Our Low-Wage Recovery

There has been lots of talk in the air about what this country needs. Republican presidential candidates have been almost unanimous about the value of cutting taxes, by which they mean the top tax rate, the one that affects the wealthy. And we must get the corporate tax rate down as well; it tops out at 35% and that must surely be why American corporations are having trouble competing, except that they aren't. The premise for lowering the top corporate tax rate is that corporations actually pay the current rate. They don't. What they do pay are the most obscene compensation packages in the world.

And let's not forget to cut spending, lots of it. Please tell me you find it odd --in a simple math that doesn't add up kind of odd-- that proponents of spending cuts, meaning nearly every conservative member of congress, simultaneously insist on budget-destroying tax cuts for the wealthy, those who have already enjoyed a generation of such largess, even as they yelp about the deficits those tax cuts created. The national debt is so horrible that we must gut spending on society's most vulnerable to save the republic, but apparently not so horrible that we can't give more tax breaks for our most privileged.

So why has our recession lasted so long? It isn't because taxes are too high, or because we have a large budget deficit.

The reason is that we are turning into a low-wage country. Look at chart below. It shows the share of employees in low-wage work. Hey, we are number one. Yes, I know, having a crappy job is better than no job at all. But this is a long ways from the can-do spirit that this country once had, back when it was an unambiguous economic superpower, back when its tax rates were much higher and wages grew along with productivity. I've discussed the wage-productivity divergence here and here.  



As Tavis Smiley and Cornel West have shown, many of the newly created jobs are "...in the restaurant, retail, temporary service, social assistance and hospitality sectors. In other words, low-wage jobs, most without health benefits or paid sick leave."  Additional analysis of the significance of the chart above, including America's growing wage polarization, is at "Economist's View."

In other words, low wages means marginalized families with low consumption. Not only can they not save, provide for their children's education, and pay for health care simultaneously, they simply cannot buy much of the products that both corporations and merchants need them to buy. The inability to consume more, regardless of how one feels about materialism, prolongs the weak recovery because everything is predicated on sales, not low taxes. Businesses, especially the smaller ones on Main Street America that do not have foreign sales, do not want lower taxes or cheaper workers. They want more customers.

“It is to the real advantage of every producer, every manufacturer and every merchant to cooperate in the improvement of working conditions, because the best customer of American industry is the well-paid worker.” FDR

Single Payer

This is a short story of a psychiatrist named Carol Paris, who is leaving her practice in the US and is relocating to New Zealand. She is fed up with a market-based system that jerks around both physicians and their patients in an effort to extract profits. As I have written before, US health care is compelled to offer a hybrid system of care for those who cannot afford the ghastly fees, especially insurance premiums, combined with those same insurance companies out to maximize profits. It may make sense to a free-market ideologue, but in practice, it is clearly a mess. It creates profits for shareholders by refusing coverage for those who cannot afford the premiums. The federal government pays for those not profitable to the private sector. Health care in America is, after all, a profit center. The Affordable Care Act has changed only some of the most egregious practices. Below is a partial transcript originally from Common Dreams.

Dr. Carol Paris is a psychiatrist. She’s practiced for 13 years in southern Maryland. And she’s fought hard for a single payer system. She’s even been arrested in Congress for speaking out for single payer. But now, she’s had enough. She’s closing her practice. And moving it to New Zealand. 

“I’m so tired and weary of trying to practice sane, passionate, good medicine in this insane health care system in the United States,” Paris said last month in an interview at Union Station before walking over to protest in front of the Supreme Court against the Obama health care law and for single payer. “It impairs my ability to practice in a way that is ethical and passionate. I have a few years left in me to practice. And I’ve decided see what it is like in another country. I have a couple of friends who are psychiatrists who have done a sabbatical in New Zealand. And they said they are so sad to be back in the United States practicing because it was so much more sane and caring in New Zealand. I’m going to see what it is like for my own mental health.” 

“The insanity here is that we have a system of financing health care in this country that is all about profit for corporate America and not about the health care of the people,” Dr. Paris said. “It is opposed to the health care of the people of America. You can’t be about profit and be about a social service.” 

“Every day, I spend more time helping my patients figure out how to game the system, how to maneuver the system of health care insurance,” Dr. Paris said. “Maybe they can afford to see me and maybe afford medicine, but they can’t afford therapy. So, I’m robbing Peter to pay Paul.” 

