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.

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.

Cognitive Dissonance

Many Americans drive around and see prosperity. Nice shops, nice houses, nice communities. It’s a pleasant sight––but it’s not their life. If you are prosperous and feel your prosperity is secure this is nice and reassuring. Life is good! If you are financially insecure or you have friends or family who are struggling it isn’t reassuring at all. How many of those you see walking and driving amid all the visible prosperity see it as an insult or a threat: “These people are fine and I am not.” Narrow prosperity is all show, and the system––the economy, the justice system, money-based politics, even the larger churches––only serves and protects the few. The economy is increasingly excluding working people from prosperity; for them these visible riches are an insult. We watch the affluent on TV and read about them in glossy magazines. Is this entertainment? They are not us and we will never be invited to their party. We have become the pathetic figures in old movies, the ones pressing their noses hungrily to the window of the restaurant watching others eat. This set piece from old movies is the one that comes just before the hungry individual throws a brick, or a bomb. Vast inequalities are a recipe for violence. But before the violence erupts where we live we spend years ignoring how dysfunctional and impractical and inefficient these disparities are.

After a few decades of Kiss Up, Kick Down economics, the kicked may begin to hit back. Here are some relevant stories from the NC News Observer, The Guardian, The Washington Post and Salon.

In NC black voters are required to take a spelling test to vote; whites aren’t.

In FL the anti birth control crowd think that elementary schools and dentists and podiatrists can fill the gap created by their shutting down reproductive health centers.

The burden of taxes removed from the lucky people who own for a living is shifted onto the people who work for a living in the shape of penalties and fees, which are compounded if they haven’t got the ability to pay.

Want to start a new business? Better be rich.

Before you eat that shrimp cocktail realize that it’s probably the product of slave laborers.

Kiss Up, Kick Down

We have an economy that distorts our sympathies and our solutions to problems. It’s all part of The Rule Of Accumulated Advantage, which says the more you have the more you get, the less you have the more we take away. The more you have the more we care about you, the less you have the less we give a damn.

Let's call this Kiss Up, Kick Down.

Examples from today’s news:

Wealth Therapy. Nobody cares about them because they’re rich. So now there are therapists who can soothe their pain. Adding another client class to the retinue, rather than distributing some of that obscene wealth down to the people who actually do the work around here, whose worries are real, whose illnesses can bankrupt them..

The story about Wealth Therapy, in the Guardian.

Down at the other end of the scale, where advantages disappear and disadvantages accrue and reinforce each other, we have a different dynamic at work. We find ways to compound disadvantages. We bill the relatives of the people who die in prison for the cost of imprisoning them. Why charge the families who have already suffered a punishment alongside their kin? Because costs of public necessities are increasingly sorted downward to be paid by people who work for a living, and since people who work for a living have seen their incomes decline there is a persistent deficit. But we must never ever ask the advantaged to pay that deficit. Because that deficit was created by putting a larger and larger portion of our economy into their pockets, and that greater portion deserves its immunity.

The story about charging the imprisoned for their imprisonment, from Vox.

A similar punishing burden falls upon young people who want to go to college. Young people with rich parents have money set aside tax free, but there is very little to be set aside in working families, so they take out loans, which have punitive interest rates, and that money flows daily, monthly and yearly into the pockets of the rich people who own the financial industry. Of course it would be wrong to tax the people who benefit vastly and unequally from our economy to take the load off the people who are trying to better themselves. This is why college debt follows graduates for the rest of their lives, especially those whose education does not lead them into hugely lucrative jobs in the financial industry.

An article about how college loans are our most unforgivable sin, in the Fiscal Times.

The bankruptcy laws allow billionaires like Donald Trump to declare bankruptcy multiple times and walk away from their speculative losses. But the debt incurred by going to college? No that is not something you can walk away from if your life doesn’t fall into place or if misfortune strikes you. Imagine if you graduate from college and unplanned injury or disease prevents you from rising immediately to a lucrative career. You’re outa luck, pal.

The tale of Trump's multiple bankruptcies in the Washington Post.

And in Vanity Fair.

In a way, felons are luckier than college graduates. Felons can be paroled or pardoned. Crimes can be forgiven or plead down. But college debt is never forgivable. The rich can bargain themselves out of their debts to society, but regular people? Never.

Kiss Up. Kick Down.

The massive shift of wealth upward is being engineered as if it’s a war on debt. Make the working class feel pinched, get them in debt, and use that fear of debt as a rationale for paying them less and less, and cutting public efforts to ease the unfairness and relieve distress.

Paul Krugman wrote an excellent piece about The Austerity Delusion for the Guardian.

Another Nobel economist, Joseph Stiglitz, has been warning about the same things. But concentrated wealth can create its own reality.

The class who own for a living use large amounts of cash (they have trillions) to create ads warning about the debt being placed on the children of the people who work for a living.

But this is a bogus warning. They are placing the debt on working people by shifting their tax burden onto working people.

They say public debt will burden our children, but they only want to stop the spending that helps working people.

They are gung-ho about corporate military contractor spending and private prison spending. They oppose education funding and infrastructure funding, calling it wasteful. They oppose fairer taxation that would place the tax burden where it was when we actually had a prosperous working class and functioning infrastructure.

They oppose public spending, calling it a burden on our children. This is as insane as saying we should starve our children to protect their inheritance. It carries enormous social costs. This kind of narrow, self-serving greed is what erodes civilizations. It ultimately leads to collapse. Of course, the wealthy will have offloaded their wealth to remote islands by then.

