US Corporations – Page 5 – The Wrongologist

United Airlines: Try Doing The Right Thing

The Daily Escape:

Kravica waterfall in Bosnia Herzegovina -photo by Vedrana Tafra

Wrongo needs to start by saying that he has nearly 800,000 lifetime air miles on United Airlines (UAL) and, after the forcible removal of a paying passenger, he will try to avoid flying them again.

You know the story: United Express in Chicago loads passengers on a plane heading to Louisville. Then four employees arrive, needing seats. United was unwilling to offer enough compensation to induce passengers to give up their seats, and ordered four passengers off of the aircraft. Three left, but one refused, saying he had to be in Louisville in the morning.

United officials called the Department of Chicago Aviation, (part of the City of Chicago), the type of government agency that you never even knew existed, to remove him. Officers grabbed his arms, dragged him screaming across the armrests and along the floor and off of the aircraft, apparently injuring him in the process.

Unusual situations like this test organizations and their leadership. The key information here is that UAL wanted to make space to carry their own staff. The flight was not “overbooked”, UAL wanted to take back seats of a few paying passengers to accommodate their own staff. Apparently, UAL had bungled its own logistics, and then looked to its paying customers to solve the problem.

Poor customer service like this exists because of corporate culture, and because the company rarely has to pay a price for it.

In Wrongo’s past, he managed 1000 employees who had technical support and/or customer service contact with the public. We had a mantra: Know when to Do The Thing Right, and know when to Do The Right Thing. 95% of the time, the job is to follow established procedures, to guide the customer to a pre-established solution that had been vetted, one that was company policy.

Our staff’s job was to “do the thing right” in those cases, to follow our processes.

5% (or less) of the time, our people would see something novel, outside the scope of established policy. Something that called for reaching an equitable solution that wasn’t in any manual.

Then, our employees needed to “do the right thing”.

These aren’t difficult concepts to instill, they are entirely consistent with most people’s personal experience, and usually with their views about fairness.

United should try empowering people to do the right thing, when going by the book fails the customer. Whatever it might have cost to compensate volunteers, it would have been far cheaper than what UAL will now pay to this passenger as soon as he gets in touch with a personal injury lawyer and starts to make a case regarding legal processes and compensation going forward.

This also illustrates how America is changing: Large corporations are willing to use the police to enforce their policies. The passenger’s choice was to comply with police demands, or face physical intimidation, or worse. And Chicago’s sub-contracted police were too eager to jump into the fray.

We should ask: Did the injured passenger break any law by refusing to give up his seat? If that’s the case, the plane was filled with lawbreakers. If not, why was an element of the Chicago police doing UAL’s dirty work?

The Seventh Amendment of the Constitution guarantees a jury trial for civil cases in the federal courts:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved

The $20 amount is trivial in today’s economy. But that idea of a jury trial has been killed by corporatist judges on the Supreme Court, and other courts, and has been replaced the company’s terms of service. When you agree, it takes away most of your rights – disputes are resolved through arbitration that the corporation almost always wins. In this case, UAL’s terms of service gives them almost unlimited authority when dealing with its passengers, including a rule regarding “refusal of transport” (Rule 21) and “denial of boarding compensation” (Rule 25).

But that doesn’t justify bad corporate behavior. Or violence.

But, thanks to Congress’s bipartisan policy of ignoring anti-trust laws for several decades, just four firms now control the vast majority of domestic flights, and they don’t really compete with one another. This is from the DOT’s report on airline competition:

Less competition means you don’t have to worry as much about annoying people with delays or overbooked flights. It also means you can make a lot more money. There’s less pressure to cut ticket prices – even when the price of oil, an airline’s biggest cost, is plummeting – and it’s easier to introduce ever-more obnoxious fees and charges.

UAL isn’t worried about you sharing a video of a passenger being dragged off their plane, because you have no real choice when you fly from certain cities.

Ultimately, the responsibility to blunt this trend is ours. Replace Citizens United. Remove corporatist judges. Keep our police on a short leash.

Don’t just upload a video, organize your neighbors and vote!

Why Trump Doesn’t Talk About Jobs Anymore

The Daily Escape:

(Bamboo after snowfall in January, near Kyoto. Photo by Hiroki Kondo)

During the 2016 presidential race, Trump campaigned on populist themes. Now that he is in office, it is clear that his policies will be neither populist nor popular, but strictly pro-business. The first clue was his choice of Cabinet members. Despite promising to “drain the swamp”, nobody realized that he could do that by making lobbyists pointless, as their clients are in charge of the government: The CEO of Exxon is head of foreign policy, a former Goldman Sachs partner heads Treasury, the daughter of a ship owner heads Transportation, a corporate raider is at Commerce, and so it goes.

