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Friday, October 31, 2014

American dream deferred indefinitely


American dream deferred indefinitely


Income inequality is now as high as it's been since the Great Depression, and the middle class is nearly extinct

American dream deferred indefinitely 
 (Credit: Shutterstock)
This article originally appeared on the L.A. Review of Books
Angeles Review of Books

INEQUALITY IS NOW ONE of the biggest political and economic challenges facing the United States. Not that long ago, the gap between rich and poor barely registered on the political Richter scale. Now the growing income divide, an issue that dominated the presidential election debate, has turned into one of the hottest topics of the age.

Postwar American history divides into two halves. For the first three decades, those on middle and low incomes did well out of rising prosperity and inequality fell. In the second half, roughly from the mid–1970s, this process went into reverse. Set on apparent autopilot, the gains from growth were heavily colonized by the superrich, leaving the bulk of the workforce with little better than stagnant incomes.

The return of inequality to levels last seen in the 1920s has had a profound effect on American society, its values, and its economy. The United States led the world in the building of a majority middle class. As early as 1956, the celebrated sociologist, C. Wright Mills, wrote that American society had become “less a pyramid with a flat base than a fat diamond with a bulging middle.”

That bulge has been on a diet. The chairman of President Obama’s Council of Economic Advisers — Professor Alan Krueger — has shown how the size of the American middle class (households with annual incomes within 50 percent of the midpoint of the income distribution) has been heading backwards from a peak of more than a half in the late 1970s to 40 percent now. The “diamond” has gone. The social shape of America now looks more like a contorted “hourglass” with a pronounced bulge at the top, a long thin stem in the middle, and a fat bulge at the bottom.

One of the most significant effects of America’s hourglass society has been the capping of opportunities and the emergence of downward mobility amongst the middle classes, a process that began well before the recession. Around 100 million Americans — a third of the population — live below or fractionally above the poverty level. A quarter of the American workforce end up in low-paid jobs, the highest rate across rich nations, while the wealthiest 400 Americans have the same combined wealth as the poorest half — over 150 million people.

With a growing percentage of the current generation facing a lower living standard than their parents, more and more US citizens express a “fear of falling,” worried about a further loss of livelihood and their relative income status. The nation is at last waking up to what has been reality for years — the vaunted American Dream (the ability of citizens to go from rags to riches, and one of the country’s most enduring values) is increasingly a myth.

In a poll conducted for The Washington Post before the 2012 presidential election, respondents were asked which was the bigger worry: “unfairness in the economic system that favors the wealthy” or “over-regulation of the free market that interferes with growth and prosperity.” They chose unfairness by a margin of 52–37 percent. The mostly pro-self-reliant American public are perhaps coming to recognize that their much-heralded virtues of hard work and self-help are no longer an effective means to economic advancement.

The most damaging impact of growing inequality has been on the American — and global — economy. It has been one of the central rules of market economics that inequality is good for growth and stability. The idea was enshrined in the postwar writings of the New Right critics of the model of managed capitalism that emerged after the war. “Inequality of wealth and incomes is the cause of the masses’ well being, not the cause of anybody’s distress” wrote the Austrian-American economist Ludwig von Mises, one of the leading prophets of the superiority of markets, in 1955.

It was a theory that gained traction during the global economic crisis of the 1970s and with the publication in 1975 of a highly influential book, Equality and Efficiency: The Big Tradeoff, by the late American mainstream economist Arthur Okun. This theory — that you can have either more equal societies or more economically successful ones, but not both — has been used to justify the growth of inequality in the United States, a trend that has since spread to a majority of the rich world. One of the telling by-products of the current economic crisis is that this theory is now being challenged. It is now being increasingly argued that the levels of income concentration in recent times have had a significant negative effect on the economy, bringing slower growth and greater turbulence and contributing to both the 2008 crash and the lack of a sustained recovery.

Perhaps the most significant convert to these ideas is President Obama. A year ago, he remarked, “When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy from top to bottom.” Addressing delegates at the annual meeting of the World Economic Forum at Davos in January 2013, Christine Lagarde, head of the International Monetary Fund, endorsed this view, “I believe that the economics profession and the policy community have downplayed inequality for too long […] [A] more equal distribution of income allows for more economic stability, more sustained economic growth.”

This view goes against the grain of the economic orthodoxy of the last 30 years. As the Chicago economist Robert E. Lucas, Nobel prizewinner and one of the principal architects of the pro-market, self-regulating school that has dominated economic strategy in the Anglo-Saxon world, declared in 2003, “Of the tendencies that are harmful to sound economics, the most poisonous is to focus on questions of distribution.”

A growing body of evidence and opinion now holds that this idea is wrong. In fact, the “distribution question” — how the cake is divided, between wages and profits on the one hand, and between the top and bottom on the other — is critical to economic health. Over the last 30 years, the rich world, led by the United States, has steered a growing share of national output first to profits and ultimately to the top one percent. Across the 34 richest nations in the world, the share going to wages has fallen from over 66 percent in 1990 to less than 62 percent today. The result is a growing detachment of living standards from output. The stagnating incomes of the bulk of Americans, along with the shrinking of the middle, are the mirror image of the rise of the plutocracy and the return of the gilded age.

This decoupling of wages from output creates a critical structural fault that ultimately brings self-destruction. First, a growing pay-output gap sucks consumer lifeblood out of economies. To fill this growing demand gap, levels of personal debt were allowed to explode. In the US, the level of outstanding personal debt rose almost threefold in the decade from 1997 to $14.4 trillion. This helped to fuel a domestic boom from the mid-1990s, but one that was never going to be sustainable.

Secondly, the long wage squeeze and the growing concentration of income at the top led to record corporate surpluses and an explosion of personal fortunes. Instead of being used to create new wealth via an investment and entrepreneurial boom (as predicted by market theorists), these massive cash surpluses were used to finance a wave of speculative financial activity and asset restructuring. The effect was the upward redistribution of existing wealth and the fueling of the bubbles — in property and business — that eventually brought the global economy to its knees. That inequality is also acting as a profound drag on the prospects of recovery.