Even in Kansas, working people are talking back. One waitress has caused quite a stir.

Would you like to see a picture of vast wealth on parade? They always gather to watch two persons of color beat each other up. Now they come in luxury jets instead of limousines. Who paid for that airport? The working taxpayer.

The Republican solution is to give the small class of people who own for a living (whose irresponsible behavior caused the Great Recession) a big fat bonus. A bonus that will perpetuate their wealth and eliminate their obligations to the society that made them rich.

Their hubris is breathtaking. Perhaps because their billions will buy ads to persuade the public to do what they want the public to do. They have only contempt for those who dislike concentrated wealth. People like Pope Francis. In this political climate Jesus wouldn’t have been let near a microphone.

Kiss Up. Kick Down.

Here's an Alternet story about how the U.S. leads the world in child poverty. Should we be proud? (USA! USA! USA!)

If the system is rigged, who's doing the rigging? And how is it rigged? (Here's an article about this very thing.) We expect the poor and vulnerable to outwit their predators, but somehow those of us who are comfortably off and less vulnerable expect full and vigorous protection. How is that fair?

This story from VOX describes how the U.S. bars the poor from safe places to put their earnings and transact their business, leaving them at the mercy of predatory operators like payday loan shops to cash their paychecks. We have an entire class of people unprotected from abusive practices.

In America the motto is Kiss Up and Kick Down. Worship and protect the rich, while abusing and blaming the poor.

How is the Republican Paradise of Kansas treating the poor? Exactly like the Daily Show says they are.

I know. “Don’t worry. I’m doing fine. I have a job. I’m OK. It’s those lazy poor folks causing all the problems.”

Is it? OK, we've covered the Kick Down part where all of us are beating up on the poor. What about the Kiss Up part? I'll let my favorite think tank explain.

Who exactly is offloading their tax burden onto you? Who’s letting you pay for their obligations, infrastructure-wise? Why do we let them get away with it?

Does Poverty Make You Less Moral?

Greece is in a worse position re Europe than Germany was after WW2. Germany had invaded and destroyed much of the continent. Greece has simply suffered a financial setback. Why is Greece in a worse position? (The New York Times discusses the Greek situation succinctly here.)

Germany could at least argue that failure to forgive its debts would cause it to invade its neighbors a third time. Would Greece be better off if it was an armed aggressor?

Why do we associate solvency with morality? Why are you more moral when you have more money?

It has to do with the hostages you hold.

Wall Street banks created havoc in the world economy by committing crimes, but they were bailed out. Why? Were they Too Big To Fail or Too Big To Jail or both?

(A judge writes about this in the LATimes. And Rolling Stone did an excellent piece about this in 2013.)

Germany may not have been solely guilty for the First World War, but it did cause and perpetrate the Second. And yet their argument in 1953 was valid. So is Greece’s. Germany of all countries should know this. Having a strong hand doesn’t make you the best moral arbiter.

In Ferguson, Missouri the mostly black citizens were targeted by police and city government as an easy revenue source. That revenue source meant the city could take less in taxes from property owners. If you are rich the system does you favors. If you are poor the system sees you as prey. Greece is the people of Ferguson, and the people of Ferguson are Greece.

Are the systems of government there to serve people? There’s a verb that has two possible meanings. There was a Twilight Zone episode where a book treasured by a ruling class of aliens was titled To Serve Man. It ended up being a cookbook, instructions how to serve humans as food in different and interesting ways.

Economics and justice sometimes turn on this kind of convenient misunderstanding. The powerful find it easier to misunderstand these things and profit from the misunderstanding.

The immorality and viciousness of the city government of Ferguson has been demonstrated and certified by the Justice Department. But it’s happening all over the country. Poverty or alienness makes innocent people easy prey, allowing police and city governments to take their property and extract fines from them with no law broken and no charges placed.

(The New Yorker described this in a riveting piece last year. I didn't believe such things happened legally in this country. They do.)

Being poor or being less than rich is becoming a crime in this country. Who and what have we become?

Vast Income Disparity is Bad for Business (Someone Tell Mitt)

In yesterday's New York Times, Annie Lowrey wrote about new findings by the International Monetary Fund economists (not a radical or lefty bunch by any means), laying out the clear and present danger the current disparity in incomes and wealth presents to the American economy and the global economy.

This is what the president was addressing during the debate the other night, and Romney was denying. Romney has built his fortune on the basis of income inequality, squeezing pay and benefits out of company after company, loading them with debt and looting pensions to enrich his small group of investors.

Turns out it's bad for business and bad for the broader economy––no real surprise––because employees of one company are the customers of other companies. It doesn't help the economy when one man's wealth is derived from another man's poverty. It's against the American grain.

Lowrey writes:

Since the 1980s, rich households in the United States have earned a larger and larger share of overall income. The 1 percent earns about one-sixth of all income and the top 10 percent about half, according to statistics compiled by the respected economists Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics.

For years, economists have thought of such inequality in part as a side effect of policies that fostered the country’s economic dynamism — its tax preferences for investment income, for instance. And organizations like the World Bank and the I.M.F., which is based in Washington, have generally not tackled inequality in the world head on.

But economists’ thinking has changed sharply in recent years. The Organization for Economic Cooperation and Development this year warned about the “negative consequences” of the country’s high levels of pay inequality, and suggested an aggressive series of changes to tax and spending programs to tackle it.