Two months into his presidency, it is clear that the Trump economic policy is pro-business, not pro-jobs, or pro-little guy. If you still have doubt, the Republicans just rolled back a series of Obama-era worker safety regulations. The Senate voted 49-48 to kill a rule that required federal contractors to disclose and correct serious safety violations.

It’s clear that industry CEOs can’t believe their good luck, despite having opposed Trump at every step before the election. He’s only asking them for some vague promises to add new American jobs in return. Acting normal when they are interviewed after leaving a Trump meeting must be the hardest part of their day.

Trump hardly mentions jobs anymore, because he knows there aren’t many. His bogey man of weak domestic manufacturing needs to be addressed: China’s total exports in 2015 were $2.3 Trillion. The US total exports in 2015 were $1.5 Trillion, second in the world.

And the total value of US manufacturing in 2015 was $6.2 Trillion and we are doing it with fewer people than ever before. Today, US factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.

Trump’s carrot and stick approach with US companies is theater. He is now industry’s number one value creator: When he commended Ford for deciding not to build a new plant in Mexico, the price of its shares rose 4.5%.

Softbank shares went up 6.2% after being praised by Trump for investing $50 billion in the US. Softbank’s motive was simple: Softbank owns Sprint, who would like to merge with T-Mobile. The authority to permit this merger lies with the new head of the FTC, yet to be named by Trump. Trump’s positive tweets feed Softbank’s hopes that the merger will be approved.

The Trump presidency has begun in the worst possible way for all who believed he would be an activist in new jobs creation for the lightly skilled, the people who overwhelmingly helped to elect him.

If the opposition wants to take Trump down, they should stop talking about Russia, and focus on Trump’s record with jobs creation. He made big promises – a job for everyone. It will be a long time (if ever) before a significant number of new manufacturing jobs materialize. This is true because Trump’s plan is to cut the fat out of government, cutting so many jobs that he might never add enough to make up for those he eliminates.

His plan is to use the freed-up funds to do something splashy with infrastructure. This would allow him to boast significant job creation, while downplaying the lost jobs in government. If Trump can figure out how to take unemployed, 50+ year old white males living in small town West Virginia, and make them productive, employed workers, then he’s a genius.

Capitalism hasn’t changed. A subset of oligarchs led by Trump have seized control of the US government. They are “nationalists”. Another subset, the “globalists” lost control of the state.

OTOH, the American people would have lost regardless of who won.

This is being repeated around the industrialized world, from Brexit, to Marine Le Pen’s right-wing challenge in France, to far right challenges to Angela Merkel in Germany.

The chaos described in Naomi Klein’s Shock Doctrine: The Rise of Disaster Capitalism is engulfing the world.

In honor of those who still believe that Trumpy will solve the jobs equation, here is Alan Jackson with “Hard Hat and a Hammer”:

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

Sample Lyrics:

Lace-up boots and faded jeans
A homemade sandwich, and a half a jug of tea
Average Joe, average pay
Same ol’ end, same ol’ day

New FCC Chair Guts Net Neutrality

Today we premiere a new feature, the “Daily Escape”, a photo that hopefully will take you away from all that is wrong just now. Some photos will be by Wrongo, but most will be from professionals. They will not have any particular relevance to the topic of the day. They are here to help you pause for a moment, and go to a different place.

Today’s Daily Escape: George Peabody Library, Johns Hopkins University

Now, on to what’s wrong…

The principle that all Internet content should be treated equally as it flows to consumers is called “net neutrality”. Net neutrality looks all but dead under Trump’s new head of the FCC. From the NYT:

In his first days as President Trump’s pick to lead the Federal Communications Commission, Ajit Pai has aggressively moved to roll back consumer protection regulations created during the Obama presidency.

Mr. Pai took a first swipe at net neutrality rules designed to ensure equal access to content on the internet. He stopped nine companies from providing discounted high-speed internet service to low-income individuals. He withdrew an effort to keep prison phone rates down, and he scrapped a proposal to open the cable box market to competition.

Before he became FCC Chair, Pai served as an FCC commissioner, one of the Republican minority under the Obama administration. In that role, he opposed reclassifying broadband providers as common carriers, which allows the agency to regulate them like utility companies, a necessary step if the FCC was to enforce net neutrality rules. That reclassification might be next to go.

Today consumers can pay Internet service providers for a higher-speed Internet connection, but regardless of the download speed they choose, under new Chair Pai’s plan, they might get some content faster, depending on how much their content provider has paid the service provider.

Tim Wu at the New Yorker offered some insight: (emphasis by the Wrongologist)

With broadband, there is no such thing as accelerating some traffic without degrading other traffic. We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t. They’ll be behind in the queue, watching as companies that can pay tolls to the cable companies’ speed ahead

The new rule gives broadband providers what they’ve wanted for about a decade: the right to speed up some traffic at the expense of others. The motivation is not complicated. The broadband carriers want to make more money for doing what they already do. Never mind that American carriers already charge some of the world’s highest prices for a service that costs less than $5/month to provide.

