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jan 14, 2019
CAPITALISM REPRESENTED ITSELF AS FREEING SERFS, SLAVES, ETC. FREEDOM BECAME CAPITALISM'S SELF-CELEBRATION WHICH IT LARGELY REMAINS. YET THE REALITY OF CAPITALISM IS DIFFERENT FROM ITS CELEBRATORY SELF-IMAGE. THE MASS OF EMPLOYEES ARE NOT FREE INSIDE CAPITALIST ENTERPRISES TO PARTICIPATE IN THE DECISIONS THAT AFFECT THEIR LIVES (E.G., WHAT THE ENTERPRISE WILL PRODUCE, WHAT TECHNOLOGY IT WILL USE, WHERE PRODUCTION WILL OCCUR, AND WHAT WILL BE DONE WITH THE PROFIT WORKERS' EFFORTS HELP TO PRODUCE). IN THEIR EXCLUSION FROM SUCH DECISIONS, MODERN CAPITALISM'S EMPLOYEES RESEMBLE SLAVES AND SERFS. YES, PARLIAMENTS, UNIVERSAL SUFFRAGE, ETC. HAVE ACCOMPANIED CAPITALISM - AN ADVANCE OVER SERFDOM AND SLAVERY. YET EVEN THAT ADVANCE HAS BEEN LARGELY UNDERMINED BY THE INFLUENCE OF THE HIGHLY UNEQUALLY DISTRIBUTED WEALTH AND INCOME THAT CAPITALISM HAS EVERYWHERE GENERATED.
RICHARD D. WOLFF
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The rapacity of contemporary capitalism is enabled by the weakness,
dishonesty, and cowardice of the flaccid and collaborationist left.
Luciana Bohne
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Socialism for the Rich, Capitalism for the Poor
Noam Chomsky: Consider this: Every time there is a crisis, the taxpayer is called on to bail out the banks and the major financial institutions. If you had a real capitalist economy in place, that would not be happening. Capitalists who made risky investments and failed would be wiped out. But the rich and powerful do not want a capitalist system. They want to be able to run the nanny state so when they are in trouble the taxpayer will bail them out. The conventional phrase is "too big to fail."
The IMF did an interesting study a few years ago on profits of the big US banks. It attributed most of them to the many advantages that come from the implicit government insurance policy -- not just the featured bailouts, but access to cheap credit and much else -- including things the IMF researchers didn't consider, like the incentive to undertake risky transactions, hence highly profitable in the short term, and if anything goes wrong, there's always the taxpayer. Bloomberg Businessweek estimated the implicit taxpayer subsidy at over $80 billion per year.
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“As soon as you're born they make you feel small
By giving you no time instead of it all
'Til the pain is so big you feel nothing at all…
Keep you doped with religion, and sex, and T.V.
And you think you're so clever and classless and free
But you're still fucking peasants as far as I can see…”
— John Lennon, “Working Class Hero
The reason we have poverty is that we have no imagination. There are a great many people accumulating what they think is vast wealth, but it's only money... they don't know how to enjoy it, because they have no imagination.
alan watts
articles
*Wall Street Superpower Eyes The Electricity Business
(ARTICLE BELOW)
*Economists concerned America’s continued ‘debt binge’ could spark a crisis
(ARTICLE BELOW)
*MEET THE CEOS RAKING IT IN FROM TRUMP’S AGGRESSION TOWARD IRAN
(ARTICLE BELOW)
*CEOS MAKE MORE IN FIRST WEEK OF JANUARY THAN AN AVERAGE SALARY. HERE’S THE SOLUTION
(ARTICLE BELOW)
*How Economists Tricked Us Into Thinking Capitalism Works
(ARTICLE BELOW)
*TRUMP ADMINISTRATION IS QUIETLY “GUTTING” TAX LAW TO GIVE BIG NEW BREAKS TO CORPORATIONS(ARTICLE BELOW)
*WORLD’S 500 RICHEST PEOPLE GAINED $1.2 TRILLION IN WEALTH IN 2019: ANALYSIS
(ARTICLE BELOW)
*Column: Ralphs is now charging 50 cents for cash back at the register
(ARTICLE BELOW)
*The Ongoing Effort to Write Wall Street Out of the 2008 Financial Crisis
(ARTICLE BELOW)
*AMAZON, CHEVRON, AND STARBUCKS AMONG 91 FORTUNE 500 CORPORATIONS THAT PAID $0 IN FEDERAL INCOME TAXES IN 2018: REPORT(ARTICLE BELOW)
*More tax break winning! AT&T looks into '4% cut in the operator's labor expenses'
(ARTICLE BELOW)
*‘STAGGERING’ NEW DATA SHOWS INCOME OF TOP 1% HAS GROWN 100 TIMES FASTER THAN BOTTOM 50% SINCE 1970(ARTICLE BELOW)
*Nobel laureate economist Joseph Stiglitz: It's time for Congress to do something about the economic mess that private-equity giants have created
(ARTICLE BELOW)
*Off the radar: U.S. CEOs' jet perks add millions to corporate tax bills
(ARTICLE BELOW)
*The monopolization of milk
(ARTICLE BELOW)
*The plutocrats’ most effective secret weapon is the U.S. tax code
(ARTICLE BELOW)
*U.S. company directors compensated more than ever, but now risk backlash
(ARTICLE BELOW)
*Investors left exposed as Trump's SEC gives America Inc a helping hand
(ARTICLE BELOW)
*We Already Have a Wealth Tax. It’s Just Paid to Hedge Fund Managers.
(ARTICLE BELOW)
*Critics warn ‘consumers will pay the price’ after GOP-controlled FCC approves T-Mobile/Sprint Merger(ARTICLE BELOW)
*California power shutoffs: when your public utility is owned by private investors
(ARTICLE BELOW)
*Rising old used car prices help push poor Americans over the edge
(ARTICLE BELOW)
*Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
(ARTICLE BELOW)
*Bankers ‘confirm Warren’s whole worldview’ by saying they’ll donate to Trump to defeat anti-Wall Street Senator in 2020(ARTICLE BELOW)
*Boeing's travails show what's wrong with modern capitalism
(ARTICLE BELOW)
*The Capitalists Are Afraid by chris hedges
(ARTICLE BELOW)
*How corporate-friendly bankruptcy laws keep protesting miners from being paid: ‘That train leaves, we ain’t got nothing’(ARTICLE BELOW)
*Billionaires whine about paying taxes in reality-challenged Wall Street Journal op-ed
(ARTICLE BELOW)
*What Uber and the Koch Brothers Have in Common: A Plan to Destroy Public Transit
(ARTICLE BELOW)
*People kill people but capitalism makes it easy and profitable around the world
(ARTICLE BELOW)
*The World’s Wealthiest Family Gets $4 Million Richer Every Hour
(ARTICLE BELOW)
*Chase plans to screw its credit card holders next week. Here’s how to stop them from screwing you.(ARTICLE BELOW)
*Millions of US taxpayers’ money invested in private prison firms
(ARTICLE BELOW)
*David Cay Johnston: The key way the super rich avoid taxes — and a simple way to close their tax loopholes once and for all(ARTICLE BELOW)
*Here’s why Capitalism vs Socialism is a false choice
(ARTICLE BELOW)
*Six people who prove capitalism is broken in America
(ARTICLE BELOW)
*Here’s the big problem with American capitalism
(ARTICLE BELOW)
*Capitalism Is Not the “Market System”
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*5 BIG MYTHS SOLD BY THE DEFENDERS OF CAPITALISM(excerpt below)
*CAPITALISM: THE NIGHTMARE(excerpt below)
*funnies and charts(below)
*THIS INFOGRAPHIC SHOWS HOW ONLY 10 COMPANIES CONTROL ALL THE WORLD’S BRANDS(ARTICLE BELOW)
The reality of capitalism
George Monbiot sums up well some of the more toxic elements of neoliberalism, which remained largely hidden since it was in the mainstream press less as an ideology than as an economic policy. He writes:
Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning. Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimized, public services should be privatized. The organization of labor and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.
fundamentals of american capitalism
* a system created by slavery utilized on cotton plantations and have now become corporations.
*keep republicans in power to aide in ripping off american consumers
*always promote patriotism and american exceptionalism so the stupid public will think you are on their side
*nothing is more important than maximizing profits
*Never pass on opportunities to defraud CUSTOMERS
*when you get caught cheating on your taxes, make sure you have bribed enough government officials to minimize damage.
*maintain lobbyists, front groups, think tanks, etc. to lie and cover-up your corporate corruption.
*develop schemes to steal employee wages
*Maximize tax avoidance strategies
*hire part-time workers and deny them benefits
*always look to outsource labor to corrupt 3rd world countries to reduce labor costs
*sell mediocre products that never perform as advertised
*once your company is caught in scandal, mount an ad campaign portraying yourself as a wholesome organiZation
*never acknowledge guilt once your company is fined or sued
*hire lobbyist to bribe local politicians
*always scheme to avoid as many government regulations as possible
*make sure to defeat union organizing
*make sure that employees bare most of the cost of benefit packages
*underfund employees' pension plans
*make sure you can steal pension fund money through bankruptcy
*re-market and re-package old products as new and raise the price
Wall Street Superpower Eyes The Electricity Business
Goldman Sachs Sets Up a Cayman Island Company to Take a Position in the Power Market
By Sarah Okeson - dc report
1/14/20
Goldman Sachs, the behemoth Wall Street investment bank whose former president was Trump’s top economic adviser, claims it isn’t connected to a company that bears its name. The two businesses also share the same offices, the same phone number and some of the same employees.
Goldman Sachs Renewable Power Marketing LLC is seeking federal approval to sell electricity at market rates, meaning it could charge more than the actual cost to produce power.
“Our findings raise a host of questions about what Goldman Sachs is doing and what else it isn’t reporting,” said Tyson Slocum of Public Citizen which is protesting to the Federal Energy Regulatory Commission.
The Goldman Sachs LLC said that Public Citizen’s protest “is unsupported and not grounded in fact, the law or the Commission’s regulations” and that the LLC is not affiliated with the Goldman Sachs Group as defined by FERC rules.
Slocum said that if Goldman Sachs can successfully claim not to be affiliated with the LLC it can get higher profits.
Congressional investigators held hearings in 2014 into banks, including Goldman Sachs, that were competing directly with commercial businesses in areas such as supplying electricity. The suppliers the Goldman Sachs LLC is working with include solar farms running on the transmission system of PG&E, the California company that filed for bankruptcy because of $30 billion in liabilities from wildfires.
Carl Levin, the former chairman of the Senate Permanent Subcommittee on Investigations, warned in 2014 that mega-bank investments in electricity and other energy markets mean that the banks could be liable for catastrophes and environmental problems. Levin said this could roil the economy much as the housing market did in 2008.
“Should a catastrophe occur, it could undermine a bank or spur fears that it might fail, sparking a bank run, a shutdown of lending, and turmoil in the U.S. economy,” Levin said.
The Goldman Sachs LLC turned to the Cayman Islands, one of the world’s most notorious tax havens, for three directors who it claimed are independent of the Goldman Sachs Group. The directors – Andrew Galloway of ICG Management Ltd., Andrew Johnson of Circumference FS and John Lewis of HighWater Ltd. – are directors at 60 other companies affiliated with the Goldman Sachs Group.
Goldman Sachs alums who have worked for Trump include Gary Cohn, the former National Economic Council director, and Treasury Secretary Steven Mnuchin. Goldman has a long history of supplying top-level government officials, whichever party is in the White House.
Public Citizen said Goldman Sachs’ links to shell companies raises questions about whether Goldman Sachs is complying with Federal Reserve reporting obligations and Securities and Exchange Commission reporting requirements.
Another mega-bank, JPMorgan Chase, unsuccessfully argued in a similar scheme that it wasn’t affiliated with a company set up to buy an energy utility. In 2013, JPMorgan was fined $410 million to settle charges of manipulating electric power markets.
“I think some lawyers working for Wall Street developed what they think is a grand loophole to conceal their bank’s involvement in ownership and control over various energy infrastructure assets,” Slocum said.
Goldman Sachs Renewable Power Marketing LLC is seeking federal approval to sell electricity at market rates, meaning it could charge more than the actual cost to produce power.
“Our findings raise a host of questions about what Goldman Sachs is doing and what else it isn’t reporting,” said Tyson Slocum of Public Citizen which is protesting to the Federal Energy Regulatory Commission.
The Goldman Sachs LLC said that Public Citizen’s protest “is unsupported and not grounded in fact, the law or the Commission’s regulations” and that the LLC is not affiliated with the Goldman Sachs Group as defined by FERC rules.
Slocum said that if Goldman Sachs can successfully claim not to be affiliated with the LLC it can get higher profits.
Congressional investigators held hearings in 2014 into banks, including Goldman Sachs, that were competing directly with commercial businesses in areas such as supplying electricity. The suppliers the Goldman Sachs LLC is working with include solar farms running on the transmission system of PG&E, the California company that filed for bankruptcy because of $30 billion in liabilities from wildfires.
Carl Levin, the former chairman of the Senate Permanent Subcommittee on Investigations, warned in 2014 that mega-bank investments in electricity and other energy markets mean that the banks could be liable for catastrophes and environmental problems. Levin said this could roil the economy much as the housing market did in 2008.
“Should a catastrophe occur, it could undermine a bank or spur fears that it might fail, sparking a bank run, a shutdown of lending, and turmoil in the U.S. economy,” Levin said.
The Goldman Sachs LLC turned to the Cayman Islands, one of the world’s most notorious tax havens, for three directors who it claimed are independent of the Goldman Sachs Group. The directors – Andrew Galloway of ICG Management Ltd., Andrew Johnson of Circumference FS and John Lewis of HighWater Ltd. – are directors at 60 other companies affiliated with the Goldman Sachs Group.
Goldman Sachs alums who have worked for Trump include Gary Cohn, the former National Economic Council director, and Treasury Secretary Steven Mnuchin. Goldman has a long history of supplying top-level government officials, whichever party is in the White House.
Public Citizen said Goldman Sachs’ links to shell companies raises questions about whether Goldman Sachs is complying with Federal Reserve reporting obligations and Securities and Exchange Commission reporting requirements.
Another mega-bank, JPMorgan Chase, unsuccessfully argued in a similar scheme that it wasn’t affiliated with a company set up to buy an energy utility. In 2013, JPMorgan was fined $410 million to settle charges of manipulating electric power markets.
“I think some lawyers working for Wall Street developed what they think is a grand loophole to conceal their bank’s involvement in ownership and control over various energy infrastructure assets,” Slocum said.
The world's fast-growing mountain of debt
January 13, 2020
By Dion Rabouin - axios
The world's total debt surged by some $9 trillion in the first three quarters of 2019, according to data from the Institute of International Finance, bringing the world's total debt load to $253 trillion, or 322% of its GDP — a record high.
Why it matters: In times of economic strength, economists exhort countries to pare back their debt burdens and pay it down to protect against future unrest and downturn.
What it means: The two may be linked. Liz Ann Sonders, chief investment strategist at Charles Schwab, told Axios earlier this year that the weak growth seen by the U.S. and much of the rest of the globe may be directly caused by the ever-growing debt.
Be smart: Even Fed chair Jerome Powell, who has been careful to focus his remarks almost exclusively on the strengths of the U.S. economy, was dour in his assessment of current U.S. debt levels.
Between the lines: The U.S. led the way in debt accumulation last year, with government debt-to-GDP rising to an all-time high of 102% of GDP, IIF finds.
What's next: All signs point to the debt binge continuing. Thanks to low interest rates and loose central bank policy, IIF estimates that total global debt will exceed $257 trillion in the first quarter of 2020.
Why it matters: In times of economic strength, economists exhort countries to pare back their debt burdens and pay it down to protect against future unrest and downturn.
- The U.S. and the overwhelming majority of the world have done just the opposite — 2019 saw the world's debt-to-GDP ratio rise at the fastest rate since 2016.
- Conversely, global growth fell to its slowest pace since the 2008–2009 financial crisis, showing diminishing returns for the increasingly large debt pile.
What it means: The two may be linked. Liz Ann Sonders, chief investment strategist at Charles Schwab, told Axios earlier this year that the weak growth seen by the U.S. and much of the rest of the globe may be directly caused by the ever-growing debt.
- "The effect may be a subtle crisis over time," she said.
Be smart: Even Fed chair Jerome Powell, who has been careful to focus his remarks almost exclusively on the strengths of the U.S. economy, was dour in his assessment of current U.S. debt levels.
- He said last year that "the federal budget is on an unsustainable path" that could "restrain fiscal policymakers’ willingness or ability to support economic activity during a downturn.”
Between the lines: The U.S. led the way in debt accumulation last year, with government debt-to-GDP rising to an all-time high of 102% of GDP, IIF finds.
- Mature markets like the U.S., eurozone and Japan ratcheted up their government debt levels last year, while emerging markets like China, India and Latin America saw the sharpest increase in non-financial corporate debt.
- China's debt notably rose to 310% of GDP, despite the nation's drive to delever and clamp down on runaway borrowing. Government debt grew at its fastest annual pace since 2009.
What's next: All signs point to the debt binge continuing. Thanks to low interest rates and loose central bank policy, IIF estimates that total global debt will exceed $257 trillion in the first quarter of 2020.
Meet the CEOs Raking It in from Trump’s Aggression Toward Iran
by Sarah Anderson | smirking chimp
January 7, 2020
*Resigned 12/22/19.
**Resigned 1/1/19 while staying on as chairman until 7/19. New CEO Kathy Warden accumulated 92,894 shares in her previous position as Northrop Grumman COO.
CEOs of major U.S. military contractors stand to reap huge windfalls from the escalation of conflict with Iran. This was evident in the immediate aftermath of the U.S. assassination of a top Iranian military official last week. As soon as the news reached financial markets, these companies’ share prices spiked, inflating the value of their executives’ stock-based pay.
I took a look at how the CEOs at the top five Pentagon contractors were affected by this surge, using the most recent SEC information on their stock holdings.
Northrop Grumman executives saw the biggest increase in the value of their stocks after the U.S. airstrike that killed Qasem Suleimani on January 2. Shares in the B-2 bomber maker rose 5.43 percent by the end of trading the following day.
Wesley Bush, who turned Northrop Grumman’s reins over to Kathy Warden last year, held 251,947 shares of company stock in various trusts as of his final SEC Form 4 filing in May 2019. (Companies must submit these reports when top executives and directors buy and sell company stock.) Assuming Bush is still sitting on that stockpile, he saw the value grow by $4.9 million to a total of $94.5 million last Friday.
New Northrop Grumman CEO Warden saw the 92,894 shares she’d accumulated as the firm’s COO expand in value by more than $2.7 million in just one day of post-assassination trading.
Lockheed Martin, whose Hellfire missiles were reportedly used in the attack at the Baghdad airport, saw a 3.6 percent increase in price per share on January 3. Marillyn Hewson, CEO of the world’s largest weapon maker, may be kicking herself for selling off a considerable chunk of stock last year when it was trading at around $307. Nevertheless, by the time Lockheed shares reached $413 at the closing bell, her remaining stash had increased in value by about $646,000.
What about the manufacturer of the MQ-9 Reaper that carried the Hellfire missiles? That would be General Atomics. Despite raking in $2.8 billion in taxpayer-funded contracts in 2018, the drone maker is not required to disclose executive compensation information because it is a privately held corporation.
We do know General Atomics CEO Neal Blue is worth an estimated $4.1 billion — and he’s a major investor in oil production, a sector that also stands to profit from conflict with a major oil-producing country like Iran.
Suleimani’s killing also inflated the value of General Dynamics CEO Phebe Novakovic’s fortune. As the weapon maker’s share price rose about 1 percentage point on January 3, the former CIA official saw her stock holdings increase by more than $1.2 million.
Raytheon CEO Thomas Kennedy saw a single-day increase in his stock of more than half a million dollars, as the missile and bomb manufacturer’s share price increased nearly 1.5 percent. Boeing stock remained flat on Friday. But Dennis Muilenberg, recently ousted as CEO over the 737 aircraft scandal, appears to be well-positioned to benefit from any continued upward drift of the defense sector.
As of his final Form 4 report, Muilenburg was sitting on stock worth about $47.7 million. In his yet to be finalized exit package, the disgraced former executive could also pocket huge sums of currently unvested stock grants.
Hopefully sanity will soon prevail and the terrifyingly high tensions between the Trump administration and Iran will de-escalate. But even if the military stock surge of this past Friday turns out to be a market blip, it’s a sobering reminder of who stands to gain the most from a war that could put millions of lives at risk.
We can put an end to dangerous war profiteering by denying federal contracts to corporations that pay their top executives excessively. In 2008, John McCain, then a Republican presidential candidate, proposed capping CEO pay at companies receiving taxpayer bailouts at no more than $400,000 (the salary of the U.S. president). That notion should be extended to companies that receive massive taxpayer-funded contracts.
Sen. Bernie Sanders, for instance, has a plan to deny federal contracts to companies that pay CEOs more than 150 times what their typical worker makes.
As long as we allow the top executives of our privatized war economy to reap unlimited rewards, the profit motive for war in Iran — or anywhere — will persist.
I took a look at how the CEOs at the top five Pentagon contractors were affected by this surge, using the most recent SEC information on their stock holdings.
Northrop Grumman executives saw the biggest increase in the value of their stocks after the U.S. airstrike that killed Qasem Suleimani on January 2. Shares in the B-2 bomber maker rose 5.43 percent by the end of trading the following day.
Wesley Bush, who turned Northrop Grumman’s reins over to Kathy Warden last year, held 251,947 shares of company stock in various trusts as of his final SEC Form 4 filing in May 2019. (Companies must submit these reports when top executives and directors buy and sell company stock.) Assuming Bush is still sitting on that stockpile, he saw the value grow by $4.9 million to a total of $94.5 million last Friday.
New Northrop Grumman CEO Warden saw the 92,894 shares she’d accumulated as the firm’s COO expand in value by more than $2.7 million in just one day of post-assassination trading.
Lockheed Martin, whose Hellfire missiles were reportedly used in the attack at the Baghdad airport, saw a 3.6 percent increase in price per share on January 3. Marillyn Hewson, CEO of the world’s largest weapon maker, may be kicking herself for selling off a considerable chunk of stock last year when it was trading at around $307. Nevertheless, by the time Lockheed shares reached $413 at the closing bell, her remaining stash had increased in value by about $646,000.
What about the manufacturer of the MQ-9 Reaper that carried the Hellfire missiles? That would be General Atomics. Despite raking in $2.8 billion in taxpayer-funded contracts in 2018, the drone maker is not required to disclose executive compensation information because it is a privately held corporation.
We do know General Atomics CEO Neal Blue is worth an estimated $4.1 billion — and he’s a major investor in oil production, a sector that also stands to profit from conflict with a major oil-producing country like Iran.
Suleimani’s killing also inflated the value of General Dynamics CEO Phebe Novakovic’s fortune. As the weapon maker’s share price rose about 1 percentage point on January 3, the former CIA official saw her stock holdings increase by more than $1.2 million.
Raytheon CEO Thomas Kennedy saw a single-day increase in his stock of more than half a million dollars, as the missile and bomb manufacturer’s share price increased nearly 1.5 percent. Boeing stock remained flat on Friday. But Dennis Muilenberg, recently ousted as CEO over the 737 aircraft scandal, appears to be well-positioned to benefit from any continued upward drift of the defense sector.
As of his final Form 4 report, Muilenburg was sitting on stock worth about $47.7 million. In his yet to be finalized exit package, the disgraced former executive could also pocket huge sums of currently unvested stock grants.
Hopefully sanity will soon prevail and the terrifyingly high tensions between the Trump administration and Iran will de-escalate. But even if the military stock surge of this past Friday turns out to be a market blip, it’s a sobering reminder of who stands to gain the most from a war that could put millions of lives at risk.
We can put an end to dangerous war profiteering by denying federal contracts to corporations that pay their top executives excessively. In 2008, John McCain, then a Republican presidential candidate, proposed capping CEO pay at companies receiving taxpayer bailouts at no more than $400,000 (the salary of the U.S. president). That notion should be extended to companies that receive massive taxpayer-funded contracts.
Sen. Bernie Sanders, for instance, has a plan to deny federal contracts to companies that pay CEOs more than 150 times what their typical worker makes.
As long as we allow the top executives of our privatized war economy to reap unlimited rewards, the profit motive for war in Iran — or anywhere — will persist.
CEOs make more in first week of January than an average salary. Here’s the solution
Tobore Okah-Avae, The Conversation - alternet
January 6, 2020
The typical FTSE 100 CEO will have earned as much as the average UK worker earns in a year by 5pm on January 6 2020 – £29,559 for 33 hours of work, according to data compiled by the High Pay Centre think tank. By the close of the year, the same CEO would have earned £3.46 million – roughly 117 times the average wage in the UK. This is a staggering differential.
If you believe that excessive executive pay is a problem, this statistic illustrates the point perfectly. These figures even represent a reduction from previous years, although this is due more to shrinkage in overall CEO pay than increases at the bottom. And UK CEO pay actually pales in comparison to their counterparts in the US, where levels topped US$14.5m (£11.5m), representing a 287-1 differential with the average worker.
Contrast this to just 40 years ago when the average CEO was paid 18 times the average salary. Still a handsome amount – arguably more than enough to reflect their levels of responsibility, skills and status. With inequality a serious problem, the government should seriously consider extending its pay ratio legislation and give average salaries a boost.
How we got here
In 1982 the chairmen of some of the largest UK companies got together to map out a way to ratchet up executive pay. They reasoned that this was necessary to make UK CEO positions more competitive internationally. Recognising the inherent barriers to such a bold move, the group suggested that the most acceptable way to achieve this would be a wholesale adoption of the “pay for performance” approach, which had already begun to take hold in the US.
According to the minutes of their meeting, it was suggested that “any higher remuneration would need to be visibly linked to performance and achievement, if it is to be socially and politically acceptable”. The group believed this approach would “persuade employees at large British firms to accept more moderate settlements” (lower pay).
What followed was a huge shift in the way British executives were compensated, with more and more aspects of pay becoming performance based. Instead of increasing salaries, companies used shares and bonuses to reward CEOs.
Even more importantly, there was a shift in focus to serve shareholders, underpinned by the idea that this would benefit the company and “greed is good”. This led to a company’s share price becoming its primary measure of growth and success.
So, as firm productivity and profitability increased, executive pay grew. But nobody else, apart from CEOs, enjoyed a similar rise in their fortunes. In fact, ordinary wages have not only failed to mimic the growth in CEO pay, the three decades since have seen the differential between CEO and average pay widen substantially.
In fact, figures show that ordinary wages have failed to keep pace with inflation and workers effectively earn less today, in real economic terms, than they did before the financial crisis. Wages have been reduced by globalisation, rapid automation and the subsequent loss of worker bargaining power. While this has enhanced the efficiency and profitability of big and successful firms, workers have not benefited in terms of what they are paid.
The vast difference between CEO and average pay touches on wider social concerns of growing inequality and the idea that modern companies enrich top executives at the expense of everyone else. CEOs of the largest public companies, usually fall within the top 1% of the income wealth and income scales.
Making executive pay fairer
The British government introduced a law in 2018 requiring listed companies to publish their ratio of CEO to median pay. This is a step forward in reducing the gap. As well as making the issue transparent, it can give rise to public outrage which encourages companies to increase how much they pay their employees.
A much further and more controversial step would be introducing upper limits for executive pay. Instead of targeting the amount executives are allowed to earn, these limits could focus on setting an appropriate gap between CEO pay and the lowest wage within the firm. So, for instance, a mandated pay limit of 50:1 would ensure the no CEO could not earn more than 50 times the lowest wage in the firm.
This is not without precedent. The Israeli government passed a law in 2016 encouraging financial institutions to set CEO pay at no more than 35 times the salary of the lowest earner. Firms can pay their CEOs more than this but will be taxed doubly for the privilege. The move followed public outrage over inequality and excessive CEO pay. Switzerland has also considered pay ratios, although a referendum on setting them at 12:1 was rejected in 2013.
The underpinning objective of any executive pay reform agenda should be less about reducing top pay levels, as it should be about making pay fairer. This could be achieved by indexing executive pay to the lower earnings within the firm. Just like the proverbial tide that lifts all boats, every rise in executive pay would trigger similar rises in the wages of the lowest paid. In this case, both the luxury yacht and the basic dinghy would rise higher.The Conversation
If you believe that excessive executive pay is a problem, this statistic illustrates the point perfectly. These figures even represent a reduction from previous years, although this is due more to shrinkage in overall CEO pay than increases at the bottom. And UK CEO pay actually pales in comparison to their counterparts in the US, where levels topped US$14.5m (£11.5m), representing a 287-1 differential with the average worker.
Contrast this to just 40 years ago when the average CEO was paid 18 times the average salary. Still a handsome amount – arguably more than enough to reflect their levels of responsibility, skills and status. With inequality a serious problem, the government should seriously consider extending its pay ratio legislation and give average salaries a boost.
How we got here
In 1982 the chairmen of some of the largest UK companies got together to map out a way to ratchet up executive pay. They reasoned that this was necessary to make UK CEO positions more competitive internationally. Recognising the inherent barriers to such a bold move, the group suggested that the most acceptable way to achieve this would be a wholesale adoption of the “pay for performance” approach, which had already begun to take hold in the US.
According to the minutes of their meeting, it was suggested that “any higher remuneration would need to be visibly linked to performance and achievement, if it is to be socially and politically acceptable”. The group believed this approach would “persuade employees at large British firms to accept more moderate settlements” (lower pay).
What followed was a huge shift in the way British executives were compensated, with more and more aspects of pay becoming performance based. Instead of increasing salaries, companies used shares and bonuses to reward CEOs.
Even more importantly, there was a shift in focus to serve shareholders, underpinned by the idea that this would benefit the company and “greed is good”. This led to a company’s share price becoming its primary measure of growth and success.
So, as firm productivity and profitability increased, executive pay grew. But nobody else, apart from CEOs, enjoyed a similar rise in their fortunes. In fact, ordinary wages have not only failed to mimic the growth in CEO pay, the three decades since have seen the differential between CEO and average pay widen substantially.
In fact, figures show that ordinary wages have failed to keep pace with inflation and workers effectively earn less today, in real economic terms, than they did before the financial crisis. Wages have been reduced by globalisation, rapid automation and the subsequent loss of worker bargaining power. While this has enhanced the efficiency and profitability of big and successful firms, workers have not benefited in terms of what they are paid.
The vast difference between CEO and average pay touches on wider social concerns of growing inequality and the idea that modern companies enrich top executives at the expense of everyone else. CEOs of the largest public companies, usually fall within the top 1% of the income wealth and income scales.
Making executive pay fairer
The British government introduced a law in 2018 requiring listed companies to publish their ratio of CEO to median pay. This is a step forward in reducing the gap. As well as making the issue transparent, it can give rise to public outrage which encourages companies to increase how much they pay their employees.
A much further and more controversial step would be introducing upper limits for executive pay. Instead of targeting the amount executives are allowed to earn, these limits could focus on setting an appropriate gap between CEO pay and the lowest wage within the firm. So, for instance, a mandated pay limit of 50:1 would ensure the no CEO could not earn more than 50 times the lowest wage in the firm.
This is not without precedent. The Israeli government passed a law in 2016 encouraging financial institutions to set CEO pay at no more than 35 times the salary of the lowest earner. Firms can pay their CEOs more than this but will be taxed doubly for the privilege. The move followed public outrage over inequality and excessive CEO pay. Switzerland has also considered pay ratios, although a referendum on setting them at 12:1 was rejected in 2013.
The underpinning objective of any executive pay reform agenda should be less about reducing top pay levels, as it should be about making pay fairer. This could be achieved by indexing executive pay to the lower earnings within the firm. Just like the proverbial tide that lifts all boats, every rise in executive pay would trigger similar rises in the wages of the lowest paid. In this case, both the luxury yacht and the basic dinghy would rise higher.The Conversation
op - ed:How Economists Tricked Us Into Thinking Capitalism Works
BY Robert R. Raymond, Truthout
PUBLISHED January 5, 2020
These days, it seems like someone is always trying to privatize something. One day it’s the Trump administration contemplating the privatization of the Department of Veterans Affairs. The next it’s the Tories looking to sell off the U.K.’s National Health Service, or economists promoting “market-based” solutions to the climate crisis. In this age of neoliberalism, the rallying cry for politicians and economists alike is always for “More privatization! More markets! Sell it all off to the private sector!”
Of course, much of the time this faith in the market is used as a cover by those looking to simply make a profit — or by the politicians representing their interests. But this is not always the case. There are many who actually believe, wholeheartedly, that markets are the most efficient and even the most ethical way to run a society. And because this is the worldview that is taught in the vast majority of economics departments throughout the world, it’s not surprising that this is the dominant worldview among those in power.
It’s an ideology that was carefully crafted during the time of the early Western economists like Adam Smith and David Ricardo. Homo sapiens are actually Homo economicus, the theory goes: selfish, competitive, rational agents who are all constantly seeking to efficiently maximize their own personal well-being.
No need to despair, however, because economists have figured out that these inherent traits can actually be utilized for good, through a social relation known as the market. By its nature, the market encourages competition and efficiency, and thus, by relying on the self-maximizing behavior of individuals, market capitalism is the only economic system that truly accepts human nature for what it is. And in fact, it’s the only system uniquely situated to actually channel this nature into a net positive outcome for society.
How does this all work? Well, when they are free to make choices that maximize their own interests, people in a market system negotiate on a price and quantity of a product or service until a sort of equilibrium is established. It’s a natural process of compromise that leaves everyone satisfied and also leads to an efficient way of producing and distributing goods and services. Everyone wins. And, the theory goes, it just so happens that the process aligns perfectly with human nature. It’s a fascinating theory. The only thing is, it’s completely wrong.
The foundation of this theory relies on an assumption about human nature that has been discredited over and over by research across multiple scientific disciplines. It turns out that Homo economicus is a fairytale, an outdated misconception, a gross distortion of reality. Yet, it still serves as the theoretical foundation of our entire economic system.
Studies have determined that the Homo economicus personality is an extremely rare one. Instead, most humans are marked by a deep capacity for reciprocity, cooperation and selflessness. For example, research shows that by 14 months of age, children are already beginning to help each other by handing over objects that others are unsuccessfully reaching for. This empathic behavior only increases as children grow older and begin to share things that they value with others and even object to other people’s violation of social norms.
These are all early signs of prosociality — behavior that is marked by an intent to help or benefit others. And importantly, this behavior is motivated by a genuine concern for others and not by selfishness.
Evolutionary biologists have also largely debunked the theory of Homo economicus. Researchers like David Sloan Wilson and others have determined that more prosocial groups will robustly outcompete less prosocial groups, meaning that prosociality was an advantageous trait when it came to the natural selection of early humans. And these theories are not new. Over a century ago, the anarchist theorist Peter Kropotkin wrote convincingly on how the survival of our species has depended more on cooperation than on the heroic efforts of isolated individuals. It certainly is difficult imagining an early human taking down a woolly mammoth without engaging in highly coordinated prosocial behavior. How else could the human species evolve to dominate the globe if not by cooperating with one another to overcome the many challenges our species faced?
Another place where we see the myth of Homo economicus debunked is in the research that comes out of post-disaster communities. In her landmark book, A Paradise Built in Hell, Rebecca Solnit presents a thesis arguing that humans have an innate capacity toward collectivism — and that these traits tend to reveal themselves most strongly in community response to disasters. Far from resorting to antisocial behavior after a disaster (a myth which the media tend to elevate), Solnit’s book outlines enumerable instances where communities demonstrate prosocial behaviors like cooperation, solidarity, sacrifice and generosity instead.
“In the wake of an earthquake, a bombing, or a major storm, most people are altruistic, urgently engaged in caring for themselves and those around them, strangers and neighbors as well as friends and loved ones,” Solnit writes. “Decades of meticulous sociological research on behavior in disasters, from the bombings of World War II to floods, tornadoes, earthquakes, and storms across the continent and around the world, have demonstrated this.”
Yet, despite the overwhelming evidence contradicting it, we’ve come to accept Homo economicus as the truth.
Perhaps not always consciously, but it haunts our dreams, our imagination. It confines our sense of possibility and imposes boundaries as arbitrary as those that carve up ecosystems and communities into nation-states.
Market capitalism has been imposed onto us, often at the point of a gun, and as a result, we’ve been forced to internalize the idea that we are a selfish, competitive and greedy species. Well, that’s just human nature, we’ll acquiesce when we hear about the profiteering of pharmaceutical companies or the greed of investment bankers. But the thing this, that’s not human nature — it’s just what we’ve been coerced into thinking by an unfeeling economic system that dominates every facet of our life. And in many ways, Homo economicus is a self-fulfilling prophecy.
