"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Erosion Of The Middle Class’

Oligarchy In The U.S.A.- How The Wealth Defense Industry Protects The Ultra-Rich: The .0001%

In Uncategorized on March 2, 2012 at 5:51 pm

Oldspeak:A small fraction of wealthy Americans constitute a powerful donor class that provides the vast majority of candidates’ funds. Long before ordinary citizens get to vote, they say, their choices are reduced to politicians deemed acceptable by the richest Americans via a “wealth primary,” in which candidates straying from a narrow economic agenda are shut out of campaign funding.“For all their influence at the polls, guys like Joe the Plumber aren’t typically campaign contributors,” explains Sheila Krumholz, executive director of the Center for Responsive Politics. “You’re more likely to see John the Bond Trader bankrolling these campaigns.” And she’s right: Of the roughly 1.4 million individual contributions of $200 or more during the 2008 elections, three-fourths of the money came from a mere one-fifth of the donors, who in turn comprised one-tenth of 1 percent of American adults.”-Jeffery A. Winters Today in America, being ‘merely-rich’ is not enough to live ‘comfortably’ and be represented by government. Apparently living comfortably involves avoiding taxation by paying untold sums and devoting whole industries of lawyers, accountants, and wealth management agents to defrauding the government. A government by virtue of their extreme wealth and inherent political power resources, 400 men run. Democracy’s gone, Oligarchical Capitalism reigns.

By Jeffery A. Winters @ In These Times:

In 2005, Citigroup offered its high net-worth clients in the United States a concise statement of the threats they and their money faced.

The report told them they were the leaders of a “plutonomy,” an economy driven by the spending of its ultra-rich citizens. “At the heart of plutonomy is income inequality,” which is made possible by “capitalist-friendly governments and tax regimes.”

The danger, according to Citigroup’s analysts, is that “personal taxation rates could rise – dividends, capital gains, and inheritance taxes would hurt the plutonomy.”

But the ultra-rich already knew that. In fact, even as America’s income distribution has skewed to favor the upper classes, the very richest have successfully managed to reduce their overall tax burden. Look no further than Republican presidential contender Mitt Romney, who in 2010 paid 13.9 percent of his $21.6 million income in taxes that year, the same tax rate as an individual who earned a mere $8,500 to $34,500.

How is that possible? How can a country make so much progress toward equality on other fronts – race, gender, sexual orientation and disability – but run the opposite way in its policy on taxing the rich?

In 2004, the American Political Science Association (APSA) tried to answer that very question. The explanation they came up with viewed the problem as a classic case of democratic participation: While the poor have overwhelming numbers, the wealthy have higher rates of political participation, more advanced skills and greater access to resources and information. In short, APSA said, the wealthy use their social capital to offset their minority status at the ballot box.

But this explanation has one major flaw. Regardless of the Occupy movement’s rhetoric, most of the growth in the wealth gap has actually gone to a tiny sliver of the 1% – one-tenth of it, or even one-one-hundredth.

Even more shockingly, that 1 percent of the 1% has shifted its tax burden not to the middle class or poor, but to rich households in the 85th to 99th percentile range. In 2007, the effective income tax rate for the richest 400 Americans was below 17 percent, while the “mass affluent” 1% paid nearly 24 percent. Disparities in Social Security taxes were even greater, with the merely rich paying 12.4 percent of their income, while the super-rich paid only one-one-thousandth of a percent.

It’s one thing for the poor to lose the democratic participation game, but APSA has no explanation for why the majority of the upper class – which has no shortage of government-influencing social capital – should fall so far behind the very top earners. (Of course, relative to middle- and lower-class earners, they’ve done just fine.)

For a better explanation, we need to look more closely at the relationship between wealth and political power. I propose an updated theory of “oligarchy,” the same lens developed by Plato and Aristotle when they studied the same problem in their own times.

Who are the oligarchs?

How much wealth does it take to make someone an oligarch in the United States?

Not just any rich person is an oligarch. Oligarchs are those rich enough to buy the professional firepower of the WDI to defend their wealth. Pulitzer Prize-winning economics reporter David Cay Johnston says that “this can sometimes be an outlay of $10 million to avoid $30 million in taxes, and other times spending only $1 million to save the same amount.”

