The “System” of Prisons

Politicians throw the term “reform” around all the time, and it usually means nothing. One problem that most agree requires reform is the US prison system. VICE did a fantastic job with their report, “Fixing the System,” which aired on HBO, about America’s broken criminal justice system. You can see it on YouTube:

https://www.youtube.com/watch?v=oTL_3WL5gfw

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

In July, VICE followed Mr. Obama to the El Reno Correctional Institution in El Reno, Oklahoma, and recorded the first time a presently serving president sat down with a bunch of inmates at a prison. He talked about their families, how they got into crime, why they copped a plea, what kind of businesses they’d like to start, how they might get financing to start those businesses, what kind of responsibilities they have as parents and to their communities, the reasons for and against the War on Drugs, and the impact of the cycle of mass incarceration on communities of color.

Perhaps a little background. The US has 2.2 million prison inmates. China is second with 1.5 million, and Russia third with 874,000. According to PrisonPolicy.org, The US incarcerates 716 people for every 100,000 residents, more than any other country. And Vox reports that 16 US states have more people in prisons than in college housing!

The HBO show says that this era of mass incarceration came about due to the war on drugs which focused on crack cocaine, meaning that many nonviolent people of color wound up in prison. Next, mandatory-minimum sentencing laws led to a throw-away-the-key culture, with long, destructive prison terms.

Well, leave it to David Brooks to take exception yesterday to the common view that prison reform would be a net positive for American society:

The drug war is not even close to being the primary driver behind the sharp rise in incarceration. About 90% of America’s prisoners are held in state institutions. Only 17% of these inmates are in for a drug-related offense, or less than one in five.

See what he did there? Brooks reframed the discussion to state prisons. Sadly, on the federal level, 48% were in prison for drug crimes, according to Department of Justice statistics. Brooks also misunderstands that the Federal sentencing minimums do not necessarily apply in state courts. He is incorrect that states hold 90% of prisoners. They hold 64%, or 1.4 million of the 2.2 million prisoners. They do hold the vast majority of violent offenders, with 725,000 (53%) jailed for violent offenses. Brooks wanders around and at the end, lands in his typically happy place:

Lifting the spirits of inmates, as described in the outstanding Atlantic online video “Angola for Life,” can also help. But the fundamental situation won’t be altered without a comprehensive surge, unless we flood the zone with economic, familial, psychological and social repair.

Well, Mr. Brooks, if you wanted to make sure that nothing changed, you would recommend waiting for an entire cluster of problems to be addressed, not one of which is remotely likely to happen. He doesn’t support any solutions. And he studiously avoids the stacked deck that makes the prison population so black.

He also missed the other elephant in the room. You can’t escape the parallel between mass incarceration and the growth of for-profit prisons. These corporations have contracts that require that cities and states provide them sufficient prisoners to meet an agreed number, or pay the prison in cash.

This incentivizes putting people behind bars, and should have nothing to do with free market capitalism. This is a policy error that must be corrected.

Two final points:

• Crime flourishes in areas where economic abandonment has produced poor schools and poor prospects. Yet Brooks has argued in the past that the minimum wage should not be raised, that welfare is wasted on moochers, and that the social safety net is too expensive to maintain.
• The plea-bargain system is another culprit. Somewhere in the 1970s, prosecutors figured out an easier way. Threaten an accused with massive charges and punishments, and then propose a plea bargain to a lesser charge. Because people are risk-averse, and/or do not have the money to hire the lawyers to fight the worst charges, they accept the plea bargain and end up in jail, without a trial. This is why it’s always important (if you can do so) to get in contact with a firm such as Mark Rees Law and similar alternatives to ensure you get a fair trial when it comes to your court date.

Conservatives like to cite the number of one-parent households and how the lack of both parents around makes it more likely that a child from a poor area will become a criminal. Mr. Brooks seems to think that releasing non-violent drug offenders from prison will not have much effect on society. But many prisoners are parents.

How many children could have a parent back with them, and maybe avoid incarceration themselves?

See the documentary. Reform the system!

Facebooklinkedinrss

Union-Busting at Pantex

Never heard of Pantex? It is the nation’s only nuclear weapons plant. The full name of the company is Consolidated Nuclear Security (CNS) Pantex. CNS is a combination of a who’s who of major defense contractors, including Lockheed Martin, Bechtel, and Booz Allen Hamilton. CNS took over Pantex in March, 2014.

The company assembles, disassembles, and tests nuclear weapon components for the US military. They also manage the storage and surveillance of plutonium pits. (Plutonium Pits? In Texas?)