A central feature of the President’s annual State of the Union address on February 11 was its call to “grow the economy from the middle out,” to “reignite the true engine of America’s economic growth — a rising, thriving middle class.” In his call for more active government to reduce inequality — from a 25 percent hike in the minimum wage to higher taxes on the rich — Obama was adding some meat to his earlier call “to restore an economy where everyone gets a fair shot, and everyone does their fair share.” Yet, despite a succession of lofty speeches, the best evidence is that since 2008, growth has continued to be very unevenly shared. The economists Emmanuel Saez and Thomas Piketty have shown that over nine tenths of growth in 2010 was captured by the top one percent. This is in stark contrast to the 1930s, when the big gainers from recovery were most ordinary Americans and the big losers were the superrich.

Obama’s program for change fails to match the radicalism of Franklin D. Roosevelt in the 1930s or that of Lyndon Johnson’s War on Poverty three decades later. Of course, creating a more equal America is hardly a cakewalk. The United States has rarely been more divided on the politics of change. Before Congressman Paul Ryan became Mitt Romney’s controversial running mate, he had blasted Obama’s proposed (and modest) tax measures on the rich as “class warfare.” Other global leaders seem equally disempowered in the face of the might of a global billionaire class determined to preserve its privileges, muscle, and wealth.

But unless Obama can find a way of breaking the firewalls created by the new plutocrats to protect their wealth from economic collapse and political interference, the likelihood is that the American middle class will go on shrinking, the American dream will further erode, and and the nation’s economy will continue to stumble from crisis to crisis.

The Economist explains Why young people don’t vote

The Economist explains

Why young people don’t vote

UNLIKE presidential contests, America’s mid-term elections do not seem to inspire many people. In 2012 fully 59% of registered voters turned up at the polls for the presidential election. But two years earlier just 42% bothered to cast their votes in the 2010 mid-term elections, and this year’s turnout may be even lower. Few are as uninterested as the young. In 2010 the turnout of people aged 18 to 24 was just 21%. Such low turnout means that in mid-term years, Republicans (whose voters tend to be older) dominate the ballot, even though they cannot win so easily in presidential years. In plenty of Senate races, Democrats are banking, perhaps too hopefully, on an unusually high youth turnout to win. Why is it so difficult to get young people to vote?

It is not only in America that the young do not exercise their democratic rights. In 2010 just 44% of people aged 18 to 24 voted in Britain’s general election, compared with 65% of people of all ages. In not a single European country do the young turn out more than older people. Historically, youth turnout has never been particularly high anywhere, but over the past few decades things have got worse. One explanation favoured by older people is that the young are simply lazy. But this does not make much sense. Today’s young people volunteer more than old people; they are much better educated; and they are less likely to drink excessively or use drugs than previous generations of youth. That does not seem like a recipe for political apathy.

A better explanation may be that young people today do not feel they have much of a stake in society. Having children and owning property gives you a direct interest in how schools and hospitals are run, and whether parks and libraries are maintained. But if they settle down at all, young people are waiting ever longer to do it. In 1970 the average American woman was not yet 21 years old when she first married, with children and home ownership quickly following.
Today women marry at 26 on average, if they marry at all, and are likely to want a career as well as children. People who have not settled down are not much affected by political decisions, and their transient lifestyles can also make it difficult to vote. In Britain, almost a quarter of 19-year-olds move from one local authority to another in a typical year; more still will move within the same district. If you rent a room and move often, registering to vote is a chore which is easily forgotten until it is too late. Many states in America require people to present government-issued ID in order to vote. Many young Americans do not have driving licenses, hunting licenses or passports, and it is a chore to get a special voter's ID, so many end up unable to vote. (Electoral fraud by impersonation in America is a negligible problem: such laws tend to be cynically enacted by right-wingers to suppress turnout among those that are most likely to vote against them.)

Dig deeper:

Why America's mid-term elections matter (Oct 2014)
The young in America are barely aware of the elections (Oct 2014)
Today’s young people are held to be alienated, unhappy, violent failures. They are proving anything but (July 2014)

Wednesday, October 29, 2014

Right-Wing Media Will Blame Obama For Rising Gas Prices But Stay Silent When Prices Drop

          more from Justin Baragona
Wednesday, October, 15th, 2014, 5:33 pm

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Don’t look now, but gasoline prices across the nation are falling, and experts expect to see the price at the pump to continue to drop. More than a third of the nation is experiencing gas prices below $3 a gallon. In Missouri, a number of cities are seeing prices around $2.80 a gallon. MarketWatch is expecting prices to fall an additional 15 to 20 cents a gallon across the country before bottoming out. This is the cheapest gas has been in the country at this time of year since 2010.

US News and World Report states that the sharp decrease in gas prices over the past few weeks, along with the expected decrease over the coming weeks, means that American consumers will have billions of dollars in disposable income to pump into the economy. Therefore, the upcoming holiday shopping season should see a rather sizable uptick from the previous year. We should also see a rise in consumer confidence over the next quarter. A number of industries, such as clothing, footwear and restaurants, should see a sizable boost this fall and winter.

Per MarketWatch, the drop in gas prices is due to sluggish demand and price wars between oil producers. Some if this could be attributed to a still sluggish global economy. Another factor could be that American consumers prefer vehicles with greater fuel efficiency. Also, while Americans are driving at roughly the same pace as they did in 2005, millennials are shifting more and more towards public transit and other forms of transportation, such as walking and bike riding.

There are a vast number of factors that go into fuel prices. While it can be argued whether or not a presidential administration’s energy policies have long-term effects on resource prices, economists generally agree that the White House really can’t do anything to change prices in the short-term. Despite this, during President Obama’s tenure in the Oval Office, conservative pundits and Republican politicians have continuously blamed him anytime the price of gasoline has jumped up. Interestingly, those same voices tend to grow very quiet whenever we see a drop in the price, like we are currently experiencing.