For some perspective, look at the income chart above, which breaks down the extent of material inequality in the United States. Pay special attention to the last column, the Material Power Index (MPI), which defines each income level as a multiple of the average income among the bottom 90 percent of American taxpayers.

Even at more than 30 times the average income of the bottom 90 percent of Americans, an average annual income of $1 million for those in the top one-half of one percent is still too modest to make them oligarchs. These citizens are certainly rich. But they don’t have enough material power to hire anything beyond the cheapest foot soldiers of the WDI.

Starting with the next threshold, however — the top one-tenth of 1 percent of incomes — the MPI suddenly quadruples from 32 to 124, and then leaps another six-fold to 819 for those with incomes in the top one-one-hundredth of one percent. In 2007, about 150,000 Americans had average annual incomes of $4 million and above. This is the threshold at which oligarchs begin to dominate the landscape.

A quick review

First, let’s review what we think we know about power in America.

We begin with a theory of “democratic pluralism,” which posits that democracy is basically a tug-of-war with different interest groups trying to pull government policy toward an outcome. In this framework, the rich are just one group among many competing “special interests.”

Of course, it’s hard not to notice that some groups can tug better than others. So in the 1950s, social scientists, like C. Wright Mills, author of The Power Elite, developed another theory of “elites” – those who wield more pull thanks to factors like education, social networks and ethnicity. In this view, wealth is just one of many factors that might help someone become the leader of a major business or gain a government position, thereby joining the elite.

But neither theory explains how the super-rich are turning public policy to their benefit even at the expense of the moderately rich. The mass affluent vastly outnumber the super-rich, and the super-rich aren’t necessarily better-educated, more skilled or more able to participate in politics; nor do the super-rich dominate the top posts of American government – our representatives tend to be among the slightly lower rungs of the upper class who are losing the tax battle.

Also, neither theory takes into account the unique power that comes with enormous wealth – the kind found in that one-tenth of the 1%. Whether or not the super-rich hold any official position in business or government, they remain powerful.

Only when we separate wealth from all other kinds of power can we begin to understand why our tax system looks the way it does – and, by extension, how the top one-tenth of 1% of the income distribution has distorted American democracy.

Enormous wealth is the heart of oligarchy.

So what’s an oligarchy?

Across all political spectrums, oligarchs are people (never corporations or other organizations) who command massive concentrations of material resources (that is, wealth) that can be deployed to defend or enhance their own property and interests, even if they don’t own those resources personally. Without this massive concentration of wealth, there are no oligarchs.

In any society, of course, an extremely unequal wealth distribution provokes conflict. Oligarchy is the politics of the defense of this wealth, propagated by the richest members of society.

Wealth defense can take many forms. In ancient Greece and Rome, the wealthiest citizens cooperated to run institutionalized states that defended their property rights. In Suharto’s Indonesia, a single oligarch led a despotic regime that mostly used state power to support other oligarchs. In medieval Europe, the rich built castles and raised private armies to defend themselves against each other and deter peasants tempted by their masters’ vaults. In all of these cases oligarchs are directly engaged in rule. They literally embody the law and play an active role in coercion as part of their wealth defense strategy.

Contemporary America (along with other capitalist states) instead houses a kind of “civil oligarchy.” The big difference is that property rights are now guaranteed by the impersonal laws of an armed state. Even oligarchs, who can be disarmed for the first time in history and no longer need to rule directly, must submit to the rule of law for this modern “civil” arrangement to work. When oligarchs do enter government, it is more for vanity than to rule as or for oligarchs. Good examples are New York City Mayor Michael Bloomberg, former presidential candidate Ross Perot and former Massachusetts Governor Mitt Romney.

Another feature of American oligarchy is that it allows oligarchs to hire skilled professionals, middle- and upper-class worker bees, to labor year-round as salaried, full-time political advocates and defenders of the oligarchy. Unlike those backing ordinary politicians, the oligarchs’ professional forces require no ideological invigoration to keep going. In other words, they function as a very well-paid mercenary army.

Whatever views and interests may divide the very rich, they are united in being materially focused and materially empowered. The social and political tensions associated with extreme wealth bond oligarchs together even if they never meet, and sets in motion the complex dynamics of wealth defense. Oligarchs do overlap with each other in certain social circles that theorists of the elite worked hard to map. But such networks are not vital to their power and effectiveness. Oligarchic theory requires no conspiracies or backroom deals. It is the minions oligarchs hire who provide structure and continuity to America’s civil oligarchy.

