Category: Inequality

Reform of Capitalism Isn’t Socialism

The Daily Escape:

Graffiti in Greece by Lotek

The NYT reported that Rep. Tom Emmer (R-MN), chairman of the National Republican Congressional Committee, said: (brackets by Wrongo)

“Socialism is the greatest vulnerability by far that the House Democrats have…He added that he had also instructed his team to spotlight “all the [Dems] extreme wild ideas on a daily basis, on an hourly basis if it’s available.”

As we said yesterday, most Democrats are not socialists. They are for reform of capitalism. The problem is that our economic system is broken; it does not meet the needs of the vast majority of our people.

Capitalism has metastasized into a financialized cancer. Its growth-at-any-cost, profit-over-purpose ideology has wreaked havoc with the lives of millions of people. From Forbes:

“One example: For more than 400 years, 12.5 million Africans were kidnapped, enslaved and sold to build wealth and power largely for white men in the US, Europe and South America. The first enslaved Africans were shipped directly to the Americas in 1518, one year after Martin Luther nailed his 95 Theses to the door of Castle Church. The centrality and largely unconstrained profit motive in capitalism has been with us since the beginning.”

Today, corporations track our every movement. Algorithms manipulate us to buy things, or to vote certain ways. We’ve put outsized power into the hands of corporations. We have to ask: What do we need from capitalism in the 21st Century? Is it more of the same, or something different?

Capitalist Reform is about re-imagining the purpose of business and redefining its success. The doctrine of shareholder primacy must be the first to go. It needs to be recognized as a form of oppression of human nature since it doesn’t value our humanity.

According to a 2019 Politico/Morning Consult survey, 76% of registered voters want the wealthiest Americans to pay more. Politico also notes that a recent poll from Fox News shows that 70% of Americans supporting increased taxes for those earning more than $10 million, and 54% of Republicans also supported it. People are contemplating not just piecemeal tax increases, but a wholesale reversal of the Reagan-era shift in tax policy. The Economist reported that in 2016, more than half of young Americans no longer support capitalism.

There is an urgent need to push back against the widening economic inequality in the US. Taxing the rich is an easy answer, because so few of us are rich.

But, step one should be increasing corporate income taxes. Corporations’ share of total taxes paid has decreased to about 9% of total US tax revenue in 2017, from about 33% in 1952. How many stories like Amazon’s failure to pay anything in taxes on $11 billion in profits should it take to begin the task of closing corporate tax loopholes and increasing corporate income taxes?

Step two is to break up corporate concentrations. Wrongo addressed this here. The primary issue with corporate concentration is that it drives up prices. The fewer sellers, the fewer choices consumers have for goods and services, and thus, there is little pressure for big competitors to hold prices down.

Step three is to help workers. The share of profits that goes to workers must increase. This shouldn’t punish capitalists. Higher wages for workers means more business for American companies.

We were founded on republicanism as a public virtue: The Constitution implies that a citizen is duty-bound to abandon self-interest when it conflicted with the General Welfare. Capitalism has usurped republicanism by insisting that abrogation of self-interest violates the doctrine of “survival of the fittest,” and it’s also an attack on individual liberty.

We need to revive the understanding of public virtue. So, some form of “mixed economy” is in our future. It’s obvious to all except right wing ideologues that socialized medical insurance is in our future. But it is doubtful that a majority want to socialize production and distribution of America’s products and companies.

The task for Congress and the next president is to figure out what activities and/or economic sectors are best guided by tax and economic policy, and which are best left to “market forces”.

We’re a country where vast wealth is rewarded with tax cuts, loopholes, and endless ways to ensure that corporate dollars earn even more dollars. While average people are bankrupted because of a health crisis, and we value semi-skilled labor at $7.25 an hour.

Today’s capitalism is anti-democratic. General welfare and public virtue derive from a desire to improve the human condition. That needs to be the goal of political action to reform capitalism, and it needs to be hammered home again and again.