In the months leading up to the 2012 election, conservative voices, led by Fox News, tried to push the meme that Obama’s refusal to sign off on the Keystone XL pipeline, along with his other energy policies, was to blame for rising gas prices. In August 2012, less than three months before the election, the Washington Times editorial board claimed that Obama’s push for more green energy was causing the surge in gas prices. Earlier that year, in May, Republican candidate Mitt Romney pulled a Palin and claimed that higher gas prices at the time were due to the lack of expanded oil drilling in Alaska and the Gulf of Mexico. In September 2012, less than two months out from the election, Fox’s Bill O’Reilly encouraged Romney to keep blaming Obama for gas prices.
Of course, you won’t hear a peep from these people now that prices are on a downward spiral and the additional disposable income will positively affect other portions of the economy. If you do hear anything, it will likely be right-wing mouthpieces contradicting themselves and claiming Obama has nothing to do with the drop. Or, even better, they’ll find a way to spin it as a negative and then blame Obama. Regardless, they’ll follow their mantra to the end. The mantra? Blame Obama for everything.

Minimum Wage Mythbusters

United States Department of Labor

Minimum Wage Mythbusters

Myth: Raising the minimum wage will only benefit teens.
Not true: The typical minimum wage worker is not a high-school student earning weekend pocket money. In fact, 88 percent of those who would benefit from a federal minimum wage increase are age 20 or older, and 55 percent are women.

Myth: Increasing the minimum wage will cause people to lose their jobs.
Not true: A review of 64 studies on minimum wage increases found no discernable effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016.

Myth: Small business owners can't afford to pay their workers more, and therefore don't support an increase in the minimum wage.
Not true: A June 2014 survey found that more than 3 out of 5 small business owners support increasing the minimum wage to $10.10. Small business owners believe that a higher minimum wage would benefit business in important ways: 58% say raising the minimum wage would increase consumer purchasing power. 56% say raising the minimum wage would help the economy. In addition, 53% agree that with a higher minimum wage, businesses would benefit from lower employee turnover, increased productivity and customer satisfaction.

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.
Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour - before tips. Even with a recent increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace the U.S. average in 2014.

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.
Not true: Employers in San Francisco must pay tipped workers the full minimum wage of $10.74 per hour – before tips. Yet, the San Francisco restaurant industry has experienced positive job growth over the past few years according to the Bureau of Labor Statistics.

Myth: Raising the federal minimum wage won't benefit workers in states where the hourly minimum rate is already higher than the federal minimum.
Not true: Only 23 states and the District of Columbia currently have a minimum wage higher than the federal minimum, meaning a majority of states have an hourly minimum rate at or below the federal minimum. Increasing the federal minimum wage will boost the earnings for some 28 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families' pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.

Myth: Younger workers don't have to be paid the minimum wage.
Not true: While there are some exceptions, employers are generally required to pay at least the federal minimum wage. Exceptions allowed include a minimum wage of $4.25 per hour for young workers under the age of 20, but only during their first 90 consecutive calendar days of employment with an employer, and as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the current federal minimum wage or the state minimum wage, whichever is higher. There are programs requiring federal certification that allow for payment of less than the full federal minimum wage, but those programs are not limited to the employment of young workers.

Myth: Restaurant servers don't need to be paid the minimum wage since they receive tips.
Not true: An employer can pay a tipped employee as little as $2.13 per hour in direct wages, but only if that amount plus tips equal at least the federal minimum wage and the worker retains all tips and customarily and regularly receives more than $30 a month in tips. Often, an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage. When that occurs, the employer must make up the difference. Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, he or she is entitled to the provisions of each law which provides the greater benefits.

Myth: Only part-time workers are paid the minimum wage.
Not true: About 53 percent of all minimum wage earners are full-time workers, and minimum wage workers contributed almost half (46 percent) of their household's wage and salary income in 2011. Moreover, more than 88 percent of those who would benefit from raising the federal minimum wage from $7.25 to $10.10 are working adults, and 55 percent are working women.

Myth: Increasing the minimum wage is bad for businesses.
Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: Increasing the minimum wage is bad for the economy.
Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised.

Myth: The federal minimum wage goes up automatically as prices increase.
Not true: While some states have enacted rules in recent years triggering automatic increases in their minimum wages to help them keep up with inflation, the federal minimum wage does not operate in the same manner. An increase in the federal minimum wage requires approval by Congress and the president. However, in his call to gradually increase the current federal minimum wage to $10.10 per hour, President Obama has also called for it to adjust automatically with inflation. Eliminating the requirement of formal congressional action would likely reduce the amount of time between increases, and better help low-income families keep up with rising prices.

Myth: The federal minimum wage is higher today than it was when President Reagan took office.
Not true: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s. That's why President Obama is urging Congress to increase the federal minimum wage and give low-wage workers a much-needed boost.

Myth: Increasing the minimum wage lacks public support.
Not true: Raising the federal minimum wage is an issue with broad popular support. Polls conducted since February 2013 when President Obama first called on Congress to increase the minimum wage have consistently shown that an overwhelming majority of Americans support an increase.

Myth: Increasing the minimum wage will result in job losses for newly hired and unskilled workers in what some call a “last-one-hired-equals-first-one-fired” scenario.
Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: The minimum wage stays the same if Congress doesn't change it.
Not true: Congress sets the minimum wage, but it doesn't keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set.

Tuesday, October 28, 2014

'A Generation Cast Aside': Child Poverty On Rise in World's Richest Countries

Published on Tuesday, October 28, 2014 by Common Dreams

'A Generation Cast Aside': Child Poverty On Rise in World's Richest Countries

Since 2008, child poverty has increased in a majority of the 41 most affluent nations, UNICEF report finds

unicef.jpgUNICEF report finds erosion of social safety nets has fueled child poverty crisis. (Image courtesy of UNICEF report)  
Children remain "the most enduring victims" of the recession in the world's wealthiest nations, where 2.6 million children have fallen below the poverty line since 2008, a new report from UNICEF reveals.

The annual study, Children of the Recession: The impact of the economic crisis on child well-being in rich countries, was released Tuesday in Rome. It finds that in the 41 richest countries at least 76.5 million children live in poverty.