The U.S. Wealth Defense Industry

The threats to wealth that oligarchs face, and want to overcome, create the enormous profit-making opportunities that motivate the wealth defense industry, or WDI. In American oligarchy, it consists of two components.

The first is the mercenary army of professionals – lawyers, accountants, wealth management agencies – who use highly specialized knowledge to navigate 72,000 pages of tax code and generate a range of tax “products” and advice, enabling oligarchs to collectively save scores of billions of dollars, every year, that would otherwise have to be surrendered to the state. While most of us are what I call “TurboTaxpayers,” buying cheap tax software to navigate our returns and make routine deductions, oligarchs purchase complex “tax opinion letters” from professional firms. These letters are drafted to justify enormous nonpayments of taxes if the IRS ever questions how certain transactions produce losses, or how other accounting gymnastics make it appear that no gains or compensation occurred. The letters can cost up to $3 million each, but can save an oligarch tens or hundreds of millions of dollars in a given year.

Written by some of the most high-powered attorneys and firms in the industry, tax letters serve to intimidate the legal department of the IRS even before a prosecution is contemplated.

The Senate is aware of these letters – noting in a 2003 report on the “tax shelter industry” that “respected professional firms are spending substantial resources … to design, market, and implement hundreds of complex tax shelters, some of which are illegal and improperly deny the U.S. Treasury of billions of dollars in tax revenues” – but getting specific information about them is extremely difficult, since the IRS rarely prosecutes oligarchs. When it does, most cases are sealed, and oligarchs who work with tax attorneys can invoke attorney-client privilege. But in 2003, there was a breach of this fortress of secrecy when the Senate published detailed reports about illegal tax shelters created by the accounting firm KPMG.

According to the Senate, the KPMG tax shelters created “phony paper losses for taxpayers, using a series of complex, orchestrated transactions involving shell corporations, structured finance, purported multi-million dollar loans, and deliberately obscure investments” for 350 clients between 1997 and 2001. The fake losses totaled about $8.4 billion, or $24 million per client; applied against their incomes, these losses reduced the taxes of each oligarch by an average of $8.3 million, or $2.9 billion for the group.

One of the reasons this case was exposed is that it was all rather down-market, using cheap cookie-cutter tax opinion letters priced at a mere $350,000 each.

Not only did all the firms and banks conspiring on behalf of these 350 oligarchs – and the oligarchs themselves – know that the investments “had no reasonable potential for profit,” but KPMG calculated that even if it was fined for failing to disclose the shelters, it would still earn far more in fees than it would pay in fines. The firm was fined $456 million. Even more incredibly, more than a dozen KPMG clients sued the firm for the taxes and penalties incurred after being discovered – the suits claim that KPMG bungled its job of creating shelters for tax evasion with zero legal risks for oligarchs. It’s tantamount to suing your hit man for a sloppy murder.

The second component of the WDI is the nitty-gritty legwork that keeps the tax system sufficiently porous, complex and uncertain enough to be manipulated. Some oligarchs do this work themselves, speed dialing public officials to directly complain about laws and regulations, but most do not. Instead, WDI professionals, motivated to earn a share of annual oligarchic gains, constitute a highly coherent and aggressive network for political pressure. These lobbyists fight to insert favorable material into the tax code, cut sections that cause problems, and block threats on the horizon.

Apologists for havens

Discussions about money in politics often begin with campaign finance reform. Advocates argue that a small fraction of wealthy Americans constitute a powerful donor class that provides the vast majority of candidates’ funds. Long before ordinary citizens get to vote, they say, their choices are reduced to politicians deemed acceptable by the richest Americans via a “wealth primary,” in which candidates straying from a narrow economic agenda are shut out of campaign funding.

“For all their influence at the polls, guys like Joe the Plumber aren’t typically campaign contributors,” explains Sheila Krumholz, executive director of the Center for Responsive Politics. “You’re more likely to see John the Bond Trader bankrolling these campaigns.” And she’s right: Of the roughly 1.4 million individual contributions of $200 or more during the 2008 elections, three-fourths of the money came from a mere one-fifth of the donors, who in turn comprised one-tenth of 1 percent of American adults.