It’s been demonstrated that studying economics actually makes you more selfish. Studies have shown that economics students are much less likely than other students to donate money that was given to them into a common pool; that they are more likely to “freeride” and are also more likely to defect than to cooperate; that they are more likely to participate in deception for personal gain; and even that they are more likely than their peers to rate greed as “generally good,” “correct” and “moral.”
And it’s not just students: economics professors give less money to charity than professors in other fields — including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry and biology.
When faced with the overwhelming evidence that Homo economicus — and thus the whole neoclassical economic project — is nonsense, the defenders of the status quo tend to rely on another myth: that there is no alternative. Margaret Thatcher famously uttered those words over 30 years ago, paving the way for an age of neoliberalism that has seen the dismantling of the social safety net, the stagnation of wages and the rise of extreme inequality.
But the thing is, there are alternative ways of organizing society that reflect the human capacity for reciprocity, selflessness and cooperation. The worker cooperative model promotes equity and democracy by giving workers ownership and control over their workplaces. It does so in a way that not only aligns with our inherently human traits, but in a way which has been shown to be more efficient and productive than the traditional workplace models.
There is also the commons model that reflects how communities organized themselves for thousands of years before they were torn off their land in the enclosure acts of 17th-century England. The commons are a way of organizing production and distribution where resources are held in common and are accessible to every member of society to be managed collectively for the benefit of all.
In fact, the political economist Eleanor Ostrom actually won the Nobel Prize in Economics in 2009 for disproving the long-held belief known as the “tragedy of the commons,” a theory which held that resources held in common by communities would naturally be overused and depleted. Ostrom’s work demonstrated that this assumption is false, and that it is in fact very possible for resources to be managed collectively without privatization.
There are many ways that community resources can be collectivized instead of privatized, from land trusts that take land off of the market to policy proposals like Medicare for All, which represents a major shift in how we view our collective responsibility when it comes to health care, or the Green New Deal, which recognizes our collective responsibility to prioritize climate justice in the fight against climate change.
The alternatives to market capitalism are out there — and the thing is, they actually align much more closely to the natural human tendencies toward reciprocity and sharing. The theories behind modern economics have left us with a burning planet and with skyrocketing inequality — it’s time to put them to rest.
And whether economists and politicians choose to accept it or not, the days of Homo economicus are limited, because a society based off of a lie cannot go on indefinitely.
Of course, much of the time this faith in the market is used as a cover by those looking to simply make a profit — or by the politicians representing their interests. But this is not always the case. There are many who actually believe, wholeheartedly, that markets are the most efficient and even the most ethical way to run a society. And because this is the worldview that is taught in the vast majority of economics departments throughout the world, it’s not surprising that this is the dominant worldview among those in power.
It’s an ideology that was carefully crafted during the time of the early Western economists like Adam Smith and David Ricardo. Homo sapiens are actually Homo economicus, the theory goes: selfish, competitive, rational agents who are all constantly seeking to efficiently maximize their own personal well-being.
No need to despair, however, because economists have figured out that these inherent traits can actually be utilized for good, through a social relation known as the market. By its nature, the market encourages competition and efficiency, and thus, by relying on the self-maximizing behavior of individuals, market capitalism is the only economic system that truly accepts human nature for what it is. And in fact, it’s the only system uniquely situated to actually channel this nature into a net positive outcome for society.
How does this all work? Well, when they are free to make choices that maximize their own interests, people in a market system negotiate on a price and quantity of a product or service until a sort of equilibrium is established. It’s a natural process of compromise that leaves everyone satisfied and also leads to an efficient way of producing and distributing goods and services. Everyone wins. And, the theory goes, it just so happens that the process aligns perfectly with human nature. It’s a fascinating theory. The only thing is, it’s completely wrong.
The foundation of this theory relies on an assumption about human nature that has been discredited over and over by research across multiple scientific disciplines. It turns out that Homo economicus is a fairytale, an outdated misconception, a gross distortion of reality. Yet, it still serves as the theoretical foundation of our entire economic system.
Studies have determined that the Homo economicus personality is an extremely rare one. Instead, most humans are marked by a deep capacity for reciprocity, cooperation and selflessness. For example, research shows that by 14 months of age, children are already beginning to help each other by handing over objects that others are unsuccessfully reaching for. This empathic behavior only increases as children grow older and begin to share things that they value with others and even object to other people’s violation of social norms.
These are all early signs of prosociality — behavior that is marked by an intent to help or benefit others. And importantly, this behavior is motivated by a genuine concern for others and not by selfishness.
Evolutionary biologists have also largely debunked the theory of Homo economicus. Researchers like David Sloan Wilson and others have determined that more prosocial groups will robustly outcompete less prosocial groups, meaning that prosociality was an advantageous trait when it came to the natural selection of early humans. And these theories are not new. Over a century ago, the anarchist theorist Peter Kropotkin wrote convincingly on how the survival of our species has depended more on cooperation than on the heroic efforts of isolated individuals. It certainly is difficult imagining an early human taking down a woolly mammoth without engaging in highly coordinated prosocial behavior. How else could the human species evolve to dominate the globe if not by cooperating with one another to overcome the many challenges our species faced?
Another place where we see the myth of Homo economicus debunked is in the research that comes out of post-disaster communities. In her landmark book, A Paradise Built in Hell, Rebecca Solnit presents a thesis arguing that humans have an innate capacity toward collectivism — and that these traits tend to reveal themselves most strongly in community response to disasters. Far from resorting to antisocial behavior after a disaster (a myth which the media tend to elevate), Solnit’s book outlines enumerable instances where communities demonstrate prosocial behaviors like cooperation, solidarity, sacrifice and generosity instead.
“In the wake of an earthquake, a bombing, or a major storm, most people are altruistic, urgently engaged in caring for themselves and those around them, strangers and neighbors as well as friends and loved ones,” Solnit writes. “Decades of meticulous sociological research on behavior in disasters, from the bombings of World War II to floods, tornadoes, earthquakes, and storms across the continent and around the world, have demonstrated this.”
Yet, despite the overwhelming evidence contradicting it, we’ve come to accept Homo economicus as the truth.
Perhaps not always consciously, but it haunts our dreams, our imagination. It confines our sense of possibility and imposes boundaries as arbitrary as those that carve up ecosystems and communities into nation-states.
Market capitalism has been imposed onto us, often at the point of a gun, and as a result, we’ve been forced to internalize the idea that we are a selfish, competitive and greedy species. Well, that’s just human nature, we’ll acquiesce when we hear about the profiteering of pharmaceutical companies or the greed of investment bankers. But the thing this, that’s not human nature — it’s just what we’ve been coerced into thinking by an unfeeling economic system that dominates every facet of our life. And in many ways, Homo economicus is a self-fulfilling prophecy.
It’s been demonstrated that studying economics actually makes you more selfish. Studies have shown that economics students are much less likely than other students to donate money that was given to them into a common pool; that they are more likely to “freeride” and are also more likely to defect than to cooperate; that they are more likely to participate in deception for personal gain; and even that they are more likely than their peers to rate greed as “generally good,” “correct” and “moral.”
And it’s not just students: economics professors give less money to charity than professors in other fields — including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry and biology.
When faced with the overwhelming evidence that Homo economicus — and thus the whole neoclassical economic project — is nonsense, the defenders of the status quo tend to rely on another myth: that there is no alternative. Margaret Thatcher famously uttered those words over 30 years ago, paving the way for an age of neoliberalism that has seen the dismantling of the social safety net, the stagnation of wages and the rise of extreme inequality.
But the thing is, there are alternative ways of organizing society that reflect the human capacity for reciprocity, selflessness and cooperation. The worker cooperative model promotes equity and democracy by giving workers ownership and control over their workplaces. It does so in a way that not only aligns with our inherently human traits, but in a way which has been shown to be more efficient and productive than the traditional workplace models.
There is also the commons model that reflects how communities organized themselves for thousands of years before they were torn off their land in the enclosure acts of 17th-century England. The commons are a way of organizing production and distribution where resources are held in common and are accessible to every member of society to be managed collectively for the benefit of all.
In fact, the political economist Eleanor Ostrom actually won the Nobel Prize in Economics in 2009 for disproving the long-held belief known as the “tragedy of the commons,” a theory which held that resources held in common by communities would naturally be overused and depleted. Ostrom’s work demonstrated that this assumption is false, and that it is in fact very possible for resources to be managed collectively without privatization.
There are many ways that community resources can be collectivized instead of privatized, from land trusts that take land off of the market to policy proposals like Medicare for All, which represents a major shift in how we view our collective responsibility when it comes to health care, or the Green New Deal, which recognizes our collective responsibility to prioritize climate justice in the fight against climate change.
The alternatives to market capitalism are out there — and the thing is, they actually align much more closely to the natural human tendencies toward reciprocity and sharing. The theories behind modern economics have left us with a burning planet and with skyrocketing inequality — it’s time to put them to rest.
And whether economists and politicians choose to accept it or not, the days of Homo economicus are limited, because a society based off of a lie cannot go on indefinitely.
happy new year, you are still being screwed by the gop!!!
Trump administration is quietly “gutting” tax law to give big new breaks to corporations
Treasury will use loopholes in the tax bill to offer giant corporations more breaks worth tens of billions
IGOR DERYSH - salon
JANUARY 1, 2020 11:00AM (UTC)
The Trump administration quietly used loopholes built into the 2017 tax cuts to give big corporations an even bigger tax savings.
The tax cut bill passed by Republicans in 2017 overwhelmingly benefited the wealthy and big corporations, according to a House Budget Committee report issued earlier this year. The law gave individuals a modest short-term tax cut while permanently slashing corporate taxes from 35 percent to 21 percent. The new law has greatly contributed to the 50 percent growth in the budget deficit since President Trump took office.
But that was not enough for big corporations, which launched intense lobbying efforts to carve out even bigger breaks in the bill’s loopholes. The effort led the Treasury Department to quietly change rules to hand big companies an even bigger tax break, according to The New York Times, costing taxpayers billions in lost revenue.
“Treasury is gutting the new law,” University of Houston tax law professor Bret Wells told the Times. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”
Republicans used budget reconciliation, a congressional process that allowed the Senate to pass the tax cuts with 51 votes instead of 60. But that process requires a bill that will contribute less than $1.5 trillion to the deficit over 10 years, so Republicans decided to offset the cost of the corporate tax cut by eliminating a wide range of corporate deductions and introducing new taxes.
One of the biggest new taxes was the "base erosion and anti-abuse tax," or BEAT, which aimed to cut down on foreign companies with large American operations avoiding US taxes by sending their profits to countries with lower tax rates. The other was a provision on "global intangible low-taxed income," or GILTI, which imposed a tax up to 10.5 percent on some offshore income.
The Joint Committee on Taxation estimated that these two new taxes would add $262 billion in revenue over the next decade, which the Times noted would be enough to fund the entire Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.
But the new taxes also featured many loopholes, and “almost immediately” after Trump signed the tax bill, companies launched an aggressive lobbying effort to carve out breaks for themselves in the law, the Times reported.
Chip Harter, a longtime tax attorney who advised companies on how to avoid taxes — before being appointed as the Treasury official in charge of writing rules regarding the new taxes — and his team “found themselves in nonstop meetings — roughly 10 a week at time — with lobbyists” from those companies, according to the Times report. Many of the lobbyists were from the same firms that Harter had previously worked for.
Earlier this month, the department released the final version of some of the BEAT rules that allowed companies to use a “complex currency-accounting maneuver” to avoid paying the tax, according to the Times, giving the lobbyists what they had pushed for.
Foreign banks like Barclays and Credit Suisse also staged an aggressive lobbying effort to carve out an exemption in the BEAT law. The lobbyists included Erika Nijenhuis, who represented the Institute of International Bankers. Harter got Treasury Secretary Steven Mnuchin to approve new exemptions for the banks earlier this year, before the tax office announced even more exemptions. In September, Nijenhuis was appointed to a job at Treasury's Office of Tax Policy.
Officials at the Joint Committee on Taxation projected that the exemptions for international banks alone would cut revenue by up to $50 billion.
All told, BEAT is only likely to collect “a small fraction” of the $150 billion projection, tax adviser Thomas Horst told the Times.
The department made the moves even as Treasury officials warned Harter that it may lack legal authority to exempt bank payments from the law. Harter dismissed the objections, according to the Times.
“We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations,” a Treasury Department spokesperson told the Times.
Companies like Procter & Gamble, News Corp., Comcast, Liberty Mutual and Anheuser-Busch also launched an intense lobbying effort to exempt themselves from GILTI. After months of meetings with lobbyists, the department announced the rules that the companies had pushed for in June.
As a result, companies “continue to shift hundreds of billions of dollars to overseas tax havens” and the IRS is collecting tens of billions less in revenue than Congress projected, the Times reported. In 2018, the United States lost more tax revenue than any other developed nation, according to the Organization for Economic Cooperation and Development.
But big companies may have even more tax breaks coming.
“In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts," the Times reported. “Big companies have spent this fall trying to win more.”
The tax cut bill passed by Republicans in 2017 overwhelmingly benefited the wealthy and big corporations, according to a House Budget Committee report issued earlier this year. The law gave individuals a modest short-term tax cut while permanently slashing corporate taxes from 35 percent to 21 percent. The new law has greatly contributed to the 50 percent growth in the budget deficit since President Trump took office.
But that was not enough for big corporations, which launched intense lobbying efforts to carve out even bigger breaks in the bill’s loopholes. The effort led the Treasury Department to quietly change rules to hand big companies an even bigger tax break, according to The New York Times, costing taxpayers billions in lost revenue.
“Treasury is gutting the new law,” University of Houston tax law professor Bret Wells told the Times. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”
Republicans used budget reconciliation, a congressional process that allowed the Senate to pass the tax cuts with 51 votes instead of 60. But that process requires a bill that will contribute less than $1.5 trillion to the deficit over 10 years, so Republicans decided to offset the cost of the corporate tax cut by eliminating a wide range of corporate deductions and introducing new taxes.
One of the biggest new taxes was the "base erosion and anti-abuse tax," or BEAT, which aimed to cut down on foreign companies with large American operations avoiding US taxes by sending their profits to countries with lower tax rates. The other was a provision on "global intangible low-taxed income," or GILTI, which imposed a tax up to 10.5 percent on some offshore income.
The Joint Committee on Taxation estimated that these two new taxes would add $262 billion in revenue over the next decade, which the Times noted would be enough to fund the entire Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.
But the new taxes also featured many loopholes, and “almost immediately” after Trump signed the tax bill, companies launched an aggressive lobbying effort to carve out breaks for themselves in the law, the Times reported.
Chip Harter, a longtime tax attorney who advised companies on how to avoid taxes — before being appointed as the Treasury official in charge of writing rules regarding the new taxes — and his team “found themselves in nonstop meetings — roughly 10 a week at time — with lobbyists” from those companies, according to the Times report. Many of the lobbyists were from the same firms that Harter had previously worked for.
Earlier this month, the department released the final version of some of the BEAT rules that allowed companies to use a “complex currency-accounting maneuver” to avoid paying the tax, according to the Times, giving the lobbyists what they had pushed for.
Foreign banks like Barclays and Credit Suisse also staged an aggressive lobbying effort to carve out an exemption in the BEAT law. The lobbyists included Erika Nijenhuis, who represented the Institute of International Bankers. Harter got Treasury Secretary Steven Mnuchin to approve new exemptions for the banks earlier this year, before the tax office announced even more exemptions. In September, Nijenhuis was appointed to a job at Treasury's Office of Tax Policy.
Officials at the Joint Committee on Taxation projected that the exemptions for international banks alone would cut revenue by up to $50 billion.
All told, BEAT is only likely to collect “a small fraction” of the $150 billion projection, tax adviser Thomas Horst told the Times.
The department made the moves even as Treasury officials warned Harter that it may lack legal authority to exempt bank payments from the law. Harter dismissed the objections, according to the Times.
“We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations,” a Treasury Department spokesperson told the Times.
Companies like Procter & Gamble, News Corp., Comcast, Liberty Mutual and Anheuser-Busch also launched an intense lobbying effort to exempt themselves from GILTI. After months of meetings with lobbyists, the department announced the rules that the companies had pushed for in June.
As a result, companies “continue to shift hundreds of billions of dollars to overseas tax havens” and the IRS is collecting tens of billions less in revenue than Congress projected, the Times reported. In 2018, the United States lost more tax revenue than any other developed nation, according to the Organization for Economic Cooperation and Development.
But big companies may have even more tax breaks coming.
“In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts," the Times reported. “Big companies have spent this fall trying to win more.”
World’s 500 richest people gained $1.2 trillion in wealth in 2019: Analysis
December 27, 2019
By Jake Johnson, Common Dreams - raw story
“In the U.S., the richest 0.1% control a bigger share of the pie than at any time since 1929.”
The 500 richest people in the world, all of whom are billionaires, gained a combined $1.2 trillion in wealth in 2019, further exacerbating inequities that have not been seen since the late 1920s.
That’s according to a new Bloomberg analysis published Friday, which found that the planet’s 500 richest people saw their collective net worth soar by 25 percent to $5.9 trillion over the last year.
“In the U.S., the richest 0.1 percent control a bigger share of the pie than at any time since 1929,” Bloomberg noted. “The 172 American billionaires on the Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg up $27.3 billion and Microsoft Corp. co-founder Bill Gates [rising] $22.7 billion.”
According to the Bloomberg Billionaires Index, eight of the 10 richest people in the world are from the U.S.
Amazon CEO Jeff Bezos lost nearly $9 billion in wealth in 2019, according to Bloomberg, but he will still likely end the year as the richest man in the world with a total net worth of $116 billion.
The analysis comes as 2020 Democratic presidential candidates, particularly Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), have made tackling inequality a key component of their policy platforms.
Warren has proposed an annual two percent tax on assets over $50 million and a three percent tax on assets above $1 billion.
Sanders, who has said he does not believe billionaires should exist, is calling for a wealth tax that would slash the fortunes of U.S. billionaires in half over 15 years, according to his campaign.
“A small handful of billionaires should not be able to accumulate more money than they could spend in 10 lifetimes,” Sanders said in September, “while millions of Americans are living in poverty and dying because they can’t afford healthcare.”
The 500 richest people in the world, all of whom are billionaires, gained a combined $1.2 trillion in wealth in 2019, further exacerbating inequities that have not been seen since the late 1920s.
That’s according to a new Bloomberg analysis published Friday, which found that the planet’s 500 richest people saw their collective net worth soar by 25 percent to $5.9 trillion over the last year.
“In the U.S., the richest 0.1 percent control a bigger share of the pie than at any time since 1929,” Bloomberg noted. “The 172 American billionaires on the Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg up $27.3 billion and Microsoft Corp. co-founder Bill Gates [rising] $22.7 billion.”
According to the Bloomberg Billionaires Index, eight of the 10 richest people in the world are from the U.S.
Amazon CEO Jeff Bezos lost nearly $9 billion in wealth in 2019, according to Bloomberg, but he will still likely end the year as the richest man in the world with a total net worth of $116 billion.
The analysis comes as 2020 Democratic presidential candidates, particularly Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), have made tackling inequality a key component of their policy platforms.
Warren has proposed an annual two percent tax on assets over $50 million and a three percent tax on assets above $1 billion.
Sanders, who has said he does not believe billionaires should exist, is calling for a wealth tax that would slash the fortunes of U.S. billionaires in half over 15 years, according to his campaign.
“A small handful of billionaires should not be able to accumulate more money than they could spend in 10 lifetimes,” Sanders said in September, “while millions of Americans are living in poverty and dying because they can’t afford healthcare.”
Opinion: How credit card companies reward the rich and punish the rest of us
By AARON KLEIN - la times
DEC. 20, 2019 3 AM
Cash registers across America should post a new holiday shopping sign: The richer you are, the less you pay. That may sound outrageous, but it’s true.
Though it’s unlikely to be advertised on a sign anywhere soon, the U.S. payment system has turned cash registers into engines of economic inequality. Driving this new system, in which the wealthy receive large discounts and the non-wealthy don’t, are ever more lucrative credit card reward programs and the government policies that promote them.
What’s in your wallet? The answer depends on how much money you have. If you have been doing well financially for a while, chances are you’ve qualified for an elite credit card — with reward perks like frequent flier miles, hotel stays or cash back every time you shop. The wealthier you are, the higher the rewards and bigger the perks the card companies offer.
How you pay and how much you make is strongly correlated. If you make less than top dollar, you can still qualify for a card, but it’s likely to have fewer rewards (3% becomes 1%). And if you’re among the half of Americans considered to have “subprime” credit, then you are more likely to be using your debit card with no rewards program at all. Folks at the bottom of the income list tend to use cash or prepaid cards, generating no perks. The payment system is designed this way, as research from the Federal Reserve Bank of San Francisco shows.
The economics of modern credit cards are often misunderstood. The bulk of card-issuers’ profit, particularly from the luxury high-end cards, comes not from interest paid by those who carry a balance on their cards, but rather from the so-called swipe fees paid by merchants, which can range from 3% to 5% of everything you buy. American Express, for example, booked in excess of $24 billion in swipe fees in 2018, more than three times as much as their net interest income. Credit card companies’ most profitable customers are the ones who shop a lot and pay their bills on time.
Card issuers share some of this swipe-fee bounty with their customers, through cash-back, free points and other perks. The more money you have to spend the more you can earn. AmEx alone spent almost $10 billion in 2018 on card member rewards. Adding fuel to this fire is U.S. tax policy, which categorizes rewards as tax-free “rebates,” thereby making a rebate of 2% or 3% more like a 5% raise at work.
The scale of this redistribution is huge and growing. Consider a wealthy family that racks up charges of $250,000 a year on a top-of-the-line credit card that gives them 2.5% cash back. That family gets a $6,250 stocking stuffer from the payment system elves—worth more than $10,000 in pre-tax wages. Meanwhile, families using cash or debit cards, who tend to be at the lower end of the earning scale, get nothing in return for their spending.
Compounding this income inequality are the economics facing merchants. Bound by contract and consumer expectations to charge the same price to all customers, businesses can’t charge more to those who use high-end credit cards, even though the merchants pay high fees on those cards.
Economic logic leads to the conclusion that lower-income consumers and merchants are subsidizing the benefits the wealthy receive. Put a different way, if the merchant could pass the fees they pay for accepting a rewards credit card on to the customer using it, wealthier people would see higher prices, or customers using cash or debit would pay less.
What can be done to stop the payment system’s continuing evolution into yet another engine of income inequality? In 2010, the federal government and 17 states sued the major credit card companies, including American Express, for prohibiting merchants from incentivizing customers to use cards that charged lower swipe fees. But last year the Supreme Court, in a 5-4 vote, with Clarence Thomas writing for the majority, upheld the card companies’ right to prohibit merchants from passing along the costs of high-reward cards to customers who chose to use them. It was a costly decision for merchants, most consumers, and a setback for policies reducing income inequality.
One step that could help is for Congress to enact a law precluding such limits on merchants. Congress should also consider whether tax policy should be changed to no longer treat rewards to high-end cardholders as nontaxable rebates.
Absent changes to this system, new payment technologies, like China’s digital wallet revolution, are unlikely to catch on in America. Innovations that reduce the inefficiency and expense of our payment system will simply fail to generate enough perks to motivate consumers to ditch their rewarding plastic. The result will be a nation where income inequality is exacerbated every time you buy.
Though it’s unlikely to be advertised on a sign anywhere soon, the U.S. payment system has turned cash registers into engines of economic inequality. Driving this new system, in which the wealthy receive large discounts and the non-wealthy don’t, are ever more lucrative credit card reward programs and the government policies that promote them.
What’s in your wallet? The answer depends on how much money you have. If you have been doing well financially for a while, chances are you’ve qualified for an elite credit card — with reward perks like frequent flier miles, hotel stays or cash back every time you shop. The wealthier you are, the higher the rewards and bigger the perks the card companies offer.
How you pay and how much you make is strongly correlated. If you make less than top dollar, you can still qualify for a card, but it’s likely to have fewer rewards (3% becomes 1%). And if you’re among the half of Americans considered to have “subprime” credit, then you are more likely to be using your debit card with no rewards program at all. Folks at the bottom of the income list tend to use cash or prepaid cards, generating no perks. The payment system is designed this way, as research from the Federal Reserve Bank of San Francisco shows.
The economics of modern credit cards are often misunderstood. The bulk of card-issuers’ profit, particularly from the luxury high-end cards, comes not from interest paid by those who carry a balance on their cards, but rather from the so-called swipe fees paid by merchants, which can range from 3% to 5% of everything you buy. American Express, for example, booked in excess of $24 billion in swipe fees in 2018, more than three times as much as their net interest income. Credit card companies’ most profitable customers are the ones who shop a lot and pay their bills on time.
Card issuers share some of this swipe-fee bounty with their customers, through cash-back, free points and other perks. The more money you have to spend the more you can earn. AmEx alone spent almost $10 billion in 2018 on card member rewards. Adding fuel to this fire is U.S. tax policy, which categorizes rewards as tax-free “rebates,” thereby making a rebate of 2% or 3% more like a 5% raise at work.
The scale of this redistribution is huge and growing. Consider a wealthy family that racks up charges of $250,000 a year on a top-of-the-line credit card that gives them 2.5% cash back. That family gets a $6,250 stocking stuffer from the payment system elves—worth more than $10,000 in pre-tax wages. Meanwhile, families using cash or debit cards, who tend to be at the lower end of the earning scale, get nothing in return for their spending.
Compounding this income inequality are the economics facing merchants. Bound by contract and consumer expectations to charge the same price to all customers, businesses can’t charge more to those who use high-end credit cards, even though the merchants pay high fees on those cards.
Economic logic leads to the conclusion that lower-income consumers and merchants are subsidizing the benefits the wealthy receive. Put a different way, if the merchant could pass the fees they pay for accepting a rewards credit card on to the customer using it, wealthier people would see higher prices, or customers using cash or debit would pay less.
What can be done to stop the payment system’s continuing evolution into yet another engine of income inequality? In 2010, the federal government and 17 states sued the major credit card companies, including American Express, for prohibiting merchants from incentivizing customers to use cards that charged lower swipe fees. But last year the Supreme Court, in a 5-4 vote, with Clarence Thomas writing for the majority, upheld the card companies’ right to prohibit merchants from passing along the costs of high-reward cards to customers who chose to use them. It was a costly decision for merchants, most consumers, and a setback for policies reducing income inequality.
One step that could help is for Congress to enact a law precluding such limits on merchants. Congress should also consider whether tax policy should be changed to no longer treat rewards to high-end cardholders as nontaxable rebates.
Absent changes to this system, new payment technologies, like China’s digital wallet revolution, are unlikely to catch on in America. Innovations that reduce the inefficiency and expense of our payment system will simply fail to generate enough perks to motivate consumers to ditch their rewarding plastic. The result will be a nation where income inequality is exacerbated every time you buy.
greed, greed, and more greed!!!
Column: Ralphs is now charging 50 cents for cash back at the register
y DAVID LAZARUS - BUSINESS COLUMNIST - la times
DEC. 20, 2019 6 AM
Airlines, banks, phone companies — each has boosted its bottom line by hitting customers with nickel-and-dime charges for services that were once offered for free.
Add Kroger, parent of Ralphs supermarkets, to the list of businesses reaching into your pocket for a little extra cash.
Ralphs joined other Kroger chains this month in rolling out a 50-cent “convenience fee” for providing cash back at the register for debit card purchases — a service most supermarkets have offered gratis for years.
Kroger is alone among leading California supermarket operators in imposing such a fee.
I contacted Vons, Albertsons, Pavilions, Trader Joe’s, Safeway, Lucky, Stater Bros., Gelson’s and Whole Foods. Each said they had no cash-back fee and no plans to introduce one.
“Our cash-back program is designed to save customers money vs. ATM fees, and to give them a safer and more convenient way to get the cash they need,” said John Votava, a Ralphs spokesman.
“Unfortunately, we cannot continue to offer this service for free due to the high demand and processing and labor costs,” he told me.
OK, let’s parse that.
High demand? Consumers have been receiving cash back at supermarkets since the 1980s, when the British retail chain Tesco realized providing cash back reduced the amount of hard currency on hand and the expense of transporting money to a bank. Over the last 30-plus years, this has served the interests of both consumers and merchants.
It’s possible demand for cash back has risen incrementally as banks’ ATM fees have gone up, but retail industry analysts say there’s no evidence to suggest consumers are abandoning bank machines in favor of supermarket checkout lines — just the opposite, in fact.
A recent study from Mercator Advisory Group found that consumers were more comfortable than ever banking via ATM, although most make sure they avoid fees by not using out-of-network machines.
As for labor costs, who are we kidding? The transaction is electronic and largely automated, requiring only a few seconds of a cashier’s time.
On the other hand, although a 50-cent fee for such a routine transaction might be small potatoes on an individual basis, over an entire customer base you’re talking big bucks.
Votava said that, in 2018, Kroger stores, including Ralphs, provided more than 150 million cash-back transactions.
At 50 cents a throw, that translates to at least $75 million in extra revenue for the company.
Seventy-five million. And if anyone thinks Kroger spends $75 million a year on cash-back transactions, there’s a cleanup on Aisle 3 they need to attend to.
Votava didn’t respond to my request for information about how much it cost Ralphs to handle those transactions. Federal law caps debit card “swipe fees” at 21 cents, meaning that’s the maximum banks and financial firms can charge merchants to make a sale go through. Banks typically charge businesses less for debit card transactions than for purchases by credit card.
Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group, called Kroger’s probable $75-million windfall “a nice chunk of revenue, likely well above cost.”
Sally Greenberg, executive director of the National Consumers League, said some shoppers may think twice before bringing their business to a supermarket that charges a cash-back fee.
“What’s next?” she asked. “If I pay with a $20 bill, will they charge me for making change?”
Kroger’s cash-back fee is oddly timed, coming, as it does, amid a major marketing campaign in which the company says it’s “celebrating its love of all customers and associates.”
As I wrote recently, Kroger’s Fresh for Everyone campaign is unusually touchy-feely for a rebranding exercise, aimed at elevating the “joy” and “fun” of shopping for food.
All I can say is that when you announce you’re celebrating your love for customers, and just a few weeks later you launch a $75-million cash grab, that’s some tough love indeed.
But it bears repeating: Kroger is by no means alone in recognizing there’s more money to be made in strong-arming customers than in offering free perks aimed at enhancing customer satisfaction.
Think ATM fees. When U.S. banks introduced the automated technology in the 1970s, they charged few if any fees for use of the machines. Banks wanted people to become comfortable with self-service. These days, ATM fees can top $4 per out-of-network transaction.
A recent study by the Federal Reserve Bank of Cleveland observed that banks traditionally made their money from charging interest on loans. Now, it said, more than a third of banking revenue “comes from so-called ‘noninterest income,’ which includes items such as overdraft fees and ATM charges.”
Airlines are the poster child for gratuitous fees. Most impose extra charges for baggage, seat assignments, legroom, snacks and even blankets — all things that once came free of charge.
Carriers now make about $5 billion a year from baggage fees alone, according to the U.S. Department of Transportation.
And don’t forget our friends in the phone and cable industries, which never met a fee they didn’t like. As I’ve noted previously, AT&T last year more than doubled its monthly “administrative fee” to $1.99 from 76 cents, raising an extra $800 million in annual revenue.
Meanwhile, Consumer Reports recently reported that fees represented more than $37 of average monthly cable bills, or about $450 in annual charges per customer.
“Companies are realizing that these can be substantial sources of revenue,” said Dipayan Biswas, a marketing professor at the University of South Florida.
Anthony Dukes, a marketing professor at USC, said businesses were frequently on the lookout for ways to capitalize on customer relationships.
“They want to capture the incremental value they offer through these services,” he explained. “For example, the fact that I can have cash back when I buy my groceries has value to me because I do not have to make an extra stop at the ATM. Ralphs wants a piece of this value.”
In other industries — airlines, telecom — the typical pattern is for one company to inflict a less-friendly charge on customers, with competing firms quickly jumping in with their own me-too fees.
That doesn’t seem to be the case here. Not one supermarket chain I contacted said they were studying Kroger’s move and mulling over a similar policy.
The sense I got was that the rest of the industry is a bit baffled by Kroger slapping customers with a fee for something that’s been taken for granted by supermarket shoppers for decades. In a highly competitive business, that could be seen as an insult by some shoppers.
So we’ll just nod politely as Ralphs insists it merely wants customers to have a “more convenient way to get the cash they need.”
Even though there are 75 million reasons to think that’s a load of hooey.
Add Kroger, parent of Ralphs supermarkets, to the list of businesses reaching into your pocket for a little extra cash.
Ralphs joined other Kroger chains this month in rolling out a 50-cent “convenience fee” for providing cash back at the register for debit card purchases — a service most supermarkets have offered gratis for years.
Kroger is alone among leading California supermarket operators in imposing such a fee.
I contacted Vons, Albertsons, Pavilions, Trader Joe’s, Safeway, Lucky, Stater Bros., Gelson’s and Whole Foods. Each said they had no cash-back fee and no plans to introduce one.
“Our cash-back program is designed to save customers money vs. ATM fees, and to give them a safer and more convenient way to get the cash they need,” said John Votava, a Ralphs spokesman.
“Unfortunately, we cannot continue to offer this service for free due to the high demand and processing and labor costs,” he told me.
OK, let’s parse that.
High demand? Consumers have been receiving cash back at supermarkets since the 1980s, when the British retail chain Tesco realized providing cash back reduced the amount of hard currency on hand and the expense of transporting money to a bank. Over the last 30-plus years, this has served the interests of both consumers and merchants.
It’s possible demand for cash back has risen incrementally as banks’ ATM fees have gone up, but retail industry analysts say there’s no evidence to suggest consumers are abandoning bank machines in favor of supermarket checkout lines — just the opposite, in fact.
A recent study from Mercator Advisory Group found that consumers were more comfortable than ever banking via ATM, although most make sure they avoid fees by not using out-of-network machines.
As for labor costs, who are we kidding? The transaction is electronic and largely automated, requiring only a few seconds of a cashier’s time.
On the other hand, although a 50-cent fee for such a routine transaction might be small potatoes on an individual basis, over an entire customer base you’re talking big bucks.
Votava said that, in 2018, Kroger stores, including Ralphs, provided more than 150 million cash-back transactions.
At 50 cents a throw, that translates to at least $75 million in extra revenue for the company.
Seventy-five million. And if anyone thinks Kroger spends $75 million a year on cash-back transactions, there’s a cleanup on Aisle 3 they need to attend to.
Votava didn’t respond to my request for information about how much it cost Ralphs to handle those transactions. Federal law caps debit card “swipe fees” at 21 cents, meaning that’s the maximum banks and financial firms can charge merchants to make a sale go through. Banks typically charge businesses less for debit card transactions than for purchases by credit card.
Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group, called Kroger’s probable $75-million windfall “a nice chunk of revenue, likely well above cost.”
Sally Greenberg, executive director of the National Consumers League, said some shoppers may think twice before bringing their business to a supermarket that charges a cash-back fee.
“What’s next?” she asked. “If I pay with a $20 bill, will they charge me for making change?”
Kroger’s cash-back fee is oddly timed, coming, as it does, amid a major marketing campaign in which the company says it’s “celebrating its love of all customers and associates.”
As I wrote recently, Kroger’s Fresh for Everyone campaign is unusually touchy-feely for a rebranding exercise, aimed at elevating the “joy” and “fun” of shopping for food.
All I can say is that when you announce you’re celebrating your love for customers, and just a few weeks later you launch a $75-million cash grab, that’s some tough love indeed.
But it bears repeating: Kroger is by no means alone in recognizing there’s more money to be made in strong-arming customers than in offering free perks aimed at enhancing customer satisfaction.
Think ATM fees. When U.S. banks introduced the automated technology in the 1970s, they charged few if any fees for use of the machines. Banks wanted people to become comfortable with self-service. These days, ATM fees can top $4 per out-of-network transaction.
A recent study by the Federal Reserve Bank of Cleveland observed that banks traditionally made their money from charging interest on loans. Now, it said, more than a third of banking revenue “comes from so-called ‘noninterest income,’ which includes items such as overdraft fees and ATM charges.”
Airlines are the poster child for gratuitous fees. Most impose extra charges for baggage, seat assignments, legroom, snacks and even blankets — all things that once came free of charge.
Carriers now make about $5 billion a year from baggage fees alone, according to the U.S. Department of Transportation.
And don’t forget our friends in the phone and cable industries, which never met a fee they didn’t like. As I’ve noted previously, AT&T last year more than doubled its monthly “administrative fee” to $1.99 from 76 cents, raising an extra $800 million in annual revenue.
Meanwhile, Consumer Reports recently reported that fees represented more than $37 of average monthly cable bills, or about $450 in annual charges per customer.
“Companies are realizing that these can be substantial sources of revenue,” said Dipayan Biswas, a marketing professor at the University of South Florida.
Anthony Dukes, a marketing professor at USC, said businesses were frequently on the lookout for ways to capitalize on customer relationships.
