Tag: Income Inequality

Angry Men Now a Political Force

The spin after the SOTU was about how angry voters are, and the political opening that creates, despite the genuine good news on the economy. Here is Mr. Obama from the SOTU:

Most of all, democracy breaks down when the average person feels their voice doesn’t matter; that the system is rigged in favor of the rich or the powerful or some narrow interest.

We can’t change the fact that some people are angry, but this article from the Washington Monthly by Andrew Yarrow points to some stunning facts about how men in particular have been left by the wayside of American life:

At least 20% of the nation’s 90 million white men have been pushed to the sidelines, either retreating or storming out of the mainstream of American life. They are not the men you see at work, who play with their children, go out with their wives or partners, are involved in their communities, and earn a living to save for their children’s education and their own retirement. What they do doesn’t register in…the gross domestic product…

Yarrow continues:

We know that they are out there. But they don’t fit old stereotypes of failure, so we’ve had trouble coming to grips with who they are or naming the problem. Parts of their stories have garnered significant attention, but we don’t see that what have been treated as separate problems are closely related.

Here are a few statistics from the article that merit your attention:

• Today, fewer than seven out of ten American men work; in the 1950s, nine out of ten worked.
• Since the 1970s, inflation-adjusted incomes for the bottom 80% of men have fallen, with the most dramatic declines occurring among the bottom 40%, most of whom do not have a college education.
• Today, just half of men are husbands; in 1960, three-fourths of men were married.
• As Barack Obama leaves office, only two out of three children live with their fathers; when John Kennedy was elected President, nine out of ten children lived with their fathers.
• Today, 43% of 18-to-34-year-old American men live with their parents (compared to 36% of millennial women); in 1960, about 28% lived at home.
• There are 36% more women in college than men, whereas in 1970, there were about 35% more men than women in college.
• Men are 50% less likely to trust government than women.
• In recent years, there has been a roughly 20-point gender voting gap, with white men being much more likely not only to vote for Republicans but to express disillusionment and anger toward government; until about 1980, men and women voted roughly evenly for Democrats and Republicans.

The point is that a lot has gone wrong for many white men, a demographic that once was the epitome of privilege and high expectations. And while politicians discuss stagnant wages, broken families and inequality, few notice, much less talk about the probable linkages between these issues and the impact of angry males on our politics.

Some may be thinking that this is a manufactured issue. After all, men still out-earn women, and they still hold most of the CEO and board–level jobs. And none of this white male angst should obscure the continuing struggles of women and people of color, including men of color. African-American and Latino men have had it worse than white men for a very long time.

But we ignore any group’s anger at our peril. The Bundy Brigade’s antics in Utah and Oregon is just one recent example. Many men are mad as hell, and their anger is often turned on scapegoats: Government in the case of the Bundys; Muslims, immigrants, African Americans, and Latinos in the case of others.

In 2016 we are seeing several presidential candidates feeding from the trough of this anger. Playing to the inchoate anger of a sizable minority of white men who have been benched economically, or who simply left the field, is a dangerous demagoguery, one that only benefits the demagogues.

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Monday Wake Up Call – November 30, 2015

Today’s wake up is for the American worker. While you were sleeping, corporate executives were piecing together an economy and associated tax regulations that allowed them to become America’s oligarchs.

The Center for Effective Government just came out with a study of CEO retirement funds. You already know the conclusion, but you didn’t know the facts:

• The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 47 million American families
• Nearly half of all working age Americans have no access to a retirement plan. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.

In addition, 73% of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans have through their employers. But average workers face limits on how much pre-tax income they can invest each year in similar plans, while the plans the F500 provides to their top executives do not. They are free to shelter unlimited amounts of compensation in their retirement funds where their money can grow tax-free, until retirement.

But for the average employee? The GAO says that 29% of workers approaching retirement (aged 50-65) do not have pension or retirement savings in a 401(k) or IRA. While according to a study by the Schwartz Center at the New School, 55% of those aged 50-64 will be forced to rely solely on Social Security (which averages $1,233 a month).