“Any recommendations I make for my new patients is based on the assumption that they will have no health insurance tomorrow...."

For visual learners I have included the video below.

Good luck, Doc. Can't say that I blame you.

The Romney Standard

On March 23 I posted a story on the abject willingness of many, including Mitt Romney and Rick Santorum, to misrepresent the actions and policies of President Obama. One takeaway from this is that a willingness to lie, with the belief that one will not be held accountable, has escalated in recent years. And yes, it has coincided strongly with the Republican party's jaw-dropping turn to the right. Lying, in other words, has become a calculated risk, part and parcel of campaign strategies, embedded in speech, spin, and soundbites.

Lying and the overall bullshit factor are on the increase in part because the media lets it happen. More fundamentally, we see a political party that is desperately trying to discredit a remarkably scandal-free sitting president, and has resorted to demeaning and hateful rhetoric known to work with a voter base that scores low on information but generally high on authoritarian personality scales.

And of course, Republicans know they are facing unfavorable demographic trends. A rational person would think the party would want to embrace a wider swath of voters and give them compelling reasons to vote Republican. Instead, that party's politicians and operatives resort to strident and inflammatory rhetoric. They do not know what else to do because they are scared of the future, and they have embraced an inflexible and unsustainable ideology that has boxed them in. They cannot offer up real solutions without violating party dogma. In such an environment, it is no surprise that the candidates feel they are justified in lying, slandering, and misrepresenting opponents. If you want to win, you can't be squeamish.

Take Mitt Romney, who, despite everything, is still likely to be the Republican nominee. It would be an understatement to say I have a problem with this class warrior, the choice of oligarchs everywhere. It isn't the Mormon thing, per se, even if that makes some Republicans squirm. After all, Romney's acceptance of magic underwear or Joseph Smith's inane story of the golden plates is not any less credible than Santorum's belief in transubstantiation or papal infallibility.

It is mostly because Romney has the interests of the one percent at heart; a Wall Street First kind of guy who thinks gutting social programs and further shifting wealth to the very top is viable policy.    

But on a more personal level I am offended by a man who now feels the lying is an acceptable campaign tactic. Adultery and divorce no longer carry the social stigma they once did, much to Newt's relief, so why should bald-faced lying? 

The video below shows Rachel Maddow discussing Romney's honesty issue. As she says, "there is something different" about Romney and his campaign, well beyond the usual twisting and distorting we find with most candidates, the kind we long accepted as the nature of hard-ball politics. Maddow gives specific, undeniable, calculated lies, and then notes the indifference the Romney camp shows when it is caught.

These examples are not mistakes or gaffs; everyone makes those and everyone deserves to be cut at least a little slack when they make them, especially during an exhausting primary race. Maddow's very reasonable question is to ask whether Romney's chronic, almost pathological willingness to lie, even when he knows fact-checkers can easily call him out, is now a leading indicator of where American politics is headed, a new standard of cynicism and calculated manipulation.

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Lying About Oil Production

Republicans keep harping on gas prices. They want very much to blame Obama, and they do so through some astonishing rhetoric. Romney in particular insists that Obama has a weak and ineffective energy policy, and that it is the reason why gas prices continue to climb.

Three points are worth noting; one is Romney's breathtaking willingness to lie, a subject I'll address in greater detail separately; second is that his own economic advisers have distanced themselves from his claims.

And then there is point number three: Romney's charges about oil production are wrong. In fact they are laughably, face-palm in disbelief kind of wrong. I have already touched on this point before. I referenced an article in the Houston Chronicle that discussed the transformation in oil production that is taking place since Obama took office. And here is how the New York Times reports it (emphasis mine):

The desolate stretch of West Texas desert known as the Permian Basin is still the lonely domain of scurrying roadrunners by day and howling coyotes by night. But the roar of scores of new oil rigs and the distinctive acrid fumes of drilling equipment are unmistakable signs that crude is gushing again.

And not just here. Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota... 

Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005. 

Pretty good, though obviously that is not what Romney is claiming. The real problem here is the White House does not tout its accomplishments very well. President Obama has allowed Republicans on all levels, including their allies at Fox, to establish the narrative. That is a mistake Democrats are prone to making. I expect the talking heads at Fox to lie, including the buffoons at Fox and Friends, but Mitt Romney is repeatedly and deliberately misrepresenting the facts.