“They want to capture the incremental value they offer through these services,” he explained. “For example, the fact that I can have cash back when I buy my groceries has value to me because I do not have to make an extra stop at the ATM. Ralphs wants a piece of this value.”
In other industries — airlines, telecom — the typical pattern is for one company to inflict a less-friendly charge on customers, with competing firms quickly jumping in with their own me-too fees.
That doesn’t seem to be the case here. Not one supermarket chain I contacted said they were studying Kroger’s move and mulling over a similar policy.
The sense I got was that the rest of the industry is a bit baffled by Kroger slapping customers with a fee for something that’s been taken for granted by supermarket shoppers for decades. In a highly competitive business, that could be seen as an insult by some shoppers.
So we’ll just nod politely as Ralphs insists it merely wants customers to have a “more convenient way to get the cash they need.”
Even though there are 75 million reasons to think that’s a load of hooey.
Amazon, Chevron, and Starbucks among 91 Fortune 500 corporations that paid $0 in federal income taxes in 2018: Report
December 16, 2019
By Jake Johnson, Common Dreams - raw story
“The 2017 tax law was a clear giveaway to corporations and their shareholders.”
More than 90 large, profitable corporations on the Fortune 500 list effectively did not pay a penny in federal income taxes in 2018, according to a new report published Monday by the Institute on Taxation and Economic Policy.
“The key takeaway from this study is that the 2017 tax law is working out well for profitable corporations.”
—Matthew Gardner, Institute on Taxation and Economic PolicyITEP examined financial filings from 379 Fortune 500 companies that reported a profit in 2018, the first year President Donald Trump’s tax cuts took effect. The Republican tax law slashed the corporate tax rate from 35 percent to 21 percent.
“The 379 profitable corporations identified in this study paid an effective federal income tax rate of 11.3 percent on their 2018 income, slightly more than half the statutory 21 percent tax,” ITEP said. “The 11.3 percent effective tax rate found in this study is likely the lowest effective tax rate in the last 40 years.”
ITEP found that 91 of the 379 companies analyzed took advantage of loopholes to effectively not pay federal income taxes in 2018 despite making a combined profit of $101 billion. That list of companies includes prominent corporate giants such as Amazon, Halliburton, Chevron, Starbucks, and Delta Air Lines.
---
Matthew Gardner, a senior fellow at ITEP and lead author of the report, said the 2017 Trump tax law was “destined to fail to live up to its grand promises.”
“Proponents of the law claimed it would boost federal corporate tax revenue, but that is nearly impossible since the law not only reduced the corporate tax rate, it also left some of the most egregious loopholes intact,” Gardner said in a statement. “The 2017 tax law was a clear giveaway to corporations and their shareholders.”
Thanks to the Republican tax law, which Trump signed in 2017, Bank of America, J.P. Morgan Chase, Wells Fargo, Amazon, and Verizon raked in a combined $16 billion in tax breaks in 2018.
“The key takeaway from this study is that the 2017 tax law is working out well for profitable corporations, which are paying some of the lowest tax rates that ITEP has recorded in the nearly 40 years it has been examining corporate taxes,” said Gardner.
“By enacting a law that dramatically reduced corporate tax collections, lawmakers weakened the nation’s ability to adequately fund critical priorities,” Gardner added. “Lawmakers will have to stop kowtowing to special interests and pretending that raising revenue doesn’t matter.”
More than 90 large, profitable corporations on the Fortune 500 list effectively did not pay a penny in federal income taxes in 2018, according to a new report published Monday by the Institute on Taxation and Economic Policy.
“The key takeaway from this study is that the 2017 tax law is working out well for profitable corporations.”
—Matthew Gardner, Institute on Taxation and Economic PolicyITEP examined financial filings from 379 Fortune 500 companies that reported a profit in 2018, the first year President Donald Trump’s tax cuts took effect. The Republican tax law slashed the corporate tax rate from 35 percent to 21 percent.
“The 379 profitable corporations identified in this study paid an effective federal income tax rate of 11.3 percent on their 2018 income, slightly more than half the statutory 21 percent tax,” ITEP said. “The 11.3 percent effective tax rate found in this study is likely the lowest effective tax rate in the last 40 years.”
ITEP found that 91 of the 379 companies analyzed took advantage of loopholes to effectively not pay federal income taxes in 2018 despite making a combined profit of $101 billion. That list of companies includes prominent corporate giants such as Amazon, Halliburton, Chevron, Starbucks, and Delta Air Lines.
---
Matthew Gardner, a senior fellow at ITEP and lead author of the report, said the 2017 Trump tax law was “destined to fail to live up to its grand promises.”
“Proponents of the law claimed it would boost federal corporate tax revenue, but that is nearly impossible since the law not only reduced the corporate tax rate, it also left some of the most egregious loopholes intact,” Gardner said in a statement. “The 2017 tax law was a clear giveaway to corporations and their shareholders.”
Thanks to the Republican tax law, which Trump signed in 2017, Bank of America, J.P. Morgan Chase, Wells Fargo, Amazon, and Verizon raked in a combined $16 billion in tax breaks in 2018.
“The key takeaway from this study is that the 2017 tax law is working out well for profitable corporations, which are paying some of the lowest tax rates that ITEP has recorded in the nearly 40 years it has been examining corporate taxes,” said Gardner.
“By enacting a law that dramatically reduced corporate tax collections, lawmakers weakened the nation’s ability to adequately fund critical priorities,” Gardner added. “Lawmakers will have to stop kowtowing to special interests and pretending that raising revenue doesn’t matter.”
The Ongoing Effort to Write Wall Street Out of the 2008 Financial Crisis
Malaika Jabali, Ryan Grim - the intercept
December 17 2019, 4:00 a.m.
SINCE THE 2008 meltdown, there’s been an ongoing effort to revise history and write Wall Street out of the financial crisis. The latest in this narrative is a new working paper, published by the Federal Reserve Bank of Philadelphia, which argues that the real criminals were, after all, those house-flipping exotic dancers made famous by Michael Lewis’s book and subsequent movie “The Big Short.”
The new study zeroes in on what its authors call “fraudulent investors”: people who got mortgages for investment homes in which they never intended to live, despite claiming that they would. Pinning the blame for the mortgage crisis on the dancers who agreed to take the money being given to them by the banks would be similar to faulting hoodwinked students for taking out massive loans from fraudulent for-profit colleges.
During the recession, conservatives latched onto the narrative that the crisis was caused by prospective homeowners’ greed, implying — and often outright stating — that the crisis resulted from the bad decisions of lower-income, largely minority families. In a 2009 congressional oversight report, then-Rep. Jeb Hensarling, R-Texas, blamed, among other reasons for the crisis, people who “simply made bad choices … and overestimated their readiness for homeownership.” He added these borrowers to his list of others, including those who commit mortgage fraud. While in Congress, Hensarling collected thousands of dollars from the payday lending industry around the time he was expected to act on policies affecting the industry, vocally criticized the Consumer Finance Protection Bureau, and crusaded for years to deregulate Wall Street after the crash. He is now an executive at banking giant UBS, while many of his former staff have moved to the CFPB, where they have set about dismantling it.
The working paper, which comes with a disclosure saying it doesn’t represent the opinion of the Philadelphia Fed, complements other research indicating that the “subprime mortgage crisis” is a myth. But it doesn’t go all the way to citing the role of Wall Street, which is convenient for politicians and regulators uninterested in policing those banks. Indeed, if the cause of the crisis was greed and fraud, there are several happy conclusions Hensarling can draw from that analysis. As he argued at the time, such borrowers were “much less sympathetic in the eyes of many,” meaning that the government has no responsibility to help those hit by the crisis. “Attempting to develop a government-subsidized foreclosure mitigation plan to assist [these borrowers] will inevitably raise significant moral hazard questions,” Hensarling argued in the 2009 report.
It also means that the law enforcement and regulatory response should focus on the borrowers, not the lenders on Wall Street or their brokers. Indeed, perhaps the most high-profile prosecution of the mortgage crisis was not of a bank CEO, but of Joe and Teresa Giudice, stars of the reality TV series “Real Housewives of New Jersey.” Both were sentenced to prison for mortgage fraud, caught with paperwork discrepancies on investment properties, and Joe Giudice, who was born in Italy, was deported, though not before spending time in solitary confinement in Immigration and Customs Enforcement custody. (“It was a terrible experience; I don’t wish that on anybody,” he said.)
While the conservative response to the crisis was to blame black and brown homeowners, the more sophisticated academic response extends the blame more broadly to other borrowers. The new paper, authored by Ronel Elul, Aaron Payne, and Sebastian Tilson, studied the pervasiveness of what it called owner-occupancy fraud — that is, borrowers who applied for home purchase loans as owner-occupants despite no evidence of them subsequently occupying the home. Fraudulent investors defaulted on their mortgage at a nearly 40 percent higher rate than owner-occupants, second-homeowners, and declared investors (those who identified that they were applying for a home purchase loan as an investment property). The paper does not examine whether brokers advised the loan applicant how to fill out the form, but reporting from the time indicates that it was nearly always brokers who guided borrowers through the process. If there was fraud, in other words, it was directed by the brokers working on behalf of lenders.
“Despite making up only 5 percent of the borrower populations,” the study says, fraudulent investors “constitute one-sixth of the dollar share of defaulted loans for originations” from 2005 to 2007.
Lenders consider investment properties to carry greater risk. If a home is one’s primary residence, there is more incentive to pay the mortgage payment and avoid delinquency. In an economic downturn, there is less incentive to wait out the market and keep a home if the borrower does not occupy it. Consequently, lenders apply higher interest rates and require more cash up front than they do for owner-occupied homes. Applying as an owner-occupier allowed fraudulent investors to save these costs, providing them with interest rates that were “35 basis points lower, on average, than otherwise similar declared investors,” the study argues. (Depending on the size of the mortgage, the difference could mean a few hundred dollars per month or less.)
The paper argues that delinquencies that came from these loans were strategic and not from fraudulent investors struggling to make payments. They defaulted on these loans despite using significantly less of their available credit than other types of home borrowers, indicating that they were, in fact, able to manage their credit. But as the economy collapsed, renting those properties to cover the mortgage became significantly more difficult, and many of the owners, undoubtedly, also lost their own jobs, rendering the fact that they had successfully managed credit before then far less relevant. As the value of the homes plummeted, the possibility of refinancing the mortgage would also disappear. Default may have been a choice, but it was often the only choice.
The new paper found that adding these “fraudulent investors” to the investor pool increased the share of investors comprising the mortgage borrowers in this period to 50 percent — feeding the kind of surging demand Wall Street had created. This fraud, the paper states, was “widespread,” including in the large government-sponsored enterprise market led by the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
Lower-income borrowers and black and Latino borrowers — including those who are upper-income — were targeted for subprime loans and people of color have struggled most to recover from the Great Recession. They have also endured most of the blame. In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year. Black and Latino households were also more likely to end this period underwater.
While recognizing that these subprime borrowers were not the crisis’s primary drivers, recent studies like those published by Philadelphia’s Fed nevertheless blame borrowers and not the actors who created the conditions and set the terms for such transactions. Wall Street banks — whose insatiable demand for loan products it could slice up, securitize, slap a AAA rating on, and sell to pension funds — had created an industry of brokers ready to produce that supply by any means of fraud necessary.
The new study zeroes in on what its authors call “fraudulent investors”: people who got mortgages for investment homes in which they never intended to live, despite claiming that they would. Pinning the blame for the mortgage crisis on the dancers who agreed to take the money being given to them by the banks would be similar to faulting hoodwinked students for taking out massive loans from fraudulent for-profit colleges.
During the recession, conservatives latched onto the narrative that the crisis was caused by prospective homeowners’ greed, implying — and often outright stating — that the crisis resulted from the bad decisions of lower-income, largely minority families. In a 2009 congressional oversight report, then-Rep. Jeb Hensarling, R-Texas, blamed, among other reasons for the crisis, people who “simply made bad choices … and overestimated their readiness for homeownership.” He added these borrowers to his list of others, including those who commit mortgage fraud. While in Congress, Hensarling collected thousands of dollars from the payday lending industry around the time he was expected to act on policies affecting the industry, vocally criticized the Consumer Finance Protection Bureau, and crusaded for years to deregulate Wall Street after the crash. He is now an executive at banking giant UBS, while many of his former staff have moved to the CFPB, where they have set about dismantling it.
The working paper, which comes with a disclosure saying it doesn’t represent the opinion of the Philadelphia Fed, complements other research indicating that the “subprime mortgage crisis” is a myth. But it doesn’t go all the way to citing the role of Wall Street, which is convenient for politicians and regulators uninterested in policing those banks. Indeed, if the cause of the crisis was greed and fraud, there are several happy conclusions Hensarling can draw from that analysis. As he argued at the time, such borrowers were “much less sympathetic in the eyes of many,” meaning that the government has no responsibility to help those hit by the crisis. “Attempting to develop a government-subsidized foreclosure mitigation plan to assist [these borrowers] will inevitably raise significant moral hazard questions,” Hensarling argued in the 2009 report.
It also means that the law enforcement and regulatory response should focus on the borrowers, not the lenders on Wall Street or their brokers. Indeed, perhaps the most high-profile prosecution of the mortgage crisis was not of a bank CEO, but of Joe and Teresa Giudice, stars of the reality TV series “Real Housewives of New Jersey.” Both were sentenced to prison for mortgage fraud, caught with paperwork discrepancies on investment properties, and Joe Giudice, who was born in Italy, was deported, though not before spending time in solitary confinement in Immigration and Customs Enforcement custody. (“It was a terrible experience; I don’t wish that on anybody,” he said.)
While the conservative response to the crisis was to blame black and brown homeowners, the more sophisticated academic response extends the blame more broadly to other borrowers. The new paper, authored by Ronel Elul, Aaron Payne, and Sebastian Tilson, studied the pervasiveness of what it called owner-occupancy fraud — that is, borrowers who applied for home purchase loans as owner-occupants despite no evidence of them subsequently occupying the home. Fraudulent investors defaulted on their mortgage at a nearly 40 percent higher rate than owner-occupants, second-homeowners, and declared investors (those who identified that they were applying for a home purchase loan as an investment property). The paper does not examine whether brokers advised the loan applicant how to fill out the form, but reporting from the time indicates that it was nearly always brokers who guided borrowers through the process. If there was fraud, in other words, it was directed by the brokers working on behalf of lenders.
“Despite making up only 5 percent of the borrower populations,” the study says, fraudulent investors “constitute one-sixth of the dollar share of defaulted loans for originations” from 2005 to 2007.
Lenders consider investment properties to carry greater risk. If a home is one’s primary residence, there is more incentive to pay the mortgage payment and avoid delinquency. In an economic downturn, there is less incentive to wait out the market and keep a home if the borrower does not occupy it. Consequently, lenders apply higher interest rates and require more cash up front than they do for owner-occupied homes. Applying as an owner-occupier allowed fraudulent investors to save these costs, providing them with interest rates that were “35 basis points lower, on average, than otherwise similar declared investors,” the study argues. (Depending on the size of the mortgage, the difference could mean a few hundred dollars per month or less.)
The paper argues that delinquencies that came from these loans were strategic and not from fraudulent investors struggling to make payments. They defaulted on these loans despite using significantly less of their available credit than other types of home borrowers, indicating that they were, in fact, able to manage their credit. But as the economy collapsed, renting those properties to cover the mortgage became significantly more difficult, and many of the owners, undoubtedly, also lost their own jobs, rendering the fact that they had successfully managed credit before then far less relevant. As the value of the homes plummeted, the possibility of refinancing the mortgage would also disappear. Default may have been a choice, but it was often the only choice.
The new paper found that adding these “fraudulent investors” to the investor pool increased the share of investors comprising the mortgage borrowers in this period to 50 percent — feeding the kind of surging demand Wall Street had created. This fraud, the paper states, was “widespread,” including in the large government-sponsored enterprise market led by the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
Lower-income borrowers and black and Latino borrowers — including those who are upper-income — were targeted for subprime loans and people of color have struggled most to recover from the Great Recession. They have also endured most of the blame. In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year. Black and Latino households were also more likely to end this period underwater.
While recognizing that these subprime borrowers were not the crisis’s primary drivers, recent studies like those published by Philadelphia’s Fed nevertheless blame borrowers and not the actors who created the conditions and set the terms for such transactions. Wall Street banks — whose insatiable demand for loan products it could slice up, securitize, slap a AAA rating on, and sell to pension funds — had created an industry of brokers ready to produce that supply by any means of fraud necessary.
More tax break winning! AT&T looks into '4% cut in the operator's labor expenses'
Walter Einenkel
Daily Kos Staff
Monday December 16, 2019 · 6:30 PM PST
The storied Republican tax cuts continue to do exactly what their detractors said they would do: make money for rich people while doing absolutely nothing to stimulate wealth in the rest of society. There is a long list of corporations that continue to downsize their employee payrolls after pretending that big tax breaks would mean big infrastructure investments and bigger jobs for Americans. Now, AT&T is looking into a new massive “cost-cutting initiative,” that will undoubtedly include downsizing their workforce even further.
As LightReading reports, at an investor forum in the beginning of December, AT&T CFO John Stephens explained that their cost-cutting would “include a 4% cut in the operator's labor expenses.” Those labor expenses make up around $1.5 billion and usually means “jobs.” Considering that some estimates put AT&T’s financial “savings” from the Republican tax cuts at around $42 billion, it is just remarkable that the obvious greed involved here isn’t bigger news.
As part of the self-serving propaganda push for the wildly unpopular tax breaks, CEOs like AT&T’s Randall Stephenson told the world that they would be investing more billions into infrastructure and great paying jobs.
Those investments and those jobs have never materialized, meaning that they were just words, not actions, which in turn means that they were outright lies.
At the end of 2018, as the big Republican tax-welfare-breaks to corporations and the rich kicked in, telecoms like AT&T began to to cut back on their promised infrastructure investments. Not only did those companies not invest more in their infrastructure, they have begun to pull back the pace with which they continue to expand. Of course, none of this is surprising when you consider that the history of telecoms like AT&T include decades of examples where after demanding—and receiving—corporate tax welfare, they have not lived up to their promised end of the bargain.
AT&T has run into financial problems after its multi-media mergers into television have ended up being big albatrosses around their necks. But those executives, making those bad business decisions, aren’t the ones on the chopping block.
As LightReading reports, at an investor forum in the beginning of December, AT&T CFO John Stephens explained that their cost-cutting would “include a 4% cut in the operator's labor expenses.” Those labor expenses make up around $1.5 billion and usually means “jobs.” Considering that some estimates put AT&T’s financial “savings” from the Republican tax cuts at around $42 billion, it is just remarkable that the obvious greed involved here isn’t bigger news.
As part of the self-serving propaganda push for the wildly unpopular tax breaks, CEOs like AT&T’s Randall Stephenson told the world that they would be investing more billions into infrastructure and great paying jobs.
Those investments and those jobs have never materialized, meaning that they were just words, not actions, which in turn means that they were outright lies.
At the end of 2018, as the big Republican tax-welfare-breaks to corporations and the rich kicked in, telecoms like AT&T began to to cut back on their promised infrastructure investments. Not only did those companies not invest more in their infrastructure, they have begun to pull back the pace with which they continue to expand. Of course, none of this is surprising when you consider that the history of telecoms like AT&T include decades of examples where after demanding—and receiving—corporate tax welfare, they have not lived up to their promised end of the bargain.
AT&T has run into financial problems after its multi-media mergers into television have ended up being big albatrosses around their necks. But those executives, making those bad business decisions, aren’t the ones on the chopping block.
‘Staggering’ new data shows income of top 1% has grown 100 times faster than bottom 50% since 1970
December 9, 2019
By Common Dreams - raw story
“The bulk of a generation of economic growth has been captured and concentrated in a few hands, and many people have barely seen any of it.”
New data released Monday explains the numbers behind Sen. Bernie Sanders’ often-cited statistic that the three richest Americans hold more wealth than the 160 million people who make up the bottom 50% of the population.
Washington Post columnist Greg Sargent published what he called “stunning” findings from Stanford University economist Gabriel Zucman, showing how both an explosion in annual earnings by the rich and an increasingly regressive tax structure have combined to allow the top 1% of Americans’ wealth to triple over the past five decades.
Meanwhile, working people are taking home just $8,000 more per year than they did in 1970.
In what Sargent called “the triumph of the rich, which is one of the defining stories of our time,” the richer a household is, the more its take-home wealth has grown in the past 50 years.
Greg Sargent✔
@ThePlumLineGS
New data:
For top 1%, average income has risen by $800,000 since 1970.
For top 0.1%, it has risen by $4 million.
For top .01%, it has risen $20 million.
Bottom 50%? $8,000.
All this is *after taxes and transfers.*
The top 1% of earners make an average of more than $1 million per year after accounting for taxes they pay, a 50-year increase of more than $800,000—100 times the growth rate of the bottom 50%.
The wealth of the top .1% is five times larger than it was in 1970, while that of the top .01% is seven times larger, at over $24 million in 2018.
Zucman and fellow economist Emmanuel Saez, his co-author of the new book “The Triumph of Injustice,” provided a chart showing how each group of earners’ take-home pay has changed since 1970. The wealthiest Americans’ assets skyrocketed by millions of dollars even in the first decade of the 21st century—when people in the bottom 50% saw their average take-home income decrease.
For middle-income earners since 1970, income-plus-effective tax rates have gone from $44,000 to about $75,000—a greater increase than those in the bottom 50% of earners, “but still their income growth rate has been very low,” Zucman told the Post.
Zucman, who with Saez advised Sen. Elizabeth Warren (D-Mass.) on her Ultra-Millionaires Tax, emphasized that both the explosion of yearly income at the top and the effective tax rates of people in all income brackets must be taken into account to understand the massive wealth gap.
“You have two trends reinforcing each other,” Zucman told the Post. “There has been the rise in market income inequality—the rise in pretax income inequality. At the same time, the tax system has become much less progressive at the top of the income distribution.”
“People have this idea that government redistribution has upset some of the rise in inequality, but essentially that’s not the case,” the economist added.
Zucman’s findings were revealed two months after New York Times columnist David Leonhardt published a graphic showing how in 2018, for the first time in U.S. history, the 400 richest Americans paid less in taxes than any other income group.
The richest Americans have benefited from numerous changes to tax laws and enforcement in recent decades, Sargent wrote, “including domestic and international tax avoidance, the whittling away of the estate and corporate taxes, and the repeated downsizing of top marginal rates.”
Tony Annett of the Center for Sustainable Development at Columbia University wrote that Zucman’s research shows how “it is no longer meaningful to rely on GDP” as a measure of economic well-being, since the benefits of growth are no longer being shared among all earners as they were in previous eras.
Seth D. Michaels of the Union of Concerned Scientists described Zucman’s findings as showing how many people of his generation have seen the bulk of economic growth “captured and concentrated in a few hands.”
“The tiny number of people raking in the overwhelming majority of the last 40 years of economic growth are distorting the economy and the political system like a black hole, everything falling toward their interests at high speed,” Michaels wrote.
New data released Monday explains the numbers behind Sen. Bernie Sanders’ often-cited statistic that the three richest Americans hold more wealth than the 160 million people who make up the bottom 50% of the population.
Washington Post columnist Greg Sargent published what he called “stunning” findings from Stanford University economist Gabriel Zucman, showing how both an explosion in annual earnings by the rich and an increasingly regressive tax structure have combined to allow the top 1% of Americans’ wealth to triple over the past five decades.
Meanwhile, working people are taking home just $8,000 more per year than they did in 1970.
In what Sargent called “the triumph of the rich, which is one of the defining stories of our time,” the richer a household is, the more its take-home wealth has grown in the past 50 years.
Greg Sargent✔
@ThePlumLineGS
New data:
For top 1%, average income has risen by $800,000 since 1970.
For top 0.1%, it has risen by $4 million.
For top .01%, it has risen $20 million.
Bottom 50%? $8,000.
All this is *after taxes and transfers.*
The top 1% of earners make an average of more than $1 million per year after accounting for taxes they pay, a 50-year increase of more than $800,000—100 times the growth rate of the bottom 50%.
The wealth of the top .1% is five times larger than it was in 1970, while that of the top .01% is seven times larger, at over $24 million in 2018.
Zucman and fellow economist Emmanuel Saez, his co-author of the new book “The Triumph of Injustice,” provided a chart showing how each group of earners’ take-home pay has changed since 1970. The wealthiest Americans’ assets skyrocketed by millions of dollars even in the first decade of the 21st century—when people in the bottom 50% saw their average take-home income decrease.
For middle-income earners since 1970, income-plus-effective tax rates have gone from $44,000 to about $75,000—a greater increase than those in the bottom 50% of earners, “but still their income growth rate has been very low,” Zucman told the Post.
Zucman, who with Saez advised Sen. Elizabeth Warren (D-Mass.) on her Ultra-Millionaires Tax, emphasized that both the explosion of yearly income at the top and the effective tax rates of people in all income brackets must be taken into account to understand the massive wealth gap.
“You have two trends reinforcing each other,” Zucman told the Post. “There has been the rise in market income inequality—the rise in pretax income inequality. At the same time, the tax system has become much less progressive at the top of the income distribution.”
“People have this idea that government redistribution has upset some of the rise in inequality, but essentially that’s not the case,” the economist added.
Zucman’s findings were revealed two months after New York Times columnist David Leonhardt published a graphic showing how in 2018, for the first time in U.S. history, the 400 richest Americans paid less in taxes than any other income group.
The richest Americans have benefited from numerous changes to tax laws and enforcement in recent decades, Sargent wrote, “including domestic and international tax avoidance, the whittling away of the estate and corporate taxes, and the repeated downsizing of top marginal rates.”
Tony Annett of the Center for Sustainable Development at Columbia University wrote that Zucman’s research shows how “it is no longer meaningful to rely on GDP” as a measure of economic well-being, since the benefits of growth are no longer being shared among all earners as they were in previous eras.
Seth D. Michaels of the Union of Concerned Scientists described Zucman’s findings as showing how many people of his generation have seen the bulk of economic growth “captured and concentrated in a few hands.”
“The tiny number of people raking in the overwhelming majority of the last 40 years of economic growth are distorting the economy and the political system like a black hole, everything falling toward their interests at high speed,” Michaels wrote.
profiting from slavery!!!
Choppy markets leave U.S. bank bonus decisions in limbo
Elizabeth Dilts Marshall, Imani Moise - reuters
DECEMBER 9, 2019 / 9:06 PM
NEW YORK (Reuters) - December is always a month of suspense on Wall Street, as dealmakers, traders and money managers at big U.S. banks wait to find out how much they will receive in bonuses.
But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.
Those awards typically account for one-third of compensation for employees who receive them, so they are important.
By now, division heads usually have a sense of what a bonus pool will look like and what portion their divisions will get. Although formal bonus communications can happen as late as March, executives and consultants start working on decisions after Labor Day and tend to give unofficial guidance to staff before year-end, sources said.
But because there is so much uncertainty about what might happen in overnight lending in late December, and the ripple effects it could have on other markets, many executives are taking the unusual step of waiting to divvy up bonus pools until the year is completely finished.
“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.”
At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.
Johnson’s firm publishes a closely watched annual report forecasting where Wall Street bonuses are headed. It found that most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%, Johnson Associates predicted.
The expected declines reflect less-than-stellar results across the banking industry this year. Although the industry has recovered dramatically from the 2007-2009 financial crisis, a fresh round of interest-rate cuts from central banks combined with subdued loan demand, weak trading results and declines in some areas of investment banking have left revenue and profits treading water.
During the first nine months of the year, Goldman Sachs Group Inc (GS.N) and the capital markets divisions of JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) reported declines of 1-8% in revenue and 8-18% in profit. Citigroup Inc (C.N) was an outlier, reporting flat revenue and a 1% gain in year-to-date earnings.
Even those who worked on big deals or in business areas or that did well — say, bankers who worked on Bristol-Myers Squibb’s (BMY.N) $74 billion acquisition of Celgene, or traders who generated a lot of revenue helping companies manage falling rates — are not assured of a rich bonus.
GRIM, ANXIOUS
Their bonuses are tied to the performance of divisions and companies overall. That means if a trading division suffers from market chaos, it will get less of the bonus pool, and the overall pool could be smaller because of related losses.
Sources at some of the banks described the atmosphere around bonuses as grim and anxious.
Bonus declines would be coming on top of a weak 2018 bonus season for Wall Street, when the average bonus paid to a securities industry employee in New York fell 17% to $153,700, according to a report by the New York State Comptroller Thomas DiNapoli.
Despite the anticipated declines, many bankers aren’t too concerned because even without bonuses, their salaries average $398,600 compared to a broader state average for workers of $79,800, the comptroller found.
“I don’t live my life based on my bonus because its purely discretionary,” a JPMorgan investment banker said, shrugging off the uncertainty.
But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.
Those awards typically account for one-third of compensation for employees who receive them, so they are important.
By now, division heads usually have a sense of what a bonus pool will look like and what portion their divisions will get. Although formal bonus communications can happen as late as March, executives and consultants start working on decisions after Labor Day and tend to give unofficial guidance to staff before year-end, sources said.
But because there is so much uncertainty about what might happen in overnight lending in late December, and the ripple effects it could have on other markets, many executives are taking the unusual step of waiting to divvy up bonus pools until the year is completely finished.
“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.”
At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.
Johnson’s firm publishes a closely watched annual report forecasting where Wall Street bonuses are headed. It found that most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%, Johnson Associates predicted.
The expected declines reflect less-than-stellar results across the banking industry this year. Although the industry has recovered dramatically from the 2007-2009 financial crisis, a fresh round of interest-rate cuts from central banks combined with subdued loan demand, weak trading results and declines in some areas of investment banking have left revenue and profits treading water.
During the first nine months of the year, Goldman Sachs Group Inc (GS.N) and the capital markets divisions of JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) reported declines of 1-8% in revenue and 8-18% in profit. Citigroup Inc (C.N) was an outlier, reporting flat revenue and a 1% gain in year-to-date earnings.
Even those who worked on big deals or in business areas or that did well — say, bankers who worked on Bristol-Myers Squibb’s (BMY.N) $74 billion acquisition of Celgene, or traders who generated a lot of revenue helping companies manage falling rates — are not assured of a rich bonus.
GRIM, ANXIOUS
Their bonuses are tied to the performance of divisions and companies overall. That means if a trading division suffers from market chaos, it will get less of the bonus pool, and the overall pool could be smaller because of related losses.
Sources at some of the banks described the atmosphere around bonuses as grim and anxious.
Bonus declines would be coming on top of a weak 2018 bonus season for Wall Street, when the average bonus paid to a securities industry employee in New York fell 17% to $153,700, according to a report by the New York State Comptroller Thomas DiNapoli.
Despite the anticipated declines, many bankers aren’t too concerned because even without bonuses, their salaries average $398,600 compared to a broader state average for workers of $79,800, the comptroller found.
“I don’t live my life based on my bonus because its purely discretionary,” a JPMorgan investment banker said, shrugging off the uncertainty.
opinion
Nobel laureate economist Joseph Stiglitz: It's time for Congress to do something about the economic mess that private-equity giants have created
Joseph Stiglitz - business insider
12/7/19
- The private-equity industry has been extracting wealth from the US economy for investors at the expense of the American economy for too long.
- The private-equity industry is too secretive, loads takeover targets with too much debt, and pushes companies to lay off too many workers.
- Given the problems with private equity, Congress is right to try to crack down on the industry with the new Stop Wall Street Looting Act.
- Joseph E. Stiglitz was awarded the Nobel Prize in Economics in 2001. He is a professor at Columbia University, and his most recent book is "People, Power and Profits: Progressive Capitalism for an Age of Discontent."
Over the past decade, a large body of research has confirmed what many of us have long suspected, namely that American capitalism is a far cry from the textbook model of a competitive, efficient economy. Instead, the United States is now home to far too many of what economists call "rent seekers."
These are economic actors who take advantage of others through market power, through individual vulnerabilities, and through inside or unequal information. They grab an unfairly large slice of the pie at the expense of other people, rather than adding to the nation's wealth.
Markets where rent-seeking is prevalent are neither efficient nor fair, and they help explain America's increasing inequality and weakening growth.
One of those rent-seeking sectors is finally getting the attention it deserves: private equity.
The private-equity industry has exploded in size over the past two decades, from $700 billion in global assets in 2000 to $5.8 trillion in 2018. In the US, it now controls 8,000 companies, more than twice as many as are traded on public markets. This all came about without any debate over whether this immensely influential industry is playing by the right rules.
As they stand, the rules ensure that private-equity barons win, no matter who else loses. Of course, not all private-equity players are exploitative. But even the good actors play on a field advantageous to them, as they exploit rules that create opacity, prevent accountability for their harmful effects, and preserve unjustifiable tax advantages.
Reining in the private-equity industry
Legislation introduced this summer by US lawmakers, including Sens. Elizabeth Warren, Bernie Sanders, Sherrod Brown, and Tammy Baldwin, and Reps. Mark Pocan and Pramila Jayapal, proposes at long last to change that.
Now, from the presidential campaign trail in Iowa to the financial press in New York to Washington policy wonks, we are discussing this set of new answers to how we address abuses in private equity that have turned parts of this massive industry into straightforward wealth extractors, not creators.
Start at the beginning of the life cycle of a private-equity fund with the investors who entrust their money to firms that promise them a healthy return. Markets deliver efficient outcomes if there is transparency. Behind a cloak of secrecy, exploitation can run rampant.
The allocation of capital can be efficient only if both investor and asset manager have credible information about the track record of the private-equity firms and their portfolio companies. Alas, even some of the most sophisticated investors on the planet — pension funds, university endowments — can't obtain that data from private-equity firms.
For example, the industry's preferred metric, the internal rate of return, is notoriously prone to manipulation. Private-equity firms often exclude money they have not yet invested when calculating a rate of return. But they will not hesitate to include that money when calculating the management fees that make the business particularly lucrative, regardless of how successfully executives invest. In the market for dollars that private equity raises, the information investors have to go on is simply not clear.
The bill introduced this summer, the Stop Wall Street Looting Act, would bring a measure of standardization and transparency for the benefit of investors by creating standard, annual, disclosures that would allow comparison shopping.
The bill would also ban efforts by private-equity firms to contractually squirm out of the fiduciary duty they owe investors, an all-too-frequent phenomenon. And it would curb fees charged to portfolio companies that are added on to the fees charged for fund management and performance often for nonexistent services, to dodge taxes.
The private-equity debt problem
Then there is the debt. Private equity's business model is built on acquisitions via debt — 70 or 80% is not unheard of. And Wall Street banks provide this debt in a way that creates perverse incentives. Banks lend the money for private-equity firms to acquire target companies, and then turn the loan into securities they sell to other investors, leaving the bankers with no stake in the outcome.
And when the company acquired by the private-equity firm is loaded with debt, private-equity firms can fire workers and sell assets to pay it down debt and generate capital for distribution to the owners — themselves. This problem is not theoretical; it's exactly what happened at retailers such as Toys R Us, Sears, and Shopko.
The new proposal would introduce a suite of changes to combat this practice including a limit to the tax deductibility of debt and a requirement for banks that finance these deals to retain a portion of the loans they underwrite.
Crucially, the Stop Wall Street Looting Act would extend the liability for the obligations of a target company to the private-equity firm itself, ensuring that the private-equity executives are on the hook for some of the risk created by loading a takeover target with debt, and do not simply reap the rewards.
Private-equity benefits from an even more outrageous provision called "carried interest," whereby managers in these enterprises are taxed on their returns from managerial activities at the very favorable capital-gains tax rate, about half the rate that those engaged in other managerial activities or workers are taxed. This is not only unfair, but it encourages the growth of these nontransparent exploitative enterprises. That would end under this bill.
Stopping the destruction of jobs
Finally, a recent study by groups including Americans for Financial Reform found that private-equity bankruptcies in the retail industry alone cost 600,000 jobs. One of those laid off, Giovanna De La Rosa, told of her experiences in this publication. The best outcome would be fewer bankruptcies, but when they happen, the welfare of workers needs to be at the top of the list, not at the bottom.
Private-equity cannot simply reap the rewards of cost-cutting and let others bear the dislocations in the lives of the workers and the communities in which they operate. So the legislation would tweak bankruptcy laws to improve the treatment of worker severance, limit executive payouts, and favor purchase offers that preserve employment.
What enables a market economy to serve American society is informed competition with a fair set of rules where decision makers bear the full consequences of their actions. A system in which private equity can hoodwink investors, rely on debt to fund acquisitions — raised by banks that pass the risk on to others — and then extract wealth from viable going concerns, is a far cry from a just market economy. It is a creation of already rich Wall Street financiers who win even if everyone else loses.
If private equity is to work to the benefit of all stakeholders, then Congress needs to demonstrate the same talent for making markets work that bad actors on Wall Street have shown for sabotaging them.