The I.M.F. has cautioned the United States, too. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” a commentary by fund economists said. “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”

But it's worse than "Oh well, bad things happen to some people". Maybe the investor class that is backing Governor Romney will pay attention when the numbers people spell out how their pet tax cuts and cozy pay deals actually harm their outlook. Shouldn't businessmen be concerned when their own behavior is bad for business?

The concentration of income in the hands of the rich might not just mean a more unequal society, economists believe. It might mean less stable economic expansions and sluggish growth.

That is the conclusion drawn by two economists at the fund, Mr. Ostry and Andrew G. Berg. They found that in rich countries and poor, inequality strongly correlated with shorter spells of economic expansion and thus less growth over time.

And inequality seems to have a stronger effect on growth than several other factors, including foreign investment, trade openness, exchange rate competitiveness and the strength of political institutions.

And the kicker...

“What worries me is the idea that we’re in a vicious cycle,” said Joseph E. Stiglitz, a Nobel laureate in economics who has studied inequality extensively. “Increasing inequality means a weaker economy, which means increasing inequality, which means a weaker economy. That economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.”

Unfortunately, wrongheadedness is a habit with some people. Paying taxpayer funded tribute to rich people is a behavior that's hard to unlearn. It took a long time to convince people the world isn't flat.

David Brooks Explained

(David Brooks is the New York Times apologist for pure unregulated predatory capitalism, which is the Romney brand. Here's his most recent column, with explanatory footnotes.)

THE CAPITALISM DEBATE

By DAVID BROOKS
Published: July 16, 2012

Let’s say you are president in a time of a sustained economic slowdown. You initiated a series of big policies that you thought were going to turn the economy around, but they didn’t work — either because they were insufficient or ineffective (Or because your opposition and their clients and the trillions of bailout dollars hoarded by Wall Street were dedicated to making sure they didn't work). How do you run for re-election under these circumstances?

Do you spend the entire campaign saying that things would have been even worse if you hadn’t acted the way you did? No. That would be pathetic. (But it would be true. I guess the truth is pathetic if you don't like it.) You go on the attack. (Not an unreasonable thing to do since the Republican opposition has attacked and blocked and ridiculed and filibustered and evaded every proposal and every compromise you've tried in the past three and a half years.) Instead of defending your economic policies, you attack modern capitalism as it now exists. (Capitalism as it exists, as enabled by the extreme deregulation of the Bush years, is a gross distortion of the practical, regulated, moderate and egalitarian capitalism its inventor, Adam Smith, described in 1776.) You blame the system for the economy. (You blame the reckless greed and extreme inequality of wealth and power between Wall Street and Main Street, which is only fair. And honest.) You do this with double ferocity if your opponent (an affable, square jawed, handsome vulture capitalist and exporter of American jobs with unknown millions in secret bank accounts in Switzerland, the Cayman Islands, the Bahamas and Bermuda) happens to be the embodiment of that system.

This is what the Obama campaign appears to have done in recent months. (Finally!) Instead of defending the policies of the last four years (which had started a decent recovery until the GOP retook the House and were able to shut it down again), the campaign has begun a series of attacks on the things people don’t like about modern capitalism. (Why argue with the American people? Give them some credit for intelligence.)

They don’t like the way unsuccessful firms go bust. (Or fairly prosperous firms are seen as vulnerable by takeover artists like Romney, who use the companies' own cash to buy them, then load them up with debt to pay themselves huge bonuses, then plunder their pension funds, slash their workers' pay and benefits, break their unions and ship their jobs overseas, using the proceeds to buy a few more homes and show ponies.) Obama hit that with ads about a steel plant closure a few months ago. They don’t like C.E.O. salaries. (Why should the boss of a company earn more in a day or an hour than an average worker earns in a year by actually making stuff?) President Obama hits that regularly. (Amen!) They don’t like financial shenanigans. (Let's quit mincing words. Call it crime, fraud, looting, corrupt practice, creative tax evasion.) Obama hits that. They don’t like outsourcing and offshoring. (Explain to me how firing people and moving their jobs overseas where you can hire a 12 year-old for a dollar a day is patriotic.) This week, Obama has been hitting that.

The president is now running an ad showing Mitt Romney tunelessly singing “America the Beautiful,” while the text on screen blasts him for shipping jobs to China, India and Mexico. (The text quotes newspaper reports that are actually factual. The singing is Romney's own. This is Politics 101.)

The accuracy of the ad has been questioned by the various fact-checking outfits. (Questioned before new information emerged that indicate Romney either lied to American voters or lied to the SEC about whether he was running Bain Capital during the period it was aggressively shipping jobs to China and India. Or maybe he was lying to Massachusetts election officials about whether he was living in his his Utah home or his Massachusetts home and running Bain. And how many homes does he own? Six?) That need not detain us. (Let's hurry past this because Romney's financial statements are dubious at best.) It’s safest to assume that all the ads you see this year (most of which will be paid for by the billions flowing into Republican PACs) will be at least somewhat inaccurate because the ad-makers now take dishonesty as a mark of their professional toughness. (A standard set by Nixon a generation ago and perfected by the Bush family.)

What matters is the ideology behind the ad: the assumption that Bain Capital, the private-equity (vulture capitalist) firm founded by Romney, should not have invested in (and subsequently looted) companies that (under Romney's/Bain's firm direction) hired workers abroad (after firing their American workers and looting their pension funds and taking away their health insurance); the assumption that hiring Mexican or Indian workers is unpatriotic (it's jolly patriotic if you're Mexican or Indian); the assumption that no worthy person would do what most global business leaders have been doing for the past half-century. (Let's just say it: If you could get away with being completely ruthless and greedy and violate trust and obligations right and left and ruin a lot of lives and make yourself rich in the process, wouldn't you do it? Some wouldn't. Very few people would have the gall to run for president on such a record.)