I leave you with one other factoid, the picture below, that Mitt Romney is shamelessly lying about. Note the sharp increase in the blue line. Note the date. Who became president just before the blue line started to go up?

Go ahead and say it, Mitt. No lying this time.

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.

Obama's Burden

A recent cover story of The Week magazine relates the difficult choices President Obama faces in Afghanistan. These choices are part of the larger set of problems he has faced since his first day in office. The two endless (and thankless) wars in the Middle East were only his biggest foreign challenge for a president who also had to overcome the biggest economic recession since the 1930's, the spectacular fallout from Wall Street's recklessly irresponsible activity; activity, it should be added, that was condoned and even applauded by free market ideologues, including Alan Greenspan.

All of this in addition to a massive trade deficit, one caused by policies that have allowed widespread offshoring of jobs and a corporate culture that does not take manufacturing seriously--these are the prime reason industries have been hollowed out.  This bears repeating: It is our own incoherent industrial policies that have contributed the most to our weakened industrial base and the mammoth trade deficit that it engendered, not China, not Japan, not foreign oil.

Obama faced two hugely expensive wars, neither of which was going well. He was forced to choose from several poor choices. The wars have added enormously to the national debt, an issue that did not seem to bother Republicans while Bush was in office.

The US has generally paid for its wars by raising taxes. We certainly did so in WWII, the Korean War, and Viet Nam. Many voters have forgotten how unusual and as we now know, reckless it was for George W. Bush, who inherited a huge budget surplus, to first squander the surplus by passing costly tax cuts for those already wealthy.  He too was faced with a large national debt as well as a seriously eroding infrastructure. He opted for tax cuts, the budget deficits returned, and then he went to war. Bush and the Republican-controlled congress refused to pay for it and the federal government has been growing its deficit ever since.

Obama tried to do what many economists said he must do; stimulate the economy, and keep the budget deficit from becoming too large, not an easy task, but then he did not create the conditions and policies in place when he took office. Others created them; Obama is getting blamed for them.

The irony is that Obama's fiscal stimulus was conventional, mainstream, and conservative. Keynes himself made it clear that government stimulus spending was very much a conservative alternative to the much greater pain of allowing massive unemployment and the resultant upheaval and unrest.

Obama gets blamed for continuing unemployment too, of course. The realty is that we have a much smaller industrial base that will call back workers when conditions improve. This is a big reason the recession lasted as long as it did, and why the recovery is so slow: there are far fewer good-paying jobs. Instead, millions of people have been forced to settle for poorer paying jobs than the ones they once held, and often with fewer benefits. Lower wages exacerbates economic recovery.

The final kicker is one left out of most analyses that focus on the mortgage crisis. The middle class carried the economy all the way until near the end of Bush the Lesser's second term. They did so by running up massive personal debts on their credit cards. That was unsustainable, of course, so once the Wall Street bankers crashed the economy, and unemployment started to rise, middle class consumers cut back on expenses. The cutbacks were prudent for the individual, but they hurt spending, tax receipts, and other peoples' jobs that depended on spending.

This is the mess the President faced on inauguration date. None of it started with him. And the process, the wars, the deindustrialization, the irresponsible tax cuts, the eroding infrastructure, the mortgage bubble, the suppression of wages, the dominance of unaccountable banks, all of it, was well under way long before most of us had even heard of Barack Obama.

Now bear in mind that most of the same people who got us in this mess, including essentially every Republican in congress, are completely opposed to Obama's every effort to extricate us, as if we can actually dig ourselves out of the hole, the one the middle class did not dig, without some pain and sacrifice. So if Obama tries to raise taxes to where they were in the Clinton boom years, he is a big government socialist. Never mind that taxes were higher under Reagan. If he tries to cut subsidies to Big Oil, as if they they needed it, he is undermining business. If he tries to rein in our out of control defense spending, he is endangering America's security. Never mind that the level of spending he proposes would still be higher than it was in Bush's first term. And every effort to get Wall Street under greater control, before it ruins it again for the rest of us, is opposed. Republicans insisted in 2010 that the Bush tax cuts be extended, and they were willing to shut down Washington to get them.  And now, of course, Obama gets blamed for the inevitably larger budget deficit.

