We're As Bad As Greece

While the crisis persists in Greece, rich Greeks aren't worried. It's not their problem. The rich float above the crises that impoverish and destroy working people. They benefit from the conditions that ruin the broader economy.

This article in the Guardian explains the Greek problem, and it's the same as the problem here in the U.S.: rich parasites. In both countries the rich are overpaid and immune to taxation. Meanwhile they benefit the most from the government spending they refuse to fund. Our tax financed military protects their trade. Our roads move their products. Our government funded research invents their patents. Our government cleans up their messes. Our safety net takes care of the workers they throw away. These three paragraphs from the Guardian are especially telling:

"Greek shipowners, who have gained from their profits being tax-free and who control at least 15% of the world's merchant freight, have also remained low-key. With their wealth offshore and highly secretive, the estimated 900 families who run the sector have the largest fleet in the world. As Athens' biggest foreign currency earner after tourism, the industry remitted more than $175bn (£112bn) to the country in untaxed earnings over the past decade. Greece's debt currently stands at €280bn.

"As ordinary Greeks have been thrown into ever greater poverty by wage and pension cuts and a seemingly endless array of new and higher taxes, their wealthy compatriots have been busy either whisking their money out of Greece or snapping up prime real estate abroad.

"An estimated €8bn flowed out of the Greek banking system in May as speculation over the country's possible exit from the eurozone mounted. Another €4bn was reported to have been withdrawn in the last two weeks – on top of an estimated €20bn since the start of the crisis in late 2009. Stories of rich Greeks sending their wives and best friends on "shopping missions" to remove secret hoards kept in banks in Switzerland and Cyprus are legion."

These three paragraphs might as well be about the U.S. and its lucky one percenters, the carefree rich––like the Romneys, who happily deduct twice the national median annual income every year for their horse expenses. It must be nice to have an expensive tax-deductible hobby like dressage. Why are our tax dollars subsidizing Mrs. Romney's playtime?

The Romney candidacy is all about making the rich less obligated to pay their way. It's about giving themselves and their friends a free ride while working Americans work harder and longer for less. President Romney would shift even more of the tax burden off people who live off wealth and onto people who work to survive. That is the Greek model, and it doesn't work. Rich Greeks are abandoning Greece, taking their wealth with them, just as Romney has most of his wealth in Switzerland and the Caymans.

Rich People Are Not Job Creators Sez Business Week

Taxes on the rich stimulate economies. If you don't believe me, maybe you'll believe a non-communist billionaire entrepreneur who's started several successful companies, writing in the certifiably non-socialist magazine Bloomberg Business Week.

Hanauer has this to say: "I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

"That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be."

Not only is the term Job Creators a lie, it is a lie that kills jobs. It protects and rewards the idleness of capital and impoverishes the average consumers who actually do create jobs in their millions by buying stuff and paying for services. Impoverish the average consumer and you put capital to sleep in the pockets and closets and jewelry drawers of the very rich. By lowering the taxes on the rich, especially the rich heirs who've never worked or created a job in their lives, and you incentivize the idleness of wealth and penalize the hiring and paying of workers.

Henry Blodget does a great job of explaining the dynamics of what Hanauer is talking about on the website Business Insider, another non-anarchistic non-socialist business publication.

Blodget: "For a specific example, Hanauer points out that his family owns 3 cars, not the 3,000 that might be bought if his $9+ million were taken home by a few thousand families.

"If that $9+ million had gone to 9,000 families instead of Hanauer, it would almost certainly have been pumped right back into the economy via consumption (i.e., demand). And, in so doing, it would have created more jobs.

"Hanauer estimates that, if most American families were taking home the same share of the national income that they were taking home 30 years ago, every family would have another $10,000 of disposable income to spend.

"That, Hanauer points out, would have a huge impact on demand — and, thereby job creation."