"Many affluent countries have suffered a 'great leap backwards' in terms of household income, and the impact on children will have long-lasting repercussions for them and their communities," said Jeffrey O’Malley, UNICEF’s Head of Global Policy and Strategy.

In 23 of the 41 wealthy countries examined, the rate of child poverty has increased since 2008. In some countries, this rise was drastic: Ireland, Croatia, Latvia, Greece, and Iceland saw child poverty climb by more than 50 percent. The report notes that the young are hit harder than the elderly, and among children, the "poorest and most vulnerable... have suffered disproportionately."
The recession has created "a generation cast aside," where unemployment for people aged 15 to 24 has increased in 34 of the 41 countries, the report states.
The United States is no exception. In 2012, 24.2 million children were living in poverty in the U.S., an increase of 1.7 million since the 2008 recession. In 34 out of 50 states, child poverty has risen since 2008.

While the authors claimed the report was not intended as a "comment on austerity," their analysis finds that the decimation of public services has fueled the crisis.

"Extreme child poverty in the United States increased more during the Great Recession than it did in the recession of 1982, suggesting that, for the very poorest, the safety net affords less protection now than it did three decades ago," states the report.

"Governments that bolstered existing public institutions and programmes helped to buffer countless children from the crisis – a strategy that others may consider adopting," the report notes.

Friday, October 24, 2014

7 Facts That Show the American Dream Is Dead


The key elements of the American dream are unreachable for all but the wealthiest.

October 22, 2014

A recent poll showed that more than half of all people in this country don’t believe that the American dream is real. Fifty-nine percent of those polled in June agreed that “the American dream has become impossible for most people to achieve." More and more Americans believe there is “not much opportunity” to get ahead.

The public has reached this conclusion for a very simple reason: It’s true. The key elements of the American dream—a living wage, retirement security, the opportunity for one's children to get ahead in life—are now unreachable for all but the wealthiest among us. And it’s getting worse. As inequality increases, the fundamental elements of the American dream are becoming increasingly unaffordable for the majority.

Here are seven ways the American dream is dying.

1. Most people can’t get ahead financially.

If the American dream means a reasonable rate of income growth for working people, most people can’t expect to achieve it.

As Ben Casselman observes at fivethirtyeight.com, the middle class hasn’t seen its wage rise in 15 years. In fact, the percentage of middle-class households in this nation is actually falling. Median household income has fallen since the financial crisis of 2008, while income for the wealthiest of Americans has actually risen.

Thomas Edsall wrote in the New York Timesthat “Not only has the wealth of the very rich doubled since 2000, but corporate revenues are at record levels.” Edsall also observed that, “In 2013, according to Goldman Sachs, corporate profits rose five times faster than wages.”

2. The stay-at-home parent is a thing of the past.

There was a time when middle-class families could lead a comfortable lifestyle on one person’s earnings. One parent could work while the other stayed home with the kids.

Those days are gone. As Elizabeth Warren and co-author Amelia Warren Tyagi documented in their 2003 book, The Two-Income Trap, the increasing number of two-earner families was matched by rising costs in a number of areas such as education, home costs and transportation.

These cost increases, combined with wage stagnation, mean that families are struggling to make ends meet—and that neither parent has the luxury of staying home any longer. In fact, parenthood has become a financial risk. Warren and Tyagi write that “Having a child is now the single best predictor that a woman will end up in financial collapse.” This book was written over a decade ago; things are even worse today.

3. The rich are more debt-free. Others have no choice.

Most Americans are falling behind anyway, as their salary fails to keep up with their expenses. No wonder debt is on the rise. As Joshua Freedman and Sherle R. Schwenninger observe in a paper for the New America Foundation, “American households… have become dependent on debt to maintain their standard of living in the face of stagnant wages.”

This “debt-dependent economy,” as Freedman and Schwenninger call it, has negative implications for the nation as a whole. But individual families are suffering too.

Rani Molla of the Wall Street Journal notes that “Over the past 20 years the average increase in spending on some items has exceeded the growth of incomes. The gap is especially poignant for those under 25 years old.”
There are increasingly two classes of Americans: Those who are taking on additional debt, and the rich.

4. Student debt is crushing a generation of non-wealthy Americans.

Education for every American who wants to get ahead? Forget about it. Nowadays you have to be rich to get a college education; that is, unless you want to begin your career with a mountain of debt. Once you get out of college, you’ll quickly discover that the gap between spending and income is greatest for people under 25 years of age.

Education, as Forbescolumnist Steve Odland put it in 2012, is “the great equalizer… the facilitator of the American dream.” But at that point college costs had risen 500 percent since 1985, while the overall consumer price index rose by 115 percent. As of 2013, tuition at a private university was projected to cost nearly $130,000 on average over four years, and that’s not counting food, lodging, books, or other expenses.

Public colleges and universities have long been viewed as the get-ahead option for all Americans, including the poorest among us. Not anymore. The University of California was once considered a national model for free, high-quality public education, but today tuition at UC Berkeley is $12,972 per year. (It was tuition-free until Ronald Reagan became governor.) Room and board is $14,414. The total cost of on-campus attendance at Berkeley, including books and other items, is estimated to be $32,168.

The California story has been repeated across the country, as state cutbacks in the wake of the financial crisis caused the cost of public higher education to soar by 15 percent in a two-year period. With a median national household income of $51,000, even public colleges are quickly becoming unaffordable
Sure, there are still some scholarships and grants available. But even as college costs rise, the availability of those programs is falling, leaving middle-class and lower-income students further in debt as out-of-pocket costs rise.

5. Vacations aren’t for the likes of you anymore.

Think you’d like to have a nice vacation? Think again. According to a 2012 American Express survey, Americans who were planning vacations expected to spend an average of $1,180 per person. That’s $4,720 for a family of four. But then, why worry about paying for that vacation? If you’re unemployed, you can’t afford it. And even if you have a job, there’s a good chance you won’t get the time off anyway.

As the Center for Economic and Policy Research found in 2013, the United States is the only advanced economy in the world that does not require employers to offer paid vacations to their workers. The number of paid holidays and vacation days received by the average worker in this country (16) would not meet the statutory minimum requirements in 19 other developed countries, according to the CEPR. Thirty-one percent of workers in smaller businesses had no paid vacation days at all.