Pantex is a union shop, and on August 29, more than 1,100 workers went on strike over CNS Pantex’ demand for health care concessions. CNS is also seeking the elimination of defined benefit pensions for new union members. In a statement, Council President Clarence Rashada said:

Wages are not the issue. Benefits, sick leave, medical coverage, prescription drugs, those are the issues.

Since work at Pantex involves exposure to dangerous chemicals and substances, the union is pushing back hard against CNS who is also seeking to shift greater health care costs onto its retirees.

The strike is the first in 45 years at Pantex, and it comes 18 months after CNS took over.

Let’s remember that Texas is a right-to-work state, so the union left one entry gate to Pantex free of picketers to allow managers and other employees to enter the plant without any commotion.

This is right up Scott Walker’s alley. The union-busting Republican governor of Wisconsin is on the campaign trail talking about preventing federal workers from collectively bargaining, creating a national right-to-work law and eliminating the National Labor Relations Board (NLRB).

And the Pantex union-busting is abetted by the Department of Energy (DOE). The union blames the DOE, arguing that a DOE rule capping worker benefits has put CNS and Pantex employees in untenable positions. By rule, CNS can’t offer employee benefits that would exceed the industry average by 5%. However, the industry baseline also includes manufacturers of cell phones and car parts, so the DOE is comparing labor costs on consumer goods and nuclear weapons, probably an Apple™ to warheads comparison.

Effectively shutting down Pantex over a labor rule that only affects 10% of DOE contractors also speaks volumes about leadership and priorities at the National Nuclear Security Administration (NNSA), which supervises Pantex and CNS.

The Project on Government Oversight (POGO) reports that in the run-up to the government’s award of the Pantex contract to CNS, CNS claimed it could save taxpayers over $3 billion by cutting redundancies and consolidating management, but NNSA never validated the claim. POGO quotes from a GAO report about the NNSA’s evaluation of the CNS bid:

Did not clearly or completely describe expected benefits and costs…lacked key analyses and assumptions for cost savings estimates…[and] was also missing a description of the unquantified benefits CNS management might or might not offer.

So, maybe it’s a matter of “screw the government” by contractors big and experienced enough to know better. POGO says a series of recent reports have found that NNSA is skimping on upkeep for old buildings, using obsolete fire safety equipment at weapons sites, and relying on broken security sensors to protect uranium stockpiles.

CNS also runs the Y-12 facility at Oak Ridge TN, former home of the Manhattan Project. Y-12’s primary mission today is providing secure storage of nuclear material for both the US and other governments. The Bulletin of Atomic Scientists calls Y-12 a “Poster child for a dysfunctional nuclear weapons complex”, noting that although Y-12 has not produced weapons for 25 years, its annual budgets have increased by nearly 50% since 1997, to more than $1 billion a year.

POGO reported that the NNSA spent $50 million on new security systems at Y-12 but couldn’t find a way to get security guards and security sensors working in sync. The overhaul was a result of a July 2012 incident in which a then-82-year-old nun and two others broke into Y-12 to protest the production of nuclear weapons. They made it into the building where most of the US stockpile of highly enriched uranium is stored. The DOE Inspector General found:

Troubling displays of ineptitude in responding to alarms, failures to maintain critical security equipment, over reliance on compensatory measures, misunderstanding of security protocols, poor communications, and weaknesses in contract and resource management.

Follow-on security tests found that the guard force at Y-12 was cheating on evaluations.

You would think that if there’s one place where this cutting corners on safety and security would not be tolerated, it’s with nuclear weapons. CNS has demonstrated in its Y-12 and Pantex situations that competent nuclear weapons handling and security at nuclear weapons facilities should be governmental functions.

They are far too important to be left to a private contractor’s business decision.

Facebooklinkedinrss

Socializing The Losses: Part Infinity

The Wrongologist often writes about privatizing profits and socializing losses, a system where businesses and individuals can benefit from the profits earned by their business, while the public gets stuck with the consequences, the long-term bill. Governments all over America play into this, from doing deals to bring or keep jobs in the state, to underwriting the costs of sports areas, to building infrastructure when a new business comes to town.

Here is another object lesson in socializing the losses. Some towns in North Dakota (ND) are beginning to worry about the debt that they have incurred to build infrastructure to support the boom in shale oil production.

Oil Price reports that oil production in ND exploded in the past five years to well over a million barrels/day, making North Dakota the second largest oil producing state in the country. The likely fallout from the recent fall in oil prices may have serious financial side effects for ND’s towns.

