Five Ugly Extremes of Inequality in America-- The Contrasts Will Drop Your Chin to the Floor

  Economy 

AlterNet / By Paul Buchheit

Five Ugly Extremes of Inequality in America-- The Contrasts Will Drop Your Chin to the Floor

Any of the ten richest Americans could pay a year's rent for all of America's homeless with their 2012 income.

March 24, 2013  |  

The first step is to learn the facts, and then to get angry and to ask ourselves, as progressives and caring human beings, what we can do about the relentless transfer of wealth to a small group of well-positioned Americans.
1. $2.13 per hour vs. $3,000,000.00 per hour

Each of the Koch brothers saw his investments grow by $6 billion in one year, which is three million dollars per hour based on a 40-hour 'work' week. They used some of the money to try to kill renewable energystandards around the country.

Their income portrays them, in a society measured by economic status, as a million times more valuable than the restaurant server who cheers up our lunch hours while hoping to make enough in tips to pay the bills.

A comparison of top and bottom salaries within large corporations is much less severe, but a lot more common. For CEOs and minimum-wage workers, the difference is $5,000.00 per hour vs. $7.25 per hour.

2. A single top income could buy housing for every homeless person in the U.S.

On a winter day in 2012 over 633,000 people were homeless in the United States. Based on an annual single room occupancy (SRO) cost of $558 per month, any ONE of the ten richest Americans would have enough with his 2012 income to pay for a room for every homeless person in the U.S. for the entire year. These ten rich men together made more than our entire housing budget.

For anyone still believing "they earned it," it should be noted that most of the Forbes 400 earnings came from minimally-taxed, non-job-creating capital gains.

3. The poorest 47% of Americans have no wealth

In 1983 the poorest 47% of America had $15,000 per family, 2.5 percent of the nation's wealth.

In 2009 the poorest 47% of America owned ZERO PERCENT of the nation's wealth (their debt exceeded their assets).

At the other extreme, the 400 wealthiest Americans own as much wealth as 80 million families -- 62% of America. The reason, once again, is the stock market. Since 1980 the American GDP has approximatelydoubled. Inflation-adjusted wages have gone down. But the stock market has increased by over ten times, and the richest quintile of Americans owns 93% of it.

4. The U.S. is nearly the most wealth-unequal country in the entire world

Out of 141 countries, the U.S. has the 4th-highest degree of wealth inequality in the world, trailing only Russia, Ukraine, and Lebanon.

Yet the financial industry keeps creating new wealth for its millionaires. According to the authors of theGlobal Wealth Report, the world's wealth has doubled in ten years, from $113 trillion to $223 trillion, and is expected to reach $330 trillion by 2017.

5. A can of soup for a black or Hispanic woman, a mansion and yacht for the businessman

That's literally true. For every one dollar of assets owned by a single black or Hispanic woman, a member of the Forbes 400 has over forty million dollars.

Minority families once had substantial equity in their homes, but after Wall Street caused the housing crash, median wealth fell 66% for Hispanic households and 53% for black households. Now the average single black or Hispanic woman has about $100 in net worth.

What to do?

End the capital gains giveaway, which benefits the wealthy almost exclusively.

Institute a Financial Speculation Tax, both to raise needed funds from a currently untaxed subsidy on stock purchases, and to reduce the risk of the irresponsible trading that nearly brought down the economy.

Perhaps above all, we progressives have to choose one strategy and pursue it in a cohesive, unrelenting attack on greed. Only this will heal the ugly gash of inequality that has split our country in two.
 

Paul Buchheit teaches economic inequality at DePaul University. He is the founder and developer of the Web sites UsAgainstGreed.org, PayUpNow.org and RappingHistory.org, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Does Irrationality Doom America?

Al Jazeera / By Paul Rosenberg

Does Irrationality Doom America?

How rational problem-solving has ceased to be "serious" among US elites.

An American flag hangs over the New York Stock Exchange on October 11, 2012 in New York City. The US jobs market brightened in February as the unemployment rate tumbled and jobs growth picked up, official data released Friday showed.

March 22, 2013  |  

 

The United States is on the verge of committing suicide. Slow suicide, perhaps, which may take decades to fully play out, but suicide nonetheless. The proximate event is the sequester - deep across-the-board cuts to military and discretionary domestic spending, originally conceived as a Sword of Damocles, but which Tea Party-dominated Republicans now see as just the perfect budget axe. And that's just one of several successive and mostly recurring crisis points at which Republicans are obstinantly demanding deep budget cuts that will inevitably slow, if not cripple the already weak economy - as well as debilitating or destroying vital government functions in the long run.

This comes at a time when there's actually a staggering need to vastly expand the scope of government action to deal with multiple looming threats of environmental catastrophe - not to mention previously intolerable levels of unemployment, and a crumbling infrastructure. Climate change is just the most prominent of such environmental threats - not just to the United States, but to the continued existence of advanced industrial civilisation as a whole - which the US can't even begin to rationally grapple with as long as anti-government ideology blocks even the most common sense actions on well-understood problems. A super-power whose highways are cracking and bridges are falling down, and which then responds by slashing spending cannot be long for this world. If it staggers on for a few more decades, that's nothing compared to the centuries that the Roman Empire endured, much less the millenia of dynastic Egypt's glory.

If markets actually worked in practice the way that they do in the simplest of textbook examples, GOP plans to radically slash government spending might not be so problematic. But realworld markets not only go into crippling crises, like the Great Depression or its still-enduring younger brother, they also fail to meet important human needs. Indeed, as conservative German economist Adolph Wagner noted in the late 19th century, the wealthier a nation becomes, the more it turns to non-market governmnet spending to meet needs that markets simply fail to meet. This observation was made well before the widespread rise of mass democratic government in the 20th century which underlay the rise of the modern welfare throuhgout the Western world. Thus, the practice of state spending to enhance the general welfare has deep historical and empirical foundations, and the sort of endless cutting that GOP now demands is nothing short of a suicidal policy for any would-be modern nation-state. The US already spends far less in the way of government social spending than most other advanced industrial nations - 16 percent of GDP compared to 20 percent for Norway, Britain and the Netherlands, 25 percent for Germany and Finland, 26 percent for Austria, Belgium and Denmark, 27 percent for Sweden and 28 percent for France, according to the OECD - and GOP plans would slash current spending significantly below where we are today.