The CEPR also found that 14 percent of employees at larger corporations also received no paid vacation days. Overall, roughly one in four working Americans gets no vacation time at all.

Rep. Alan Grayson, who has introduced the Paid Vacation Act, correctly notes that the average working American now spends 176 hours more per year on the job than was the case in 1976.

Between the pressure to work more hours and the cost of vacation, even people who do get vacation time—at least on paper—are hard-pressed to take any time off. That’s why 175 million vacation days go unclaimed each year.

6. Even with health insurance, medical care is increasingly unaffordable for most people.

Medical care when you need it? That’s for the wealthy.

The Affordable Care Act was designed to increase the number of Americans who are covered by health insurance. But health coverage in this country is the worst of any highly developed nation—and that’s for people who have health insurance.

Every year the Milliman actuarial firm analyzes the average costs of medical care, including the household’s share of insurance premiums and out-of-pocket costs, for a family of four with the kind of insurance that is considered higher quality coverage in this country: a PPO plan which allows them to use a wider range of healthcare providers.

Even as overall wealth in this country has shifted upward, away from middle-class families, the cost of medical care is increasingly being borne by the families themselves. As the Milliman study shows, the employer-funded portion of healthcare costs has risen 52 percent since 2007, the first year of the recession. But household costs have risen by a staggering 73 percent, or 8 percent per year, and now average $9,144. In the same time period, Census Bureau figures show that median household income has fallen 8 percent.
That means that household healthcare costs are skyrocketing even as income falls dramatically.

The recent claims of “lowered healthcare costs” are misleading. While the rate of increase is slowing down, healthcare costs are continuing to increase. And the actual cost to working Americans is increasing even faster, as corporations continue to maximize their record profits by shifting healthcare costs onto consumers. This shift is expected to accelerate as the result of a misguided provision in the Affordable Care Act which will tax higher-cost plans.

According to an OECD survey, the number of Americans who report going without needed healthcare in the past year because of cost was higher than in 10 comparable countries. This was true for both lower-income and higher-income Americans, suggesting that insured Americans are also feeling the pinch when it comes to getting medical treatment.

As inequality worsens, wages continue to stagnate, and more healthcare costs are placed on the backs of working families, more and more Americans will find medical care unaffordable.

7. Americans can no longer look forward to a secure retirement.

Want to retire when you get older, as earlier generations did, and enjoy a secure life after a lifetime of hard work? You’ll get to… if you’re rich.
There was a time when most middle-class Americans could work until they were 65 and then look forward to a financially secure retirement. Corporate pensions guaranteed a minimum income for the remainder of their life. Those pensions, coupled with Social Security income and a lifetime’s savings, assured that these ordinary Americans could spend their senior years in modest comfort.

No longer. As we have already seen, rising expenses means most Americans are buried in debt rather than able to accumulate modest savings. That’s the main reason why 20 percent of Americans who are nearing retirement age haven’t saved for their post-working years.

Meanwhile, corporations are gutting these pension plans in favor of far less general programs. The financial crisis of 2008, driven by the greed of Wall Street one percenters, robbed most American household of their primary assets. And right-wing “centrists” of both parties, not satisfied with the rising retirement age which has already cut the program’s benefits, continue to press for even deeper cuts to the program.

One group, Natixis Global Asset Management, ranks the United States 19th among developed countries when it comes to retirement security. The principal reasons the US ranks so poorly are 1) the weakness of our pension programs; and 2) the stinginess of our healthcare system, which even with Medicare for the elderly, is far weaker than that of nations such as Austria.
Economists used to speak of retirement security as a three-legged stool. Pensions were one leg of the stool, savings were another and Social Security was the third. Today two legs of the stool have been shattered, and anti-Social Security advocates are sawing away at the third.


Vacations; an education; staying home to raise your kids; a life without crushing debt; seeing the doctor when you don’t feel well; a chance to retire: one by one, these mainstays of middle-class life are disappearing for most Americans. Until we demand political leadership that will do something about it, they’re not coming back.

Can the American dream be restored? Yes, but it will take concerted effort to address two underlying problems. First, we must end the domination of our electoral process by wealthy and powerful elites. At the same time, we must begin to address the problem of growing economic inequality. Without a national movement to call for change, change simply isn’t going to happen.

Richard (RJ) Eskow is a blogger and writer, a former Wall Street executive, a consultant, and a former musician.

Thursday, October 23, 2014

Economics As If Future Generations Mattered

Published on Thursday, October 23, 2014 by On the Commons

Economics As If Future Generations Mattered

Creating a commons ethic for ecological restoration and social justice

What are the principles needed to guarantee that we are fair to future generations? (Photo: Raul Lieberwirth/flickr/cc)

We have turned a corner on climate change-- a wrong turn-- and it is happening more rapidly than we have predicted. Climate change is already disrupting society, ecosystems, and national economies. We have altered so much of our Earth that we now threaten our own survival.

We know the catastrophic risks we are passing onto future generations and we wonder, with anxiety and grief, what will become of our planet. We ask ourselves, “what can I do?”

"The message that solutions to climate change and environmental degradation is up to the individual directly conflicts with what people are witnessing."

One of the key barriers to taking action on the paramount issues of our time is that these problems are the end result of entrenched cultural, economic and social systems. The message that solutions to climate change and environmental degradation is up to the individual directly conflicts with what people are witnessing: the health and well-being of their bodies and their communities coming a distant second to powerful economic interests.

Current economic calculations do not recognize the full cost to the Commons – the cultural and natural heritage we share that is the foundation of our economy.

Yet growing numbers of people are waking up to the reemerging Commons ethic, which holds that human systems must be aligned to match ecological ones.

People believe that future generations have the inalienable right to a healthy planet, and many are now seeking ways to withdraw their consent to the politics and policies that lead to a toxic future.

A rights-based approach to human systems like the economy allows us to open our discussion to questions like: What is the economy for? What are the principles needed to guarantee that we are fair to future generations? What tenets make justice and the protection of the Commons more likely?