But while this fraction does coincide with our approximation of the size of the American oligarchy, campaign donations are not oligarchs’ primary or even most effective strategy for political influence. Academics Michael Graetz and Ian Shapiro explain this in their 2005 book, Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth.

“Campaign contributions, soft money, spending limits for political candidates and the like have become controversial issues,” they admit, “but they mattered little in the estate tax fight.” The battle was between smaller oligarchs and the biggest players at the top. Believing it unlikely that the elimination of the estate tax could be extended indefinitely, a significant number of wealthy Americans with a net worth between $5 and $15 million wanted the threshold moved up to exempt their estate tax. In exchange, they supported a higher estate tax rate on everyone above the threshold. Big oligarchs took the opposite position. They wanted no estate tax at all. But if Congress was going to bring it back, the ultra-rich supported a lower exemption in exchange for a lower overall rate.

The big oligarchs won again – but not because of campaign finance. “Money mattered more fundamentally in shifting the tectonic plates underlying American tax debates,” Graetz and Shapiro suggest. And this is precisely where oligarchs deploy their resources in the WDI.

Oligarchs’ “three decades of investments in activist, conservative think tanks” has blazed an ideological path that drones in the WDI follow. Activists at institutions like the Heritage Foundation supply “ideological ammunition to the lobbyists and interest groups … who work relentlessly … to keep up the tax-cutting pressure on the Hill.”

This pressure was hard at work in President Obama’s feeble attempt to curtail offshore tax havens in 2009. In the middle of massive public bailouts to the financial system and large bonuses on Wall Street, the president proposed stronger measures to fight against who he called “tax cheats,” the individuals using offshore tax havens to deny the government nearly $70 billion a year – a level equal to about seven cents on every dollar of taxes paid honestly.

But Obama’s proposals were less aggressive than his rhetoric. The president urged Congress to support efforts to sanction nations that maintained secrecy on bank accounts and corporate entities, and sought to hire 800 additional IRS agents “to detect and pursue American tax evaders abroad”; these measures were projected to save a mere $8.7 billion over 10 years – about one percent of the losses from offshore accounts. Despite the timidity, the proposals received only a lukewarm response from Democrats and outright hostility from Republicans, who argued that they would cripple American corporations’ ability to compete globally.

Dan Mitchell, a senior fellow (i.e. mercenary) at the Cato Institute (a think tank financed by American oligarchs), defended tax havens as “outposts of freedom.” If Americans are concerned that “individuals are moving their money to countries with better tax law, that should be a lesson to us that we should fix our tax law.”

In other words: Let’s decrease taxes on the super-rich.

The WDI, arising naturally from the opportunities and risks created by enormous wealth, has spawned its own pile of these opinion-makers, free to spread their ideas through a compliant corporate media while oligarchs themselves are free to look on.

Oligarchy, or Democracy?

To argue that the United States is a thriving oligarchy does not imply that our democracy is a sham: There are many policies about which oligarchs have no shared interests. Their influence in these areas is either small or mutually canceling.

Though it may strike at the heart of elitism, greater democratic participation is not an antidote to oligarchic power. It is merely a potential threat. Only when participation challenges material inequality – when extreme wealth is redistributed – do oligarchy and democracy finally clash.

The answer to the question of inequality, then, is troubling. Wars and revolutions have destroyed oligarchies by forcibly dispersing their wealth, but a democracy never has.

Democracy and the rule of law can, however, tame oligarchs.

A campaign to tame oligarchs is a struggle unlikely to fire the spirits of those outraged by the profound injustices between rich and poor. However, to those enduring the economic and political burdens of living among wild oligarchs, it is an achievement that can improve the absolute welfare of average citizens, even if the relative gap between them and oligarchs widens rather than narrows.

A graduate student in one of my seminars – resisting my terminology – once declared that the “U.S. has rich people, not oligarchs.” More than anything else, that statement claims that somehow American democracy has managed to do something no other political system in history ever has: strip the holders of extreme wealth of their inherent power resources and the political interests linked to protecting those fortunes.

Of course, this hasn’t happened.

But it is endlessly fascinating that we’re now in a moment when Americans are once again asking fundamental questions about how the oligarchic power of wealth distorts and outflanks the democratic power of participation.

Jeffrey A. Winters is an associate professor of political science at Northwestern University. For a more extensive explanation of his theory of oligarchy, read Oligarchy (Cambridge University Press, 2011).