Consider Williston, ND, a town in the center of the shale oil patch that finds itself planning for the worst. The town is deciding how to cope with $300 million in debt, money it borrowed to build infrastructure to meet the rapid growth of people and equipment working in the oil patch. That meant building new roads, schools, and a water-treatment plant, all of which were paid for by the city. The debt was expected to be repaid from increased sales and real estate taxes that suddenly may not be flowing into local and state coffers.

Williams County Commissioner Dan Kalil told NPR that he fears the town has overreached and won’t recover quickly, as global demand for oil is expected to grow slowly over the next few years, and shale oil prices may not bounce back to the mid-2014 levels. He may be correct. Production is down about 5% from its all-time high of 1.2 million barrels per day in December 2014. But more declines are expected with drillers pulling rigs and crews from the field. Rig counts in ND have fallen to 76, far below the 130 that state officials believe is needed to keep production flat.

And ND is experiencing the negative side effects of an oil boom. The huge increase in drilling brought a wave of cash and people to once sleepy towns, fueling a boom not only in oil, but also in crime, prostitution, and drug trafficking. Consider that Williston went from a population of 14,000 in the 2010 census to an estimated 24,000 in 2014.

On June 3rd, the US DOJ, in conjunction with ND’s Attorney General, announced the creation of a “strike force” that would target organized crime in the state. The effort is a direct response to the rise in crime in the shale oil field towns in ND and Montana, which has been fueled by:

Dramatic influxes in the population as well as serious crimes, including the importation of pure methamphetamine from Mexico and multi-million dollar fraud and environmental crimes.

Too many people, too much money, too little economic security in the local economy. The weak oil players pull out, and the debt, crime and now unemployment, remain. And the towns and state government have to sweep up after the companies go.

That’s not all. The boom/bust cycle makes estimating the future population of Williston difficult. How many kids and spouses of oil field workers will settle permanently in the area? Does the school district build, or stand pat? Will more classrooms be paid for by more taxes, or will they be a money loser? In a boom, most oil field workers are temporary; towns need permanent residents in order to build schools.

Even if a semblance of the oil boom returns, and Williston attracts more workers who come to stay, Dan Kalil fears another boom would mean even more people, traffic and crime.

So, who pays? The taxpayers. The people who don’t pull out when the companies leave. The people who stay have to cover the hole in the budget, and tolerate fewer services when the money guys hit the road. Williston isn’t Detroit, but in both cases, the little people are left holding the bag.

Once again, a town makes a long-term investment, hoping for a return down the road in the form of increased sales taxes and property tax revenues. They sacrifice quality of life, looking for a return in the form of more and better jobs, and better house values. They pay higher prices for most things.

On the other hand, Williston’s Walmart is hiring at $17/hour.

But when you think about it, that is now a subsistence wage in Williston.

Facebooklinkedinrss

Technology Isn’t Creating Enough Middle Class Jobs

Yesterday we talked about how America is losing middle class jobs to technical outsourcing on our way to becoming a land of spreadsheets and flags. Today, let’s discuss another aspect of that; how technology continues to cost more and more mid-skilled jobs. We usually think of technology as a great panacea, making most of our processes more efficient. In fact, many of us can look back on the “sneakernet” of the 1980s and feel good about how far we’ve come with technology.

But technology has also reduced the number of middle class workers required, at a time when American wages are stagnant and benefits are falling for the remaining available jobs.

The meme used to be that if technology replaced workers, new jobs came along and net-net, more people were employed. Although things weren’t that simple, by 1900 if you were displaced, you could get another job because 99% of all jobs were still done only by humans.

Today corporations tell us that the knowledge economy can take as many workers as we can create, and since we can’t create them fast enough, technology firms need more of the H-1B visas we discussed yesterday. This is false. Facebook is touted as a prime player in the knowledge economy, but it only employs 5,800 to service 1 billion customers! Twitter has 400 million total users. It has 2,300 employees.

What is the value of Facebook and Twitter to the jobs economy? These are two of our very “best” success stories, and they only employ 8,100 workers. They have had a huge impact on society, but the total jobs they have created are only a rounding error in our economy.

Much of what we want to buy is produced in factories increasingly run with robots, and maintained and operated by small cadres of engineers. Increased sales of iPhones only add a few sales jobs at $12/hour in the US and not many new factory jobs in China. Also, keep in mind that globally, some 3 billion people are looking for work and the vast majority are willing to work for less than the average American.

We all know that technology is costing jobs, and by some estimates it could cost half of all current jobs in the next 20 years. So, we can expect an ever-greater number of unemployed chasing an ever-shrinking number of jobs that can’t be eliminated or simplified by technology. Thus, the prognosis for many medium and some higher-skilled workers appears grim. With this being said, technology is benefiting a lot of businesses and the way they operate. You’ll get a better understanding of it just by reading these Quotes about AI. Seeing as technology doesn’t look like it is going anywhere anytime soon, we might as well use it to our advantage in a business.