'Sequestration' : A term unclear to many in US

Centrist enablers

The culprit here, however, is not just GOP extremism - which is, after all, wildly unpopular - but rather the morally feckless elite centrists who enable them by obscuring what they're up to, and by painting the Democrats are equally to blame, no matter what the Democrats do, short of capitulating completely.
Slates's Matthew Yglesias has recently captured the essenial cognitive trick by which centrist ideology rationalises itself by blaming the (relatively, at least) blameless:

[S]eriousness can refer both to the merits of an initiative or to its political viability. So scrapping the minimum wage in favor of a Guaranteed Basic Income isn't a serious proposal, since obviously it stands zero chance of passing Congress.
Once you embrace the Principle of Seriousness, the way is clear for rigorous BipartisanThink. If the parties fail to agree because one party is being unreasonable and the other party is failing to cater to their unreasonable demands, then the apparently reasonable party is in fact failing to be serious. After all, a serious proposal is one that stands a chance of passing. Reasonable proposals will not pass a Congress in which one party is being unreasonable, so by definition the Principle of Seriousness allocates the blame equally to both sides. Balance is restored to the Force.

This passage captures the essence of "seriousness" perfectly. But it says nothing about how or why we got here, or where it will lead - all vitally important topics to consider, but impossible to focus on accurately as long as we're subjected to the rule of "serious" discourse. For now, we need to tease out a few more points from Yglesias's insight.

Serious and viable

Let's begin by noting that what he's described is a form of fallacious reasoning, specifically, the fallacy of equivocation, in which one word is used with two different meanings. In its most basic form, one meaning is replaced by another: "Feathers are light; black is dark; therefore no feathers are black". Or "Nothing is better than eternal salvation. A ham sandwich is better than nothing. Therefore, a ham sandwich is better than eternal salvation". You don't have to observe a dietary law against eating pork to see something fishy about such "logic". But what Yglesias is describing is a less patently ridiculous form, in which the two different meanings are essentially welded together - without, of course, acknowledging what has been done.

Yet, the fundamental fact remains: the basis of what's going on here is a commonplace logical fallacy. That alone is reason enough to reject it out of hand - but not to understand how and why it works. And so we continue with three more points teased out from Yglesias's insight:

1. If unreasonable positions ensure that the other side gets equal blame in the centrist's scorekeeping and resulting media coverage, then they are inherently "can't lose" positions. This provides a basic floor which biases the entire process against being reasonable.
2. If some sort of action is eventually necessary (as it is with budget issues, and most other governmental questions as well), then the unreasonable side - which by definition cares less (perhaps not at all) about real-world consequences - has an increasing advantage the longer that the issue remains unresolved, thus further motivating them to remain unreasonable. If they start at 50 percent (equal blame), things only get better for them over time, as the blame burdern remains constant, but the cost pressure to do something rises much more accurately on the reasonable side.
3. The realm of conceivable alternatives is heavily skewed to the unreasonable side, for at least two main reasons identifiable as distinct forms of bias. First off, there's an enormous gap between what sounds reasonable initially and what can actually work - as any inventor, engineer, or even songsmith knows. If there's no workability test, then the fantasy-based side can crank out alternatives far faster and more easily than the reality-based side can ever dream of. Secondly, because of the bias against "politically unviable" ideas, there is a prohibitive bias against reasonable alternatives that might respond to claims, complaints or positions of the unreasonable side, and thus exert pressure on them to respond, change, or even yield. 

A classic example of this second bias against reasonable alternatives is the Progressive Caucus's repeated offerings (2011, 2012) of a budget that would balance in ten years - unlike Ryan's - provide pro-growth investments for the future, preserve popular welfare state programmes, and include a diverse mix of tax increases that still leave tax burderns well below historic highs. The Progressive Caucus budgets have been routinely ignored, despite having significant support (read about their most recent offering, an alternative to the sequester here - when people were polled on it, it swamped the competition, even edging out the GOP plan among Republicans). The obvious "reason" is that they have no chance of being passed by intransigent Republicans - ie, "they are not serious" in the "politically viable" sense. But, of course, they are serious in the "solves the budget deficit" sense - which the Republican's Ryan budgets never have been before now (his 2011 version balanced the budget in 2063 and his 2012 version balanced it in 2040 - despite deceptive claims to the contrary, neither accomplished any significant deficit reduction in the first ten years). If the Beltway media had initially decided that actually solving problems ought to be given a high priority, then the Progressive Caucus budgets would have gotten vastly more coverage, Ryan's would have been laughed off-stage and - voila! - the Progressive Caucus budgets would magically become "serious" in the "politically viable" sense as well.

Disallowing frivolity

So why is the discussion dominated by a non-solution while a real solution can't even be discussed? It's because the "politically viable" sense of serious totally dominates over the "pragmatically effective" sense of the word, and because what is politically viable is circularly defined: extremist Republican non-solutions are politically viable because Republicans adamantly insist that they are, no matter how laughable they may be - and centrist bipartisan ideologues routinely and reliably endorse their false claims as matters of fact when they do so. The fact that they aren't even remotely serious, in the problem-solving sense, never even enters the picture.

