Tuesday, March 12, 2013

America's Zero-Sum Economy

In response to watching an interview of Sean Hannity on Fox News with Occidental College professor Caroline Heldman, I had to point out a few things that maybe she could use in her next showing:

There are 9 million less Americans in the work force, not because of Obama, but because corporations are doing more with less; and because of outsourcing over that last 20 years; and because multi-national corporations are earning more and more profits from "emerging markets" overseas.

Also, because 8.5 million jobs were lost during the Great Recession, job growth has only managed to keep pace with natural population growth, while many laid-off older workers were forced into an early Social Security retirement.

We have $6 trillion in more debt, not because of Obama, but because of the economy he was left with and the skewed tax code that Congress refuses to reform, enabling the top 1% to extract and hoard ever more of the county's wealth. When George W. Bush ran up the first $10 trillion in debt with two wars and tax cuts for the rich, Sean Hannity wasn't complaining then.

We have 46 million Americans on food stamps, not because of Obama, but because corporations were allowed to bust unions and import jobs with H-1B VISAs, thus driving down wages. Food stamps go to mostly white working Americans as "wage subsidies" because corporations (especially in an over-saturated job market) don't have to pay a "living wage". Most "entitlements" are really "wage subsidies", and corporations like Wal-Mart benefits the most.

The Republicans fight raising the minimum wage, raising taxes to a fair level on the ultra-wealthy, and insist on cutting government spending even while the population is much higher now than it was 4 years ago --- 15 million more just since the unemployment rate peaked at 10.2% in October of 2009.

Wealth inequality is higher now than it's been in over 100 years --- all data shows this --- but the GOP refuses to acknowledge this, especially multi-millionaires like Sean Hannity, Bill O'Reilly and Rush Limbaugh. They would rather leave the bulk of their estates (untaxed on the first $10 million) to their children (or take their money to the grave) rather than to pay one dime more in taxes to help the other 47% of Americans to survive.

People like to think that in America, a poor person has a good chance of becoming rich and a rich person has a good chance of dying penniless. Mainly, though, poor people stay poor and rich people stay rich.

While we occasionally hear the anecdotal stories of those who pick themselves up by the boot straps and become "self-made millionaires", that is the exception to the rule. Very few people who were born and raised in dire poverty rarely escape. And very few people who were born and raised in privilege have ever died broke --- with the exception of a son who had killed his father because he couldn't wait for his inheritance. (See my post: Murder and Betrayal of the Rich and Famous)

While these stories of "rags to riches" (or like the rich banker in the movie "Trading Places") are very uplifting, they are far and few from the actual reality. In truth, especially over the past 40 years, Americans have been living in a Zero-Sum economy.

Economists at the San Francisco Federal Reserve crunched some numbers: The data showed that when the population is divided into fifths, the middle three groups of this income distribution are fairly mobile. For this middle group (where one is born in this distribution) wealth does not determine where one will eventually end up.

But for those born in the bottom or the top fifth, mobility is much more constricted, suggesting that birth circumstances play more of a role in lifetime outcomes.

But the middle three fifths have been steadily declining for the past 40 years, and there are 3 main reasons for this: 1) Wealth inequality perpetuated by the largest banks and corporations, 2) a Congress that refuses to reform the tax code and financial regulatory system, and 3) a justice system that is incapable of reforming the largest institutional banks, hedge funds, and private equity firms.

Basically, because of the Congress (and our election process), the American people are being denied any chance at all of correcting this massive imbalance of wealth and power in the world's largest democracy.

If big corporations won't pay a "living wage" to their workers; and if our legal system won't prosecute the CEOs of big banks; and if the I.R.S. isn't funded by Congress to pursue the biggest tax cheats; that leaves us with Zero-Sum --- because there must be one winner and one loser, and for every gain there is a loss.

Differing schools of thought believe that social justice is best attained through cooperative negotiation (such as with labor unions). Zero-Sum in the business world is: pay more to workers, you own less / pay less to workers, you get more. But usually, Congress has made sure for the past four decades, that it's usually the average American worker who is the loser in any deal.