This ad — and the rhetoric the campaign is using around it — challenges the entire logic of capitalism as it has existed over several decades. (Actually, David. No. Go reread your Adam Smith. Reread your Theodore Roosevelt. Reread your Dwight Eisenhower. I'd recommend you reread Keynes, but you won't.) It’s part of a comprehensive attack on the (utter corruption and destruction of the) economic system Romney personifies. (He's the poster boy for the corporate “shenanigans” that collapsed our economy in the last few months of the Bush administration.)

This shift of focus has been audacious. (And long overdue. Obama has been too polite, too reserved, and too trusting in the age-old democratic rules and traditions in Washington, old traditions like cooperation and polity, which the Republicans have been spitting on for years. A word about audacity: Washington and Ben Franklin were audacious confronting the largest empire in the world. TR was audacious to confront the great powers and monopolies on Wall Street. Audaciousness isn't always a bad thing. Calling Obama audacious is audacious, in the negative sense.) Over the years of his presidency, Obama has not been a critic of globalization. (Globalization isn't necessarily bad. Free trade can also be Fair Trade, benefiting all sides of the trade. When globalization is an excuse to exploit disorganized and unprotected workers in impoverished countries or steal their raw materials or to dismantle workers' rights in your own country, using the infrastructure and institutions and perverting the laws created as part of a fair society to do so, that is bad globalization. That is the Romney model.) There’s no real evidence that, when he’s off the campaign trail, he has any problem with outsourcing and offshoring. (He isn't in the offshoring business. Obama hasn't exported a single job, but none of us can avoid buying tennis shoes made by teenagers in Malaysia or the Philippines.) He has lavishly praised people like Steve Jobs who were prominent practitioners. (He praised their inventiveness and the quality of their products designed here. Like most of us, he no doubt wishes they were made here.) He has hired people like Jeffrey Immelt, the chief executive of General Electric, whose company embodies the upsides of globalization. (If you want someone to advise and manage a complex economy you hire somebody who has experience advising and managing complex international companies. It would be foolish not to hire the most competent people. Sometimes even when they don't entirely agree with you, as FDR did when he created the SEC.) His economic advisers have generally touted the benefits of globalization even as they worked to help those who are hurt by its downsides. (The point of Democratic policy has always been to strengthen our economy while not gutting the source of its energy which is a skilled and well-paid workforce, citizens who can afford to buy the products they manufacture. FDR's rich friends called him a traitor to his class for siding with working people. I'd call that patriotism.)

But, politically, this aggressive tactic has worked. (Americans are lied to a lot by FoxNews and talk radio, but at the end of the day they are not stupid.) It has shifted the focus of the race from being about big government, which Obama represents, (a government big enough to serve a big country and stand up to huge transnational corporations...and by the way, Obama has increased spending less than any president since Truman––look it up) to being about (predatory or vulture) capitalism, which Romney represents.

Just as Republicans spent years promising voters that they could have tax cuts forever (and never pay for anything again), now the Democrats are promising voters that they can have all the benefits of capitalism without the downsides (as their parents and grandparents had in the bad old days of Truman and Eisenhower and JFK, before corporations were people in all respects but personal responsibilities), like plant closures, rich C.E.O.’s and outsourcing. (Funny how productivity gains don't count unless they are paid upward to the people in the executive suite. Workers are greedy if they demand benefits like healthcare but CEOs are shrewd if they demand free dry cleaning, free limos and courtside tickets for life) Just as Republicans used to force Democrats into the eat-your-spinach posture (you need to have high taxes if you want your programs) (Historically, Republicans only wanted the streets paved to their homes, their country clubs, their factory, and, as Leona Helmsley said, thought taxes were for little people), now Democrats are casting Republicans into the eat-your-spinach posture (you need to accept outsourcing and the pains of creative destruction if you want your prosperity). (Creative destruction is what the mob called burning the factory to collect on the insurance.)

The Romney campaign doesn’t seem to know how to respond. (There is no plausible response. Maybe they know this.) For centuries, business leaders have been inept when writers, intellectuals and politicians attacked capitalism (which is why the billionaire class have spent billions buying writers, economists, academics, inviting creative people to their beach homes, creating “think tanks” and buying ad talent and mass-purchasing their dreadfully bad political books onto the bestseller list. It's called bribery.), and, so far, the Romney campaign is continuing that streak. (But how many billionaires can Romney loyalists fit into one 60,000 square foot Hamptons “cottage” for a fundraiser?)

One thing is for sure. As Arthur Brooks of the American Enterprise Institute (see "billionaire funded right wing think tank", above) has said again and again (to appreciative monied audiences who pay for his airfare), it’s not enough to say that capitalism will make you money. You can’t fight what is essentially a moral critique with economics. (Since when has money made you immune to moral considerations? I think Jesus had a few things to say about the morality of the rich. Adam Smith naively assumed the rich would submit to honest, fair regulation.)