The oligarchs have seen these forecasts. That may explain their unwillingness to do anything serious to create effective jobs programs here at home. They don’t need to do anything, because there is a (virtually) infinite supply of skilled and unskilled workers in the overpopulated third world.

The issue is not technology, or robots, or restoring our manufacturing base. Nor is the issue better skills, or technology or outsourcing. We have too many people chasing too few good jobs.

Incomes will continue to stagnate, because automation does not threaten unskilled jobs. This is sometimes called “Moravec’s Paradox”, which says that, contrary to traditional assumptions, high-level reasoning requires relatively little computation, but low-level sensorimotor skills require enormous computational resources. The “Roomba” robotic vacuum cleaner is, despite years of development, just an expensive toy. It has had zero impact on the market for janitors and maids, yet, wages for American janitors and maids have fallen because of competition from the currently unemployed and newly arrived immigrants. While the Roomba aims to be a forward-looking cleaning solution, it still cannot compete with the manual vacuum cleaners, like Bissell’s, that still prove to be the preferred choice despite innovative attempts to move towards automation. See this link for Bissell vacuum cleaners – https://www.bissell.com/vacuums/upright-vacuum-cleaners/

If we forecast continuing technology breakthroughs (and we should), and combine that with the 3 billion people currently looking for work globally, we have to conclude that the planet is overpopulated if the goal is a growing global middle class.

This is why the quest for better technology has become the enemy of sustaining middle class growth in the developed world.

Facebooklinkedinrss

Monday Wake Up Call – May 8, 2015

“Ethics is knowing the difference between what you can do and what you should do.”Justice Potter Stewart

It looks like Scrooge McDuck runs human resources at Disney. Disney World laid off 250 tech workers, who were American programmers and computer operators that have been replaced by Indian techies with H-1B visas. The techs were supplied by HCL America, an Indian outsourcing firm.

H-1B visas are intended for high-level professionals who, in concept, fill jobs for which no Americans are available. 85,000 of these visas are granted each year, and they are in high demand. Technology giants like Microsoft, Facebook and Google repeatedly press Congress to add to the annual quotas, saying there are not enough Americans with the skills they need.

In Disney’s case, the Americans were not only available, they were actually working in the jobs.

The H-1B visa program has been great for tech innovation, and the Wrongologist supports it, but this is an egregious abuse of the corporate right to employment at will, and of the spirit of the H-1B visa laws. From the NY Times:

The chairman of the Walt Disney Company, Robert A. Iger, is a co-chairman with Michael R. Bloomberg, the former mayor of New York, and Rupert Murdoch, the executive chairman of News Corporation, in the Partnership for a New American Economy, which pushes for an overhaul of immigration laws, including an increase in H-1B visas.

Companies speak a lot about teamwork, esprit de corps, and group identity, all in the context of helping the company reach its goals. But the Disney lesson is that we’re really good at ignoring those lofty ideals, while driving an anti-employee, mean-spirited chase of a marginal dollar of profit.

If employers really need a foreign employee resource, they should be charged an annual fee of $50K for each H1-B visa they use. For truly unusual skills, it would be worth the fee. For Disney, who is just looking to buy labor for a few dollars less than the going rate for American citizens, it would remove the economic advantage. We need to ask our corporations to stop defending the indefensible.

Republicans shout from the mountaintops about illegal immigrants, while on the other hand, they are quite willing to add to the numbers of H-1B visas, immigration of a kind. Furthermore, H-1Bs allow for chain migration (kids and spouses) as well, and thanks to new rules, H-1B spouses can work as well.

Time to wake up America! Disney’s H-1B’s are the first step in a process. They have been brought in by Disney so that they can gain the experience to manage Disney’s IT operation. And some time down the road, Disney’s Florida HCL people will work with HCL’s India-based IT workers, allowing Disney to move most of their IT operation over there at a fraction of the cost that Disney pays here.

Corporatism has inverted Henry Ford’s mantra to pay his workers enough to afford his cars. The new mantra is, pay only a few employees enough to afford your goods, and let the government worry about the rest of them.

America has to be more than a spreadsheet and a flag.