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The Power of Messaging

The Daily Escape:

Buttermere Lake, Cumbria, England – photo by Matt Owen-Hughes

On Monday in El Paso TX, Trump attacked Democrats, calling them:

“The party of socialism, late-term abortion, open borders and crime…To pave the way for socialism, Democrats are calling for massive tax hikes and the complete elimination of private health care…They’re coming for your money and they’re coming for your freedom.”

Trump’s focus on “socialism” is based on the few liberal Democratic presidential candidates who have called for Medicare-for-all, or environmental proposals intended to lower carbon emissions.

He brought up the “Green New Deal”, saying it would virtually eliminate air travel and that it sounds “like a high school term paper that got a low mark.”

This is just the latest stage in the war waged by the right against the ideals and programs of the New Deal. Kim Phillips Fein, reviewing the new book “Winter War: Hoover, Roosevelt, and the First Clash Over the New Deal” by Eric Rauchway, writes: (brackets by Wrongo)

Throughout the [1932] campaign, Hoover had attacked what he considered a “social philosophy very different from the traditional philosophies of the American people,” warning that these “so-called new deals” would “destroy the very foundations” of American society. As Hoover later put it, the promise of a “New Deal” was both socialistic and fascistic; it would lead the country on a “march to Moscow.”

2020 will be all about messaging. Once again, just like 88 years ago, Republicans will run on socialism. Trump will add the threats posed by open borders and abortion to the right-wing stew.

The question is what will be the 20+ Democrats who are running for president be talking about? Michael Tomasky in The Daily Beast suggests: (emphasis by Wrongo)

I am saying, though, that Democrats should stop pretending they can unite the country. They can’t. No one can. What they can do, what they must do, is assemble a coalition of working- and middle-class voters of all races around a set of economic principles that will say clearly to those voters that things are going to be very different when they’re in the White House…

There is a power to fashioning a new political coalition around the concept of economic justice. We live in a time when politicians of both parties have followed a consistent strategy: massage the economic numbers and the media, keep the rich and powerful happy, and make sure you stay on the “fiscally conservative” side of the line.

Now, a few Democrats are pushing the party elders to re-consider economic justice as FDR did in the1930s. These Democrats intuit that most Americans are trying to reconcile the life they were told they would have with today’s reality. The gulf between what they were told, and what actually happened is wide. And it looks as if it will only get wider.

Many Americans feel that they can’t pay their bills anymore, and they are afraid. Their jobs aren’t stable, they can’t look forward to retirement. About 20% say they have more credit card debt than savings. The lives they thought they’d live are upside down, and they’re not sure they can do anything about it. Quite a few followed their preachers and a few charlatan Republicans, and can’t understand why things are so scary and bad for them.

America is divided, but maybe not in the way you are thinking. It’s the left behinds and millennials who are worried about their future. And it’s both of them against the politicians, corporations and the oligarchs. As David Crosby sang:

“There’s something happening here, what it is ain’t exactly clear”

In 2020, we’ll be fighting for not just the soul of our country, but the meaning of American life: Should the one with the most toys win?

What is more important, universal health care, or outlawing abortion? Better roads and bridges, or keeping out immigrants? A better environment, or lower taxes?

Ocasio-Sanchez’s Green New Deal (GND) can easily be dismissed, but what really is the difference between how the Green New Deal might be financed, and how the Federal Reserve spent nearly $4 Trillion on its Quantitative Easing (QE) schemes?

The big difference is who profits. QE was welfare for the banks. For the GND, society at large would benefit.

You will get to decide, and plenty of people are already fighting for your attention.

Some are worth listening to. What will you choose to do?

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Monday Wake Up Call – MLK Jr. Edition, January 21, 2019

The Daily Escape:

El Capitan in winter, Yosemite NP, CA – photo by Jonkooo

From Tom Sullivan:

Those of us of a certain age, but not quite old enough, were too young to attend the 1963 March on Washington. The march and Rev. Martin Luther King’s “I Have A Dream” speech influenced our era, our views, and changed the country. There are times one wishes, if only I could have been there for that moment in history. Then again, such thinking fixes the civil rights movement in time. The truth is, that struggle never ended.

