' salaries are too high, so we must rein in those destructive teachers' unions. "Never mind that stuff you hear about Wall Street. Those guys deserve every penny they got, and besides, look at all the jobs they create."

The truly reprehensible thing about Mitt Romney is that he personally promotes these ideas and never once has acknowledged that the Bush tax cuts, which he wants to deepen, have been a prime contributor to the federal deficit. Everything the man says indicates he will be for the one percent and will penalize the working class, and yet he is running as a viable candidate.

And as we just saw in Wisconsin, there are plenty of voters who are fine with Scott Walker's effort to strip away the hard-fought gains by teachers and other public workers. Many now instinctively believe that there is such a thing in America as "big labor," and that cutting back salaries and benefits of teachers, librarians, firefighters, cops, and others, will somehow drive the economy forward, that and more tax cuts for the wealthy. Republicans have apparently convinced more than a few that teachers are now fat cats. The Wall Street bankers that drove the economy into recession have almost entirely avoided legal scrutiny. Forgotten is their unforgivable act of paying mammoth executive compensation with the very tax dollars meant to stabilize the catastrophic mess they created. No accountability, no significant judicial proceedings, and the few penalties levied have been easily paid and treated as nothing more than the cost of doing business.

The banks got away with it while attention has been diverted to where Republicans want it. They, including Mitt Romney himself, have convinced many that pushing back against the oligarchy is class warfare, but endless bitching about teachers and other members of the middle class, with an eye to stripping their rights and reducing their pay, is productive policy. And they have roughly half of that middle class believing it.

That is quite an accomplishment.

Good For Business

I see where America's biggest corporations, the Fortune 500, have just reported record profits of $824 billion for 2011. This wasn't supposed to happen, not if you listened to the rhetoric from the chieftains of these firms, along with the paid shills of the Republican Party. After all, wasn't President Obama supposed to be a closet Marxist? And isn't he set on destroying free enterprise and turning us all into wards of the Democratic Party? Or was it a Muslim caliphate?

How did that argument go again? They said business needs tax cuts in order to hire more workers, and that America's seemingly high corporate tax rate was stifling business. They said that Wall Street had no confidence in Obama and that business would languish as a result. All those regulations and taxes had to be cut if we were ever to recover. If only Obama wasn't so extremist or anti-business. This is after Wall Street trashed the economy under Bush's indifferent watch, and before, during, and after the dramatic recovery of corporate profits and stock prices after Obama took office.

Couldn't have happened to a more deserving bunch, the same Wall Street crowd that was, and under Obama, continues to be, the wealthiest and most privileged people this side of the House of Windsor.

Republican talking points have become a fantastical bundle of contradictions, increasingly disconnected to empirical reality. Here is ThinkProgress with more on how well big business has done under Obama and more background on increased productivity (with no commensurate wage increases), increasing CEO pay, and the 40-year low in the tax rates corporations actually pay.

Lying: An Unregulated Industry

We keep hearing the same theme on the Republican campaign trail, the same tired bromide about how government weighs heavily on the private sector, the onerous regulations that sap our energy, and the ruinous taxes that undermine private initiative. And of course, all of this is what President Obama wants, because liberals, especially the foreign-born dark ones, want bureaucrats to take over the economy. That's why there are fewer civil servants now than when Obama assumed office. He wanted to destroy the big banks, which is why he rescued them. And his anti-corporate mentality explains not only that GM is turning profits and cutting paychecks, but that corporate profits are way up, as is the stock market. Private sector job creation has steadily climbed, despite Obama's confiscatory socialism. And he wants to drive up oil prices, which is why domestic oil production-and domestic drilling permits-- have increased every year since Bush left office, the same year Wall Street triggered the recession.

For some people, in other words, facts don't matter. Not even to presidential candidates. We have been subjected to a barrage of rhetoric that says essentially two things: 1) taxes are too high, and that is half the reason why the economy is sluggish, and 2) regulations are too numerous and burdensome, which is the other half. The solution? It's simple. In the Manichean mind of Republicanism, all policy prescriptions are simple; cut taxes and regulations. 

Never mind that we already have the lowest taxes in the OECD; no where else are the very wealthy able to protect so much of their money. And that nonsense about corporate taxes at a ruinous 35%? I addressed that here. Union death-grip on the economy? The United States has the lowest union membership in the entire OECD. And it has been steadily declining, exactly what conservatives have always wanted. And we have the cheapest gasoline in the OECD as well.