Romney is going to have to define a vision of modern capitalism. (As a Bush Jr. advisor once said “We create our own reality.” In the new Republican universe reality can be bought, usually without inconveniencing rich friends with a tax bill.) He’s going to have to separate his vision from the scandals and excesses we’ve seen over the last few years. (Let's walk that back a couple of years and stipulate that the scandals were the most scandalous during the regime of your man George W. Bush. The Obama years have been about uncovering them and re-installing the regulations against scandalous behavior. Over fierce Republican objections.) He needs to define the kind of capitalist he is and why the country needs his virtues. (Assuming you don't mean the “virtues” of firing people and paying those wages to yourself and your fellow investors for your skill at firing people. Firing isn't the best word here. “Firing” assumes cause. Most of the people Romney fired were laid off for the “crime” of earning a living, for making things at a wage American companies used to pay when America's economy got its strength from workers who could afford to be consumers.)

Let’s face it, he’s not a heroic entrepreneur (except in his autobiography, his stump speeches, his reports to shareholders and his statements to the SEC). He’s an efficiency expert. (A CEO tends to define “efficiency” by how little he can pay his workers to work longer and harder and faster.) It has been the business of his life to take companies that were mediocre and sclerotic (or paid a fair wage for good work) and try to make them efficient (make them pay less for more work, by hiring Asian children if need be; slashing benefits) and dynamic (a word possibly adopted by McKinsey to project a robust image onto a company without it actually meaning anything). It has been his job to be the corporate version of a personal trainer: take people who are puffy and self-indulgent and whip them into shape. (Here's where David begins to sound like he's writing a brochure for the Hitler Youth. I don't think that is his intention.)

That’s his selling point: rigor (forcing other people to be rail-thin and rigorous translates into his fat monthly paycheck) and productivity (again, other people's hard work and productivity can be paid directly to him for demanding it. This, if you can avoid throwing up, is called a “business model”.) If he can build a capitalist vision around that, he’ll thrive. (HE will thrive. Other people, not so much.) If not, he’s a punching bag. (Commence punching.)

Oh, heck...Bill Maher said it better than I can:

“America's rich aren't giving you money, they're taking your money. Between the years 1980 and 2005 80% of all new income generated in this country went to the richest 1%. Let me put that in terms that even you fatass teabaggers, I'm sorry, can understand.

“Say 100 Americans get together and order a 100 slice pizza. The pizza arrives and the first guy takes 80 slices. And if someone suggests, why don't you just take 79 slices, that's socialism! I know, I know. I know, I know, it's just a TV show. But it does reinforce the stupid idea people have that rich people would love us and share with us if only they got to walk a mile in our cheap plastic shoes.

“But they're the reason the shoe factory moved to China. We have this fantasy that our interests and the interests of the super rich are the same. Like somehow the rich will eventually get so full that they'll explode. And the candy will rain down on the rest of us.

“Like there's some kind of pinata of benevolence. But here's the thing about a pinata. It doesn't open on its own. You have to beat it with a stick.”

Eat that, David Brooks. Maybe they should hand his column to Bill Maher.

Harder Faster Longer (For Less Pay)

Today's Must Read is from the New York Times. It invites us to be less productive. This sounds like a slacker motto––unhelpful, uncooperative, lacking in the team spirit which is so fashionable these days in workplaces––but consider this: the way we measure productivity requires workers to work longer and harder and better for less pay each year. That's how managers meet their benchmarks. That's why 40 years of productivity gains have been paid upward, not to the workers achieving them. How is that fair?

The same harder/faster/longer ethos has crept into our schools. Each year schools and teachers and students are expected to achieve higher marks, the way a business is expected to. But it's fundamentally stupid and impractical. Teachers start over every year with new kids, at roughly the same level as the kids who came before. Yet the gains of the past year are used to compound the expectations.

I am not adept at figuring compound interest, but I figure that with a yearly rise in student achievement of say 2%, compounded annually, measured over the past 40 years since I was in school, that kids today have to be ten times or a hundred times smarter, quicker and more knowledgeable than they were in 1972. Are their brains larger? I've not noticed it. But the work load is much larger. The kids burn out quicker too. The teachers are teaching 45 in a class on the same pay and lower school funding measured against inflation.

This is what happens when you invite businessmen to run your society. They turn up the speed on the machine and pocket the profits or bank them in the Caribbean. That is the model being sold this year by the Republican Party. It's the package they been selling us for four decades. It burned our economy out in 2007 and 2008, but they're still driving the car.

Kicking the Poor: An American Pastime

Barbara Ehrenreich has a trenchant and disturbing piece in this morning's Guardian. It is a well-reported piece, thoroughly footnoted and linked to sources of further information. So why is it labelled "opinion" rather than published as fact? (And why did Ehrenreich have to cross the Atlantic to get it published?) Fact editors have to be extra careful not to lay blame. Fact reporting is one more thing under the thumb of the advantaged. Journalism, which once took appropriate pride in discomforting the comfortable, is now especially careful not to offend. It's one more advantage in the powerful system of Accumulated Advantage and Disadvantage.

This journalistic caution has increased as the comfortable class has narrowed and grown comfortable beyond the dreams of avarice. Their comfort must not be disturbed, and reining in these systems that prey on the poor might result in the comfortable having to pony up their rightful share of public costs. The rich might have their puny taxes increased if we stopped hitting up the poor for the costs of being poor.

The bizarre injustices Ms. Ehrenreich describes here are positively Dickensian, but in a time so rich with injustice, too many of our best writers devote themselves to chronicling the struggles and ennui of the moneyed, the leisure classes.