The current rules mean that if CEO’s slash worker retirement benefits, they can boost corporate profits and thereby, stock prices. And since much of executive compensation is tied to the company’s stock price, these rules (and company practice) create a powerful incentive for CEO’s to choose their pocketbooks over those of their employees.

We are talking about market power. The CEO’s and their firms have little to fear from Mr. Market. In turn the rising wealth at the top buys growing political influence, through campaign contributions, lobbying, and the rewards of the revolving door between government jobs and those in the private sector. Political influence in turn is used to write the rules of the game—the tax laws we are speaking of here, antitrust laws, deregulation, union-busting—all in a way that reinforces income concentration.

The result is a feedback loop between political power and market power that created, and now maintains, a vicious circle of oligarchy.

Well, time to wake up from a snooze that allowed our politicians and the largest corporations and their CEOs to turn our country and economy into their private sandbox.

To help with today’s wake-up, here is Rage Against the Machine, the gone but not forgotten band, with Zach de la Rocha on vocals and the superb Tom Morello on guitar. They are performing “No Shelter”, written in 1998:

https://www.youtube.com/watch?v=6NEoesmnYU4

Sample Lyrics:
Empty ya pockets son, they got you thinkin’ that
What ya need is what they selling
Make you think that buying is rebelling
From the theaters to malls on every shore
Tha thin line between entertainment and war

Chained to the dream they got ya searchin’ for
Tha thin line between entertainment and war

There be no shelter here
Tha front line is everywhere
There be no shelter here
Tha front line is everywhere

American eyes, American eyes
View the world from American eyes
Bury the past, rob us blind
And leave nothing behind

Just stare
Just stare
Relive the nightmare

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

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The Republican “Free Stuff” Meme

At the last Republican presidential debate, Chris Christie (R-NJ) characterized the Democratic candidates’ debate as:

A parade of, ‘I’ll give you this for free; I’ll give you that for free’.

Senator Marco Rubio said: (brackets by the Wrongologist)

It [the first Democratic debate] was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.

Jeb Bush says that black voters should back him, since his:

…message is one of hope and aspiration, not one of division and get in line and we’ll take care of you with free stuff…

For the record, Medicare, Medicaid, Social Security, and unemployment have dedicated tax revenue streams. If we back out those funded benefits, all other elements of the so-called social safety net “free stuff” adds up to ~$405 billion, a fraction of the $1.2 trillion in “unfunded” Federal entitlements, and most of the rest goes to top income earners.

So, what do Republicans mean when they say “Free Stuff”? From Jared Bernstein:

There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.

Under any of these definitions, the Republican claims are misleading: they attack help for people who need it, while implicitly condoning tax subsidies for the wealthy. What the Republicans want us to focus on are public education, Medicaid, and direct cash assistance to the poor, but the government provides other subsidies, some of which the GOP seems perfectly happy to keep in place.

For example, Rubio and Bush want to cut capital gains taxes below the current level (Rubio would completely abolish them). But today’s reduced cap gains rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Then there are things like regressive housing tax breaks, about 70% of which go to those in the top 20%. In addition, 68% of the tax benefits for retirement savings and 64% of subsidies for individual retirement accounts (IRAs) accrue to the top 20%.

Can it be that government benefits for poor people are “free stuff”, while benefits for the wealthy are not?

Maybe Christie, Rubio, and Bush subscribe to the second definition described above: It’s “free stuff” if you receive more in benefits than you pay in taxes, but not if you pay more in taxes than you receive in benefits.

The third way to think about “free stuff” mirrors the most accepted concept of “free”. Bernstein asks:

Suppose, for example, that you opened your email today to find an unexpected $100 Amazon gift card. No matter how much money you had spent or planned to spend at Amazon, you would call this “free” money. Or imagine that you go out to dinner at a restaurant and a waiter decides to “comp” your dessert. Regardless of the overall price of your meal, you would likely consider that dessert item to be “free.”