But that campaign theme, the one about unleashing the private sector by gutting taxes and government? None of the four Republicans left standing (OK, Paul and Gingrich are on their knees) ever misses a chance to tell voters that fewer corporate regulations means freedom for us all. We are left with a truism that Republicans have understood better than Democrats: you can get enough people, not all, but enough of them, to believe outrageous and nonsensical tripe if you just repeat it enough, preferably with confidence and conviction, if not outright rage.

Now for some reality. According to Ifo Institute for Economic Research at the University of Munich, in a study that compiled World Bank data, and entitled Business Regulation in International Comparison (available here), the United States is a mighty fine place to do business. The US is suffering, and fares poorly when broad demographic data are compared to similar OECD members, but when it comes to business getting what it wants, the US scored higher than any other large country. It was third overall (among a total of 30 OECD and non-OECD countries), bested marginally by smallish New Zealand and Singapore.

The US scored highest in category 5 -protecting investors- confirming the charge that government prioritizes the interests of the investor class. And we were fourth-best, right up there with the two authoritarian states, Hong Kong and Singapore, when it came to the relative ease of starting a business. The real kicker is that the US was also ranked fourth-best when it came to hiring and firing workers, where nations scored high if business was able to fire workers easily and avoid costly penalties and benefits.

Republicans like Romney and Santorum have been telling us that they will unleash the private sector from that horrid Obama, and they will do it by ever more tax cuts, ever fewer regulations.

They are full of shit. The reality is almost the complete opposite of their fact-free narrative. If suppressing working-class wages and unions, enabling and subsidizing the welfare queens on Wall Street, cutting taxes for the investor class, and letting management compensation run wild were the appropriate policy tools, Wall Street would not have crashed and we would not have had the recession in the first place.

If you know anything about economic history, you know that we have been on this path for decades. And all the Republican candidates can do is call for more of it.

Getting Simpletons to Blame Obama

This crap about trying to blame President Obama for rising gas prices needs to be seen for what it is: a cynical attempt by Republicans and their official partner, Fox News, to derail the President's reelection prospects. They, Republicans, do it in part to divert attention away from the inane clown car called the Republican presidential primaries. But they also do it it part because they know that many low-information voters will fall for it, like the guy below.

For those interested in the real reasons why gas prices fluctuate, and why they should be rising at this particular time, I invite you to read Why are Gas Prices Skyrocketing?  It is worth noting the evidence he provides showing that Asia and Europe are buying up oil because of the fear that, once again, the US will precipitate a war in the Middle East and jeopardize supplies from Iran.

But the real reason gas prices are rising is because Wall Street speculators are driving up prices. The Commodity Futures Trading Commission knew it was true in 2008, when gas prices shot up under Bush, and it knows it is true under Obama. CFTC Commissioner Bart Chilton explains in the video below how it works and who pays. It is part and parcel of conservative economic policies that ensure the transfer of capital from Main Street to Wall Street. 



The video below is from 2008, when Bush the Lesser was still President, and is why I say Fox News panders to low information voters; especially those with short memories. Speculators drove up prices near the end of Bush's tenure. Most at Fox don't want to shine the light on Wall Street traders, but at least Bill O'Reilly knew enough--in 2008--to recognize the role of speculators and that an American President doesn't wield power to dictate gas prices, or to curb speculation.

Except, apparently, when the President is a Democrat.


The mendacious inconsistency of the arguments thrown out in the unceasing effort to undermine the Obama administration would be downright hilarious were it not for the stakes involved.

Little Sally's Epiphany

On Dec. 22 I posted an article about the doctrine of maximizing shareholder value, what former GE CEO Jack Welch called "the dumbest idea in the world." I shared the views of Steve Denning at Forbes who discussed the contradictions, to use a Marxist term, of management's blind allegiance to improving the net worth of shareholders. Denning, in turn, featured a new book by Roger Martin.

Martin has another article on this called "Little Sally Learns About the Toxicity of Shareholder Value Maximization." In it, Martin makes the case that corporations committed to maximizing shareholder value have perverse expectations of employees. Why would management expect, Martin says, employees to be motivated by a corporate culture that cares most about making mostly rich people richer, people the employees do not even know?

Martin's recognition of the basic psychology of employee motivation should sound familiar to the longstanding view, often held by progressives, that American corporate culture is short-sighted and less committed to improving its products than their bottom line. Recall that General Motors' management of yesteryear boasted that GM was not in the business of making cars, but of making money. GM's subtle indifference to product quality and innovation weighed heavily on it for a generation and nearly destroyed it. Its future remains uncertain.