The  Women’s Congress for Future Generations, to be held Nov. 7-9 in Minneapolis, is joining the groundswell of individuals and organizations calling for the arraignment of our capital-driven, infinite-growth paradigms, and adopting different economic principles which many Indigenous cultures have lived by for centuries. This gathering builds and extends on the first Women’s Congress held in Moab, Utah in September 2012.

Attendees of the Moab Congress drafted a living Declaration of the Rights of Future Generations and corresponding Bill of Responsibilities of Present Generations. The goal of the upcoming Congress in November is to infuse the Declaration with an even deeper analysis of economic and environmental justice.

Participants at the Congress will bring forward ideas to help shift the way we care for and relate to our Earth--ideas such as moving environmental law out of free market private property law into rights law; caring for the Commons, the Precautionary Principle, and Free Prior and Informed Consent. Congress goers-- both men and women--will imagine different economic principles that counter dominant but destructive paradigms.

Some of the new principles to be discussed are:

  1. The Earth is the source of our life and our economic activity.
  2. The Commons, the cultural and natural heritage we share, are the foundation of economics, which presupposes: a) a role of government as the trustee of the commons; b) Laws and rules governing economic systems must first protect the commonwealth; c) Concepts such as economic growth, which ignore the cost to the commons are evolutionary dead-ends.
  3. Justice within generations and justice between generations must be linked to economic justice.
And these are a few of the tenets that flow from these economic principles:
  1. Measure the right things:  Currently we do not measure the health of the Commons. Pollution and disease count as good for the economic GDP.
  2. Polluter Pays:  The one who pollutes or damages the commons shall be held responsible and pay for restoration.
  3. No Debt to Future Generations without a Corresponding Asset:  We cannot ask future generations to pay for our messes.  We can share with them the costs of assets like parks, art, clean air and water.
  4. Audit, Account for and Fund Commons Assets.
This is a conversation about the definition, boundaries, and acceptance of limits.
If one accepts the incontestable truth that present generations inherit an Earth left from previous generations, and that we are all eventually ancestors, then our lives are a simultaneously defined by inheriting and bequeathing.

Facing another incontestable truth that our Earth is finite allows us to expand our point of view to include a “bigger picture,” which tells a story with a common goal: It is a story of an incredibly interconnected living systems on which we are dependent, not dominant. The story of human development that has recalibrated its systems to match those of nature itself. The story  of a civilization that thrives on stewardship and care, generation after generation into the far future.

Carolyn Raffensperger is the Executive Director of the Science & Environmental Health Network, www.sehn.org.

Kaitlin Butler is project director at the Science and Environmental Health Network and an organizer of the 2014 Women’s Congress.

Wednesday, October 22, 2014

The rich can stop worrying about a middle-class revolution

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The rich can stop worrying about a middle-class revolution

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A stagnant economy has undoubtedly put a lot of financial stress on the middle class. And that is bumming out America’s 1 percenters. “Our country is rapidly becoming less a capitalist society and more a feudal society,” entrepreneur Nick Hanauer wrote recently in Politico, in an open letter to “my fellow zillionaires.”
Hanauer — an early investor in Amazon (AMZN) who says he has been involved with more than 30 startups — cites the well-documented rise in income inequality during the past 30 years as the ultimate cause of a Mad Maxian dystopia he envisions. "If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us," he writes. "One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there's no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand."
He’s not the only wealthy worrier. Venture capitalist Tom Perkins complained earlier this year about the “persecution” of the rich through high taxes, while magnates such as Sam Zell, Wilbur Ross and John Mack have griped of late about the unschooled masses scapegoating America’s moneyed elite.

Chill out, rich folks

The rich ought to chill out. While the masses may envy their wealth, there’s no evidence of a revolution brewing, or even a well-behaved civil disturbance. Americans are clearly dismayed at the direction the country seems to be heading, but they are also docile in the face of decline and confused about possible solutions. Hanauer fears mobs heading for the castles of Greenwich and Palo Alto, but America’s disaffected these days are more likely to vent their rage behind closed doors as they shake their fists at Fox News or MSNBC and leave cranky comments on websites such as this one. If there’s a populist threat to the plutocrats, it’s years or even decades away.

Here’s the proof: Before the pitchforks, there will be higher taxes on the wealthy — yet there’s meager support for more redistribution of wealth. Polls show that slightly more than half of Americans favor raising taxes on the wealthy for specific causes such as helping reduce poverty, which makes it sound like tax hikes have widespread support and are inevitable. But here’s the catch: An even higher portion of Americans are disgusted with the government, with little trust that it spends tax money wisely. That’s why Republicans can consistently block tax hikes on the wealthy with little payback at the voting booth.

If there’s simmering outrage at this state of affairs, it’s not evident in the public square. The “Occupy” movement against the financial elite enjoyed a moment in 2011 but has largely fizzled. Hanauer argues that the occupiers helped sharpen the focus on income inequality, but The Tea Party is probably a more lasting phenomenon. And the Tea Party's gripes about the wealthy are limited to corporate welfare and crony capitalism that puts government bureaucracy at the service of the rich. As for wealth and income inequality, the Tea Party generally takes a laissez-faire, free-market view: Those who can get rich, should.
Labor unions have represented the workingman’s concerns for a century, but they’re on the wane, too. Union membership has been in steady decline for at least 30 years, with no rebound on the horizon. The United Auto Workers couldn’t unionize a Volkswagen plant in Tennessee earlier this year, even with the tacit support of the company itself. Michigan became a “right to work” state in 2013, diminishing the power of unions in their own backyard.

More power for the wealthy

The Supreme Court, meanwhile, has enhanced the power of the rich through two decisions during the past several years that have eviscerated limits on campaign donations to political causes and candidates, which favors those with millions to spend to influence election outcomes. Two well-regarded academics, Martin Gilens of Princeton University and Benjamin I. Page of Northwestern University, argued in a recent paper that economic elites have gained so much power that “America’s claims to being a democratic society are seriously threatened.”
Hanauer sounds more like President Obama than a self-important plutocrat when he suggests ways to even out the wealth and income gaps. He favors a minimum wage of $15 per hour and chides wealthy business owners who feel they, rather than their customers, make the economy hum. "We rich people ... have convinced ourselves that we are the main job creators," he writes. "It's simply not true. There can never be enough superrich Americans to power a great economy."