One further point. There is a dynamic, deceptive cross-over effect, in which one meaning of serious - politically viable - masquerades as the other, providing a pragmatic real-world solution. Indeed, this is very essense of the deception involved. After all, the game could not even get started if, from the beginning, we disallowed ideas that don't solve the problem at hand. Historically, the US used to do a decent job of screening out such ideas, up until 1995, when Newt Gingrich became Speaker of the House. On taking power, Gingrich devoted a great deal of energy and attention to resructuring the House to disable reality checks, as independent conservative Bruce Bartlett has explained, including downsizing or eliminating centres of staff expertise and abolishing the Office of Technology Assessment. That's how Gingrich helped create the world in which Paul Ryan thrives.

Code talkers

There is another way to understand the confusion of meaning about "serious" policy aside from seeing it as a fallacy, and that is to see it as involving a form of "code-switching". Code-switching refers to a linguistic practice of bilingual speakers switching from one language to another. There are various different schools of thought about the what, why and how of code-switching, but nobody doubts that it's a widespread phenomenon among bilingual speakers. And linguists don't only use it to refer to switching between different languages. Code-switching is also used to describe how African-Americans may switch from an informal, "down-home" to a more formal, professionalised mode of speech.
Given this sense of code-switching, it doesn't seem to be much of stretch to consider wonkish economic policy talk, for example, as one mode of speech, and sports-metaphor-driven conflictual power-politics talk - extensively critiqued in James Fallows' 1996 Breaking The News, for example - as another. From this perspective, what I've described above as a logical fallacy appears instead as a switching point, from one mode to the other. But, of course, there's a sense in which both modes are conginually operative, just as bilingual speakers are continually able to understand one another and to respond in either language. Because both understandings remain operative throughout - at least potentially - one cannot pretend that the fallacy "goes away" somehow, it merely gets submerged. This example of code-switching has an inherently deceptive quality and purpose to it, but it can be examined in terms that allow study and comparison with other examples, other situations where this need not be the case.

For example, in one theory, Wikipedia explains:

The Communication Accommodation Theory (CAT), developed by Howard Giles, professor of communication at the University of California, Santa Barbara, seeks to explain the cognitive reasons for code-switching, and other changes in speech, as a person seeks either to emphasize or to minimize the social differences between him- or herself and the other person(s) in conversation. Prof. Giles posits that when speakers seek approval in a social situation they are likely to converge their speech with that of the other person speaking. This can include, but is not limited to, the language of choice, accent, dialect, and para-linguistic features used in the conversation. In contrast to convergence, speakers might also engage in divergent speech, with which an individual person emphasizes the social distance between him- or herself and other speakers by using speech with linguistic features characteristic of his or her own group.

This might be seen in the situation described above like this: divergent speech that emphasises social distance is the language of conflict - specifically, in this case, class conflict: upper vs all the rest (but portrayed as middle vs under). This is what's used the moment any talk of raising taxes is involved. Convergant speech is dispassionate wonk talk, relatively drained of emotion - as well as inconvenient facts. The perversity of the situation is that conflictual language is used to exclude the interests and priorities of the large majority of the American people, while the dispassionate wonk talk is used to create a bipartisan elite concensus that fundamentally excludes just those interests and priorities. That's how you create an "expert" discourse of very serious people who are utterly out of touch with the world they are guiding to catastrophe.

Which is, of course, exactly how the financial crises was created in the first place. Not to mention the Iraq War. This is how US elites operate nowadays - not just in one field of politics, but all across the board. Problem-solving and argument-winning have become two entirely antagonistic activities, and "moderate" "centrist" "bipartisanship" has become the creation of such profound confusion that the voting public won't catch on until it's far, far too late.

This is how empires die. It is the exact opposite of how republics thrive.

Paul Rosenberg is a California-based writer/activist, senior editor for Random Lengths News, where he's worked since 2002. He's also written for Publishers Weekly, Christian Science Monitor, LA Times, LA Weeklyand Denver Post. In 2000/2001, he was a principal editor/writer at Indymedia LA. He was a front-page blogger at Open Left from 2007 to 2011.

Follow him on Twitter: @PaulHRosenberg

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Mental Breakdown of a Nation: The epic story of humanity in four parts.

 

From the book Water: The Essence of Life by Mark Niemeyer

 

Mental Breakdown of a Nation

Humanity 1.0: Our Birth

The epic story of humanity in four parts.

18 March 2013

 

Humanity 1.0: Our Birth

  

As far as we know, we emerged about 200,000 years ago. At this time we had no language, no clothing, no art, no religion. We lived in the wild and ate what we could forage or hunt. We were hard to distinguish from our closest cousins – the chimpanzees and bonobos. 

What came to differentiate us from them – our remarkable capacity for innovation – was still only a faint trace at this time, a latent capacity. During the first hundred thousand years of our existence, we were confined to a small area in the hot, dry savanna of East Africa. 

There . . . we roamed, sweat, and slept beneath the stars on hard ground. We lived like the animals that we are . . .

Mental Breakdown of a Nation

Humanity 2.0: The First Leap

The epic story of humanity in four parts.

 

Agriculture was like a secret code. Once we discovered it, it unlocked a magical, controlling power over nature that until then had only belong to the realm of supernatural beings. 

We discovered our power to tinker with the processes of life … that we could cull endlessly reliable sources of dinner by cordoning off “our own” pieces of earth, and bending the environment to suit our will.

We banned all other species from our space, except for those we planned to chew and swallow.

Everything we sowed and everything we reaped was aimed at maintaining a single species – ourselves.

Before agriculture, it took human beings 50,000 years to move out of Africa. After agriculture, it took humanity a tenth of that time to cover the entire globe …

Mental Breakdown of a Nation 

Humanity 3.0: Project Total Control

The epic story

of humanity in four parts.

Adbusters, 21 March 2013

Mental Breakdown of a Nation

 

When humans figured out how to synthesize fertilizer from fossil fuels, we suddenly gleaned two billion people's worth of food from the same small piece of land – flouting competition and lack of resources, and spreading across the globe like contagion. We waged war on our microscopic enemies: bacteria, viruses, fungi, and all other microbes. We conjured antibiotics, vaccines, water-treatment plants, and continued to annihilate as much of our biological competition as possible. In short: we were cunning.