Off the radar: U.S. CEOs' jet perks add millions to corporate tax bills
Tim McLaughlin - reuters
DECEMBER 2, 2019
BOSTON (Reuters) - As U.S. corporate jet use approaches pre-financial crisis levels and chief executives take an increasing number of personal trips on the company tab, many investors are being kept in the dark about the true cost of the perk.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
The monopolization of milk
Claire Kelloway / Washington Monthly - alternet
November 21, 2019
Earlier this year, both The New York Times and National Public Radio reported that Chinese retaliatory tariffs in Trump’s trade war were accelerating the loss of U.S. dairy farms. In the first half of 2019, dairy exports to China were down 54 percent from the previous year, at a time when dairy farmers rely on exports to market a surplus of milk that’s driven milk prices below most farmers’ break-even point for nearly four years.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
The plutocrats’ most effective secret weapon is the U.S. tax code
Jim Hightower / Creators Syndicate - alternet
November 12, 2019
I should start this homily on inequality by distinguishing income from wealth. Income is your annual wages or salary, as well as your earnings from a business, pension or government benefits such as Social Security, etc.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
- Startling statistic: 1 in 5 Americans have zero net worth — or less. Many of us owe more than we own and, living paycheck to paycheck, can’t get ahead to build a nest egg.
- More startling statistic: U.S. wealth disparity is the greatest of any advanced economy in the world, with the richest 1% holding more of our nation’s wealth than the bottom 90% of us.
- Even more startling: Just three Americans — Jeff Bezos (Amazon), Bill Gates (Microsoft) and Warren Buffett (Berkshire Hathaway) — possess more personal wealth ($248 billion) than the entire bottom half. Yes, more than 165 million of us combined.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
the thieves at the top!!!
U.S. company directors compensated more than ever, but now risk backlash
Tim McLaughlin - reuters
NOVEMBER 8, 2019
BOSTON (Reuters) - It’s nice work if you can get it.
The average annual compensation for non-executive directors at S&P 500 companies rose 2 percent to $304,856 last year, topping $300,000 for the first time and 43 percent higher than it was 10 years ago, according to a new report released by executive headhunters Spencer Stuart.
But thanks largely to stock grants some earned a lot more than that.
Directors at biotechnology company Regeneron Pharmaceuticals Inc received, on average, $1.2 million in compensation last year. That figure does not include the more than $6 million received by Regeneron’s independent chairman, company disclosures show.
And the non-executive directors of Wall Street powerhouse Goldman Sachs Group Inc made $599,279 on average in 2018, the highest for any financial company in the S&P. That was, though, down from $604,837 in 2017. The investment bank, which had 13 board meetings last year, declined to comment beyond disclosures in its proxy statement.
S&P 500 boards met, on average, just 7.9 times, in person or via telephone, during 2018. That’s down from 9 a decade ago, according to Spencer Stuart.
The bigger payouts are being made at a sensitive time for Corporate America. A top contender for the Democratic presidential nomination for the 2020 election, Elizabeth Warren, has the boardroom in her sights as she seeks to tackle inequality in American society. As well as proposals such as a wealth tax aimed at billionaires, Warren has proposed that workers at U.S. corporations elect at least 40% of board members.
Warren’s campaign declined to comment.
Investors are also taking an increasingly feisty view of directors’ compensation, which is typically set by the board itself. A growing number of shareholder lawsuits are challenging big-ticket board compensation packages.
As a result, more companies are expected to put these matters to a shareholder vote at company annual meetings, said Paul Hodgson, a compensation expert and senior adviser at ESGuage, a corporate governance data and analysis firm.
“There’s a certain amount of nervousness within companies about what they’re paying directors,” Hodgson said. “More attention is being paid to outliers than in the past.”
Compensation limits are also becoming more prevalent, with advisory firms Institutional Shareholder Services and Glass Lewis backing demands from some shareholders, according to global risk advisory firm Willis Towers Watson.
A study by the firm found that the number of companies with an annual compensation limit for directors increased to 63% in 2018 from 55% the previous year.
For some, being a director can mean doing as little as attending regularly scheduled meetings.
Board experts say, though, that the job can be a lot more demanding than that. The National Association of Corporate Directors estimates board members commit at least 250 hours a year to their responsibilities.
A director may visit company factories and offices, read and comment on background papers, and is often involved in board committee work. Regeneron director Christine Poon, for example, participated in 21 meetings last year, including 10 as chair of the compensation committee.
Directors at software developer Roper Technologies Inc, who on average received nearly $910,000 in 2018, participate in at least 15 days of board meetings a year, according to the company’s proxy filing. That works out at over $60,000 per day.
Roper says the compensation reflects their contribution to the company’s superior performance - a cumulative return of 1,084% over the past 15 years compared with the S&P 500’s 207%, according to the proxy.
Roper did not return email and calls seeking comment.
Some companies are proud to be miserly. Microsoft Corp founder Bill Gates received just $3,300 last year for his work as a director of Berkshire Hathaway Inc, which is run by fellow billionaire Warren Buffett.
And directors at fashion company Ralph Lauren Corp received nearly all of their pay in cash in 2018, and made a lot less than their peers, pulling down just $107,299, according to Spencer Stuart. At some companies, there is a delay in directors receiving the full benefit of their service. That is the case at Goldman, whose directors don’t receive shares from their restricted stock grants until they retire.
Smaller, lesser known biopharmaceutical companies can offer the biggest compensation packages.
Vertex Pharmaceuticals Inc awards a $400,000 restricted stock grant to directors that vests after one year. It’s the key feature in a package that averaged $613,128 per director last year. Vertex did not return messages seeking comment.
Regeneron Chairman Roy Vagelos received $6.35 million in 2018, benefiting from big stock option awards, and that was down from $11.8 million in 2017.
Regeneron, known for drugs that treat eye disease, held six board meetings in 2018. Vagelos, a former CEO of Merck & Co Inc, attended all of those as well as three technology committee meetings.
“The quality of our board is unparalleled – over half our directors are members of the National Academy of Sciences and two of our directors are Nobel laureates,” said Regeneron spokeswoman Alexandra Bowie when asked about the compensation
Last year, though, Regeneron did agree to curb its director pay as part of a settlement with investors who sued the company, claiming Vagelos and other directors received excessive compensation.
A new compensation plan in effect this year has resulted in a nearly 50% year-over-year decrease in the reported value of director stock awards on the day they were granted. That will probably start to be reflected in 2019 numbers.
Pharmaceutical company Incyte Corp, whose board members made an average of $493,657 in 2018, also re-evaluated the way it structured directors’ compensation after getting investors’ push back.
Incyte eliminated grants that fixed the number of shares given to directors at the same level each year. When the shares climbed this immediately gave them a year-on-year windfall.
The company now makes annual stock grants based on a target dollar value. Incyte also discontinued an enhanced initial grant of stock for new directors.
“These changes make our board compensation consistent with other companies,” Incyte spokeswoman Catalina Loveman said.
The average annual compensation for non-executive directors at S&P 500 companies rose 2 percent to $304,856 last year, topping $300,000 for the first time and 43 percent higher than it was 10 years ago, according to a new report released by executive headhunters Spencer Stuart.
But thanks largely to stock grants some earned a lot more than that.
Directors at biotechnology company Regeneron Pharmaceuticals Inc received, on average, $1.2 million in compensation last year. That figure does not include the more than $6 million received by Regeneron’s independent chairman, company disclosures show.
And the non-executive directors of Wall Street powerhouse Goldman Sachs Group Inc made $599,279 on average in 2018, the highest for any financial company in the S&P. That was, though, down from $604,837 in 2017. The investment bank, which had 13 board meetings last year, declined to comment beyond disclosures in its proxy statement.
S&P 500 boards met, on average, just 7.9 times, in person or via telephone, during 2018. That’s down from 9 a decade ago, according to Spencer Stuart.
The bigger payouts are being made at a sensitive time for Corporate America. A top contender for the Democratic presidential nomination for the 2020 election, Elizabeth Warren, has the boardroom in her sights as she seeks to tackle inequality in American society. As well as proposals such as a wealth tax aimed at billionaires, Warren has proposed that workers at U.S. corporations elect at least 40% of board members.
Warren’s campaign declined to comment.
Investors are also taking an increasingly feisty view of directors’ compensation, which is typically set by the board itself. A growing number of shareholder lawsuits are challenging big-ticket board compensation packages.
As a result, more companies are expected to put these matters to a shareholder vote at company annual meetings, said Paul Hodgson, a compensation expert and senior adviser at ESGuage, a corporate governance data and analysis firm.
“There’s a certain amount of nervousness within companies about what they’re paying directors,” Hodgson said. “More attention is being paid to outliers than in the past.”
Compensation limits are also becoming more prevalent, with advisory firms Institutional Shareholder Services and Glass Lewis backing demands from some shareholders, according to global risk advisory firm Willis Towers Watson.
A study by the firm found that the number of companies with an annual compensation limit for directors increased to 63% in 2018 from 55% the previous year.
For some, being a director can mean doing as little as attending regularly scheduled meetings.
Board experts say, though, that the job can be a lot more demanding than that. The National Association of Corporate Directors estimates board members commit at least 250 hours a year to their responsibilities.
A director may visit company factories and offices, read and comment on background papers, and is often involved in board committee work. Regeneron director Christine Poon, for example, participated in 21 meetings last year, including 10 as chair of the compensation committee.
Directors at software developer Roper Technologies Inc, who on average received nearly $910,000 in 2018, participate in at least 15 days of board meetings a year, according to the company’s proxy filing. That works out at over $60,000 per day.
Roper says the compensation reflects their contribution to the company’s superior performance - a cumulative return of 1,084% over the past 15 years compared with the S&P 500’s 207%, according to the proxy.
Roper did not return email and calls seeking comment.
Some companies are proud to be miserly. Microsoft Corp founder Bill Gates received just $3,300 last year for his work as a director of Berkshire Hathaway Inc, which is run by fellow billionaire Warren Buffett.
And directors at fashion company Ralph Lauren Corp received nearly all of their pay in cash in 2018, and made a lot less than their peers, pulling down just $107,299, according to Spencer Stuart. At some companies, there is a delay in directors receiving the full benefit of their service. That is the case at Goldman, whose directors don’t receive shares from their restricted stock grants until they retire.
Smaller, lesser known biopharmaceutical companies can offer the biggest compensation packages.
Vertex Pharmaceuticals Inc awards a $400,000 restricted stock grant to directors that vests after one year. It’s the key feature in a package that averaged $613,128 per director last year. Vertex did not return messages seeking comment.
Regeneron Chairman Roy Vagelos received $6.35 million in 2018, benefiting from big stock option awards, and that was down from $11.8 million in 2017.
Regeneron, known for drugs that treat eye disease, held six board meetings in 2018. Vagelos, a former CEO of Merck & Co Inc, attended all of those as well as three technology committee meetings.
“The quality of our board is unparalleled – over half our directors are members of the National Academy of Sciences and two of our directors are Nobel laureates,” said Regeneron spokeswoman Alexandra Bowie when asked about the compensation
Last year, though, Regeneron did agree to curb its director pay as part of a settlement with investors who sued the company, claiming Vagelos and other directors received excessive compensation.
A new compensation plan in effect this year has resulted in a nearly 50% year-over-year decrease in the reported value of director stock awards on the day they were granted. That will probably start to be reflected in 2019 numbers.
Pharmaceutical company Incyte Corp, whose board members made an average of $493,657 in 2018, also re-evaluated the way it structured directors’ compensation after getting investors’ push back.
Incyte eliminated grants that fixed the number of shares given to directors at the same level each year. When the shares climbed this immediately gave them a year-on-year windfall.
The company now makes annual stock grants based on a target dollar value. Incyte also discontinued an enhanced initial grant of stock for new directors.
“These changes make our board compensation consistent with other companies,” Incyte spokeswoman Catalina Loveman said.
Investors left exposed as Trump's SEC gives America Inc a helping hand
Katanga Johnson - reuters
NOVEMBER 5, 2019 / 11:10 PM
WASHINGTON (Reuters) - The United States’ top market cop is slowly taking the shackles off corporations.
Since becoming head of the Securities and Exchange Commission (SEC) in 2017, Jay Clayton has presided over more than two dozen measures which make life easier for America Inc, according to a Reuters analysis of SEC announcements and interviews with more than a dozen lawyers, academics and advocacy groups.
The changes — 17 implemented so far with a further nine proposed — are part of a broader push to help reverse a 20-year decline in U.S. public company listings by modernizing disclosures and cutting regulatory costs for firms.
But a majority of them will weaken investor safeguards or diminish their rights, according to lawyers, consumer and investor groups and SEC sources.
“Under Clayton’s leadership, the Securities and Exchange Commission has been quietly chipping away at an array of rules, many quite technical in nature,” said Anna Pinedo, a partner at law firm Mayer Brown.
“Although individually these haven’t gotten much attention, in aggregate the SEC’s rulemaking agenda under Clayton adds up to positive changes for public companies.”
Clayton declined to be interviewed for this story but his spokeswoman said protecting the interests of Main Street investors was a top priority.
“The initiatives advanced under his leadership maintain or enhance investor protections, including by ensuring today’s investors receive the material information necessary to make investment decisions,” Natalie Strom said in a statement.
Appointed by President Donald Trump with a mandate to entice more companies to go public, Clayton pledged to boost jobs and pension pots by making it more attractive for small companies to sell shares on stock exchanges while also protecting mom-and-pop investors.
Corporations led by the U.S. Chamber of Commerce, the country’s biggest business group, have said red tape is partly to blame for a 50% decline in the number of listed companies over the past two decades.
“Clayton recognizes that the decline of public companies is a threat to the long-term competitiveness of the American economy,” said Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets Competitiveness.
“Clayton has taken a holistic step-by-step approach to reverse this situation.”
But trimming companies’ disclosure requirements, for example by giving them more leeway over how and what they divulge in regulatory filings, and more freedom to make redactions, mean investors will get less information, say critics.
It is still too early to see the full effects of most of the changes but corporate governance experts worry that they swing the balance in favor of companies and make public markets more treacherous for both institutional and retail investors.
“The deregulatory agenda now advancing at the SEC is too often driven by lobbyist intuition rather than hard facts about the markets we oversee,” Robert Jackson, one of five SEC commissioners, told Reuters. He has opposed several of the measures.
One of Clayton’s most contentious proposals would relax a requirement, created by Congress in 2002 following the Enron accounting scandal, for companies with less than $100 million in revenues to get their internal financial reporting controls signed-off by an independent auditor.
Another controversial proposal to cap financial rewards for whistleblowers could reduce the incentive for company insiders to come forward with evidence of wrongdoing. After fierce attacks by corporate governance advocates, that proposal may be softened as Clayton tries to get it across the line in coming months.
This week, he proposed changes that would limit the ability of shareholders to submit proposals on items like executive compensation to company management.
To be sure, Clayton has toughened market oversight in some areas. Some of the measures aimed at simplifying financial disclosures make it easier for investors to identify material information and give them more information on certain topics, such as how company employees deal in their stock.
Cryptocurrency offerings have slumped after Clayton said they should be regulated like stock offerings, and he passed a package of measures this year requiring stockbrokers to disclose potential conflicts of interest, and the commissions they earn, when giving financial advice.
The broker rules, however, were heavily criticized by advocates for mom-and-pop investors who said they still left investors exposed to conflicted advice.
Going public is expensive. Investment bankers, lawyers and auditors collectively charge millions of dollars to prepare companies for their stock market debut and it can cost millions more to comply with ongoing regulatory requirements.
But there are other reasons why companies are staying private, denying ordinary investors the sort of investment opportunities they traditionally rely on to fund their retirement.
For one, deregulation in the private market since 1996 has made it easier for firms to raise money from private investors, cutting most Americans out of the equation. Record low interest rates in recent years have spurred those wealthy individuals and institutions to put more cash into start-up investments.
Over the past five years, there has been at least $150 billion raised in private equity and debt placements, compared to $90 billion over the previous period, according to data from Dealogic. The overall figure is likely to be far larger as data on such private deals is not comprehensive.
And while the total number of public companies is lower than 20 years ago, the total value of public companies has doubled, partly due to mergers and acquisitions.
The IPO market has improved this year. As of the end of October, there had been 37 small-cap company listings, each raising between $300 million and $1 billion, on track to beat last year’s 39 listings and in line with 2017.
Bankers said this was largely due to a buoyant stock market, boosted by record low interest rates, rather than any regulatory changes introduced by the SEC.
“Although these new tools have been put in place and positively received, the continued strength of the broader market has been the primary factor driving IPO volumes,” said Jim Cooney, head of equity capital markets for the Americas at Bank of America.
A former Wall Street deals lawyer who has represented a roster of big banks and hedge funds, including Goldman Sachs and Deutsche Bank, Clayton initially disappointed Republicans and corporate lobbyists who had hoped he would hand them quick big wins.
Instead, Clayton focused on building consensus with the four other commissioners who decide on rule-making and enforcement actions at the SEC. Two of the five current commissioners were picked by the Democratic party. The rest, including Clayton, are Republican appointees.
Over the past year, though, Clayton has proved more willing to push through changes despite dissent from the Democratic commissioners, most notably Jackson, who has voted against several measures since joining in January 2018.
Jackson, an academic who has studied the reliability of corporate disclosures, said reducing the frequency and substance of information companies had to publish, “comes with real costs for real people”.
Allison Lee, the other Democrat commissioner, declined to comment. Republican commissioners Hester Peirce and Elad Roisman, did not respond to requests for comment.
Since becoming head of the Securities and Exchange Commission (SEC) in 2017, Jay Clayton has presided over more than two dozen measures which make life easier for America Inc, according to a Reuters analysis of SEC announcements and interviews with more than a dozen lawyers, academics and advocacy groups.
The changes — 17 implemented so far with a further nine proposed — are part of a broader push to help reverse a 20-year decline in U.S. public company listings by modernizing disclosures and cutting regulatory costs for firms.
But a majority of them will weaken investor safeguards or diminish their rights, according to lawyers, consumer and investor groups and SEC sources.
“Under Clayton’s leadership, the Securities and Exchange Commission has been quietly chipping away at an array of rules, many quite technical in nature,” said Anna Pinedo, a partner at law firm Mayer Brown.
“Although individually these haven’t gotten much attention, in aggregate the SEC’s rulemaking agenda under Clayton adds up to positive changes for public companies.”
Clayton declined to be interviewed for this story but his spokeswoman said protecting the interests of Main Street investors was a top priority.
“The initiatives advanced under his leadership maintain or enhance investor protections, including by ensuring today’s investors receive the material information necessary to make investment decisions,” Natalie Strom said in a statement.
Appointed by President Donald Trump with a mandate to entice more companies to go public, Clayton pledged to boost jobs and pension pots by making it more attractive for small companies to sell shares on stock exchanges while also protecting mom-and-pop investors.
Corporations led by the U.S. Chamber of Commerce, the country’s biggest business group, have said red tape is partly to blame for a 50% decline in the number of listed companies over the past two decades.
“Clayton recognizes that the decline of public companies is a threat to the long-term competitiveness of the American economy,” said Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets Competitiveness.
“Clayton has taken a holistic step-by-step approach to reverse this situation.”
But trimming companies’ disclosure requirements, for example by giving them more leeway over how and what they divulge in regulatory filings, and more freedom to make redactions, mean investors will get less information, say critics.
It is still too early to see the full effects of most of the changes but corporate governance experts worry that they swing the balance in favor of companies and make public markets more treacherous for both institutional and retail investors.
“The deregulatory agenda now advancing at the SEC is too often driven by lobbyist intuition rather than hard facts about the markets we oversee,” Robert Jackson, one of five SEC commissioners, told Reuters. He has opposed several of the measures.
One of Clayton’s most contentious proposals would relax a requirement, created by Congress in 2002 following the Enron accounting scandal, for companies with less than $100 million in revenues to get their internal financial reporting controls signed-off by an independent auditor.
Another controversial proposal to cap financial rewards for whistleblowers could reduce the incentive for company insiders to come forward with evidence of wrongdoing. After fierce attacks by corporate governance advocates, that proposal may be softened as Clayton tries to get it across the line in coming months.
This week, he proposed changes that would limit the ability of shareholders to submit proposals on items like executive compensation to company management.
To be sure, Clayton has toughened market oversight in some areas. Some of the measures aimed at simplifying financial disclosures make it easier for investors to identify material information and give them more information on certain topics, such as how company employees deal in their stock.
Cryptocurrency offerings have slumped after Clayton said they should be regulated like stock offerings, and he passed a package of measures this year requiring stockbrokers to disclose potential conflicts of interest, and the commissions they earn, when giving financial advice.
The broker rules, however, were heavily criticized by advocates for mom-and-pop investors who said they still left investors exposed to conflicted advice.
Going public is expensive. Investment bankers, lawyers and auditors collectively charge millions of dollars to prepare companies for their stock market debut and it can cost millions more to comply with ongoing regulatory requirements.
But there are other reasons why companies are staying private, denying ordinary investors the sort of investment opportunities they traditionally rely on to fund their retirement.
For one, deregulation in the private market since 1996 has made it easier for firms to raise money from private investors, cutting most Americans out of the equation. Record low interest rates in recent years have spurred those wealthy individuals and institutions to put more cash into start-up investments.
Over the past five years, there has been at least $150 billion raised in private equity and debt placements, compared to $90 billion over the previous period, according to data from Dealogic. The overall figure is likely to be far larger as data on such private deals is not comprehensive.
And while the total number of public companies is lower than 20 years ago, the total value of public companies has doubled, partly due to mergers and acquisitions.
The IPO market has improved this year. As of the end of October, there had been 37 small-cap company listings, each raising between $300 million and $1 billion, on track to beat last year’s 39 listings and in line with 2017.
Bankers said this was largely due to a buoyant stock market, boosted by record low interest rates, rather than any regulatory changes introduced by the SEC.
“Although these new tools have been put in place and positively received, the continued strength of the broader market has been the primary factor driving IPO volumes,” said Jim Cooney, head of equity capital markets for the Americas at Bank of America.
A former Wall Street deals lawyer who has represented a roster of big banks and hedge funds, including Goldman Sachs and Deutsche Bank, Clayton initially disappointed Republicans and corporate lobbyists who had hoped he would hand them quick big wins.
Instead, Clayton focused on building consensus with the four other commissioners who decide on rule-making and enforcement actions at the SEC. Two of the five current commissioners were picked by the Democratic party. The rest, including Clayton, are Republican appointees.
Over the past year, though, Clayton has proved more willing to push through changes despite dissent from the Democratic commissioners, most notably Jackson, who has voted against several measures since joining in January 2018.
Jackson, an academic who has studied the reliability of corporate disclosures, said reducing the frequency and substance of information companies had to publish, “comes with real costs for real people”.
Allison Lee, the other Democrat commissioner, declined to comment. Republican commissioners Hester Peirce and Elad Roisman, did not respond to requests for comment.
We Already Have a Wealth Tax. It’s Just Paid to Hedge Fund Managers.
BY Alexis Goldstein, Truthout
PUBLISHED October 31, 2019
Volatility in the markets is very scary for ordinary U.S. citizens who face real repercussions from economic downturns. But this volatility is positively golden for traders on Wall Street and at hedge funds.
I spent seven years working on Wall Street, and the traders I knew prided themselves on making money whether the market was crashing or surging. That’s why I’m so skeptical of the now two billionaire hedge fund managers who predict a market crash if Elizabeth Warren or Bernie Sanders is elected president. These billionaires don’t care about the horrific consequences that a market downturn would have on ordinary U.S. citizens. They care about their tax rate.
Tuesday, billionaire hedge fund manager Paul Tudor Jones told the Robin Hood Investors Conference that if Sen. Elizabeth Warren is elected president, the U.S. stock market will drop 25 percent due to fears over her proposed wealth tax. Jones is parroting the exact prediction that a different billionaire hedge fund manager, Leon Cooperman, made two weeks ago. Cooperman told CNBC that the market would tank by 25 percent if either Warren or Sen. Bernie Sanders wins the general election. “What is their problem with billionaires?” he lamented.
These billionaire traders aren’t actually concerned about the economy, and they sure aren’t telling you what they really think about where the market would go should Sanders or Warren win the presidency. No trader I ever worked with would ever give away market advice for free. Traders work hard to develop an “edge,” be it from obscure research, building the fastest trading system, or even just leveraging the rumor mill. Hedge fund managers are even less likely to tell you what they really think about the direction of the market, because their wealthy clients pay enormous sums for their opinions. You never give up your edge to others for free.
All the wealth tax tantrums among these billionaire traders belie the simple fact that they already charge a wealth tax, of sorts, themselves. Hedge fund managers charge their clients an upfront fee of 2 percent of their entire investment, just to get in the door. This just so happens to match the base wealth tax rate Warren is proposing: 2 cents on every dollar. Hedge fund managers then also take 20 percent of any profits they make for their clients each year. If hedge fund billionaires are happy to charge their clients a 2 percent participation fee, they should expect to pay at least that same 2 percent fee themselves to participate in society. Just as a hedge fund’s initial fee gains an investor access to a fund, so does a wealth tax help provide for the basic infrastructure, education and, well, bank rescues that the federal government has historically provided.
I also think that Jones and Cooperman are just scaremongering, rather than voicing any real concern, because traders like them don’t actually care if the market goes up or down. The entire premise of a hedge fund is that any manager worth their salt is so clever, they’ll make money for you in up markets or down. But while a plunge in the stock market may not scare them, the prospect of their own taxes going up absolutely does.
Jones’s net worth is $5.1 billion. Cooperman’s, $3.2 billion. Under Warren’s proposed wealth tax, which only kicks in after $50 million in wealth, Jones would owe $123 million per year — a 2 percent tax on the first $950 million, and a 3 percent tax on the remaining $4.1 billion. Cooperman would owe $85 million annually. Under Sanders’s tax on extreme wealth, which starts at 1 percent for wealth above $32 million, and increases gradually till it maxes out at 8 percent for wealth over $10 billion, Jones would owe $263.7 million each year, and Cooperman would owe $148.7 million.
Sanders and Warren aren’t the only Democratic primary candidates supporting a wealth tax. Billionaire Tom Steyer, himself a former hedge fund manager, has proposed a wealth tax of 1 percent on those with over $32 million in net worth, under which Jones would owe $58.7 million, and Cooperman would owe $31.7 million.
Julián Castro has also proposed a Wealth Inequality Tax for those in the top 0.1 percent of fortunes, which would tax income from capital each year at the same rate labor income is, rather than only when that capital is sold.
Other billionaires, and those who love them, have done their own pearl-clutching about Warren and Sanders’s support for a wealth tax. When CNBC’s Jim Cramer said on September 10 that financial executives were fearful of Warren winning, the senator proudly quote-tweeted the segment with the quip, “I’m Elizabeth Warren and I approve this message.” Billionaire fund manager Roy Baron said last Friday that Warren’s wealth tax is “pretty nuts.” It makes sense that he’d be bothered: Baron’s personal net worth is 2.4 billion, and he’d pay $61 million, $106.7 million, and $213.4 million under Steyer, Warren and Sanders’ plans, respectively. Meanwhile, billionaire and former New York City mayor Michael Bloomberg said in January that Warren’s wealth tax was unconstitutional, saying of the plan, “It’s called Venezuela.” Bloomberg, who is worth an astonishing $51.2 billion, would owe $512 million under Steyer’s plan, $1.5 billion under Warren’s, and $3.8 billion annually under Sanders.
If it sounds like these billionaires would be paying a whole lot of money if a wealth tax were implemented — that’s true! But these taxes wouldn’t put a dent in these billionaires’ bottom lines, and the money could be used to fund popular and needed investments to support the needs of the U.S. public. Warren’s wealth tax is how she intends to fund everything from free college to universal child care to a $450 billion boost in public high schools. And it’s also hardly the first time Wall Street or its allies have disingenuously warned about harms to the market should they face political accountability. Long before Rep. Maxine Waters (D-California) assumed the chair of the powerful House Financial Services Committee, a former McKinsey consultant warned in 2012 that if Waters ever became chair, “Most of the international banks would start folding their tents.” Chairwoman Waters has been doing her job overseeing the financial markets for 10 months now, and the international banking giants have not packed up and left.
When I was working at Merrill Lynch right before the 2008 financial crisis, one of the traders told me that no matter what happened in the world, you have to ask yourself, “how do I trade this?” What he meant was that a trader’s task is to figure out, given the news of the day, which bets would make the most money.
While watching the strength of both Sanders and Warren in the polls, these billionaire traders are, as they always do, trying to maximize their profits. But in order to do so, they need to enlist the help of a scared public, whom they hope to intimidate away from any support of a meaningful wealth tax. These billionaires may have fooled their wealthy investors into giving them millions in fees each year — but that doesn’t mean the public has to buy their nonsense.
I spent seven years working on Wall Street, and the traders I knew prided themselves on making money whether the market was crashing or surging. That’s why I’m so skeptical of the now two billionaire hedge fund managers who predict a market crash if Elizabeth Warren or Bernie Sanders is elected president. These billionaires don’t care about the horrific consequences that a market downturn would have on ordinary U.S. citizens. They care about their tax rate.
Tuesday, billionaire hedge fund manager Paul Tudor Jones told the Robin Hood Investors Conference that if Sen. Elizabeth Warren is elected president, the U.S. stock market will drop 25 percent due to fears over her proposed wealth tax. Jones is parroting the exact prediction that a different billionaire hedge fund manager, Leon Cooperman, made two weeks ago. Cooperman told CNBC that the market would tank by 25 percent if either Warren or Sen. Bernie Sanders wins the general election. “What is their problem with billionaires?” he lamented.
These billionaire traders aren’t actually concerned about the economy, and they sure aren’t telling you what they really think about where the market would go should Sanders or Warren win the presidency. No trader I ever worked with would ever give away market advice for free. Traders work hard to develop an “edge,” be it from obscure research, building the fastest trading system, or even just leveraging the rumor mill. Hedge fund managers are even less likely to tell you what they really think about the direction of the market, because their wealthy clients pay enormous sums for their opinions. You never give up your edge to others for free.
All the wealth tax tantrums among these billionaire traders belie the simple fact that they already charge a wealth tax, of sorts, themselves. Hedge fund managers charge their clients an upfront fee of 2 percent of their entire investment, just to get in the door. This just so happens to match the base wealth tax rate Warren is proposing: 2 cents on every dollar. Hedge fund managers then also take 20 percent of any profits they make for their clients each year. If hedge fund billionaires are happy to charge their clients a 2 percent participation fee, they should expect to pay at least that same 2 percent fee themselves to participate in society. Just as a hedge fund’s initial fee gains an investor access to a fund, so does a wealth tax help provide for the basic infrastructure, education and, well, bank rescues that the federal government has historically provided.
I also think that Jones and Cooperman are just scaremongering, rather than voicing any real concern, because traders like them don’t actually care if the market goes up or down. The entire premise of a hedge fund is that any manager worth their salt is so clever, they’ll make money for you in up markets or down. But while a plunge in the stock market may not scare them, the prospect of their own taxes going up absolutely does.
Jones’s net worth is $5.1 billion. Cooperman’s, $3.2 billion. Under Warren’s proposed wealth tax, which only kicks in after $50 million in wealth, Jones would owe $123 million per year — a 2 percent tax on the first $950 million, and a 3 percent tax on the remaining $4.1 billion. Cooperman would owe $85 million annually. Under Sanders’s tax on extreme wealth, which starts at 1 percent for wealth above $32 million, and increases gradually till it maxes out at 8 percent for wealth over $10 billion, Jones would owe $263.7 million each year, and Cooperman would owe $148.7 million.
Sanders and Warren aren’t the only Democratic primary candidates supporting a wealth tax. Billionaire Tom Steyer, himself a former hedge fund manager, has proposed a wealth tax of 1 percent on those with over $32 million in net worth, under which Jones would owe $58.7 million, and Cooperman would owe $31.7 million.
Julián Castro has also proposed a Wealth Inequality Tax for those in the top 0.1 percent of fortunes, which would tax income from capital each year at the same rate labor income is, rather than only when that capital is sold.
Other billionaires, and those who love them, have done their own pearl-clutching about Warren and Sanders’s support for a wealth tax. When CNBC’s Jim Cramer said on September 10 that financial executives were fearful of Warren winning, the senator proudly quote-tweeted the segment with the quip, “I’m Elizabeth Warren and I approve this message.” Billionaire fund manager Roy Baron said last Friday that Warren’s wealth tax is “pretty nuts.” It makes sense that he’d be bothered: Baron’s personal net worth is 2.4 billion, and he’d pay $61 million, $106.7 million, and $213.4 million under Steyer, Warren and Sanders’ plans, respectively. Meanwhile, billionaire and former New York City mayor Michael Bloomberg said in January that Warren’s wealth tax was unconstitutional, saying of the plan, “It’s called Venezuela.” Bloomberg, who is worth an astonishing $51.2 billion, would owe $512 million under Steyer’s plan, $1.5 billion under Warren’s, and $3.8 billion annually under Sanders.
If it sounds like these billionaires would be paying a whole lot of money if a wealth tax were implemented — that’s true! But these taxes wouldn’t put a dent in these billionaires’ bottom lines, and the money could be used to fund popular and needed investments to support the needs of the U.S. public. Warren’s wealth tax is how she intends to fund everything from free college to universal child care to a $450 billion boost in public high schools. And it’s also hardly the first time Wall Street or its allies have disingenuously warned about harms to the market should they face political accountability. Long before Rep. Maxine Waters (D-California) assumed the chair of the powerful House Financial Services Committee, a former McKinsey consultant warned in 2012 that if Waters ever became chair, “Most of the international banks would start folding their tents.” Chairwoman Waters has been doing her job overseeing the financial markets for 10 months now, and the international banking giants have not packed up and left.
When I was working at Merrill Lynch right before the 2008 financial crisis, one of the traders told me that no matter what happened in the world, you have to ask yourself, “how do I trade this?” What he meant was that a trader’s task is to figure out, given the news of the day, which bets would make the most money.
While watching the strength of both Sanders and Warren in the polls, these billionaire traders are, as they always do, trying to maximize their profits. But in order to do so, they need to enlist the help of a scared public, whom they hope to intimidate away from any support of a meaningful wealth tax. These billionaires may have fooled their wealthy investors into giving them millions in fees each year — but that doesn’t mean the public has to buy their nonsense.
Critics warn ‘consumers will pay the price’ after GOP-controlled FCC approves T-Mobile/Sprint Merger
October 17, 2019
By Common Dreams - raw story
Consumers advocates called out Republicans on the Federal Communications Commission Wednesday for a party-line vote approving a “blatantly anti-competitive” proposed merger between T-Mobile and Sprint, the third- and fourth-largest wireless carriers in the United States.
“With less competition, rates rise and innovation falls… If this merger succeeds, consumers will pay the price.”
—Jessica Rosenworcel, FCC
S. Derek Turner, research director at the national advocacy group Free Press, took aim at FCC Chair Ajit Pai, an appointee of President Donald Trump and former telecommunications industry lawyer who publicly backed the deal months before commission staffers completed a review of it.
Pai formalized his support for the $26.5 billion merger in August, with a statement that emphasized its supposed benefits but lacked any evidence. Critics warn that allowing two major wireless providers to become one will drive up costs for consumers.
“Despite Chairman Pai’s bogus claims, nothing about this deal would lower prices for customers or lead to faster 5G deployment,” said Turner. “And the loss of competition would disproportionately harm low-income people and communities of color.”
Democratic FCC Commissioner Jessica Rosenworcel, who voted against the merger, detailed her concerns about its consequences in an op-ed for The Atlantic ahead of Wednesday’s vote.
“We’ve all seen what happens when market concentration increases following a merger,” Rosenworcel wrote. “A condensed airline industry brought us baggage fees and smaller seats, even as the price of fuel fell. A condensed pharmaceutical industry has led to a handful of drug companies raising the prices of lifesaving medications, taking advantage of those struggling with illness.”
“There’s no reason to think the mobile-phone industry will be different,” she added. “With less competition, rates rise and innovation falls. All the evidence demonstrates that this holds true in the mobile-phone industry too. If this merger succeeds, consumers will pay the price.”
The U.S. Department of Justice signed off on the deal in July—but, purportedly to address competition concerns, made the merger contingent on Sprint selling some parts to the satellite television provider Dish Network Corp. DOJ Antitrust Division Assistant Attorney General Makan Delrahim claimed the deal would would enable Dish to “provide a full range of mobile wireless services nationwide.”
Gigi Sohn, a former FCC senior staffer who is now a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy and a Benton Foundation senior fellow, called the Republican-controlled FCC’s decision to approve the merger “the culmination of one of the most irregular and opaque processes in FCC history.”