Republicans have left the President with few options: Republicans will continue to support looser regulations and lower taxes (for the rich). Never mind that these are what created the financial mess in the first place. Only now are Republicans insisting on lower spending, not coincidentally on the programs that help the bottom half of society. Any honest appraisal of the federal budget will show that even significantly lower spending will do little to close the budget gap, not when tax revenues-from individuals and corporations alike-are the lowest they have been in decades.

Here is a short video that covers much of the above. It offers up in graphic form the impact on the federal deficit and debt of the wars, the bank bailouts, the recession, and most of all the Bush tax cuts.



One more thing; Obama even got Osama bin Ladin, after the trail had gone cold, so no, Bush, you don't get credit. 

Facts Keep Getting in the Way

Man I love it when Rachel Maddow sets bloviating liars like Karl Rove straight. He, along with the presidential candidates still standing keep trying to find something new to pin on Obama. Now he's getting blamed for high gas prices. It is an old tactic used to score points with low-information voters because apparently many of them really do support candidates who promise the holy grail of American consumerism; cheap gas and lots of it. 

In the video below we have Rove, on Fox News, of course, claiming the President is anti-oil, laughably mischaracterizing the role of the US Export-Import Bank, and essentially trying to plant the seed in the viewer's head that Obama is so nefarious that for reasons that elude thinking people, he, the President, would want energy prices to go up in a recovering economy and an election year. Newt Gingrich is shown making similar charges. Gee, I had no idea that Obama is so ingeniously treacherous.

Rachel Maddow brilliantly points out the idiocy of these charges through the ample use of her favorite weapon, facts. Watch as she shows how domestic oil production has been going up every year since Obama took office. She is referencing an article from that socialist rag, the Houston Chronicle, that says in part:

The United States' rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation's oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quad­rupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

"It's staggering," said Marshall Adkins, who directs energy research for the financial services firm Raymond James. "If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years."

Rove does have one redeeming quality; his first name is pretty cool. He even manages to spell it right.

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Romney Loved His Bailout

Mitt Romney wants to tell us he is just loaded with business experience, just the kind needed to run the country, 'cause don't you know, representing the diverse interests of the American people is incredibly similar to being chief vulture at Bain Capital. Only his huge ideological blind spot has kept him from realizing that the plunder and pillage known as private equity is not exactly endearing him to voters.

And about that one term as governor of Massachusetts? He has been running from that too. He wouldn't be if he were going after moderates or independents, but these are Republican primaries, so he wants the Republican base, the right wing of the right wing party, to forget what he said and did as governor, such as signing the Massachusetts health care insurance reform law, which provided near universal health care for citizens of that state.
 
Now there is one more item, one that I expected to come up sooner; his role as chief executive of the 2002 Winter Olympics Organizing Committee. Frankly I expected Romney to toot his horn a bit more on this. Isn't it a feather in his cap? More evidence of his organizational and leadership skills?

Maybe not, though I am not sure Romney is sufficiently self-aware to realize the ideological impasse any Republican would face once it was realized just how Romney financed the 2002 Winter Olympics in Salt Lake City.

As the video below reveals, the 2002 Winter Olympics were not only frightfully expensive, much of the money came from taxpayers. And for me, the issue is not, in and of itself, that tax dollars were spent, though the amount, and what it bought certainly matter. The essential hypocrisy of Mitt Romney is his claim that the private sector does most everything better, that he has the requisite private sector chops--and rugged free market individualism to go with it-- and his increasing strident rant against the legitimacy of government. We must get government out of the way, he says, for this will unleash the private sector. 

Recall the 1984 games in Los Angeles, where the private sector played a major role, and the credit that was given to Peter Ueberroth for his ability to raise money from private donors. Instead, Romney lobbied the federal government, one then largely controlled by Republicans, for huge amounts of cash--from taxpayers-- to foot what proved to be a record-breaking tab. He gleefully boasts of it in the video, even while he chides others when they rely on government.

There is only thing Romney perhaps can boast, as he does in the video, and that is his lobbying skills at getting the federal government to give him huge amounts of money. He showed you can get a lot of things done if you can talk friends in Washington to pay for it. The Salt Lake City games were a success, but Romney is now reluctant to acknowledge that it was because the federal government bailed him out to the tune of $1.3 billion.