 

As The Plutonomy Powers Ahead, The Realonomy Remains In Recession

In Uncategorized on February 3, 2012 at 4:55 pm

Oldspeak:‘In a Plutonomy “the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers.” In other words, official economic statistics no longer represent the experience of the economy as a whole. More and more, they represent only the experiences of the very rich...the Realonomy has been in recession since 1999. Even at the very top of the Realonomy, people have experienced flat or declining incomes over the past 12 years…The Realonomy won’t start growing again until America addresses its runaway inequality. We need fairer taxes, higher minimum wages, and more – not less – government spending…That may all sound counterintuitive in a recession, but that’s only because we’ve gotten so used to the politics of Plutonomy. Growth isn’t enough.’ –Salvatore Babones. Not only is Growth not enough, it’s unsustainable. Infinite growth in simply IMPOSSIBLE on a planet with finite resources. The current empire in decline, the U.S. of A. one of the biggest debtor nations on the planet has not come to terms with the fact that it is indeed an empire in decline, and is generating more debt than wealth, while drawing down assets faster than they can replenish them, thus accelerating the rate of decline. “The ‘culture of debt’ has become a global issue, and it is not just financial, but defines how every society and economy now interacts with respect to their fundamental economic, human and natural assets.” –Edward B. Barbier We can’t continue down this unsustainable path indefinitely. The music will stop and the party will end. Then what? That’s what we need to be asking ourselves. Then what?

By Salvatore Babones @ Truthout:

America’s longest recession since World War II officially ended in June 2009. Since then, the economy has expanded by almost 6 percent (adjusted for inflation). All of the losses of 2007-2009 have been erased.

American economic output is now at an all-time high. So why doesn’t it feel that way?

Back in October 2005, three Citigroup stock analysts heralded the arrival of a new kind of economic system in the United States. They called it the “Plutonomy,” the economy of the rich.

They explained that in a Plutonomy “the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers.” In other words, official economic statistics no longer represent the experience of the economy as a whole. More and more, they represent only the experiences of the very rich.

Official economic statistics show that US national income per capita grew a cumulative 10 percent between 1999 and 2011 (adjusted for inflation). In aggregate, we generate 10 percent more per person than we did 12 years ago. Where did that 10 percent growth go?

Up in the stratosphere of the American Plutonomy, the IRS reports that incomes among the top 400 American taxpayers increased 107 percent between 1999 and 2007 (adjusted for inflation). Top 400 incomes declined in 2008, but by most accounts they have now bounced back to pre-recession levels.

For people who just make it into the top 1 percent, the gains have been much more modest. Their real incomes have risen about 12 percent since 1999, depending how you count. By some estimates, the increase has been closer to 6 percent. In other words, people at the 99th percentile of the US income distribution – people making upwards of $360,000 per year – have just about kept pace with economic growth in the economy as a whole.

Since 1999, no group below the top 1 percent has even kept pace. They are the “other 99 percent.” They live in the “Realonomy.”

In the Realonomy, people make most of their money from wages, not investments. In the Realonomy, people have to worry about retirement planning and health insurance. In the Realonomy, people can’t afford to lose their jobs.

While the Plutonomy continues to grow by leaps and bounds, the Realonomy has been in recession since 1999. Even at the very top of the Realonomy, people have experienced flat or declining incomes over the past 12 years. For example, families at the 95th percentile of America’s income distribution have experienced, on average, a 1.2 percent decline in real income (income adjusted for inflation) since 1999.

Further down the ladder, the situation gets worse and worse. For families at the 80th percentile, incomes are down 1.3 percent; at the 60th percentile, down 4.4 percent; at the 40th percentile, down 7.1 percent; at the 20th percentile, down 10.5 percent.

Nor does education provide an insurance policy. Among college graduates with full-time, year-round jobs, real incomes are down 3.6 percent over the past 12 years.

On the other hand, those without college degrees or full-time jobs have fared even worse.

The simple fact is that the Realonomy has been stagnant or in recession since 1999. The Realonomy hit bottom in 2009-2010, but it still hasn’t bounced back. Only the Plutonomy is growing, not the Realonomy.

The Realonomy won’t start growing again until America addresses its runaway inequality. We need fairer taxes, higher minimum wages, and more – not less – government spending.