Wrongo was in Washington in 1963. Dr. King is one of his heroes. And, as Tom Sullivan says, the struggle has never ended. Wrongo spent the 1960s and 1970s convinced that America would turn a corner, see the wrong in slavery, and know that racism was holding us back.

He thought that we would achieve a point of equilibrium where Americans of all stripes would accept each other as part of a larger tribe, one that shared common beliefs about democracy and equality for all.

Wrongo was wrong. We’re not there. We’ve made some progress, but then we fell back on old beliefs.

Today we are 51 years removed from Dr. King’s assassination, and while America is better and fairer than it was then, we will enter the 2020’s needing to do much to improve society.

This brings me to MLK’s last book, “Where Do We Go from Here: Chaos or Community?” published the year before he died. In it, King lays out a vision for America’s future, including the need for both better jobs and housing, higher pay and quality education. King called for an end to global suffering, saying that for the first time, humankind had the resources and technology to eradicate poverty.

He wrote about how Civil Rights reforms had fallen short, but he couldn’t have envisioned what the Supreme Court did in gutting the Voting Rights Act of 1965 with its 2013 decision in Shelby County vs. Holder.

So here we are in 2019 with white kids mocking Native Americans at the Lincoln Memorial, chanting “Build that wall, build that wall.” This happened days after Trump made light of the 1890 massacre at Wounded Knee to mock Sen. Elizabeth Warren.

And for context, we live in a time when chanting the president’s name has become a tool of racial intimidation.

Here we are: Income inequality is the highest it’s been since the 1940s.Our federal government is shut down because we can’t agree about the threat posed by illegal immigrants asking for asylum at the US southern border. And racism is marching back into the light from under rocks all across the country.

Time to wake up America! Racism is the wound that won’t heal. We have much to do, and the work won’t be easy.

To help you wake up here is a 2019 song by The Killers, “Land of the Free”. It is broadly about America and the intolerance holding us back. Listen to it, and reflect on what it makes you feel. Depending on what about it makes you angry, it is a reflection of who you are. The video is very powerful. Please take the time to watch it.

Think about what’s at the heart of this song. People who want the same things we do:

Those who read the Wrongologist in email can view the video here.

Finally, a quote from James Baldwin’s The Fire Next Time:

“White men have had to believe for many years, and for innumerable reasons, that black men are inferior to white men. Many of them, indeed, know better, but, as you will discover, people find it very difficult to act on what they know.”

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Today’s Wages Have the Same Purchasing Power as in 1978

(Email publishing of The Wrongologist should be restored as Wrongo is using a different vendor, WordPress. Apologies to those who read in email.)

The Daily Escape:

Cliff Palace, Mesa Verde National Park, Colorado, as it might have looked at night in the 12th Century lit by camp fires. Mesa Verde is unique since it is the only NP that preserves the works of man – photo by Rick Dunnahoo

This is going to be a historic year, even when compared to 2018. And it’s starting out with a bang. The government is shut down, half the cabinet is empty, the 2020 presidential race has officially started, and the Democrats are taken over the House.

And that’s without whatever Mueller shoe will drop sometime in the year, or whatever Twitter atrocities Trump decides to commit. In other words, we’re going to have our hands full.

But today, let’s talk about how bad the economy is below the surface of the headline numbers. Debt is rising, and rising debt is supposed to be matched by rising income. It shouldn’t be a surprise that more income is required in order to service more debt. But so far, in the 21st century, for the bottom 90%, debt is growing while income is stagnating.

Pew’s Fact Tank has an analysis that speaks to this problem. Average hourly earnings for non-management private-sector workers in July were $22.65, 2.7% above the average wage from a year earlier. But in the years just before the 2007-08 financial collapse, average hourly earnings often increased by around 4% year-over-year.

And during the high-inflation years of the 1970s and early 1980s, average wages commonly jumped 7%, 8% or even 9% year-over-year.