In the large-scale server market, Internet traffic is nearly free. In that market, a terabyte of data costs about $1/month. That’s 1000 gigabytes/month, if you are not familiar with usage of that size. The home user pays 10x to as much as 1000x more than that per month; $100 for 100 gigabytes of traffic is not uncommon. A recent offer from AT&T for 45 M/bit internet is $30/month, which includes 1TB of data/mo. So 1000 gigabytes costs $30, or $1 per 33 gigabytes, but, if you exceed ATT’s limit, the price goes up dramatically: You would have to pay $10 per each additional 50 GB.

No volume discount for you, but Netflix will get one.

Requiring access fees for faster service will be good for Netflix, since it won’t have to worry as much about competitive traffic, particularly from small companies. The ultimate result will be to lock in the current set of incumbents who control the internet, ushering in the era of big, fat, (and possibly) inefficient monopolies.

Republicans and big corporations like to say that they are against regulation because the free market should rule. That economic efficiency brings lower prices.

It is always a lie.

Our New Political Majority

(This is the last column for this week. We will resume on Sunday with cartoons. Everyone has reasons to be thankful, so take the time to talk about them with your loved ones, or your close friends this week.)

Last weekend, like most Americans, Wrongo spoke with friends and family about how we got to the disappointing political place where we are today.

Der Spiegel Online asked: If you think back ten years, could you have imagined in 2006 that America’s reality would be Donald Trump as president of the US? Probably not, but ten years ago:

Economic growth and job growth both fell in 2006 as the residential housing boom came to an end.
Wages were the smallest share of national income since the government began compiling the statistic in 1947.
Consumer debt soared to new heights, while consumer debt payments rose to the highest on record.

Those were dispatches from the ongoing war that corporations and neoliberal economic elites made on our citizens. And it didn’t stop there. After 2006, we had the financial meltdown and the Great Recession. Banks had to be bailed out. Millions of people lost their jobs. Debt grew, and faith in government’s willingness and ability to improve the fortunes of their citizens evaporated.

The clear losers were workers in traditional economic sectors, particularly in manufacturing. According to a study by economists David Autor, David Dorn and Gordon Hanson, the increase in imports from China have resulted in the loss of 1.5 million manufacturing jobs since the early 1990s.

But automation had a greater impact: In total, some 6.9 million manufacturing jobs were lost in the US between the early 1990s and 2011. For those who have lost their jobs, it seems that their political representatives have forgotten them. Particularly when establishment Democrats and Republicans continue to push for more trade, by which they mean more imports from our global corporations who continue to export those jobs to lower-wage countries.

In 2016, despite substantially better economic times, many American still worried about losing their jobs and their financial security. They saw themselves as the losers in a game that only helps corporations and the elites. This domination of our politics by the economic elites has produced a defacto disenfranchisement of everyone else.

A new political map has emerged, one that doesn’t neatly fit into the Left vs. Right model of our politics. The new dividing line is between those who support, and those who oppose, America’s economic elites and their neoliberal policies. Those on both sides of the old ideologies who distrust the elites are connected by their fear of being left behind. This was clear in 2016 in those precincts where Trump outperformed Romney, and where Clinton underperformed Obama.

This is today’s landscape, but in 1998, Richard Rorty, an American philosopher who died in 2007, wrote “Achieving Our Country” which predicted our current political situation. According to the NYT, the following fragment of the book has been retweeted thousands of times since the election:

Members of labor unions, and unorganized unskilled workers, will sooner or later realize that their government is not even trying to prevent wages from sinking or to prevent jobs from being exported. Around the same time, they will realize that suburban white-collar workers — themselves desperately afraid of being downsized — are not going to let themselves be taxed to provide social benefits for anyone else.

At that point, something will crack. The nonsuburban electorate will decide that the system has failed and start looking around for a strongman to vote for — someone willing to assure them that, once he is elected, the smug bureaucrats, tricky lawyers, overpaid bond salesmen, and postmodernist professors will no longer be calling the shots.

One thing that is very likely to happen is that the gains made in the past 40 years by black and brown Americans, and by homosexuals, will be wiped out. Jocular contempt for women will come back into fashion…All the resentment which badly educated Americans feel about having their manners dictated to them by college graduates will find an outlet.

Rorty’s basic contention is that the left abandoned its core philosophy in favor of a neo-liberal worldview that promoted globalism and corporatism. Rorty said in a lecture in 1997:

This world economy will soon be owned by a cosmopolitan upper class which has no more sense of community with any workers anywhere than the great American capitalists of the year 1900.

Mr. Rorty’s most prescient words:

The cultural Left has a vision of an America in which the white patriarchs have stopped voting and have left all the voting to be done by members of previously victimized groups.

Rorty said that in 1998. And in 2016, it was Hillary Clinton’s failed election strategy.