“The FCC majority prejudged the merits of this merger two months before the Justice Department found the combination of T-Mobile and Sprint to be anti-competitive and required the creation of a new fourth competitor to pass legal muster,” Sohn said in a statement. “Despite this radical change in the merger, Chairman Pai has refused to put the new arrangement out for public comment.”
“Given the harmful impacts of this merger and the shady manner in which the FCC’s approval was reached behind closed doors, the public should have had the opportunity to weigh in… But public input isn’t to be taken seriously at Pai’s FCC.”
—S. Derek Turner, Free Press
Turner of Free Press said Wednesday that “given the harmful impacts of this merger and the shady manner in which the FCC’s approval was reached behind closed doors, the public should have had the opportunity to weigh in and comment before the full agency voted. But public input isn’t to be taken seriously at Pai’s FCC.”
Although the deal has won the approval of regulators at the FCC and DOJ, Turner highlighted that “ultimately, this matter will be decided on the facts in court.”
“The good news is that attorneys general from more than a dozen states and the District of Columbia have joined a lawsuit to block the merger,” explained Turner, who denounced the deal as “both awful and unlawful.”
According to Reuters, the trial is scheduled to begin Dec. 9. The group of 17 state AGs represent more than half of the country’s population.
New York Attorney General Letitia James, who is leading the suit with Xavier Becerra of California, said earlier this year that state leaders are challenging the merger “because it would bad for consumers, bad for workers, and bad for innovation.”
Sohn declared that “once again, the states are standing up for consumers when the federal government has refused to do so.”
“With less competition, rates rise and innovation falls… If this merger succeeds, consumers will pay the price.”
—Jessica Rosenworcel, FCC
S. Derek Turner, research director at the national advocacy group Free Press, took aim at FCC Chair Ajit Pai, an appointee of President Donald Trump and former telecommunications industry lawyer who publicly backed the deal months before commission staffers completed a review of it.
Pai formalized his support for the $26.5 billion merger in August, with a statement that emphasized its supposed benefits but lacked any evidence. Critics warn that allowing two major wireless providers to become one will drive up costs for consumers.
“Despite Chairman Pai’s bogus claims, nothing about this deal would lower prices for customers or lead to faster 5G deployment,” said Turner. “And the loss of competition would disproportionately harm low-income people and communities of color.”
Democratic FCC Commissioner Jessica Rosenworcel, who voted against the merger, detailed her concerns about its consequences in an op-ed for The Atlantic ahead of Wednesday’s vote.
“We’ve all seen what happens when market concentration increases following a merger,” Rosenworcel wrote. “A condensed airline industry brought us baggage fees and smaller seats, even as the price of fuel fell. A condensed pharmaceutical industry has led to a handful of drug companies raising the prices of lifesaving medications, taking advantage of those struggling with illness.”
“There’s no reason to think the mobile-phone industry will be different,” she added. “With less competition, rates rise and innovation falls. All the evidence demonstrates that this holds true in the mobile-phone industry too. If this merger succeeds, consumers will pay the price.”
The U.S. Department of Justice signed off on the deal in July—but, purportedly to address competition concerns, made the merger contingent on Sprint selling some parts to the satellite television provider Dish Network Corp. DOJ Antitrust Division Assistant Attorney General Makan Delrahim claimed the deal would would enable Dish to “provide a full range of mobile wireless services nationwide.”
Gigi Sohn, a former FCC senior staffer who is now a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy and a Benton Foundation senior fellow, called the Republican-controlled FCC’s decision to approve the merger “the culmination of one of the most irregular and opaque processes in FCC history.”
“The FCC majority prejudged the merits of this merger two months before the Justice Department found the combination of T-Mobile and Sprint to be anti-competitive and required the creation of a new fourth competitor to pass legal muster,” Sohn said in a statement. “Despite this radical change in the merger, Chairman Pai has refused to put the new arrangement out for public comment.”
“Given the harmful impacts of this merger and the shady manner in which the FCC’s approval was reached behind closed doors, the public should have had the opportunity to weigh in… But public input isn’t to be taken seriously at Pai’s FCC.”
—S. Derek Turner, Free Press
Turner of Free Press said Wednesday that “given the harmful impacts of this merger and the shady manner in which the FCC’s approval was reached behind closed doors, the public should have had the opportunity to weigh in and comment before the full agency voted. But public input isn’t to be taken seriously at Pai’s FCC.”
Although the deal has won the approval of regulators at the FCC and DOJ, Turner highlighted that “ultimately, this matter will be decided on the facts in court.”
“The good news is that attorneys general from more than a dozen states and the District of Columbia have joined a lawsuit to block the merger,” explained Turner, who denounced the deal as “both awful and unlawful.”
According to Reuters, the trial is scheduled to begin Dec. 9. The group of 17 state AGs represent more than half of the country’s population.
New York Attorney General Letitia James, who is leading the suit with Xavier Becerra of California, said earlier this year that state leaders are challenging the merger “because it would bad for consumers, bad for workers, and bad for innovation.”
Sohn declared that “once again, the states are standing up for consumers when the federal government has refused to do so.”
California power shutoffs: when your public utility is owned by private investors
Widescale power shutdown reveals the depth of California’s infrastructure problems amid a growing climate crisis
Susie Cagle in Oakland
the guardian
Sat 12 Oct 2019 01.00 EDT
When the United States’ largest investor-owned utility, Pacific Gas and Electric, shut down power to millions of Californians this week, nearly no one was ready. Not governments. Not businesses. And certainly not the general public.
As parts of the state went dark, the California governor Gavin Newsom told reporters he was “outraged because it didn’t have to happen”.
“They’re in bankruptcy due to their terrible management going back decades. They’ve created these conditions, it was unnecessary,” he said about PG&E. “This can’t be the new normal.”
But Newsom also called public safety power shutoffs in cases of potential wildfire risk “not novel”. State regulators approved PG&E’s plans. And the municipalities that called on vulnerable residents to use personal resources to preemptively evacuate knew this was coming.
The widescale public safety power shutdown revealed the depth of California’s infrastructure problems amid a growing climate crisis, as “de-energizing” policy trades one possible disaster for another.
“It’s a whole series of missteps over a long period of time by PG&E and by a whole bunch of other actors that led us to this point,” said Costa Samaras, a climate resilience researcher and analyst, and associate professor at Carnegie Mellon University. “What is clear is whatever this giant mess is, it’s not in any way acceptable or sustainable.”
PG&E and de-energizing
PG&E made shutting down its grid in dry, windy weather a core part of its wildfire management strategy in 2018, after the company faced $30bn in liabilities for their role in sparking two of the deadliest and costliest fires in California history. PG&E filed for bankruptcy shortly after.
With its new “safety plan”, the company essentially admitted that keeping the lights on was dangerous – and potentially very expensive for its own bottom line. By choosing to shut down the grid this week, the utility might have stopped another spark – and another massive bill.
PG&E may be a public utility – the biggest electric utility in the US – and it may have been shutting off its lines to millions of people in the interest of public safety, but it is not, and has never been, owned by the public.
With their huge monopoly markets and guaranteed rates of return, California utilities are attractive businesses for investors. Earlier this year, utilities asked the state for an even bigger payday. Meanwhile, PG&E invested millions in state lobbying, paid out $4.5bn in profits to shareholders over the last five years, and millions in executive bonuses – all while deferring necessary maintenance and repairs to its system.
“A lot of money went to dividends that should’ve gone to your trees,” a federal judge told the company in April.
PG&E equipment has been blamed for sparking 17 out of 23 major fires across the state in 2017, and the 2018 Camp fire that all but destroyed the town of Paradise and killed 85 people. Following those two devastating fire seasons, PG&E filed for bankruptcy protection to cover its liability costs, which are expected to total upwards of $30bn, compared to the company’s market cap of $20bn. Any liabilities incurred from a new, large, devastating wildfire might have impacted the company’s ongoing bankruptcy proceedings.
While PG&E’s 2019 Wildfire Safety Plan calls for the kind of maintenance the company shirked in the past – increased vegetation management around lines, more inspections and repairs on equipment, and additional weather stations – the backbone of the plan is de-energization.
Depending on how PG&E assesses the fire risk and the potential failure of the grid at any given time, the plan calls for shutting down up to 30,700 miles of transmission and distribution lines, about 25% of the grid, potentially impacting all 5.4 million PG&E accounts, or roughly 16 million people.
Power lines, fire risk and climate changed weather
As officials in Oakland, California, prepared the public for large portions of the city to go dark this week, they released a statement that read, in part: “The decision to turn off power, and the speed at which it is restored, is planned and managed solely by PG&E.”
But it’s planning and management that are regulated by the state utility commission, which worked to update de-energizing rules throughout 2018 and 2019, requiring utilities to make “all feasible and appropriate attempts to notify customers” of a shutoff.
“The public safety power shutoff is a government policy being implemented by the Public Utilities Commission. There’s lots of executive branch authority over this situation,” said Leah Stokes, utilities researcher and political science professor at UC Santa Barbara. “It’s kind of a blunt instrument to use on the problem.”
After this week, there are many open questions as to how PG&E considers the problem and assesses fire risk.
“The forecast didn’t call for unprecedented extreme fire weather conditions. The power shutoff was unprecedented, but the weather conditions were not,” said Daniel Swain, climate scientist at UCLA’s Institute of the Environment and Sustainability. “It isn’t entirely clear what did go into that decision. We don’t know publicly what PG&E’s thresholds are.”
State rules leave utilities to control when they’ll shut down the power, and how they’ll choose to do it. PG&E’s de-energizing plan calls for the consideration of a variety of criteria and conditions when it comes to initiating a public safety power shutoff. According to the plan, “No single factor drives a Public Safety Power Shutoff.”
Some factors include: a national weather service “red flag warning” of high fire weather, low humidity levels, forecasted sustained winds, the availability of dry vegetation or fuels, and “on-the-ground, real-time observations from PG&E crews”. But there are no hard rules or numbers by which PG&E abides when deciding whether or not to subjectively shut off the grid to millions of people in California.
California could easily meet those vague criteria a few times a year, said Swain.
“If this is the risk aversion strategy that a private utility is going to take but we’re going to be hitting those thresholds an awful lot in the present climate and might hit it even more frequently in a warmer future climate, that doesn’t seem to be a very realistic longterm solution,” said Swain. “The notion of doing this for anything short of a real emergency puts a huge burden on a lot of people.”
Regulatory and ownership solutions
And even as a business decision, for PG&E, it’s an inherently short-sighted one. “You’re losing a lot of money by putting people out of power versus if you were undergrounding lines, or made microgrids, or solar and battery backup,” said Stokes. “You could make those investments once and then have benefits in the future. Now you just have the costs without those investments.”
It’s this kind of management that’s inspired a campaign to nationalize the electricity grid.
“There’s a fundamental contradiction between PG&E’s mandate to make as much profit as they can for their shareholders and invest in the health and safety of Californians,” said Keith Brower Brown, co-chair of the East Bay chapter of Democratic Socialists of America, which launched a campaign for the public takeover of PG&E in 2018. “We’re not naive to the fact that there have been public utilities that have had problems too – just because something’s public doesn’t mean it’s run well. But there’s a path to accountability when you have public control.”
But more control and regulation alone won’t necessarily fix PG&E’s management, nor the grid itself.
“The only way out of this bind is not only public ownership of the company but a massive scale public investment in building the kind of safe, clean energy infrastructure that we need,” said Brown.
As it stands, those investments and priorities are controlled and directed by a profit-motivated PG&E. Newsom, the California governor, warned that changes to PG&E will come slowly – the company operates more than 125,000 transmission and distribution power lines across roughly 70,000 square miles of the state. PG&E previously put the cost of inspecting and repairing every bit of its grid at $150bn.
So the public is left to bear the costs and risks in the meantime of a new kind of disaster, along with the familiar ones.
“Nobody is investing for climate resilience at the level that’s necessary and that’s really what’s concerning about this incident – this is one of the richest areas of the country and if we can’t even figure it out there, we’re going to have problems,” said Costa Samaras, a climate resilience researcher and analyst, and associate professor at Carnegie Mellon University.
“To me this is a real learning opportunity to find where the resilience gaps are, find out who’s vulnerable, and fix it before it gets worse,” said Samaras. “This is the challenge, not just for PG&E but for the whole ecosystem: businesses, municipalities, counties. What’s the plan?”
As parts of the state went dark, the California governor Gavin Newsom told reporters he was “outraged because it didn’t have to happen”.
“They’re in bankruptcy due to their terrible management going back decades. They’ve created these conditions, it was unnecessary,” he said about PG&E. “This can’t be the new normal.”
But Newsom also called public safety power shutoffs in cases of potential wildfire risk “not novel”. State regulators approved PG&E’s plans. And the municipalities that called on vulnerable residents to use personal resources to preemptively evacuate knew this was coming.
The widescale public safety power shutdown revealed the depth of California’s infrastructure problems amid a growing climate crisis, as “de-energizing” policy trades one possible disaster for another.
“It’s a whole series of missteps over a long period of time by PG&E and by a whole bunch of other actors that led us to this point,” said Costa Samaras, a climate resilience researcher and analyst, and associate professor at Carnegie Mellon University. “What is clear is whatever this giant mess is, it’s not in any way acceptable or sustainable.”
PG&E and de-energizing
PG&E made shutting down its grid in dry, windy weather a core part of its wildfire management strategy in 2018, after the company faced $30bn in liabilities for their role in sparking two of the deadliest and costliest fires in California history. PG&E filed for bankruptcy shortly after.
With its new “safety plan”, the company essentially admitted that keeping the lights on was dangerous – and potentially very expensive for its own bottom line. By choosing to shut down the grid this week, the utility might have stopped another spark – and another massive bill.
PG&E may be a public utility – the biggest electric utility in the US – and it may have been shutting off its lines to millions of people in the interest of public safety, but it is not, and has never been, owned by the public.
With their huge monopoly markets and guaranteed rates of return, California utilities are attractive businesses for investors. Earlier this year, utilities asked the state for an even bigger payday. Meanwhile, PG&E invested millions in state lobbying, paid out $4.5bn in profits to shareholders over the last five years, and millions in executive bonuses – all while deferring necessary maintenance and repairs to its system.
“A lot of money went to dividends that should’ve gone to your trees,” a federal judge told the company in April.
PG&E equipment has been blamed for sparking 17 out of 23 major fires across the state in 2017, and the 2018 Camp fire that all but destroyed the town of Paradise and killed 85 people. Following those two devastating fire seasons, PG&E filed for bankruptcy protection to cover its liability costs, which are expected to total upwards of $30bn, compared to the company’s market cap of $20bn. Any liabilities incurred from a new, large, devastating wildfire might have impacted the company’s ongoing bankruptcy proceedings.
While PG&E’s 2019 Wildfire Safety Plan calls for the kind of maintenance the company shirked in the past – increased vegetation management around lines, more inspections and repairs on equipment, and additional weather stations – the backbone of the plan is de-energization.
Depending on how PG&E assesses the fire risk and the potential failure of the grid at any given time, the plan calls for shutting down up to 30,700 miles of transmission and distribution lines, about 25% of the grid, potentially impacting all 5.4 million PG&E accounts, or roughly 16 million people.
Power lines, fire risk and climate changed weather
As officials in Oakland, California, prepared the public for large portions of the city to go dark this week, they released a statement that read, in part: “The decision to turn off power, and the speed at which it is restored, is planned and managed solely by PG&E.”
But it’s planning and management that are regulated by the state utility commission, which worked to update de-energizing rules throughout 2018 and 2019, requiring utilities to make “all feasible and appropriate attempts to notify customers” of a shutoff.
“The public safety power shutoff is a government policy being implemented by the Public Utilities Commission. There’s lots of executive branch authority over this situation,” said Leah Stokes, utilities researcher and political science professor at UC Santa Barbara. “It’s kind of a blunt instrument to use on the problem.”
After this week, there are many open questions as to how PG&E considers the problem and assesses fire risk.
“The forecast didn’t call for unprecedented extreme fire weather conditions. The power shutoff was unprecedented, but the weather conditions were not,” said Daniel Swain, climate scientist at UCLA’s Institute of the Environment and Sustainability. “It isn’t entirely clear what did go into that decision. We don’t know publicly what PG&E’s thresholds are.”
State rules leave utilities to control when they’ll shut down the power, and how they’ll choose to do it. PG&E’s de-energizing plan calls for the consideration of a variety of criteria and conditions when it comes to initiating a public safety power shutoff. According to the plan, “No single factor drives a Public Safety Power Shutoff.”
Some factors include: a national weather service “red flag warning” of high fire weather, low humidity levels, forecasted sustained winds, the availability of dry vegetation or fuels, and “on-the-ground, real-time observations from PG&E crews”. But there are no hard rules or numbers by which PG&E abides when deciding whether or not to subjectively shut off the grid to millions of people in California.
California could easily meet those vague criteria a few times a year, said Swain.
“If this is the risk aversion strategy that a private utility is going to take but we’re going to be hitting those thresholds an awful lot in the present climate and might hit it even more frequently in a warmer future climate, that doesn’t seem to be a very realistic longterm solution,” said Swain. “The notion of doing this for anything short of a real emergency puts a huge burden on a lot of people.”
Regulatory and ownership solutions
And even as a business decision, for PG&E, it’s an inherently short-sighted one. “You’re losing a lot of money by putting people out of power versus if you were undergrounding lines, or made microgrids, or solar and battery backup,” said Stokes. “You could make those investments once and then have benefits in the future. Now you just have the costs without those investments.”
It’s this kind of management that’s inspired a campaign to nationalize the electricity grid.
“There’s a fundamental contradiction between PG&E’s mandate to make as much profit as they can for their shareholders and invest in the health and safety of Californians,” said Keith Brower Brown, co-chair of the East Bay chapter of Democratic Socialists of America, which launched a campaign for the public takeover of PG&E in 2018. “We’re not naive to the fact that there have been public utilities that have had problems too – just because something’s public doesn’t mean it’s run well. But there’s a path to accountability when you have public control.”
But more control and regulation alone won’t necessarily fix PG&E’s management, nor the grid itself.
“The only way out of this bind is not only public ownership of the company but a massive scale public investment in building the kind of safe, clean energy infrastructure that we need,” said Brown.
As it stands, those investments and priorities are controlled and directed by a profit-motivated PG&E. Newsom, the California governor, warned that changes to PG&E will come slowly – the company operates more than 125,000 transmission and distribution power lines across roughly 70,000 square miles of the state. PG&E previously put the cost of inspecting and repairing every bit of its grid at $150bn.
So the public is left to bear the costs and risks in the meantime of a new kind of disaster, along with the familiar ones.
“Nobody is investing for climate resilience at the level that’s necessary and that’s really what’s concerning about this incident – this is one of the richest areas of the country and if we can’t even figure it out there, we’re going to have problems,” said Costa Samaras, a climate resilience researcher and analyst, and associate professor at Carnegie Mellon University.
“To me this is a real learning opportunity to find where the resilience gaps are, find out who’s vulnerable, and fix it before it gets worse,” said Samaras. “This is the challenge, not just for PG&E but for the whole ecosystem: businesses, municipalities, counties. What’s the plan?”
Rising old used car prices help push poor Americans over the edge
Nick Carey - reuters
OCTOBER 11, 2019 / 3:07 AM /
FREEPORT, Ill. (Reuters) - For America’s working poor, an often essential ingredient for getting and keeping a job – having a car – has rarely been more costly, and millions of people are finding it impossible to keep up with payments despite prolonged economic growth and low unemployment.
More than 7 million Americans are already 90 or more days behind on their car loans, according to the New York Federal Reserve, and serious delinquency rates among borrowers with the lowest credit scores have by far seen the fastest acceleration.
The seeds of the problem are buried deep in the financial crisis, when in the midst of the worst economic downturn since the Great Depression, automakers slashed production. A decade later, that has made a relative rarity of used 10-year-old vehicles that are typically more affordable for low-wage earners.
According to data provided to Reuters by industry consultant and car shopping website Edmunds, the average price of that vintage of vehicle is $8,657, still nearly 75% higher than in 2010 despite some softening in prices over the last year. The average new car, in contrast, has seen a price rise of 25% in that same time period.
“This is pinching people at the worst point possible,” said Ivan Drury, Edmunds’ senior manager of industry analysis. “If you need basic A to B transportation, you have to get an older car that needs more repairs and has more wear-and-tear issues.”
Monthly auto payments for Americans making under $40,000 have remained flat since 2017, while those in higher wage brackets have seen their payments rise, according to a Cox Automotive Inc analysis for Reuters.
On the face of it, this might seem like good news. But to Cox chief economist Jonathan Smoke, it indicates poorer Americans are stretched so thin they cannot afford to pay more.
“They just don’t have any flexibility to increase their payment,” Smoke said.
Weak lending standards in recent years are partly to blame for the rising delinquency rates, which Warren Kornfeld, a senior vice president on Moody’s financial institutions team, said are approaching record highs despite a solid economy.
Auto lenders are belatedly tightening lending standards, but it may already be too late, he said.
“The economy is masking the true performance of auto loans,” Kornfeld said. “If we hit a downturn today, the performance of auto loans would not look very good.”
Research from the New York Fed earlier this year showed that while delinquency rates among borrowers with high credit scores have remained steady and low, for subprime borrowers they have been rising, pushing up the overall delinquency rate. Around 8% of loans originated by lower-score buyers with a credit score below 620 were categorized as seriously late, “a development that is surprising during a strong economy and labor market,” Fed researchers wrote.
‘HARD TO MAKE ENDS MEET’
Like many Americans, for Hollis Heyward no car means no job. The 30-year-old father of two makes $10 an hour working at a warehouse in Freeport, a rural town of 25,000 about 115 miles (185.07 km) northwest of Chicago.
Heyward can only get to work by car.
In the midst of a divorce, all he could afford was a gray 2005 Pontiac Grand Prix with close to 200,000 miles on it, which he bought for $1,300 cash - a fraction of the average new car price.
Suddenly also stuck paying off the loan on his future ex-wife’s car, Heyward had to rework the loan with local used-car dealer Gordy Tormohlen of Good People Automotive. Under his “workout” deal, Heyward is paying the loan’s principal only and Tormohlen has waived the interest payments. Heyward’s monthly payment is now around $120 per month, down from around $350 before the workout.
“Right now, it’s hard to make ends meet,” said Heyward. “But I am not the kind of guy to walk away from my commitments.”
Tormohlen, 59, a second-generation dealer, said his business is up 10% this year as auto finance companies tighten lending standards. He said the market feels like it did before the financial crisis hit in 2008, when consumers were over-extended with debt.
“Americans have grown too comfortable with debt and the time has come to pay the piper,” he said.
Tormohlen is a “Buy Here, Pay Here” dealer, offering subprime loans that he finances himself at 19%, which is higher than a bank but lower than many finance companies.
He said he can work directly with struggling customers like Heyward, whom he has known for a decade, but worries that large finance companies with tens or hundreds of thousands of borrowers will be in deep trouble when a downturn hits.
Indeed, according to the New York Fed, more than 1 million more Americans are behind on their car loans now than at the peak of delinquencies in 2010 after the financial crisis.
“The big lenders who do not know their customers are going to have a problem when the economy turns,” Tormohlen says.
“LIVE BEYOND YOUR MEANS”
Expensive older used cars are exacerbating the problem and it may take years for them to return to more affordable levels.
George Augustaitis, director of automotive industry analytics at CarGurus Inc (CARG.O), an online marketplace for new and used cars, said late this spring his team started to notice an “accelerating decline” in the number of available vehicles under $10,000, which typically would include vehicles between eight and 12 years old.
In an analysis for Reuters, CarGuru’s data shows a falling share of inventory of Great Recession-era cars, while the number of online “leads” from consumers seeking those vehicles has remained steady.
In fact, the average American car is the oldest on record, according to IHS Markit, and CarGurus’ Augustaitis said the available inventory of vehicles costing under $10,000 will not return to more normal levels until 2022, reflecting rising car production after the Great Recession.
Ken Shilson, president of the National Alliance of Buy Here, Pay Here Dealers (NABD), said American consumers have become too comfortable with debt and subprime customers have been “poisoned” by easy access to capital for much of the long economic expansion. But he added those customers will be forced by tighter underwriting to seek even older vehicles.
“The American way is to always live beyond your means and Americans aren’t good at making life adjustments,’ Shilson said. “But there’s a reality check coming and many subprime buyers will be forced to find more affordable transportation.”
More than 7 million Americans are already 90 or more days behind on their car loans, according to the New York Federal Reserve, and serious delinquency rates among borrowers with the lowest credit scores have by far seen the fastest acceleration.
The seeds of the problem are buried deep in the financial crisis, when in the midst of the worst economic downturn since the Great Depression, automakers slashed production. A decade later, that has made a relative rarity of used 10-year-old vehicles that are typically more affordable for low-wage earners.
According to data provided to Reuters by industry consultant and car shopping website Edmunds, the average price of that vintage of vehicle is $8,657, still nearly 75% higher than in 2010 despite some softening in prices over the last year. The average new car, in contrast, has seen a price rise of 25% in that same time period.
“This is pinching people at the worst point possible,” said Ivan Drury, Edmunds’ senior manager of industry analysis. “If you need basic A to B transportation, you have to get an older car that needs more repairs and has more wear-and-tear issues.”
Monthly auto payments for Americans making under $40,000 have remained flat since 2017, while those in higher wage brackets have seen their payments rise, according to a Cox Automotive Inc analysis for Reuters.
On the face of it, this might seem like good news. But to Cox chief economist Jonathan Smoke, it indicates poorer Americans are stretched so thin they cannot afford to pay more.
“They just don’t have any flexibility to increase their payment,” Smoke said.
Weak lending standards in recent years are partly to blame for the rising delinquency rates, which Warren Kornfeld, a senior vice president on Moody’s financial institutions team, said are approaching record highs despite a solid economy.
Auto lenders are belatedly tightening lending standards, but it may already be too late, he said.
“The economy is masking the true performance of auto loans,” Kornfeld said. “If we hit a downturn today, the performance of auto loans would not look very good.”
Research from the New York Fed earlier this year showed that while delinquency rates among borrowers with high credit scores have remained steady and low, for subprime borrowers they have been rising, pushing up the overall delinquency rate. Around 8% of loans originated by lower-score buyers with a credit score below 620 were categorized as seriously late, “a development that is surprising during a strong economy and labor market,” Fed researchers wrote.
‘HARD TO MAKE ENDS MEET’
Like many Americans, for Hollis Heyward no car means no job. The 30-year-old father of two makes $10 an hour working at a warehouse in Freeport, a rural town of 25,000 about 115 miles (185.07 km) northwest of Chicago.
Heyward can only get to work by car.
In the midst of a divorce, all he could afford was a gray 2005 Pontiac Grand Prix with close to 200,000 miles on it, which he bought for $1,300 cash - a fraction of the average new car price.
Suddenly also stuck paying off the loan on his future ex-wife’s car, Heyward had to rework the loan with local used-car dealer Gordy Tormohlen of Good People Automotive. Under his “workout” deal, Heyward is paying the loan’s principal only and Tormohlen has waived the interest payments. Heyward’s monthly payment is now around $120 per month, down from around $350 before the workout.
“Right now, it’s hard to make ends meet,” said Heyward. “But I am not the kind of guy to walk away from my commitments.”
Tormohlen, 59, a second-generation dealer, said his business is up 10% this year as auto finance companies tighten lending standards. He said the market feels like it did before the financial crisis hit in 2008, when consumers were over-extended with debt.
“Americans have grown too comfortable with debt and the time has come to pay the piper,” he said.
Tormohlen is a “Buy Here, Pay Here” dealer, offering subprime loans that he finances himself at 19%, which is higher than a bank but lower than many finance companies.
He said he can work directly with struggling customers like Heyward, whom he has known for a decade, but worries that large finance companies with tens or hundreds of thousands of borrowers will be in deep trouble when a downturn hits.
Indeed, according to the New York Fed, more than 1 million more Americans are behind on their car loans now than at the peak of delinquencies in 2010 after the financial crisis.
“The big lenders who do not know their customers are going to have a problem when the economy turns,” Tormohlen says.
“LIVE BEYOND YOUR MEANS”
Expensive older used cars are exacerbating the problem and it may take years for them to return to more affordable levels.
George Augustaitis, director of automotive industry analytics at CarGurus Inc (CARG.O), an online marketplace for new and used cars, said late this spring his team started to notice an “accelerating decline” in the number of available vehicles under $10,000, which typically would include vehicles between eight and 12 years old.
In an analysis for Reuters, CarGuru’s data shows a falling share of inventory of Great Recession-era cars, while the number of online “leads” from consumers seeking those vehicles has remained steady.
In fact, the average American car is the oldest on record, according to IHS Markit, and CarGurus’ Augustaitis said the available inventory of vehicles costing under $10,000 will not return to more normal levels until 2022, reflecting rising car production after the Great Recession.
Ken Shilson, president of the National Alliance of Buy Here, Pay Here Dealers (NABD), said American consumers have become too comfortable with debt and subprime customers have been “poisoned” by easy access to capital for much of the long economic expansion. But he added those customers will be forced by tighter underwriting to seek even older vehicles.
“The American way is to always live beyond your means and Americans aren’t good at making life adjustments,’ Shilson said. “But there’s a reality check coming and many subprime buyers will be forced to find more affordable transportation.”
OP-ED ECONOMY & LABOR
Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
BY Richard D. Wolff, Truthout
PUBLISHED September 30, 2019
Leaders around the world increasingly worry about the next capitalist recession (or economic downturn) now looming globally. In Europe’s strongest economy, Germany, a recession has already arrived in all but formal naming. U.S. manufacturing has declined for the last two quarters. Negative interest rates (where lenders pay borrowers to safely make a loan) are an increasingly widespread sign. Another sign is that lenders charge higher interest rates for short-term vs. long-term loans because they fear an impending recession will make borrowers’ ability to repay riskier in the short term. Anxieties about safety reflect the sense of an impending economic crash.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
bankers would rather back a traitor to the country than warren, amazing!!!!
Bankers ‘confirm Warren’s whole worldview’ by saying they’ll donate to Trump to defeat anti-Wall Street Senator in 2020
September 27, 2019
By Common Dreams - raw story
“Wall Street continues to make campaign ads for Elizabeth Warren.”
For the second time in three weeks, Sen. Elizabeth Warren embraced Wall Street executives’ fear of her potential presidency after CNBC reported Thursday that several anonymous bankers threatened to back President Donald Trump in the 2020 election if Warren becomes the Democratic nominee.
“I think if she can show that the tax code of 2017 was basically nonsense and only helped corporations, Wall Street would not like the public thinking about that.”
—Wall Street executive
CNBC spoke to one executive who said they were considering supporting Trump in the general election fundraising cycle to keep Warren from winning.
“You’re in a box because you’re a Democrat and you’re thinking, ‘I want to help the party, but she’s going to hurt me, so I’m going to help President Trump,'” the executive said.
The executives’ comments illustrated the very political system that the Massachusetts Democrat aims to tear down as president, Warren suggested in a tweet Thursday night.
Elizabeth Warren✔
@ewarren
I'm fighting for an economy and a government that works for all of us, not just the wealthy and well-connected. I'm not afraid of anonymous quotes, and wealthy donors don't get to buy this process. I won't back down from fighting for the big, structural change we need. https://twitter.com/CNBC/status/1177262095819300864 …
CNBC✔
@CNBC
Wall Street Democratic donors warn the party: We'll sit out, or back Trump, if you nominate Elizabeth Warren https://cnb.cx/2m1TPR6
2:08 PM - Sep 26, 2019
Another executive said a Warren administration approach to taxation could plainly illustrate the injustice of Trump’s $1.5 trillion tax cut for corporations and the wealthy.
“I think if she can show that the tax code of 2017 was basically nonsense and only helped corporations, Wall Street would not like the public thinking about that,” the banker told CNBC.
Warren plans to require the wealthiest Americans to pay a two percent tax on any assets over $50 million in order to help fund a universal childcare program, investment in rural healthcare and community services, and affordable higher education.
The executives’ comments came weeks after CNBC anchor Jim Cramer said many on Wall Street are afraid of a potential Warren presidency and believe “she’s got to be stopped.”
The senator tweeted “I approve this message” at the time, while supporters observed that the Warren campaign could benefit from a campaign ad using Wall Street’s own words.
On Thursday, political observers again said big banks are advertising Warren’s strengths as they share their concerns over her plans to rein in Wall Street’s power—not just with her tax plan but also her proposals to limit executive compensation, force private equity firms to pay the debts of the companies they buy, and hold executives accountable for their firms’ wrongdoing.
The bankers’ suggestion that they would rather back Trump—days after House Speaker Nancy Pelosi announced she was pursuing an impeachment inquiry following a whistleblower’s revelation that the president asked the Ukrainian president for help winning the 2020 election—”confirms Warren’s whole worldview” and approach to Wall Street, economist Paul Krugman tweeted.
Warren’s response to the CNBC article was juxtaposed by reports of former Vice President Joe Biden’s appearance at a fundraiser in Los Angeles Thursday night.
While the senator was pledging not to “back down from fighting for the big, structural change we need,” Biden was telling a donor that while the wealthy shouldn’t expect a tax cut from his administration if he wins in 2020, there will be “no punishment, either.”
The New York Times reported Thursday that—growing wary of recent positive polling for progressives Warren and Sen. Bernie Sanders (I-Vt.), who has also pledged to get big money out of politics—Biden allies are considering forming a super PAC on his behalf.
Biden has said he opposes super PACs, but news that his supporters may rely on unlimited fundraising in an effort to propel him to the nomination served as a contrast to Warren’s approach and comments about her from Wall Street.
“The Democratic nominee should be chosen by voters, not millionaires and corporate special interests,” End Citizens United president Tiffany Muller told the Times.
For the second time in three weeks, Sen. Elizabeth Warren embraced Wall Street executives’ fear of her potential presidency after CNBC reported Thursday that several anonymous bankers threatened to back President Donald Trump in the 2020 election if Warren becomes the Democratic nominee.
“I think if she can show that the tax code of 2017 was basically nonsense and only helped corporations, Wall Street would not like the public thinking about that.”
—Wall Street executive
CNBC spoke to one executive who said they were considering supporting Trump in the general election fundraising cycle to keep Warren from winning.
“You’re in a box because you’re a Democrat and you’re thinking, ‘I want to help the party, but she’s going to hurt me, so I’m going to help President Trump,'” the executive said.
The executives’ comments illustrated the very political system that the Massachusetts Democrat aims to tear down as president, Warren suggested in a tweet Thursday night.
Elizabeth Warren✔
@ewarren
I'm fighting for an economy and a government that works for all of us, not just the wealthy and well-connected. I'm not afraid of anonymous quotes, and wealthy donors don't get to buy this process. I won't back down from fighting for the big, structural change we need. https://twitter.com/CNBC/status/1177262095819300864 …
CNBC✔
@CNBC
Wall Street Democratic donors warn the party: We'll sit out, or back Trump, if you nominate Elizabeth Warren https://cnb.cx/2m1TPR6
2:08 PM - Sep 26, 2019
Another executive said a Warren administration approach to taxation could plainly illustrate the injustice of Trump’s $1.5 trillion tax cut for corporations and the wealthy.
“I think if she can show that the tax code of 2017 was basically nonsense and only helped corporations, Wall Street would not like the public thinking about that,” the banker told CNBC.
Warren plans to require the wealthiest Americans to pay a two percent tax on any assets over $50 million in order to help fund a universal childcare program, investment in rural healthcare and community services, and affordable higher education.
The executives’ comments came weeks after CNBC anchor Jim Cramer said many on Wall Street are afraid of a potential Warren presidency and believe “she’s got to be stopped.”
The senator tweeted “I approve this message” at the time, while supporters observed that the Warren campaign could benefit from a campaign ad using Wall Street’s own words.
On Thursday, political observers again said big banks are advertising Warren’s strengths as they share their concerns over her plans to rein in Wall Street’s power—not just with her tax plan but also her proposals to limit executive compensation, force private equity firms to pay the debts of the companies they buy, and hold executives accountable for their firms’ wrongdoing.
The bankers’ suggestion that they would rather back Trump—days after House Speaker Nancy Pelosi announced she was pursuing an impeachment inquiry following a whistleblower’s revelation that the president asked the Ukrainian president for help winning the 2020 election—”confirms Warren’s whole worldview” and approach to Wall Street, economist Paul Krugman tweeted.
Warren’s response to the CNBC article was juxtaposed by reports of former Vice President Joe Biden’s appearance at a fundraiser in Los Angeles Thursday night.
While the senator was pledging not to “back down from fighting for the big, structural change we need,” Biden was telling a donor that while the wealthy shouldn’t expect a tax cut from his administration if he wins in 2020, there will be “no punishment, either.”
The New York Times reported Thursday that—growing wary of recent positive polling for progressives Warren and Sen. Bernie Sanders (I-Vt.), who has also pledged to get big money out of politics—Biden allies are considering forming a super PAC on his behalf.
