TO COMMENT CLICK HERE
june 16, 2018
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
---------------------------------------------------------
The rapacity of contemporary capitalism is enabled by the weakness,
dishonesty, and cowardice of the flaccid and collaborationist left.
Luciana Bohne
--------------------------------------------------------
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.
-----------------------------------------------
“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
Crony capitalism is defined as an economy tilted in favor of businesses that have close relationships with the government and lean on those relationships for special treatment — tax breaks or some other form of state intervention. To an extent, this arrangement has long been part of the American economy. But the problem has grown worldwide as globalization has taken off in the last two decades. This has meant a rise in billionaire wealth around the world and an enormous increase in the inequality gap between the world’s richest and poorest people.
articles
*Income Inequality Has Reached Its Highest Level Since 1928
(ARTICLE BELOW)
*AT&T $85.4bn takeover of Time Warner approved by judge in blow to Trump
(ARTICLE BELOW)
*Amazon just scored a major win in Seattle, and it shows HQ2 is already doing what it was likely designed to do(ARTICLE BELOW)
*BERNANKE: Trump's tax cuts are like 'Wile E. Coyote' and the economy's boost will fall off the cliff in 2020(ARTICLE BELOW)
*Toys ‘R’ Us Workers Take on Private-Equity Barons: ‘You Ought to Be Ashamed’
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*Software and stealth: how carmakers hike spare parts prices
(ARTICLE BELOW)
*Why the Only Answer is to Break Up the Biggest Wall Street Banks
(ARTICLE BELOW)
*Meet the big winners in Neil Gorsuch’s America
(ARTICLE BELOW)
*Big Pay Gaps Are Bad for Business
(ARTICLE BELOW)
*Harley-Davidson took its tax cut, closed a factory, and rewarded shareholders
(ARTICLE BELOW)
*COMPANIES TURN TRUMP TAX CUTS INTO A BIG WINDFALL FOR WEALTHY INVESTORS
(ARTICLE BELOW)
*'CEOs don't want this released': US study lays bare extreme pay-ratio problem
(ARTICLE BELOW)
*With Each Pharma-Funded Meal, Doctors’ Opioid Prescriptions Rise
(ARTICLE BELOW)
*CHEAP FUN WITH THE STOCK MARKET, ARITHMETIC AND CEO PAY
(ARTICLE BELOW)
*How three cities are fighting back against the oldest scam in US sports
(ARTICLE BELOW)
*The Irresponsibility of Fiscal Responsibility
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*How Big Pharma Is Corrupting the Truth About the Drugs It Sells Us
(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
...Magical thinking is not limited to the beliefs and practices of pre-modern cultures. It defines the ideology of capitalism. Quotas and projected sales can always be met. Profits can always be raised. Growth is inevitable. The impossible is always possible. Human societies, if they bow before the dictates of the marketplace, will be ushered into capitalist paradise. It is only a question of having the right attitude and the right technique. When capitalism thrives, we are assured, we thrive. The merging of the self with the capitalist collective has robbed us of our agency, creativity, capacity for self-reflection and moral autonomy. We define our worth not by our independence or our character but by the material standards set by capitalism—personal wealth, brands, status and career advancement. We are molded into a compliant and repressed collective. This mass conformity is characteristic of totalitarian and authoritarian states. It is the Disneyfication of America, the land of eternally happy thoughts and positive attitudes. And when magical thinking does not work, we are told, and often accept, that we are the problem. We must have more faith. We must envision what we want. We must try harder. The system is never to blame. We failed it. It did not fail us...
Reign of Idiots By Chris Hedges - apr 30, 2017
fundamentals of american capitalism
*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
Income Inequality Has Reached Its Highest Level Since 1928
by jake thomas - the intellectualist
6/16/18
As the threat of automation looms large over the economy, the middle class continues to shrink, and U.S. poverty persists, concerns over income inequality remain strong. (Image credit: Reagan Library/Public Domain)
Rising income inequality in the United States continues to be a topic of public interest, though opinions differ as to how concerned Americans should be. According to research by Emmanuel Saez, an economics professor at UC-Berkeley, the escalation has been steady from the 1970s onward, and he points to the "working rich" as at least a partial explanation for this trend.
A century ago, Saez notes that the highest earners derived much of their income from earnings on the accumulated wealth of past generations. By contrast, “[t]he evidence suggests that top incomes earners today are…“working rich,” highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age.”
In the few decades following the Great Depression, and particularly World War II, Americans saw a significant shift in income distribution.
In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution: By 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades.
This trend changed in the 1970s, kicking off an as-yet-unchanged upward climb in income inequality.
[S]tarting in the mid- to late 1970s, the uppermost tier’s income share began rising dramatically, while that of the bottom 90% started to fall. The top 1% took heavy hits from the dot-com crash and the Great Recession but recovered fairly quickly: Saez’s preliminary estimates for 2012 (which will be updated next month) have that group receiving nearly 22.5% of all pretax income, while the bottom 90%’s share is below 50% for the first time ever (49.6%, to be precise).
As the threat of automation looms large over the economy, themiddle class continues to shrink, and U.S. poverty persists, concerns over income inequality remain strong.
The share of the U.S. poor population in severe poverty – defined by the Census Bureau as those with family or individual incomes below half of their poverty threshold – reached its highest point in at least 20 years. The hollowing of the American middle class has proceeded steadily for more than four decades. Since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out as having triggered or hastened the decline in the middle.
Pew Research documented Americans' opinions on income inequality in 2013 and found unsurprising results:
Opinions also differed across party lines:
Rising income inequality in the United States continues to be a topic of public interest, though opinions differ as to how concerned Americans should be. According to research by Emmanuel Saez, an economics professor at UC-Berkeley, the escalation has been steady from the 1970s onward, and he points to the "working rich" as at least a partial explanation for this trend.
A century ago, Saez notes that the highest earners derived much of their income from earnings on the accumulated wealth of past generations. By contrast, “[t]he evidence suggests that top incomes earners today are…“working rich,” highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age.”
In the few decades following the Great Depression, and particularly World War II, Americans saw a significant shift in income distribution.
In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution: By 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades.
This trend changed in the 1970s, kicking off an as-yet-unchanged upward climb in income inequality.
[S]tarting in the mid- to late 1970s, the uppermost tier’s income share began rising dramatically, while that of the bottom 90% started to fall. The top 1% took heavy hits from the dot-com crash and the Great Recession but recovered fairly quickly: Saez’s preliminary estimates for 2012 (which will be updated next month) have that group receiving nearly 22.5% of all pretax income, while the bottom 90%’s share is below 50% for the first time ever (49.6%, to be precise).
As the threat of automation looms large over the economy, themiddle class continues to shrink, and U.S. poverty persists, concerns over income inequality remain strong.
The share of the U.S. poor population in severe poverty – defined by the Census Bureau as those with family or individual incomes below half of their poverty threshold – reached its highest point in at least 20 years. The hollowing of the American middle class has proceeded steadily for more than four decades. Since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out as having triggered or hastened the decline in the middle.
Pew Research documented Americans' opinions on income inequality in 2013 and found unsurprising results:
- More than half (61%) of Americans said the U.S. economic system favors the wealthy, while just 35% said it’s fair to most people
- While 54% of low-income people and 49% of middle-income people called the rich-poor gap a “very big” problem, only 36% of high-income people did so.
- A third of the high-income group said the rich-poor gap was either a small problem (19%) or not a problem at all (14%).
Opinions also differed across party lines:
- More than half (55%) of Republicans said the economic system is fair to most people, but majorities of Democrats (75%) and independents (63%) said it favors the wealthy.
- 61% of Democrats and 50% of independents said the gap was a very big problem, versus only 28% of Republicans.
- Four-in-ten Republicans termed the gap either a small problem (22%) or not a problem at all (18%).
we are all screwed!!!
AT&T $85.4bn takeover of Time Warner approved by judge in blow to Trump
Merger will create telecoms and media giant
Trump had called deal ‘not good for the country’
AT&T’s politically charged takeover of Time Warner was approved by a US judge on Tuesday in a blow to the Trump administration which had fought hard to have the deal scrapped.
US district judge Richard Leon dismissed the antitrust case brought by the justice department last November, the culmination of a 20-month ordeal that has seen the deal attacked by Donald Trump, critics of media consolidation and consumer groups.
Leon rejected all of the government’s objections to the deal and warned against an appeal. “I hope the government has the wisdom and courage,” not to seek a stay, he said.
The $85.4bn merger will create a telecoms and media giant combining AT&T’s mobile, cable and satellite TV business with Time Warner’s portfolio of blue-chip media assets.
Time Warner owns CNN, HBO, home to Game of Thrones and Veep, and Warner Brothers, whose franchises included Batman, the Lego movies and Harry Potter.
Corporate America had closely watched the case. Seats for the ruling at the E Barrett Prettyman courthouse in downtown Washington were in such demand that lines began forming outside the courthouse a full day before the scheduled 4pm announcement.
The decision on a so-called “vertical integration” – between two companies who do not make competing products – could have a profound impact on future mergers. Vertical mergers, such as Amazon’s takeover of Whole Foods and drugstore chain CVS’s purchase of health insurer Aetna, have become increasingly popular.
But the most immediate effect of the deal will be on the already consolidated media market. A clear win for AT&T will embolden Comcast, the US’s largest cable company, to top Walt Disney’s $52bn bid for 21st Century Fox, the media empire controlled by Rupert Murdoch and his family.
Comcast has made clear its intention to challenge that merger and is reportedly preparing a $60bn all-cash offer of its own. Comcast has alreadymade an offer for Sky, the UK satellite TV business. 21st Century Fox owns 39% of Sky and has been in a long battle with UK regulators to buy the rest of the company.
AT&T’s wooing of Time Warner has been politically complicated from the outset. Announced in October 2016, it was seized on by then presidential candidate Donald Trump as the sort pf deal his administration would block.
On the campaign trail Trump argued that a combined AT&T/Time Warner was “too much concentration of power in the hands of too few”. Trump weighed in again after the justice department filed its suit: “Personally, I’ve always felt that that was a deal that’s not good for the country. I think your pricing is going to go up,” he said last November.
Critics charged that Trump had come out against the deal because of Time Warner’s CNN, which has been highly critical of his presidency. The Trump administration has denied those charges.
In May it was revealed that AT&T had paid Michael Cohen, Trump’s personal attorney, $600,000 for consultancy fees as it attempted to woo the White House. AT&T’s chief executive officer, Randall Stephenson, said the hiring had been “a big mistake”.
In court the justice department argued an integrated company would use its size to raise prices and that it was problematic for one company to own a top pay-TV distributor, AT&T’s DirecTV, as well as Time Warner, a company that makes content distributed by DirecTV’s rivals.
AT&T in turn called the government’s arguments “absurd” and has argued the deal is necessary for it to compete with tech companies like Netflix, Apple and Amazon as they spend billions to bolster their positions in media.
US district judge Richard Leon dismissed the antitrust case brought by the justice department last November, the culmination of a 20-month ordeal that has seen the deal attacked by Donald Trump, critics of media consolidation and consumer groups.
Leon rejected all of the government’s objections to the deal and warned against an appeal. “I hope the government has the wisdom and courage,” not to seek a stay, he said.
The $85.4bn merger will create a telecoms and media giant combining AT&T’s mobile, cable and satellite TV business with Time Warner’s portfolio of blue-chip media assets.
Time Warner owns CNN, HBO, home to Game of Thrones and Veep, and Warner Brothers, whose franchises included Batman, the Lego movies and Harry Potter.
Corporate America had closely watched the case. Seats for the ruling at the E Barrett Prettyman courthouse in downtown Washington were in such demand that lines began forming outside the courthouse a full day before the scheduled 4pm announcement.
The decision on a so-called “vertical integration” – between two companies who do not make competing products – could have a profound impact on future mergers. Vertical mergers, such as Amazon’s takeover of Whole Foods and drugstore chain CVS’s purchase of health insurer Aetna, have become increasingly popular.
But the most immediate effect of the deal will be on the already consolidated media market. A clear win for AT&T will embolden Comcast, the US’s largest cable company, to top Walt Disney’s $52bn bid for 21st Century Fox, the media empire controlled by Rupert Murdoch and his family.
Comcast has made clear its intention to challenge that merger and is reportedly preparing a $60bn all-cash offer of its own. Comcast has alreadymade an offer for Sky, the UK satellite TV business. 21st Century Fox owns 39% of Sky and has been in a long battle with UK regulators to buy the rest of the company.
AT&T’s wooing of Time Warner has been politically complicated from the outset. Announced in October 2016, it was seized on by then presidential candidate Donald Trump as the sort pf deal his administration would block.
On the campaign trail Trump argued that a combined AT&T/Time Warner was “too much concentration of power in the hands of too few”. Trump weighed in again after the justice department filed its suit: “Personally, I’ve always felt that that was a deal that’s not good for the country. I think your pricing is going to go up,” he said last November.
Critics charged that Trump had come out against the deal because of Time Warner’s CNN, which has been highly critical of his presidency. The Trump administration has denied those charges.
In May it was revealed that AT&T had paid Michael Cohen, Trump’s personal attorney, $600,000 for consultancy fees as it attempted to woo the White House. AT&T’s chief executive officer, Randall Stephenson, said the hiring had been “a big mistake”.
In court the justice department argued an integrated company would use its size to raise prices and that it was problematic for one company to own a top pay-TV distributor, AT&T’s DirecTV, as well as Time Warner, a company that makes content distributed by DirecTV’s rivals.
AT&T in turn called the government’s arguments “absurd” and has argued the deal is necessary for it to compete with tech companies like Netflix, Apple and Amazon as they spend billions to bolster their positions in media.
billions in profits, pay no taxes, cheap workers of wages!!!
Amazon just scored a major win in Seattle, and it shows HQ2 is already doing what it
was likely designed to do
Dennis Green - business insider
6/12/18
- Seattle's city council voted for a new tax on large employers in the city in May, but it now looks ready to repeal the tax before it goes into effect.