However, after adjusting for inflation, today’s average hourly wage has about the same purchasing power it did in 1978. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

Here is Pew’s chart demonstrating the problem:

Because there’s been little growth in wages, the growth in the standard of living for those below the 90th percentile has been largely fueled by additional consumer debt. The WSJ reports that consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019, the highest in history. Debt allows you to furnish your home, pay for education, and get a car without having to save for them. In that way, it supports the growing economy.

But Pew also shows how most of the income gains went to those at the top of the food chain:

 

 

Among people in the top 10th of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).

This lack of symmetrical growth in debt and income actually matters. At some point household borrowers will default in greater numbers than they do today. When those losses occur, the monetary system won’t be able to bail out debtors (or banks) this time around as handily as we did in 2008.

 

Sluggish and uneven wage growth is a key factor behind widening income inequality in the US. Another Pew Research Center report found that in 2016, Americans in the top tenth of the income distribution earned 8.7 times as much as Americans in the bottom tenth ($109,578 versus $12,523).

Compare that to 1970, when the top 10th earned 6.9 times as much as the bottom 10th ($63,512 versus $9,212).

There is no simple solution to get American workers back on the right track. At a minimum, it will take a political groundswell aimed at overturning the way the tax code favors corporations. Along the way we will have to displace the political power of our corporate oligarchs.

Government must be made to serve the public interest, not Mr. Market.

Democracy is the sole mechanism enabling our citizens to have political and economic agency. But, democracy will cease to matter in a corporate-controlled, globalized system of government influence.

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Who The Dems Should Nominate for President

(There will be no Thursday column this week. Wrongo is in NYC.)

The Daily Escape:

The Passion Facade, La Familia Sagrada by Gaudi, Barcelona, Spain

Wrongo has been highlighting several people who have big ideas that could move our country toward reform of capitalism. One issue that impacts that reform is health insurance, and many Congressional candidates who won in the 2018 mid-terms ran either on preserving the ACA, or on implementing Medicare for All.

Talk has started on the 2020 presidential election, and the almost 30 potential candidates that seem set to try for the White House. Now that a Texas judge has declared the ACA unconstitutional, and should that decision be upheld, health insurance should be a big issue in 2020.

For Democrats, politics is a game of good policies badly presented. For Republicans, politics is a game of bad policies skillfully presented. With that in mind, let’s turn to Sen. Chuck Schumer (D-NY), who on Sunday with Chuck Todd, refused to endorse Medicare for All. Instead, he said: “there are lots of different routes” to a universal healthcare system.

Though Schumer says he will support a “healthcare plan that can pass,” there is no evidence that any of the alternatives to Medicare for All have a better chance of passing than Sanders’ single-payer plan that was introduced last year. In the House, a majority of the Democratic caucus supports single-payer.

This is what we have to look forward to in 2019 and 2020. The Dems old guard will try and triangulate on policy in an attempt to corral a few Republican Senators. Nancy Pelosi is not a fan of Medicare for All.

A few of the old guard are running for president, including Bernie and Joe Biden. On the progressive side of the Democratic Party, there is a big age gap to a few relatively young politicians who are clearly progressive-purists.

Benjamin Studebaker has a provocative column, “Why We Cannot Nominate a Young Person in 2020”. His argument is that Democrats who are between 40 and 60 may have the right level of experience and political gravitas, but they all grew up in the Party of the Clintons:

…the overwhelming majority of Democratic politicians in their 40s and 50s are centrists who came of age politically in the ‘90s and ‘00s. These are people who got into Democratic Party politics because they grew up admiring the Clintons….They have spent their political lives working with Gore and Kerry and Obama and that’s the discourse they swim in. Corey Booker is 49. Kamala Harris is 54. Beto O’Rourke is 46. Kirsten Gillibrand is 52. Amy Klobuchar is 58. This group has…been tutored in triangulation from the time they were political toddlers.