There are, in fact, two separate arguments at play here; One is the Denning-Roger idea that management is inappropriately concentrating on short-term profits and boosting share price, practices which are systematically distorting management decisions. The other is that focusing on the interests of the investor class, the one percent, creates a bias against workers, community, and ultimately the corporation itself. It is a model best suited to maximizing wealth for a few; it does that very well.

The result is that US corporate culture has the deeply held tendency to treat employees as a mere input, an irritating expense that must be reduced, the abstract L for Labor in the cold computations of economists. It is this second argument which explains why, in the US more than, say, Germany or Sweden, the middle class is squeezed, why jobs are scare, but the investor class is richer than ever. It is the triumph of corporate profits as the centerpiece of American political economy, economics as if people didn't matter.

These are two different lines of argument, from different sources, politics, and traditions, that have dovetailed into a single unavoidable conclusion. I can only hope that we finally see a few inchoate signs that free market economists, free traders, and other purveyors of casino capitalism are beginning to realize the intellectual poverty of their ideology and the aching unsustainability of the American corporate model they have created and upon which they feed.

I leave you with an illustrative dialogue Roger Martin shared about Little Sally.

Sally: Daddy, my teacher asks me to listen carefully in class and do my homework every night. What does your boss ask you to do?

Daddy: He wants me to help him maximize shareholder value?

Sally: Huh? What does that mean?

Daddy: It means increasing our stock price to the highest we can make it go.

Sally: Why?

Daddy: Because that will make the shareholders happy.

Sally: Well who are these shareholders anyway?

Daddy: They are people who buy shares in our company.

Sally: What are they like? Do you know them?

Daddy: Actually we don't really know who they are. Every three months, we get a list of them but they buy and sell so often, the list changes routinely. And even the list we get is for organizations like mutual fund companies and pension funds that invest money on behalf of shareholders and aren't the actual shareholders.

Sally: This is getting a bit confusing. Are they at least nice people; these mutual funds and pension funds?

Daddy: It would be hard to describe them as terribly nice. They are really demanding and if we don't increase the stock price for them, they get pretty upset and sell our stock.

Sally: That isn't very nice. When they do that, do they sell to nicer people?

Daddy: No, typically they sell to people about like them - pretty impatient.

Sally: This sounds pretty weird. If you do get the share price to rise and the shareholders are happy rather than upset, do they do nice things for the company?

Daddy: Not really, Sally. What happens is that they then insist on us getting the share price to rise some more still. Or sometimes they sell their shares because the price has risen enough for them.

Sally: Whew. I must have this wrong but let me check. You go to work every day trying to increase your company's share price for people that you don't know, who don't act nicely at all, and if they are unhappy just sell their shares to some other people who you don't know either and are also not very nice. And if you succeed, they don't do anything for you other than put more pressure on you or sell because they are happy. They seem to sell whether they are happy or upset. That can't be much fun. Why do you do it Daddy? Why don't you try to do something a bit more fun?

Daddy: Well Sally, I know that it sounds kind of weird, but that is our capitalist system. It is our duty to maximize shareholder value, even if it is pretty unfulfilling and unpleasant. And I try to do the best job I can to help our CEO do that. And Sally, if I do a really good job helping my CEO, when he retires, he might appoint me CEO.

Sally: I love you Daddy and because of that I kind of hope that he doesn't make you CEO!

Super Bowl Socialism

On this day, Super Bowl Sunday, we will once again witness the gawdy mixture of sports, excess, patriotism, and military pride. The US military and the National Football League are two institutions in America that are deeply socialist in their structure: They are successful for that reason.

Take the US military: Everyone from a fresh recruit to the Joint Chiefs of Staff is on the public payroll; housing, food, travel benefits, a retirement plan. And they all have a government-provided and regulated health care I suspect few are willing to abandon for the capriciousness of the profits-first private sector. Moreover, the military is chock-a -block with regulations, rules, requirements, and a thick code of behavior.

It is worth noting that the US military is a dominating force in the world because the US government wanted it to be, not because the markets made it happen. Military preeminence is this nation's industrial policy and power, complete with the world's most sophisticated weapons. Our defense industry is number one because our government put resources into it and fostered private sector support. 