That may all sound counterintuitive in a recession, but that’s only because we’ve gotten so used to the politics of Plutonomy. Growth isn’t enough.

We have growth. The top of the top 1 percent is growing like crazy. It’s government’s job to redirect some of that growth to the other 99 percent.

 

Report: Poverty In America Likely To Get Worse; 46 Million ‘Living’ Below Poverty Line

In Uncategorized on January 16, 2012 at 12:26 pm

Oldspeak:” ‘Poverty in America is remarkably widespread, the number of people living in poverty is increasing and is expected to increase further, despite the recoveryMillions of Americans will be forced into poverty in the coming years even as the US hauls itself out of the longest and deepest recession since the second world war’ Dr King would be appalled.

By Chris McGreal @ U.K. Guardian:

Millions of Americans will be forced into poverty in the coming years even as the US hauls itself out of the longest and deepest recession since the second world war.

A study from Indiana University, released on Wednesday, says the number of Americans living below the poverty line surged by 27% since the beginning of what it calls the “Great Recession” in 2006, driving 10 million more people into poverty.

The report warns that the numbers will continue to rise, because although the recession is technically over, its continued impact on cuts to welfare budgets and the quality of new, often poorly paid, jobs can be expected to force many more people in to poverty. It is also difficult for those already under water to get back up again.

“Poverty in America is remarkably widespread,” concludes the study, At Risk: America’s Poor During and After the Great Recession. “The number of people living in poverty is increasing and is expected to increase further, despite the recovery.”

The white paper, drafted by the university’s school of public and environmental affairs, which is among the best ranked schools of its kind in the US, says that six years ago, 36.5 million Americans fell below the poverty line. By 2010, the number of people living in poverty rose to 46.2 million and continued to grow over the past year.

“The Great Recession has left behind the largest number of long-term unemployed people since records were first kept in 1948. More than 4 million Americans report that they have been unemployed for more than 12 months,” said the report.

John Graham, dean of the school and one of the authors of the report, said that the numbers of “new poor” will continue to rise.

“One of the big surprises is that poverty in the United States is likely to continue to increase even as the economic recovery unfolds,” said Graham. “The unique feature of the great recession is not just the high rate of unemployment, but the long duration of unemployment that millions of Americans have experienced. [For] a lot of these long-term unemployed, the job that they had won’t exist when they go back in to the labour market.”

Graham said that many of those who once held well-paid jobs will be forced to settle for lower paying work, trapping some in a permanent cycle of poverty.

“As a consequence they will be poor or near poor for a substantial period of time,” he said.

The latest census data shows that nearly one in two of the US’s 300 million citizens are now officially classified as having a low income or living in poverty. One in five families earns less than $15,000 (£9,600) a year.

The Indiana University study says that the numbers of people falling into poverty is also likely to grow because of severe cuts to state and federal welfare budgets.

“The states by their constitutions all have to have a balanced budget each year. A lot of states are already in the process of cutting back their safety net programmes at the same time that poverty is increasing,” said Graham. “Their needs are going up but the programmes are receiving less support. It’s going to continue because the revenues of state governments are not increasing as rapidly as is needed and the federal government will be under a lot of pressure because of its large deficit to decrease funding given to the states.”

The report warns that the situation is likely to become even worse if the long-term unemployed lose their jobless benefits. Congress extended them for two months at the end of the year, but it is unlikely they will be continued indefinitely.

Among the most severely affected states are Florida, Nevada and Arizona, which have been particularly badly hit by the housing foreclosure crisis, and Michigan and Ohio, which have seen the collapse of traditional manufacturing.

Minorities are among the hardest hit. More than one in four African Americans and Hispanics is officially recorded as living in poverty. About one in 10 white Americans fall below the poverty line.

“We can expect to find that the most vulnerable parts of our society are the ones who will recover most slowly from a deep recession like this. More have gone in to poverty and they’ll be slower coming out of it,” said Graham. “If you look at the educational levels and skill levels of African Americans and Hispanics, they are more vulnerable as the job market tightens. They don’t have either the extra edge in education or skills that white Americans do.”

The report says that the situation would have been much worse had it not been for the Obama administration’s 2009 federal stimulus package, which increased child health insurance for poorer families, and cut taxes for low income workers.

Still, the study says that although unemployment is officially falling, that may not be the whole story. Some workers give up looking for jobs and are no longer counted in the unemployment rate.