Recently in a post on his blog titled "The Non Zero-Sum Society", Robert Reich writes "A newly-released analysis by the Economic Policy Institute shows that the super-rich have done well in the economic recovery while almost everyone else has done badly. The top 1 percent of earners’ real wages grew 8.2 percent from 2009 to 2011, yet the real annual wages of Americans in the bottom 90 percent have continued to decline in the recovery."

But many of us have already known (or suspected) this for several years (if not decades) that something was very, very wrong with the status quo; but just since the onslaught of the Great Recession, have more and more Americans started to become more aware and privy to this, thanks mostly to the internet and cable tv.

Top Senate Democrats and Republicans just released a catchall government funding bill that denies President Barack Obama any new money for implementing signature first-term accomplishments, including new regulations for Wall Street.

Using their leverage, Republicans have denied a White House request for almost $1 billion to help set up state health-care exchanges to implement ObamaCare® as well as smaller requests for financial regulators to implement the 2010 Dodd-Frank law overhauling regulation of Wall Street --- and also less money for the IRS to police tax returns.

In an Associated Press article released by the Washington Post, it notes that for every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10 --- a rate of return so good the Obama administration wanted to boost the agency’s budget. House Republicans, seeing the heavy hand of a "too-big" government, begged to differ. They’ve already voted to cut the IRS budget by $600 million in 2011 and wanted even bigger cuts in 2012.

READ: GOP Looks to Cut IRS Budget, Despite Returns and Policing Tax Evasion Could Save Billions, But Republicans Won't Fund Enforcement.

Republicans tend to talk about non-compliance in the tax code (tax evasion) as if it were solely a function of tax rates. The higher tax rates are, the greater the incentive for tax evasion; lower tax rates and evasion will decline. Thus tax evasion for the GOP is yet another excuse to cut taxes [on the rich] and de-fund the I.R.S.

Also: Are the banks really too big to jail? If there was any doubt about the answer to that question, Eric Holder, the nation’s attorney general, last week blurted out a stunning admission, one that we’ve all known to be true, but few inside any presidential administration have every said aloud: Yes, they are.

Mr. Holder told the Senate Judiciary Committee: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.”

So the banks are above the law (and our government won't jail CEOs for any and all criminal wrong-doing); and no one will break up the banks (or nationalize them like a public utility), or impose stricter regulations (or enforce the laws we already have on the books), or tax them any more --- Zero-Sum, they win, we lose.

We have a growing population, yet we also have constant attacks on increased government spending. We have the Republican's often repeated convenient excuse and their use of a false "crisis" on national debt to cut spending (mostly for the poor); but yet, Congress refuses to reform the tax code --- and they also won't use the I.R.S. to go after the biggest tax cheats --- even though we have massive tax fraud and a growing a deficit, but with no added revenues. Zero-Sum, they win, we lose.

We have multi-national corporations that refuse to pay fair domestic wages, but instead bust labor unions (lobbying for "Right to Work laws) and outsource jobs overseas --- or they are using H-1B VISAs to import labor into the U.S. to further depress overall wages. Their lobbyists run this country, not our votes.

And these same corporations also don't pay near enough in taxes. Robert Scheer, author of "The Great American Stickup", has a new post at the Huffington Post: It's Good to Be the Multinational
--- and also, at TooMuch.Org there is another good article about corporate taxes and CEO pay: Once Upon a Time, Corporations Paid Taxes --- Zero-Sum, they win, we lose.

Consider this: The U.S. is rapidly losing its position as the world's superpower and wealth aggregator. The chart below from Credit Suisse ranks the top 10 countries in the world in terms of average wealth per adult. While the U.S. was #1 ten years ago, it has now dropped from first to seventh place.

But at least Congress has had their own backyard attended to --- 7 of the 10 counties with the highest household incomes are in the Washington D.C. area. Critics say that unlike other 'boom towns' where wealth was created through producing something, Washington's wealth comes from taking money from the rest of the country.

So then, what does all that leave for the average working (or poor, or middle-class) American when their own government institutions are failing them? Zilch, nada, nothing --- Zero-Sum. As usual, they (the top 1%) wins, we (the bottom 99%) loses. And it won't get any better, but will only worse with the present Congress.

Where have you gone Bernie Sanders? A nation turns its lonely eyes to you...

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