Most economists would agree with that, but Hanauer risks hyping the consequences of a growing wealth gap when he warns that “revolutions, like bankruptcies, come gradually, and then suddenly.” That may be true in repressed states that don’t allow ordinary people to express their frustrations. But in functioning democracies (and even in the United States), there’s plenty of warning when social unrest is percolating. These days, all you have to do is read the blogs and follow the right Twitter (TWTR) accounts. If you do, you’ll encounter plenty of angst — but not much revolutionary zeal.

The economic trends Hanauer identifies are, in fact, real problems. America as a whole will suffer if the fortunes of the middle class don’t improve. There are solutions, however, and they’ll probably materialize in the usual American way — right before disaster strikes. It’s nearly inevitable there will be government spending cuts and, yes, tax hikes, when the government’s finances become unsustainable, which could take a decade or more. When it happens, the politicians in Washington will find ways to spread the pain around and America will muddle through. The rich will have to pay more, but they’ll still be rich. And they still won't have to worry about pitchforks.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

Monday, October 20, 2014

How Much Of The Economy Do We Actually Need?

There are other ways of doing things... Sustainable Man


“Earn a living.”

“Be practical.”

“Get a job.”

Odds are that you have heard these statements before. As an adult, we don’t need anyone to tell us these things. We tell ourselves. But there was a time when each of us heard these ideas for the first time. Do you remember?

Perhaps you heard it after you were asked, “What do you want to do when you grow up?” as if you weren’t something already. You might have responded “I want to play with horses,” or “I’d like to travel to the moon,” or maybe even “I want to help reduce the suffering in the world.” If you were young enough, your adult companions might have admired at your youthful innocence and purity. But if you were close to becoming an adult, the response was probably something like, “That’s nice but you need to be practical. You’re going to have to get a job to earn a living.”

And so we trade in our dreams of healing animals to become a plastic surgeon, dreams of surfing the open oceans to become an investment banker, dreams of simply being in harmony with our environment for the relentless push of doing something to earn a living.

You may feel the urge to stop reading because you know where I am headed with this. I am stoking a wound inside all of us living in Western society – the time each of us realized that either directly or indirectly, we were going to have to support ourselves by selling something to someone in order to survive. I know it hurts. I have the wound too.

This wound hurts even more because of its ramifications. Think about it. The reason some people do not have food to eat, the reason there is no cure for the ebola virus, the reason why we recycle fashion and design machines to break down just fast enough not to piss off the customer is because every time we do we enable someone else to “earn a living.” But when do we stop to ask the critical question and, more importantly, come to the natural conclusion that we simply don’t need everyone to “earn a living” anymore?

Think about the activities performed by our ancestors and people living tribal cultures. When they were not playing or acting leisurely, nearly everyone would be engaged in activities that were directly related to the survival of the group with food production being the primary focus. Surely, with all our modern technological advances, we should be able to accomplish what our ancestors were able to – meeting the basic human needs for all – with far more ease.
When the United States declared their independence in the late 1700s, ninety percent of Americans earned their living by growing food. The remaining ten percent were left to be the shopkeepers, blacksmiths, seamstresses, bankers, and all other professions. Today, less than one percent of the population is involved in food production, putting the vast majority in the position of needing to think of some new thing we can get people to buy. Instead of realizing the gift that automation could bring to the entire human race by alleviating the need to “earn a living”, we kept the charade of forcing people to invent new ways to do it. So what are some of those ways we are earning our living today?

Joel Comm made $400,000 by building a mobile app, the iFart that creates farting noises at the push of a button. Gary Dahl made $15 million in six months by selling pet rocks and Richard James made $250 million on his slinky invention. Jessica Vanessa figured out she could make more money making “twerking” videos online than she could educating children. The world spends over $500 billion every year trying to convince people that they need these new products and services, almost twenty times the cost of alleviating hunger. In light of the fact that 17 million children in the United States do not have enough food to eat, these kinds of stories of “earning a living” should stimulate some serious questions. Why must we continue to slave away at unnecessary jobs creating superfluous goods and services when our brothers and sisters can’t even get enough food to eat?

I don’t mean to be insensitive here. Everyone living in Western society is under a very real pressure, even if artificially manufactured, to earn a living. Not only does our survival depend on earning a living but it also influences, whether we like it or not, the respect we receive and, for many, is intimately linked to their self-worth. But set that aside for a moment and ask yourself this question.
Is what I do to “earn a living” really needed by society? In other words, could society get by without whatever I produce? I can honestly say that I have never held a job that was crucial to human survival. That is not true for everyone but I suspect if we are honest with ourselves, most of us would agree. What then is the purpose of our economy, if it is not to meet the needs of all people?

Well, our economy has a purpose. It is to maximize gross domestic product (GDP), a measurement of the sum total of all goods and services exchanged for money. The higher this number gets, so goes the theory, the better and happier our lives will be. This is the fundamental assumption underlying our programmed response – the need to earn a living – to how we spend our precious, limited time on this beautiful spaceship floating through the galaxy.
So how much of the economy is really needed? Well, it turns out that food production and distribution comprise about five percent of the overall economy.
Energy production and distribution is just over three percent, most of which goes towards fueling the transportation of all these superfluous goods and moving us back and forth to our jobs designing, marketing, financing, manufacturing, shipping them. Even at its current levels of catastrophic waste and price gouging, the health care industry is just seven percent of GDP. What else do we need? The Internet? 0.3 percent. Veterinary services? 0.1 percent. When you add it all up, only fifteen percent of the economy is needed to meet our basic needs (and probably much less due to all the wasteful practices designed to increase revenue).