- Amazon was a vocal critic of the so-called "head tax" and said it would halt construction on two towers in the city center if it went through.
- The quick about-face shows the power of Amazon and the advantages its HQ2 project is already offering the company.
Amazon was a vocal opponent of Seattle's new "head tax" from the start, and now it looks like the company will get its way.
City leaders are looking to stop the tax before it's implemented, the Associated Press reported on Tuesday. Seattle's city council had approved the tax at $275 per employee per year in May, and it was expected to go into effect later in the year. The head tax was meant to raise millions in city funds to help fight homelessness in Seattle.
While Amazon was not the only company that lobbied against the head tax, it was probably the most vocal. It paused construction on two massive towers it's developing in the city, resuming construction on only one of them after the vote passed.
"We are disappointed by today's city council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council's hostile approach and rhetoric toward larger businesses, which forces us to question our growth here," Amazon vice president Drew Herdener said in a statement after the council vote passed in May.
He continued: "We are highly uncertain whether the city council's anti-business positions or its spending inefficiency will change for the better."
The implication is clear: Amazon can continue its rapid growth elsewhere, outside of Seattle, unless the city council enacts more business-friendly policies.
Unlike most businesses though, that isn't just an empty threat. Most businesses don't have much leverage against city government. Moving headquarters is a long, expensive, and lengthy process. Amazon's second headquarters process, while not even shovel-ready by any stretch of the imagination, is already having a measurable impact on its relations with Seattle.
This impact was exactly what HQ2 was designed to do, at least, that is, according to some experts closely observing the selection process. Some have said Amazon is trying to learn from its struggles in Seattle, where it is the scapegoat for many of the city's ills.
Others have said the HQ2 selection process is a plan to pit two city governments against each other, with the winner ultimately being the company's bottom line and future growth, as Glenn Fleishman writes in Fast Company.
Before Amazon has even selected the city that will host its HQ2, HQ1 is reaping the benefits.
BERNANKE: Trump's tax cuts are like 'Wile E. Coyote' and the economy's boost will fall off the cliff in 2020
Akin Oyedele - business insider
6/8/18
- Ben Bernanke, the former Federal Reserve chairman, said Thursday that the Trump administration's tax cuts would initially boost the economy but reach the edge of the cliff in 2020.
- "In 2020, Wile E. Coyote is going to go off the cliff, and he's going to look down, and that [stimulus] will essentially be withdrawn at that point," Bernanke said, referring to the "Looney Tunes" character.
- Bernanke, a distinguished fellow in residence at the Brookings Institution, was the Fed chair from 2006 to 2014.
The former Federal Reserve Chairman Ben Bernanke said Thursday that the Trump administration's fiscal stimulus risked damaging the US economy by 2020.
That's because the $1.5 trillion tax cut and increases to government spending come at "the very wrong moment," when unemployment is at historic lows and the economy is already being supported by low interest rates, Bernanke said at an event hosted by the American Enterprise Institute.
The Congressional Budget Office expects tax cuts to boost the US economy's output, but at a decreasing rate through 2020. Also, the cuts are likely to come at a huge cost to the federal government's revenue — the CBO estimated that the US budget deficit wouldballoon to $804 billion in fiscal 2018.
According to Bernanke, the federal government would be less equipped to handle the next economic downturn when stimulus is needed the most.
"In the current law, it's going to hit the economy in a big way this year and next year, Bernanke said.
"And then in 2020, Wile E. Coyote is going to go off the cliff, and he's going to look down, and that [stimulus] will essentially be withdrawn at that point," he said, referring to the "Looney Tunes" cartoon character.
Bernanke, a distinguished fellow in residence at the Brookings Institution who was the Fed chairman from 2006 to 2014, added that fiscal stimulus would make the central bank's job more difficult because it's coming at a time when the economy is "at full employment."
"The Fed has got a much more difficult job to try to maintain non-inflationary full employment over the next three or four years, given this strong stimulus at this unusual time followed by some incidental withdrawal of stimulus in a couple of years from now," Bernanke said.
Congress designed the personal tax cuts to expire in 2026, partly because they would add to the deficit outside a 10-year window in violation of a budget-reconciliation provision.
Toys ‘R’ Us Workers Take on Private-Equity Barons: ‘You Ought to Be Ashamed’
David Dayen at The Nation - daily kos
6/5/18
Workers from Toys “R” Us stores across America set up a mock graveyard in the New York City lobby of private-equity giant Bain Capital on Monday. The gravestones read “Toys R Us: 1957-2018” and “Here Lies Geoffrey [the Toys “R” Us mascot], Killed by Wall Street Greed.” Alicia Henson of Lexington, Kentucky, a pregnant woman holding a child in her arms, began to speak about her time with the company. She was jostled by a security guard attempting to shut down the protest. After other workers separated them, Cheryl Claude of South River, New Jersey, took the megaphone.
“Thirty-three years of giving my life for this company, and you guys are taking everything away from every one of us. You guys ought to be ashamed of yourselves.”
The Bain Capital protest was part of a series of actions demanding a modicum of dignity from financiers who drove Toys “R” Us into the ground. All 735 Toys “R” Us stores in America will be closing by the end of June, and 33,000 workers will not only lose their jobs; they won’t be receiving severance pay, even if they worked for the company for decades.
Previously the company paid severance after any downsizing; those days are over. In many states workers will also lose unused vacation and sick-leave pay. Yet executive bonuses, including for disgraced CEO Dave Brandon, were paid out before the company filed for bankruptcy; only the workers were left high and dry.
“The big dogs are getting away with murder,” said Romerick Anderson, an assistant store manager from Ontario, California, who helped organize 11 workers in his area to come east to protest. “When does it stop?” [...]
“Thirty-three years of giving my life for this company, and you guys are taking everything away from every one of us. You guys ought to be ashamed of yourselves.”
The Bain Capital protest was part of a series of actions demanding a modicum of dignity from financiers who drove Toys “R” Us into the ground. All 735 Toys “R” Us stores in America will be closing by the end of June, and 33,000 workers will not only lose their jobs; they won’t be receiving severance pay, even if they worked for the company for decades.
Previously the company paid severance after any downsizing; those days are over. In many states workers will also lose unused vacation and sick-leave pay. Yet executive bonuses, including for disgraced CEO Dave Brandon, were paid out before the company filed for bankruptcy; only the workers were left high and dry.
“The big dogs are getting away with murder,” said Romerick Anderson, an assistant store manager from Ontario, California, who helped organize 11 workers in his area to come east to protest. “When does it stop?” [...]
The Normalization of Corruption
ROBERT KUTTNER JUNE 5, 2018
the american prspect
America’s slide into kleptocracy has bipartisan roots.
The emblem of this era is the mingling of personal corruption on the part of America’s leaders with the political corruption of American capitalism and the rise of autocracy. And of course the three trends feed on each other.
Take the case of the latest assertions by Trump’s lawyers in their memo to the Special Counsel Robert Mueller. The claim is naked in its candor: Trump is simply above the law. Anything that he does as president is legal, simply because he does it. This is Trump’s attitude generally, and it is the essence of tyranny.
Autocracy and personal corruption go hand in hand. If there are no democratic checks, the autocrat can be as corrupt as he likes. Trump’s signature in the run-up to the 2016 election, and in office, has been trading favors with Vladimir Putin—not favors that reset our diplomatic relationship with Russia and cooled tensions, but personal favors that benefited Trump financially. As an autocrat, he believes that he can avoid being held to account, and he may be right.
Trump is now repeating with China what he did with Russia: trading away national security goals for personal profit.
There is no other explanation for his overruling of the entire national security establishment in Trump’s defense of the Chinese telecom company ZTE, which was caught red-handed violating the embargo against North Korea and which represents a real espionage threat. But the Chinese simply bribed Trump with a huge loan to a Trump-sponsored project before the fact of Trump’s policy reversal, and then added a thank you by giving special lucrative trademark approval to Ivanka Trump afterwards.
Selling out your country for personal gain is an impeachable offense hidden in plain view. But Trump’s personal corruption as a dictatorial president is enabled by Republicans, who are willing to look the other way most of the time because his corruption serves their corruption.
The deeper disease is the slide of American capitalism into kleptocracy—in which very wealthy people make an alliance with the dictator, who helps them rig the rules to enable themselves to become even richer, in violation of anything like the supposed efficiency of markets that Republicans keep invoking. Crony capitalism works best when it enjoys an alliance with corrupt political leaders.
Does any serious person think that the gutting of the 2010 Dodd-Frank Act will be good for the economy? It’s a naked power grab that will create more risk for the financial system, and more immense wealth for the biggest banks who can in turn reward politicians.
It is bad enough that Republicans are so invested in the success of Trump that they invite and benefit from flagrant corruption. What’s worse, the American kleptocracy is in many respects bipartisan.
How else can we explain the fact that 16 Senate Democrats and 33 House Democrats voted to weaken the Dodd-Frank Act. It’s not as if voters in swing states are clamoring for more regulatory relief for Wall Street.
In 1989, when the Berlin Wall fell, many commentators were proclaiming that the world would now embrace the model of capitalist democracy. They didn’t reckon with the appeal of Putinism—corrupt crony capitalism linked to political dictatorship, with forms of democracy just for show.
It’s not hard to see why Putin is such a pal and role model for Trump. And here’s the worst part. Pervasive corruption invites pervasive cynicism and even political nihilism on the part of citizens—a sense that they all do it, that the system is hopelessly rigged, and that politics is a sham and a futile exercise.
That’s the essence of Putinism. That’s how Trump gets away with the total contradiction of being a corrupt billionaire who professes to speak for the people. If they all do it, we might as well have a leader who is at least a tough guy rather than a wimp.
We are not quite all the way on the path to Putin hell, but we are well down the road. Our Republic has suffered grave damage.
It might yet be saved if Mueller picks up the pace and manages to tender his presumably explosive report before he is removed; or if there is not too much outright electoral theft in November and Democrats take back the House and begin the impeachment process; or if some Republicans consider the larger stakes and are seized with an outbreak of civic conscience.
There is the further risk of what could happen when a progressive Democrat gets the presidential nomination in 2020, and vows to clean out crony capitalism for real, Roosevelt style. The entire kleptocracy, from the Koch brothers to Wall Street Democrats, will do everything to keep that candidate from destroying their game.
We may yet get our Republic back, but it will take courage, mobilization, leadership, and luck.
Take the case of the latest assertions by Trump’s lawyers in their memo to the Special Counsel Robert Mueller. The claim is naked in its candor: Trump is simply above the law. Anything that he does as president is legal, simply because he does it. This is Trump’s attitude generally, and it is the essence of tyranny.
Autocracy and personal corruption go hand in hand. If there are no democratic checks, the autocrat can be as corrupt as he likes. Trump’s signature in the run-up to the 2016 election, and in office, has been trading favors with Vladimir Putin—not favors that reset our diplomatic relationship with Russia and cooled tensions, but personal favors that benefited Trump financially. As an autocrat, he believes that he can avoid being held to account, and he may be right.
Trump is now repeating with China what he did with Russia: trading away national security goals for personal profit.
There is no other explanation for his overruling of the entire national security establishment in Trump’s defense of the Chinese telecom company ZTE, which was caught red-handed violating the embargo against North Korea and which represents a real espionage threat. But the Chinese simply bribed Trump with a huge loan to a Trump-sponsored project before the fact of Trump’s policy reversal, and then added a thank you by giving special lucrative trademark approval to Ivanka Trump afterwards.
Selling out your country for personal gain is an impeachable offense hidden in plain view. But Trump’s personal corruption as a dictatorial president is enabled by Republicans, who are willing to look the other way most of the time because his corruption serves their corruption.
The deeper disease is the slide of American capitalism into kleptocracy—in which very wealthy people make an alliance with the dictator, who helps them rig the rules to enable themselves to become even richer, in violation of anything like the supposed efficiency of markets that Republicans keep invoking. Crony capitalism works best when it enjoys an alliance with corrupt political leaders.
Does any serious person think that the gutting of the 2010 Dodd-Frank Act will be good for the economy? It’s a naked power grab that will create more risk for the financial system, and more immense wealth for the biggest banks who can in turn reward politicians.
It is bad enough that Republicans are so invested in the success of Trump that they invite and benefit from flagrant corruption. What’s worse, the American kleptocracy is in many respects bipartisan.
How else can we explain the fact that 16 Senate Democrats and 33 House Democrats voted to weaken the Dodd-Frank Act. It’s not as if voters in swing states are clamoring for more regulatory relief for Wall Street.
In 1989, when the Berlin Wall fell, many commentators were proclaiming that the world would now embrace the model of capitalist democracy. They didn’t reckon with the appeal of Putinism—corrupt crony capitalism linked to political dictatorship, with forms of democracy just for show.
It’s not hard to see why Putin is such a pal and role model for Trump. And here’s the worst part. Pervasive corruption invites pervasive cynicism and even political nihilism on the part of citizens—a sense that they all do it, that the system is hopelessly rigged, and that politics is a sham and a futile exercise.
That’s the essence of Putinism. That’s how Trump gets away with the total contradiction of being a corrupt billionaire who professes to speak for the people. If they all do it, we might as well have a leader who is at least a tough guy rather than a wimp.
We are not quite all the way on the path to Putin hell, but we are well down the road. Our Republic has suffered grave damage.
It might yet be saved if Mueller picks up the pace and manages to tender his presumably explosive report before he is removed; or if there is not too much outright electoral theft in November and Democrats take back the House and begin the impeachment process; or if some Republicans consider the larger stakes and are seized with an outbreak of civic conscience.
There is the further risk of what could happen when a progressive Democrat gets the presidential nomination in 2020, and vows to clean out crony capitalism for real, Roosevelt style. The entire kleptocracy, from the Koch brothers to Wall Street Democrats, will do everything to keep that candidate from destroying their game.