Hunger led us to agriculture. Later, lust, pride, beauty, cleanliness, power, order, and control drove us to even greater discoveries: penicillin, ethanol, organ transplants, and silicone breasts. And every new discovery harbored a secret prophecy, a vision of future humanity – sublime and indestructible – promising to extend our life spans, make us invulnerable, make things easier, more comfortable, more convenient, and efficient.

In just these past two hundred years, the number of humans inhabiting the earth went from one to eight billion. We've taken over the whole planet, and we just keep growing … 

Check out Humanity 1.0: Our Birth & Humanity 2.0: The First Leap … 

 

Part 4 coming soon.

The Economy Sucks Because Banks Are Still Sticking It To Overextended Home Loan Borrowers

Economy  

AlterNet / By Steven Rosenfeld

The Economy Sucks Because Banks Are Still Sticking It To Overextended Home Loan Borrowers

Banks aren't budging, and government isn't offering millions of households what they need. 

 

 

Photo Credit: Shutterstock

March 7, 2013  |  

 

 

If the Dow Jones Industral Average is hitting records highs, how come the economy where most Americans live still sucks?

The answer is not just that many people don't own stocks or that cash-rich businesses aren’t hiring, or other oft-cited trends such as stagnant wages or stubborn jobless rates. It’s because a giant slice of the housing market is still frozen, due to millions of underwater mortgages, and that is smothering local economies.

“Each house that is sold creates a number of jobs,” said YouWalkAway.com founder Jon D. Maddux, whose company advises people facing foreclosure. “There is a huge drain on the economy because of this.”

How serious is this economic undercurrent? It depends who you ask, but some affordable housing experts say that it is so big—with 27.5 percent of U.S. mortgage holders owing more than their house was worth as of December—that it helped push the U.S. mobility rate to its lowest level since the Census Bureau started tracking it decades ago. In other words, even though 792,000 people moved last year because lenders foreclosed or were evicted, 13.8 million were stranded with underwater mortgages as of December.

“The underwater homeowners is a serious drag on the economy,” said Brent White, a law professor at University of Arizona and author of Underwater Home: What Should You Do If You Own More On Your Home Than It’s Worth. “When there was a housing boom, there was a lot of spending because homeowners had a lot of positive equity. They were spending because they felt wealthy… now they feel poor. They think their house is not a good investment anymore. There is a negative wealth effect because they feel poor.”

With so many households and communities still held hostage by debt, it is no wonder that news reports of Wall Street's recovery land with a thud on Main Streets across America (see map) where the real estate collapse is still raw. And the prospects for solving this nationwide economic crisis are very slim, because neither the private sector nor government has anything underway that’s intended to help most of these 13.8 million underwater households.
“They’re not offering that,” White said. “That’s the problem. It’s not there.”

Beyond Foreclosures: The Rest Of The Iceberg

The housing bubble was at the heart of the meltdown that caused the Great Recession. People bought homes with easy access to capital. Or they borrowed against rising home values to finance their lifestyles. When those loans could no longer be paid, the market crashed. But the debts did not go away. The most visible part of that collapse was the foreclosure crisis. Today, private investors are buying thousands of foreclosed homes, causing low-end home prices to rise. But they haven’t risen enough to fix underwater mortgages—where the money owed is more than current selling prices.

“The housing market is bifurcated,” said Paul Staley, who buys and sells low-end homes for a Bay Area affordable housing non-profit. “On one hand, what’s happening is prices are strong, but there’s a huge portion of supply where people are not free to trade because they’re still underwater. They’re trying for a loan modification. They want to move, but can’t. Not yet. How do you work that out? This is thousands of local households.”

“There is an artificiality in the housing market now,” he explained, saying that prices are rising in part because a significant supply of affordable homes—those with underwater mortgages—are not available for sale. “Banks slowed down the foreclosure process. But all these other homes are in limbo. The next big question is how do you resolve the debt issues hanging over these homes?”

That question does not have quick answers. Lenders do not want to take losses, so they’re waiting for prices to rise. While there’s cheery business press coverage touting the marketplace for liberating a lucky few, the larger reality is that millions of people are stuck in homes they paid too much for—or borrowed too much against—and are hesitant to spend, slowing local economies. In 2012, Zillow Real Estate Research said 2 million borrowers recovered from underwater positions, but 13.8 million borrowers remain there. And those individuals are not spending money for much besides bills and other necessities.
“I think of the fear that people have,” Maddux said, when asked about underwater loans and the falling mobility rate. “They are afraid to sell their homes because they cannot buy another one. That is a very strong drain on the mobility rate… You do have this very real problem with inventory and problem with people unable to sell their homes.”

“If you have an underwater home and you are unemployed and you get a job offer across the country, you can’t take it,” said White. “If you’re underemployed and you get an offer across your state, you can’t take it. That’s not good for the economy. You want people to go where their talents can be used effectively.”

“The people who are least able to afford these kinds of things are locked in homes that are distant—far from where they work,” said MobilityLab.org’s Tom Fairchild, whose organization encourages people to bike and walk to work, not commute in cars. “They’re locked in this formula of drive until you can qualify… They underestimate the costs. We see this all over the country.”

Neither the private sector nor the government is offering much help either, these experts said. Financial industry lobbyists were successful in persuading Congress not to require them to accept losses on underwater loans—and offer borrowers a new terms at a lower rate, White said. Many of today’s underwater loans were written a few years ago when interest rates were nearly double what they are today. Because those homes are now worth less than their mortgages, they’re stuck: no lender will work with them to refinance negative equity, because a lender looks to the home’s value as its way to secure potential losses.
Moreover, most of the government programs, such as the recent multibillion-dollar settlement with the state attorneys general, is designed for people who are facing the loss of their home—foreclosure and eviction—which is not the same as having an underwater mortgage. The underwater borrowers are mostly still paying, quite profitably for the lenders. In some cases, banks accept what's known as short sales, where a new buyer pays less than the loan. But that is a lengthy process and not widespread.