“Although the official rate of unemployment is declining, much of this apparent progress is attributable to the fact that many adults are giving up on the search for a job,” it said.

The report argues that a better measure of how well an economy is creating employment is the “jobs-to-people ratio”. It says that in a healthy economy the range is between 0.60 and 0.70. The US fell within that range until it fell to 0.582 at the end of 2009. It had risen only to 0.585 in November 2011.

“These data suggest that the reported progress in reducing the rate of unemployment may not be as encouraging as we think since increasing numbers of the unemployed may simply be giving up on the search for a job,” the report said.

Class Dismissed: How Television Frames The Working Class

In Uncategorized on December 9, 2011 at 1:09 pm

Oldspeak:Class Dismissed explores the ways in which race, gender, and sexuality intersect with class, offering a more complex reading of television’s often one-dimensional representations. The video also links television portrayals to negative cultural attitudes and public policies that directly affect the lives of working class people. It examines the patterns inherent in TV’s disturbing depictions of working class people as either clowns or social deviants — stereotypical portrayals that reinforce the myth of meritocracy.’ A brilliant deconstruction of TVs transformation in its beginnings with accurate depictions of working class life, to its infiltration by powerful commercial interests who demanded sanitized, product placement filled depictions of middle class life. Where the working class are constantly aspiring to consume more and more. How It propagates deeply ingrained stereotypes & the subtle propaganda-filled myths of a ‘classless society’ where everyone has access to “The American Dream”. Class judgement abounds. Racism, sexism, bigotry, and societally generated downward pressures on people do not. Conformity and consumption in the prescribed ways are glamorized any deviation from prescribed ‘norms’ are demonized or worse ignored/not depicted.  Must see TV!

 

Nearly $2 Trillion Purloined From U.S. Workers in 2009

In Uncategorized on July 12, 2011 at 5:54 pm

Oldspeak:”The U.S. ranks 39th in the world in income inequality, behind such Economic Juggernauts as Uzbekistan, Pakistan, Afghanistan, Iran, Kenya, Armenia, Vietnam and Yemen. Understand that this massive transfer of wealth from workers to managers and owners via ‘bonuses, bloated salaries, elephantine stock options, padded consulting fees, outsized compensation to boards of directors, sumptuous conferences, palatial offices complete with original artwork, retinues of superfluous “support” staff, hunting lodges, private corporate dining rooms, regal retirement agreements, and so on—defy exact categorization.’ And has been happening steadily over the past 30 years. It has directly contributed to the withering of the middle class and the extreme concentration of wealth in the hands of the top  .01% of the population at levels not seen since the great depression/glided age. The signs are all there, the danger is clearly ahead. We’ve seen what happens under these extreme economic conditions, yet our elected officials have lead feet on the accelerator, plunging the U.S. Economy toward the cliff. Why? How can so many supposedly educated people lack such basic common sense and appreciation of past history? Makes you wonder if they all know something we don’t.”

Richard D. Wolf: When Capitalism Hits The Fan:

By James M. Cypher @ Dollars and Sense:

In 2009, stock owners, bankers, brokers, hedge-fund wizards, highly paid corporate executives, corporations, and mid-ranking managers pocketed—as either income, benefits, or perks such as corporate jets—an estimated $1.91 trillion that 40 years ago would have collectively gone to non-supervisory and production workers in the form of higher wages and benefits. These are the 88 million workers in the private sector who are closely tied to production processes and/or are not responsible for the supervision, planning, or direction of other workers.

From the end of World War II until the early 1970s, the benefits of economic growth were broadly shared by those in all income categories: workers received increases in compensation (wages plus benefits) that essentially matched the rise in their productivity. Neoclassical economist John Bates Clark (1847-1938) first formulated what he termed the “natural law” of income distribution which “assigns to everyone what he has specifically created.” That is, if markets are not “obstructed,” pay levels should be “equal [to] that part of the product of industry which is traceable to labor itself.” As productivity increased, Clark argued, wages would rise at an equal rate.

The idea that compensation increases should equal increases in average labor productivity per worker as a matter of national wage policy, or a wage norm, is traceable to the President’s Council of Economic Advisors under the Eisenhower and Kennedy administrations. This macroeconomic approach was anchored in the fact that if compensation rises in step with productivity growth, then both unit labor costs and capital’s versus labor’s share of national income will remain constant. This “Keynesian Consensus” never questioned the fairness of the initial capital/labor split, but it at least offered workers a share of the fruits of future economic growth.