We may yet get our Republic back, but it will take courage, mobilization, leadership, and luck.
Software and stealth: how carmakers hike spare parts prices
Tom Bergin, Laurence Frost - reuters
JUNE 3, 2018 / 12:06 AM
LONDON/PARIS (Reuters) - Carmakers including Renault, Jaguar Land Rover and Peugeot have boosted revenues by over $1 billion in the past decade by using sophisticated pricing software, according to sales presentations prepared by the software vendor, Accenture, and other documents filed in a court case.
The software works, Accenture told prospective clients, by identifying which spare parts in a manufacturer’s range customers would be content to pay more for, how much to raise prices by and which prices should not be hiked.
The latter would include, for example, radiators and body parts that may feature in French automotive insurer group SRA’s basket of parts that measures them for inflation, according to a court filing by the software creator, Laurent Boutboul.
Documents relating to the case were obtained by French news site Mediapart and shared with Reuters and EIC, a network of European investigative news outlets.
The client presentations and court complaints seen by Reuters cover the period 2009 to 2015.
Jaguar Land Rover (JLR) acknowledged still using the Partneo software but Reuters was unable to determine which other car makers, if any, currently use it.
Accenture denied its software was unfair to motorists and said its focus was on increasing clients’ efficiency.
“Solutions of this type, which enable companies to assess and manage their products, are commonplace across industries. They help companies analyze spare part visibility and availability,” it said in a statement.
Boutboul is claiming 33 million euros from Accenture over what he says is damage to his reputation because Accenture broke European competition rules.
He says it did this by using non-public information taken from Renault to help configure the pricing systems it set up for PSA and potentially other manufacturers. His lawsuit did not specify the exact information.
Boutboul’s lawyer said Boutboul could not comment on the details of an ongoing legal action. Accenture said it rejected his claims.
Renault, Jaguar Land Rover (JLR) and Peugeot said their pricing strategies for spare parts were legal, did not take advantage of car owners and were focused on efficiency and ensuring availability for motorists.
Peugeot said in a statement its replacement parts strategy “consists in offering ranges of spare parts that meet the needs of all customers, regardless of their budget, at the highest level of reliability and safety.”
Renault said it “strives to provide its customers with a wide variety of quality spare parts, the price of which is calculated based on parameters that Renault considers fair and equitable”.
JLR said it used Partneo to “deliver consistency in pricing across our spare parts range to ensure that we are appropriately priced against our competition”.
France’s competition regulator said it had examined the software and did not see a reason to open a full anti-trust investigation, without explaining its thinking.
Renault said it was unaware of any of its non-public pricing information being shared with other carmakers. PSA said it rejected Boutboul’s accusations, but did not answer detailed questions about how its software was configured.
Accenture said its pricing software, called Partneo “does not share confidential or sensitive data between clients”.
“PERCEIVED VALUE METHODOLOGY”
In the past two decades, pricing software has become widely used.
Aaron Roth, Associate Professor of Computer and Information Science at the University of Pennsylvania, said using software to try and identify the highest prices people were willing to pay was merely an extension of long-established practice among manufacturers and retailers.
“Already, prices for products are set trying to maximize profits,” he said.
In a 2013 presentation to BMW, Accenture claimed its software had, on average, allowed clients to increase parts prices by 15 percent.
But the recommended increases varied widely from product to product. Accenture recommended in presentations seen by Reuters to six clients, including PSA, Honda and Volvo, that prices of many replacement parts should be doubled.
An October 2013 presentation to carmaker Volvo said that the software had led to “yearly gains achieved” at seven car and truck makers of a combined $415 million a year.
Volvo said it did not use Partneo but declined to comment on the presentation. PSA declined to comment on whether or how much it increased prices. Honda did not respond to a request for comment.
Accenture said in its presentations that Partneo relies on a “perceived value pricing methodology”.
While manufacturers often seek a specific margin on parts, the software attempts to identify those parts for which consumers would be happy to pay above the typical mark-up.
It selected these based on a product appearing to a car buyer to be more valuable or expensive to produce, client presentations show.
Accenture noted in a 2009 presentation to France’s PSA that customer perceptions of the intrinsic value of a part are often based on factors like size, weight, and material of an item like a shiny brand badge or a cog.
In one presentation to Mitsubishi, it suggested the Japanese carmaker lift the price of a silvery model badge from 14.42 euros to 87.49 euros, an increase of 507 percent. Mitsubishi declined to comment on whether it used the software or increased its prices.
The car parts business has long been highly profitable, industry analysts say.
While manufacturers struggle to make a profit margin of more than 10 percent when selling a vehicle, “spare parts gross margin can go up to 90 percent,” Accenture said in a presentation for BMW’s South African arm in 2013.
BMW said it decided not to use Partneo but declined to elaborate further.
PRICING SUPERVISION
Although the market for new cars is highly transparent and competitive, the market for spare parts is less liquid and transparent, partly because some components can be protected by trademarks or patents, analysts say.
Car manufacturers have long been accused by insurers and motoring groups from Australia to the United States of charging too much for spare parts.
Partneo mainly focuses on increasing parts prices based on their appearance but it also has a feature that tries to avoid potential insurer reaction to price increases of certain items.
The software categorizes components as those “with or without 3rd party pricing supervision” — prices monitored by specialist publications or insurers — according to three client presentations seen by Reuters.
For example, in France, Securite Reparation Automobile (SRA), a group backed by insurers, measures car parts inflation and publishes this in the hope it will help exert downward pressure on parts inflation.
According to Boutboul’s complaint, Partneo avoided hiking prices of the specific parts whose price is closely followed by SRA. Accenture declined to comment on whether the software still operated in this way.
The software works, Accenture told prospective clients, by identifying which spare parts in a manufacturer’s range customers would be content to pay more for, how much to raise prices by and which prices should not be hiked.
The latter would include, for example, radiators and body parts that may feature in French automotive insurer group SRA’s basket of parts that measures them for inflation, according to a court filing by the software creator, Laurent Boutboul.
Documents relating to the case were obtained by French news site Mediapart and shared with Reuters and EIC, a network of European investigative news outlets.
The client presentations and court complaints seen by Reuters cover the period 2009 to 2015.
Jaguar Land Rover (JLR) acknowledged still using the Partneo software but Reuters was unable to determine which other car makers, if any, currently use it.
Accenture denied its software was unfair to motorists and said its focus was on increasing clients’ efficiency.
“Solutions of this type, which enable companies to assess and manage their products, are commonplace across industries. They help companies analyze spare part visibility and availability,” it said in a statement.
Boutboul is claiming 33 million euros from Accenture over what he says is damage to his reputation because Accenture broke European competition rules.
He says it did this by using non-public information taken from Renault to help configure the pricing systems it set up for PSA and potentially other manufacturers. His lawsuit did not specify the exact information.
Boutboul’s lawyer said Boutboul could not comment on the details of an ongoing legal action. Accenture said it rejected his claims.
Renault, Jaguar Land Rover (JLR) and Peugeot said their pricing strategies for spare parts were legal, did not take advantage of car owners and were focused on efficiency and ensuring availability for motorists.
Peugeot said in a statement its replacement parts strategy “consists in offering ranges of spare parts that meet the needs of all customers, regardless of their budget, at the highest level of reliability and safety.”
Renault said it “strives to provide its customers with a wide variety of quality spare parts, the price of which is calculated based on parameters that Renault considers fair and equitable”.
JLR said it used Partneo to “deliver consistency in pricing across our spare parts range to ensure that we are appropriately priced against our competition”.
France’s competition regulator said it had examined the software and did not see a reason to open a full anti-trust investigation, without explaining its thinking.
Renault said it was unaware of any of its non-public pricing information being shared with other carmakers. PSA said it rejected Boutboul’s accusations, but did not answer detailed questions about how its software was configured.
Accenture said its pricing software, called Partneo “does not share confidential or sensitive data between clients”.
“PERCEIVED VALUE METHODOLOGY”
In the past two decades, pricing software has become widely used.
Aaron Roth, Associate Professor of Computer and Information Science at the University of Pennsylvania, said using software to try and identify the highest prices people were willing to pay was merely an extension of long-established practice among manufacturers and retailers.
“Already, prices for products are set trying to maximize profits,” he said.
In a 2013 presentation to BMW, Accenture claimed its software had, on average, allowed clients to increase parts prices by 15 percent.
But the recommended increases varied widely from product to product. Accenture recommended in presentations seen by Reuters to six clients, including PSA, Honda and Volvo, that prices of many replacement parts should be doubled.
An October 2013 presentation to carmaker Volvo said that the software had led to “yearly gains achieved” at seven car and truck makers of a combined $415 million a year.
Volvo said it did not use Partneo but declined to comment on the presentation. PSA declined to comment on whether or how much it increased prices. Honda did not respond to a request for comment.
Accenture said in its presentations that Partneo relies on a “perceived value pricing methodology”.
While manufacturers often seek a specific margin on parts, the software attempts to identify those parts for which consumers would be happy to pay above the typical mark-up.
It selected these based on a product appearing to a car buyer to be more valuable or expensive to produce, client presentations show.
Accenture noted in a 2009 presentation to France’s PSA that customer perceptions of the intrinsic value of a part are often based on factors like size, weight, and material of an item like a shiny brand badge or a cog.
In one presentation to Mitsubishi, it suggested the Japanese carmaker lift the price of a silvery model badge from 14.42 euros to 87.49 euros, an increase of 507 percent. Mitsubishi declined to comment on whether it used the software or increased its prices.
The car parts business has long been highly profitable, industry analysts say.
While manufacturers struggle to make a profit margin of more than 10 percent when selling a vehicle, “spare parts gross margin can go up to 90 percent,” Accenture said in a presentation for BMW’s South African arm in 2013.
BMW said it decided not to use Partneo but declined to elaborate further.
PRICING SUPERVISION
Although the market for new cars is highly transparent and competitive, the market for spare parts is less liquid and transparent, partly because some components can be protected by trademarks or patents, analysts say.
Car manufacturers have long been accused by insurers and motoring groups from Australia to the United States of charging too much for spare parts.
Partneo mainly focuses on increasing parts prices based on their appearance but it also has a feature that tries to avoid potential insurer reaction to price increases of certain items.
The software categorizes components as those “with or without 3rd party pricing supervision” — prices monitored by specialist publications or insurers — according to three client presentations seen by Reuters.
For example, in France, Securite Reparation Automobile (SRA), a group backed by insurers, measures car parts inflation and publishes this in the hope it will help exert downward pressure on parts inflation.
According to Boutboul’s complaint, Partneo avoided hiking prices of the specific parts whose price is closely followed by SRA. Accenture declined to comment on whether the software still operated in this way.
Why the Only Answer is to Break Up the Biggest Wall Street Banks
by Robert Reich | the smirking chimp
June 2, 2018 - 6:01am
On Wednesday, Federal bank regulators proposed to allow Wall Street more freedom to make riskier bets with federally-insured bank deposits – such as the money in your checking and savings accounts.
The proposal waters down the so-called “Volcker Rule” (named after former Fed chair Paul Volcker, who proposed it). The Volcker Rule was part of the Dodd-Frank Act, passed after the near meltdown of Wall Street in 2008 in order to prevent future near meltdowns.
The Volcker Rule was itself a watered-down version of the 1930s Glass-Steagall Act, enacted in response to the Great Crash of 1929. Glass-Steagall forced banks to choose between being commercial banks, taking in regular deposits and lending them out, or being investment banks that traded on their own capital.
Glass-Steagall’s key principle was to keep risky assets away from insured deposits. It worked well for more than half century. Then Wall Street saw opportunities to make lots of money by betting on stocks, bonds, and derivatives (bets on bets) – and in 1999 persuaded Bill Clinton and a Republican congress to repeal it.
Nine years later, Wall Street had to be bailed out, and millions of Americans lost their savings, their jobs, and their homes.
Why didn’t America simply reinstate Glass-Steagall after the last financial crisis? Because too much money was at stake. Wall Street was intent on keeping the door open to making bets with commercial deposits. So instead of Glass-Steagall, we got the Volcker Rule – almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
Now those loopholes and exemptions are about to get even bigger, until they swallow up the Volcker Rule altogether. If the latest proposal goes through, we’ll be nearly back to where we were before the crash of 2008.
Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bankers say the tougher regulatory standards put them at a disadvantage relative to their overseas competitors.
Baloney. Since the 2008 financial crisis, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States.
The real reason Wall Street has spent huge sums trying to water down the Volcker Rule is that far vaster sums can be made if the Rule is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.
As a result of consolidations brought on by the Wall Street bailout, the biggest banks today are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.
The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.
The sad lesson of Dodd-Frank and the Volcker Rule is that Wall Street is too powerful to allow effective regulation of it. America should have learned that lesson in 2008 as the Street brought the rest of the economy - and much of the world - to its knees.
If Trump were a true populist on the side of the people rather than powerful financial interests, he’d lead the way, as did Teddy Roosevelt starting in 1901.
But Trump is a fake populist. After all, he appointed the bank regulators who are now again deregulating Wall Street. Trump would rather stir up public rage against foreigners than address the true abuses of power inside America.
So we may have to wait until we have a true progressive populist president. Or until Wall Street nearly implodes again – robbing millions more of their savings, jobs, and homes. And the public once again demands action.
The proposal waters down the so-called “Volcker Rule” (named after former Fed chair Paul Volcker, who proposed it). The Volcker Rule was part of the Dodd-Frank Act, passed after the near meltdown of Wall Street in 2008 in order to prevent future near meltdowns.
The Volcker Rule was itself a watered-down version of the 1930s Glass-Steagall Act, enacted in response to the Great Crash of 1929. Glass-Steagall forced banks to choose between being commercial banks, taking in regular deposits and lending them out, or being investment banks that traded on their own capital.