What’s so striking about “Achieving Our Country” is Rorty’s argument that both the cultural and political left abandoned economic justice in favor of identity politics, ignoring too many economically disadvantaged Americans.

According to voter turnout statistics from the 2016 election, 58.4% of eligible voters actually voted (135.2 million). Clinton received about 63.7 million votes (27.5% of eligible voters) to Trump’s 62 million, (26.8%) while 9.5 million votes went to others.

This means that 41.6% of America voted for nobody, far outweighing the votes cast for Trump or Clinton.

That the majority of Americans did not vote is not because they don’t care. They voted no confidence in a political system that forgot about them a long time ago.

A minority elected Trump. The majority voted against our neoliberal political system.

(BTW, Tuesday was the 53^rd anniversary of JFK’s assassination. While it remains fresh in Wrongo’s mind, it hardly registers in the minds of the press or the public. A new idea on Oswald’s motives appeared in the LA Times. Take a look.)

Hail The Orange Overlord

(Wrongo will say more about Veteran’s Day during Sunday’s cartoon edition. For today, let’s acknowledge that Veteran’s Day is one of America’s most patriotic holidays, and that this year, it feels very disappointing to many of us. Leave that aside. Take a minute to reflect on those who fought for us so that we have the right to vote for whomever we please.)

Regarding the election: Aren’t you happy that America is on its way to being great again?

For both the winners and the losers, please don’t make things worse than they have to be by deepening the divide between the two political camps. Most of all, try to be understanding of each other. Half of the country is not reacting well to this, and some on both sides are going to say things that they’ll regret, or that put them at odds with you and your core values.

People aren’t at their best when they’re afraid and confused, so take a beat, and let the next month or two go by without overreacting. There will plenty of time to do that after the inauguration.

And there is little value for Democrats in performing a self-flagellating post-mortem. We can analyze the results, but we can’t change them. We know what went wrong, even if we won’t admit it. Here’s what has to happen:

Democrats need to find a way to make sure that their primary process favors new faces with bold, inspiring ideas. We can’t have any more competent retreads. Mondale, Dukakis, Gore, Kerry and Hillary Clinton were all competent technocrats who were really weak candidates. How many times must we replay this record before changing direction?
It’s time for Democrats to stop using white working classas a pejorative. Not so long ago they were the bedrock of the New Deal Democratic Party. Find a way to be respectful. Think about how to bring them back to the Democrats’ side.
There is one argument that we need to see less of: that the demographic makeup of the US is sure to produce a Democratic paradise. This argument is false, as we learned on November 8, and it promotes lazy thinking by the leaders of the DNC: the “We’ll just sit back and they’ll drop into our hands like ripe fruit” kind of thinking.

Finally, the notion that since the old white people will die off, we should focus solely on Millennials is stupid. Time makes more old people every day. And as people age, they change their opinions and politics.

Hillary and her campaign team failed. They raised $1.1 billion by Election Day, and lost conclusively. Their strategy, and its execution were both failures. If you spent a $billion in the corporate world and failed, you would be fired immediately by your organization. Dems should take no consolation from Hillary winning the popular vote. It doesn’t change who the president is. The real numerical difference is very small, and may even be reversed by the time all votes are counted.

Hillary did not articulate an inspiring vision. Her damned emails and the Clinton Foundation were self-inflicted wounds. Her team’s strategy of micro-targeting, which worked well for an inspiring candidate Barack Obama, was self-limiting for the technocrat Clinton.

The 2016 problem that Democrats failed to address was that nearly half of the electorate was dissatisfied enough that they were willing to vote for Donald Trump, arguably the least qualified person to ever hold the office. And Clinton and her campaign team had no message or vision directed at the group Donald inspired.

Presidential campaigns are an affair of the heart, but Hillary was a cerebral candidate in a highly-charged emotional situation.

The so-called Deplorables have spoken. Democrats have opened the door and let the Right Wing demons in. The GOP now has free reign. And doubtless, there will be no mercy dispensed as they roll back the new deal legislation that remains of the books.

It is likely that the “lesson” the DNC will learn from their loss will be to move even further to the right. Yet, when Americans have to choose between an ersatz Republican-lite and the real thing, they will choose the real thing every time. If the DNC had an ounce of clever thinking, they would recognize the need to be once again have a platform that is:

Fully committed to adding more jobs, jobs, jobs
For reining in the economic power of large corporations
For reversing income inequality
For Medicare for all
For additional taxation of the highest personal income brackets
Against endless war
Against Citizens United

The question is whether progressives attempt to “reform” the Democratic Party, or whether they organize a new party. It might begin like the Republicans began when they split from the Whigs. The Whigs split started in 1850, and by 1856, the Whigs were no longer a national party.

Maybe in these times, a new “American Justice” party could recruit Elizabeth Warren, Bernie Sanders, Kamala Harris, Tulsi Gabbard, Gavin Newsom and most important, a battalion of young messengers to bring a third party to power in the US.