At the same time, most observers will happily tell you the US military is full of courageous, dedicated, devoted, proud, and hypercompetitive men and women. All this and modest pay as well.

This is a combination that free market advocates say cannot exist. Any institution so encumbered will surely stifle innovation, resourcefulness, and personal responsibility.

We see a similar result with professional sports. The NFL, for example, exemplifies bounded competition: a highly circumscribed set of rules and regulations which define and control every aspect of the game. That set of rules and regs is exactly why the game works; they are designed to enhance competition because they do not allow a richer or better situated team to dominate the game. And they minimize cheating, which bothers Americans more in sports than it does in Wall Street and government. Players, union members all, compete fiercely within the confines of the rules, and abide by a thick rulebook that regulates every aspect of play.

Again this contradicts the free market doctrine that insists regulations are inherently burdensome and constrict creativity, competition, and glorious individualism. With no sense of irony, sports fans glibly cheer on their favorite franchises that make clear they win through team effort and pound out selfishness, arrogance, and self-centered individualists more concerned about their stats and their image. There is no I in team, as they say. And no, it is not because of high pay; the pattern fits all sports, including high school, college, and amateur players with no real prospects for riches.
    
I see that Bill Maher got my memo. In the video below Maher also notes the socialist structure of the NFL, what he calls the irritable bowl syndrome  He does stress different points, however. Watch it and note how the socialized structure of the NFL provides such different results than does major league baseball.

American Tax Dodgers

On January 12, I posted some comments about Les Leopold's recent article on tricks the corporate use to hoard wealth. I referred to economic productivity and how the gains are no longer being shared with the middle class.

He also highlighted how large corporations, despite the endless bleating about high corporate taxes, often pay little or no taxes. Specifically he noted how low state and local corporate taxes have become. As Leopold says:

Large corporations pay next to nothing in state and local taxes. As a result of the Wall Street-created crash, state and local governments are struggling to make up for lost revenues and rising costs to care for the jobless and the destitute. In a fair society we would be asking Wall Street to pay for the damage it created. Instead, Wall Street has used its enormous lobbying muscle to make sure politicians are asking states to cut back public services of all kinds. Meanwhile, large corporations use every trick in the book to avoid paying state and local taxes. A recent joint report by the Institute on Taxation and Economic Policy and Citizens for Tax Justice reveals that 265 large corporations avoided $42.7 billion in taxes from 2008 to 2010. That’s enough money to hire more than one million teachers! Instead, we are firing teachers in the name of fiscal austerity.

 The full report to which Leopold refers is at The Institute for Taxation and Economic Policy.  The reports should make clear that whatever other problems ail the US, overtaxed corporations isn't one of them. Citizens for Tax Justice also offers a compendium of how America's most profitable companies pay taxes dramatically lower than the advertised rate; for many, the US tax code has become a profit center, one more way to privatize benefits and socialize costs.


The idea, which every Republican presidential candidate has made at one time or another, that America's high corporate tax rate of 35% is killing the economy should be put to rest by a simple observation at the next debate followed up by a blunt question: 

"You do realize that corporate profits have grown enormously, along with executive compensation?" 


"Are you so naive that you actually believe corporations pay a 35% tax rate?" 

It really is no different at the state level. They game the system at the federal level and at the state level. A more detailed analysis of how corporations avoid taxes while they capture subsidies and other benefits paid by taxpayers, in particular how they play one state or municipality off against another, can be found in Greg LeRoy's well-researched book: The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation.

Redistributing Wealth

Les Leopold recently posted an article at Alternet called How Can the World's Richest Country Let Children Go Hungry? 6 Tricks Corporate Elites Use to Hoard All the Wealth. Not only is he spot on in his analysis, the evidence supporting his contentions is massive and unmistakable. I want to examine just one of them in this post. The others I will return to in time.

His first, and now mine, addresses increased economic productivity and how the benefits have become poorly distributed. His contention is thus:

Productivity continues to rise but the 99 percent doesn’t share in the benefits. The key to the material wealth of any nation is productivity – how much we produce per worker hour. Productivity is a crude measure of our overall level of knowledge, technique, organization, skill and cooperative work practices that produce the sum total of our goods and services. Lo and behold, there’s nothing at all wrong with productivity in America. It continues to rise and rise just like it did during our post-WWII boom years. What’s changed is that the average American wage has stalled since the mid-1970s -- which is precisely the time that we started to deregulate Wall Street and cut taxes on the rich. During the 1950s and '60s boom years, almost all Americans shared in the fruits of productivity leading to rising real wages (after inflation). But now the productivity lines and wage lines have pulled apart. The gap between the two lines represents trillions of dollars that once went to the average American but are now going almost entirely to the super-rich.