Glass-Steagall’s key principle was to keep risky assets away from insured deposits. It worked well for more than half century. Then Wall Street saw opportunities to make lots of money by betting on stocks, bonds, and derivatives (bets on bets) – and in 1999 persuaded Bill Clinton and a Republican congress to repeal it.
Nine years later, Wall Street had to be bailed out, and millions of Americans lost their savings, their jobs, and their homes.
Why didn’t America simply reinstate Glass-Steagall after the last financial crisis? Because too much money was at stake. Wall Street was intent on keeping the door open to making bets with commercial deposits. So instead of Glass-Steagall, we got the Volcker Rule – almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
Now those loopholes and exemptions are about to get even bigger, until they swallow up the Volcker Rule altogether. If the latest proposal goes through, we’ll be nearly back to where we were before the crash of 2008.
Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bankers say the tougher regulatory standards put them at a disadvantage relative to their overseas competitors.
Baloney. Since the 2008 financial crisis, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States.
The real reason Wall Street has spent huge sums trying to water down the Volcker Rule is that far vaster sums can be made if the Rule is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.
As a result of consolidations brought on by the Wall Street bailout, the biggest banks today are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.
The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.
The sad lesson of Dodd-Frank and the Volcker Rule is that Wall Street is too powerful to allow effective regulation of it. America should have learned that lesson in 2008 as the Street brought the rest of the economy - and much of the world - to its knees.
If Trump were a true populist on the side of the people rather than powerful financial interests, he’d lead the way, as did Teddy Roosevelt starting in 1901.
But Trump is a fake populist. After all, he appointed the bank regulators who are now again deregulating Wall Street. Trump would rather stir up public rage against foreigners than address the true abuses of power inside America.
So we may have to wait until we have a true progressive populist president. Or until Wall Street nearly implodes again – robbing millions more of their savings, jobs, and homes. And the public once again demands action.
Meet the big winners in Neil Gorsuch’s America
Not everyone is going to lose their rights, just the non-rich people.
IAN MILLHISER - thinkprogress
MAY 31, 2018, 11:04 AM
In the days since Neil Gorsuch issued his opinion in in Epic Systems v. Lewis — which will allow employers to force their workers to sign away many of their legal rights under pain of termination — things escalated quickly, with two news stories that broke in the immediate aftermath of the decision pointing the way to a grimmer future to come.
The first of these items is the news that big box store Lowe’s immediately seized full advantage of the power Gorsuch just gave them over their employees. As the Huffington Post’s Dave Jamieson reported, Lowe’s told its store managers and assistant managers that they must give up their right to sue the store in a real court of law or to join a class action suit against their employer. Workers who wouldn’t agree to give up these rights risked losing their 2018 bonuses and their “continued employment at Lowe’s.”
Under the new arrangement for Lowe’s managers, any dispute that arises between the store and those employees must be handled by a privatized arbitration system where workers are less likely to prevail than in real courts, and where workers who do prevail typically are awarded less money than litigants who did not sign away their rights.
The second story involved Munger, Tolles & Olson, an elite law firm that hires top graduates from many of the best law schools in the country. Last week, Ian Samuel, a fellow at Harvard Law School, tweeted out excerpts from a forced arbitration agreement to which the firm wanted all of its summer associates to agree. Among other things, the agreement appeared designed to protect senior lawyers who engage in sexual harassment.
As Samuel put it, “if some bothersome woman should tell people that some Munger partner got handsy at a firm event, fear not: there’s a clause for that.”
Yet this second story ended very differently than the saga at Lowe’s is likely to end. After Samuel made the law firm’s forced arbitration agreement public, the firm backed down.
---
It’s not hard to guess why these two stories played out so differently. Lowe’s store managers aren’t exactly living in poverty, but they aren’t fantastically rich either. According to two websites that crowdsource salary information on various employers, a store manager typically earns between $80,000 and $90,000. That’s enough to own a home in many parts of the country, but it’s not the sort of salary companies typically pay to top employees who have serious bargaining power if their employer makes an unreasonable demand.
Law firms like Munger, on the other hand, compete for a small pool of top graduates from mostly elite law schools. The leading firms pay $180,000 annual salaries to their first year associates, and their pay only goes up from there. A firm that gets a reputation for imposing coercive agreements on its employees will have a tough time recruiting the best associates — and the people the firm wants to hire have the power to go elsewhere.
Which brings us back to Epic Systems. Gorsuch begins his opinion with a question which assumes that the workers and bosses in that case reached a real agreement that the workers should give up their rights — “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?” The reality was very different. Employees at two of the companies at issue in Epic Systems were literally told that they agreed to give up their rights if they continued to work there.
Workers had to chose between their right to sue, and their job.
It is likely that this will soon be the fate of the overwhelming majority of the workforce. Even employees who are fairly comfortably ensconced in the middle class, such as Lowe’s store managers, will be caught up in forced arbitration agreements and class action bans.
Meanwhile, a handful of senior executives, highly-compensated professionals, and other extraordinarily fortunate employees will enjoy the full panoply of rights available to them under federal and state law. The sort of people who least need the protection of the law will become its most protected class.
Indeed, this dynamic is already starting to play out. Students at at least one of America’s top law schools are organizing to protect themselves against abusive arbitration.
Georgetown should adopt this policy, and its peer law schools should emulate it. If a handful of elite law schools band together, they could effectively shield large law firm associates throughout the industry from abusive arbitration agreements. And lawyers deserve to have their rights protected too.
Yet there will also be a terrible irony if these schools succeed in banishing forced arbitration from big law. Some of the same law firm associates who benefit from such a campaign will go on to draft forced arbitration agreements for their firm’s clients. And those agreements are likely to reshape the workforce for everyone except for its biggest winners.
The first of these items is the news that big box store Lowe’s immediately seized full advantage of the power Gorsuch just gave them over their employees. As the Huffington Post’s Dave Jamieson reported, Lowe’s told its store managers and assistant managers that they must give up their right to sue the store in a real court of law or to join a class action suit against their employer. Workers who wouldn’t agree to give up these rights risked losing their 2018 bonuses and their “continued employment at Lowe’s.”
Under the new arrangement for Lowe’s managers, any dispute that arises between the store and those employees must be handled by a privatized arbitration system where workers are less likely to prevail than in real courts, and where workers who do prevail typically are awarded less money than litigants who did not sign away their rights.
The second story involved Munger, Tolles & Olson, an elite law firm that hires top graduates from many of the best law schools in the country. Last week, Ian Samuel, a fellow at Harvard Law School, tweeted out excerpts from a forced arbitration agreement to which the firm wanted all of its summer associates to agree. Among other things, the agreement appeared designed to protect senior lawyers who engage in sexual harassment.
As Samuel put it, “if some bothersome woman should tell people that some Munger partner got handsy at a firm event, fear not: there’s a clause for that.”
Yet this second story ended very differently than the saga at Lowe’s is likely to end. After Samuel made the law firm’s forced arbitration agreement public, the firm backed down.
---
It’s not hard to guess why these two stories played out so differently. Lowe’s store managers aren’t exactly living in poverty, but they aren’t fantastically rich either. According to two websites that crowdsource salary information on various employers, a store manager typically earns between $80,000 and $90,000. That’s enough to own a home in many parts of the country, but it’s not the sort of salary companies typically pay to top employees who have serious bargaining power if their employer makes an unreasonable demand.
Law firms like Munger, on the other hand, compete for a small pool of top graduates from mostly elite law schools. The leading firms pay $180,000 annual salaries to their first year associates, and their pay only goes up from there. A firm that gets a reputation for imposing coercive agreements on its employees will have a tough time recruiting the best associates — and the people the firm wants to hire have the power to go elsewhere.
Which brings us back to Epic Systems. Gorsuch begins his opinion with a question which assumes that the workers and bosses in that case reached a real agreement that the workers should give up their rights — “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?” The reality was very different. Employees at two of the companies at issue in Epic Systems were literally told that they agreed to give up their rights if they continued to work there.
Workers had to chose between their right to sue, and their job.
It is likely that this will soon be the fate of the overwhelming majority of the workforce. Even employees who are fairly comfortably ensconced in the middle class, such as Lowe’s store managers, will be caught up in forced arbitration agreements and class action bans.
Meanwhile, a handful of senior executives, highly-compensated professionals, and other extraordinarily fortunate employees will enjoy the full panoply of rights available to them under federal and state law. The sort of people who least need the protection of the law will become its most protected class.
Indeed, this dynamic is already starting to play out. Students at at least one of America’s top law schools are organizing to protect themselves against abusive arbitration.
Georgetown should adopt this policy, and its peer law schools should emulate it. If a handful of elite law schools band together, they could effectively shield large law firm associates throughout the industry from abusive arbitration agreements. And lawyers deserve to have their rights protected too.
Yet there will also be a terrible irony if these schools succeed in banishing forced arbitration from big law. Some of the same law firm associates who benefit from such a campaign will go on to draft forced arbitration agreements for their firm’s clients. And those agreements are likely to reshape the workforce for everyone except for its biggest winners.
opinion: Big Pay Gaps Are Bad for Business
Would you do your best work for a CEO who pulls in 5,000 times your own salary?
By Sarah Anderson - other words
May 23, 2018
Mattel is one of the largest toy-making companies on earth. Turns out it’s one of the biggest manufacturers of income inequality, too.
Last year, the Barbie doll manufacturer paid its CEO nearly 5,000 times as much as its median worker.
This stunning revelation is the result of a new regulation that requires U.S. publicly held corporations to report their CEO-worker pay ratios to the Securities and Exchange Commission.
Mattel’s gap is the widest reported so far. But most other big U.S. companies also have staggering divides. According to a new report by the staff of Minnesota Congressman Keith Ellison, the first 225 large corporations to release their numbers had pay ratios averaging 339 to 1.
“This immense inequality is a crisis for our economy and our democracy,” said Ellison, a longtime advocate of pay gap disclosure.
What’s good for these CEOs, however, is actually bad for business.
A CNBC analysis of the new pay ratio data, for example, suggests that companies with large pay disparities have lower profits per employee.
Why might that be? According to a recent study by a Harvard Business professor, companies tend to perform poorly if workers feel they’re not paid fairly. The study’s author said workers who feel that way are likely to lack motivation and even quit their jobs.
It’s not hard to understand how it could put a damper on your morale to be working hard and struggling to get by while your boss is being rewarded hundreds — or even thousands — of times more than you on payday.
Doug Smith, a former partner at the big McKinsey management consulting firm, argues that the economic costs of huge pay gaps go far beyond the problems of low employee morale and high turnover.
“Instead of building a real economy beneficial to all,” Smith says, “these unethical pay practices spread outsourcing, offshoring, tax avoidance, downsizing, and the substitution of good-paying permanent jobs with temporary, precarious employment.”
There’s a growing movement to use the new pay ratio data to encourage corporations to narrow their gaps. Portland, Oregon will soon become the first city to impose a tax penalty on companies with pay gaps above 100 to 1.
Charlie Hales, Portland’s mayor when the law was passed in late 2016, argued that it made good business sense to encourage narrower gaps.
In a former job at an employee-owned engineering firm, Hales had seen firsthand how a small pay ratio boosted the bottom line. “Everyone worked a little harder because your success was my success,” Hales said. “And that egalitarian culture led to a strong work ethic that drove the corporation to success.”
With the new pay ratio data now coming out, lawmakers in six states — California, Connecticut, Illinois, Massachusetts, Minnesota, and Rhode Island — are considering Portland-style pay ratio taxes.
Narrowing the divides within U.S. corporations may not automatically leave us all whistling away while we work. But we’ll all pay a price if we keep fiddling while extreme inequality burns down our economy.
Last year, the Barbie doll manufacturer paid its CEO nearly 5,000 times as much as its median worker.
This stunning revelation is the result of a new regulation that requires U.S. publicly held corporations to report their CEO-worker pay ratios to the Securities and Exchange Commission.
Mattel’s gap is the widest reported so far. But most other big U.S. companies also have staggering divides. According to a new report by the staff of Minnesota Congressman Keith Ellison, the first 225 large corporations to release their numbers had pay ratios averaging 339 to 1.
“This immense inequality is a crisis for our economy and our democracy,” said Ellison, a longtime advocate of pay gap disclosure.
What’s good for these CEOs, however, is actually bad for business.
A CNBC analysis of the new pay ratio data, for example, suggests that companies with large pay disparities have lower profits per employee.
Why might that be? According to a recent study by a Harvard Business professor, companies tend to perform poorly if workers feel they’re not paid fairly. The study’s author said workers who feel that way are likely to lack motivation and even quit their jobs.
It’s not hard to understand how it could put a damper on your morale to be working hard and struggling to get by while your boss is being rewarded hundreds — or even thousands — of times more than you on payday.
Doug Smith, a former partner at the big McKinsey management consulting firm, argues that the economic costs of huge pay gaps go far beyond the problems of low employee morale and high turnover.
“Instead of building a real economy beneficial to all,” Smith says, “these unethical pay practices spread outsourcing, offshoring, tax avoidance, downsizing, and the substitution of good-paying permanent jobs with temporary, precarious employment.”
There’s a growing movement to use the new pay ratio data to encourage corporations to narrow their gaps. Portland, Oregon will soon become the first city to impose a tax penalty on companies with pay gaps above 100 to 1.
Charlie Hales, Portland’s mayor when the law was passed in late 2016, argued that it made good business sense to encourage narrower gaps.
In a former job at an employee-owned engineering firm, Hales had seen firsthand how a small pay ratio boosted the bottom line. “Everyone worked a little harder because your success was my success,” Hales said. “And that egalitarian culture led to a strong work ethic that drove the corporation to success.”
With the new pay ratio data now coming out, lawmakers in six states — California, Connecticut, Illinois, Massachusetts, Minnesota, and Rhode Island — are considering Portland-style pay ratio taxes.