If that doesn’t happen, we need to see the DNC leadership’s heads on a pike.

In either case, we face a decade or more of rebuilding progressivism into an American political majority.

Happy Birthday to our National Park Service

100 years ago yesterday, Woodrow Wilson signed the bill that created the National Park Service (NPS). The National Parks are truly a great American resource, showing us nature in a near-pristine form, much as it might have been thousands of years ago. The parks also give us insight into places that are an important part of our national heritage, such as battlefields, or landmarks, like the Statue of Liberty.

There was a time in America when protecting our heritage through preserving open space was thought to be a civic duty. Alas, that is no longer considered a responsibility by recent Congresses. Obama has used the Antiquities Act as a way around the stasis in Washington, creating several national monuments.

The most recent is the Katahdin Woods and Waters National Monument in northern Maine. There have been calls for a national park in northern Maine for a very long time, but the lack of federally controlled land and the hostility of local residents who believe the timber industry is going to make a comeback, made it impossible to get a park designation. But Roxane Quimby, founder of Burt’s Bees, gave almost 90,000 acres of pristine land to the government to help make something happen.

Opinions in Maine were mixed. There are more than a few folks who want the land to remain available to the paper mills, should the paper industry ever return to Maine. Republican Gov. Paul LePage denounced Quimby’s donation:

That’s one way to get out of paying taxes to the state of Maine…It’s also an ego play for Roxanne Quimby and Senator Angus King. It’s sad that rich, out-of-state liberals can team up with President Obama to force a national monument on rural Mainers who do not want it.

Last time we checked Quimby and King were in-state liberals, and the land was given to America, not to Mr. Obama.

Of course, the NPS faces major problems on its 100^th birthday. An NPR report indicated that the service is facing challenges like climate change, overcrowding, underfunding and relevancy. Regarding climate change, the parks are having to adapt to rapid changes as we saw in Glacier National Park, where most glaciers could be gone by 2030. The parks are trying to educate the public about climate change, despite continued hostility from Republicans who refuse to fund it.

Relevance is a big issue. Surveys show that the average park visitor is 41 years old and white, not the future of a young, diverse majority America that will be here about the same time as the glaciers disappear.

Finally, the number of sites managed by the NPS has grown from 35 in 1916 to 400 sites today. That has led to substantial deferred maintenance, and given that Congress is unlikely to come up with additional funding, the NPS is seeking corporate funding, and possibly sponsorship.

Imagine Yellowstone: brought to you by Coca-Cola…

This brings into question of the very meaning of the commons: If we sell sponsorships, who owns the Grand Canyon? Who decides how Glacier National Park should be managed?

But, in a world where the GOP won’t agree to fund the parks, that’s what you should expect.

On a happier note, here are photos taken on our final days in Banff National Park in Alberta, Canada. Here is Moraine Lake, a small, jewel-like glacier-fed lake, created by gigantic rock slide:

DSCN5657

The distinctive color is from the sunlight reflecting off of dissolved particles of finely ground rock called “glacial flour”. And here is a photo of Lake Louise in Banff:

DSCN5694

Lake Louise was named after Princess Louise Caroline Alberta (1848–1939), the fourth daughter of Queen Victoria. Apparently, the Province of Alberta is named after her as well. She never visited.

Here is a close-up of the Louise Glacier above the lake:

DSCN5676

The glacier is 300’ thick at the edge of the cliff wall.

Trump’s Same ‘Ol GOP Tax Plan

Neil Irwin at the NYT compared the Clinton and Trump tax plans. Hillary’s raises taxes on the rich, and adds ~$1.1 Trillion to federal tax revenues over the next 10 years. The Pant Load’s plan is under revision (again), but, his old plan reduced revenues by ~$9.5 Trillion over the same period, and while his new plan will probably cost less, it will still create red ink.

Jared Bernstein had a few points which you might not have picked up on:

…the plan is pure, old-fashioned, supply-side, trickle-down orthodoxy. How that squares with Trump’s play for disaffected working class voters hurt by globalization is left as an exercise for the reader.

Bernstein’s best point is about the “pass-through” income loophole Trump creates. His new plan sets the top income tax rate at 33% but creates “a much lower rate than 33% for a substantial number of very-high-income households by allowing people to pay a new low rate of 15 percent on “pass-through” income (business income claimed on individual tax returns). According to the Tax Foundation, pass-through businesses now earn more net income than traditional “C” corporations (like GE or Ford). So of course, Republicans want to lower their tax rates. More from Bernstein:

More than two-thirds of all pass-through business income flows to the top 1 percent of tax filers.

