Tuesday, June 18, 2013

Congressional Malfeasance, Jobs and Inequality

A CNN network reporter has been asking the online public to pick the topics that we thought he should be covering for the rest of the year. The top pick as of last week was: “America’s widening gap between the rich and poor.”

Senator Bernie Sanders writes at the Guardian.co.uk, "The American people get the economic realities. According to a Gallup poll, nearly six out of 10 believe that money and wealth should be more evenly distributed among a larger percentage of the people in the U.S., while only a third of Americans think the current distribution is fair. A record-breaking 52% of the American people believe that the federal government should redistribute wealth by heavy taxes on the rich".

Income for the country's top 1 percent has soared by 275 percent over the past 30 years, while growth for the rest of us has stagnated. A new study finds that Congress played a large role in exacerbating the problem of inequality by manipulating the tax code --- so the rich keep getting richer. Morgan Stanley recently told investors they should expect pre-tax profit margins of 20-22% by 2015 in its wealth-management business.

The rich have always had their mansions and yachts. Then they had yachts that carried little submarines. Now the rich can have a yacht that also doubles as a submarine. Designers have built the latest toy for the super-rich: a 115m submarine-yacht with a helipad and a swimming pool that moves below deck when submerged. It will stretch longer than a football field, dive below 300 meters, and as one report notes, “satisfy the ever raising demands from super-rich yacht owners who want to stand out from the crowd.” (The Joneses and Smiths...and their yacht envy.)

Meanwhile, analysts at Sentier Research are now estimating that America’s most typical income-earners, took home 7.3 percent less this past January, after inflation, than they earned in January 2000 — and 4.5 percent less than they earned in June of 2009 (the year the Great Recession "officially" ended).

Also, in advance of a congressional hearing on tax havens, a new Institute for Policy Studies report reveals the massive windfalls members of the “Fix the Debt” campaign stand to gain from their proposals to widen tax haven loopholes. The campaign is a heavily funded corporate lobby group pushing for cuts to Social Security and Medicare and more corporate tax breaks. One of their main goals is a “territorial” tax system. This reform would increase incentives to exploit tax havens by permanently exempting U.S. corporations’ foreign earnings from U.S. federal income taxes. Fix the Debt Co-Founders Erskine Bowles and Alan Simpson made this reform a centerpiece of their recently released deficit reduction proposal.

Have you ever heard of Mitt Romney's $100 million IRA account? IRAs and 401ks (and other similar retirement plans) shelters our income from taxes --- the original rationale being, to help average American workers save for their retirement. But the nation’s most wealthy have been exploiting these tax-sheltered accounts to dodge billions of dollars in taxes --- and that's the reason why the White House now wants to limit these nest-eggs to $3.4 million.

But the CEO of Putnam Investments (Robert Reynolds, with over $125 billion in assets under management) is leading the charge to kill that limit. His bizarre case for no cap: “Right now elderly poverty is at an all-time high.” Economist Dean Baker notes that Reynold's argument is nonsense on two counts. 1) Elderly poverty isn’t sitting near any all-time high, and 2) the elderly who do live in poverty aren’t worrying about "brushing up against the $3.4 million tax-exempt limit” (And who really believes that Robert Reynolds gives a damn about the elderly?)

The Nobel Prize-winning op-ed columnist Paul Krugman writes that "the clear and present danger is mass unemployment, and we should deal with it now." But Congress has done nothing for the past 4 years but attempt to repeal ObamaCare, pass anti-abortion legislation, and to cut everything that's not nailed down in the government budget. Economist Dean Baker writes, "The sequester is throwing around 600,000 people out of work according to the Congressional Budget Office. These are the people who have the necessary skills to fill jobs in the economy, but who will not be working because people in Washington lack the necessary skills to design policies to keep the economy near full employment."

And to add to this Congressional malfeasance, our representatives are foregoing their duties by allowing the bank's lawyers to re-write banking regulations and stripping the Dodd-Frank reforms. "One possible explanation for having banks like Citigroup write financial services legislation is its significant knowledge (based upon experience) of fraudulent and bad management practices. But with this line of reasoning, Bernie Madoff should've headed Congress' efforts for financial services reform." Robert Reich writes that neither the Republicans nor Democrats have done much of anything to effectively rein in the banks, and says if there ever was to be "a viable third party in America, it may borne of ill-fated consequences."