Under this definition, “free stuff” from the government would be new benefits or reduced taxes relative to one’s current situation. Since the Christie, Rubio, and Bush tax plans all contain massive tax cuts, they would give away huge amounts of foregone tax revenue as “free stuff,” and unlike the “free stuff” proposed by the Democratic candidates – the GOP “free stuff” would go to their very wealthy patrons.

From the carried interest loophole, to drug patent law, to defense industry markups, to sweetheart deals for the oil industry, the total “free stuff” for the 1% dwarfs that available to the rest of us. Yet, the nattering nabobs of trickledown continue to target removing the scraps doled out to the 99%.

Social stability is the reason the rich should not begrudge the support given to those that are less fortunate in our society. The rich have the most to lose should the vast majority decide they have suffered enough, and we see an “off with their heads” moment.

Extra money in the hands of the 1% or the .01% just creates bidding wars for penthouse apartments that the 2% can no longer afford.

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Truth or Spin?

Eye of the beholder: Baltimore in flames!
COW Balto Fire

The only problem is the photo wasn’t taken in Baltimore. It was taken in Venezuela. But, Fox13 in Memphis, TN posted it as “Baltimore in Flames.” For those who saw Fox’s rendition of the story, the image is of urban devastation in Baltimore. A viewer recalled the actual event and called Fox out. Fox took the photo down after it racked up tens of thousands of views, saying: “Our team didn’t fact check the picture the way we should have.”

At the time, many commentators stressed the need for peaceful protests. It wasn’t long before some invoked MLK. You can always count on Wolf Blitzer:

I just want to hear you say there should be peaceful protests, not violent protests, in the tradition of Martin Luther King.

Sure, why not? Here is what a 38 year-old Martin Luther King Jr. already the winner of the Nobel Peace Prize, said to the American Psychological Association’s convention in Washington, DC:

Urban riots must now be recognized as durable social phenomena. They may be deplored, but they are there and should be understood. Urban riots are a special form of violence. They are not insurrections. The rioters are not seeking to seize territory or to attain control of institutions. They are mainly intended to shock the white community. They are a distorted form of social protest.

MLK said more: (emphasis and brackets by the Wrongologist)

But most of all, alienated from society and knowing that this society cherishes property above people, he [the Negro] is shocking it by abusing property rights…This may explain why most cities in which riots have occurred have not had a repetition, even though the causative conditions remain. It is also noteworthy that the amount of physical harm done to white people other than police is infinitesimal and in Detroit whites and Negroes looted in unity.

He also said:

It is incontestable and deplorable that Negroes have committed crimes; but they are derivative crimes. They are born of the greater crimes of the white society. When we ask Negroes to abide by the law, let us also demand that the white man abide by law in the ghettos. Day-in and day-out he violates welfare laws to deprive the poor of their meager allotments; he flagrantly violates building codes and regulations; his police make a mockery of law; and he violates laws on equal employment and education and the provisions for civic services.

And Dr. King closed with this:

These are often difficult things to say but I have come to see more and more that it is necessary to utter the truth in order to deal with the great problems that we face in our society.

Speaking truth, or showing photos that distort the truth?

Take another “truth”, the Republican’s emerging 2016 campaign idea: What matters is economic opportunity, not inequality. A Wall Street Journal poll asks the question:

Which concerns you more: the income gap between the wealthiest Americans and the rest of the country or middle and working class Americans not being able to get ahead financially?

The answer?
• Income gap between the wealthy and the rest of the country: 28%
• Middle and working class not being able to get ahead: 68%

People tend to share values, and they lean more towards equal opportunities than equal outcomes. But, these are linked through causation. That means we can’t increase opportunity without reducing inequality. If we have narrowly distributed growth, those with asset-driven incomes hold disproportionate power relative to those whose incomes depend on paychecks. So, measures that attempt to reduce the 1%’s economic “rents”, things like collective bargaining, higher minimum wages, trade policy that protects workers’ rights and wages, robust safety nets, and progressive taxation, are attacked by Republicans as counterproductive to growth and jobs.