Today’s wake-up is another in our spring bird collection. It is the Orchard Oriole, the smallest of North America’s orioles, it builds hanging, pouch like nests during its breeding season. We get both the Baltimore Orioles and these guys in Mid-May:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The Wall Street Journal had a blog post open letter to consumers asking why consumers didn’t spend more money. Imagine their concern, since mean US family income is stuck at the same level as in the late 1990s. Remember that the WSJ supports the TPP trade legislation, like the last deal that outsourced millions of middle class jobs. Please, WSJ, go back to talking to companies, and leave consumers alone.

A list of the top 50 restaurants in the world. 5 are in the US. Wrongo and Ms. Right are going to #49 later this month.

In a stunning discovery that overturns decades of textbook teaching, researchers at the University Of Virginia School Of Medicine have found that the brain is directly connected to the immune system.

Owning a home no longer plays the same role in the lives of Americans that it has in the past. And it is clear that many middle-income Americans cannot realistically aspire to become homeowners anytime soon. A recent survey conducted by the American Institute of CPA’s found that most Americans are now more concerned about having enough money to retire than about becoming a homeowner.

China has 30,000 tons of gold, (which is almost more gold than the rest of the world’s central banks, combined). It’s also important to make explicit that the Chinese are slowly laying the groundwork for it to take over the dollar’s role as the global reserve currency sometime in the future.

Chinese state media has warned that war with the US may be “inevitable.” Beijing published a policy paper detailing how its military will shift its focus from land and coastlines to the open seas. They criticized “external countries…busy meddling in South China Sea affairs. The money quote:

We do not want a military conflict with the United States, but if it were to come we have to accept it.

 

Facebooklinkedinrss

End Government Subsidies of Private Equity

We have written about taxpayer-funded corporate subsidies this week. Let’s talk about the Private Equity (PE) industry, where profit margins are pretty high. By PE we mean investing in assets that include equity securities and debt of operating companies that are not at the time of the investment, publicly traded. Having a number of streams of income coming from a variety of investments or income generating assets is one of the best ways to build wealth. You see, hPE is a re-branding of leveraged buyouts (LBOs) which were the way Wall Streeters built wealth in the 1980s.

In the past 35 years, we have seen a finance-led revolution that has generated fantastic wealth for PE managers. PE has in large part, helped create the growing chasm between America’s most wealthy and everyone else. This is shown in the disproportionate numbers of private equity and hedge fund principals in the top .1% of American wealth. That wealth doesn’t only come from just making a killing when the target company goes public or is acquired, it also comes from favorable tax treatments for the PE company principals and investors.

Although the PE industry is often held up as an exemplar of free-market capitalism, it is surprisingly dependent on government subsidies for its profits. In a typical deal, a PE firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it, or taking it public.

The key to this strategy is debt: the PE firms borrow to invest since, just as with your mortgage, the less money you put down, the bigger the potential return on investment. But debt also increases the risk that companies will go bust, so early on, the amount of debt PE firms employed was conservative.

That has changed in the last 10 years. After using debt to buy them, many PE funds now have their portfolio companies borrow even more. They then use that money to pay themselves “special dividends.” This allows them to recoup their initial investment while keeping the same ownership stake.

Before 2000, big special dividends were not common. But between 2003 and 2007, PE funds took more than $70 billion out of their companies. These dividends created no economic value-they just redistributed money from the company to the private-equity investors.

As an example, in 2004, Wasserstein & Company bought the mail-order fruit retailer Harry & David. The following year, Wasserstein and other investors took out more than $100 million in dividends, paid for with borrowed money. In 2011, Harry and David defaulted on its debt and dumped its pension obligations on the US government. And when an investment goes bankrupt, there are more fees, and maybe more tax write-offs for the PE partners.

Taxpayers are left on the hook. Interest payments on that debt are tax-deductible, and when pensions are dumped, a federal agency, the Pension Benefit Guaranty Corporation (PBGC) picks up the company’s pension liability. That means taxpayers are on the hook for those unfunded pensions.

And the money that PE dealmakers earn is taxed at a much lower rate than normal income, thanks to the US tax code’s carried interest loophole, which permits that income to be taxed at capital gains rates.

Most do not know that the single largest source of investment capital in PE funds is government pension funds. According to Preqin, a database company that tracks investment in PE, approximately 30% of capital in US PE funds is contributed by government pension funds. Government pension funds are usually called “public” pension funds, administered by government employees and governed by officials who are directly elected by the public or appointed by elected officials.

A key point about the power and reach of PE. They have more than $3.5 trillion under management. Assuming normal leverage (30% equity) that gives them $11.7 trillion in buying power. That’s about 40% of the value of publicly-traded firms in the US. Think about the political clout they have by investing government pension money. Not only do PE firms own a huge portion of America’s productive businesses, unlike the diffuse ownership of public companies, they control them outright.