And it will probably get worse: When you can pay a lower rate on a particular type of income, you will visit with a tax lawyer and set up a Limited Liability Corporation (LLC). Then off you go to the boss and say, as Bernstein points out:

“I’m no longer Joe Paycheck, I’m Joe Paycheck, LLC. Pay me the same salary but call it a consultant’s fee for services provided by my limited liability corporation”. Joe then passes that income through from the business to the personal side of the tax code and pays 15% on it.

Where Joe might have formerly paid as much as 39.5%. This will allow the hedge fund and private equity guys to move from paying a mere 24% that they pay on earnings today to 15%, if Trump gets the GOP-led Congress to go along.

Trump also wants to repeal the estate tax. Like the prior “improvement”, this one will benefit the Donald personally. The estate size that must pay estate taxes today is $10.9 million. So if a couple has an estate smaller than that, they pay no estate tax. How many are paying it? Only 0.2% of estates (that’s 2 in a 1,000) pay it today.

So none of these are the “small family businesses” and “family farms” that Republicans whine about. If you have the better part of $11 million in assets, you ain’t that small.

A minute more on the LLC: LLCs were created by Congress to give owners of businesses the ability to avoid “double taxation” on taxable income they receive from their businesses. The theory is, business income from a C corporation is taxed twice: once at the corporate level and again at the personal level when dividends are paid to owners. Businessmen could have avoided double taxation by simply operating their businesses as proprietorships or general partnerships. But then they would lose the limited liability protection from creditors that C corporations and limited partnerships provide.

So Congress created the LLC hybrid to enable businessmen to have their limited liability cake and eat it too. But you don’t get the same deal: Wrongo and Ms. Right have paid into Social Security for over a combined one hundred years. Along the way, we could not deduct our yearly SS contributions, which means we paid income taxes on the income that we used to make our contributions. Now that we are receiving Social Security payments, we pay federal and state income taxes again on the payments we receive.

If we use some of our Social Security income to buy gas, we are taxed again in federal and state motor fuel taxes. Same when we buy goods and services, and pay state sales taxes.

Double, triple and quadruple taxation are pervasive throughout our economy, but it’s only the average Joes that pay them. So no tears for Mr. Trump, the Kochs and “job creators” who say they need a break from double taxation.

Or maybe ask your Congressperson for a similar break for you.

Trump is cutting taxes for the rich. If you think he is gonna help the middle class, he is hoodwinking you. You may see a few pennies in tax cuts while the rich take in extra millions to buy bigger, better penthouse apartments.

Meanwhile, the roads and bridges that you use to get to work will crumble even further, because he’s planning to give away the store. Paying your taxes is extremely important and new rules will mean a new way of getting this done, so before you worry, take a look at a tax planning Winnipeg lawyer or one in your state to discuss on how you can plan out your taxes better and keep up to date with any changes.

Capitalism, It’s Not You, It’s Me

There is a meme that has gone global since the early days of the Occupy movement. Here it is as a wall graffiti from Greece that uses the same meme we first saw in NYC in 2011:

Capitalism Lotek

Just kidding capitalism, it really is you.

The artist is a Greek who styles himself as Lotek. The name Lotek is derived from the short story (and later, a film) by William Gibson called Johnny Mnemonic. The story is set in 2021, in a world ruled by corporations. An anti-authoritarian gang that are called Lo-Teks, fight the power. They are in fact not low tech at all, but are high tech hackers. Sound familiar?

Greece is surely a place at war with neoliberalism and free market capitalism. So is it also time for us to reconsider capitalism?

Consider this from Mark Blyth in Foreign Affairs:

An inherent tension exists between capitalism and democratic politics since capitalism allocates resources through markets, whereas democracy allocates power through voting.

The compromises both systems have struck with each other over recent history shapes our contemporary political and economic world. Blyth observes:

In the three decades that followed World War II, democracy set the rules, taming markets with the establishment of protective labor laws, restrictive financial regulations, and expanded welfare systems.
Starting in the 1970s, a globalized, deregulated capitalism, unconstrained by national borders, began to push back.

And today, capital markets and capitalists are setting the rules, and democratic governments follow them.

Some background: Cutting taxes in the 1980s caused government revenues to fall. Deficits widened, and interest rates rose as those deficits became harder to finance. At the same time, conservative governments, especially in the UK and the US, dismantled the regulations that had reined in the excesses of the financial service industry since the 1940s.

The financial industry began to grow unchecked, and as it expanded, investors sought safe assets that were highly liquid and provided good returns: the debt of developed countries.

This allowed governments to plug their deficits and spend more, all without raising taxes.

But the shift to financing the state through debt came at a cost. Since WW II, taxes on labor and capital had provided the foundation of postwar state spending. But, as governments began to rely more on debt, the tax-based states of the postwar era became the debt-based states of today.