The political selling of “equal opportunity” is a house of cards. Why would anyone be happy with just equal opportunity, if it means an equal chance to live in in poverty? The R’s seem to be comparing equal economic opportunity to one roll of the dice: Roll a six sided die, get a 1, and earn less than $20,000, roll a 6, and you earn more than $115,000.

It’s high stakes, but relax, you’ve got equal opportunity.

Here is a Red-Winged Blackbird for your moment of Zen. Saw the first of the year today in a Crab Apple tree on the vast land holdings at the Mansion of Wrong:

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

See you on Sunday.

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The 1% Are Heading to Galt’s Gulch

(Galt’s Gulch was the sanctuary in Atlas Shrugged where Ayn Rand’s Real Men of Genius spurned American socialism for their own libertarian paradise.)

Welcome to the economy that has just turned the page. But not that page.

The World Economic Forum ended in Davos Switzerland. This is their 45th annual meeting at Davos. Who attends? 2,500 business leaders, politicians, diplomats and a few celebrities take part in the meeting. As in the past, 73% of the delegates are men, and almost 800 of the attendees are from the US.

According to CNN, most of the 1% flew in to Davos on private jets. Roughly 1,700 private flights landed in Switzerland, 5% more than last year. The Guardian reported that, for Davos insiders, the big story was the world economy, but this year, they weren’t concerned all that much about income inequality. From The Guardian’s live blogging at Davos: (emphasis by the Wrongologist)

A year ago, Davos attendees said income disparity was the top threat to world stability, as years of lobbying by the likes of Occupy Wall Street hit home. Today, though, the issue doesn’t appear in the top 10. The Ukraine conflict, and the turmoil in the Middle East, have elbowed it out.

However, another Guardian article described that many of the global oligarchs attending Davos are already planning their escape. These people know full well that the current game won’t last forever. Their response is to take as much money as possible, and flee before the pitchforks emerge. At a packed session in Davos, former hedge fund director Robert Johnson revealed that worried hedge fund managers were going to create an oasis of uber-wealth and then lock the doors:

I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway.

They want to leave to live in a Galt’s Gulch of their own creation. And Hedge fund managers are just a small part of the Plutocracy. The concentration of wealth and ownership in very few hands is growing, and that process has reached epidemic proportions.

In fact, according to the anti-poverty charity Oxfam, the wealthiest 1% will soon own more than the rest of the world’s population. Oxfam’s research shows that the share of the world’s wealth owned by the richest 1% increased from 44% in 2009 to 48% last year. Based on the current trend, Oxfam says it expects the wealthiest 1% to own more than 50% of the world’s wealth by 2016.

But, hasn’t our economy turned the page? Apparently, the Davos 1% types are way ahead of the Obama administration. From Monday’s NYT: (Brackets by the Wrongologist)

The middle class has shrunk consistently over the past half-century. Until 2000, the reason was primarily because more Americans moved up the income ladder. But since then, the reason has shifted: [Now] there is a greater share of households on the lower rungs of the economic ladder.

The Times uses yearly income of $35,000 to $100,000 to define middle class. The $35k amount is about 50% higher than the official poverty level for a family of four.

Here is the NYT’s graph of the current breakdown by income:
HH Income by Group(All numbers on the solid black lines in the chart are percentages of the US population and do not add to 100% due to rounding)

From the NYT:

Even as the American middle class has shrunk, it has gone through a transformation. The 53 million households that remain in the middle class — about 43% of all households — look considerably different from their middle-class predecessors of a previous generation…

Recently, the fastest-growing component of the middle class has been households headed by people 65 and older. Today’s seniors have better retirement benefits than previous generations. Also, older Americans are increasingly working past traditional retirement age. More than eight million were in the labor force in 2013, nearly twice as many as in 2000.

A December New York Times poll showed that 60% of people who self-identify as middle class think that if they work hard, they will get rich. But the income and census data suggest that goal is moving increasingly out of reach.