So, PE is a government-sponsored enterprise, both via tax subsidy and via funding. We taxpayers are helping them to fabulous paydays, thanks to our Congress Critters.

If PE firms are as good at remaking companies as they claim, they shouldn’t need tax loopholes to make their money. If we capped the deductibility of corporate debt, and closed the carried-interest loophole, it would not prevent PE firms from buying companies or improving corporate performance.

But it would add to our tax revenues, and that might keep a bridge or two from falling into a river during rush hour somewhere in America.

The American Dream: You have to be asleep to believe it.” -George Carlin

Facebooklinkedinrss

Why Don’t Low-Wage People Get Better Jobs?

Regarding Tuesday’s post, “More About Taxpayers Subsidizing Corporations“, which deals with taxpayers subsidizing the low-wage employees of restaurant chains, long-time blog reader Kevin asks: “Why don’t the folks who flip burgers go out and get better jobs?” Excellent question.

Two thoughts. First, they should move up whenever possible, and the chart below about restaurant employee turnover should lead us to believe that they do move out, if not up. When it comes to workplace changes, everyone deserves the chance to move up into higher positions and therefore, this will increase the rate of employee turnover. Research from Work Institute has suggested that 22% of turnover was due to career development and a higher chance of job growth. Being able to excel in your chosen career can only happen if these people decide to make this change. But, whether they leave or not, those jobs will remain at or below minimum wage, and the taxpayers will continue to subsidize these restaurant corporations who underpay them. It falls to the social safety net to make up the difference. Take a look at restaurant employee turnover statistics:

Restaurant employee turnover

Source: People Report, a division of TDN2k

The burger flippers turnover is the highest among restaurant hourly employees, and it is growing. These are the people who don’t even get tips, so since employee turnover is the highest where wages are the lowest, it’s the burger flippers who move on. This could also be due to job satisfaction they may feel in the workplace. It could be argued that they do not feel the same level of appreciation within a service profession as they would in an office environment that would buy gifts for employees in order to boost their morale in an attempt to keep them for longer.

A second thought is, what jobs can they move up to? Here is a little background:

The US lost more than 8.84 million private sector jobs in the Great Recession. Now, five years after employment hit bottom in February 2010, private sector employment has returned to prerecession levels. The National Employment Law Project (NELP) indicates in a study that low-wage job creation didn’t just happen in the first phases of the recovery, but today, five years in, job growth is heavily concentrated in lower-wage industries. Lower-wage industries accounted for 22% of job losses during the recession, but 44% of employment growth.

Worse, low-wage jobs account for 100% of the net job growth in the economy. Today NELP reports that there are:

• 958,000 fewer mid-wage jobs than at the start of the recession
• 976,000 fewer high-wage jobs than in 2008

The National Restaurant Association’s 2015 economic forecast says the restaurant industry in 2014 added 1,000 jobs per day. It is projected to provide a record 14 million jobs in 2015.

So, where do the motivated, striving burger flippers go?

The glibertarians say the burger flippers should work hard, save money from their minimum wage jobs, get a better education, and move on to a higher paying job, maybe in an office or a laboratory. OK, that’s possible for some.

They say that Mr. Market determines what the value of a burger-flipping job should be. And, if it isn’t a living wage, the burger flipper should study some more.

But when they move on, odds are that they will move to another low-wage job, more likely than not, in the restaurant industry.

And regardless of what new low-wage job they take, the taxpayers’ subsidy of the Corporatists will continue.

Facebooklinkedinrss

More About Taxpayers Subsidizing Corporations

Yesterday we talked about how apartment rents can’t be afforded by minimum wage workers. Today, we look at one industry with low wage workers, the full-service restaurant industry. Full service restaurants are the large name brands like Appleby’s, Cracker Barrel, Chili’s, Outback and Olive Garden.

Full service restaurants employ over 4 million people and that is expected to grow by nearly 10% by 2022, which means that these companies are in a profitable market segment. The top 5 full service chains made $705 million in profits last year, while paying out another $751 million in dividends and stock buybacks.

A new report by the Restaurant Opportunities Center (ROC), shows that five of the ten lowest paid jobs as reported by the Bureau of Labor Statistics (BLS) are in full-service restaurants. Since many full-service restaurant workers receive wages below what is needed to meet their basic necessities, these workers rely on taxpayer-funded programs in order to meet their basic needs. We pay the full-service restaurant industry a double subsidy:

• High numbers of full-service restaurant workers are on public assistance
• By paying a less-than-minimum wage, customers are paying restaurant workers’ wages directly through tips

The ROC’s analysis looked at utilization of public assistance programs to estimate annual benefit expenditures for families of full-service restaurant workers for the years 2009-2013. Here is a summary of their findings:

• Nearly half of the families of full-service restaurant workers are enrolled in one or more public-assistance programs
• The cost of public assistance to families of workers in the full-service restaurant industry is $9,434,067,497 per year (that’s $9 billion for the math-impaired)
• Tipped restaurant workers live in poverty at 2.5 times the rate of our overall workforce
• The taxpayer underwriting of social programs for low-wage workers in a single Olive Garden is $196,970 annually.