Biden has said he opposes super PACs, but news that his supporters may rely on unlimited fundraising in an effort to propel him to the nomination served as a contrast to Warren’s approach and comments about her from Wall Street.
“The Democratic nominee should be chosen by voters, not millionaires and corporate special interests,” End Citizens United president Tiffany Muller told the Times.
Boeing's travails show what's wrong with modern capitalism
Deregulation means a company once run by engineers is now in the thrall of financiers and its stock remains high even as its planes fall from the sky
Matt Stoller
Wed 11 Sep 2019 06.00 EDT
The plight of Boeing shows the perils of modern capitalism. The corporation is a wounded giant. Much of its productive capacity has been mothballed following two crashes in six months of the 737 Max, the firm’s flagship product: the result of safety problems Boeing hid from regulators.
Just a year ago Boeing appeared unstoppable. In 2018, the company delivered more aircraft than its rival Airbus, with revenue hitting $100bn. It was also a cash machine, shedding 20% of its workforce since 2012 while funneling $43bn into stock buybacks in roughly the same period. Boeing’s board rewarded its CEO, Dennis Muilenburg, lavishly, paying him $23m in 2018, up 27% from the year before.
There was only one problem. The company was losing its ability to make safe airplanes. As Scott Hamilton, an aerospace analyst and editor of Leeham News and Analysis, puts it: “Boeing Commercial Airplanes clearly has a systemic problem in designing, producing and delivering airplanes.”
Something is wrong with today’s version of capitalism. It’s not just that it’s unfair. It’s that it’s no longer capable of delivering products that work. The root cause is the generation of high and persistent profits, to the exclusion of production. We have let financiers take over our corporations. They monopolize industries and then loot the corporations they run.
The executive team at Boeing is quite skilled – just at generating cash, rather than as engineers. Boeing’s competitive advantage centered on politics, not planes. The corporation is now a political machine with a side business making aerospace and defense products. Boeing’s general counsel, former judge Michael Luttig, is the former boss of the FBI director, Christopher Wray, whose agents are investigating potential criminal activity at the company. Luttig is so well connected in high-level legal circles he served as a groomsman for the supreme court chief justice, John Roberts.
The company’s board members also include Nikki Haley, until recently the United Nations ambassador, former Nato supreme allied commander Edmund PGiambastiani Jr, former AIG CEO Edward M Liddy, and a host of former political officials and private equity icons.
Boeing used its political connections to monopolize the American aerospace industry and corrupt its regulators. In the 1990s, Boeing and McDonnell Douglas merged, leaving America with just one major producer of civilian aircraft. Before this merger, when there was a competitive market, Boeing was a wonderful company. As journalist Jerry Useem put it just 20 years ago, “Boeing has always been less a business than an association of engineers devoted to building amazing flying machines.”
But after the merger, the engineers lost power to the financiers. Boeing could increase prices, lay off workers, reduce quality and spend its cash buying back stock.
And no one could do anything about it. Customers and suppliers no longer had any alternative to Boeing, and Boeing corrupted officials in both parties who were supposed to regulate it. High profits masked the collapse in productive skill until the crashes of the 737 Max.
Boeing’s inability to make good safe airplanes is a clear weakness. It is, after all, an airplane aerospace company. But because Boeing is America’s only commercial airplane company, the crisis is rippling across the economy. Michael O’Leary, CEO of Ryanair, which ordered 58 737 Max planes, says his company cannot grow as planned until Boeing, “gets its shit together”. Contractors and subcontractors slowed production of parts for the airplane, and airline customers scrambled to address shortages of airplanes.
Far from being an anomaly, Boeing is the norm in the corporate world across the west. In 2016, the Economist noted that profits across the corporate sector were high and persistent, a function of a lack of competition across swaths of the economy. If corporations don’t have to compete, they can raise prices to buyers, lower what they pay to suppliers and workers, and reduce quality.
High profits result in sloth and corruption. Many of our industrial goliaths are now run in ways that are fundamentally destructive. General Electric, for instance, was once a jewel of American productive capacity, a corporation created out of George Westinghouse and Thomas Edison’s patents for electric systems. Edison helped invent the lightbulb itself, brightening the world. Today, as a result of decisions made by Jack Welch in the 1990s to juice profit returns, GE slaps its label on lightbulbs made in China. Even worse, if investigator Harry Markopoulos is right, General Electric may in fact be riddled with accounting fraud, a once great productive institution strip-mined by financiers.
These are not the natural, inevitable results of capitalism. Boeing and GE were once great companies, working in capitalist open markets.
So what went wrong? In short, the law. In the 1970s, a host of thinkers on the right and left – from Milton Friedman to George Stigler to Alfred Kahn to the current liberal supreme court justice Stephen Breyer – argued that policymakers should take restraints off capital and get rid of anti-monopoly rules. They used many terms to make this case, including deregulation, cost/benefit analysis, and the consumer welfare standard in antitrust law. They embraced the shareholder theory of capitalism, which emphasizes short-term profits. What followed was a radical consolidation of market power, and then systemic looting.
Today, high profit margins are a pervasive and corrupting influence across the government and corporate sectors. Private equity firms moved capital from corporations and workers to themselves, destroying once healthy retailers like RadioShack, Toys R Us, Payless and K-Mart.
The disease of inefficiency and graft has spread to the government. In 1992, Harvard Professor Ash Carter, who later become the secretary of defense under Obama, wrote that the Pentagon was too difficult to do business with. “The most straightforward step” to address this, he wrote, “would be to raise the profit margins allowed on defense contracts.” The following year Prof Carter was appointed assistant secretary of defense for international security policy in the first Clinton administration, which followed his advice.
Earlier this year, the defense department found that one defense contractor run by private equity executives had profit margins of up to 4,451% on spare parts it sold to the military. Consulting giant McKinsey was recently caught trying to charge the government $3m a year for the services of a recent college graduate.
The ultimate result of concentrating wealth and corrupting government is to concentrate power in the hands of a few. We’ve been here before. In the 1930s, fascists in Italy and Germany were gaining strength, as were communists in the Russia. Meanwhile, leaders in liberal democracies were confronted by a frightened populace losing faith in democracy. American political leaders were able to take on domestic money lords with a radical antitrust campaign to break the power of the plutocrats. Today we are in a similar situation, with autocrats making an increasingly persuasive case that liberal democracy is weak.
The solution to this political crisis is fairly simple, and it involves two basic principles. One, policymakers have to increase competition for large powerful companies, to bring profits down. Executives should spend their time competing with each other to build quality products, not finding ways of attracting former generals, or administration officials to their board of directors. Two, policymakers should raise taxes on wealth and high incomes to radically reduce the concentration of wealth, which will make looting irrational.
Our system is no longer aligning rewards with productive skill. Despite the 737 Max crisis, Boeing’s stock price is still twice as high as in July 2015, when Muilenburg took over as CEO. That right there is what is broken about modern capitalism. We had better fix it fast.
Just a year ago Boeing appeared unstoppable. In 2018, the company delivered more aircraft than its rival Airbus, with revenue hitting $100bn. It was also a cash machine, shedding 20% of its workforce since 2012 while funneling $43bn into stock buybacks in roughly the same period. Boeing’s board rewarded its CEO, Dennis Muilenburg, lavishly, paying him $23m in 2018, up 27% from the year before.
There was only one problem. The company was losing its ability to make safe airplanes. As Scott Hamilton, an aerospace analyst and editor of Leeham News and Analysis, puts it: “Boeing Commercial Airplanes clearly has a systemic problem in designing, producing and delivering airplanes.”
Something is wrong with today’s version of capitalism. It’s not just that it’s unfair. It’s that it’s no longer capable of delivering products that work. The root cause is the generation of high and persistent profits, to the exclusion of production. We have let financiers take over our corporations. They monopolize industries and then loot the corporations they run.
The executive team at Boeing is quite skilled – just at generating cash, rather than as engineers. Boeing’s competitive advantage centered on politics, not planes. The corporation is now a political machine with a side business making aerospace and defense products. Boeing’s general counsel, former judge Michael Luttig, is the former boss of the FBI director, Christopher Wray, whose agents are investigating potential criminal activity at the company. Luttig is so well connected in high-level legal circles he served as a groomsman for the supreme court chief justice, John Roberts.
The company’s board members also include Nikki Haley, until recently the United Nations ambassador, former Nato supreme allied commander Edmund PGiambastiani Jr, former AIG CEO Edward M Liddy, and a host of former political officials and private equity icons.
Boeing used its political connections to monopolize the American aerospace industry and corrupt its regulators. In the 1990s, Boeing and McDonnell Douglas merged, leaving America with just one major producer of civilian aircraft. Before this merger, when there was a competitive market, Boeing was a wonderful company. As journalist Jerry Useem put it just 20 years ago, “Boeing has always been less a business than an association of engineers devoted to building amazing flying machines.”
But after the merger, the engineers lost power to the financiers. Boeing could increase prices, lay off workers, reduce quality and spend its cash buying back stock.
And no one could do anything about it. Customers and suppliers no longer had any alternative to Boeing, and Boeing corrupted officials in both parties who were supposed to regulate it. High profits masked the collapse in productive skill until the crashes of the 737 Max.
Boeing’s inability to make good safe airplanes is a clear weakness. It is, after all, an airplane aerospace company. But because Boeing is America’s only commercial airplane company, the crisis is rippling across the economy. Michael O’Leary, CEO of Ryanair, which ordered 58 737 Max planes, says his company cannot grow as planned until Boeing, “gets its shit together”. Contractors and subcontractors slowed production of parts for the airplane, and airline customers scrambled to address shortages of airplanes.
Far from being an anomaly, Boeing is the norm in the corporate world across the west. In 2016, the Economist noted that profits across the corporate sector were high and persistent, a function of a lack of competition across swaths of the economy. If corporations don’t have to compete, they can raise prices to buyers, lower what they pay to suppliers and workers, and reduce quality.
High profits result in sloth and corruption. Many of our industrial goliaths are now run in ways that are fundamentally destructive. General Electric, for instance, was once a jewel of American productive capacity, a corporation created out of George Westinghouse and Thomas Edison’s patents for electric systems. Edison helped invent the lightbulb itself, brightening the world. Today, as a result of decisions made by Jack Welch in the 1990s to juice profit returns, GE slaps its label on lightbulbs made in China. Even worse, if investigator Harry Markopoulos is right, General Electric may in fact be riddled with accounting fraud, a once great productive institution strip-mined by financiers.
These are not the natural, inevitable results of capitalism. Boeing and GE were once great companies, working in capitalist open markets.
So what went wrong? In short, the law. In the 1970s, a host of thinkers on the right and left – from Milton Friedman to George Stigler to Alfred Kahn to the current liberal supreme court justice Stephen Breyer – argued that policymakers should take restraints off capital and get rid of anti-monopoly rules. They used many terms to make this case, including deregulation, cost/benefit analysis, and the consumer welfare standard in antitrust law. They embraced the shareholder theory of capitalism, which emphasizes short-term profits. What followed was a radical consolidation of market power, and then systemic looting.
Today, high profit margins are a pervasive and corrupting influence across the government and corporate sectors. Private equity firms moved capital from corporations and workers to themselves, destroying once healthy retailers like RadioShack, Toys R Us, Payless and K-Mart.
The disease of inefficiency and graft has spread to the government. In 1992, Harvard Professor Ash Carter, who later become the secretary of defense under Obama, wrote that the Pentagon was too difficult to do business with. “The most straightforward step” to address this, he wrote, “would be to raise the profit margins allowed on defense contracts.” The following year Prof Carter was appointed assistant secretary of defense for international security policy in the first Clinton administration, which followed his advice.
Earlier this year, the defense department found that one defense contractor run by private equity executives had profit margins of up to 4,451% on spare parts it sold to the military. Consulting giant McKinsey was recently caught trying to charge the government $3m a year for the services of a recent college graduate.
The ultimate result of concentrating wealth and corrupting government is to concentrate power in the hands of a few. We’ve been here before. In the 1930s, fascists in Italy and Germany were gaining strength, as were communists in the Russia. Meanwhile, leaders in liberal democracies were confronted by a frightened populace losing faith in democracy. American political leaders were able to take on domestic money lords with a radical antitrust campaign to break the power of the plutocrats. Today we are in a similar situation, with autocrats making an increasingly persuasive case that liberal democracy is weak.
The solution to this political crisis is fairly simple, and it involves two basic principles. One, policymakers have to increase competition for large powerful companies, to bring profits down. Executives should spend their time competing with each other to build quality products, not finding ways of attracting former generals, or administration officials to their board of directors. Two, policymakers should raise taxes on wealth and high incomes to radically reduce the concentration of wealth, which will make looting irrational.
Our system is no longer aligning rewards with productive skill. Despite the 737 Max crisis, Boeing’s stock price is still twice as high as in July 2015, when Muilenburg took over as CEO. That right there is what is broken about modern capitalism. We had better fix it fast.
opinnion: The Capitalists Are Afraid
Chris Hedges - truthdig
SEP 09, 2019
Capitalists seek to maximize profits and reduce the cost of labor. This sums up capitalism at its core. It is defined by these immutable objectives. It is not about democracy. It is not, as has been claimed, about wealth creation for the working class. It has nothing to do with freedom. Those capitalists, especially in corporations, who are not able to increase profits and decrease the cost of labor, through layoffs, cutting wages, destroying unions, offshoring, outsourcing or automating jobs, are replaced. Personal ethics are irrelevant. Capitalists are about acquisition and exploitation.
Capitalists go to absurd lengths to lie about capitalism’s true nature. It is why Business Roundtable’s most recent version of its Principles of Corporate Governance, signed by 181 major CEOs—including the heads of Amazon, General Motors and Chevron, all three of which paid no federal income tax in 2018—rivals the doublespeak of the worst totalitarian regimes of the 20th century.
If maximizing profit means turning the oceans into dead zones, filling the atmosphere with carbon emissions and toxins that render the climate unfit for humans, pumping chemicals and waste into the soil, water, air and food supply that ensure that cancer is an epidemic, buying off elected officials and judges to serve the exclusive interests of capital and privatizing social services, including health care, transportation, education and public utilities, to gouge the public, that is the price of business. If reducing the cost of labor means forcing workers to remain unorganized and abolishing work, health and safety regulations, if it means moving industry overseas where foreign workers toil like 19th-century serfs, if it means suppressing wages at home to force an impoverished population into debt peonage, that is the price of business.
It is not accidental that the United States now has the worst income inequality since the 1920s. This was engineered by the capitalist class. But what Business Roundtable’s Aug. 19 statement reveals is that the capitalists are frightened they have been found out. Capitalism free of external restraints and with no internal restraints will pillage and exploit a captive population until it rises up in fury. It is such an eruption that today’s capitalists worry is on the horizon.
Capitalism, because it is such a socially destructive force, saturates the media landscape with advertising to misinform and manipulate the public. It uses its vast wealth to buy up the press, domesticate universities, nonprofits and think tanks and demonize and muzzle its critics. It funds pseudo-intellectuals and pseudo-economists who tirelessly propagate the ideology of neoliberalism, the belief that transferring wealth upward into the hands of the ruling oligarchs is beneficial to society. It forms global monopolies that prey on the public. It wages endless wars in its quest for profit. It equates anti-capitalist agitation with terrorism, meaning, for example, that anyone in the U.S. who attempts to photograph or film the savagery and cruelty of industrial agriculture—one of the primary causes of carbon emissions—can be charged under terrorism acts. And when its pyramid schemes, frauds and financial bubbles collapse, it loots the national treasury and leaves taxpayers with the bill. (In the U.S. economic crisis of 2008, corporations gobbled up $4.6 trillion in public money.)
Capitalism, as Karl Marx understood, if unregulated and unfettered, is a revolutionary force. It first creates a mafia economy, as Karl Polanyi wrote, and then a mafia government. It was the greed of the capitalist class that turned our cities in decaying hulks and impoverished more than half the country. It was the greed of the capitalist class that set us on a course of ecocide. It was the greed of the capitalist class that created the mechanisms of internal repression, including police that function as rogue paramilitary units in our internal colonies, wholesale surveillance of the public, a vastly expanded system of mass incarceration and the agencies, including the National Security Agency, Homeland Security and the FBI, that spy on the public to thwart resistance. It was the greed of the capitalist class that dismantled the democratic institutions of the United States. It was the greed of the capitalist class that gave us Donald Trump. This disdain for the common good and democracy makes these capitalists traitors.
Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of Business Roundtable, conceded in the press release containing the “Statement on the Purpose of a Corporation” that “the American dream is alive, but fraying.” He assured us, however, that “major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
Alex Gorsky, chairman of the board and chief executive officer of Johnson & Johnson and chair of the Business Roundtable Corporate Governance Committee, added that the statement “affirms the essential role corporations can play in improving our society.”
Darren Walker, the president of the Ford Foundation, called the statement “tremendous news” and said it would “result in shared prosperity and sustainability for both business and society.”
The sententious and self-congratulatory passages in the statement can be summed up by the opening paragraphs:
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.
Capitalists such as Dimon (net worth $1.4 billion), whose company has paid more in regulatory fines than any other in America, and Gorsky, whose corporation was charged with helping fuel Oklahoma’s opioid crisis and then ordered by a court to pay $572 million in restitution in that state, would, in a functioning democracy, be in prison. Johnson & Johnson, Purdue Pharma, Pfizer and McKesson together are responsible for the deaths of many thousands of Americans--more than 130 people died every day in the U.S. from opioid-related drug overdoses in 2016 and 2017, according to the federal government.
The financial crimes of Dimon alone are numerous and notorious. They include underwriting fraudulent securities in the years leading up to the 2008 financial crash, overcharging members of the military on mortgages and mortgage refinancing transactions, overcharging customers for overdraft fees, manipulating bidding on California and Midwest electricity markets, overcharging homeowners for flood insurance, billing customers for nonexistent credit card monitoring services, charging minorities higher rates and fees on mortgages than those paid by white borrowers and failing to pay overtime to company workers.
So, what is this statement—which is equivalent to Al Capone insisting the mob ran a benevolent society in Chicago—about?
It is about the capitalists running scared. They know the reigning ideology of neoliberalism no longer has any credibility. Its lies have been exposed. They know the ruling institutions, including the legislative, executive and judicial branches of government, are dysfunctional and despised. They know the media, Wall Street and the big banks are distrusted and hated. They know the criminal justice system, which criminalizes poverty and legalizes corporate fraud, is a sham. They know social mobility is, in effect, nonexistent. And, most importantly, they know that the financial system, built on the scaffolding of trillions lent to them by the government at marginal interest rates, is not sustainable and will trigger another recession, if not a depression. They also know they are to blame.
The capitalists are determined to protect their wealth. They are determined, and probably able, to block left-leaning candidates Elizabeth Warren and Bernie Sanders from obtaining the Democratic nomination for president. But they are also aware that politicians such as Hillary Clinton, Nancy Pelosi, Chuck Schumer and Joe Biden who have spent their careers serving corporate power are harder and harder to sell to the electorate. The mendacity and hypocrisy of the Democratic Party are evident in the presidency of Barack Obama, who ran as an outsider and reformer in the wake of the 2008 financial meltdown. Obama—whom Cornel West called “a black mascot for Wall Street”—callously betrayed the party’s base. Actions by him, Clinton and other Democratic leaders after the 2008 financial debacle opened the door for the demagogue Donald Trump, who, although a con artist and inveterate liar, was astute enough to tell voters, especially from the white working class, what they wanted to hear.
Business Roundtable’s August statement is a pathetic attempt to reframe the capitalists’ roles in society, to give these corporate grifters gentler, kinder faces. It will not work. The capitalists have the power to destroy, but no longer to create. And out of their relentless destruction, which they are incapable of halting, will come the social unrest they fear and monstrosities more terrifying than Donald Trump.
Capitalists go to absurd lengths to lie about capitalism’s true nature. It is why Business Roundtable’s most recent version of its Principles of Corporate Governance, signed by 181 major CEOs—including the heads of Amazon, General Motors and Chevron, all three of which paid no federal income tax in 2018—rivals the doublespeak of the worst totalitarian regimes of the 20th century.
If maximizing profit means turning the oceans into dead zones, filling the atmosphere with carbon emissions and toxins that render the climate unfit for humans, pumping chemicals and waste into the soil, water, air and food supply that ensure that cancer is an epidemic, buying off elected officials and judges to serve the exclusive interests of capital and privatizing social services, including health care, transportation, education and public utilities, to gouge the public, that is the price of business. If reducing the cost of labor means forcing workers to remain unorganized and abolishing work, health and safety regulations, if it means moving industry overseas where foreign workers toil like 19th-century serfs, if it means suppressing wages at home to force an impoverished population into debt peonage, that is the price of business.
It is not accidental that the United States now has the worst income inequality since the 1920s. This was engineered by the capitalist class. But what Business Roundtable’s Aug. 19 statement reveals is that the capitalists are frightened they have been found out. Capitalism free of external restraints and with no internal restraints will pillage and exploit a captive population until it rises up in fury. It is such an eruption that today’s capitalists worry is on the horizon.
Capitalism, because it is such a socially destructive force, saturates the media landscape with advertising to misinform and manipulate the public. It uses its vast wealth to buy up the press, domesticate universities, nonprofits and think tanks and demonize and muzzle its critics. It funds pseudo-intellectuals and pseudo-economists who tirelessly propagate the ideology of neoliberalism, the belief that transferring wealth upward into the hands of the ruling oligarchs is beneficial to society. It forms global monopolies that prey on the public. It wages endless wars in its quest for profit. It equates anti-capitalist agitation with terrorism, meaning, for example, that anyone in the U.S. who attempts to photograph or film the savagery and cruelty of industrial agriculture—one of the primary causes of carbon emissions—can be charged under terrorism acts. And when its pyramid schemes, frauds and financial bubbles collapse, it loots the national treasury and leaves taxpayers with the bill. (In the U.S. economic crisis of 2008, corporations gobbled up $4.6 trillion in public money.)
Capitalism, as Karl Marx understood, if unregulated and unfettered, is a revolutionary force. It first creates a mafia economy, as Karl Polanyi wrote, and then a mafia government. It was the greed of the capitalist class that turned our cities in decaying hulks and impoverished more than half the country. It was the greed of the capitalist class that set us on a course of ecocide. It was the greed of the capitalist class that created the mechanisms of internal repression, including police that function as rogue paramilitary units in our internal colonies, wholesale surveillance of the public, a vastly expanded system of mass incarceration and the agencies, including the National Security Agency, Homeland Security and the FBI, that spy on the public to thwart resistance. It was the greed of the capitalist class that dismantled the democratic institutions of the United States. It was the greed of the capitalist class that gave us Donald Trump. This disdain for the common good and democracy makes these capitalists traitors.
Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of Business Roundtable, conceded in the press release containing the “Statement on the Purpose of a Corporation” that “the American dream is alive, but fraying.” He assured us, however, that “major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
Alex Gorsky, chairman of the board and chief executive officer of Johnson & Johnson and chair of the Business Roundtable Corporate Governance Committee, added that the statement “affirms the essential role corporations can play in improving our society.”
Darren Walker, the president of the Ford Foundation, called the statement “tremendous news” and said it would “result in shared prosperity and sustainability for both business and society.”
The sententious and self-congratulatory passages in the statement can be summed up by the opening paragraphs:
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.
Capitalists such as Dimon (net worth $1.4 billion), whose company has paid more in regulatory fines than any other in America, and Gorsky, whose corporation was charged with helping fuel Oklahoma’s opioid crisis and then ordered by a court to pay $572 million in restitution in that state, would, in a functioning democracy, be in prison. Johnson & Johnson, Purdue Pharma, Pfizer and McKesson together are responsible for the deaths of many thousands of Americans--more than 130 people died every day in the U.S. from opioid-related drug overdoses in 2016 and 2017, according to the federal government.
The financial crimes of Dimon alone are numerous and notorious. They include underwriting fraudulent securities in the years leading up to the 2008 financial crash, overcharging members of the military on mortgages and mortgage refinancing transactions, overcharging customers for overdraft fees, manipulating bidding on California and Midwest electricity markets, overcharging homeowners for flood insurance, billing customers for nonexistent credit card monitoring services, charging minorities higher rates and fees on mortgages than those paid by white borrowers and failing to pay overtime to company workers.
So, what is this statement—which is equivalent to Al Capone insisting the mob ran a benevolent society in Chicago—about?
It is about the capitalists running scared. They know the reigning ideology of neoliberalism no longer has any credibility. Its lies have been exposed. They know the ruling institutions, including the legislative, executive and judicial branches of government, are dysfunctional and despised. They know the media, Wall Street and the big banks are distrusted and hated. They know the criminal justice system, which criminalizes poverty and legalizes corporate fraud, is a sham. They know social mobility is, in effect, nonexistent. And, most importantly, they know that the financial system, built on the scaffolding of trillions lent to them by the government at marginal interest rates, is not sustainable and will trigger another recession, if not a depression. They also know they are to blame.
The capitalists are determined to protect their wealth. They are determined, and probably able, to block left-leaning candidates Elizabeth Warren and Bernie Sanders from obtaining the Democratic nomination for president. But they are also aware that politicians such as Hillary Clinton, Nancy Pelosi, Chuck Schumer and Joe Biden who have spent their careers serving corporate power are harder and harder to sell to the electorate. The mendacity and hypocrisy of the Democratic Party are evident in the presidency of Barack Obama, who ran as an outsider and reformer in the wake of the 2008 financial meltdown. Obama—whom Cornel West called “a black mascot for Wall Street”—callously betrayed the party’s base. Actions by him, Clinton and other Democratic leaders after the 2008 financial debacle opened the door for the demagogue Donald Trump, who, although a con artist and inveterate liar, was astute enough to tell voters, especially from the white working class, what they wanted to hear.
Business Roundtable’s August statement is a pathetic attempt to reframe the capitalists’ roles in society, to give these corporate grifters gentler, kinder faces. It will not work. The capitalists have the power to destroy, but no longer to create. And out of their relentless destruction, which they are incapable of halting, will come the social unrest they fear and monstrosities more terrifying than Donald Trump.
And they will still vote for the GOP!!!
How corporate-friendly bankruptcy laws keep protesting miners from being paid: ‘That train leaves, we ain’t got nothing’
September 1, 2019
By Sarah K. Burris - Raw Story
Bankruptcy laws in the United States have grown so corporate-friendly that if a company goes belly-up, employees are going to be the real losers. Such is the case in Kentucky, where coal miners are preventing a train of coal from moving by holding a sit-in on the railroad tracks.
A Washington Post interview with the Blackjewel miners revealed the heartbreaking realities of families who had their salaries taken from their account and haven’t been paid for their work. Blackjewel filed for bankruptcy as the coal industry is slowly falling to cheaper options in the free markets.
Chris Rowe just bought his first home in the Kentucky mining town. Just days later, he was laid off along with the rest of the works. The company gave no signal that anything was wrong and no warning or settlements to workers.
“The same situation may have happened to others, but we are the ones making a stand,” 35-year-old Rowe told The Post. “We mined the coal and broke our backs to get that coal, so that coal belongs to us until they pay for it.”
Chris Sexton and 1800 more workers are in the same boat.
“We had just bought a washer, and then the bank pulled the money back out, and it made our account negative,” said Rowe’s wife Stacy.
That’s when miners called each other and decided to opt for an act of civil disobedience.
Missouri farmer Wayne Cryts drove 12 hours just to support the miners’ non-violent war against Blackjewl. He has experience with companies that go bankrupt and ultimately take people down with them. In the 1980s he almost lost 31,000 bushels of soybeans because the company he used to store it filed for bankruptcy. Court proceedings restricted his options, so he and allies forced their way into the grain elevator to get the crop. It caused a huge legal battle and Cryts ultimately ended up in jail.
“I can tell you from experience, that coal is the only leverage you got,” Cryts explained.
Blackjewel isn’t the first coal company to file for bankruptcy, as alternative fuels and green energy are becoming more popular.
Presidential candidate Sen. Elizabeth Warren (D-MA) is a bankruptcy law expert and developed a plan that would protect workers when a corporation files for bankruptcy protection. CEOs and other top executives wouldn’t be allowed to score significant bonuses while filing for bankruptcy under her plan. Currently, Blackjewel could legally take all of their money and run and refuse to pay their workers.
“Let’s call this what it is: legalized looting — looting that makes a handful of Wall Street managers very rich while costing thousands of people their jobs, putting valuable companies out of business, and hurting communities across the country,” Warren wrote in a blog post detailing her plan.
“If that train leaves, we ain’t got nothing,” said Sexton, who is owed $5,000 from BlackJewel. “This is all we got left, because we mined it and still ain’t got paid for it.”
The company is selling off mines across the country and told workers that one of “the buyer has committed to assume and pay outstanding employee obligations,” a statement from interim CEO David Beckman said.
President Donald Trump promised miners he would save their jobs when he ran for president in 2016. While Trump has been willing to bailout farmers due to his trade tariffs, he has yet to step in to help coal miners.
Read the full report in The Washington Post.
A Washington Post interview with the Blackjewel miners revealed the heartbreaking realities of families who had their salaries taken from their account and haven’t been paid for their work. Blackjewel filed for bankruptcy as the coal industry is slowly falling to cheaper options in the free markets.
Chris Rowe just bought his first home in the Kentucky mining town. Just days later, he was laid off along with the rest of the works. The company gave no signal that anything was wrong and no warning or settlements to workers.
“The same situation may have happened to others, but we are the ones making a stand,” 35-year-old Rowe told The Post. “We mined the coal and broke our backs to get that coal, so that coal belongs to us until they pay for it.”
Chris Sexton and 1800 more workers are in the same boat.
“We had just bought a washer, and then the bank pulled the money back out, and it made our account negative,” said Rowe’s wife Stacy.
That’s when miners called each other and decided to opt for an act of civil disobedience.
Missouri farmer Wayne Cryts drove 12 hours just to support the miners’ non-violent war against Blackjewl. He has experience with companies that go bankrupt and ultimately take people down with them. In the 1980s he almost lost 31,000 bushels of soybeans because the company he used to store it filed for bankruptcy. Court proceedings restricted his options, so he and allies forced their way into the grain elevator to get the crop. It caused a huge legal battle and Cryts ultimately ended up in jail.
“I can tell you from experience, that coal is the only leverage you got,” Cryts explained.
Blackjewel isn’t the first coal company to file for bankruptcy, as alternative fuels and green energy are becoming more popular.
Presidential candidate Sen. Elizabeth Warren (D-MA) is a bankruptcy law expert and developed a plan that would protect workers when a corporation files for bankruptcy protection. CEOs and other top executives wouldn’t be allowed to score significant bonuses while filing for bankruptcy under her plan. Currently, Blackjewel could legally take all of their money and run and refuse to pay their workers.
“Let’s call this what it is: legalized looting — looting that makes a handful of Wall Street managers very rich while costing thousands of people their jobs, putting valuable companies out of business, and hurting communities across the country,” Warren wrote in a blog post detailing her plan.
“If that train leaves, we ain’t got nothing,” said Sexton, who is owed $5,000 from BlackJewel. “This is all we got left, because we mined it and still ain’t got paid for it.”
The company is selling off mines across the country and told workers that one of “the buyer has committed to assume and pay outstanding employee obligations,” a statement from interim CEO David Beckman said.
President Donald Trump promised miners he would save their jobs when he ran for president in 2016. While Trump has been willing to bailout farmers due to his trade tariffs, he has yet to step in to help coal miners.
Read the full report in The Washington Post.
Greed is God!!
Billionaires whine about paying taxes in reality-challenged Wall Street Journal op-ed
August 15, 2019
By Brad Reed - Raw Story
Billionaires Bernie Marcus and John Catsimatidis this week took to the pages of the Wall Street Journal to complain about having to pay taxes on the grounds that they know how to spend their money far better than the government does, and should thus be left alone so they can create wealth.
Marcus, who is the founder of home goods retailer Home Depot, and Catsimatidis, who is a supermarket magnate based in New York, both believe that it would be deeply wrong for them to pay higher taxes because making money is the single most patriotic thing they do as American citizens.
“We know we can spend our dollars more wisely, and in ways that benefit our communities and our country, than politicians can,” they write. “We continually plow most of our earnings back into the enterprises and charities we support, built, own or operate. Our businesses in particular are our legacies, and our greatest passion is to ensure that they keep growing and innovating for decades beyond our lifetimes. Every additional dollar the government takes from us is a dollar less for this critical process of expanding America’s wealth and job-creating businesses.”
In the case of Marcus’s Home Depot, however, “plowing” earnings back into the company often takes the form of share buybacks that benefit investors but do not raise wages for workers.
As CNBC reported earlier this year, Home Depot announced a massive $15 billion buyback of shares that was so large that it earned the company the title of a “Buyback Monster.”
Given that buybacks don’t put more money into workers’ salaries or research and development, they have become an easy target for politicians who attack them as drivers of wealth inequality. Even conservatives like Sen. Marco Rubio (R-FL) now want to end tax advantages for stock buybacks on the ground that “we have too often failed to make the well-being of working Americans the terms for market success.”
Marcus’s claim that his business is providing prosperity for its employees is also dubious given Home Depot’s long history of union busting, which prevents employees from bargaining for higher pay.
Home Depot has also been the subject of multiple class-action lawsuits filed on behalf of its workers, including a $2.6 million settlement over claims that the company failed to provide adequate seating to its workers, and a $10 million settlement for not properly training its employees to handle hazardous waste, which led to a fire breaking out in a store in Marina del Rey, California.
Elsewhere in the editorial, the billionaires say that taxing them would mean they would not be able to give as much money to charity. But as Los Angeles Times columnist Michael Hiltzik argues, one major reason why billionaires give to charity is because it helps them score further tax reductions.
Additionally, all of this charitable giving on behalf of the wealthy has not fixed problems such as contaminated pipes in Flint, Michigan, nor the continuously crumbling roads and bridges that blanket the American heartland.
Read the entire editorial at this link.
Marcus, who is the founder of home goods retailer Home Depot, and Catsimatidis, who is a supermarket magnate based in New York, both believe that it would be deeply wrong for them to pay higher taxes because making money is the single most patriotic thing they do as American citizens.
“We know we can spend our dollars more wisely, and in ways that benefit our communities and our country, than politicians can,” they write. “We continually plow most of our earnings back into the enterprises and charities we support, built, own or operate. Our businesses in particular are our legacies, and our greatest passion is to ensure that they keep growing and innovating for decades beyond our lifetimes. Every additional dollar the government takes from us is a dollar less for this critical process of expanding America’s wealth and job-creating businesses.”
In the case of Marcus’s Home Depot, however, “plowing” earnings back into the company often takes the form of share buybacks that benefit investors but do not raise wages for workers.
As CNBC reported earlier this year, Home Depot announced a massive $15 billion buyback of shares that was so large that it earned the company the title of a “Buyback Monster.”
Given that buybacks don’t put more money into workers’ salaries or research and development, they have become an easy target for politicians who attack them as drivers of wealth inequality. Even conservatives like Sen. Marco Rubio (R-FL) now want to end tax advantages for stock buybacks on the ground that “we have too often failed to make the well-being of working Americans the terms for market success.”
Marcus’s claim that his business is providing prosperity for its employees is also dubious given Home Depot’s long history of union busting, which prevents employees from bargaining for higher pay.
Home Depot has also been the subject of multiple class-action lawsuits filed on behalf of its workers, including a $2.6 million settlement over claims that the company failed to provide adequate seating to its workers, and a $10 million settlement for not properly training its employees to handle hazardous waste, which led to a fire breaking out in a store in Marina del Rey, California.
Elsewhere in the editorial, the billionaires say that taxing them would mean they would not be able to give as much money to charity. But as Los Angeles Times columnist Michael Hiltzik argues, one major reason why billionaires give to charity is because it helps them score further tax reductions.
Additionally, all of this charitable giving on behalf of the wealthy has not fixed problems such as contaminated pipes in Flint, Michigan, nor the continuously crumbling roads and bridges that blanket the American heartland.
Read the entire editorial at this link.
What Uber and the Koch Brothers Have in Common: A Plan to Destroy Public Transit
BY JEREMY MOHLER - In These Times
8/13/19
At first glance, the rideshare corporation Uber couldn’t appear more different than conservative oil-mogul billionaires Charles G. and David H. Koch. Uber has hired numerous former Democratic Party campaign managers and lobbyists and the company’s CEO, Dara Khosrowshahi, has publicly criticized the Trump administration, including over the travel ban on several majority-Muslim countries. The Kochs, meanwhile, have gained a reputation for bankrolling the Republican Party.
Yet Uber—the Silicon Valley startup-gone-public—shares at least one goal with the most prominent funders of modern conservatism: the destruction of America’s public transit.