Studebaker says that we can’t count on any of these candidates if we want Medicare for All, or a host of other policy improvements. He thinks we need someone who was too left-wing for the Democratic Party in the 1970s, and there is only one such person left alive: Bernie Sanders.

Wrongo isn’t sure. The NYT’s David Leonhardt, in his “Secret to Winning” column, says that the Democrats need a candidate who can, and will run as an economic populist:

They need a candidate who will organize the 2020 campaign around fighting for the little guy and gal….It would be a campaign about Republican politicians and corporate lobbyists who are rigging the game, a campaign that promised good jobs, rising wages, decent health care, affordable education and an end to Trumpian corruption.

Leonhardt thinks that several of those younger Democrats can do the job. He says that the formula is: Return to an updated New Deal. Put the public interest first, not the interests of the over-privileged elites. Force corporations and the rich to pay increased taxes.

Norm Ornstein notes that by 2040, 70% of Americans will live in 15 states, which means that the other 30% of the country will choose 70 of our 100 senators. And the 30% that are in charge of the Senate will be older, whiter, more rural, and more male than the 70%.

Whomever the Dems nominate must have a plan to successfully strip away a few red states. Economic populism can help do that, since it helps the working classes and unemployed. Higher taxes on corporations and the wealthy, a higher minimum wage, and universal health care coverage are the cornerstones of the winning strategy.

The nominee must be someone who is authentic, not someone who is simply an ideologically pure lefty.

Being authentic means someone who doesn’t poll test every idea, and doesn’t base their messaging on what the editorial board of the NYT or WaPo thinks are the right ideas.

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Funding The Revolution

The Daily Escape:

Lake Louise, Alberta, Canada in snow – photo by Yan Gao

When the President and the incoming Speaker of the House get into a televised shouting match over whether we have enough money to fund Trump’s wall, you know that things have to change in America. They’re fighting over use of a limited resource, the US government’s funding.

We now have within our means the ability to feed, clothe, shelter, and educate everyone. But, as a country, we are unwilling to do so, because we buy into neoliberal economic theory. Never in history have we had the ability to make our species as secure as we do now, but we choose instead to make as many as insecure as possible.

Until about 1980, economic growth created a level of prosperity that earlier generations of Americans could only dream about. But, economic growth no longer makes people more economically secure. We’ve become prisoners in a system that promotes permanent growth, where wages stagnate, schools decay, and Goldman Sachs sits inside our government.

The question we should be asking is: How can our politics provide an answer to our people’s need for economic security? We know that neoliberalism has reduced many of our people to states of economic insecurity. We know that our economic and social order must change, and profoundly, or face an eventual revolution. This isn’t an option, it’s a certainty.

That means that only state funding will create the (peaceful) change we need.

Here’s a big idea from Richard Murphy, a UK tax accountant:

…To put this another way, what may be the biggest programme of change ever known in human history is required in very short order. We need new energy systems; transformation of our housing stock; new transport infrastructure; radically different approaches to food that might even require rationing if we cannot create change any other way; different ways of working and new ways of using leisure time.

Murphy goes on to say:

But this must be done in a way that increases certainty. Jobs must be created on the ground…And I mean, in every constituency….but the transport and other infrastructure must be provided in that case and that does not simply mean more roads. The social safety net must be recreated. That means a job guarantee. It also means a universal basic income. And business must be transformed. Since that process will be incredibly expensive this requires capital and if that means state investment and co-ownership, so be it.

Murphy says that if this was wartime, our government would find the money to fund radical change. He says that we can no longer just extract higher taxes from the rich to solve our funding requirements, we need to create a vision, a plan and funding to achieve the change required.

One way to fund a portion of these requirements may be to restrict funding for the military, to eliminate tax breaks and subsidies for corporations. More from Murphy:

The time for pussy-footing is over. We know what we need to do. We know the scale of the issue. We know the reasons for acting….and we know we can pay for it. This is not left or right as we know it. And any party not addressing it is part of the problem and not the solution.

