The High-Low On The American Economy

Here’s what Robert Reich had to say this morning about exorbitant executive pay in America:

"Exxon Mobil chief executive Rex W. Tillerson is delivering bad news to shareholders: Profits were down 63 percent in the first quarter financial results, announced yesterday. They were down by half in 2015. Low petroleum prices have forced Exxon Mobil to cut spending, reduce capital outlays, and borrow to meet dividend payments. This week Standard & Poor’s downgraded the corporation’s credit rating.

"But don’t cry for Tillerson. He’s scheduled to retire next March with a nest egg of $218 million in Exxon stock plus a pension plan worth $69.5 million. His salary this year alone is about 500 times the median U.S. household income.

"Even when big corporations and their shareholders lose, their CEOs seem always to come out winners. Isn’t it time CEO pay was capped at, say, 100 times the income of the median household? Shareholders should set this standard, and the government shouldn’t allow a company to deduct any executive pay in excess of $1 million. Alternatively, as I've suggested before, tax corporations in proportion to the ratio of their CEO pay to the typical U.S. worker's pay."

The Washington Post reports on how the CEO of EXXON earns many millions whether the company has a good year or a bad year. How fair is that?

The departing CEO of Yahoo! (is that company still around?) is being paid $55 million to go away.

How we got to where we are now: The Washington Post reports on how "high finance" thinking has warped our values and our policies.

What makes it worse is how our policies are shaped by Big Money and their lobbyists and superPACs. These forces are far more powerful than organized labor, which is shrinking every year, more powerful than the Republican controlled Congress, which the lobbyists carry around in their pocket. Bloomberg reports on how hard the US Chamber of Commerce has pushed our tax policies to the extreme.

This disparity in power is more significant than the disparity in pay. Americans have bought into the myth of Rugged Individualism, that each of us is better alone than as a part of a group. (Because groups are communist…unless it’s the American Legion or the Rotary or the Chamber of Commerce.)

This is a distortion of American tradition. The tradition of barn raising and helping your neighbor, of standing together the way the original colonists did, despite their differences. This idea of individualism has helped the 1% reduce the voice of the rest of us to nothing. It has persuaded millions of working Americans to rush to get the anti-union bargains at Walmart. It has organized the workers to break up the unions that won their parents a middle class life.

Salon explains the rise of individualism and the decline of America's sense of teamwork.

Meanwhile, at the high end of the economy the members of the owning class are paid more in an day than ordinary workers are paid in a year. Some are paid that much every hour.

The Wall Street Journal reports that CEOs now make 373 times what average workers do.

If you wonder why healthcare keeps costing you more, look at the multi-millions their CEOs are paid each year.

At the low end, working people get next to nothing. Millions of low end jobs don’t pay a living wage, so people have to work two jobs, and the workers are subject to rampant wage theft. Still, Republicans block every proposal to raise the minimum wage.

The Wall Street Journal, the favorite newspaper of America's 1%, published a story blaming the sluggish growth in the U.S. economy on the refusal to raise working people's wages. After 30 years of suppressed wages and nothing growing but CEO salaries and investment bubbles you'd think it would be clear that economic energy doesn't come from the people who spend at Cartier and the local Jaguar dealership, it comes from the broad spending of ordinary working people...when they have enough money to spend.

Even the middle class is feeling insecure, a story told in this month's Atlantic.

But the working poor and the unemployed have it much worse.

Why not do what the Republican gods Hayek and Friedman both proposed: have a guaranteed minimum income for all Americans? Why not? Because people who earn money from their money, who own for a living, dislike anything that shares their luck with other less fortunate people. The people who own for a living don’t want to give anything to the people who work for a living. VOX explains the idea of a guaranteed minimum income and how it would work.

The rich are always discussing how they wish the poor were better people. Who really needs to fix that problem? The rich do. They are extremely lucky but they believe luck had nothing to do with it. If they were reminded where their fortunes came from they might be less arrogant and less greedy. They might become better people, to the benefit of all of us. Robert Frank (author of the new book Success and Luck: Good Fortune and the Myth of Meritocracy) discusses this at VOX.

Most Agree With Sanders But Understand We Can't Elect Him...Why?

Noam Chomsky discussed this democratic quandary. We agree on what we want but we also agree we cannot have it.

Most Americans agree with Sanders.

Most are persuaded he is radical and impractical.

Therefore what most Americans want and believe in is radical and impractical. And we can't have that.

This is an undemocratic problem. It may also be the key rationale of voter suppression.

Public opinion seems driven not by what the public wants but by fiat from the persuaders, the persuading class, who are employed by the people with greater wealth.