Narrowing the divides within U.S. corporations may not automatically leave us all whistling away while we work. But we’ll all pay a price if we keep fiddling while extreme inequality burns down our economy.
|
|
Harley-Davidson took its tax cut, closed a factory, and rewarded shareholders
The motorcycle maker in January told Kansas City workers it would close a plant there. Days later, it announced a nearly $700 million stock buyback plan.
By Emily Stewart - vox
May 22, 2018, 8:00am EDT
In September 2017, House Speaker Paul Ryan traveled to a Harley-Davidson plant in Menomonee Falls, Wisconsin, to tout the Republican tax bill, which President Trump would sign later that year. “Tax reform can put American manufacturers and American companies like Harley-Davidson on a much better footing to compete in the global economy and keep jobs here in America,” Ryan told workers and company leaders.
Four months later and 500 miles away in Kansas City, Missouri, 800 workers at a Harley-Davidson factory were told they would lose their jobs when the plant closed its doors and shifted operations to a facility in York, Pennsylvania -- a net loss of 350 jobs. Workers and union representatives say they didn’t see it coming.
Just days later, the company announced a dividend increase and a stock buyback plan to repurchase 15 million of its shares, valued at about $696 million.
It’s a pattern that’s played out over and over since the tax cuts passed — companies profit, shareholders reap the benefits, and workers get left out. Corporate stock buybacks hit a record $178 billion in the first three months of 2018; average hourly earnings for American workers are up 67 cents over the past year. Harley-Davidson is an American symbol, and President Trump has trotted it out as an example of business success. But as it’s getting its tax cut, it’s outsourcing jobs and paying shareholders.
The tax cuts aren’t saving jobs at Harley-Davidson
It wasn’t just Ryan who made promises to Harley-Davidson. Trump in February 2017 met with Harley-Davidson executives and union representatives at the White House. He thanked the company for building in America and predicted its operations would grow.
“I think you’re going to even expand — I know your business is now doing very well, and there’s a lot of spirit right now in the country that you weren’t having so much in the last number of months that you have right now,” Trump said. He added that impending changes to “taxing policies,” health care, tariffs, and trade would only make things better.
The tax cut, at least, came through. The Republican tax bill, which slashes the corporate tax rate to 21 percent from 35 percent, is giving Harley sizable tax savings this year. The company estimates its effective tax rate — the amount it pays — will be 23.5 percent to 25 percent this year, about 10 percentage points lower than it would have been without the tax bill.
That’s a significant savings: The company makes about $800 million to $1 billion in pre-tax profit, according to Seth Woolf, an analyst at North Coast Research.
Just over a month after Trump signed the tax cuts into law, the Kansas City closure was announced. Workers found out when they arrived at the plant that morning: They were kept in the hallway, informed that the factory would be shut, and sent home for the rest of the day without pay. The union had no advance warning, said Greg Tate, a staff representative for the United Steelworkers District 11, which represents about 30 percent of the Harley-Davidson plant’s workers. (Harley-Davidson and the two unions that represent most of its production employees last year terminated their 22-year partnership agreement.)
“We really never had any belief that they were going to shut the Kansas City facility down,” Tate said. The announcement was “the first anyone found out about it.”
The company will cut 800 jobs at the Kansas City plant when it closes by the fall of 2019 and says it expects to add 450 full-time, casual, and contractor positions in its York facility — a net loss of 350 jobs.
The median household income in York is much lower than in Kansas City, and Tate said that hiring a casual workforce there — temporary workers brought in to boost production during peak season — will be easier and cheaper for Harley.
“This is a decision we did not take lightly,” Harley said in a statement. “The Kansas City plant has been assembling Harley-Davidson motorcycles since 1997, and our employees will leave a great legacy of quality, price, and manufacturing leadership. We are grateful to them and the Kansas City community for their many years of support and their service to our dealers and our riders.”
Harley-Davidson is also expanding overseas
Meanwhile, Harley-Davidson is opening up a plant in Thailand, where it plans to start production later this year. (The company also owns and operates facilities in India and Brazil, and it is closing a facility in Australia.) The company says the Thailand plant isn’t meant to outsource jobs but to boost its international business and avoid tax and tariff burdens. Trump’s proposed steel tariffs could pose a threat to Harley and add an estimated $30 million to its costs, and the European Union has threatened to impose a tariff on the company’s motorcycles in retaliation.
Union leaders, however, have suggested that the Thailand plant opening and the Kansas City plant closing are tied together.
“Part of my job is being moved to York, but the other part is going to Bangkok,” Richard Pence, a machinist at the Kansas City plant, told the Milwaukee Journal Sentinel earlier this month when in Washington as part of a meeting between House Minority Leader Nancy Pelosi and members of the Association of Machinists and Aerospace Workers, which represents about 70 percent of the Harley-Davidson workers being laid off.
The Kansas City plant closing will cost Harley up to $200 million through 2019, according to Bloomberg’s estimates, and should result in annual savings of $65 million to $75 million after 2020.
Tate, from the steelworkers union, suggested the tax savings Harley reaped from the GOP bill might have actually freed up the cash for it to go ahead with the US restructuring plan now. “They have the capital now to move Kansas City, to shut it down,” he said. “All of that money really came from the tax cut plan, so it kind of had the opposite effect of what it was supposed to do.”
Woolf, the analyst, said he wasn’t sure that was the case. “I think what this reflects is that they’re finally coming to grips with the fact that the US market is contracting,” he said. Harley-Davidson has been struggling in recent years — sales have declined as its core demographic, baby boomers, ages and as millennials shy away from big bikes. The decline has been particularly acute in the US: Harley-Davidson’s motorcycle sales declined 8.5 percent in the United States in 2017 and 3.9 percent abroad.
The tax cuts let Harley reward shareholders
Meanwhile, since the tax cut, the company is managing to reward shareholders. Just days after revealing the decision to shutter the Kansas City plant, the company announced a dividend increase and a stock buyback plan to repurchase 15 million of its shares, valued at about $696 million.
On a call discussing the company’s first-quarter results in April, chief financial officer John Olin indicated that shareholder primacy will continue. “Beyond what we invest in the business, we will return and continue to return all excess cash to our shareholders,” he said. The company this year shut the media out of its annual shareholders meeting.
Harley-Davidson is one of a string of companies to announce major share buybacks since the tax bill was passed in December. Apple in early May said it would buy back $100 billion of its shares. The tech conglomerate Cisco in February said it would put an additional $25 billion toward a stock buyback. Troubled megabank Wells Fargo in January announced about $22 billion in buybacks. Pepsi announced a $15 billion buyback, Amgen and AbbVie $10 billion, and Google’s parent company Alphabet $8.6 billion.
Harley-Davidson isn’t the only company to shutter a US plant since the tax cuts were passed in December. The same day Kansas City workers found out their plant was closing, about 900 workers at an Electrolux plant in St. Cloud, Minnesota, found out the facility they were working in would be shutting down too. The Swedish home appliance company will consolidate its freezer production in South Carolina, where Joe Baratta, a representative for International Association of Machinists (IAM) Local 623, told me starting wages are lower.
He described a recent trip to Home Depot. “I see products that we were building here last year that say ‘Made in China’ with the Frigidaire name on it, they’re already in stores,” he said. “It’s a tough pill to swallow to go into every store in town looking at a product and saying, ‘There’s 150 jobs we lost. There’s another 200 jobs we lost.’”
Since Harley-Davidson announced its Kansas City plant closure in January, Trump — who made a big deal of saving jobs at a Carrier plant in Indiana in 2016 — hasn’t had anything to say about it, even when asked. IAM President Robert Martinez Jr. sent a letter to the White House asking him to save the Kansas City facility in March.
“For decades, hard-working Machinists Union members have devoted their lives to making high-quality, American-made products for Harley,” he wrote, later adding, “America’s working men and women deserve better than being thrown out onto the street. Our nation deserves better.”
An IAM spokesperson said Martinez met with White House trade adviser Peter Navarro on April 11 about the Harley closure, and he promised to follow up with the company’s CEO. The union had not received an official response from the president.
Four months later and 500 miles away in Kansas City, Missouri, 800 workers at a Harley-Davidson factory were told they would lose their jobs when the plant closed its doors and shifted operations to a facility in York, Pennsylvania -- a net loss of 350 jobs. Workers and union representatives say they didn’t see it coming.
Just days later, the company announced a dividend increase and a stock buyback plan to repurchase 15 million of its shares, valued at about $696 million.
It’s a pattern that’s played out over and over since the tax cuts passed — companies profit, shareholders reap the benefits, and workers get left out. Corporate stock buybacks hit a record $178 billion in the first three months of 2018; average hourly earnings for American workers are up 67 cents over the past year. Harley-Davidson is an American symbol, and President Trump has trotted it out as an example of business success. But as it’s getting its tax cut, it’s outsourcing jobs and paying shareholders.
The tax cuts aren’t saving jobs at Harley-Davidson
It wasn’t just Ryan who made promises to Harley-Davidson. Trump in February 2017 met with Harley-Davidson executives and union representatives at the White House. He thanked the company for building in America and predicted its operations would grow.
“I think you’re going to even expand — I know your business is now doing very well, and there’s a lot of spirit right now in the country that you weren’t having so much in the last number of months that you have right now,” Trump said. He added that impending changes to “taxing policies,” health care, tariffs, and trade would only make things better.
The tax cut, at least, came through. The Republican tax bill, which slashes the corporate tax rate to 21 percent from 35 percent, is giving Harley sizable tax savings this year. The company estimates its effective tax rate — the amount it pays — will be 23.5 percent to 25 percent this year, about 10 percentage points lower than it would have been without the tax bill.
That’s a significant savings: The company makes about $800 million to $1 billion in pre-tax profit, according to Seth Woolf, an analyst at North Coast Research.
Just over a month after Trump signed the tax cuts into law, the Kansas City closure was announced. Workers found out when they arrived at the plant that morning: They were kept in the hallway, informed that the factory would be shut, and sent home for the rest of the day without pay. The union had no advance warning, said Greg Tate, a staff representative for the United Steelworkers District 11, which represents about 30 percent of the Harley-Davidson plant’s workers. (Harley-Davidson and the two unions that represent most of its production employees last year terminated their 22-year partnership agreement.)
“We really never had any belief that they were going to shut the Kansas City facility down,” Tate said. The announcement was “the first anyone found out about it.”
The company will cut 800 jobs at the Kansas City plant when it closes by the fall of 2019 and says it expects to add 450 full-time, casual, and contractor positions in its York facility — a net loss of 350 jobs.
The median household income in York is much lower than in Kansas City, and Tate said that hiring a casual workforce there — temporary workers brought in to boost production during peak season — will be easier and cheaper for Harley.
“This is a decision we did not take lightly,” Harley said in a statement. “The Kansas City plant has been assembling Harley-Davidson motorcycles since 1997, and our employees will leave a great legacy of quality, price, and manufacturing leadership. We are grateful to them and the Kansas City community for their many years of support and their service to our dealers and our riders.”
Harley-Davidson is also expanding overseas
Meanwhile, Harley-Davidson is opening up a plant in Thailand, where it plans to start production later this year. (The company also owns and operates facilities in India and Brazil, and it is closing a facility in Australia.) The company says the Thailand plant isn’t meant to outsource jobs but to boost its international business and avoid tax and tariff burdens. Trump’s proposed steel tariffs could pose a threat to Harley and add an estimated $30 million to its costs, and the European Union has threatened to impose a tariff on the company’s motorcycles in retaliation.
Union leaders, however, have suggested that the Thailand plant opening and the Kansas City plant closing are tied together.
“Part of my job is being moved to York, but the other part is going to Bangkok,” Richard Pence, a machinist at the Kansas City plant, told the Milwaukee Journal Sentinel earlier this month when in Washington as part of a meeting between House Minority Leader Nancy Pelosi and members of the Association of Machinists and Aerospace Workers, which represents about 70 percent of the Harley-Davidson workers being laid off.
The Kansas City plant closing will cost Harley up to $200 million through 2019, according to Bloomberg’s estimates, and should result in annual savings of $65 million to $75 million after 2020.
Tate, from the steelworkers union, suggested the tax savings Harley reaped from the GOP bill might have actually freed up the cash for it to go ahead with the US restructuring plan now. “They have the capital now to move Kansas City, to shut it down,” he said. “All of that money really came from the tax cut plan, so it kind of had the opposite effect of what it was supposed to do.”
Woolf, the analyst, said he wasn’t sure that was the case. “I think what this reflects is that they’re finally coming to grips with the fact that the US market is contracting,” he said. Harley-Davidson has been struggling in recent years — sales have declined as its core demographic, baby boomers, ages and as millennials shy away from big bikes. The decline has been particularly acute in the US: Harley-Davidson’s motorcycle sales declined 8.5 percent in the United States in 2017 and 3.9 percent abroad.
The tax cuts let Harley reward shareholders
Meanwhile, since the tax cut, the company is managing to reward shareholders. Just days after revealing the decision to shutter the Kansas City plant, the company announced a dividend increase and a stock buyback plan to repurchase 15 million of its shares, valued at about $696 million.
On a call discussing the company’s first-quarter results in April, chief financial officer John Olin indicated that shareholder primacy will continue. “Beyond what we invest in the business, we will return and continue to return all excess cash to our shareholders,” he said. The company this year shut the media out of its annual shareholders meeting.
Harley-Davidson is one of a string of companies to announce major share buybacks since the tax bill was passed in December. Apple in early May said it would buy back $100 billion of its shares. The tech conglomerate Cisco in February said it would put an additional $25 billion toward a stock buyback. Troubled megabank Wells Fargo in January announced about $22 billion in buybacks. Pepsi announced a $15 billion buyback, Amgen and AbbVie $10 billion, and Google’s parent company Alphabet $8.6 billion.
Harley-Davidson isn’t the only company to shutter a US plant since the tax cuts were passed in December. The same day Kansas City workers found out their plant was closing, about 900 workers at an Electrolux plant in St. Cloud, Minnesota, found out the facility they were working in would be shutting down too. The Swedish home appliance company will consolidate its freezer production in South Carolina, where Joe Baratta, a representative for International Association of Machinists (IAM) Local 623, told me starting wages are lower.