He’s suggesting deficit financing for societal gain. What are the chances that revolutionary change can happen? Almost zero today. Left to our political class, we’re just going to keep on doing what we’re currently doing, that is, until we can’t.

As we said yesterday, people say, “It’s the system, we can’t change it”.

But, in the Middle Ages, the exact same thing could have been said about feudalism. That institution was deeply entrenched, it was “how things are, and were meant to be.” It was inconceivable that something like democratic government could ever succeed feudalism, yet it did.

Today, our revolutionary task is to allow democracy to express its full potential to reshape and revitalize our social and economic life.

We must begin by setting priorities, taking resources from areas that drain the economy. Then we need to devote those resources to things that will make for a healthier, more secure economy.

One example is to adjust the priority that military defense spending has in our economy. Let’s stop being the world’s policeman, nobody wants us to do it. Then, use the excess resources to build infrastructure, and renewable energy systems.

Everything else we need then will become easier to build.

It’s a matter of deciding what our priorities are, and voting for those who agree with that vision.

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Can America Learn From France’s Yellow Vest Movement?

The Daily Escape:

Turtlehead Pond, Groton State Forest, VT – October 2018 photo by mattmacphersonphoto

The Yellow Vests have thrown France into turmoil with their protests in recent weeks. They say they want lower taxes, higher salaries, freedom from gnawing financial fear, and a better life.

It’s a uniquely French phenomenon. Every automobile in France is supposed to be equipped with a yellow vest, so that in case of car accident or breakdown, the driver can put it on to ensure visibility and avoid getting run over.

That enabled the wearing of a yellow vest to demonstrate against unpopular government measures to catch on quickly. Most people had one. The symbolism was fitting: in case of an income inequality emergency, show people that you don’t want to be run over.

What set off the protests was a rise in gasoline taxes. But it became immediately clear that much more was driving the protests, that the gasoline tax was the last straw in a long series of measures favoring the rich at the expense of the majority of the population.

That’s why the movement achieved almost instant popularity and support.

The Yellow Vests held their first demonstrations on Saturday, November 17 on the Champs-ElysĂ©es in Paris. Most French trade union demonstrations are well organized. People carry banners and listen to speeches from leaders at the end. But, the Yellow Vests showed up without any organization, and no leaders to tell them where to go, or to speak for the crowd’s demands.

They were just there in yellow vests, angry and ready to explain their anger to any listener. Their message was:

We can’t make ends meet. The cost of living keeps going up, and our incomes keep going down. We just can’t take it anymore. The government must stop what it’s doing and change course.

This is another example that income disparity between the rich and rest of us is out of control on a global basis.

The Yellow Vest protesters know that our political systems are controlled by the rich, and by their captured politicians. They are enriching themselves on the backs of the working and middle classes. Interestingly, it was the French economist, Thomas Piketty, who has researched and publicized the fact that the US has the largest income gap of any Western nation.

We should be paying closer attention both to Piketty and the Yellow Vests.

Global corporations and their fellow traveler politicians know that this sort of discontent is infectious, so politicians always try to quell it quickly. If the American 90% got the idea from France, revolution might migrate, as our revolution in 1776 migrated to France in 1789.

It is interesting that the NYT reports that in France, the Yellow Vest protests were totally unanticipated by the government.

We all know that income inequality is a growing global problem, so how can it be that the suffering of a country’s citizens and their protest against the French government’s plan to increase gas taxes would be “totally unanticipated by the parties’’?  Are the powers that be in France completely tone-deaf to the needs of their constituents?

So, are there lessons for America in the Yellow Vest movement? There should be, because the issue here is similar to the issue in France, and elsewhere in Europe. That issue is economic insecurity.

There’s no political will to deal with job insecurity. There’s no mechanism in place for those who can’t pay their bills. Soon, given automation and AI, there will not be enough work available for everyone to support themselves and their families. Underemployed people will still need food, shelter, and health care, so they might start by demonstrating in order to get them.