Here's what Leopold is saying, in graphic form:

As should be apparent, throughout most of the post-war period, labor productivity steadily increased, and workers' compensation largely kept up. This was close to ideal and helps explain why the US economy was the envy of the world. The trend came to an end, rather abruptly, in roughly 1980.

It isn't getting any better. A recent study from Northwestern University reveals that 88 percent of income growth since 2009 was in the form of corporate profits, and only one percent went to wages. A recent investor report from JP Morgan notes approvingly that corporate profit margins increased by about 1.3 percent from 2000 to 2007, adding not only that profit margins are now at levels "not seen in decades," but that the primary reason for the fattened margins is a reduction in wages and benefits.

This is sick.  I remind the reader that reducing taxes on the wealthy and on corporations is at the heart of the Republican platform. And increasing wages and benefits for middle America is not.

Media and Government are Both Failing Us

Here is Cenk Uygur relating recent discoveries that members of congress provided inside information to hedge fund managers. There hasn't been much media coverage on this. Cenk notes that the story originally appeared in the Wall Street Journal, which one would think would have been enough to trigger follow-up stories, you know, the ones on the front page of every newspaper saying criminal investigations are under way.

Didn't happen. And that is the other story: media complacency. Even though the story has been broken, few have followed up and tried to learn more. How many people really learned of this story? Can there be a more blatant example of the corruption of our government? And has our media reached a point where this no longer seems to be especially newsworthy?



Cenk treats this as a breaking story, and it should be, but in reality it is another incremental move to complete oligarchy. The more it happens, the less people pay attention. Apparently not enough people, regardless of motivation, seem to think the story should be vigorously pursued.

David Sirota has a excellent analysis on why no one is investigating Wall Street, not specifically the insider trading info given to the hedgies, but the widely documented criminal behavior of the big banks.

When it comes to our government’s collective refusal to aggressively investigate — much less prosecute — Wall Street crime, one prevailing line of apologism implies that it’s all about resources. As the general fable goes, Wall Street is so sprawling and so lawyered up that public law enforcement agencies simply don’t have the resources to make sure justice is served, especially at a time of budget deficits. In this story, Wall Street is not simply too big to fail; it’s too big to even police.

Right, David; there are reasons why congress has underfunded watchdog agencies like the SEC, and it isn't because it cares about the budget deficits. And it is worth noting that the media did in fact cover the banker-induced recession reasonably well, at least for those of us who sought out appropriate media sources. Not hard to do, by the way if you have an Internet connection. Sirota's dismay is that Washington knew full well what had happened, in time we all knew, but that there is still almost no government action to hold the criminal class criminally liable.  Instead politicians direct their venom at the poor.

Tracking an individual example of this phenomenon, Matt Taibbi makes clear that it’s really difficult to overstate just how revealing this kind of thing is. Wall Street crooks who stole trillions of dollars are rewarded by the administration with additional trillions in bailouts. Meanwhile, those crooks’ now-impoverished victims — so poor they are on food stamps, mind you — are being targeted by the same administration for criminal investigation for allegedly making a few extra bucks on recycling empty bottles.

Our government is directing prosecutorial resources at food stamp recipients because they may have earned a few extra dollars from recycling bottles. Poor people are sent to jail while the wealthy pay fines and sign documents that allow for no admission of wrong-doing.

We could endlessly debate the extent to which President Obama or Democrats in congress contribute to Wall Street's special privileges. It should be clear to all that Republicans are the party of America's wealthiest. Never in recent history has a party so shamelessly shilled for the 1% while demonizing, ridiculing, and haranguing the poor and powerless. It is Republicans, it must be remembered, who continue to claim that unqualified home borrowers of modest means were to blame for derailing the economy.

Others will argue, incorrectly in my view, that there is no real difference between the two parties. These are cynical conclusions held by the intellectually lazy. Having said that, there is not as much difference between the two parties as I would like, or as much as there used to be. More than a few Democrats have shown a contemptible willingness to do the bidding of the investor class.

Economists for Occupy Wall Street

A short video from economists who understand what #OWS is, and why it is protesting this country's unsustainable, rigged system.

Occupy Economics from Softbox on Vimeo.


From econ4.org.