(The rich persuasions are also obeyed by those with less wealth, who own for a living on a more modest scale, whose financial security is held hostage by equity markets, the people who have retired from working life and joined––as junior members––the body of those who “own for a living.”)

This conundrum is difficult to explain in one sentence, and therefore not useful in persuading people. Fiats are one sentence.

Experience is a better persuader. The persuading class uses hard experience against us. In most cases it is hard experience their rich clients have caused.

The psychological control exerted by the people with money is our larger problem.

The defection of retired workers is understandable; their sentiments run one way but their fears dictate the safer choice of doing what their money says.

For working people the rhetorical trick works like this:

They are earning less than their parents did, but the tax burden has been shifted off of the owning classes and onto them.

This persuades them that they/we cannot afford good government and public sector spending. (Even if government-run programs and projects are less wasteful and less expensive because they’re not driven by profit.)

Their experience of lack of money persuades working people that they do not DESERVE good government and public services.

You pay for what you get.

You get what you deserve.

What you cannot afford you do not deserve.

Hence those with riches are deserving, those living in poverty deserve nothing. Working hard has nothing to do with it.

Working for a living makes you less deserving than owning for a living. In this sense Americans are participating in a violent upending of fundamental American values.

We have returned to the brutality of an earlier age.

Hillary may accomplish more in the hurly-burly of Washington politics than Bernie would. Practicality has a place. But the demands of working people, the grievances of working people, are not radical, and practical politics can solve them if we don't relegate them to second class status, which is the danger right now.

Two Examples Show How The Legal System Is Stacked In Favor Of The Rich

This is what happens to people at the bottom of the justice system. Reported today at VOX.

This is what happens to the people at the top. Reported today in the New Yorker.

A 75 year old disabled man in Mississippi who did time many years ago for robbery is tried for marijuana possession. He is convicted and sentenced to life in prison, a mandatory sentence because of his 20-year old conviction for robbery. The Supreme Court refuses to consider his appeal. Apparently life imprisonment for marijuana possession is not cruel and unusual punishment. Or the Supreme Court can’t be bothered. This is what happens to people at the bottom of the system.

Meanwhile the SEC, the agency charged with investigating and bringing charges against the largest financial companies, hesitates to prosecute individuals who made billions by defrauding millions of ordinary Americans during the financial crisis.

Why?

Because the man at the SEC who was in charge of the case had seen the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.”

People at the top level of massive multi-billion dollar frauds that ruined thousands of ordinary people’s lives are “real people” who “have done one bad thing” but a sad old disabled onetime felon who possesses pot is nobody.

The poor man in Mississippi is nobody that anybody running the system knows personally. Nobody the prosecutors care about. Prosecutors mingle with “real people” who earn massive fortunes, sometimes by fraud. The fraudulent seem very plausible, that is how they are able to commit the fraud. The larger the fraud, the more plausible and real they seem. Prosecutors don’t enjoy mingling with people at the lower end of the criminal spectrum where their misfortune and desperation makes them less plausible and less deserving.

Successful criminals who have massive fortunes and fabulous Manhattan apartments plus expensive homes in various luxury enclaves are real people but ex-cons who live quietly on a farm in Mississippi are not real people––at least in the eyes of the law. There have been multiple cases rejected by the right hand side of the Supreme Court, cases where a man has been proved innocent but is still facing the death penalty. The conservatives on the court shrug and say No. But the criminal who has stolen massive amounts of money from millions of unsuspecting Americans gets a pass. Someone who seems that real and that plausible must not have meant any harm. He can keep his houses and his money.

This is what Americans are angry about. This is what Bernie Sanders is listening to. This might be the kind of non-violent marijuana "offender" President Obama pardons. But we need to repair the system, not simply hope that occasionally a hand reaches down from the sky and corrects one or a handful of the terrible injustices. This is why electing a Democrat president is so vital this year. It would begin to redress the harm and rebalance the scales in favor of regular people.

The Wisconsin Shell Game

"Even before Kansas, Wisconsin was the lab rat for an assault on the political commons on behalf of the modern oligarchs. If they could do it in Wisconsin, the theory went, they could do it anywhere. And so they did. And they have."

Charles Pierce explains the disaster of Scott Walker's Wisconsin (in Esquire).

But there is always a reason for cutting public funds for unnecessary frills and luxuries like universities and schools and roads and hospitals. Being thrifty, for instance. Can’t spend money we don’t have, they say. (When you cut taxes to the people who have most of the money, you do wind up with less money to spend. Unless you are one of the few with the most money and lower taxes.)