As the figure below shows, both Clark’s idea of a “natural law” of distribution and Keynesian national wage policy have ceased to function since the onset of the neoliberal/supply-side era beginning in the early 1970s. From 1972 through 2009, “usable” productivity—that part of productivity growth that is available for raising wages and living standards—increased by 55.5%. Meanwhile, real average hourly pay fell by almost 10% (excluding benefits). As a group, workers responded by increasing their labor-force participation rate. To make the calculation consistent over time, employment is adjusted to a constant participation rate set at the 1972 level. Had compensation matched “usable” productivity growth, the (adjusted) 84 million non-supervisory and production workers in 2009 would have received roughly $1.91 trillion more in wages and benefits. That is, 13.5% of the nation’s Gross Domestic Product in 2009 was transferred from non-supervisory workers to capitalists (and managers) via the gap of 44.4% that had opened up between compensation and “usable”productivity since 1972.

As expected, neoclassical (or mainstream) economists offer tortured justifications for the new status quo. The erstwhile dauphin of neoclassical economics, Harvard economist Gregory Mankiw agrees with Clark’s formulation. But he says that even though “productivity has accelerated, workers have become accustomed to the slow rate of wage growth since the 1970s.” Why “accustomed”? Well, believe it or not, neoclassical economists claim that today’s workers suffer from “low wage aspirations.” Mankiw equates the wage that workers aspire to with the wage they consider fair. So, according to this very strange formulation, workers consider that they are getting a fair shake today, even though their compensation increases lag behind their productivity increases. Yet a few decades earlier, they considered it fair (as did Clark and Mankiw) for compensation growth to keep up with productivity increases.

Some economists simply deny that any change has occurred. Noted neoclassical conjurer Martin Feldstein believes that the “productivity-compensation gap” is merely a matter of bad measurement: by dropping the Consumer Price Index as the appropriate yardstick, Feldstein alchemically transforms the way wages are adjusted for inflation. His soothing Panglossian recalibration raises workers’ “real” income; et voilà!—the productivity-compensation gap all but disappears.

Leaving aside such statistical prestidigitation, a vast upward transfer of income is evident. That transfer is directly related to the rupture of the so-called “Treaty of Detroit”—an understanding between capital and labor, pounded out during the Truman administration, wherein employers accepted the idea that compensation could grow at the rate that productivity increased. In 1953 union strength was at its high point; 32.5% of the US labor force was unionized. With the profit squeeze of the early 1970s and the onset of Reaganism, unionization rates began to fall—to 27% in 1979, then to 19% in 1984. By 2010 the rate was down to 11.9% (and only 6.9% in the private sector). Off-shoring, outsourcing, vigorous (and often illegal) corporate tactics to stop unionization drives, and an overall political climate of hostility to free and fair union elections have deprived workers of the countervailing power they once held. The result is that without unions struggling to divide the economic pie, non-supervisory and production workers (78% of the private-sector workforce) have been deprived of a minimal level of economic distributive justice.

The upward redistribution has remained as hidden as possible. The forms it has taken—as bonuses, bloated salaries, elephantine stock options, padded consulting fees, outsized compensation to boards of directors, sumptuous conferences, palatial offices complete with original artwork, retinues of superfluous “support” staff, hunting lodges, private corporate dining rooms, regal retirement agreements, and so on—defy exact categorization. Some would appear as profit, some as interest, some as dividends, realized capital gains, gigantic pension programs, retained earnings, or owners’ income, with the remainder deeply buried as “costs of doing business.”

In the final analysis, the $1.91 trillion figure is only an approximation, designed to make more concrete a concept that has lacked an important quantitative dimension. Of course, had compensation increases matched “usable” productivity increases, workers would have paid taxes on the wage portion of their compensation, leaving them with much less than the $1.91 trillion in their pockets. Meanwhile, as these funds are shifted over to capital (and management salaries), federal, state, and local taxes are paid on the portion which appears as declared income. This results in a considerable drop in the net after-tax transfer amount actually pocketed by capital through their appropriation of the productivity increases of non-supervisory workers. Even so, their haul remains a staggering—even astonishing—sum.