He described a recent trip to Home Depot. “I see products that we were building here last year that say ‘Made in China’ with the Frigidaire name on it, they’re already in stores,” he said. “It’s a tough pill to swallow to go into every store in town looking at a product and saying, ‘There’s 150 jobs we lost. There’s another 200 jobs we lost.’”
Since Harley-Davidson announced its Kansas City plant closure in January, Trump — who made a big deal of saving jobs at a Carrier plant in Indiana in 2016 — hasn’t had anything to say about it, even when asked. IAM President Robert Martinez Jr. sent a letter to the White House asking him to save the Kansas City facility in March.
“For decades, hard-working Machinists Union members have devoted their lives to making high-quality, American-made products for Harley,” he wrote, later adding, “America’s working men and women deserve better than being thrown out onto the street. Our nation deserves better.”
An IAM spokesperson said Martinez met with White House trade adviser Peter Navarro on April 11 about the Harley closure, and he promised to follow up with the company’s CEO. The union had not received an official response from the president.
Companies turn Trump tax cuts into a big windfall for wealthy investors
Laura Clawson
Daily Kos Staff
Saturday May 19, 2018 · 7:00 AM PDT
The Republican tax law is proving great for corporate executives and major shareholders—translation: rich people—but the evidence keeps coming in that giving corporations a giant tax cut doesn’t translate into jobs or higher wages for regular workers. A few companies have given workers a one-time bonus, but the real money is going to stock buybacks:
Buybacks are a strategy to boost stock prices – by reducing the number of shares outstanding, which artificially increases a company’s earning per share. But they do little to improve the economy.
How much money? It could be $1 trillion. So far in 2018:
Don’t forget, the corporate leadership that’s making these buyback decisions will also benefit from them, since many executive compensation packages are tied to stock prices or include stocks and stock options.
Republicans claimed the corporate tax cut would benefit workers, though it was always easy to see that for a lie if you just poked at it a little. And now we have the unfortunate proof of the lie.
Buybacks are a strategy to boost stock prices – by reducing the number of shares outstanding, which artificially increases a company’s earning per share. But they do little to improve the economy.
How much money? It could be $1 trillion. So far in 2018:
- Apple – $100 billion
- Cisco – $25 billion
- Wells Fargo – $22.6 billion
- Pepsi – $15 billion
- AbbVie – $10 billion
- Amgen – $10 billion
- Google parent Alphabet – $8.6 billion
- Visa – $7.5 billion
- eBay – $6 billion
Don’t forget, the corporate leadership that’s making these buyback decisions will also benefit from them, since many executive compensation packages are tied to stock prices or include stocks and stock options.
Republicans claimed the corporate tax cut would benefit workers, though it was always easy to see that for a lie if you just poked at it a little. And now we have the unfortunate proof of the lie.
how do you spell greed???
'CEOs don't want this released': US study lays bare extreme pay-ratio problem
The first comprehensive study of CEO-to-worker pay reveals an extraordinary disparity – with the highest gap approaching 5,000 to 1
Edward Helmore in New York
the guardian
Wed 16 May 2018 05.00 EDT
The first comprehensive study of the massive pay gap between the US executive suite and average workers has found that the average CEO-to-worker pay ratio has now reached 339 to 1, with the highest gap approaching 5,000 to 1.
The study, titled Rewarding Or Hoarding?, was published on Wednesday by Minnesota’s Democratic US congressman Keith Ellison, and includes data on almost 14 million workers at 225 US companies with total annual revenues of $6.3tn.
Just the summary makes for sober reading.
In 188 of the 225 companies in the report’s database, a single chief executive’s pay could be used to pay more than 100 workers; the average worker at 219 of the 225 companies studied would need to work at least 45 years to earn what their CEO makes in one.
It also shows how some of the most extreme disparities in CEO-to-worker pay exist in industries that are considered consumer discretionary, such as fast food and retail, with a 977 to 1 disparity, one of the widest gaps.
“Now we know why CEOs didn’t want this data released,” says Ellison, who championed the implementation of the pay ratio disclosure rule as it was written into the Dodd-Frank financial reform bill of 2010. “I knew inequality was a great problem in our society but I didn’t understand quite how extreme it was.”
The requirements, long resisted by some of the largest US companies, simply tells companies to identify a median worker and then calculate how much the CEO makes in comparison to that person.
But the requirement triggered years of prevarication as companies claimed the method of calculating CEO compensation and median employee compensation had not been well defined. Some claimed that including workers employed abroad, especially in developing countries, would make pay ratio data even more extreme than it would be if calculated only within the US.
“If wealth is being concentrated into fewer and fewer hands, then obviously wealth is being dissipated from more and more people,” Ellison said.
“We have people who are paying more half their income in rent, and we have whole school districts where poverty is erasing any opportunity for Americans to climb that ladder.”
According to a recent Bloomberg analysis of 22 major world economies, the average CEO-worker pay gap in the US far outpaces that of other industrialized nations.
The average US CEO makes more than four times his or her counterpart in the other countries analyzed.
Ellison rejected claims from corporate America that executive suite compensation is a just reward for the skillful exercising of their business talents. “Truth is, they’re doing nothing except extracting value and wealth from hard working people because they have economic advantages.”
“With all this extra money they have, it corrupts our politics absolutely,” he continues. “It concentrates markets and makes them less competitive.”
Ellison has become a frequent target for criticism from the Trump administration, including from the president himself.
Last week, Ellison, who also serves as deputy chair of the Democratic National Committee, appeared at a Minnesota May Day parade wearing a black T-shirt with the words “Yo no creo en fronteras”, or “I don’t believe in borders”. Trump described the slogan as an example of the US having “the worst immigration laws in the history of mankind”.
Companies singled out for criticism in the report include Marathon Petroleum, a gas station operator, whose CEO Gary Heminger took home an astonishing 935 times more pay than an average employee in 2017.
Sarah Anderson, the policy director at Inequality.org, said the data that’s now coming out from corporate America could prove historic.
“We’ve known for many years we have an extreme gap between CEO and worker pay but this report goes into detail about which companies are doing the most to contribute to inequality by having extreme gaps in pay scales.”
Anderson’s advocacy group had previously identified at least five US firms where workers would have to work more than 1,000 years to catch up with their top bosses. The companies include the auto-parts maker Aptiv (CEO-worker pay ratio: 2,526 to 1), the temp agency Manpower (2,483 to 1), the amusement park owner Six Flags (1,920 to 1), Del Monte Produce (1,465 to 1), and the apparel maker VF (1,353 to 1).
“We’re getting eye-opening data now because companies are now required to make disclosures for their global workforce,” she said.
Ellison said the data remains imperfect, as companies are still able to exclude contracted workers from their reporting. He singled out Newmont Mining, which claims 30,000 workers and contractors on its website but only reported 12,500 to the SEC.
“What happened to the other workers? They’re missing some. But even then the CEO is making 114 times the average employee.”
Ellison hopes that the issue is beginning to break out of the political echo-chamber and that changes are beginning to occur.
The city of Portland, Oregon, for instance, recently imposed a 10% business tax surcharge on companies with top executives making more than 100 times what their median worker is paid – and a 20% surcharge on firms with pay gaps that stretch exceed 250 to 1.
“We need to ban stock buy-backs, increase marginal tax rates, we need to make sure companies cant write huge bonuses. But we also need to increase the voice of workers. What’s going on in Portland is good. Taxes are part of any realistic solution. It’s not like this concentration and hoarding of wealth has no consequence. Everytime they acquire more, it means someone else gets less.”
The study, titled Rewarding Or Hoarding?, was published on Wednesday by Minnesota’s Democratic US congressman Keith Ellison, and includes data on almost 14 million workers at 225 US companies with total annual revenues of $6.3tn.
Just the summary makes for sober reading.
In 188 of the 225 companies in the report’s database, a single chief executive’s pay could be used to pay more than 100 workers; the average worker at 219 of the 225 companies studied would need to work at least 45 years to earn what their CEO makes in one.
It also shows how some of the most extreme disparities in CEO-to-worker pay exist in industries that are considered consumer discretionary, such as fast food and retail, with a 977 to 1 disparity, one of the widest gaps.
“Now we know why CEOs didn’t want this data released,” says Ellison, who championed the implementation of the pay ratio disclosure rule as it was written into the Dodd-Frank financial reform bill of 2010. “I knew inequality was a great problem in our society but I didn’t understand quite how extreme it was.”
The requirements, long resisted by some of the largest US companies, simply tells companies to identify a median worker and then calculate how much the CEO makes in comparison to that person.
But the requirement triggered years of prevarication as companies claimed the method of calculating CEO compensation and median employee compensation had not been well defined. Some claimed that including workers employed abroad, especially in developing countries, would make pay ratio data even more extreme than it would be if calculated only within the US.
“If wealth is being concentrated into fewer and fewer hands, then obviously wealth is being dissipated from more and more people,” Ellison said.
“We have people who are paying more half their income in rent, and we have whole school districts where poverty is erasing any opportunity for Americans to climb that ladder.”
According to a recent Bloomberg analysis of 22 major world economies, the average CEO-worker pay gap in the US far outpaces that of other industrialized nations.
The average US CEO makes more than four times his or her counterpart in the other countries analyzed.
Ellison rejected claims from corporate America that executive suite compensation is a just reward for the skillful exercising of their business talents. “Truth is, they’re doing nothing except extracting value and wealth from hard working people because they have economic advantages.”
“With all this extra money they have, it corrupts our politics absolutely,” he continues. “It concentrates markets and makes them less competitive.”
Ellison has become a frequent target for criticism from the Trump administration, including from the president himself.
Last week, Ellison, who also serves as deputy chair of the Democratic National Committee, appeared at a Minnesota May Day parade wearing a black T-shirt with the words “Yo no creo en fronteras”, or “I don’t believe in borders”. Trump described the slogan as an example of the US having “the worst immigration laws in the history of mankind”.
Companies singled out for criticism in the report include Marathon Petroleum, a gas station operator, whose CEO Gary Heminger took home an astonishing 935 times more pay than an average employee in 2017.
Sarah Anderson, the policy director at Inequality.org, said the data that’s now coming out from corporate America could prove historic.
“We’ve known for many years we have an extreme gap between CEO and worker pay but this report goes into detail about which companies are doing the most to contribute to inequality by having extreme gaps in pay scales.”
Anderson’s advocacy group had previously identified at least five US firms where workers would have to work more than 1,000 years to catch up with their top bosses. The companies include the auto-parts maker Aptiv (CEO-worker pay ratio: 2,526 to 1), the temp agency Manpower (2,483 to 1), the amusement park owner Six Flags (1,920 to 1), Del Monte Produce (1,465 to 1), and the apparel maker VF (1,353 to 1).
“We’re getting eye-opening data now because companies are now required to make disclosures for their global workforce,” she said.
Ellison said the data remains imperfect, as companies are still able to exclude contracted workers from their reporting. He singled out Newmont Mining, which claims 30,000 workers and contractors on its website but only reported 12,500 to the SEC.
“What happened to the other workers? They’re missing some. But even then the CEO is making 114 times the average employee.”
Ellison hopes that the issue is beginning to break out of the political echo-chamber and that changes are beginning to occur.
The city of Portland, Oregon, for instance, recently imposed a 10% business tax surcharge on companies with top executives making more than 100 times what their median worker is paid – and a 20% surcharge on firms with pay gaps that stretch exceed 250 to 1.
“We need to ban stock buy-backs, increase marginal tax rates, we need to make sure companies cant write huge bonuses. But we also need to increase the voice of workers. What’s going on in Portland is good. Taxes are part of any realistic solution. It’s not like this concentration and hoarding of wealth has no consequence. Everytime they acquire more, it means someone else gets less.”
With Each Pharma-Funded Meal, Doctors’ Opioid Prescriptions Rise
According to an eye-opening new study.
JULIA LURIE - mother jones
MAY. 14, 2018 11:00 AM
Amid a spiraling overdose epidemic, opioid prescribing is still on the rise for a small subset of physicians: those who receive funding from opioid manufacturers.
That’s according to a research letter published Monday in the Journal of the American Medical Association. The study combined two datasets: Open Payments data showing the funding that doctors received from opioid makers for things like speaking, consulting, travel, meals, and other non-research purposes in 2014, and Medicare data showing the number of opioid prescriptions those doctors billed the following year.
Physicians receiving payments from opioid makers—about seven percent of all doctors—prescribed about four times as many opioids as those who didn’t. Strikingly, the general trend held not just for the select few prescribers receiving big consulting and speaker fees, but for the many more who had eaten meals paid for by the drug companies—a common practice in which pharmaceutical representatives bring lunch to clinicians’ offices or take the doctors out to eat. As the chart below shows, with each additional so-called “industry meal” that a doctor consumed (the typical cost of which was just $13), the number of opioid prescriptions that the doctor wrote the following year increased.
Though the study didn’t prove that the increased prescription rates were a direct result of the meals, prior studies suggest that all payments—not just meals—are associated with increased prescribing, wrote lead author Dr. Scott Hadland, a pediatrician and researcher at Boston Medical Center’s Grayken Center for Addiction, in an email.
Sponsoring meals “is commonplace and goes largely unquestioned throughout the US,” he wrote. “Fewer than 1 in 50 doctors received big payments. The remainder mostly received inexpensive opioid marketing meals. Yet, these meals were clearly associated with increased prescribing on a large scale.”
Meals served as a cheap way to reach a lot of doctors: Of the roughly 369,000 doctors who billed opioid prescriptions to Medicare, about 25,000 had at least one meal sponsored by opioid makers. The meals cost the companies less than $2 million. Meanwhile, only 436 of the physicians received payments of more than $1,000.