Or there may be better more sensible places to spend that money, giving it to those who need it more, for instance. In the case of Scott Walker, he decided the great public university system in Wisconsin was less deserving than the new basketball stadium some hedge fund billionaires wanted but didn’t want to pay for.

SLATE reports on where Scott Walker's spending cuts were more usefully spent.

The same shell game reported in Forbes.

How do you persuade the public that a .500 basketball team with attendance fifth lowest in the league is more deserving than the college students of Wisconsin (and the advanced science and industry that is created by those college graduates)?

First you rubbish education and educators. You begin by rubbishing any system you want to get rid of, whether you want to pocket the money or give it to your friends.

You say they think they’re superior to regular folk. This creates resentment.

Then you defund what you have carefully rubbished.

Defunding leads to poorer performance and dysfunction, which you can point to and say “See? This is rubbish!” thus justifying your funding cuts.

Dysfunction will make people dislike just about anything, especially if it’s something they’ve relied on.

Defund and create dysfunction. This dysfunction leads to dissatisfaction. It’s like shooting someone in the leg and mocking them because they’re limping. Humanity is very fickle in its affections.

While one hand has been accomplishing this nasty deed your other hand has been handing the “savings” to people you like better than university know-it-alls who might understand what a crook you are, who might also know how you’ve been crooked and how your crookedness is harming everybody.

A less educated population is easier to push around.

Wisconsinites: get ready to be a more obedient and servile population! Prepare to be less than you used to be! Wisconsin is becoming more like the backward southern states where income, life expectancy, health, education and functioning social fabrics are all near the bottom.

The leading Wisconsin newspaper tells the sorry tale of Wisconsin's decline since Walker took over.

It’s the same story in GOP governed Michigan (Flint water anyone?), Kansas, Florida, Louisiana (Where Jindal drove the state into the ditch and then left the scene of the accident). In state after state the Republican experiment with lowered taxes has put the economy into crisis. Today’s Republicans love breaking things that work. They’re a lot different from the responsible, practical Republicans we knew a few decades ago.

The Atlantic reports on the failure of GOP governed states to keep up with the rest of America.

How Our Kiss Up/Kick Down Tax Policy Could Be Fairer

Obama takes steps against too-big-to-fail banks. From VOX.

The Wall Street Journal thinks this is a bad idea, so it must be good for most people. Why not create a safer harbor for retirement savings than the predator filled waters of the financial sector, where the safest waters are reserved for the wealthy.

The new fiduciary rule means financial advisors would once again be obligated to you rather than obligated to the financial giants who’d like to use the masses of lower income retirees like a cash machine. From SLATE.

Pulitzer Prize financial reporter David Cay Johnston discusses a few of the sneakier dodges available to the 1%.

Did you realize that the helpful folks who devise the simple, easy to use tax software are not really helpful at all but predatory?

Which is why they oppose any new policy that would make tax filing easier for everyone.

VOX reports on Elizabeth Warren's good idea.

Propublica reports how the Turbotax people lobbied Congress to keep our tax code more complicated. Complicated tax laws make them very very rich.

Maybe the worst policy in recent years is the one that makes college loan debt unforgivable. I mean, even the worst felons are paroled eventually, but college loans persist after the death of the college student who incurred them. College debt interest ought to be tax deductible like mortgage interest. You incurred the debt to open up a better career, why isn’t it a business expense? Why in god’s name is it now suggested we make it a tax deduction for corporations to pay off your debt for you, when your paying it off wasn’t deductible? Reported at SLATE.

From the PARIS REVIEW, some history on the crime of indebtedness.

The unfairness of our Kiss Up Kick Down economy is finally sinking in. People are angry and understand what they are angry about. Before we’ll see a fundamental shift we need a critical mass of understanding, a consensus that the system is screwed up and isn’t working. It’s not just unfair, it is dysfunctional. From NEW YORK MAGAZINE.

The 1% are hoarders. While we work long hours they rake in millions they haven’t earned without lifting a finger, and they hide it where it can’t be taxed for schools and bridges and water systems. Reported by EVONOMICS.

Even Goldman Sachs may be realizing the current system is not working. Reported by BLOOMBERG.

One thing has to change: we need to quit putting the rich above the law. I’ve seen this expressed in another nicely cynical way: “I’ll believe corporations are people when they hang one in Texas." Reported by PROMARKET.

This kind of corruption has happened before. Bill Moyers revisits the corruption of a few decades ago.