“There has been some refinancing,” White said, but not enough. “If you really wanted to solve the problem, you might require banks to refinance, or have direct lending from the government—refinancing at today’s interest rates… Japan had a direct government refi program when its home prices crashed in the 1990s.”

When asked if he saw anything on the horizon that might break the underwater mortgage logjam, White said no, there was no public or private sector initiative of that scale.

Sympathy For Banks, Not Borrowers

Some of the reason is government policymakers and lenders are not very sympathetic to people who are seen as borrowing and spending beyond their means. That stance, when examined, is hypocritical, White said.

Businesses, including lenders, are encouraged to write off bad debt and are rewarded with higher market valuations, while individuals who write off bad debt are penalized by lower credit scores and higher borrowing costs. “We expect people to keep paying, but we expect business to shed their toxic debt,” he said. 

What this means is that regions of the country with the most underwater loans (see map) are poised to have a drag on local economic recovery into the foreseeable future. And it is not because of the oft-cited factors associated with America’s growing gap between the haves and have-nots, such as still-high unemployent, wage stagnation, globalization and reluctance in hiring trends.
It’s because lenders—and the government—are not willing to stop a massive transfer of wealth from 13.8 million still-underwater borrowers to banks by lowering their interest rates, and in so doing allowing each of those households to spend several hundred dollars a month elsewhere in their communities.  

Steven Rosenfeld covers democracy issues for AlterNet and is the author of "Count My Vote: A Citizen's Guide to Voting" (AlterNet Books, 2008).

Washington Moves to Planet Rand: Why the Rich Prosper While We Get Screwed

Economy  

 

AlterNet / By Les Leopold

 

Welcome to Ayn Rand Planet: Why the Rich Prosper from the Stock Market While We Get Screwed

On Planet Rand, the stock-market boom is a wonderful thing precisely because it rests upon the recent rise in corporate profits.

 

 

Photo Credit: Flickr

March 11, 2013  |  

 

 

This morning I received an email blast form Amazon. It was pushing The Fountainhead and Atlas Shrugged, the old and new testament of the Ayn Rand nation, which includes much of the Tea Party and its Republican allies.

How appropriate to be promoting Ayn Rand books just as the stock market and corporate profits both reached record highs. How appropriate to think of the infamous John Galt withdrawing from society in comfort while the rest of us face high unemployment, oppressive student loans, increasing healthcare costs, upside-down mortgages, and declining real incomes. But, according to Rand's philosophy, this is as it should be -- the wealthy getting all the rewards while the rest of us get nothing.

None of this is accidental. Our two-tiered economic recovery is the direct result of policies, or the lack thereof, that flow directly from Randian principles. If we don't do something soon, we'll all be living on Planet Rand.

Who Owns the Stock Market?

Before exploring this Randian policy coup, let's be clear on who owns how much stock in America, and therefore who is benefiting most from the record rise in the equity markets.

Click to enlarge.

As of 2010, the top 1 percent of households owned 35 percent of all the stocks in America while the bottom 80 percent of us owned only 8 percent. These percentages include both direct ownership of stock shares and indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k) plans, and other retirement accounts. (See "Wealth, Income and Power" by G William Domhoff.) So the current market boom is extremely profitable for the well-to-do, especially the super-rich, which is precisely what an Ayn Rand true-believer would cherish. Why is that?

On Planet Rand, each individual pursues his or her own rational self-interest. That is the definition of morality. It excludes altruism, which is posited as a negative, guilt-driven trait that should be avoided at all costs. Yes, this sounds selfish, but that's a good thing on Planet Rand, because acting in your own rational self-interest leads to improvement, success, fulfillment and happiness. That's how you can become a "maker" instead of a spineless moocher. (When I hear all this talk about the "makers," the Yiddish word macher always comes to mind -- a word used to describe an ambitious, puffed-up schemer. )

So on Planet Rand, the stock-market boom is a wonderful thing precisely because it rests upon the recent rise in corporate profits. (The New York Times reports that corporate profits as a share of national income are at their highest levels since 1950.) Aren't those corporations run by the smart, successful CEOs who are society's "makers"? Aren't those CEOs applying Randian reason in pursuit of their self-interest? Surely, this is why these makers deserve everything they can get.

Why Are We Being Left Behind?

It's easy to see why the Randians would adore the super-rich. After all they're not alone in their idolization of the wealthy. It's seems like most of Congress adores the super-rich as well. But why do the Randians refer to everyone else as moochers? Why be so hard on the rest of us?

This becomes clearer when we look at two kinds of answers to the question of why most of us have been left out of the current economic recovery. The first set of answers comes from a straightforward analysis about how our economy works, and doesn't work:

• High unemployment depresses wages of low- and middle-income wage-earners
• Increases in the use of advanced technologies allow corporations to produce more with less labor, thereby keeping unemployment high
• Increased global production creates jobs elsewhere
• Fiscal austerity leads to job, wage and benefit cuts for public employees
• Fiscal austerity also prevents the additional stimulus we need to create jobs
• Attacks on unions further erode workers' bargaining power and keeps wages low
• Wall Street is using indirect government support to gamble rather than to rework mortgages and invest in businesses

You'll find many of these causal explanations coming from insightful political economists like Paul Krugman and Robert Reich.

Screw the Rest of Us!

The second kind of explanation is what you'll find on Planet Rand. In that world, there is no such thing as the "public interest." Even the family doesn't count for much. It's all up to the individual.

Randians love the free-market for entirely different reasons than Adam Smith. They make no pretense that the invisible hand of deregulated markets will make all boats rise. That's just guilt-driven altruism parading as economic analysis, they say. The point of under-regulated markets is that they allow individuals to succeed on their own. Regulations of all kinds are opposed because they represent the evil hand of government. In fact, on Planet Rand, there's a constant state of war between the collectivists -- as represented by the government -- and the individual "makers." If you're not a maker then you're a parasite. We deserve only what each of us can get on our own, they would claim. We live to pursue our rational self-interest, not to better anyone else's.