All told, opioid makers spent about $9 million on non-research physician payments in 2014. About half of that came from Insys, the pharmaceutical company that makes fentanyl spray Subsys. The company’s marketing tactics have recently come under fire: Insys repeatedly misrepresented its product and the patients using it in order to boost sales, according to an investigation released last fall by Sen. Claire McCaskill (D-Mo.). In October, founder John Kapoor was arrested on fraud and bribery charges.
A number of states have implemented policies over the past year aimed at curbing pharmaceutical influence on doctors. But Hadland notes that in some cases—like New Jersey’s recent rule capping physician pharmaceutical payments to $10,000 a year—the policies only affect a small group of prescribers. As he said, “The bigger public health problem is likely the widespread practice of offering low-value meals to physicians to influence prescribing patterns on a grand scale.”
That’s according to a research letter published Monday in the Journal of the American Medical Association. The study combined two datasets: Open Payments data showing the funding that doctors received from opioid makers for things like speaking, consulting, travel, meals, and other non-research purposes in 2014, and Medicare data showing the number of opioid prescriptions those doctors billed the following year.
Physicians receiving payments from opioid makers—about seven percent of all doctors—prescribed about four times as many opioids as those who didn’t. Strikingly, the general trend held not just for the select few prescribers receiving big consulting and speaker fees, but for the many more who had eaten meals paid for by the drug companies—a common practice in which pharmaceutical representatives bring lunch to clinicians’ offices or take the doctors out to eat. As the chart below shows, with each additional so-called “industry meal” that a doctor consumed (the typical cost of which was just $13), the number of opioid prescriptions that the doctor wrote the following year increased.
Though the study didn’t prove that the increased prescription rates were a direct result of the meals, prior studies suggest that all payments—not just meals—are associated with increased prescribing, wrote lead author Dr. Scott Hadland, a pediatrician and researcher at Boston Medical Center’s Grayken Center for Addiction, in an email.
Sponsoring meals “is commonplace and goes largely unquestioned throughout the US,” he wrote. “Fewer than 1 in 50 doctors received big payments. The remainder mostly received inexpensive opioid marketing meals. Yet, these meals were clearly associated with increased prescribing on a large scale.”
Meals served as a cheap way to reach a lot of doctors: Of the roughly 369,000 doctors who billed opioid prescriptions to Medicare, about 25,000 had at least one meal sponsored by opioid makers. The meals cost the companies less than $2 million. Meanwhile, only 436 of the physicians received payments of more than $1,000.
All told, opioid makers spent about $9 million on non-research physician payments in 2014. About half of that came from Insys, the pharmaceutical company that makes fentanyl spray Subsys. The company’s marketing tactics have recently come under fire: Insys repeatedly misrepresented its product and the patients using it in order to boost sales, according to an investigation released last fall by Sen. Claire McCaskill (D-Mo.). In October, founder John Kapoor was arrested on fraud and bribery charges.
A number of states have implemented policies over the past year aimed at curbing pharmaceutical influence on doctors. But Hadland notes that in some cases—like New Jersey’s recent rule capping physician pharmaceutical payments to $10,000 a year—the policies only affect a small group of prescribers. As he said, “The bigger public health problem is likely the widespread practice of offering low-value meals to physicians to influence prescribing patterns on a grand scale.”
Cheap Fun With the Stock Market, Arithmetic and CEO Pay
Monday, May 07, 2018
By Dean Baker, Truthout | Op-Ed
Everyone with a 401(k) has been impressed by the stock market's run-up in recent years. Even adjusting for inflation, the S&P 500 is more than 20 percent higher than its peak in the 1990 stock bubble. Of course, the economy is nearly 40 percent larger, which makes the run-up somewhat less striking.
Nonetheless, the ratio of stock prices to corporate earnings is at unusually high levels. According to data from Nobel Laureate and economist Robert Shiller, the current ratio of the S&P 500 to corporate earnings is close to 25. That compares to a long-term average of less than 15.
The reason this matters is that as the price-to-earnings ratio rises, the dividend yield falls. Forty years ago, the dividend yield was well over 4.0 percent. It currently is just over 1.8 percent. This means that more of the return from stock depends on a rise in the stock price.
But if stocks rise just in step with the economy and profit growth (this assumes no further rise in profit shares), then capital gains are not going to be offsetting a weak dividend yield. Using the projections from the Congressional Budget Office (CBO), GDP is expected to grow at less than a 2.0 percent annual rate over the next decade. Add in a 1.8 percent dividend yield, and shareholders are looking at a real return of less than 3.8 percent.
That is considerably less than the stock returns that many investors seem to expect. Historically, real stock returns have averaged close to 7.0 percent. That has come down some in the last quarter century; if we take the period since the last peak in 2007, real returns have averaged just 5.6 percent annually. It is very difficult to see how returns, even this high, can be maintained going forward.
Stock prices could continue to outpace profit growth, but that would mean ever higher price-to-earnings ratios and ever lower dividend yields. If the market were to provide the same 5.6 percent return over the next decade, as it did since the last peak, and the growth projections prove correct, the price-to-earnings ratio will be well over 30 by 2028.
As dividend yields fall close to 1.0 percent, it would be necessary to have even more rapid increases in price-to-earnings ratios to maintain anything resembling recent or historical returns. Will price-to-earnings ratios hit 50, 60, or higher?
Well, Bitcoin has a market valuation of more than $150 billion, but most people wouldn't want to bet on this craziness persisting for decades. The point is, in almost any plausible scenario we can anticipate, stock returns will be considerably lower in the future than in the past.
This raises a whole array of interesting questions, but I want to focus on one in particular: CEO pay. Most CEO pay comes from stock options. Rapidly rising stock prices allowed CEOs to make tens of millions of dollars, even if they turned in a mediocre performance. They just had to do something close to their peers and they could count on getting rich.
That will no longer be true in a world where stocks, on average, offer meager gains. This means that if CEOs are still going to pocket paychecks in the tens of millions of dollars annually, corporate boards will have to rewrite contracts to either give them many more options or much larger straight pay.
In a context where shareholders are not seeing the sorts of returns that make them happy, will they be anxious to rewrite contracts so that mediocre CEOs still get rich? Our corporate governance process is so corrupt that it is very difficult for shareholders to rein in the pay of their top employees, but the sight of top management getting rich while providing mediocre returns may provide sufficient motivation for shareholders to organize.
They may actually start asking questions like, "Can we get another CEO for less money who is at least as good?" And, serious downward pressure on CEO pay would be a great thing for the economy.
If CEOs were again paid 20 to 30 times the wages of ordinary workers, instead of the current 200 to 300 times, it would have an impact on pay structures throughout the economy. When the CEO gets $2-$3 million, the next line of management is just over $1 million, and the third layer is in the high six figures. This frees up a huge amount of money for everyone else.
Also, if the CEOs at the country's largest companies are making $2-3 million, then we can expect the top executives at universities and private charities and foundations to settle for the high six figures, instead of the multi-million dollar compensation packages many now pull down. Again, less money at the top means more for everyone else.
The full impact of lower stock returns is a much longer story, but there is real potential for it placing downward pressure on CEO pay. And that is a very good thing.
Nonetheless, the ratio of stock prices to corporate earnings is at unusually high levels. According to data from Nobel Laureate and economist Robert Shiller, the current ratio of the S&P 500 to corporate earnings is close to 25. That compares to a long-term average of less than 15.
The reason this matters is that as the price-to-earnings ratio rises, the dividend yield falls. Forty years ago, the dividend yield was well over 4.0 percent. It currently is just over 1.8 percent. This means that more of the return from stock depends on a rise in the stock price.
But if stocks rise just in step with the economy and profit growth (this assumes no further rise in profit shares), then capital gains are not going to be offsetting a weak dividend yield. Using the projections from the Congressional Budget Office (CBO), GDP is expected to grow at less than a 2.0 percent annual rate over the next decade. Add in a 1.8 percent dividend yield, and shareholders are looking at a real return of less than 3.8 percent.
That is considerably less than the stock returns that many investors seem to expect. Historically, real stock returns have averaged close to 7.0 percent. That has come down some in the last quarter century; if we take the period since the last peak in 2007, real returns have averaged just 5.6 percent annually. It is very difficult to see how returns, even this high, can be maintained going forward.
Stock prices could continue to outpace profit growth, but that would mean ever higher price-to-earnings ratios and ever lower dividend yields. If the market were to provide the same 5.6 percent return over the next decade, as it did since the last peak, and the growth projections prove correct, the price-to-earnings ratio will be well over 30 by 2028.
As dividend yields fall close to 1.0 percent, it would be necessary to have even more rapid increases in price-to-earnings ratios to maintain anything resembling recent or historical returns. Will price-to-earnings ratios hit 50, 60, or higher?
Well, Bitcoin has a market valuation of more than $150 billion, but most people wouldn't want to bet on this craziness persisting for decades. The point is, in almost any plausible scenario we can anticipate, stock returns will be considerably lower in the future than in the past.
This raises a whole array of interesting questions, but I want to focus on one in particular: CEO pay. Most CEO pay comes from stock options. Rapidly rising stock prices allowed CEOs to make tens of millions of dollars, even if they turned in a mediocre performance. They just had to do something close to their peers and they could count on getting rich.
That will no longer be true in a world where stocks, on average, offer meager gains. This means that if CEOs are still going to pocket paychecks in the tens of millions of dollars annually, corporate boards will have to rewrite contracts to either give them many more options or much larger straight pay.
In a context where shareholders are not seeing the sorts of returns that make them happy, will they be anxious to rewrite contracts so that mediocre CEOs still get rich? Our corporate governance process is so corrupt that it is very difficult for shareholders to rein in the pay of their top employees, but the sight of top management getting rich while providing mediocre returns may provide sufficient motivation for shareholders to organize.
They may actually start asking questions like, "Can we get another CEO for less money who is at least as good?" And, serious downward pressure on CEO pay would be a great thing for the economy.
If CEOs were again paid 20 to 30 times the wages of ordinary workers, instead of the current 200 to 300 times, it would have an impact on pay structures throughout the economy. When the CEO gets $2-$3 million, the next line of management is just over $1 million, and the third layer is in the high six figures. This frees up a huge amount of money for everyone else.
Also, if the CEOs at the country's largest companies are making $2-3 million, then we can expect the top executives at universities and private charities and foundations to settle for the high six figures, instead of the multi-million dollar compensation packages many now pull down. Again, less money at the top means more for everyone else.
The full impact of lower stock returns is a much longer story, but there is real potential for it placing downward pressure on CEO pay. And that is a very good thing.
How three cities are fighting back against the oldest scam in US sports
Billionaire owners have for years leveraged the threat of relocation to line their pockets. Here’s how three cities are fighting back against one of the longest-running scams in American sports
Elliott Turner
the guardian
Tue 8 May 2018 05.00 EDT
Does this story sound familiar: a sports team pleads poverty and gets public funds to build a new stadium. A few years later, that same team changes hands at a massive valuation. A decade or two later, the team gripes about the stadium and leaves town. To the dismay of local fans and politicos, taxpayers are stuck with a tenant-less stadium and a sizable bill.
Columbus, Miami and Washington DC are fighting to change that same, sad tune. Here’s how:
Last fall, MLS’s Columbus Crew started to publicly angle for a move to Austin. They claimed the market was “underperforming”, Mapfre Stadium was old, and pined for a downtown location. Fans responded with a vociferous ‘Save the Crew’ movement, but the city refused to pony up tax dollars for any venture. The Crew then got serious about Austin, and found themselves in court after the state and city sued.
The lawsuit is based on Ohio state law, which uniquely addresses taxpayer funded stadiums. In 1996, the Ohio Legislature passed legislation to try and prevent sports teams from using public funds to build stadiums and then leave town; the law was inspired by the NFL’s Browns’ acrimonious move to Baltimore. Basically, the Ohio Revised Code requires a team in a stadium paid for by public funds to give six months notice of a plan to move, and then another six months for the local government or investors to have an opportunity to buy the team.
Before the Crew’s open flirtation with Austin, the law had never been used. Nobody knows how it will play out; there’s no legal precedent and many of the key terms are a bit vague (in the non-legal sense). The key questions will be: what counts as “notice” to get the clock ticking on those six months? Has that happened already? What is a “reasonable opportunity” for a local group to buy the team? How much would the local owners need to pay?
What’s at stake, in addition to civic pride, is millions of dollars. If the Crew vacate Mapfre Stadium for Austin, the public would bear a significant financial burden; Columbus would have to pay maintenance costs for a stadium with no anchor tenant, or shell out tens of millions of dollars to demolish the structure. They would also lose the annual rent paid by the Crew, often around a million dollarsper year.
Ohio and Columbus may ultimately lose the lawsuit, but at least the ‘Browns law’ has put the brakes on the team’s relocation. It also has hit both the Crew and MLSwith legal bills. And, if the law succeeds, other states – sick of getting played by billionaire sports team owners – could pass similar legislation.
In the absence of legislation, local governments can protect stadium investment by insisting on ‘no relocation’ agreements. For example, in July of this year, MLS’ DC United will begin play in a new stadium: Audi Field. The team paid $150m in construction costs, but the District spent $85m to get most of the land and still has an eminent domain case for the last two acres pending. Thus, the total bill could easily pass one hundred million dollars.
Thus, the District signed a 12 page Non-Relocation Agreement with the club. On Page 5, Section 2.3, DC Unitedagree that “so long as this Agreement is in effect, the Team shall not enter into any contract or agreement with respect to or which would result in the move or relocation of, and shall not move or otherwise relocate or attempt to move.”
This agreement is a good idea, but cities can already sue a moving partner for breach of lease. By tying it to the lease, there’s not much additional protection. According to Section 5.2, the remedies if relocation happens are: “specific performance” – they can make the team stay and play out the lease – or “declaratory relief” – they can ask a Judge to rule that DC is violating the agreement preemptively. This is not that different from DC suing the club for breaching the lease contract.