The sooner our corporate and political leaders decide to work on these problems, the better we all will sleep at night. But, no one in the top 10% of our economic strata has any idea what it is like to go without the necessities; it is simply inconceivable to them.

Many think that there are no consequences to the inequality that has developed in America since 1980, but there certainly will be consequences. We are in the midst of economic class warfare. The politicians, bought by the corporate plutocrats, are pushing their corporatist agenda down the throats of the middle and working classes.

We can either engage in a slow reform of Capitalism, or we can wait another generation, and participate in an urgent, rapid destruction of Capitalism as we know it today.

If we opt to go slow, let’s not kid ourselves. You don’t close a deep wound with a Band-Aid. It takes surgery.

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Tax Abatements Are Killing School Budgets

The Daily Escape:

Egmont National Park, NZ – photo by vicarious_NZ

A new report shows that US public schools in 28 states lost at least $1.8 billion in tax revenues last year as a result of tax incentives granted to corporations. The study analyzed the financial reports of 5,600 of the nation’s 13,500 independent public school districts.

Good Jobs First examined the first full year of reporting under a new accounting standard for school districts, adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules for all states and most localities. The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements.

This is extremely important, since most local schools are very dependent on revenue from property taxes, but they rarely have influence over corporate tax abatements granted by their towns, and/or the cities or counties where they are located.

And local voters have had no way to see how much they are forced to pay in additional taxes that were lost to enrich the pockets of corporate employers.

Good Jobs found that the 10 most affected states could have hired more than 28,000 new teachers if they were able to use the lost revenues. Or, they could have avoided higher home property taxes, or provided their teachers with better resources, or higher pay.

States and cities have long used abatements and other tax incentives to lure companies, or to keep them from leaving, and/or to encourage them to expand locally. Often, those companies make their choice of location based on the quality of local schools and colleges.

These abatement deals are made by local politicians and are meant to boost local economic development. Their proponents say the lost tax revenue is worth it, because they grow the local economy. But it is difficult to know whether the benefits outweigh the burdens.

And until GASB 77, it has been impossible to see just how much a school system may have lost because of a company’s tax break. The new rule is especially helpful in understanding local schools finances, because it requires the reporting of revenue losses even if they are suffered passively by the school system as the result of decisions made by another body of government.

Of the five districts that lost the most, three are in Louisiana. Together, they lost more than $158 million, or $2,500 for each student enrolled. The School District of Philadelphia, which only last year regained local control from the state after climbing out of a deep fiscal crisis, lost the second most revenue at $62 million.

Overall, nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million.

But most school districts have not yet complied with Rule 77, which was implemented in 2015. Good Jobs First estimates that another $500 million of subsidies and abatements are currently unreported.

Most of us believe that our governments are supposed to govern in the interests of the “general welfare,” that when voters put people in positions of power, based on the legitimacy of our electoral process, is the limit of our responsibility as voters.

We accept that somebody has to say what the rules are, and then enforce them.

But in our neoliberal economic times, voters have to remember that our governments often act as wholly owned subsidiaries of the 1%. It takes suspension of belief to accept that our republic, ruled as it is by an oligarchy, is working for the general welfare of all of our citizens.

Why do we think that, our “governments”, all of which are subject to capture and ownership by the few, are going to somehow provide decency, comity, or fairness to all of us?

We need to abandon the article of faith that the free market, one without government oversight, promotes the best economic outcome for all of us.

Today’s inequality says the opposite.

We need a new vision of the role of government. But it isn’t really a “new” vision. It is simply a return to insisting on the “promotion of the General Welfare for all” as the paramount object of government.

Here’s another thought from Gordon Wood, in his book, Creation of the American Republic:

In a republic each individual gives up all private interest that is not consistent with the general good, the interest of the whole body. For the republican patriots of 1776 the commonweal was all encompassing—a transcendent object with a unique moral worth that made partial considerations fade into insignificance.

The last outcome that American revolutionaries wanted was to be ruled by oligarchs. But, here we are.

We need to reform our capitalism.

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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