"Have You Got a Better One?"

Mitt Romney has a habit of stepping in it, what with his lines about banks being people, how he likes to fire people, and how he too is unemployed.  He was even caught pointing to his blue jeans trying to prove he is a regular guy. I mean, shit, he actually pointed at them as if he should somehow get points or something, as if it made a damn bit of difference. And he does this with a remarkable lack of self awareness, not realizing how phony he looks. This is the guy who is insisting that he was a "severely conservative governor." This is a laughable contention that conservatives can see right through (like the rest of us).

But there is one revealing moment that has been largely overlooked. He was on the deeply conservative Laura Ingraham radio show recently where he continued to make the claim that Obama made the recession worse. He has repeated some variation of this shtick at numerous venues; Obama may not have caused the recession, but he made it worse.

Ingraham asked how effective is it to keep ragging about Obama's handling of the economy when most indicators show the economy improving.

Romney's response? You need to hear it for yourself. In the video below Rachel Maddow has two face-palm moments. The first, at about the 3:40 mark, shows Romney insisting that things are worse, and then claiming he didn't say it. It is reminiscent of John McCain's campaign statement that he never claimed he was a maverick. Say what?

And then at about the 8:35 mark, Maddow plays the audio from the Ingraham show. After some blunt questioning from Ingraham about the economy, Romney first says, "Of course it's getting better." Not only is this a contradiction of his earlier claims about making things worse, it is an indirect admission that once again, Republican policies blew up the economy and once a Democratic President was charged with cleaning up the mess.

Ingraham then points out the obvious when she says Obama inherited a major recession, enacted various policies, and we are now seeing job growth, but wonders why Romney says to vote against Obama anyway. "Isn't that a hard argument to make?," she says,

Romney's response: "Have you got a better one, Laura?"

Damn, Mitt, that's some pretty weak sauce. But thanks for making the case for the President. Obama has said the economy is turning around. Glad to see you agree.

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.

Newt's Hilarious Hypocrisy

It's a little early to say how the Republican primaries are going to play out, but it is evident that the two frontrunners, Mitt Romney and Newt Gingrich, are seriously damaged goods. Gingrich has been a known factor for many years. That helps explain why he is reviled by many in his own party. Romney has scored a major victory in Florida and has retained his front-runner status. His biggest advantage is that candidates like Gingrich, Santorum, and Paul are the only alternatives. And they are more than all but the most disaffected Republicans can stomach.

Still, Gingrich speaks in ways that have visceral appeal to many conservatives. He is reactionary rage personified, at least compared to the clueless Romney. And Gingrich knows how to tap that rage. Below is Mark Karlin's take on how Gingrich is operating; what's inside his head as well as the heads of people who actually think he should be president.

The brazen hypocrisy of the GOP on sexual, religious and family matters has been a consistent source of bewilderment for BuzzFlash since the site was founded in May of 2000. In fact, BuzzFlash (now a part of Truthout) began largely in reaction to the dissemination of a disingenuous, Republican, demagogic, political hypocrisy that is inexplicable on any rational level - and we've covered about every psychological theory that tries to explain how people who hold themselves out to be godly can be full of such hate, bitterness, greed and gross double standards. 

In fact, during the last South Carolina debate, Newt Gingrich - who has made the alleged collapse of America's "moral values" one of his trademark "red meat" appeals - deflected questions about his Lothario, adulterer, callous "family values" behavior by attacking the press. Gingrich knows that lacerating the supposed "liberal media" rouses the Tea Party faction of the GOP like splashing a bowl of blood on a vampire. 

Gingrich claimed to be "appalled" by the "destructive, vicious, negative nature of much of the news media." He called a panelist question about charges that he wanted an "open marriage" with his second wife (who was diagnosed with multiple sclerosis at the time), while he was having a multiyear affair with his eventual third wife, as "close to despicable as anything I [Gingrich] can imagine." 

Jon Stewart is feeling BuzzFlash's pain now - one that is particularly acute when watching the GOP presidential debates. In fact, after playing a segment on the "Daily Show" about Gingrich's "indignation" over questions about his egregious, immoral family values, Stewart's brain appeared ready to explode as he listed just some of the audacious hypocrisies in which the former House speaker has engaged. 