ROC estimated that low wages and lack of benefits at the five largest full-service restaurant companies in the US cost taxpayers an estimated $1.4 billion per year. They focused on the major means-tested public programs that provide income supplements for working families. These included Medicaid and Children’s Health Insurance Program, or CHIP, the federal earned income tax credit (EITC), food stamps (the Supplemental Nutrition Assistance Program, or SNAP), basic household income assistance (Temporary Assistance for Needy Families, or TANF).

Since 1991, the federal tipped sub-minimum wage has been set at $2.13 per hour, but states may establish a minimum wage that is higher than the federal government’s. So restaurant workers in 22 states receive the federal sub-minimum wage of $2.13 per hour, while restaurant workers in 20 states receive higher state sub-minimum wages of up to $5.00 per hour. Restaurant workers in eight states receive the full minimum wage.

Women make up 66% of all tipped workers, and people of color make up 40% of the total. Unsurprisingly, their poverty levels are higher in states that pay a $2.13 sub-minimum wage than in states that pay one minimum wage for both tipped and non-tipped workers.

You will pay more for a meal at most of these restaurants than at the fast food places. And that cost will go up if you believe in a fair wage for a fair day’s work. Naturally, the industry, represented by the National Restaurant Association is fighting any increase in the minimum wage for restaurants. This is something ALEC has been working with the National Restaurant Association and state governments to fight.

How about if the 535 well-coiffed rubber stamps in Washington start by raising the wages on any companies where public assistance subsidizes payroll wages? Why should taxpayer money be going to fund stock buybacks and bonuses to restaurant chain CEOs?

We could dream big, of tying the minimum wage to the cost of local resources like housing. Given the problem we reviewed yesterday, the minimum wage could be linked to how many hours is necessary to pay a month’s rent and utilities.

Every low wage worker needs a place to sleep when they aren’t working. It shouldn’t be on the street so that their employers can repurchase more stock.

On our dime.

Facebooklinkedinrss

Monday Wake Up Call – May 18, 2015

The Amtrak accident in Philadelphia came hours before the House Appropriations Committee was due to meet to debate a transportation bill. Amtrak is a for-profit entity, but its board is appointed by the president, and it is entirely funded by the government, receiving roughly $1.4 billion a year in subsidies. It operates in the red, losing $227 million a year.

Congress has been considering tightening the purse-strings. The Senate has been slow to approve $7.8 billion in Amtrak funding that has been passed by the House. Much of the money would go to prop up sagging rails and refurbish rolling stock.

But John Boehner said discussing Amtrak funding in the wake of the crash was “stupid”. Boehner noted that the crash was caused by the train going too fast, not bad infrastructure. Republicans prefer to attack the national train system because only Democrats ride trains, not good truck driving folks. We should invest in modern high-speed trains to zip Americans around the country. We could also invest in a better safety infrastructure so that train wrecks don’t happen if they are the fault of the engineer or conductor. Instead, the rail industry and its Republican friends are pushing for the reduction of train crews on freight trains, which could cause more crashes.

Sadly, the Goldilocks Moment (when it’s “just right”) to discuss practical responses to a tragedy can be discerned only by Mr. Boehner. Yesterday was too early, and politicized the tragedy by pointing out how Republican policies and governance set the stage for eight people to be killed. At some point, John Boehner will tell us it’s now “too late” to get any legislation in the hopper.

Amtrak has received $45 billion in subsidies from the 1970’s to the present. That’s about one year’s taxpayer support for big oil. Democrats should absolutely push for greater Amtrak funding in the wake of the crash.

Don’t expect Boehner or any Republican to take any real heat for opposing this, but it makes their moral position on these issues completely clear.

