The Wrongologist

What’s
Wrong Today:

As
someone who entered the workplace in the 1970’s, the Wrongologist would never
have thought that he would look back and say those were the “good old
days”.

The
three decades before the 1970’s were a time of unprecedented growth for the
middle class: a time of steady jobs, rising pay, and employer-provided health
care. The gains allowed them to purchase homes and cars, send children to
college and provide for a life that their parents could only have dreamt of: The
Wrongologist’s middle class parents sent 4 kids to college paid for by savings.
They owned two new cars without car loans. They owned a house and only one
parent ever worked outside the home.

It
was a society in which the middle class also exerted considerable political and
economic clout.

Yet,
Hedrick Smith argues in
his new book, Who Stole the American Dream? (Random House, 2012), that it was the apex for America’s middle
class and that the four decades since have brought about an inexorable
decline.

What
caused the turnaround?

The shifting political landscape of
the 1970’s and 1980’s, along with the globalization of the economy began the
erosion of the middle class’s political and economic clout.

Over the past three decades we have become two
Americas – the 1% and the 99%. Smith believes the intellectual foundation of that change was laid by Lewis F.
Powell who was an Associate Justice of the Supreme Court.

Powell
and William Rehnquist were nominated by President
Nixon on the same day to serve on the Court. Powell took over the seat held
for many years by Hugo Black.

Few
people know that 2 months before joining the Supreme Court, Powell drafted the “Powell
Memorandum”, a confidential memorandum for the US
Chamber of Commerce entitled:
“Attack on the American Free
Enterprise System.” Powell argued:

In
the memorandum, Powell advocated “constant surveillance” of textbook
and television content, as well as a purge of left-wing elements.  He described a road map to defend free-enterprise
capitalism against real and/or perceived socialist, communist, and fascist
cultural trends.  

His
positions in the memorandum foreshadowed Powell’s opinion in First National Bank of Boston v. Bellotti, a foundation of the Citizens United decision which declared
that corporate financial influence of elections through independent
expenditures should be protected with the same vigor as individual political
speech. Much of the present Court’s opinion in Citizens United v. Federal Election
Commission relied
on the same arguments used by Powell in Bellotti.

On the other hand, Powell voted with the majority in Row
vs. Wade.

Back to his memo; Powell urged the business
community to build and use political power, with the US Chamber of Commerce taking
the lead role. At the time, President Nixon supported a popular tide of greater
federal regulation that brought us the EPA, OSHA, the Consumer Product Safety
Commission, NHTSA, and the Mining Enforcement and Safety Administration into
existence, and strengthened the FTC.

These
trends are what Powell positioned Corporate America to organize and oppose, a backlash
that has resulted in the rout of the middle class. Led by the Business Roundtable,
this campaign, catalyzed by Justice Powell’s memorandum, sought to:

• Neutralize
  the idea of a Consumer Protection Agency

• Weaken
  organized labor

• Repeal
  the regulatory regime

• Weaken
  or privatize the social safety net

• Promote
  additional tax loopholes for corporations and lower taxes on high earners

Note
that all but one of the above
have been accomplished.

Mr.
Smith points out that this shift in power led to a fundamental change in
political influence away from the middle class to corporations. However, he
doesn’t say that a vast conspiracy led to this state of affairs. Rather, he points
to failures by Congress and the Executive branch to understand the rule of unintended
consequences that has now produced the
most serious internal crises this country has faced since the Civil War.

What
can we do to restore the Dream?

The basic political issue in America has become: “Does the economy exist to serve the
nation, or does the nation exist to serve the economy?”

Our affirmative vote must be for the economy to
serve the nation. How do we do that?

Reform the corporate tax code: A study of 280 major firms
over the 2008-10 period by Citizens for Tax Justice found corporations on
average were paying 18.5%, not the stated rate of 35% that Republicans complain
must be lowered:

(source:
NYT)

From the
above chart, it is clear that adjusted for inflation, corporate taxes have
fallen dramatically as a percent of revenues. Rather than solely focus on the
tax rate of the top 2%, let’s include corporations:

• No loopholes even for nice causes: That means
  churches, farmers, not-for-profits

• No loopholes for the usual suspects: The oil
  industry and the financial services industry

• No carried interest loophole for funds and
  individuals registered as investment companies

• Tax foreign retained profits of Multinationals

Fix our infrastructure:
Airports, highways, seaports, universal broadband and smart grid
electricity. Its gonna be expensive, get over it.We have to be competitive with the rest of the world.

Implement a trade policy:

• Make all governments “Buy American”

• Implement tariffs for any country (even those with
  “Most Favored Nation” designation) if they do not treat our goods equally with
  how we treat theirs, or if they treat their workers badly.  

Implement an industrial policy:

1.  
Start
with jobs 

• Mandate that US companies with more than $50
  million in annual revenue hire a minimum quota of unemployed and recent
  graduates.

• Mandate a similar quota for hiring the long-term
  unemployed into a one-year internship, paid for by the US government

• The recent graduate hires would be at the company’s
  expense.

• Those companies who still had these individuals on
  their payrolls after 2 years would be given a 100% tax credit for their
  out-of-pocket costs associated with the new hires

2.  End the legalization of corporate crime
by the US Government
(See the Wrongologist here).
What must change:

• Stop the revolving door between the
  regulatory authorities and industry by requiring a 3 year “cooling off” period
  before a regulator can take a job in the industry he/she regulates

• Same should be true for Politicians: This means you, Jim DeMint

• Make an example of any corporation that is a bad
  actor by giving it the business equivalent of a prison term in the line of
  business where it misbehaved

• Start prosecuting Banksters under RICO, the
  Racketeer Influenced and Corrupt Organizations Act.  Under RICO, a person
  who is a member of an enterprise that has committed any two of 35 crimes—27
  federal crimes and 8 state crimes—within a 10-year period can be charged with
  racketeering. Those found guilty of racketeering can be fined up to $25,000 and
  sentenced to 20 years in prison per each count of racketeering. In addition,
  the racketeer must forfeit all ill-gotten gains and interest in any business
  gained through a pattern of “racketeering activity”

• Put.
  Some. Banksters. In. Jail.

3. Pick tomorrow’s industries: (Despite
complaints by Republicans)

• The winners should be industries which give the US a strategic advantage over
  our Chinese and Indian competitors and create real value defined as high
  tax revenues and job growth down the road

• The
  Wrongologist is not a Futurologist, so someone else has to pick ‘em

• Whichever we pick, we should back them with
  investment guarantees and tax credits                                        
  

Lewis
F. Powell was the thought leader who started the erosion of the middle class,
but he has been gone since 1988.

Now, job #1 is to elect leaders who will move
to end the rot in DC and restore balance to our society.