And while Congress has been busy catering to the rich (and their biggest campaign donors), they've done very little about creating jobs --- but they sure like to float those big JOB banners in the background whenever they make their media appearances to complain about other, much less relevant, matters. Just as with past distractions (e.g. Fast and Furious, Beganhzi talking points, etc.) now we have the most recent revelations about the NSA's domestic surveillance programs, the DOJ's secret investigations of journalists and the IRS targeting of conservative 501c groups, which have all further distracted Congress from focusing on the economy and creating jobs --- which, according to a New York Times-CBS Poll, are American's two most important concerns. Recently it was gun control and gay marriage. Now we're back to amnesty, comprehensive immigration reform or the Dream Act. And we also have Syria. What will it be tomorrow? Another tornado? Another oil spill? Another political "scandal"? It will be anything but "jobs".

And our business leaders haven't helped much either by offering part-time jobs, low-paying jobs and temporary jobs --- or offshoring jobs and offering jobs to H-1B visa applicants. We have a massive churn in the labor market as desperate Americans are scurrying from one job to another trying to survive. The New York Times editorial board writes, "Corporate executives have valuable perspectives on the economy, but they also have an interest in promoting the notion of a skills gap. They want schools and, by extension, the government to take on more of the costs of training workers that used to be covered by companies as part of on-the-job employee development. They also want more immigration, both low and high skilled, because immigrants may be willing to work for less than their American counterparts."

You can call Nick Hanauer a top 1 percenter. Or you can call him filthy rich. But you don’t want to call the Seattle-based venture capitalist a “job creator.” Hanauer told a U.S. Senate subcommittee earlier this month that “rich business people like me neither create jobs nor deserve tax breaks for creating them." So who does create jobs? Hanauer testified that average people with money in their pockets to spend are the real jobs creators. Added the veteran entrepreneur, “Anyone who's ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do if and only if increasing customer demand requires it. If lower tax rates and more wealth for the wealthy actually did create work, then today we would be drowning in jobs.” (The U.S. currently has 3.8 job openings for 11.7 million unemployed).

Award-winning American economist Ed Lazear writes, "The U.S. is not getting back many of the jobs that were lost during the recession. At the present slow pace of job growth, it will require more than a decade to get back to full employment defined by pre-recession standards. There's no evidence that I'm aware of that shows conclusively (or at all) that the supply of workers rather than the demand for workers is the problem."

And the New York Times goes on to note that it's not because Americans lack job skills. "There is a durable belief that much of today’s unemployment is rooted in a skills gap, in which good jobs go unfilled for lack of qualified applicants. This is mostly a corporate fiction, based in part on self-interest and a misreading of government data." But one of Senator Marco Rubio's aides thinks it's because. "there are American workers who, for lack of a better term, can’t cut it."

In my post When Capitalism comes to a Shuttering Halt (a reader's commentary and my reply about technology and globalization), Robert writes, "If you haven't read it, I recommend Martin Ford's The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. He argues that technological unemployment is upon us, and calls for a Basic Guaranteed Income for everyone, paid for from a 'wage recapture tax' imposed on corporations." (The Washington Post also has an article about this.)

The Lights in the Tunnel (Description) What will the economy of the future look like? Where will advancing technology, job automation, outsourcing and globalization lead? This groundbreaking book by a Silicon Valley computer engineer explores these questions and shows how accelerating technology is likely to have a highly disruptive influence on our economy in the near future--and may well already be a significant factor in the current global crisis. THE LIGHTS IN THE TUNNEL employs a powerful thought experiment to explore the economy of the future. An imaginary "tunnel of lights" is used to visualize the economic implications of the new technologies that are likely to appear in the coming years and decades. The book directly challenges conventional views of the future and illuminates the danger that lies ahead if we do not plan for the impact of rapidly advancing technology. It also shows how the economic realities of the future might offer solutions to issues such as poverty and climate change.

For those of you who are interested, read this comprehensive narrative called Growing Apart: A Political History of American Inequality, which TooMuchOnline says is "the most up-to-date guide yet to understanding why America has become so unequal, more unequal than any other major developed nation. This new guide, by Colin Gordon, taps the latest research on inequality — from all over the world — and links readers to a broad array of source material."

Mitt Romney once said that Congress should pass a requirement that anyone running for President must have business experience (because if one requirement was for military service, his entire family would get a failing grade). But if we were to use business experience as a requirement, I wouldn't nominate a chickenhawk like Mitt Romney, but someone more like Nick Hanauer --- and I could be his running mate ;)

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