Washington Moves Toward Planet Rand

This world view has become the heart and soul of the Tea Party and a good portion of the Republican Party as well. As a result, any and all efforts to help spread the recovery are vehemently opposed:

• Unemployment insurance? It prevents the unemployed from seeking jobs. Let them get by on their own wits, not on our money. It's bad for them. It's bad for the rest of us.
• Increase the minimum wage? All money transactions are fair trades. You get what someone is willing to pay you, no more, no less. The government shouldn't be telling a businessman what to pay anyone.
• Public job creation to reduce unemployment? You must be kidding. The government is an ever present threat to liberty. It should only provide for defense, courts and police. Job creation only comes from the makers.
• Aid to states and localities to prevent layoffs of teachers and other public employees? No, lay them off. Get rid of public education. Get rid of as much government as possible.
• Close tax loopholes for large corporations and hedge funds?Not a chance. Under no circumstances do we want one penny more going to government.

Romney's 47 percent/maker-taker comments were no fluke. After all, he tapped Paul Ryan, a self-syled Randian acolyte, as his running mate. It's also not a fluke that the Republican Party will oppose any and all efforts to make Wall Street pay for the damage it has done to the economy. Sure, they get lots of fat campaign donations. But in addition to the corruption that infects both parties, we find a new philosophical meanness that particularly permeates through the Tea Party/Republican Party. In the name of fighting for individual freedom and against government, they are more than happy to screw those who are harmed by Wall Street's insatiable greed.

The Randian policy coup helps explain why facts no longer matter in policy debates, why failed and disproven economic policies (like supply side economics) never go away, and why compromise is out of the question. These folks are at war against anyone who supports the public interest and the very notion of the common good.

Let me repeat: on Planet Rand, there is no common good, there is no altruism, there is no whining about CEOs and Wall Street barons. There is only individual self-interest and the crusade against government.

Democrats Become the Old Republicans

Here's the scary part. The more the Randian philosophy infects the Republicans, the more the Democrats move to the right. As President Clinton sarcastically quipped in 1993, "Where are all the Democrats? I hope you're all aware we're all Eisenhower Republicans...Here we are, and we're standing for lower deficits and free trade and the bond market. Isn't that great?"

President Clinton was onto something. Aren't President Obama and a large chunk of the Democratic Party still "standing for lower, deficits and free trade and the bond market"? (BTW, when President Clinton reappointed Alan Greenspan as chairman of the Federal Reserve in 1996, did he know or care that Greenspan had been among the most loyal members of Ayn Rand's inner circle?)

The Randian Antidote: Movement-Building

It's almost a cliché now to suggest that we need to build a progressive populist movement if we really want to do something about increasing inequality, unemployment, the student debt burden, and the continuing Wall Street rip-offs. Nevertheless, it's still true. Nothing much will happen if all we do is put forth wonky policy proposals from our many 501c3 non-profit organizations.
Also, hoping that a few solid Democrats can do it all for us is a pipe dream. For more than a generation progressives have been trying to put more people like Elizabeth Warren and Bernie Sanders into Congress, and we're still going backward.

Both the Tea Party and Occupy Wall Street proved that mass mobilization can dramatically shift the terms of debate. Yes, the Tea Party has some very rich donors, but I doubt that money alone accounts for the success of that formation, or for why no sustained progressive movement has emerged. But this much is clear: If we want out of the Randian economy, we need to break out of our separate issue silos to form a common vision and organization that can take back America from its corporate rulers. For most Americans, the spirit of solidarity, community and commonwealth trumps greed and selfishness. They are waiting for a way out of Planet Rand.

Les Leopold is the executive director of the Labor Institute in New York, and author of How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America's Wealth (J. Wiley and Sons, 2013).

The Grand Bargain We Don't Need

Published on Monday, March 11, 2013 by Policy Shop Blog / Demos

The Grand Bargain We Don't Need

by Robert Kuttner

 

 

President Obama has been meeting with small groups of Republican senators and representatives in an effort to reduce the damage of the so-called sequester -- the $85 billion in automatic budget cuts that took effect March 1. But these meetings, if successful, are likely to lead to greater economic and political damage, in the form of a "grand bargain" to cut Social Security and Medicare in exchange for some reductions in tax preferences.



This is a bad idea for several reasons.

First, in these deals, it's usually Democrats who get taken to the cleaners. Republican leaders insist that their rank and file members will never vote for progressive tax increases, so the tax part of the bargain tends to focus on closing minor loopholes while Republicans demand major spending cuts in return.

Secondly, the sequester is a grave problem not just because the cuts are automatic, but because they are a down payment on a decade of budget cuts that both President Obama and the Republicans have embraced. If we trade the $85 billion of automatic cuts in the sequester for $85 billion of some other cuts, the impact on the economy is just as depressive.

President Obama's own proposals support $4 trillion of deficit cuts over a decade, only slightly less than what Republicans demand. The deal that he made over New Years weekend to spare the economy the "fiscal cliff" cut taxes by over $3 billion. Some of this extended the Bush tax cuts for 99 percent of taxpayers, but a lot if it was in the continuation of tax loopholes for the well-off. Massive spending cuts are already baked into the cake for the next decade.

Third, Social Security and Medicare outlays are not what ails the economy, and the two programs tend to be wrongly lumped together in discussions of "entitlement reform." A characteristic recent piece in the Washington Post by liberal deficit hawks Isabel Sawhill and Harry Holzer substantially blames progressives for the current fiscal stalemate:

The reluctance of our fellow progressives to consider sensible reforms to entitlement programs is puzzling. Progressives must begin to acknowledge a hard fact: Our very expensive retirement programs already crowd out public spending on virtually all other priorities -- including programs for the poor and those that strengthen the nation's future

Sawhill and Holzer go on to argue that since Republicans will resist higher taxes, Social Security and Medicare are the main place to look for budget savings.