So if we only need fifteen percent of the economy, what makes up the other eighty-five percent? Amazingly, finance, insurance, real estate, rental, and leasing comprise nearly twenty percent of GDP. None of these services meet any real or tangible human need, but rather are part of the economic game we have invented. Another twelve percent of GDP are professional and business services, which exist to help people or companies design, market, finance, manufacture, and ship all those goods that help us to “earn a living.”

One could argue that we need the manufacturing (twelve percent) and construction (four percent) sectors of the economy as well. However, there is so much excess operational capacity of all the machines that we have already produced that we could easily find ways to share them. In fact, we already are. And given that there is five times the number of vacant homes as there are homeless people, we probably could stop building new houses too.

By looking at what comprises GDP, we can see that most of the economy is unnecessary and only exists due to this antiquated notion of the need to justify our existence in terms of what we can produce that others will buy. Not only that but all of this excess production and consumption (and the apparent need to secure the resources needed to keep it going) is the main driver of climate change, inequality, war, and all the other forms of depravation and suffering in the world. All of this to fuel an economy that we don’t even need? What are we doing?

There really is so much work that needs to be done. It just isn’t the kind where it involves creating something to be consumed. We certainly need people to start growing food locally, to begin restoring damaged ecosystems, to spend time nurturing and raising children to become adults capable of dealing with their emotions in healthy ways. But you just aren’t going to convince a bank to loan you money to do these things. The banks will only do that if you will give even more money back to them. This highly limits the scope of what our economy can do.

We need an economic revolution – one that allows us to meet the needs of the entire world, not just those who managed to find a way to “earn a living.” Whereas two hundred years ago, it took nine out of ten people to work to provide enough food for the rest, today one out of a hundred can do the job. Through automation, we have been able to drastically increase our productive capacity while decreasing the human labor required in achieving it. So ingrained is this concept of “earning a living” that was a necessity throughout human history that we have failed to recognize that we could just stop, and instead share the increasingly small burden of providing material needs to all. Instead, we carry on with inventing new ways to “earn a living”.

“Earn a living.” What an interesting phrase. You must do something to earn your life. Your life is not something given to you, but rather something that must be justified by your contribution to it, measured in the form of income earned. As I sit on my porch and watch deer jump the fences people erect to protect their “property” and the squirrels gather the nuts that have freely fallen on the ground, I wonder if we will ever wake up to the reality of our situation, that we have already created an abundant world capable of providing for every human need. All we must do now is, collectively, to realize it.

Thursday, October 16, 2014

What Markets Will

The Opinion Pages | Op-Ed Columnist

What Markets Will

In the Middle Ages, the call for a crusade to conquer the Holy Land was met with cries of “Deus vult!” — God wills it. But did the crusaders really know what God wanted? Given how the venture turned out, apparently not.

Now, that was a long time ago, and, in the areas I write about, invocations of God’s presumed will are rare. You do, however, see a lot of policy crusades, and these are often justified with implicit cries of “Mercatus vult!” — the market wills it. But do those invoking the will of the market really know what markets want? Again, apparently not.

And the financial turmoil of the past few days has widened the gap between what we’re told must be done to appease the market and what markets actually seem to be asking for.

To get more specific: We have been told repeatedly that governments must cease and desist from their efforts to mitigate economic pain, lest their excessive compassion be punished by the financial gods, but the markets themselves have never seemed to agree that these human sacrifices are actually necessary.
Investors were supposed to be terrified by budget deficits, fearing that we were about to turn into Greece — Greece I tell you — but year after year, interest rates stayed low. The Fed’s efforts to boost the economy were supposed to backfire as markets reacted to the prospect of runaway inflation, but market measures of expected inflation similarly stayed low.

How have policy crusaders responded to the failure of their dire predictions? Mainly with denial, occasionally with exasperation. For example, Alan Greenspan once declared the failure of interest rates and inflation to spike “regrettable, because it is fostering a false sense of complacency.” But that was more than four years ago; maybe the sense of complacency wasn’t all that false?

All in all, it’s hard to escape the conclusion that people like Mr. Greenspan knew as much about what the market wanted as medieval crusaders knew about God’s plan — that is, nothing.

In fact, if you look closely, the real message from the market seems to be that we should be running bigger deficits and printing more money. And that message has gotten a lot stronger in the past few days.

I’m not mainly talking about plunging stock prices, although that’s surely telling us something (but as the late Paul Samuelson famously pointed out, stocks are not a reliable indicator of economic prospects: “Wall Street indexes predicted nine out of the last five recessions!”) Instead, I’m talking about interest rates, which are flashing warnings, not of fiscal crisis and inflation, but of depression and deflation.

Most obviously, interest rates on long-term U.S. government debt — the rates that the usual suspects keep telling us will shoot up any day now unless we slash spending — have fallen sharply. This tells us that markets aren’t worried about default, but that they are worried about persistent economic weakness, which will keep the Fed from raising the short-term interest rates it controls.

Interest rates on much European debt are even lower, because Europe’s economic outlook is so bad, and we’re not just talking about Germany. France is currently in conflict with the European Commission, which says that the projected French deficit is too big, but investors — who are still buying French bonds despite a 10-year interest rate of only 1.26 percent — are evidently much more worried about European stagnation than French default.

It’s also instructive to look at interest rates on “inflation-protected” or “index” bonds, which are telling us two things. First, markets are practically begging governments to borrow and spend, say on infrastructure; interest rates on index bonds are barely above zero, so that financing for roads, bridges, and sewers would be almost free. Second, the difference between interest rates on index and ordinary bonds tells us how much inflation the market expects, and it turns out that expected inflation has fallen sharply over the past few months, so that it’s now far below the Fed’s target. In effect, the market is saying that the Fed isn’t printing nearly enough money.

One question you might ask is why the market’s pro-spending, print-more-money message has suddenly gotten louder. My guess is that it’s mainly driven by events in Europe, where the slide into deflation and the growing public backlash against austerity have reached a tipping point. And it’s very reasonable to worry that Europe’s problems may spill over to the rest of us.

In any case, the next time you hear some talking head opining on what we must do to satisfy the markets, ask yourself, “How does he know?” For the truth is that when people talk about what markets demand, what they’re really doing is trying to bully us into doing what they themselves want.