The Rich Are Less Ethical Than the Unrich

A study published by the National Academy of Sciences indicates that affluent Americans are likelier to break rules, lie, cheat, steal and otherwise behave unethically than less affluent Americans. The reason? Personal gain appears to justify any means that enables that gain. The more a person has gained the more license they feel to get more, by hook or by crook. I read about this in an excellent story written by Susan Perry, who writes for MinnPost here in Minneapolis.

This isn't true of ALL rich people. It's just a tendency, a small tendency really. Rich people are likelier to lie, cheat, steal, take advantage than poor people and average people. But if you asked most people about their judgments about strangers they meet on the street, they'd probably admit they are likelier to assume criminality among poor people than rich people who dress nicely and have expensive haircuts. Which shows how much common sense is worth. There are rich people who steal billions. (Fran Lebowitz once said a person doesn't earn a billion dollars, he steals it.) It's the poor kid taking a pair of shoes or a sixpack of pop who end up in prison. And the rich people who take/appropriate/finagle/chisel/steal billions are likelier to feel justified. The arbitrageur who uses a company's own money to take it over and then loots it, shuts its factories down and fires its workforce and puts their pension fund in his pocket, has no qualms because his personal wealth proves he is a good man. Maybe poor people wind up in prison because they have the honesty to feel guilty.

So wealth tends to confer a sense of license or entitlement. Here's a nifty set of infographics.

That word again. "Entitlement" is one of the dirtiest words among pundits these days. It appears––among the rich anyway–– that "entitlements" are only wrong if they are given to people who need them or have earned them. If you consider that rich people are (according to this research study) likelier to take what isn't due to them, likelier to butt in line, likelier to cut people off, likelier to lie for their own gain, the other side of this coin is worth looking at too, namely that poor people or people of average income are likelier to wait their turn, refuse what isn't due them (or what might not be due them), likelier to yield advantage to others, likelier to concede in a dispute, to compromise, to forgive, likelier to play fair politically and likelier to accept adverse events without complaint, events such as stolen elections, unfairly foreclosed mortgages, stolen trillions on Wall Street, jobs and wages and pensions lost in order to enrich those higher up on the income scale. And yet we tend to judge these people more harshly. We tend to think they aren't as good as someone who's got lots of money.

Dressing well and driving an expensive car and living in a fine house in a fine neighborhood and having wealthy friends sanitizes your behavior, or that is the common belief. And not only among the rich. Those unrich people who yielded when cut off in traffic, who went along with being lied to, who accepted being cheated or stepped on, acquiesced to the wrongdoing. Wealth breeds arrogance, but poverty breeds obedience. It's like they said in the middle ages: "might makes right." What was true then, before democracy made the world fair, is still true. Maybe this fair world we grew up in was only temporary.

AUSTERITY IS HOW THE RICH TEACH WORKING PEOPLE TO BE POOR

Krugman is right again. Today's column is about the stupidity of austerity measures during a recession.

What is it about Big Men (and it's usually men)? When they screw up, they screw up Big, and after they screw up they spend the post screw-up period arranging ways to blame everyone else.

The big money people, the hedge funds, the investment banks, bet long on dubious items and they leveraged themselves to do so. When their bets failed, they couldn't pay up so they were bailed out by us.

But that wasn't enough. They couldn't bear taking any blame for what they'd done, so they blamed the people who were victimized by their greed and overreaching. They blamed the people whose jobs were axed because of the downturn they, the bankers and hedge fund gamblers, had caused. They blamed homeowners whose home values dropped because bankers had wagered those home values too high. They blamed the homeowners' children and the homeowners' dogs. Once they'd blamed everyone but themselves they arranged to punish them. The punishment is called Austerity.

But austerity doesn't work. Let me rephrase that: it works badly. It has a very powerful effect, but the effect is negative. It is like surgeons bleeding a patient who is suffering from loss of blood. It is like an airline pilot whose plane is in a stall deciding it's a good time to conserve fuel.

Austerity is like starving one's children to protect their inheritance. Who does it benefit? The bankers who manage the funds.

Austerity is a financial form of anorexia nervosa, and just as dangerous. It's been proven dangerous, ineffective, wrongheaded and stupid over long years of painful experience. The problem is most people don't have long memories or good understanding of these things and bankers have the money (provided by the taxpayer bailout) to buy advertising and network air time and political influence. They are able to sell anything they'd like, and austerity is what they'd like now––for us, not for them.

Austerity forces everyone to sacrifice to make sure the bankers don't need to. They caused a problem, and we are fixing it––but we are only fixing it for them. We are paying for the damage they did and this payment period is prolonging and deepening the harm done. Austerity causes broad harm to avoid inconveniencing a small group of bankers.

AUSTERITY IS HOW THE RICH TEACH WORKING PEOPLE TO BE POOR. This is a phrase that should be heard more, but without the kind of money bankers have it's not likely to be heard very much on radio or television.

Vast Income Inequality Has Its Fans

When each new economics report comes out telling us that the extremely rich have again taken more of the pie and more of the people who do the work are falling into poverty, Wall Street's paid apologists go on TV and lend pithy quotes to columns for the Wall Street Journal.

These apologists are wrong but they manage to hide behind a lot of manipulated data. It isn't unfair to compare their song and dance to one of those three card monte tricksters on street corners, the guys who always win your money. The very rich always win because they use the same kinds of tricks. The money gets manipulated out of working people's pockets into the pockets of the people who win the game. Is it still theft when it's billions of dollars instead of tens and twenties? Let's just say it's complicated enough that it's harder to prosecute. The New Republic's Timothy Noah and Jonathan Chait and economist Brad Delong explain it much better than I do.