This line of argument is misleading on several grounds. It isn't Social Security and Medicare that are killing other social programs, but Republican refusal to support them.

The ratio of public debt to GDP is roughly stable for the next decade. If we begin making cuts now, whether in Social Security and Medicare, or in other outlays, we will slow the recovery. That will only worsen the debt ratio over the long term, and at a depressed level of economic output.

Republicans do resist higher taxes, but at times Democrats have prevailed in raising taxes on the rich -- with the full support of the voters. President Clinton managed it in 1993, and even President Obama, though he settled for too skimpy a bargain, got Republicans to vote for a $630 billion tax hike on the top one percent last January. Faced with a choice of cuts in Social Security and Medicare or tax increases on the wealthy, polls show that most voters opt for the taxes.
Social Security and Medicare face entirely different fiscal challenges. As even a budget-balancer like former OMB chief Peter Orszag has acknowledged, the current Social Security program will face cost increases of only about one percentage point of GDP over the next 75 years, largely because of the aging of the population.

We can bring the program into balance by lifting the lid on incomes subject to payroll taxes. Since Social Security is financed by taxes on wages, the program would be nicely in surplus of wages began rising with productivity again, as they did in the 30 years after World War II.

Medicare faces larger deficits, but mainly because it co-exists with a heavily commercialized larger health system. A remarkable piece in Time magazine, by Steven Brill, "Why Medical Bills Are Killing Us," explains how hospitals and doctors charge astronomical fees that have no connection to their actual costs. A single-payer system -- Medicare for all -- could drastically reduce the rate of medical inflation.

When someone like Dr. Sidney Wolfe of Public Citizen, or Sen. Bernie Sanders, or former New England Journal of Medicine Marcia Angell, calls for single payer insurance as the solution to our health mess, they are starry-eyed socialists. When Time magazine stumbles on this reality, it's news.
But whacking Medicare, either to pay for the sins of the rest of the health-industrial complex or to compensate for the Republican refusal to tax the rich, it is utterly perverse.

This supposed grand bargain, long promoted by centrist deficit hawks and their Wall Street allies, is bad economics, bad social policy, and bad politics for Democrats. So far, only the refusal on the part of Republicans to entertain more than the most token of tax increases on the rich as part of a bargain has saved Obama from himself.

© 2013 Demos

 

Robert Kuttner is co-founder and co-editor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. He was a longtime columnist for Business Week, and continues to write columns in the Boston Globe and Huffington Post. He is the author of A Presidency in Peril: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle to Control our Economic Future, Obama's Challenge, and other books.

5 Ways Privatization Is Poisoning America

Economy  

AlterNet / By Paul Buchheit

5 Ways Privatization Is Poisoning America

We all live better lives when the common good is not for sale.

March 10, 2013  |  

 

 

 

It gets more maddening every day. Essential human needs are being packaged into products to be bought and sold. The right to food and water, education, health care, public spaces, and unrestricted speech shouldn't be based on who can pay the most, or on who can generate profits with the slickest marketing pitch.

The free-market capitalism that drives our economy is a doctrine of individuals pursuing profit. Nothing else matters. An executive for Roche, a healthcare company, said "We are not in the business to save lives, but to make money."

With privatization of the common good we risk losing both our heritage and our humanness.


1. The Taking of Public Land

Attempts to privatize federal land were made by the Reagan administration in the 1980s and the Republican-controlled Congress in the 1990s. In 2006, President Bush proposed auctioning off 300,000 acres of national forest in 41 states.

The assault on our common areas continues with even greater ferocity today, as the euphemistic Path to Prosperity has proposed to sell millions of acres of "unneeded federal land," and libertarian groups like the Cato Institute demand that our property be "allocated to the highest-value use." Mitt Romney admitted that he didn't know "what the purpose is" of public lands.

Examples of the takeaway are shocking. Peabody Coal is strip-mining public lands in Wyoming and Montana and making a 10,000% profit on the meager amounts they pay for the privilege. Sealaska is snatching up timberland in Alaska. The Central Rockies Land Exchange would allow Bill Koch to pick up choice Colorado properties from the Bureau of Land Management, while neighboring Utah Governor Gary Herbert sees land privatization as a way to reduce the deficit. Representative Cliff Stearns recommended that we "sell off some of our national parks." One gold mining company even invoked an 1872 law to grab mineral-rich Nevada land for which it stands to make a million-percent profit.

The National Resources Defense Council just reported that oil and gas companies hold drilling and fracking rights on U.S. land equivalent to the size of California and Florida combined. Much of this land is"split estate," which means the company can drill under an American citizen's property without consent. Unrestrained by government regulations, TransCanada was able to use eminent domain in Texas to lay its pipeline on private property and then have the owner arrested for trespassing on her own land, and Chesapeake Energy Corporation overturned a 93-year-old law to frack a Texas residence without paying a penny to the homeowners. Most recently, the oil frenzy in North Dakota has cheated Native Americans out of a billion dollars worth of revenue from drilling leases.

Away from the mountains and the plains, back in the cities of Chicago and Indianapolis and L.A. and San Diego, our streets and parking spaces have been surrendered to corporations until the time of our great-grandchildren, with some of the highest profit margins in the corporate world.


2. Water for Sale

The corporate invasion of the water market is well underway. In May 2000 Fortune Magazine called water "one of the world's great business opportunities..[It] promises to be to the 21st century what oil was to the 20th." Citigroup is on board, viewing water as a prime investment, and perhaps the "single most important physical-commodity based asset class."