Recently, I recall seeing a clip of Newt in high dudgeon denouncing the alleged secular godlessness and lack of morality in Europe - and he vowed that he would not let the US sink into such degeneracy. Gingrich is the ultimate con man, saying whatever needs to be said to arouse the ember of the dark side of fundamentalist faith. He creates a fantasy world of demons who are supposedly set out to destroy "divinely" bestowed "American exceptionalism," when he himself has spent more time playing "Sympathy for the Devil" in his life than following the Ten Commandments. 

And, most significantly, as Jon Stewart has come to learn, Gingrich is filled with such confident cunning - such calculated lying - that he can make those who engage in reason want to jump out the nearest window in dismay. 

He is a master magician of the dark arts. That much you can say for him.

The video to which Karlin refers is below. What Karlin says in words, Jon Stewart brilliantly captures in just a few minutes on The Daily Show.

The Daily Show
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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.

Amend 2012

It was two years ago this week when five corporatists on the US Supreme Court made the ludicrous argument that corporations are people and that not allowing them to spend unlimited money on political campaigns would be denying them their right, as people, to free speech. Thanks to their ruling in Citizens United vs. FEC, not only do rich people have more free speech, corporations do now as well. And since we do not hinder free speech, we cannot hinder the free flow of money into politics. Corporations can now buy elections and politicians more blatantly than ever before. Since money is fungible, that guarantees foreign corporations will be in on it as well. It's free speech, you see. It's right there in that constitution teabaggers keep waving around.

Corporate America dominates government, politicians, the voting process, and the media that covers it. Citizens United has helped turn us into a banana republic that allows an oligarchy to subvert our entire political economy. The impact of that ruling will surely be magnified greatly in 2012, a presidential election year. 

Robert Reich reviews the issue and invites us to learn more and get involved in the only way we can to reduce the ridiculous and corrupting influence of corporate money in elections. He joins with amend2012.org and others to push for a constitutional amendment that states what should have been obvious; corporations are not people. They do not get to buy elections.

Think about Citizens United the next time Republicans claim they favor strict constructionism. Think about that case's tortured logic that effectively guarantees that corporations will buy elections the next time conservatives complain about activist judges.

Red State Reality

Below is one of the few times conservative columnist David Brooks has actually said something intelligent, albeit in an otherwise ignorant piece:

Like most Americans, including most evangelicals under 40, I find this culture war language absurd. If conservative ideas were that much more virtuous than liberal ideas, then the conservative parts of the country would have fewer social pathologies than the liberal parts of the country. They don’t.

Brooks is correct, though I doubt he is truly cognizant of the implications of this admission. He originally wrote it in his own New York Times post, but in case you can't get past the barriers, and don't want to register, try Blue Texan's take.

Blue Texan notes, as have many others, that the constant harangue from conservatives about the path to prosperity, stabiity, and, sweet Jesus, freedom itself, is through an environment with low taxes, cheap labor, damn few regulations and devoid of unions, bureaucrats, and secular liberals. The big problem with this view is that it is at odds with empirical reality.

CNN's Jack Cafferty raises a good question, one not raised enough, when he asks: What does it say that most of the 10 poorest states are Republican? Things don't look good when Mississippi, home of Republican heavyweight Gov. Haley Barbour, has a friendly, pro-business infrastructure with low wages, low union membership, and Republican domination of local and government. And churches everywhere.

The problem is that Missippippi is America's poorest state, with poverty levels reminiscent of the third world. Next in line are Arkansas, Tennessee, West Virginia, Louisiana, Montana, South Carolina, Kentucky, Alabama and North Carolina. Republicans dominate all of them in most elections. 

Steve Chapman, writing in the Chicago Tribune, also notes the conservative meme is a fantasy:

Consider homicide, which is not only socially harmful but a violation of one of the Ten Commandments. Mississippi has the highest rate of church attendance in America, according to a Gallup survey, with 63 percent of people saying they go to church "weekly or almost weekly." But Mississippians are far more likely to be murdered than other Americans.

On the other hand, we have Vermont, where people are the most likely to skip church. Its murder rate is only about one-fourth as high as the rest of the country. New Hampshire, the second-least religious state, has the lowest murder rate.

These are no flukes. Of the 10 states with the most worshippers, all but one have higher than average homicide rates. Of the 11 states with the lowest church attendance, by contrast, 10 have low homicide rates.