MarketWatch: The rich continue to get much richer while everyone else is poorer.

Business Insider: The middle class was losing ground even when the economy was good.

Business Week: the social contract is unraveling in developed countries because of extreme income inequality.

From the Guardian: looking at the data. It isn't pretty, unless you are one of the handful of lucky winners. Imagine a lottery that rewarded winners with money stolen from you...

Think conservatives are pro family? This Guardian writer says "think again".

If you think poverty is all right as long as you have your health, consider that the poorer you are the shorter your lifespan. This BBC report shows this is even true in the UK where access to healthcare isn't restricted to people of means as it is in the US. Is this pro-life? No, it's only pro-life for the wealthy.

The Atlantic has the charts and graphs. Having had personal experience with their rigorous fact checking department I know they are reliable.

Want to see where the big money is? Look here, at the website of the Paris School of Economics.

Un-American Business

All the productivity gains of the past thirty years have been paid upwards, but, hell, that's what productivity gains do or they cease to exist.

Because "increased productivity" is another way of saying workers are working longer/harder/faster for the same or less money. (Or have been replaced by machines.)

That Americans don't understand this shows how good their media are at lying to them, disinforming them, misinforming them, how good the propaganda is. When workers applaud productivity gains they are applauding the enrichment of someone else.

American business used to honor three loyalties: to the customer, to the employees, and finally, when the other two were satisfied, to shareholders, themselves. The first two loyalties have been degraded by a devotion to profit and only profit. Because profit boosts share value and share value boosts bonuses linked to share value. Profits have become God. Because obligations to customers and employees (in a societal sense the same thing) subtract from profit they have become the great enemies of American business.

Praise of the noble employee is lip service; the nobler he/she is the less he/she will work for. (You know how sacred such things as pension obligations are if you've read Ellen Schultz's book Retirement Heist.)

Today's treasured customer is thought of in predatory terms. "New and Improved" usually means they've put more air in the cereal or made the hardware flimsier or the software buggier. A key economic shift occurred when insurance companies ceased to think of themselves as insurers of people and began thinking of themselves as raisers of capital.

The problem is capital has nowhere to go if the customer hasn't got enough income to spend on goods and services. And the customer is the employee. In the past decade American business has shifted its focus from fulfilling needs and wants to exploiting vulnerabilities and shortages and fears. We live in a predatory economy. Next stop? Kleptocracy.

Middle Class Fear is the GOP's Best Weapon

Middle class worry has worked very effectively for the Tories in the UK, as this piece from the Guardian explains. In England, David Cameron, the Conservative leader who has been sacrificing programs for the working and middle class in order to protect the perks and benefits of the super-rich, is privately glad riots have broken out in London and Manchester. The violence takes his corrupt bargain with Rupert Murdoch, tabloid baron and owner of FoxNews and the Wall Street Journal, out of the news. And it also gins up the worries of an already worried middle and working class, people who feel insecure about their jobs are more pliable when violence threatens everything they've earned

Meanwhile, in this country, Republicans are delivering exactly the economy they want, as this article from Alternet.org explains. Stagnant, insecure, fragile, panicky. They love it. Fearful people are more obedient and more easily fooled. People working their brains out trying to stay even aren't as likely to ask hard questions. They are more likely to watch the propaganda programming on FoxNews that juices their fears and directs them not at the causes but at each other.

I've been pushing the word "HOARDING" as it pertains to the trillions corporations and super rich investors are sitting on. Is it any different than hoarding food in a famine or water in a drought? I'm glad to see the word is being properly applied.

Another article, by a professor at UC Santa Cruz, with useful charts and graphs, explains the poisonous asymmetry in the American economy. Imbalance causes instability. On a fundamental level, worried workers make poor consumers. What ought to worry Main Street is that the Big Boys don't care much about America. Their toast is buttered by growing prosperity in other countries. How patriotic is that?

What the Middle Class Loses the Upper Class Keeps

Today's must-read is a New York Times article about how the richest bankers and corporate heads are paying themselves better in this recession than they earned before they helped tank the economy and we bailed them out.

Also, Mother Jones reports on how American workers work harder and longer for less money than they earned a generation ago. Not a good thing, unless you own instead of working for a living.

The Wall Street Journal, Rupert Murdoch's Republican Party newspaper, is reporting that workers who once could expect to earn more and have greater job security as they gained experience, skills and efficiency, now earn less and have less job security as they get past 40. The opposite of how it worked in Eisenhower's America.

Note that the WSJ's solution is to pour more of your earnings into Wall Street (boosting stock prices and executive bonuses and options, while skimping on the middle class "good life"). Was this negative trend part of a long range Republican plan? I don't think they achieved this by accident.

American workers have always been proud of producing more goods and services and doing so better and quicker and therefore earning more for it. It's enabled them to join the middle class, own homes, send children to college and retire comfortably. It also enabled them to be better consumers, which made a lot of businesses more prosperous. A broad prosperity is a more durable prosperity. This was the model until 1980, when the Reagan Revolution changed the formula.

The model since 1980 has been for workers to produce more goods and services better and quicker... but earn the same, or often less, for doing so. Since 1980 the prosperity of people who work and produce has not been considered prosperity at all, it's been relabeled a negative, a debit, a burden, a liability, a cost.