The vital human resource of water is being privatized and marketed all over the country. In Pennsylvania and California, the American Water Company took over towns and raised rates by 70% or more. In Atlanta, United Water Services demanded more money from the city while prompting federal complaints about water quality. Shell owns groundwater rights in Colorado, oil tycoon T. Boone Pickens is buying up the water in drought-stricken Texas, and water in Alaska is being pumped into tankers and sold in the Middle East.

A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. Various privatizationabusesor failures occurred in California, Georgia, Illinois, Indiana, New Jersey, and Rhode Island.

Of course, water monopolization is a global concern, and a life-threatening issue in undeveloped countries, where 884 million people are without safe drinking water and more than 2.6 billion people lack the means for basic sanitation. Whether in the U.S. or in the world's poorest nation, the folly of privatizing water is made clear by the profit-seeking motives of business:

(1) Water corporations are primarily accountable to their stockholders, not to the people they serve.
(2) They will avoid serving low-income communities where bill collection might be an issue.
(3) Because of the risk to profits, there is less incentive to maintain infrastructure.


3. Owning Human Life

Monsanto and their agro-chemical partners call themselves the "life industry."

In 1980 a General Electric geneticist engineered an oil-eating bacterium, effective against oil spills, and in the first case of its kind the Supreme Court ruled that "a live, human-made micro-organism is patentable subject matter." Fifteen years later a World Trade Organization decision allowed plants, genes, and microorganisms to be owned as intellectual property.

The results, not surprisingly, have been disastrous. One-fifth of the human genome is privately owned through patents. Strains of influenza and hepatitis have been claimed by corporate and university labs, and because of this researchers can't use the patented life forms to perform cancer research. Thus the cost of life-preserving tests often depends on the whim (and the market analysis) of the organization claiming ownership of the biological entity.

The results have also been otherworldly. In 1996 the U.S. National Institutes of Health attempted to patent the blood cells of the primitive Hagahai tribesman of New Guinea. U.S. companies AgriDyne and W.R. Grace tried to gain ownership of the neem plant, used for centuries in India for the making of medicines and natural pesticides. Other examples of 'biopiracy': The University of Cincinnati holds a patent on Brazil's guarana seed; the University of Mississippi holds a patent on the Asian spice turmeric.

Most tragically, tens of thousands of Indian farmers, charged for seeds that they used to develop on their own, and forced to repurchase them every year, have been driven to suicide after experiencing crop failures and ruinous debt.

Monsanto is at the forefront of GMO seeds and litigation against vulnerable farmers. To date the company has won over half of its patent infringement lawsuits. The Supreme Court is currently weighing the arguments in Bowman vs. Monsanto, which asks if a company can have a claim on a farmer whose crops were derived from a seed already paid for. More significantly, the question is whether a company can claim the rights to a form of life that has been nurtured by communities of farmers for centuries.


4. Owning the Air

In polluted Beijing, wealthy entrepreneur Chen Guangbiao is selling "fresh air" in a soft drink can for about 80 cents.

While Americans are not yet dependent on (real or imagined) breathing supplements, we have relinquished public access to the air in another important way: the 1996 Telecommunications Act led the way to a giveaway of the transmission airwaves to the broadcast media. Through an effective lobbying campaign the communications industry gained all the benefits of a lucrative public space without even a licensing fee. Objected former Senate Majority Leader Bob Dole, "The airwaves are a natural resource. They do not belong to the broadcasters, phone companies or any other industry. They belong to the American people."

Closely related is our right to freedom of expression on the Internet, which has been repeatedly threatened, despite the presence of existing copyright laws, by aggressive proposals like the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Privacy is at risk with the Cyber Intelligence Sharing and Protection Act (CISPA), passed in the House despite objections by Ron Paul and others who recognize the "Big Brother" implications of government monitoring of Google and Facebook accounts. The Foreign Intelligence Surveillance Act has facilitated the monitoring of foreign communications in the name of anti-terrorism.

A 2011 UNESCO report offered this worrisome insight: "..the control of information on the Internet and Web is certainly feasible, and technological advances do not therefore guarantee greater freedom of speech."


5. Children as Products

Leading capitalists like Bill Gates and Jeb Bush and Michael Bloomberg and Arne Duncan and Michelle Rhee, who together have a few months teaching experience, have decided that the business model can pump out improved assembly line versions of our children.

Charter schools simply don't work as well as the profitseekers would have us believe. The recently updated CREDO study at Stanford concluded again that "CMOs (Charter Management Organizations) on average are not dramatically better than non-CMO schools in terms of their contributions to student learning." Approximately the same percentages of charters and non-charters are showing improvement (or lack of improvement) in reading and math. In addition, poorly performing charters tend not to improve over time.

Nevertheless, charters remain appealing to poorly informed parents. The schools like to represent themselves as equal opportunity educational options, but the facts state the opposite, as many of them have strict application standards that ensure access to the most qualified students. Funding for such schools drains money out of the public system.

Children are viewed as products in another way -- on the school-to-prison pipeline. Many school districts employ "school resource officers" to patrol their hallways, and to ticket or arrest kids who disrupt the academic routine, no matter the age of the offender or the nature of the "offense":

-- A twelve-year-old was arrested for wearing too much perfume.
-- A five-year-old was handcuffed for committing "battery" on a police officer.
-- A six-year-old was called a "terrorist threat" for talking about shooting bubbles at a classmate.

Along with these bizarre instances is the frightening precedent set by a private prison, Corrections Corporation of America, which despite having no law enforcement authority was allowed to participate in a drug sweep at a high school in Arizona.


An Antidote?

A successful society doesn't derive from a few Ayn-Rand-type individuals. It's the other way around, as philosopher John Dewey reasoned in the 1930s. It's easy to forget that our country's greatest success was due to a collaborative effort in the years during and after World War 2, when advances in manufacturing and technology made us the strongest economy the world had ever seen. It was a shared success. The common good was not for sale.

Paul Buchheit teaches economic inequality at DePaul University. He is the founder and developer of the Web sites UsAgainstGreed.org, PayUpNow.org and RappingHistory.org, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.