Kiss Up, Kick Down––April 2016 Edition

This week John Oliver takes his always funny approach to an investigation of credit agencies, those large slipshod corporations that tell potential employers and landlords that you are actually a different person with a criminal record. Why do they do this? Because employers and landlords––groups of people who are always richer and more secure than you are–– are worried that someone lower down on the food chain is going to rip them off when the proper order if things reserves the right to rip people off to folks like them. Besides, if they make mistakes about your credit history (and 25% of the time they do) it’s only happening to people poorer than they are, so who gives a damn? (A: apparently no one.)

What if poverty is actually profitable to rich people. It is, and this happens. Predatory capitalism prefers to prey on people too poor or too weak to put up a fight.

If you dare to fight back, if you dare to criticize the powerful, this sort of thing might happen. Some courageous citizen annoyed Florida Governor Rick Scott and he did this. By the way, has Experian or any of the other credit rating agencies ascertained that Governor Scott is not actually Bat Boy?

Why do rich people have such contempt for the poor? Maybe they have a warped view of reality. Maybe they think money grows on trees and some people are just too dumb and lazy to pick the fruit. Because for rich people money does grow on trees. For the rest of us that is just an expression. Evonomics takes a look at the perpetual money machine rich people live off of.

The Levitation of the Owning Classes

A conference was convened at Harvard Business School recently to sort out the problems with the theory of the corporation. I have suggested in numerous essays on this blog that many of our recent problems have been caused by shifts in corporate theory, which have led to shifts in our moral philosophy. Shifts that have made our moral philosophy less moral.

I think a tipping point was reached at around the time of the Lewis Powell memo, when the owning class (the minority of people who own for a living) decided that the working classes (the majority of people who work for a living) were controlling politics and policies and the legal system.

They may have had a point. After all, in a democracy it is contradictory for a minority of people to overrule the majority, especially based upon wealth and income. A certain amount of deception is required to achieve the desired contradiction. What made the regaining of power most distasteful was the means by which the wealthy classes did so: they did it via hate politics, via the Southern Strategy of dividing working class people by racial and religious animosities and suspicions.

(This practice did not die with Lee Atwater’s deathbed confession and apology; it persists with the baldfaced racism of the current Republican Party in Washington and the states where anything and everything proposed or espoused by the black man in the White House is automatically anathema. Because he is black, Obama is “other”, he is foreign, not-Christian, a half-breed, the antiChrist. The ugliness of this was barely discussed in the press out of deference to the party of Lincoln. All of this ugliness was financed out of the vast reservoir of wealth accumulated during 35 years of Reaganomics, which meant mouths were kept shut on the ugliness of the politics of the right out of deference to the vast accumulated wealth: it is unwise, even dangerous, to speak ill of the system that controls the money.)

But this is the political side of the problem. The important shift took place in the moral and ethical side. Our sense of morality changed during the Reagan and post-Reagan period. For most of the 20th century corporations were progressive innovators. They tended to be more evolved on issues of gender and race and the rights and security of the worker. Healthcare became a right at corporations. Whole packages of benefits emerged through a sometimes tense partnership with unions, but the benefits were not all to the employee: the company benefited too, and the idea of mutuality emerged and became part of the corporate DNA. Corporations had obligations to employees first, then to shareholders, then to the community and the customer. Sometimes the ranking shifted but a rough parity was maintained because the three categories overlapped and their interests overlapped.

At some point, however––and here I cite the Powell memo––the worker and his “pushy” demands became the enemy of the corporate elite and the shareholder. A new calculation became an ethical determinant. Efficiency was the sole imperative, efficiency being achieved by eliminating all obligations not payable to the shareholder by way of profit. Anything that subtracted from immediate profit was counted as a negative, a loss, a harm to the corporation. Worker income and benefits subtracted from profits and were counted as a negative, almost a moral wrong. Benefits to the community could be disguised as public relations but even these charges were harmful. Unless they could be used to subtract from taxes––which meant a benefit to the community could be used as an instrument to avoid paying taxes to the community. Obligations to anything but profit and shareholder dividend had become a moral wrong. Whatever made a rich person richer was morally imperative. It was either stupid or unethical to not maximize the profit stream, which also meant avoiding obligations outside of one’s self interest that would subtract from profit. Even if it made the economy healthier and fairer and might increase future profit, if it subtracted from immediate profit it was wrong and should be avoided.

To rationalize this evasion other “moral reasonings” were invented: the community and its government and its bureaucracies were labelled “inefficient” or wasteful or corrupt––which some were to varying degrees, but reform was not the goal. The corrupting influences were, after all, money and power, which the monied could not disparage or repudiate. The problem, according to the new wealth-centric philosophy, was simple: the public sector was less moral and correct than the private sector. The public sector was not “properly” focused on profit, an incorruptible and pure goal, but was focused instead on an impure goal of public good, one that did not obey the profit imperative. That was the corruption.