If 60% of the middle class still think they can get rich, despite clear evidence to the contrary, the Plutocrats and lobbyists have successfully brainwashed the American public. They are unable to see just how systematically and catastrophically they have been played.

We may be able to take back control from the Plutocrats and the Oligarchs. But they now have control of our militarized police, they control cyber spying programs aimed at American citizens, and they control a byzantine political system completely removed from the average person’s day-to-day.

Gone are the days when we could storm the castle with torches and pitchforks, demanding change, and win.

If we succeed in bringing about real change, and not the faux change marketed by politicians, it will not be a pretty affair. They will fight. And they have the means to do so.

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Money Changes Everything

The WaPo reported that the world’s 400 richest people added $92 billion to their collective wealth in 2014. Drilling down on the US political implications of that headline, Bloomberg reports: (emphasis by the Wrongologist)

Here’s a bit of perspective on the ever-rising cost of elections and the big-money donors who finance them: Three of the country’s wealthiest political contributors each saw their net worth grow in 2014 by more than $3.7 billion, the entire cost of the midterm elections.

(OpenSecrets.org reported that the tab for the 2014 House and Senate elections came to $3.7 billion.)

Bloomberg’s records show that Warren Buffett, Larry Ellison, and Laurene Powell Jobs (widow of Apple founder Steve Jobs) each earned enough in 2014 to have covered all of that campaign expense with the just the growth in their individual wealth.

So, the 2014 return on investment for political donations seems to be very, very good. And with investment returns like that, Citizens United will remain in place forever.

The Bloomberg Billionaires Index shows that 11 of the political donors that Bloomberg tracks added a combined $33 billion to their wealth in 2014. The implication is that, as the 2016 presidential election season approaches, almost all of those donors will have even more cash to burn contribute.

Their wealth, combined with loosening campaign-finance restrictions and the growing comfort of the wealthy flexing their financial muscles in politics will jump-start 2016 primary campaigns in the next few months. And Congress gave an additional gift to wealthy donors by voting in the CRomnibus to raise the limits on how much individuals can give to political parties: (emphasis by the Wrongologist)

Previously individual donors could give the national party committees up to $32,400 per year. The new law allows donors to add gifts of up to $97,200 to each of three causes: presidential nominating conventions, building funds, and legal proceedings, such as recounts.

That’s a grand total of $324,000 per year, ten times the prior level.

This points to a reality: A wealthy donor can now almost singlehandedly bankroll a candidate, as Sheldon Adelson did for former House Speaker Newt Gingrich in 2012. These buckets of ducats raise questions about whether their political contributions create policy. Bloomberg quotes Craig Holman of Public Citizen:

Our democracy just isn’t going to survive in this type of atmosphere…The US, throughout history, has worked on a very delicate balance between capitalism in the economic sphere and democracy in the political sphere. We no longer have that balance. The economic sphere is going to smother and overwhelm the political sphere.

The sheer amount of money some donors made on paper in 2014 rewrites the context of “big” money in politics. For a state-wide political race, a $1 million cash infusion could change the outcome. For America’s big-money clique, it’s a fraction of what some billionaires can make or lose in a single day.

The NYT’s Binyamin Appelbaum contends in “Who Wants to Buy a Politician?” that there is an upper limit to the political expenditures by the wealthy. He makes the point that during the 2014 midterms, television stations in several contested markets reported that they had sold all of their available slots and that one station in New Hampshire actually issued refunds after selling more ads than it could air.

He says that the real return on political investment is in lobbying, which seems to be more valuable than campaign contributions. Appelbaum quotes Michael Munger, of Duke University:

Incumbents and large corporations can basically spend as much as it would take to defeat some change that would harm them…They spend around 10 times as much on lobbying, suggesting that it’s less effective to influence the selection of policy makers than to influence the policy-making process itself.

Also, the lobbyists threaten legislators that there will be fewer campaign donations next time unless the legislator votes correctly.

Either way, the wealthy have the money to buy the change they need, or you do not.

 

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