Time to wake up America! Infrastructure upgrading is not anti-American. For your morning wake up call, here is the Veery Thrush, also called the Wilson’s Thrush:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The Antarctic’s Larsen “B” and “C” ice shelf’s are going away by 2020. NASA’s Jet Propulsion Laboratory says that the “B” shelf is now “approaching demise.” NASA adds that the ice shelf “is likely to disintegrate completely before the end of the decade.” But, global warming is a hoax…

A 10-year-old oil leak where an offshore platform toppled during a hurricane could continue spilling crude into the Gulf of Mexico for a century or more if left unchecked. No, it isn’t the BP leak. Taylor Energy Company owned the platform and has played down the extent and environmental impact of the leak. The Coast Guard provided a leak estimate that is about 20 times greater than one provided by the company. Quelle surprise! An American company tries to minimize its responsibilities.

A New Zealand company called Touchpoint Group is building a robot that will be angry all the time. The idea is to let angry customers speak to a machine instead of human call center agents. The robot will collect the data to better serve you with bullshit responses.

Inequality Watch: Scientists find alarming deterioration in DNA of the urban poor. Well, if you lived a life of constant worry over money and how you would pay your bills, raise your kids with enough food, clothing and self-respect, your DNA might deteriorate too!!!

Raul Castro says that Pope Francis may get him to return to religion. Mr. Castro said: “I will resume praying and turn to the Church again if the Pope continues in this vein.” This Pope may really be the Rightologist!

Here is an extra wake-up for you this spring morning. Unclear how this pose happened, but it is relaxing:

Frog

Facebooklinkedinrss

Corporations Are Using Free Speech To Undermine Regulations

There is a Corporatist supremacy movement operating below the radar in America. US Corporations are using the First Amendment to undermine the corporate regulatory fabric that has been built up since the founding of the Republic. You know about the Supreme Court’s decision in Citizens United, which said that corporations were legal persons entitled to free speech rights. You remember last year’s decision in Burwell vs. Hobby Lobby, where the Supreme Court decided that the mandate in Obamacare requiring corporations to pay for some of their employees’ contraception is a violation of the company’s First Amendment right of religious expression.

Here are a few examples you may not know about:

On April 14, 2014, a federal court ruled that corporations have a First Amendment free-speech right not to tell anyone if they’re financing “war and humanitarian catastrophe” in Congo. The court decided that although corporations can usually be required to disclose “purely factual and uncontroversial information,” but, in this case, that this principle is limited to government efforts to protect consumers from deception.

The regulation was an obscure provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that requires companies to inform the public if their products use conflict minerals. In the case of conflict minerals, the Act’s goal is to let consumers know if the products they are buying are helping to finance war.

To the court, that provision of Dodd-Frank is unconstitutional, because “it requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups.”

This is part of a growing Corporate movement to use their rights of Free Speech under the First Amendment to escape regulation, and it has been steadily winning victories in the federal courts.

Another case: In 2011, the National Labor Relations Board (NLRB), released a rule requiring businesses to put up an 11”x17” black-and-white poster notifying employees of their rights under federal law. Beneath the official NLRB seal and above the phrase “This is an official government poster,” it informed employees that they have the right to join, or not to join, a union, and that they cannot be coerced into doing either.

The National Association of Manufacturers sued the NLRB and In May, 2013, the US Court of Appeals in the DC Circuit struck down the NLRB’s rule on First Amendment and statutory free speech grounds. The Court said it did not matter that the “speech” in question was a non-ideological poster that stated US law. And it did not matter that the rule placed no constraints on companies’ speech or on the free flow of information. The Court held that the act of compelling a company to “host or accommodate another speaker’s message” was enough to violate its free speech.

Over the past few years, corporations like Nike, Verizon, Google, and the credit ratings agencies like S&P and Moody’s have been crafting (and winning in court) with innovative new First Amendment defenses to blunt all sorts of “government intrusions”.

What’s going on? The right of free speech was closely connected with the defining idea of government by “We the People“. James Madison explained that in his view, “free communication among the people” is “the only effectual guardian of every other right.”

From the Country’s founding until late in the 20th century, the courts didn’t rule that the First Amendment protected very much of corporate speech. But now, Corporations are busy collecting a portfolio of First Amendment case law that establishes that corporations have a First Amendment-protected right to avoid much of government regulation. If this continues, it will change our society:

• There will be no corporate transparency
• No way to enforce workers’ rights
• No way to compel companies to protect investors or shareholders

Most financial regulations will cease to provide meaningful value to consumers.

Perhaps we have to ask our Courts to remember Justice John Marshall, who wrote in 1819, “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.”

All of the regulations that helped foster a strong economy and a strong middle class during the 1940’s through the 1970’s are now being weakened through a Corporatist revolution, enabled by our courts.

America is looking at the start of another period of unfettered capitalism. The rise of the Corporatists is at hand. We have reached the point now where we have government of the Corporation, for the Corporation.

What are you (we) gonna do about it?

Facebooklinkedinrss