We began to see the movement on the Right to demolish the public sector altogether, to privatize it, to place it into “more responsible hands” where its responsibilities could be properly carried out not for the benefit of the public but for the purer moral benefit of profit. This ultimately meant the crude profitization of public needs and vulnerabilities. That was the ultimate goal––see a need or a vulnerability and squeeze that for profit, because where will you find a more pliable and obedient consumer than one that is hungry or ill-housed or ignorant or in pain or afraid of death (or all of the above)? The new corporate “morality” applauded this new predatory model.

Another shift occurred. The responsibility for paying for public needs that would now be more profitably (and expensively) satisfied by private companies needed to be borne by someone other than the private companies themselves via taxes––tax obligation would erase the gain achieved by the newly appropriated area of profit. The taxes needed to be borne by the public, by the individual, and preferably by the individual who worked for a living rather than the individual who owned for a living.

In the past three decades the owning classes have achieved a rare kind of levitation above public obligations, above the worries of ordinary people, above any concern for the needs or sufferings of the world––unless that concern could be converted into cash via a tax deduction. (An entire industry emerged to feed and fleece the generous and helpful impulses of humanity rather than efficiently managing those obligations as a public sector function, where they would be managed for usefulness. Profit subtracted from the useful mission but the mission and usefulness were no longer the goal; profit was the goal.)

The shift of wealth from the many to the few and the shift of obligations from the wealthy to the working poor has been achieved almost invisibly. Certainly the public watches and is entertained by various forms of wealth porn on television and in print but the effect on their lives is blurred and obscured. Instead the wealthy few are portrayed as admirable and enviable, the poor as ridiculous and blamed for their squalor. The rich lives are the lives to aspire to. These are the moral paragons. What they have is justified by the new morality described above. And what others suffer is justified by their inability or refusal to behave in a sufficiently moral way that would make them rich. Television preachers extoll the righteousness of selfishness and greed and parade their expensive suits and cars and jets and mansions before their worshippers, all of it tax free, because all public need is immoral and inefficient and corrupt.

We saw the inefficiency and corruption of this “efficient and less corruptible” rearrangement of wealth in the financial crisis of 2008-2009. How did this emerge without warning? I suggest that paying attention only in one direction, toward what serves shareholders and concentrates wealth, leaves us two thirds blind. We ignore the interests and rational demands and considerable contributions of the greater part of our system. When corporations devote all their attention to shareholders and ignore and deprive the employee and the consumer/community constituencies they are planning and acting on dangerously limited information. If you are a human being you judge this as a less moral way of behaving. If you are a money minded corporate mandarin you should see this as less efficient and shortsighted. A longterm shift in corporate and political thinking over-rewarded one narrow part of our population and under-rewarded the majority. By depriving and impoverishing workers by slow degrees it subtracted economic vigor from our markets. The result being (and only a 2/3 blind ruling class would fail to see this) that the hugely increased pools of investment capital in the owning classes were left in a difficult situation: too much investible capital was chasing too few plausible investments––plausible investments being ones based on robust consumer demand––because consumer demand was no longer as robust. What robustness remained was fueled by debt which was quickly seized as a new category for implausible investment which spawned a whole menagerie of implausible fabricated instruments backed by unsupportable debt.

This was damnfoolishness and overreach and hubris and unreason on a far greater scale than could ever have been attributed to the “overreaching” working classes that had precipitated the Lewis Powell memo. There is a reason for a balance of powers in an economy and a society as much as in a government. The overreach of the owning classes had created a top-heavy and fragile edifice. One that had changed its function from serving people to one that preyed on them; eventually it would eat itself out of a food supply. The collapse was avoided in 2009, but the rescue saved the perpetrators first, blamed the victims, and kept the malfunctioning system in place, compounding the wealth of the too-rich and enlarging the too large. This is the sort of foolishness that causes revolutions. We can see from the present political scene that revolution can arise in benign or dangerous forms. We have one revolution that seeks to repair and reform the wrongs of the Reagan revolution. We have another that seems bent on compounding them with a bizarre mixture of fascism, know-nothing-ism, gangsterism, hucksterism, and fraud.

Meanwhile, short of a violent upheaval, what persists is a brutal concentration of wealth and power that enforces its primacy over all the machinery of public life, legal, financial, political, compounding that dour money minded force I call The Rule of Accumulated Advantage.