As I've pointed out before a multi-millionaire CEO who justifies his raises by lowering his employees' pay and benefits doesn't take his five million or hundred million dollar paycheck and buy a thousand refrigerators or a hundred cars as his employees would do. He buys another company and makes it leaner and meaner, or he buys his wife or mistress a $50,000 tennis bracelet. Tax cuts to rich people do not create jobs because lower taxes disincentivizes investment in the factory or the employees. Rewarding up and taxing down kills economies. It rewards rich people pocketing their gains, what I prefer to call hoarding. It certainly ain't job creating.

If you prefer, I first heard Hanauer's story on NPR. Consider this, if taxes are lowered on rich people they have less incentive to give money to public radio.

"Goldman Sachs rules the world"

Stock trader Alessio Rastani had a moment of remarkable candor on the BBC last week.

"For most traders we don't really care about having a fixed economy, having a fixed situation, our job is to make money from it. Personally, I've been dreaming of this moment for three years. I go to bed every night and I dream of another recession. When the market crashes... if you know what to do, if you have the right plan set up, you can make a lot of money from this."

"This is not a time right now for wishful thinking that governments are going to sort things out. The governments don't rule the world, Goldman Sachs rules the world," said Rastani.

He expressed an eager hope that the economy would crash in the next year because it was going to make him very rich. These are the people who will control events. Unless we restore some of the regulations removed by the last four presidents prior to Obama. One good idea would be to place a tiny transaction tax on share trading.

"...a tax of just 0.05 percent (one twentieth of one percent) levied on each stock, bond, derivative or currency transaction would be aimed at financial institutions’ casino-style trading, which helped precipitate the economic crisis. Because these markets are so vast, the tax could raise hundreds of billions of dollars a year globally for cash-strapped governments and could increase development aid."

It might also help limit the large financial speculators who buy thousands of shares for split seconds and then sell them, forcing the markets quickly up or down in massive computer driven gyrations. Those gyrations are making traders rich because they earn fees for every transaction. These traders profit from a panicked market. They profit from inadequate public information, from their own prior information or inside information, from asymmetries of information and from broad insecurities and public worries.

Barbara Ehrenreich has a very good piece in the Washington Post. How strange it is to live in a country where most people are hurting, worried and living at their limits but the rich are treated like a special protected class. It's worth reading and sharing.

"...consider Daphne Guinness, profiled at length in this past week’s New Yorker, who is apparently best known for wearing clothes, which she draws from a wardrobe of 2,500 garments, 450 pairs of shoes and 200 handbags. On the day she was interviewed, she wore a high-collared, presumably bespoke shirt by uber-designer Alexander McQueen, “a pave diamond brooch,” silver sheaths on two of her fingers and “custom-made sparkly silver Mary Janes, with a three inch platform under the toe” — not the heel, the toe. Well, to each her own, but she might as well walk around Manhattan wearing a sign saying “My husband stole your pension.”" The super rich are flaunting again because they've been rebranded by the Republicans as "Job Creators"––without creating any jobs. Their money isn't invested in factories or employees but luxury goods.

But anyone or any party that takes the side of the poor against the rich or the powerless many against the powerful few will find he has powerful enemies. Money puts people in office and guess where the money is. Meanwhile we have a large powerful political and media apparatus devoted to the aid and protection of the very rich: the Republican Party, Fox News, the Wall Street Journal and the entire Murdoch operation, and most of talk radio.

Today's Must-Read

From the Wall Street Journal there's this interview with economist Nouriel Roubini. Roubini places blame for this economy squarely on George Bush and Republican policies:

This morning's must-read is an excellent Warren Buffett piece in the New York Times. Buffett has been saying the same thing for several years, that our tax policies coddle the rich and punish working people. Tax the rich fairly, as Eisenhower did, or even as gently as Reagan did, and goodbye deficit. A fair policy would prevent a second recession, but a second recession is exactly what the Republicans want. More people ought to be saying this out loud.

I've said it before: the engine of our economy isn't the rich, the so-called "job creators" who aren't creating any jobs. The engine of any economy is the working men and women, the people who work and earn paychecks that they spend on groceries and mortgages, cars, new refrigerators, new clothes, on goods and services.