While polarization in the United States is on the rise when it comes to metrics like party affiliation and media consumption, there’s a frightening level of agreement in corporate America, regardless of party loyalty. Examining where both Uber and the Koch brothers agree exposes the consensus hiding beneath the surface of our current political gridlock. Yes, rideshare corporations and oil tycoons share a financial interest in a car-centric future. But both also lobby for corporate tax cuts, deregulation and fewer rights and protections for workers. Both also envision a society with weakened or nonexistent public goods, part of a 40-year privatization trend that’s touched everything from public education to water access. From this vantage point, government is, in fact, getting things done and solving problems—just for corporate America rather than poor and working people.
A close look at the growing war on public transit reveals the planks of this corporate consensus.
In documents filed with the Securities and Exchange Commission, Uber’s executives claim to see a “massive market opportunity” in the estimated 4.4 trillion miles traveled each year by people using public transit across 175 countries. The company continues to heavily subsidize per-ride costs to inflate its value to investors and undercut existing options, despite bleeding billions of dollars. “Uber is effectively a middleman for a money transfer from venture-capital (VC) firms to consumers,” writes James P. Sutton in National Review. Simply put, effectively supplanting the taxi industry wasn’t enough: Uber plans on undercutting public transit to finally turn a profit.
For their part, the Koch brothers are funneling money to their political action committee (PAC), Americans for Prosperity, to kill proposed public transit projects nationwide. Last year, they led the charge in stopping a popular $5.4 billion transit plan in Nashville, Tennessee, that had even been backed by a coalition of the city’s business community. The Kochs have funded similar anti-public transit efforts in Arkansas, Arizona, Michigan, Utah and other states.
Their stated rationale, of course, is lower taxes. Americans for Prosperity tried to kill a 2017 gas-tax plan in Indiana meant to raise a billion dollars to invest in buses and infrastructure, even though it was introduced by the state’s GOP-led House of Representatives. Cutting taxes is the Koch brothers’ bread and butter. They contributed $20 million to help pass the Trump tax plan, which slashed taxes for their primary business, Koch Industries, by as much as $1.4 billion a year.
Uber has joined the Koch brothers on this libertarian crusade, using a corporate shell game to avoid paying billions in taxes and lobbying against taxes and fees on rides across the globe.
The corporate behemoths also share a stated goal of “cutting red tape.” The Koch brothers bankrolled the founding of the nation’s first libertarian think tank, the Cato Institute, which sees “limited government,” i.e., deregulation, as a key ingredient of freedom. They also funded the now-defunct Freedom Partners, which developed a road map that shaped the early days of the Trump administration’s deregulatory policy agenda. Uber, together with its main competitor Lyft, boasted more lobbyists in 2016 than Amazon, Microsoft and Walmart combined. As of June 2018, the two corporations had convinced 41 state legislatures and many local governments to pass legislation protecting them from regulation.
Most importantly, both the Koch brothers and Uber understand that their freedom depends on taking freedom away from working people. Uber has spent generously on fighting to ensure its drivers maintain their precarious status as independent contractors. The company has also invested heavily in technology that would get rid of drivers altogether, including driverless cars. The Koch brothers’ anti-worker views date back much further, all the way to the counterrevolutionary days at the end of the New Deal era. Fred Koch, Charles and David’s father, owned an oil refinery corporation and was active in the archconservative John Birch Society. Through groups like the National Right to Work Legal Defense Foundation, the Kochs have long led the attack against collective bargaining rights for public employees, including train and bus drivers.
At the end of the day, the Koch Brothers and Uber are much like Coke and Pepsi. They may have clashing styles, but their product is largely the same: lower corporate taxes, deregulation, lower wages, and private control over public goods like mass transit.
Yet Uber—the Silicon Valley startup-gone-public—shares at least one goal with the most prominent funders of modern conservatism: the destruction of America’s public transit.
While polarization in the United States is on the rise when it comes to metrics like party affiliation and media consumption, there’s a frightening level of agreement in corporate America, regardless of party loyalty. Examining where both Uber and the Koch brothers agree exposes the consensus hiding beneath the surface of our current political gridlock. Yes, rideshare corporations and oil tycoons share a financial interest in a car-centric future. But both also lobby for corporate tax cuts, deregulation and fewer rights and protections for workers. Both also envision a society with weakened or nonexistent public goods, part of a 40-year privatization trend that’s touched everything from public education to water access. From this vantage point, government is, in fact, getting things done and solving problems—just for corporate America rather than poor and working people.
A close look at the growing war on public transit reveals the planks of this corporate consensus.
In documents filed with the Securities and Exchange Commission, Uber’s executives claim to see a “massive market opportunity” in the estimated 4.4 trillion miles traveled each year by people using public transit across 175 countries. The company continues to heavily subsidize per-ride costs to inflate its value to investors and undercut existing options, despite bleeding billions of dollars. “Uber is effectively a middleman for a money transfer from venture-capital (VC) firms to consumers,” writes James P. Sutton in National Review. Simply put, effectively supplanting the taxi industry wasn’t enough: Uber plans on undercutting public transit to finally turn a profit.
For their part, the Koch brothers are funneling money to their political action committee (PAC), Americans for Prosperity, to kill proposed public transit projects nationwide. Last year, they led the charge in stopping a popular $5.4 billion transit plan in Nashville, Tennessee, that had even been backed by a coalition of the city’s business community. The Kochs have funded similar anti-public transit efforts in Arkansas, Arizona, Michigan, Utah and other states.
Their stated rationale, of course, is lower taxes. Americans for Prosperity tried to kill a 2017 gas-tax plan in Indiana meant to raise a billion dollars to invest in buses and infrastructure, even though it was introduced by the state’s GOP-led House of Representatives. Cutting taxes is the Koch brothers’ bread and butter. They contributed $20 million to help pass the Trump tax plan, which slashed taxes for their primary business, Koch Industries, by as much as $1.4 billion a year.
Uber has joined the Koch brothers on this libertarian crusade, using a corporate shell game to avoid paying billions in taxes and lobbying against taxes and fees on rides across the globe.
The corporate behemoths also share a stated goal of “cutting red tape.” The Koch brothers bankrolled the founding of the nation’s first libertarian think tank, the Cato Institute, which sees “limited government,” i.e., deregulation, as a key ingredient of freedom. They also funded the now-defunct Freedom Partners, which developed a road map that shaped the early days of the Trump administration’s deregulatory policy agenda. Uber, together with its main competitor Lyft, boasted more lobbyists in 2016 than Amazon, Microsoft and Walmart combined. As of June 2018, the two corporations had convinced 41 state legislatures and many local governments to pass legislation protecting them from regulation.
Most importantly, both the Koch brothers and Uber understand that their freedom depends on taking freedom away from working people. Uber has spent generously on fighting to ensure its drivers maintain their precarious status as independent contractors. The company has also invested heavily in technology that would get rid of drivers altogether, including driverless cars. The Koch brothers’ anti-worker views date back much further, all the way to the counterrevolutionary days at the end of the New Deal era. Fred Koch, Charles and David’s father, owned an oil refinery corporation and was active in the archconservative John Birch Society. Through groups like the National Right to Work Legal Defense Foundation, the Kochs have long led the attack against collective bargaining rights for public employees, including train and bus drivers.
At the end of the day, the Koch Brothers and Uber are much like Coke and Pepsi. They may have clashing styles, but their product is largely the same: lower corporate taxes, deregulation, lower wages, and private control over public goods like mass transit.
People kill people but capitalism makes it easy and profitable around the world
As tragic as our domestic mass murders are, they're a fraction of the global carnage caused by guns made in the USA
BOB HENNELLY - Salon
AUGUST 11, 2019 12:00PM (UTC)
The corporate media fakes soul searching for the root cause of mass murder in a nation that floods the world with weapons of every description and markets violence as recreation and entertainment.
You don’t have to be Marianne Williamson to know that this is another manifestation of late-stage vulture capitalism that has no conscience and feeds off the ever-mounting pile of human carrion it generates worldwide.
As tragic as our domestic mass murders are here, they are just part of the carnage around the world caused by weapons stamped proudly “Made in America.”
And while our politicians beat their chest about the United States being the bulwark to counterterrorism, we are the chief exporters of its tools out the back door of our loading dock.
Be sure with the billions of dollars the exporters of death have made, they easily bought and paid for the very same politicians who now offer American communities caught in the crossfire of gun violence just thoughts and prayers.
As the Trump administration tortures undocumented families from south of the border, separating children from their parents and putting them all in cages and the San Antonio shooter took aim in Walmart, its gunfire from American made weapons used by drug-gangs that have migrants fleeing northward.
That’s the iron ring of death and human misery forged by an economic system bereft of morality that uses just a portion of the vast profits it generates to subvert our politics and our legal system.
In 1994 Congress made it “unlawful for a person to manufacture, transfer or possess” a semiautomatic assault weapon as well as high capacity magazines. The legislation prohibited 19 different models of this class of weapon.
In 2004, President George W. Bush and the GOP, primed with millions of dollars from the gun lobby, let the decade long assault weapons ban expire.
U.S. guns flooded places like Mexico where The Economist reported in May “that 70% of gun crimes in Mexico involve American-bought weapons” and “the share of homicides in Mexico involving a firearm grew from 16% in 1997 to 66% in 2017.”
The Economist continued. “That suggests around half of Mexico’s 33,000 murder victims last year were killed by a gun manufactured in the United States, which had 14,542 gun-homicides in 2017. An American-made gun is more likely to be used in a murder in Mexico than at home.”
While one of President Trump’s first actions was to sign-off on rolling back of an Obama era regulation to keep guns out of the hands of the mentally ill, he also shifted the responsibility for approving gun exports “from the State Department to the Department of Commerce, which applies looser rules,” according to The Economist.
For days now, since the back-to-back mass murders in San Antonio and Dayton the corporate news media has pondered ‘just what is it about the American character that lends itself to such random acts of such monstrous violence?’
Hmmm . . . just what could it be?
With panel after panel presented in “special reports” with bloody graphics and 911 calls as an audio scene-setter, the same old talking heads take turns diagnosing the seemingly intractable problem of random gun violence that is so uniquely an American problem.
One expert says it’s the undiagnosed mentally ill, who just happen to be mostly young white men who find succor in the dark recesses of the internet. Another will blame Donald Trump and the resurgence of white nationalism. The on-call ex-FBI and DOJ officials talk about their need for more “tools in their counter-terrorism toolbox” and the need for a domestic “war on terror 2.0.”
Really? We haven’t come to terms with the geopolitical ravages and costs of the initial war on terror, and now they want to bring the concept home. There’s just no sense of the cruel irony that we spent trillions, accelerated global warming and destroyed millions of lives prosecuting the first war on terror and all for what? Live fire drills at Walmart?
On the latest spate of mass murders, the safest ground for pundits to land on in their 30-second answer is to blame the widespread availability of guns in our country that is just five percent of the world’s population but owns 42 percent of the civilian-owned guns on the planet.
That means we are sitting on close to 400 million guns in a country with close to 330 people. Feel safe?
We are captive to the capitalist world view that detaches a product, no matter how potentially lethal, from the consequences of its use as if a commercial transaction where some sort of baptism that absolves the seller from whatever action a depraved customer might take.
Case in point, an economic impact study released in April by the National Shooting Sports Foundation, the firearms industry trade association, that gushed about their sector’s exponential economic growth in “recent years has been nothing short of remarkable.”
The trade group’s economic impact footprint went from $19.1 billion in 2008 to $52.1 billion in 2018, a 171 percent increase in just a decade. NSSF reported the gun industry paid $15.7 billion in wages and paying $6.8 billion in taxes in 2018.
Yet, not factored in their cost-benefit analysis is the annual $229 billion in gun-violence related spending as well as the $8.6 billion in direct costs to cover emergency room and overall medical costs attributed to gun violence.
According to the Gifford Law Center, a gun control advocacy think tank, over the past decade 1.3 million Americans have been shot. Close to 36,000 are killed annually, or an average of one hundred a day. There is one mass shooting a day on average in the U.S. — that’s incidents with four or more people killed or wounded by gunfire.
But take heart, it’s August and President Trump has declared it National Shooting Sports Month and the National Sport Shooting Foundation reminds us the country’s firearms and ammunition manufacturers “take great pride in supporting wildlife conservation efforts.”
You don’t have to be Marianne Williamson to know that this is another manifestation of late-stage vulture capitalism that has no conscience and feeds off the ever-mounting pile of human carrion it generates worldwide.
As tragic as our domestic mass murders are here, they are just part of the carnage around the world caused by weapons stamped proudly “Made in America.”
And while our politicians beat their chest about the United States being the bulwark to counterterrorism, we are the chief exporters of its tools out the back door of our loading dock.
Be sure with the billions of dollars the exporters of death have made, they easily bought and paid for the very same politicians who now offer American communities caught in the crossfire of gun violence just thoughts and prayers.
As the Trump administration tortures undocumented families from south of the border, separating children from their parents and putting them all in cages and the San Antonio shooter took aim in Walmart, its gunfire from American made weapons used by drug-gangs that have migrants fleeing northward.
That’s the iron ring of death and human misery forged by an economic system bereft of morality that uses just a portion of the vast profits it generates to subvert our politics and our legal system.
In 1994 Congress made it “unlawful for a person to manufacture, transfer or possess” a semiautomatic assault weapon as well as high capacity magazines. The legislation prohibited 19 different models of this class of weapon.
In 2004, President George W. Bush and the GOP, primed with millions of dollars from the gun lobby, let the decade long assault weapons ban expire.
U.S. guns flooded places like Mexico where The Economist reported in May “that 70% of gun crimes in Mexico involve American-bought weapons” and “the share of homicides in Mexico involving a firearm grew from 16% in 1997 to 66% in 2017.”
The Economist continued. “That suggests around half of Mexico’s 33,000 murder victims last year were killed by a gun manufactured in the United States, which had 14,542 gun-homicides in 2017. An American-made gun is more likely to be used in a murder in Mexico than at home.”
While one of President Trump’s first actions was to sign-off on rolling back of an Obama era regulation to keep guns out of the hands of the mentally ill, he also shifted the responsibility for approving gun exports “from the State Department to the Department of Commerce, which applies looser rules,” according to The Economist.
For days now, since the back-to-back mass murders in San Antonio and Dayton the corporate news media has pondered ‘just what is it about the American character that lends itself to such random acts of such monstrous violence?’
Hmmm . . . just what could it be?
With panel after panel presented in “special reports” with bloody graphics and 911 calls as an audio scene-setter, the same old talking heads take turns diagnosing the seemingly intractable problem of random gun violence that is so uniquely an American problem.
One expert says it’s the undiagnosed mentally ill, who just happen to be mostly young white men who find succor in the dark recesses of the internet. Another will blame Donald Trump and the resurgence of white nationalism. The on-call ex-FBI and DOJ officials talk about their need for more “tools in their counter-terrorism toolbox” and the need for a domestic “war on terror 2.0.”
Really? We haven’t come to terms with the geopolitical ravages and costs of the initial war on terror, and now they want to bring the concept home. There’s just no sense of the cruel irony that we spent trillions, accelerated global warming and destroyed millions of lives prosecuting the first war on terror and all for what? Live fire drills at Walmart?
On the latest spate of mass murders, the safest ground for pundits to land on in their 30-second answer is to blame the widespread availability of guns in our country that is just five percent of the world’s population but owns 42 percent of the civilian-owned guns on the planet.
That means we are sitting on close to 400 million guns in a country with close to 330 people. Feel safe?
We are captive to the capitalist world view that detaches a product, no matter how potentially lethal, from the consequences of its use as if a commercial transaction where some sort of baptism that absolves the seller from whatever action a depraved customer might take.
Case in point, an economic impact study released in April by the National Shooting Sports Foundation, the firearms industry trade association, that gushed about their sector’s exponential economic growth in “recent years has been nothing short of remarkable.”
The trade group’s economic impact footprint went from $19.1 billion in 2008 to $52.1 billion in 2018, a 171 percent increase in just a decade. NSSF reported the gun industry paid $15.7 billion in wages and paying $6.8 billion in taxes in 2018.
Yet, not factored in their cost-benefit analysis is the annual $229 billion in gun-violence related spending as well as the $8.6 billion in direct costs to cover emergency room and overall medical costs attributed to gun violence.
According to the Gifford Law Center, a gun control advocacy think tank, over the past decade 1.3 million Americans have been shot. Close to 36,000 are killed annually, or an average of one hundred a day. There is one mass shooting a day on average in the U.S. — that’s incidents with four or more people killed or wounded by gunfire.
But take heart, it’s August and President Trump has declared it National Shooting Sports Month and the National Sport Shooting Foundation reminds us the country’s firearms and ammunition manufacturers “take great pride in supporting wildlife conservation efforts.”
The World’s Wealthiest Family Gets $4 Million Richer Every Hour
The 25 wealthiest dynasties on the planet control $1.4 trillion
Bloomberg
August 10, 2019
The numbers are mind-boggling: $70,000 per minute, $4 million per hour, $100 million per day.
That’s how quickly the fortune of the Waltons, the clan behind Walmart Inc., has been growing since last year’s Bloomberg ranking of the world’s richest families.
At that rate, their wealth would’ve expanded about $23,000 since you began reading this. A new Walmart associate in the U.S. would’ve made about 6 cents in that time, on the way to an $11 hourly minimum.
Even in this era of extreme wealth and brutal inequality, the contrast is jarring. The heirs of Sam Walton, Walmart’s notoriously frugal founder, are amassing wealth on a near-unprecedented scale — and they’re hardly alone.
The Walton fortune has swelled by $39 billion, to $191 billion, since topping the June 2018 ranking of the world’s richest families.
Other American dynasties are close behind in terms of the assets they’ve accrued. The Mars family, of candy fame, added $37 billion, bringing its fortune to $127 billion. The Kochs, the industrialists-cum-political-power-players, tacked on $26 billion, to $125 billion.
So it goes around the globe. America’s richest 0.1% today control more wealth than at any time since 1929, but their counterparts in Asia and Europe are gaining too. Worldwide, the 25 richest families now control almost $1.4 trillion in wealth, up 24% from last year.
To some critics, such figures are evidence that capitalism needs fixing. Inequality has become an explosive political issue, from Paris to Seattle to Hong Kong. But how to shrink the growing gap between the rich and the poor?
As the tension increases, even some billionaire heirs are backing steps such as wealth taxes.
“If we don’t do something like this, what are we doing, just hoarding this wealth in a country that’s falling apart at the seams?” Liesel Pritzker Simmons, whose family ranks 17th on the Bloomberg list, said in June. “That’s not the America we want to live in.”
A notable addition this year: the Saudi royal family.
The House of Saud is worth $100 billion, based on the cumulative payouts royal family members are estimated to have received over the past 50 years from the Royal Diwan, the executive office of the king.
That’s a lowball figure. After all, oil giant Saudi Aramco, the linchpin of the Saudi economy, is the world’s most profitable company. The kingdom is hoping to take it public at a $2 trillion valuation.
Tallying dynastic dollars isn’t an exact science. Fortunes backed by decades and sometimes centuries of assets and dividends can obfuscate the true extent of a family’s holdings. The net worth of the Rothschilds or Rockefellers, for instance, is too diffuse to value. Clans whose wealth is currently unverifiable are also absent.
But of those we can track, most are reaping the rewards of ultra-low interest rates, tax cuts, deregulation and innovation. Koch Industries, for instance, has a venture-capital arm. The latest generation of Waltons is establishing its own enterprises.
Other big gainers include the owners of fashion house Chanel and Italy’s Ferrero family, whose brands include Nutella spread and Tic Tac mints. In India, the fortune of the Ambani family swelled $7 billion, to $50 billion.
In all, the world’s 25 richest families have $250 billion more wealth, compared to last year.
The rich aren’t necessarily getting richer together. The Quandt family dropped eight places following a poor year for Bayerische Motoren Werke AG, which has battled trade tensions and slowing global markets as BMW invests in the disruptive shift to self-driving electric vehicles. The Dassault, Duncan, Lee and Hearst families all fell from the list.
And this could in many ways represent a peak, as U.S. President Donald Trump escalates a trade war with China and worries grow about a global recession.
“It can be very challenging to preserve wealth over the long-term,” said Rebecca Gooch, research director at Campden Wealth, a network and education business for generational-wealth holders. “Family-owned operating businesses can shift from booming to declining, a family’s investment portfolio might not be well diversified or there can be issues with generational transitions.”
See complete list
That’s how quickly the fortune of the Waltons, the clan behind Walmart Inc., has been growing since last year’s Bloomberg ranking of the world’s richest families.
At that rate, their wealth would’ve expanded about $23,000 since you began reading this. A new Walmart associate in the U.S. would’ve made about 6 cents in that time, on the way to an $11 hourly minimum.
Even in this era of extreme wealth and brutal inequality, the contrast is jarring. The heirs of Sam Walton, Walmart’s notoriously frugal founder, are amassing wealth on a near-unprecedented scale — and they’re hardly alone.
The Walton fortune has swelled by $39 billion, to $191 billion, since topping the June 2018 ranking of the world’s richest families.
Other American dynasties are close behind in terms of the assets they’ve accrued. The Mars family, of candy fame, added $37 billion, bringing its fortune to $127 billion. The Kochs, the industrialists-cum-political-power-players, tacked on $26 billion, to $125 billion.
So it goes around the globe. America’s richest 0.1% today control more wealth than at any time since 1929, but their counterparts in Asia and Europe are gaining too. Worldwide, the 25 richest families now control almost $1.4 trillion in wealth, up 24% from last year.
To some critics, such figures are evidence that capitalism needs fixing. Inequality has become an explosive political issue, from Paris to Seattle to Hong Kong. But how to shrink the growing gap between the rich and the poor?
As the tension increases, even some billionaire heirs are backing steps such as wealth taxes.
“If we don’t do something like this, what are we doing, just hoarding this wealth in a country that’s falling apart at the seams?” Liesel Pritzker Simmons, whose family ranks 17th on the Bloomberg list, said in June. “That’s not the America we want to live in.”
A notable addition this year: the Saudi royal family.
The House of Saud is worth $100 billion, based on the cumulative payouts royal family members are estimated to have received over the past 50 years from the Royal Diwan, the executive office of the king.
That’s a lowball figure. After all, oil giant Saudi Aramco, the linchpin of the Saudi economy, is the world’s most profitable company. The kingdom is hoping to take it public at a $2 trillion valuation.
Tallying dynastic dollars isn’t an exact science. Fortunes backed by decades and sometimes centuries of assets and dividends can obfuscate the true extent of a family’s holdings. The net worth of the Rothschilds or Rockefellers, for instance, is too diffuse to value. Clans whose wealth is currently unverifiable are also absent.
But of those we can track, most are reaping the rewards of ultra-low interest rates, tax cuts, deregulation and innovation. Koch Industries, for instance, has a venture-capital arm. The latest generation of Waltons is establishing its own enterprises.
Other big gainers include the owners of fashion house Chanel and Italy’s Ferrero family, whose brands include Nutella spread and Tic Tac mints. In India, the fortune of the Ambani family swelled $7 billion, to $50 billion.
In all, the world’s 25 richest families have $250 billion more wealth, compared to last year.
The rich aren’t necessarily getting richer together. The Quandt family dropped eight places following a poor year for Bayerische Motoren Werke AG, which has battled trade tensions and slowing global markets as BMW invests in the disruptive shift to self-driving electric vehicles. The Dassault, Duncan, Lee and Hearst families all fell from the list.
And this could in many ways represent a peak, as U.S. President Donald Trump escalates a trade war with China and worries grow about a global recession.
“It can be very challenging to preserve wealth over the long-term,” said Rebecca Gooch, research director at Campden Wealth, a network and education business for generational-wealth holders. “Family-owned operating businesses can shift from booming to declining, a family’s investment portfolio might not be well diversified or there can be issues with generational transitions.”
See complete list
Chase plans to screw its credit card holders next week. Here’s how to stop them from screwing you.
The Supreme Court gave Chase a license to break the law, but there's a way out.
IAN MILLHISER - Thinkprogress
JUL 30, 2019, 8:00 AM
JPMorgan Chase, the banking behemoth that provides credit cards to thousands of Americans, sent an email to many of its customers in late May which sought to strip those customers of most of their rights to sue the bank if the bank violates the law. Though the email gave those customers the ability to opt out of this effort to strip away their rights, the instructions on how to do so were buried deep in the email — deep enough that the bank likely hoped no one would read that far.
The subject of the email was “Important information regarding changes to your Chase account.” A copy of the email was forwarded to ThinkProgress by a Chase customer who received it.
Forced arbitration
The relevant portions of the email concern forced arbitration, an abusive practice largely invented by conservatives on the Supreme Court.
Beginning in the 1980s, the Supreme Court began to rewrite the Federal Arbitration Act of 1925 — a statute that, in Justice Ruth Bader Ginsburg’s words, was intended to allow “merchants with relatively equal bargaining power” to resolve disputes through private arbitrators — to allow companies to force workers and consumers into a privatized arbitration system that favors corporate parties. This rewriting accelerated in the 21st century, with a series of 5-4 decisions that departed sharply from the Arbitration Act’s text.
The Act, for example, exempts “workers engaged in foreign or interstate commerce.” Nevertheless, in Circuit City v. Adams, the Supreme Court held that most workers engaged in foreign or interstate commerce may be forced into arbitration agreements.
Similarly, in AT&T Mobility v. Concepcion, the Supreme Court held that companies may force their customers to sign away their right to join a class action lawsuit as a condition of doing business for that company. More recently, in Epic Systems v. Lewis, a 5-4 court explained that workers can be forced to sign a forced arbitration agreement with a class action ban under pain of firing.
As a paper by the Economic Policy Institute’s Ross Eisenbrey explains, individual workers forced into arbitration are less likely to prevail before an arbitrator than they are before a real judge. And when they do prevail, they typically receive far less money.
Similarly, class action bans effectively allow companies to illegally take money from their workers or consumers with impunity, so long as they only take a little bit at a time.
Class actions allow multiple plaintiffs, who all share a similar grievance against the same defendant, to join together in a single lawsuit against that defendant. They are particularly important when a company engages in widespread, low-dollar lawbreaking against many individuals.
Suppose, for example, that a bank decides to illegally charge a $150 fee to each of its 100,000 credit card customers. Nearly none of these customers will sue the bank over a matter of only $150, because the cost of litigating such a case will exceed the amount of money at issue. So if the customers cannot join together in a class action, the bank will walk away with a cool $15 million ($150 * 100,000).
How to opt-outThe Chase email contains both a forced arbitration provision and a ban on class actions. It “provides that all disputes between you and Chase must be resolved by BINDING ARBITRATION,” and explicitly states that parties to the forced arbitration agreement “GIVE UP YOUR RIGHT TO GO TO COURT (except for matters that may be taken to a small claims court).” The email further provides that class actions “are not available under this agreement to arbitrate.”
Though the email does allow some claims to proceed in small claims court rather than before an arbitrator, it also provides that such claims must proceed “on an individual basis.” Thus, the email seeks to immunize Chase from class action litigation.
Significantly, however, the email also provides that customers may opt out of the forced arbitration provision and class action ban, but only if they comply with very specific instructions.
Can I (the customer) reject this agreement to arbitrate?
Yes. You have the right to reject this agreement to arbitrate if you notify us no later than 8/9/2019. You must do so in writing by stating that you reject this agreement to arbitrate and include your name, account number, address and personal signature. Your notice must be mailed to us at P.O. Box 15298, Wilmington, DE 19850-5298. Rejection notices sent to any other address, or sent by electronic mail or communicated orally, will not be accepted or effective.
If you received this email, in other words, and do not wish to give up your rights to your credit card company, you must send a letter via snail mail to the P.O. Box listed above — and you must do so by late next week.
Though it may be surprising that Chase allows people to opt-out of forced arbitration, the opt-out provision serves a very specific legal purpose. As Professor Charlotte Garden wrote in a recent paper on forced arbitration, California law arguably permits courts to strike down forced arbitration provisions if that provision is imposed without choice. So it’s in a company’s interest to give customers a choice to opt-out — so long as the choice is buried where few people are likely to notice it.
As Garden explained, the delivery service Grubhub imposed a forced arbitration agreement on its drivers. Yet “only two delivery drivers of thousands had opted out of the [forced arbitration provision] during the months after Grubhub added its opt out clause.” Similarly, “only 270 drivers out of more than 160,000” opted out of Uber’s forced arbitration agreement. Thus, opt-out clauses help protect companies from a court decision invalidating a forced arbitration agreements, and they typically do so at virtually no cost to the company. Few people notice them. Fewer still probably understand them. So almost no one opts out.
Chase, however, cannot prevent members of the media from reporting on this abusive practice. Nor can it prevent any of its customers who read this column from invoking the opt-out provision.
Disclaimer: This column does not contain legal advice and does not create an attorney/client relationship. If you wish to obtain legal advice, consult your own lawyer.
The subject of the email was “Important information regarding changes to your Chase account.” A copy of the email was forwarded to ThinkProgress by a Chase customer who received it.
Forced arbitration
The relevant portions of the email concern forced arbitration, an abusive practice largely invented by conservatives on the Supreme Court.
Beginning in the 1980s, the Supreme Court began to rewrite the Federal Arbitration Act of 1925 — a statute that, in Justice Ruth Bader Ginsburg’s words, was intended to allow “merchants with relatively equal bargaining power” to resolve disputes through private arbitrators — to allow companies to force workers and consumers into a privatized arbitration system that favors corporate parties. This rewriting accelerated in the 21st century, with a series of 5-4 decisions that departed sharply from the Arbitration Act’s text.
The Act, for example, exempts “workers engaged in foreign or interstate commerce.” Nevertheless, in Circuit City v. Adams, the Supreme Court held that most workers engaged in foreign or interstate commerce may be forced into arbitration agreements.
Similarly, in AT&T Mobility v. Concepcion, the Supreme Court held that companies may force their customers to sign away their right to join a class action lawsuit as a condition of doing business for that company. More recently, in Epic Systems v. Lewis, a 5-4 court explained that workers can be forced to sign a forced arbitration agreement with a class action ban under pain of firing.
As a paper by the Economic Policy Institute’s Ross Eisenbrey explains, individual workers forced into arbitration are less likely to prevail before an arbitrator than they are before a real judge. And when they do prevail, they typically receive far less money.
Similarly, class action bans effectively allow companies to illegally take money from their workers or consumers with impunity, so long as they only take a little bit at a time.
Class actions allow multiple plaintiffs, who all share a similar grievance against the same defendant, to join together in a single lawsuit against that defendant. They are particularly important when a company engages in widespread, low-dollar lawbreaking against many individuals.
Suppose, for example, that a bank decides to illegally charge a $150 fee to each of its 100,000 credit card customers. Nearly none of these customers will sue the bank over a matter of only $150, because the cost of litigating such a case will exceed the amount of money at issue. So if the customers cannot join together in a class action, the bank will walk away with a cool $15 million ($150 * 100,000).
How to opt-outThe Chase email contains both a forced arbitration provision and a ban on class actions. It “provides that all disputes between you and Chase must be resolved by BINDING ARBITRATION,” and explicitly states that parties to the forced arbitration agreement “GIVE UP YOUR RIGHT TO GO TO COURT (except for matters that may be taken to a small claims court).” The email further provides that class actions “are not available under this agreement to arbitrate.”
Though the email does allow some claims to proceed in small claims court rather than before an arbitrator, it also provides that such claims must proceed “on an individual basis.” Thus, the email seeks to immunize Chase from class action litigation.
Significantly, however, the email also provides that customers may opt out of the forced arbitration provision and class action ban, but only if they comply with very specific instructions.
Can I (the customer) reject this agreement to arbitrate?
Yes. You have the right to reject this agreement to arbitrate if you notify us no later than 8/9/2019. You must do so in writing by stating that you reject this agreement to arbitrate and include your name, account number, address and personal signature. Your notice must be mailed to us at P.O. Box 15298, Wilmington, DE 19850-5298. Rejection notices sent to any other address, or sent by electronic mail or communicated orally, will not be accepted or effective.
If you received this email, in other words, and do not wish to give up your rights to your credit card company, you must send a letter via snail mail to the P.O. Box listed above — and you must do so by late next week.
Though it may be surprising that Chase allows people to opt-out of forced arbitration, the opt-out provision serves a very specific legal purpose. As Professor Charlotte Garden wrote in a recent paper on forced arbitration, California law arguably permits courts to strike down forced arbitration provisions if that provision is imposed without choice. So it’s in a company’s interest to give customers a choice to opt-out — so long as the choice is buried where few people are likely to notice it.
As Garden explained, the delivery service Grubhub imposed a forced arbitration agreement on its drivers. Yet “only two delivery drivers of thousands had opted out of the [forced arbitration provision] during the months after Grubhub added its opt out clause.” Similarly, “only 270 drivers out of more than 160,000” opted out of Uber’s forced arbitration agreement. Thus, opt-out clauses help protect companies from a court decision invalidating a forced arbitration agreements, and they typically do so at virtually no cost to the company. Few people notice them. Fewer still probably understand them. So almost no one opts out.
Chase, however, cannot prevent members of the media from reporting on this abusive practice. Nor can it prevent any of its customers who read this column from invoking the opt-out provision.
Disclaimer: This column does not contain legal advice and does not create an attorney/client relationship. If you wish to obtain legal advice, consult your own lawyer.
Millions of US taxpayers’ money invested in private prison firms
At least 20 public worker pension funds have invested in firms profiting from Trump’s immigration policy, including California and New York
This story is co-published with the Documented news website and newsletter
Max Siegelbaum of Documented
The Guardian
Thu 11 Jul 2019 07.00 BST
Millions of US taxpayer dollars are being invested into private prison operators involved in the detention of thousands of migrants across the United States, an investigation shows.
Some of the largest investments, which are by pension funds for public sector workers such as teachers and firefighters, come from states with “sanctuary” policies, such as New York, California and Oregon.
Nationwide, at least 20 pension funds and plans have invested in Geo Group or CoreCivic, the two biggest private prison operators, according to a Guardian/Documented analysis of US Securities and Exchange Commission (SEC) filings.
These funds range from big organizations like the California Public Employees’ Retirement System (CalPers), which manages $81bn in stock holdings, to the more modestly sized funds like the New Mexico Educational Retirement Board, which manages about $2.3bn.
Public worker funds across the US have at least $67m currently invested in the two companies, according to filings from the first quarter of 2019, which probably show just a portion of the total amount of public sector pension money invested in both companies.
The two firms have become more attractive to investors after Donald Trump became president, pushing tougher immigration policies. The firms have secured contracts worth hundreds of millions of dollars from Immigrations and Customs Enforcement (Ice) which has turned to private operators as it has detained growing numbers of immigrants.
‘Complicity is unacceptable’
While the holdings in the SEC filings are only a tiny proportion of the estimated $3.8tn invested in public retirement funds, immigration advocacy campaigners and some lawmakers say they have a symbolic power, and have called for public pensions funds to follow the lead of some banks and disinvest.
Last week it emerged one of Canada’s biggest pension funds quietly divested from the two firms after the Guardian/Documented had reported late last year that the Canadian Pension Plan Investment Board (CPPIB) held nearly US$8m in stock in Geo Group and CoreCivic.
Disinvestment in private prison operators sent a powerful message, according to Daniel Altschuler, director of civic engagement and research at Make the Road New York, an immigrant advocacy organization.
“Taking a stand sends a message that complicity with companies that are profiting from people’s pain is unacceptable,” said Altschuler.
This is a message some major banks have been getting, he added. “As some cities and states either divest or look at divestment, the banks have been aware of that.”
In March, JPMorgan Chase & Co decided to stop financing private prison companies. They had previously underwritten bonds and syndicated loans for Geo Group and CoreCivic.
Earlier this week SunTrust Bank announced it would be ceasing to do business with the private prison industry. Last month Bank of America did the same.
The Miami Herald reported that the bank had provided Caliburn, the operator of a Florida facility where roughly 2,300 migrant children are held, with a loan of $380m and a $75m credit line. The bank said that it decided to cease doing business with prison operators, in part due to “the concerns of our employees and stakeholders in the communities we serve”, a Bank of America spokesperson told CNN.
Private prison operators boom in Trump era
Towards the end of Barack Obama’s second term, the justice department (DoJ) decided to discontinue all use of private prison corporations to house American prisoners and immigrant detainees. The stock for Geo Group and CoreCivic immediately plummeted more than 30% each.
But shortly after Trump was sworn in, he discontinued the DoJ policy and the stock of both companies slowly started climbing again. Between fiscal year 2015 and fiscal year 2018, as the administration began to ramp up its crackdown on immigrants, the targeted average daily population of detained immigrants grew 50%.
Since 1 January 2017, Geo Group has won agency contracts worth over $390m, according to data from USA Spending, the federal government’s spending tracker. CoreCivic received over $228m in the same timeframe.
Biggest investments from New York and California
According to the SEC data, the largest investments into both companies come from the New York Teachers Retirement System, which has a total investment of $9.5m, and CalPers, which has an investment of $9.5m into the companies.