David Brooks needs to complete his mea culpa. It won't do to just say that social pathology measurements are no better in red states than blue; they are, in fact, much worse.

As Harry Truman famously said:

"If you want to live like a Republican, vote Democratic."

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.

Reckless Indifference

This lengthy chart reveals much about what powerful Republicans think of the rest of us. A quick look below at the tax proposals of the Republican presidential candidates reveals just how willing they are to exacerbate inequality.

It should be apparent that each proposal overwhelmingly benefits those already wealthy and will have little positive impact on millions of struggling families. It should be equally obvious that these tax proposals will make the deficit much worse.

None of the candidates has any intention of reimplementing the tax structures of the past that helped create the middle class, provided for solid growth, paid for defense-and wars-with taxes, and managed to balance the budget, or come very close to it.

There is only one major difference between now and earlier in the post-war period, up to the 1980s, and it isn't government spending. The difference is that 30+ years of tax cuts for the wealthy, starting with Ronald Reagan, have shielded the very wealthy from the taxes they used to pay. That has created a two-fold tax structure: the middle and working class are asked to pay more, and the budget shortfalls, dramatically larger than in the past, end up as government debt, picked up by China and other trading partners.

The current set of proposals only worsens the trend. Every detail is a giveaway to America's richest.


Tax Proposals Infographic by: Certified Tax Coach

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.

Getting More Bang for the Buck

The chart below, and it's from Moody's Economy.com, a mainstream source, says what progressive economists have been saying all along. As the column on the right shows (It's that technical term called "bang for the buck"), progressive policy prescriptions are more effective than conservative ones. I do not know the methodological specifics, but the higher number indicates greater efficiency.

One example is "increased infrastructure spending," which has a score of 1.57. This was, and is, spending urged by progressives and by the Democratic Party in general. In comparison, conservatives, and certainly every Republican presidential candidate, argue for reduced corporate taxes (.32), that the Bush tax cuts should be permanent (.32), and that we should make dividend and capital gains tax cuts permanent (.37). It is not a coincidence that each of these items, despite demonstrated inefficiency, favor the rich. And wouldn't you know it, even a temporary increase in food stamps proves to be the single most efficient item on the entire list, a policy strongly supported by Democratic pols and strongly opposed by Republicans.


The chart does not say why the policies differ so much, and it certainly does not address why Republican pols ignore the evidence, but two observations are warranted.

The first of these is that from an economic perspective, policies that help the working and middle class are generally superior because it is they who prop up the economy, and that is because they work, pay taxes, and, very importantly, are the primary patrons of most businesses in America. They are the true job creators and they are the reason most businesses even exist. Most businesses will tell you that they don't need a tax break, or less regulation. What they need are more customers.

But this does not explain why Republicans so shamelessly shill for the rich, and why so many middle-class Republican voters are OK with this. The answers are mostly not found in economics, but in psychology. My premise is this: Educated progressives are in favor of evidence-based policies. Of course, some policies have not been effective, but those that are not get revised or abandoned. And don't get any ideas about how progressives keep flogging dead ideas like Keynesian stimulus packages; the chart above shows them to be effective. Progressives (mostly) follow the evidence, and base policies that they consider rational and empirically-grounded.

In contrast, true conservatives are not basing policies on economics (except perhaps the economics of personal enrichment), but on psychology. Issue after issue, conservatives are making moral arguments about what they think is right, not what is economically sound. Their positions are often less rational than they are visceral.  Call it the politics of personality. And do note that even ostensibly educated Republicans, such as the presidential candidates, cater to and sound like their conservative base: Their economic policy prescriptions are almost entirely lower taxes, lower regulations, and now that a Democratic is in the White House, lower spending. These are absurdly inadequate and inappropriate policies that are massively at odds with the evidence and expert opinion.

There is a growing body of literature on what motivates conservatives. I have touched on this previously, especially on the role of authoritarianism.  Here let me add two additional academic studies: one has been out for a few years, called The Political Brain: The Role of Emotion in Deciding the Fate of the Nation, by Drew Westin. The other just came out: The Reactionary Mind: Conservatism From Edmund Burke to Sarah Palin, by Corey Robin.

Read, learn, and arm your brain.  Your nation depends on you to make rational decisions.