This transformation had profound political consequences. The increase in government debt has allowed capitalists to override the preferences of citizens:

Bond-market investors can now exercise an effective veto on policies they don’t like by demanding higher interest rates when they replace old debt with new debt.
Investors can use courts to override the ability of states to default on their debts, as happened recently in Argentina
They can shut down an entire country’s payment system if that country votes against the interests of creditors, as happened in Greece in 2015.
Citizens United dictates who runs for office in the US, and in many cases, who wins.

Now that the financial industry has become more powerful than the people, should we blindly follow capitalism’s meme as the only way forward?

Free-market rhetoric hides the dependence of corporate profits on conditions provided for, and guaranteed by, governments. For example:

Our financial institutions insist that they should be free of meddlesome regulations while they depend on continuing access to cheap credit from the Federal Reserve.
Our pharmaceutical firms have resisted any government limits on their price-setting ability at the same time that they rely on government grants of monopolies through our patent system.

To use a sporting metaphor, it’s as if the best football team purchased not only the best coaches and facilities, but also bought the referees and the journalists as well. Those responsible for judging economic competition have lost all authority, which leaves the dream of ‘meritocracy’ or a ‘level playing field’ in tatters.

In our country, the divide between the business oligarchs, the political class and “the people” increasingly appears unbridgeable, marked by hostility and deep distrust. When people are told for a generation that government mustn’t make decisions that interfere with free markets, it is inevitable that people will lose faith in democratic governance, and in government’s capacity to help them solve their problems.

Capitalism in its current form no longer works for the people. We have seen a reaction in the start of movements by Occupy, by Bernie, and by others in Europe.

Remember that the greatest prosperity in living memory in the US came during the brief social democratic moment, in the 1950s and 1960s, when the constraints on business were the greatest.

More democracy and more economic justice are the necessary foundations for the path to a more prosperous, and sustainable economy.

A reformed capitalism must be a part of what emerges from that fight.

Democrats’ Strategic Failure Continues to Haunt

When President Obama won re-election in 2012, Democrats increased their majority in the Senate, but the House of Representatives remained in Republican hands. In House races in 2012, 1.7 million more votes were cast for Democrats than for Republicans, but Republicans came away with 33 more Congressional seats.

How did this happen when in 2008, Republicans lost a “wave” election, and were looking at eight years in the minority? The Republicans were staring down a demographic tidal wave, and the Democrats were talking about a decade of changing politics. The Democrats had taken a super majority in the Senate. The real risk to the GOP was that, by the 2020 census, demographics could keep them in a semi-permanent minority for a very long time.

Then, along came a Republican strategist named Chris Jankowski. He had a strategy, one which the Democrats failed to react to. A strategy that turned a period of a likely permanent GOP minority to a GOP majority in four years. All of this is covered in “Rat-F*****: The True Story Behind The Secret Plan To Steal America’s Democracy“, by Salon’s editor-in-chief, David Daley.

Jankowski’s strategy was to gain control of as many state legislatures as possible in 2010. The plan was to control the state’s redistricting process for Congressional districts, once the result of the 2010 Census was available. That is because state legislatures draw most of the congressional boundaries across the country. The GOP’s plan was called REDMAP for Redistricting Majority Project. The idea behind REDMAP was to hit the Democrats in several state legislatures where Democratic statehouse majorities were thin. They targeted races with vast sums of money and were able to flip many state houses.

In 2009, Democrats held the majority of seats in both houses of the state legislature in 27 states. In six more, they held a majority in one house. The Presidency, the US Senate, and the House of Representatives were all in Democratic hands.

In 2010, Republicans gained nearly 700 state legislative seats, which, was a larger increase than either party has seen in modern history. The wins were sufficient to push 20 legislative chambers from a Democratic to a Republican majority.

Most significantly, the GOP took control over both houses of the legislature in 25 states.

REDMAP’s success was made possible by funding from a super-PAC called the Republican State Leadership Committee. It raised $30 million, mostly from corporations, of which $18 million was received just weeks before Election Day.

Pennsylvania is an object lesson: So skillfully were the lines drawn by the Republican legislature that in 2012, when President Obama carried Pennsylvania by 300,000 votes and the state’s Democratic congressional candidates collectively out-polled their rivals by 100,000 votes, Republicans still won 13 of Pennsylvania’s 18 seats in the House of Representatives.

In Michigan, the 2012 election was a huge success for Democrats. Voters elected a Democratic US Senator by more than 20 points and reelected President Obama by almost 10 points, but Republicans ended up with nine of the state’s Congressional seats to the Democrats’ five.

This was among the greatest political achievement in modern times. If you’re a Republican, you look at this and say, we played by the rules, we played within the law, and we won!

And the Democrats spent 2009-2011 asleep at the wheel, presiding over a catastrophic strategic failure.

Worse, the GOP plans were announced by Karl Rove in a March 2010 op-ed in the Wall Street Journal. Rove said they were going to use redistricting to take back the Congress. The GOP plan was in plain sight.