Other states with immigrant-friendly policies and investments in the two companies include Oregon, New Mexico, Colorado and Utah.
The state board of administration of the Florida Retirement System reported about $3.8m in the first quarter of 2019. In a response to questions, John Kuczwanski, manager of external affairs for the fund, said they had more than $16m invested in the two companies, actively and passively.
About half of the 20 pension funds responded to a request for comment on their holdings.
Most of them said they made their investments through following indices created by financial research firms like S&P. Some had portions of their money managed by external firms.
Some funds said environmental social and corporate governance (ESG) principles informed investments; several said they had no ESG guidelines.
In a statement, the New York State Teachers’ Retirement System (NYSTRS) said their holdings in the two firms are “primarily passively held in portfolios that track a broad market index. NYSTRS is mindful of balancing fiduciary duties with environmental, social and governance concerns in investing. Where appropriate, and on a case by case basis, we express our views on ESG through our proxy voting program.
“For example, there was a recent Geo Group shareholder proposal calling for the publication of an annual human rights report. NYSTRS voted for this proposal.”
CalPers said: “CalPers global equity portfolio is comprised of more than 10,000 companies from across the globe, and is largely managed through an index-oriented investment strategy. For more information on CalPers’ investment strategies, see our policies page … [and] our CalPers governance and sustainability principles.”
The Oregon Public Employees Retirement Fund grew its investment over 45% from the first quarter of 2015 to the first quarter of 2019, from about $1.4m to about $2m.
Arizona’s state retirement fund its investment grew 44%.
Best returns
Some funds said maximising returns was their focus, not social concerns.
“We’re not a social investor. We want to get the best return while managing risk,” said Beau Barnes, deputy executive secretary and general counsel at the Kentucky Teachers’ Retirement System.
A representative from Pennsylvania’s Public School Employees’ Retirement System said that fund does not have ESG principles either, and only follows a state law that forbids them from investing in companies with ties to Sudan and Iran.
“Our statues generally prohibit prioritization of social investing considerations over maximization of long-term risk-adjusted returns,” said Matt Clark of the South Dakota Investment Council.
While Geo Group has maintained a relatively stable price, CoreCivic has plummeted from about $30 to $19 in three years. The median growth in investment over the course of the Trump administration was 14%.
Collectively, these 20 public sector funds manage more than $319bn, of which just 0.02% is invested in those two private prison companies.
Calls to divest
Some public pensions have been resistant to calls to divest.
After a hard-fought campaign spearheaded by a group of advocates called Educators for Migrant Justice, the California State Teachers’ Retirement System into divested the fund’s holdings from CoreCivic in November 2018 and Geo Group, which amounted to about $12m.
Now, advocates are focusing on CalPers.
“We’re starting to see traction with board members,” said Emily Claire Goldman, founder and director for Educators for Migrant Justice, an ESG transparency initiative. Goldman explained that the pension fund industry has started increasingly using private equity as an investment vehicle, which she said “is a complete black box”.
CoreCivic and Geo Group say they follow the government’s guidelines for detention practices and routinely pass inspection. “Geo’s facilities are highly rated by independent accreditation entities … and provide high-quality services in safe, secure and humane residential environments,” the company said in a statement.
Some of the largest investments, which are by pension funds for public sector workers such as teachers and firefighters, come from states with “sanctuary” policies, such as New York, California and Oregon.
Nationwide, at least 20 pension funds and plans have invested in Geo Group or CoreCivic, the two biggest private prison operators, according to a Guardian/Documented analysis of US Securities and Exchange Commission (SEC) filings.
These funds range from big organizations like the California Public Employees’ Retirement System (CalPers), which manages $81bn in stock holdings, to the more modestly sized funds like the New Mexico Educational Retirement Board, which manages about $2.3bn.
Public worker funds across the US have at least $67m currently invested in the two companies, according to filings from the first quarter of 2019, which probably show just a portion of the total amount of public sector pension money invested in both companies.
The two firms have become more attractive to investors after Donald Trump became president, pushing tougher immigration policies. The firms have secured contracts worth hundreds of millions of dollars from Immigrations and Customs Enforcement (Ice) which has turned to private operators as it has detained growing numbers of immigrants.
‘Complicity is unacceptable’
While the holdings in the SEC filings are only a tiny proportion of the estimated $3.8tn invested in public retirement funds, immigration advocacy campaigners and some lawmakers say they have a symbolic power, and have called for public pensions funds to follow the lead of some banks and disinvest.
Last week it emerged one of Canada’s biggest pension funds quietly divested from the two firms after the Guardian/Documented had reported late last year that the Canadian Pension Plan Investment Board (CPPIB) held nearly US$8m in stock in Geo Group and CoreCivic.
Disinvestment in private prison operators sent a powerful message, according to Daniel Altschuler, director of civic engagement and research at Make the Road New York, an immigrant advocacy organization.
“Taking a stand sends a message that complicity with companies that are profiting from people’s pain is unacceptable,” said Altschuler.
This is a message some major banks have been getting, he added. “As some cities and states either divest or look at divestment, the banks have been aware of that.”
In March, JPMorgan Chase & Co decided to stop financing private prison companies. They had previously underwritten bonds and syndicated loans for Geo Group and CoreCivic.
Earlier this week SunTrust Bank announced it would be ceasing to do business with the private prison industry. Last month Bank of America did the same.
The Miami Herald reported that the bank had provided Caliburn, the operator of a Florida facility where roughly 2,300 migrant children are held, with a loan of $380m and a $75m credit line. The bank said that it decided to cease doing business with prison operators, in part due to “the concerns of our employees and stakeholders in the communities we serve”, a Bank of America spokesperson told CNN.
Private prison operators boom in Trump era
Towards the end of Barack Obama’s second term, the justice department (DoJ) decided to discontinue all use of private prison corporations to house American prisoners and immigrant detainees. The stock for Geo Group and CoreCivic immediately plummeted more than 30% each.
But shortly after Trump was sworn in, he discontinued the DoJ policy and the stock of both companies slowly started climbing again. Between fiscal year 2015 and fiscal year 2018, as the administration began to ramp up its crackdown on immigrants, the targeted average daily population of detained immigrants grew 50%.
Since 1 January 2017, Geo Group has won agency contracts worth over $390m, according to data from USA Spending, the federal government’s spending tracker. CoreCivic received over $228m in the same timeframe.
Biggest investments from New York and California
According to the SEC data, the largest investments into both companies come from the New York Teachers Retirement System, which has a total investment of $9.5m, and CalPers, which has an investment of $9.5m into the companies.
Other states with immigrant-friendly policies and investments in the two companies include Oregon, New Mexico, Colorado and Utah.
The state board of administration of the Florida Retirement System reported about $3.8m in the first quarter of 2019. In a response to questions, John Kuczwanski, manager of external affairs for the fund, said they had more than $16m invested in the two companies, actively and passively.
About half of the 20 pension funds responded to a request for comment on their holdings.
Most of them said they made their investments through following indices created by financial research firms like S&P. Some had portions of their money managed by external firms.
Some funds said environmental social and corporate governance (ESG) principles informed investments; several said they had no ESG guidelines.
In a statement, the New York State Teachers’ Retirement System (NYSTRS) said their holdings in the two firms are “primarily passively held in portfolios that track a broad market index. NYSTRS is mindful of balancing fiduciary duties with environmental, social and governance concerns in investing. Where appropriate, and on a case by case basis, we express our views on ESG through our proxy voting program.
“For example, there was a recent Geo Group shareholder proposal calling for the publication of an annual human rights report. NYSTRS voted for this proposal.”
CalPers said: “CalPers global equity portfolio is comprised of more than 10,000 companies from across the globe, and is largely managed through an index-oriented investment strategy. For more information on CalPers’ investment strategies, see our policies page … [and] our CalPers governance and sustainability principles.”
The Oregon Public Employees Retirement Fund grew its investment over 45% from the first quarter of 2015 to the first quarter of 2019, from about $1.4m to about $2m.
Arizona’s state retirement fund its investment grew 44%.
Best returns
Some funds said maximising returns was their focus, not social concerns.
“We’re not a social investor. We want to get the best return while managing risk,” said Beau Barnes, deputy executive secretary and general counsel at the Kentucky Teachers’ Retirement System.
A representative from Pennsylvania’s Public School Employees’ Retirement System said that fund does not have ESG principles either, and only follows a state law that forbids them from investing in companies with ties to Sudan and Iran.
“Our statues generally prohibit prioritization of social investing considerations over maximization of long-term risk-adjusted returns,” said Matt Clark of the South Dakota Investment Council.
While Geo Group has maintained a relatively stable price, CoreCivic has plummeted from about $30 to $19 in three years. The median growth in investment over the course of the Trump administration was 14%.
Collectively, these 20 public sector funds manage more than $319bn, of which just 0.02% is invested in those two private prison companies.
Calls to divest
Some public pensions have been resistant to calls to divest.
After a hard-fought campaign spearheaded by a group of advocates called Educators for Migrant Justice, the California State Teachers’ Retirement System into divested the fund’s holdings from CoreCivic in November 2018 and Geo Group, which amounted to about $12m.
Now, advocates are focusing on CalPers.
“We’re starting to see traction with board members,” said Emily Claire Goldman, founder and director for Educators for Migrant Justice, an ESG transparency initiative. Goldman explained that the pension fund industry has started increasingly using private equity as an investment vehicle, which she said “is a complete black box”.
CoreCivic and Geo Group say they follow the government’s guidelines for detention practices and routinely pass inspection. “Geo’s facilities are highly rated by independent accreditation entities … and provide high-quality services in safe, secure and humane residential environments,” the company said in a statement.
David Cay Johnston: The key way the super rich avoid taxes — and a simple way to close their tax loopholes once and for all
July 10, 2019
By David Cay Johnston, DC Report @ Raw Story
Our investigative series The Koch Papers illustrates many deep problems in America’s creaky, century old-income tax system, especially how our Congress has, through favors to donors, transformed it into has two tax systems, separate and unequal.
These dual systems pose a threat to our nation’s social stability, to our national security and to America remaining a nation of equality under law. But there is a simple solution to this, as we shall see. It requires only that Congress stand up for honest and fair tax law enforcement, not the interests of those major campaign donors who cheat.
One of the most significant lessons applies to William Ingraham Koch and his company whether or not, as his former chief tax executive claims, the IRS failed to curb massive income tax “fraud.” That’s because if Koch did find a way to lawfully collect more than $100 million in tax-free profits annually it is just as much a public issue as if he did it by cheating.
Congress, Are You Listening?
No reasonable person can defend a system under which workers laboring all year for the $7.25 federal minimum wage pay more than a dollar a day in income taxes while billionaire business owners pocket millions in profits tax-free.
Nor is there any reasonable defense for hamstringing our tax police by requiring them to intensely audit the working poor while cutting resources to audit the well to do and the corporations they own.
America’s federal income tax system was long regarded as the most efficient and effective in the world, studied by tax administrators from Argentina to Zimbabwe. China’s system was designed four decades ago with American advice. Britain’s was reformed a quarter century ago to be more like America’s.
But today we suffer because our Congress has failed in its duty to ensure that our federal tax system flows from the economy instead of cutting against it while making sure that the tax police—the IRS—enforce our tax laws equal shares of fairness and vigor. The Koch Papers series illuminates all of these problems and more.
The creation of two tax systems grows from Congress treating Americans differently depending on how they earn their daily bread.
Congress does not trust those in the first system—workers, pensioners and investors who collect dividends and interest.
For these Americans, income is independently verified and taxes are withheld before people get paid.The IRS knows how much you made because Congress requires your employer, pension agency or stock broker to report your income to IRS computers.
Under this reporting regime, cheating is nearly impossible.
America’s other income tax system applies to wealthy people who own their business, including Bill Koch and Donald Trump.
No Income Verification
Congress trusts such people to faithfully report their revenues, profits and losses and to pay 100 percent of their income taxes voluntarily. Unlike workers, there is little or no independent verification of business income.
It makes no sense to regard them as models of integrity, given decades of experience showing that tax cheating is rampant. One man pocketed $450 million tax-free with the IRS in the dark until a jilted lover turned him in. The IRS admitted in 2005 that it has no idea about the extent of high-end tax cheating.
Audits are the only way to have any assurance that rich business owners are paying the taxes that Congress requires.
But the number of audits has been shriveling along with time spent per audit. In addition, the IRS adopted rules two decades ago, at the behest of Congress, requiring auditors to warn companies in advance what issues would be examined and to not look more broadly unless the evidence they found rose to indications of criminality. The IRS long ago abandoned quality in corporate audits in favor of closing them quickly. And it has told Congress that the tax code is so complex that it cannot untangle many of the tax shelters sold by Wall Street.
Corporations have learned that withholding documents is a good way to avoid getting caught not paying all the taxes they owe. That is one of the many accusations against Bill Koch and his company leveled in whistleblower complaints by Charles Middleton, Koch’s former top tax executive. Koch and his company, Carbon Oxbow LLC, simply say the IRS closed its audit with no changes.
Playing ‘Audit Roulette’
Middleton gave the IRS documents that he says show Koch and his company knowingly engaged in “audit roulette,” which is cheating in the expectation that it was unlikely to be caught by IRS auditors and, if is, by withholding documents.
Last year, the risk that millionaires and billionaires would have their tax returns audited was 1-in-31. Every tax expert I know says the willingness to play audit roulette has been rising as audits of the rich and their companies have shrunk over the last three decades.
Tax audit roulette, not incidentally, is a much safer bet than spinning the wheel in Atlantic City where the odds are 19-to-1.
Audit rules for partnerships, which do not pay taxes directly, are dramatically more in favor of tax cheats. Over the last two decades, audit rates have ranged between 400-to-1 at the turn of the centuryto 224-to-1 in recently.
The falling audit risk is measured by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, which has a federal court order requiring the IRS to turn over data monthly.
TRAC’s latest report documents “an alarming and continued downward spiral in government audits of the wealthiest taxpayers and America’s corporate giants. Despite growing income inequality—where the top 1% of Americans control much of the wealth in the United States—less and less attention is being given by federal agents and investigators to determine whether these same individuals and businesses properly report their true incomes and pay taxes on these dollars. Billions of dollars are arguably at stake, as is American faith in the fairness of our federal tax system.”
The way to make the system fair is to require withholding on all income. Business owners who take money out of their companies should be required to rely on a trustee whose legal duty is to withhold taxes and report the income, risking prison or failure to do so. That is how the system operates for workers, pensioners and investors.
Along with this Congress needs to enact rules requiring the reporting of loans to and from companies by their owners that are consolidated with individual income reports. That will enable IRS computers to flag what appear to be loans being used to disguise income, though in most cases follow up would be needed by humans.
In our complex 21st Century economy we are beset with mind-numbing problems, many of which seem to defy sensible solutions. But requiring that all income be verified and treating business owners the same as their workers, that’s a simple problem that will get fixed if we demand our Congress act in our best interests regardless of how much it offends tax cheats among the political donor class.
These dual systems pose a threat to our nation’s social stability, to our national security and to America remaining a nation of equality under law. But there is a simple solution to this, as we shall see. It requires only that Congress stand up for honest and fair tax law enforcement, not the interests of those major campaign donors who cheat.
One of the most significant lessons applies to William Ingraham Koch and his company whether or not, as his former chief tax executive claims, the IRS failed to curb massive income tax “fraud.” That’s because if Koch did find a way to lawfully collect more than $100 million in tax-free profits annually it is just as much a public issue as if he did it by cheating.
Congress, Are You Listening?
No reasonable person can defend a system under which workers laboring all year for the $7.25 federal minimum wage pay more than a dollar a day in income taxes while billionaire business owners pocket millions in profits tax-free.
Nor is there any reasonable defense for hamstringing our tax police by requiring them to intensely audit the working poor while cutting resources to audit the well to do and the corporations they own.
America’s federal income tax system was long regarded as the most efficient and effective in the world, studied by tax administrators from Argentina to Zimbabwe. China’s system was designed four decades ago with American advice. Britain’s was reformed a quarter century ago to be more like America’s.
But today we suffer because our Congress has failed in its duty to ensure that our federal tax system flows from the economy instead of cutting against it while making sure that the tax police—the IRS—enforce our tax laws equal shares of fairness and vigor. The Koch Papers series illuminates all of these problems and more.
The creation of two tax systems grows from Congress treating Americans differently depending on how they earn their daily bread.
Congress does not trust those in the first system—workers, pensioners and investors who collect dividends and interest.
For these Americans, income is independently verified and taxes are withheld before people get paid.The IRS knows how much you made because Congress requires your employer, pension agency or stock broker to report your income to IRS computers.
Under this reporting regime, cheating is nearly impossible.
America’s other income tax system applies to wealthy people who own their business, including Bill Koch and Donald Trump.
No Income Verification
Congress trusts such people to faithfully report their revenues, profits and losses and to pay 100 percent of their income taxes voluntarily. Unlike workers, there is little or no independent verification of business income.
It makes no sense to regard them as models of integrity, given decades of experience showing that tax cheating is rampant. One man pocketed $450 million tax-free with the IRS in the dark until a jilted lover turned him in. The IRS admitted in 2005 that it has no idea about the extent of high-end tax cheating.
Audits are the only way to have any assurance that rich business owners are paying the taxes that Congress requires.
But the number of audits has been shriveling along with time spent per audit. In addition, the IRS adopted rules two decades ago, at the behest of Congress, requiring auditors to warn companies in advance what issues would be examined and to not look more broadly unless the evidence they found rose to indications of criminality. The IRS long ago abandoned quality in corporate audits in favor of closing them quickly. And it has told Congress that the tax code is so complex that it cannot untangle many of the tax shelters sold by Wall Street.
Corporations have learned that withholding documents is a good way to avoid getting caught not paying all the taxes they owe. That is one of the many accusations against Bill Koch and his company leveled in whistleblower complaints by Charles Middleton, Koch’s former top tax executive. Koch and his company, Carbon Oxbow LLC, simply say the IRS closed its audit with no changes.
Playing ‘Audit Roulette’
Middleton gave the IRS documents that he says show Koch and his company knowingly engaged in “audit roulette,” which is cheating in the expectation that it was unlikely to be caught by IRS auditors and, if is, by withholding documents.
Last year, the risk that millionaires and billionaires would have their tax returns audited was 1-in-31. Every tax expert I know says the willingness to play audit roulette has been rising as audits of the rich and their companies have shrunk over the last three decades.
Tax audit roulette, not incidentally, is a much safer bet than spinning the wheel in Atlantic City where the odds are 19-to-1.
Audit rules for partnerships, which do not pay taxes directly, are dramatically more in favor of tax cheats. Over the last two decades, audit rates have ranged between 400-to-1 at the turn of the centuryto 224-to-1 in recently.
The falling audit risk is measured by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, which has a federal court order requiring the IRS to turn over data monthly.
TRAC’s latest report documents “an alarming and continued downward spiral in government audits of the wealthiest taxpayers and America’s corporate giants. Despite growing income inequality—where the top 1% of Americans control much of the wealth in the United States—less and less attention is being given by federal agents and investigators to determine whether these same individuals and businesses properly report their true incomes and pay taxes on these dollars. Billions of dollars are arguably at stake, as is American faith in the fairness of our federal tax system.”
The way to make the system fair is to require withholding on all income. Business owners who take money out of their companies should be required to rely on a trustee whose legal duty is to withhold taxes and report the income, risking prison or failure to do so. That is how the system operates for workers, pensioners and investors.
Along with this Congress needs to enact rules requiring the reporting of loans to and from companies by their owners that are consolidated with individual income reports. That will enable IRS computers to flag what appear to be loans being used to disguise income, though in most cases follow up would be needed by humans.
In our complex 21st Century economy we are beset with mind-numbing problems, many of which seem to defy sensible solutions. But requiring that all income be verified and treating business owners the same as their workers, that’s a simple problem that will get fixed if we demand our Congress act in our best interests regardless of how much it offends tax cheats among the political donor class.
Here’s why Capitalism vs Socialism is a false choice
DAVID KORTEN, YES! MAGAZINE - COMMENTARY - raw story
05 MAY 2019 AT 01:25 ET
Economic power is—and always has been—the foundation of political power. Those who control the peoples’ means of living rule.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
Six people who prove capitalism is broken in America
Over the last few years, the Guardian talked to many people for whom capitalism isn’t working – here are a few of their stories
Lauren Aratani
the guardian
Thu 2 May 2019 10.43 EDT
Work hard, get paid, thrive. That’s the way the system is supposed to work. If you’re not thriving, according to this logic, you’re simply not working hard enough.
But that’s not the reality many people live, even in wealthy, industrialized nations like the United States. For many Americans, long hours and unrelenting dedication to their job are not enough to save them from homelessness, debt, and other humiliations.
In 2018, the world’s richest 2,200 billionaires saw a 12% increase in wealth, according to a report by the development charity Oxfam, while the world’s poorest half saw an 11% drop in wealth. And in the United States today, the richest three Americans hold more wealth than the bottom 50% of the country.
This widening gulf means, on the one hand, stories of the children of billionaires ruining their parents’ multimillion-dollar paintings with cornflakes – and, on the other, the many employees of billion-dollar companies who struggle to pay rent.
Over the last few years, the Guardian talked to many people for whom capitalism as we know it isn’t working. Here are a few of their stories:
The Lyft driver who says she’s lucky to make $8 an hour, after expenses
Many Uber and Lyft drivers in the United States get paid less than minimum wage and struggle to cover the expenses of the job. Some drivers, like Nicole Moore, have begun to organize to fight for their rights as drivers. “There is no reason this should be the fastest-growing low-wage job in America,” she said.
The Amazon warehouse worker who lives out of her car
Numerous Amazon warehouse workers have filed cases against the company for leaving them to suffer through workplace injuries with little to no pay to cover health costs. Vickie Shannon Allen, who works at a fulfillment center in Haslet, Texas, hurt her back while working as a lineman. Between healthcare costs and weeks when her back prevented her from working and getting paid, she has become homeless. She started living in her car, parked outside the very warehouse where she works. “They cost me my home, they screwed me over and I go days without eating,” she told the Guardian last year.
The Virginia boy who takes classes in plywood trailers while the state promises Amazon huge tax breaks
With too many students and not enough space in its school district, Fairfax county in Virginia has turned to desperate measures to accommodate its students. Over 22,000 students in the county – the third-richest in America – attend classes in trailers made of cheaply constructed plywood. The state’s governor has proposed increasing education funding by $269m, yet he offered Amazon nearly three times as much in tax breaks, leaving teachers and parents feeling like their children are being robbed.
Rachna Sizemore, whose son is autistic and was transferred to a school nearly half an hour away because of overcrowding, is worried about the potential dangers of learning in a trailer. “In this era of school shootings, having our children in trailers, which [are] open to the public without any of the security that we have for the buildings … that’s not safe and that’s not a good learning environment,” she told the Guardian.
A Tesla factory worker who was told to keep working after his co-worker on the assembly line passed out from exhaustion
“I’ve seen people pass out, hit the floor like a pancake and smash their face open,” Jonathan Galescu, a production technician at Tesla, told the Guardian in 2017. “They just send us to work around him while he’s still lying on the floor.”
The single mother of two who works six days a week at a fast food restaurant, yet is homeless
Fran Marion works six days a week at a Popeyes in Kansas City for $9.50 an hour. When the city condemned the house she was living in because her landlord refused to make repairs, she was made homeless. Her two teenage children live with a friend, and she stays with a co-worker. “Not having a home, honestly, you guys, it makes me feel like I am a failure. Like I have let my kids down,” Marion told the Guardian in August 2017.
The laid-off GM worker who feels cheated by Trump’s broken promises
“It’s been two years now since [Trump’s] election and all I see is more job losses,” Tommy Wolikow of Lordstown, Ohio, said last year. “I went back to school, I’m a qualified diesel technician, I got my class A [commercial] driver’s license. I did what you are supposed to do. The jobs that are out there in my area are all low-paying. I can’t raise my three daughters on those wages. People are picking up and leaving.”
But that’s not the reality many people live, even in wealthy, industrialized nations like the United States. For many Americans, long hours and unrelenting dedication to their job are not enough to save them from homelessness, debt, and other humiliations.
In 2018, the world’s richest 2,200 billionaires saw a 12% increase in wealth, according to a report by the development charity Oxfam, while the world’s poorest half saw an 11% drop in wealth. And in the United States today, the richest three Americans hold more wealth than the bottom 50% of the country.
This widening gulf means, on the one hand, stories of the children of billionaires ruining their parents’ multimillion-dollar paintings with cornflakes – and, on the other, the many employees of billion-dollar companies who struggle to pay rent.
Over the last few years, the Guardian talked to many people for whom capitalism as we know it isn’t working. Here are a few of their stories:
The Lyft driver who says she’s lucky to make $8 an hour, after expenses
Many Uber and Lyft drivers in the United States get paid less than minimum wage and struggle to cover the expenses of the job. Some drivers, like Nicole Moore, have begun to organize to fight for their rights as drivers. “There is no reason this should be the fastest-growing low-wage job in America,” she said.
The Amazon warehouse worker who lives out of her car
Numerous Amazon warehouse workers have filed cases against the company for leaving them to suffer through workplace injuries with little to no pay to cover health costs. Vickie Shannon Allen, who works at a fulfillment center in Haslet, Texas, hurt her back while working as a lineman. Between healthcare costs and weeks when her back prevented her from working and getting paid, she has become homeless. She started living in her car, parked outside the very warehouse where she works. “They cost me my home, they screwed me over and I go days without eating,” she told the Guardian last year.
The Virginia boy who takes classes in plywood trailers while the state promises Amazon huge tax breaks
With too many students and not enough space in its school district, Fairfax county in Virginia has turned to desperate measures to accommodate its students. Over 22,000 students in the county – the third-richest in America – attend classes in trailers made of cheaply constructed plywood. The state’s governor has proposed increasing education funding by $269m, yet he offered Amazon nearly three times as much in tax breaks, leaving teachers and parents feeling like their children are being robbed.
Rachna Sizemore, whose son is autistic and was transferred to a school nearly half an hour away because of overcrowding, is worried about the potential dangers of learning in a trailer. “In this era of school shootings, having our children in trailers, which [are] open to the public without any of the security that we have for the buildings … that’s not safe and that’s not a good learning environment,” she told the Guardian.
A Tesla factory worker who was told to keep working after his co-worker on the assembly line passed out from exhaustion
“I’ve seen people pass out, hit the floor like a pancake and smash their face open,” Jonathan Galescu, a production technician at Tesla, told the Guardian in 2017. “They just send us to work around him while he’s still lying on the floor.”
The single mother of two who works six days a week at a fast food restaurant, yet is homeless
Fran Marion works six days a week at a Popeyes in Kansas City for $9.50 an hour. When the city condemned the house she was living in because her landlord refused to make repairs, she was made homeless. Her two teenage children live with a friend, and she stays with a co-worker. “Not having a home, honestly, you guys, it makes me feel like I am a failure. Like I have let my kids down,” Marion told the Guardian in August 2017.
The laid-off GM worker who feels cheated by Trump’s broken promises
“It’s been two years now since [Trump’s] election and all I see is more job losses,” Tommy Wolikow of Lordstown, Ohio, said last year. “I went back to school, I’m a qualified diesel technician, I got my class A [commercial] driver’s license. I did what you are supposed to do. The jobs that are out there in my area are all low-paying. I can’t raise my three daughters on those wages. People are picking up and leaving.”
Here’s Exactly Who’s Profiting from the War on Yemen
And how the U.S. could stop weapon sales if it wanted to.
the fundamentals of slave-capitalism!!!
Here’s the big problem with American capitalism
MARSHALL AUERBACK, INDEPENDENT MEDIA INSTITUTE - COMMENTARY - raw story
18 DEC 2018 AT 09:14 ET
It’s part of the American experience to find yourself in an elevator, in an airplane terminal, or at home, looking at a screen with stock numbers whizzing by, and people yammering about how America is somewhere on the spectrum between wonderful or about to disintegrate because of a 5 percent swing in Boeing or Microsoft stock. How did we get to a national economic conversation that is dominated by chatter on the rise and fall of stocks, when it’s just a small part of economic life for most of the 300 million people who live in this country?
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
Capitalism Is Not the “Market System”
BY
Richard D. Wolff Truthout
With the Democratic Socialists of America now counting 48,000 people within its membership and socialist candidates such as Alexandria Ocasio-Cortez pushing for free universities and Medicare for All, Americans are once again discussing capitalism versus socialism. Fortunately, they are not doing so in the old Cold War manner of uncritically celebrating one while demonizing the other. Rather, it’s a debate over the choice Americans must make now between keeping capitalism or changing the system to some form of socialism. As debates often do, this debate awakens us to problems and differences in how we understand its basic terms. For clarity and to make progress in this important debate, we need to stop conflating “capitalism” with the market. This is done far too often and on all sides of the debate.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
'Corporations Are People' Is Built on an Incredible 19th-Century Lie
How a farcical series of events in the 1880s produced an enduring and controversial legal
precedent
ADAM WINKLER - the atlantic
Somewhat unintuitively, American corporations today enjoy many of the same rights as American citizens. Both, for instance, are entitled to the freedom of speech and the freedom of religion. How exactly did corporations come to be understood as “people” bestowed with the most fundamental constitutional rights? The answer can be found in a bizarre—even farcical—series of lawsuits over 130 years ago involving a lawyer who lied to the Supreme Court, an ethically challenged justice, and one of the most powerful corporations of the day.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
5 Big Myths Sold by the Defenders of Capitalism
Our dominant economic system causes too many Americans too much pain.
By Valerie Vande Panne / AlterNet December 29, 2017, 11:22 AM GMT
I’ve been writing about the economic and environmental realities of marginalized communities for some time, primarily from the perspective of positive systems that are growing to support disenfranchised people. Many of these alternative economic networks, such as barter and time trade, are born out of necessity. As I explore these economies and some of the new ways communities are fostering and investing in health and growth, I am increasingly met by the same arguments against them—and every single one of these arguments is a myth. Capitalism is, at its core, an entrenched system of addiction, whose very root is the greed of over-consumption, whether it's food, sex, money, mouse clicks, or property.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Capitalism: The Nightmare
Paul Street
From Truthdig: The neoliberal, arch-capitalist era we inhabit is chock full of statistics and stories that ought to send chills down the spines of any caring, morally sentient human. Nearly three-fourths (71 percent) of the world’s population is poor, living on $10 a day or less, and 11 percent (767 million people, including 385 million children) live in what the World Bank calls “extreme poverty” (less than a $1.90 a day). Meanwhile, Oxfam reliably reports that, surreal as it sounds, the world’s eight richest people possess among themselves as much wealth as the poorest half of the entire human race.
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
funnies and charts
Cartoon: Hedge fund nation
By Jen Sorensen
Tuesday Dec 19, 2017 · 5:01 AM PST
This Infographic Shows How Only 10 Companies Control All the World’s Brands
Tom Cahill | December 31, 2016
From U.S. Uncut: Almost all of the food and beverage brands we know are owned by just 10 global conglomerates, according to a blistering new report.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
The "Golden Age of Capitalism" Was an Era of Racism and Secret Coups
By Emma Caterine, Truthout
From Bernie Sanders calling violently anti-Communist President Eisenhower a socialist, to a plethora of op-eds hailing the allegedly great policies the Republicans had toward labor and refugees, you have probably seen at least one liberal in your life mourn the loss of the Republicans of the so-called "Golden Age of Capitalism," the 1950s. These arguments usually rest on the achievements of that time, such as the desegregation of the military, a corporate tax rate of 50 percent, a top income tax rate of 91 percent, a rate of profit that stood above 20 percent throughout the decade and annual average Gross Domestic Product growth of 3.13 percent.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
There’s No Such Thing as a ‘Free Market’
Capitalism with absolutely no government intervention is a myth — and always was.
By Jill Richardson
From Other Words: The debates leading up to the election this year will no doubt invoke the “American value” of capitalism. But what, exactly, does that mean? And what should it mean?
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
Why Tax Havens Are Political and Economic Disasters
Seeking prosperity through lax business and tax regulations leaves countries worse off
by Brooke Harrington
From The Atlantic: In the early 1990s, economists coined the term "the resource curse" to describe a paradox they observed in countries where valuable natural resources were discovered: Rather than thriving, such countries often crumbled, economically and politically. The newfound wealth, instead of raising living standards for all, generated violence, as well as accelerating the growth of inequality and corruption. Terry Karl, a Stanford political science professor, dubbed this the "paradox of plenty." The same story has played out again and again all over the world, from Venezuela (where Karl did her research on the destruction wrought by oil wealth) to Sierra Leone (home of blood diamonds) and Afghanistan (which, despite $3 trillion in mineral wealth, remains among the poorest and most corrupt countries in the world).
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
Reverse mortgages: The final blow killing middle class wealth
From Demo Underground: Many fellow Americans that have worked their entire lives, weathered several recessions and depressions, put their children through school, helped many in need, and faithfully paid their mortgages for decades are now being taken advantage of once again. Most have followed all the rules necessary to be considered fiscally responsible, yet because of "legal fraud" by the financial sector and policies effected by purchased politicians, their years in retirement will be compromised.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
America’s Future Depends on Containing Neoliberalism
By Frank Fear ~ LA Progressive
The Rise and Evolution of Neoliberalism
The concept was born in 1930s Europe in reaction to The New Deal in America and The Nazi Movement in Germany. Both expressions were seen as totalitarian, squelching individual freedom and initiative. Over time, Neoliberalism morphed, becoming especially attractive to those who favored reducing regulatory oversight, downsizing government, and accentuating capitalism as the coin of the realm.
“The market” would take care of things—literally all things—and the market metaphor expanded to embrace a variety of domains associated with social and economic life. In Monbiot’s view, “Neoliberalism sees competition as the defining characteristic of human relations…. The market ensures that everyone gets what they deserve.”
It wasn’t until the early 1980s—with Margaret Thatcher in power in Great Britain and Ronald Reagan in the U.S.—that a neoliberal philosophy became a guiding force for national and international affairs. In famously declaring, “There is no alternative,” Thatcher showed how dedicated she was to free markets, free trade, and global capitalism. The American analogue, “Reaganomics” (aka supply-side economics), focused on redressing “an undue tax burden, excessive government regulation, and massive public spending programs that hampered growth.”
“Call it Reaganism or Thatcherism, economism, or market fundamentalism,” William Deresiewicz writes, “neoliberalism is an ideology that reduces all values to money values. The worth of a thing is the price of the thing. The worth of a person is the wealth of the person. Neoliberalism tells you that you are valuable exclusively in terms of your activity in the marketplace — or, in Wordsworth’s phrase, your ‘getting and spending’.”
Neoliberalism was no short-term political fancy, either. It persisted and expanded, promulgated by powerful advocates, to the point that it changed the way America does business. Nobel Prize-winning economist Joseph Stiglitz believes that Neoliberalism has “rewritten the rules” of the U.S. economy by privileging elites. It did so by deregulating business affairs, privatizing public and human services, cutting social services, lowering taxes, and reducing government size and scope. In exchange, elites promised “trickle down benefits” and declared “A Thousand Points of Light” would take care of human and social needs.
Impacts of Neoliberalism
Neoliberalism proceeded, undeterred, without a counterweight. In so doing, though, it created a stink in social affairs. Today, America is something different from what it was before. The unimaginable now happens. Consider three examples.
•Flint, Michigan. There was a time when what happened to Flint wouldn’t have happened in this country. Today it does, in part, because of lower taxes, corporate dependency, limited regulations, and cost-savings for public services. But “Flint,” the city, isn’t just one place. Metaphorically it’s everywhere: a racially concentrated population in socioeconomic distress with an affluent population living comfortably distant.
•Infant mortality. It’s mindboggling to conceive that 21st Century America would struggle in this domain, but it does. The Centers for Disease Control and Prevention reported recently that about 25 industrialized countries are doing better than the U.S. in keeping children alive. A recent New York Times headline was harsh and direct: The U.S. Is Failing in Infant Mortality, Starting at One Month Old.
•Income. According to a new report released by The Congressional Budget Office, American incomes increased differentially across income categories from 1975-2013. Incomes for the Top 1% increased nearly 200% during that 35-year period, but rose only 18% for those in the bottom four income quintiles. (Note: According The Economic Policy Institute, family income of about $400k per year is required in the U.S. to get into the 1% category; and the average income in that bracket is $1.2 million dollars. The average family income for everybody else is about $46k per annum). “Increased inequality is prominent,” conclude researchers at The World Bank. Stiglitz confirms that conclusion with this finding: “91% of all increases in income from 2009 to 2012 in the U.S. went to the wealthiest 1% of Americans.”
The challenge is clear: America won’t be America much longer—at least how we many of us perceive America to be—if circumstances and trends like these continue. But it won’t be easy to shift into a different gear. Neoliberalism is embedded in American psyche and culture. Around for such a long time, it has become “the way things are”—what’s “normal.”[...]