The wages of average workers have remained flat or declined since 1980. This was part of the Reagan Revolution too, but something a lot of people didn't realize they were voting for. This "doing down" has crossed over into the public sphere as well, where the temporary upper bracket tax cuts are sacred but the middle and working class tax cuts and benefits are negotiable and easily taken away, and now, as a finishing touch, middle class public employees are losing their rights and their job security. The job security in the public sector was something that allowed government to pay lower wages, but now security is gone too. Ironically, the savings are being shared out very narrowly to the very rich, with burdens shifted simultaneously onto the middle class.

Prosperity and security have become a narrow right, an upper class right, as was the case before the Great Depression. The real "gift" of Reaganomics is a new aristocracy and a growing servant class. The shift we are seeing is "validated" by Republican mathematics, which puts middle class prosperity in the cost column and upper class prosperity in the profit column, one bad and to be avoided, the other a sacred good to be protected. We need to change the math. It isn't fuzzy, as one Republican once said; it's actually crystal clear, but it's wrong, it's unfairly weighted, its values are skewed toward the values we revolted against in 1776. Ironically, the Republicans are using pictures from the 1950s, the broad prosperity they are destroying, to advertise the new narrower economics that benefits only their richest clients. Un-rich Republicans will receive their reward in heaven, supposedly.

Did Psychopaths Cause the Economic Crisis?

Answer: possibly. An article in Fast Company suggested that psychopathology led to the ruin of the energy giant ENRON. But there are other more recent articles saying the same about the executive class in general. A highly regarded human resources magazine. The New York Times. National Public Radio. This American Life. What does it say about our society if the people who run our economy are nuts?

We test convicted criminals for psychopathic tendencies when we sentence them and before releasing them back into the general population, but people who head up large corporations are immune from this kind of intrusion. So we don't really know whether the people who lead our companies or trade our stocks or operate hedge funds to game the markets or manage our health insurance on a denial basis are psychopaths.

All we have is the set of traits psychologists use to measure psychopathology and the unsettling realization that many of these psychopathic traits are also the traits of rock stars in the business world.

The standard list of psychopathic characteristics:
Glibness and superficial charm
Grandiose sense of self-worth
Pathological lying––skilled secretiveness
Manipulative cunning
Lack of remorse or guilt––ruthlessness
Shallow affect––genuine emotion is short-lived and self-centered
Lack of empathy, lack of concern for others
Failure to accept responsibility for own actions––evasion of liability

It does sound like a lot of the people in executive positions. Especially the people at the very top.

Another often-cited characteristic of psychopathic personalities is risky behavior. To a certain degree we admire risk-takers, but risk can be taken to extremes, with much at stake and large downsides. Concentrated wealth in the hands of big risk takers risks our entire society.

Did psychopaths in expensive suits lead us into the financial crisis? If so, they're still running things, and paying themselves more than they did before.

I'm not saying we should label individual CEOs as psychopaths. It's not that simple. But maybe we should begin labeling ruthless CEO behavior, the remorseless downsizing of companies and the pocketing of vast sums, as psychopathic. As sick behavior. As something to be abhorred rather than admired.

We see some of the same stubborn recklessness in the elected politicians who cut taxes on the very very rich and protect them from regulation and interference, while simultaneously and ruthlessly cutting millions of working people off from help.

Consider the dangerous game of budget Chicken being played by Republicans right now. We wouldn't tolerate it on the highway, why let it happen with our state and federal budgets? Threatening government shutdowns and credit defaults is recklessness. Gladly dumping the poor, the sick and the elderly but refusing to consider restoring the Reagan era tax rate onto the extremely rich is antisocial behavior.

There is a callous ruthlessness in the Republican leadership that comes very close to psychopathology. And it's hard to negotiate with psychopaths; they don't blink, they don't hesitate, they don't think twice or worry about other people. That's why they often win. We admire winners in America, but we should draw the line somewhere. Antisocial disregard for others shouldn't be admired or rewarded. Why do we vote for it?

We Could Afford To Be More Scandinavian

Some of our parents think very highly of their Scandinavian ancestors and friends. They go there when they can and like to show us their photos afterwards. They admire all things Norwegian/Danish/Swedish, the neatness of the landscape, how well kept everything looks, the good repair of the infrastructure, the modesty and decorum of the people, also of course the blonde hair and the cheekbones. We sometimes hear them wishing America could be more like the old country.

There are a number of ways we could be more like Scandinavia, and it would make us a better society and a fairer one. Raise taxes on the very rich, for instance. Scandinavia is full of rich people who live very very well, who pay very high taxes on the upper end of their incomes and in this way help the less fortunate, less successful, the less healthy, take care of themselves. These rich Scandinavians haven't moved away in droves. They haven't shut their businesses and moved to Mexico or Malaysia or some other low tax/low wage country. Employment is robust (Norwegian friends of ours have noted that a lot of Swedes now work in Norway where there are more jobs than people), national debt is low compared to the U.S., contentedness is high, the sense of economic freedom is equal to ours.

And the Scandinavian economy has functioned just as well as our own, possibly better during this economic crisis. In Scandinavia the basic security of the population hasn't made them too afraid to buy goods and services they need.

Anyway, an excellent analysis can be found at Lane Kenworthy's blog. Worth reading and sharing with your Scandinophile friends and relatives. Kenworthy did his comparisons with Denmark and Sweden. Norway being a very rich oil exporting nation makes the comparison less apt; oil wealth subsidizes a lot more there. We could learn a lot from Scandinavia. How to be a better and fairer, a more efficient society. It's actually wasteful to throw too much money at people who already have too much.