This takes us to Hillary Clinton’s possible choices for Vice President. Apparently, she is leaning towards Tim Kaine, (D-VA). Kaine is attractive in that Hillary needs to win in Virginia to win the presidency. Kaine is a Harvard-educated lawyer and was governor of Virginia from 2006-2010.

We mention him here since he was Chair of the Democratic National Committee from 2009-2011.

That’s right, it was Tim Kaine who the Republicans outsmarted with their REDMAP strategy. It is Tim Kaine who let the GOP place so many different locks on the door to Congress. Undoing that will take years of really concentrated effort, state by state, chamber by chamber. It’s going to take the Democratic Party at least until after the 2020 census to undo what Tim Kaine let happen in 2010 and 2011.

Perfect choice for VP. He’s the right guy to follow a Hillary Presidency.

In preparation for the next census, Democrats have come up with a REDMAP-like plan of their own. They call it Advantage 2020, and say they plan to spend $75 million.

Republicans have announced REDMAP 2020. Their spending goal?

$125 million.

The Pant Suit vs. the Pant Load – Jobs, Part Infinity

We are in a time when a presidential candidate’s personality counts for more than the candidate’s policies. Candidates obfuscate on most policy issues and the media lets them get away with absolutely outrageous declarations of near-facts or outright half-truths.

One policy we must make them nail down explicitly is their jobs policy.

The key to making America great again is adding more jobs. Wrongo is a pest on this subject, but without more jobs, growth in GDP is harder to achieve. Tax revenues are more difficult to grow. People who are idle get into trouble.

The Pant Suit and the Pant Load know this, so they will talk from here to November about adding manufacturing jobs back to cities that lost them starting in the 1970’s. Those jobs are never coming back, but both of them are working hard to convince you they can do it. Consider this, from Parallel Narratives:

We’re now being told by folks who know better that all we need to do to bring those jobs back, to resurrect a future we can believe in, or make America great again, is to elect the outsider politician who is not beholden to elite interests like banks, CEOs and politicians. Unfortunately, that horse has left the barn, those jobs are gone for good…

A great example of a politician braying the “I can bring jobs back” mantra was in Sunday’s NYT business section’s column, “Preoccupations.” In it, a young couple had the option to work from home, so they moved from Austin, TX, that hot-bed of tech, to South Portland ME, not so techie. They work for two different firms from two home offices. Then, they are invited to attend a funds-raiser for a gubernatorial candidate: (emphasis by the Wrongologist)

The candidate raising campaign funds was a hard-working lawyer who seemed genuinely well meaning, but no one had told him that his economic platform of protecting manufacturing jobs and Maine’s traditional industries wasn’t going to fly with an audience of health care professionals, programmers, web designers and researchers…We muttered to each other that this guy didn’t have a place in his platform for people like us, many of whom worked for employers in other states. Our checkbooks stayed in our pockets.

If you hear this kind of BS from the Pant Suit or the Pant Load, your checkbook should also remain hidden.

While the low-wage jobs problem has been around for more than 40 years, America’s politicians are still peddling the same solutions. In fact, a new analysis from the White House’s Council of Economic Advisers (CEA) released Monday shows that only 88% of men ages 25 to 54 are participating in the US workforce. The CEA reports that the US has the third-lowest labor-force participation rate for “prime-age men” among the world’s developed countries. We have done so well that, on a percentage basis, Greece, Slovenia and Turkey all have more men working than the US does. Greece! The decline is concentrated among less educated. Here is a chart:

Male Labor Force Part by Edu

More than 95% of men used to work in 1964, regardless of their educational attainment. Today, you better have at least a bachelor’s degree if you want to be sure you will get a job. But it is worse than that. The CEA said:

In recent decades, less-educated Americans have suffered a reduction in their wages relative to other groups. From 1975 until 2014, relative wages for those with a high school degree fell from over 80% of the amount earned by workers with at least a college degree to less than 60%.

Clinton and Trump would have you believe that the problem is bad trade deals with China, the TPP, or immigration. Trump in particular, is saying that the political elites have knowingly caused this all at the expense of the American worker. There is a modicum of truth to that, but it is the American corporation and the American tax code that is closing out US jobs, and hammering the middle class. American corporations now pay about 11% of our total US taxes, down from about 30% of US taxes in 1960, as jobs (and markets) have moved abroad.

What are the Pant Suit and/or the Pant Load going to do in the face of advancing automation now facing us not just in manufacturing, but also in the service and knowledge industries?

It is time to make the candidates talk about this on the campaign trail.

The basic policy choice we have is to put people to work, or to continue to allow the profit motive to dominate. If the profit motive remains supreme, we will continue our relentless drive to reduce labor costs — by eliminating jobs, or by paying workers less for the same work.

To date, our leaders have chosen the latter path, and we have reaped the results. We have become a land of spreadsheets and flags.

The Wrongologist

Geopolitics, Power and Political Economy

Category: US Corporations