Ideally, a remedy would have more bite. For example, cities could insist on liquidated damages, which is basically a fine. If X party violates the agreement, they must pay $5m per breach.
Equally worrisome, DC’s Non-Relocation Agreement would not apply to the Columbus Crew’s flirtation with Austin. That’s because no “agreement” has been signed between Columbus and the city – just negotiations and contacts.
A stronger Non-Relocation Agreement could include “exclusive negotiation windows” language. Basically, in layperson terms, a sports team cannot cast sideward glances at other cities during the lease. It would state that the team cannot talk with other localities about a stadium up until one year before the lease expires, for example. MLS has agreed to exclusive windows in TV deals.
Even when relocation doesn’t happen, there’s another problem: risk v reward. These stadium deals are often followed by the owner selling the team at a profit. And a big part of the team’s new valuation is that very stadium deal. Taxpayers foot the risk, but don’t see the upside.
For example, in 2010, the Miami Marlins of Major League Baseball (then known as the Florida Marlins) were valued by Forbes at $317m. In 2013, only three years later, Forbes valued the Marlins at $520m. What happened? They got a new stadium that was paid for largely by taxpayers. Of the $639m construction costs, the team only paid $1 out of every $5. Even worse, Miami-Dade borrowed over $400m and will end up paying over a billion dollars.
Still, Miami smartly inserted a clause in their agreement that they would get 5% of any profits from the sale of the team. Loria bought the team for $158m in 2002, and then sold the team for $1.2bn. Ballpark, that’s a $1bn dollar increase in value. Even assuming that’s all profit, 5% of that would still only be $50m dollars. That’s a lot of money, but only one-eighth of the construction costs paid by taxpayers. And much less than the billion paid over time on bonds.
To make matters worse, Miami taxpayers may not even see that $50m dollars. Or even a single dollar from the team’s sale. MLB claims the Marlins are a “money-losing” franchise and the profit sharing clause in the contract allows Loria to deduct “debt, certain expenses, and taxes tied to a sale.” Thus, his attorneys told Miami-Dade County he would not be sharing anything. They claim there was no profit. The County has responded by suing, and the case is winding through the courts.
Thus, the era of sports teams bullying communities into paying for stadiums while they keep the profits appears at a crossroads: legislation and savvy negotiations means local governments are pushing back. The tide hasn’t turned, but Columbus, Miami and Washington are taking steps in the right direction. Hopefully others will follow suit.
Columbus, Miami and Washington DC are fighting to change that same, sad tune. Here’s how:
Last fall, MLS’s Columbus Crew started to publicly angle for a move to Austin. They claimed the market was “underperforming”, Mapfre Stadium was old, and pined for a downtown location. Fans responded with a vociferous ‘Save the Crew’ movement, but the city refused to pony up tax dollars for any venture. The Crew then got serious about Austin, and found themselves in court after the state and city sued.
The lawsuit is based on Ohio state law, which uniquely addresses taxpayer funded stadiums. In 1996, the Ohio Legislature passed legislation to try and prevent sports teams from using public funds to build stadiums and then leave town; the law was inspired by the NFL’s Browns’ acrimonious move to Baltimore. Basically, the Ohio Revised Code requires a team in a stadium paid for by public funds to give six months notice of a plan to move, and then another six months for the local government or investors to have an opportunity to buy the team.
Before the Crew’s open flirtation with Austin, the law had never been used. Nobody knows how it will play out; there’s no legal precedent and many of the key terms are a bit vague (in the non-legal sense). The key questions will be: what counts as “notice” to get the clock ticking on those six months? Has that happened already? What is a “reasonable opportunity” for a local group to buy the team? How much would the local owners need to pay?
What’s at stake, in addition to civic pride, is millions of dollars. If the Crew vacate Mapfre Stadium for Austin, the public would bear a significant financial burden; Columbus would have to pay maintenance costs for a stadium with no anchor tenant, or shell out tens of millions of dollars to demolish the structure. They would also lose the annual rent paid by the Crew, often around a million dollarsper year.
Ohio and Columbus may ultimately lose the lawsuit, but at least the ‘Browns law’ has put the brakes on the team’s relocation. It also has hit both the Crew and MLSwith legal bills. And, if the law succeeds, other states – sick of getting played by billionaire sports team owners – could pass similar legislation.
In the absence of legislation, local governments can protect stadium investment by insisting on ‘no relocation’ agreements. For example, in July of this year, MLS’ DC United will begin play in a new stadium: Audi Field. The team paid $150m in construction costs, but the District spent $85m to get most of the land and still has an eminent domain case for the last two acres pending. Thus, the total bill could easily pass one hundred million dollars.
Thus, the District signed a 12 page Non-Relocation Agreement with the club. On Page 5, Section 2.3, DC Unitedagree that “so long as this Agreement is in effect, the Team shall not enter into any contract or agreement with respect to or which would result in the move or relocation of, and shall not move or otherwise relocate or attempt to move.”
This agreement is a good idea, but cities can already sue a moving partner for breach of lease. By tying it to the lease, there’s not much additional protection. According to Section 5.2, the remedies if relocation happens are: “specific performance” – they can make the team stay and play out the lease – or “declaratory relief” – they can ask a Judge to rule that DC is violating the agreement preemptively. This is not that different from DC suing the club for breaching the lease contract.
Ideally, a remedy would have more bite. For example, cities could insist on liquidated damages, which is basically a fine. If X party violates the agreement, they must pay $5m per breach.
Equally worrisome, DC’s Non-Relocation Agreement would not apply to the Columbus Crew’s flirtation with Austin. That’s because no “agreement” has been signed between Columbus and the city – just negotiations and contacts.
A stronger Non-Relocation Agreement could include “exclusive negotiation windows” language. Basically, in layperson terms, a sports team cannot cast sideward glances at other cities during the lease. It would state that the team cannot talk with other localities about a stadium up until one year before the lease expires, for example. MLS has agreed to exclusive windows in TV deals.
Even when relocation doesn’t happen, there’s another problem: risk v reward. These stadium deals are often followed by the owner selling the team at a profit. And a big part of the team’s new valuation is that very stadium deal. Taxpayers foot the risk, but don’t see the upside.
For example, in 2010, the Miami Marlins of Major League Baseball (then known as the Florida Marlins) were valued by Forbes at $317m. In 2013, only three years later, Forbes valued the Marlins at $520m. What happened? They got a new stadium that was paid for largely by taxpayers. Of the $639m construction costs, the team only paid $1 out of every $5. Even worse, Miami-Dade borrowed over $400m and will end up paying over a billion dollars.
Still, Miami smartly inserted a clause in their agreement that they would get 5% of any profits from the sale of the team. Loria bought the team for $158m in 2002, and then sold the team for $1.2bn. Ballpark, that’s a $1bn dollar increase in value. Even assuming that’s all profit, 5% of that would still only be $50m dollars. That’s a lot of money, but only one-eighth of the construction costs paid by taxpayers. And much less than the billion paid over time on bonds.
To make matters worse, Miami taxpayers may not even see that $50m dollars. Or even a single dollar from the team’s sale. MLB claims the Marlins are a “money-losing” franchise and the profit sharing clause in the contract allows Loria to deduct “debt, certain expenses, and taxes tied to a sale.” Thus, his attorneys told Miami-Dade County he would not be sharing anything. They claim there was no profit. The County has responded by suing, and the case is winding through the courts.
Thus, the era of sports teams bullying communities into paying for stadiums while they keep the profits appears at a crossroads: legislation and savvy negotiations means local governments are pushing back. The tide hasn’t turned, but Columbus, Miami and Washington are taking steps in the right direction. Hopefully others will follow suit.
The Irresponsibility of Fiscal Responsibility
Monday, April 23, 2018
By Dean Baker, Truthout | Op-Ed
It's official: New York Times columnist David Leonhardt pronounced the Democrats as the party of fiscal responsibility. In contrast to three of the last four Republican presidents who raised deficits with big tax cuts for the rich and increases in military spending, the last Democratic presidents sharply reduced the budget deficit during their term in office.
Leonhardt obviously intends the designation to be praise for the party, but it really shows his confusion about budget deficits and their impact on the economy. Unfortunately, this confusion is widely shared.
Contrary to what Leonhardt seems to think, the economy doesn't get a gold star for a balanced budget or lower deficit. In fact, lower deficits can inflict devastating damage on the economy by reducing demand, leading to millions of workers needlessly unemployed.
This has a permanent cost as many of the long-term unemployed may lose their attachment to the labor market and never work again. Their children will also pay a big price as children of unemployed parent(s) tend to fare worse in life by a wide variety of measures, especially when unemployment is associated with family breakup, frequent moves and possible evictions. Also, lower levels of output will mean less investment, making the economy less productive in the future.
We actually have some basis for estimating the cost of long periods where the economy suffers from insufficient demand. If we compare the Congressional Budget Office's (CBO) projections for potential GDP in 2018 made before the Great Recession, with their current projections, the gap is more than $2 trillion, or 10 percent of GDP.
That loss comes to more than $15,000 a year for every household in the country. In other words, the CBO's projections imply that if we had managed to sustain high levels of demand in 2008 and subsequent years, rather than falling into a severe recession with a weak recovery, the annual income of the average household would be $15,000 a year higher.
Perhaps the CBO didn't know what it was talking about when it made these projections back in 2008. (Of course, we are now supposed to take the CBO's projections of deficits and interest burdens as sanctified, but maybe they have gotten much smarter in the last decade.) Let's suppose that if we had managed to avoid the recession and maintain high levels of output, potential GDP would be just 5 percent higher today, half as much as the CBO had projected back in 2008.
In that case, the loss from too much fiscal responsibility (deficits that were too small) would be $1 trillion a year or $7,500 per household. That dwarfs the amount at stake in most of the policies we debate. For example, the International Trade Commission projected that the Trans-Pacific Partnership would generate gains of just 0.23 percent of GDP after 15 years, when its benefits were fully realized.
It would be difficult to get an accurate measure of the full costs caused by the weak recovery from the recession; both in terms of lost output at the time, and the permanent damage to the economy and people's lives, but there can be little doubt that it is enormous. Nonetheless, the proponents of fiscal responsibility, who are largely responsible for these costs, continue to be treated as paragons of virtue. After all, we are supposed to want balanced budgets or at least small deficits, right?
Economic policy will continue to suffer as long as the loudest voices in the debate have no understanding of how the economy works. Deficits can undoubtedly be harmful. When the economy is reaching its limits, as indicated by a shortage of workers or other inputs and rapidly rising wages and prices, a higher deficit will make this problem worse.
But we have not reached this point yet, and honest people who understand the economy will acknowledge that we don't know how close we are to this point. In that context, why should we think there is any big problem with a larger deficit. This does not mean we want to give more tax breaks to rich people and have useless or even harmful military spending.
Regarding the interest burden of the debt, it remains below the 1990s level when measured as a share of GDP. That is likely to be the case for many years to come under plausible scenarios.
Furthermore, the burden of interest on the debt is enveloped by the burden the government created by its grants of patent and copyright monopoly. These cost us almost $400 billion a year (2 percent of GDP) in higher prescription drug prices alone. And, if you don't understand how the burden from government-granted patent and copyright monopolies are like the burden of debt, it's time you do your homework.
Leonhardt obviously intends the designation to be praise for the party, but it really shows his confusion about budget deficits and their impact on the economy. Unfortunately, this confusion is widely shared.
Contrary to what Leonhardt seems to think, the economy doesn't get a gold star for a balanced budget or lower deficit. In fact, lower deficits can inflict devastating damage on the economy by reducing demand, leading to millions of workers needlessly unemployed.
This has a permanent cost as many of the long-term unemployed may lose their attachment to the labor market and never work again. Their children will also pay a big price as children of unemployed parent(s) tend to fare worse in life by a wide variety of measures, especially when unemployment is associated with family breakup, frequent moves and possible evictions. Also, lower levels of output will mean less investment, making the economy less productive in the future.
We actually have some basis for estimating the cost of long periods where the economy suffers from insufficient demand. If we compare the Congressional Budget Office's (CBO) projections for potential GDP in 2018 made before the Great Recession, with their current projections, the gap is more than $2 trillion, or 10 percent of GDP.
That loss comes to more than $15,000 a year for every household in the country. In other words, the CBO's projections imply that if we had managed to sustain high levels of demand in 2008 and subsequent years, rather than falling into a severe recession with a weak recovery, the annual income of the average household would be $15,000 a year higher.
Perhaps the CBO didn't know what it was talking about when it made these projections back in 2008. (Of course, we are now supposed to take the CBO's projections of deficits and interest burdens as sanctified, but maybe they have gotten much smarter in the last decade.) Let's suppose that if we had managed to avoid the recession and maintain high levels of output, potential GDP would be just 5 percent higher today, half as much as the CBO had projected back in 2008.
In that case, the loss from too much fiscal responsibility (deficits that were too small) would be $1 trillion a year or $7,500 per household. That dwarfs the amount at stake in most of the policies we debate. For example, the International Trade Commission projected that the Trans-Pacific Partnership would generate gains of just 0.23 percent of GDP after 15 years, when its benefits were fully realized.
It would be difficult to get an accurate measure of the full costs caused by the weak recovery from the recession; both in terms of lost output at the time, and the permanent damage to the economy and people's lives, but there can be little doubt that it is enormous. Nonetheless, the proponents of fiscal responsibility, who are largely responsible for these costs, continue to be treated as paragons of virtue. After all, we are supposed to want balanced budgets or at least small deficits, right?
Economic policy will continue to suffer as long as the loudest voices in the debate have no understanding of how the economy works. Deficits can undoubtedly be harmful. When the economy is reaching its limits, as indicated by a shortage of workers or other inputs and rapidly rising wages and prices, a higher deficit will make this problem worse.
But we have not reached this point yet, and honest people who understand the economy will acknowledge that we don't know how close we are to this point. In that context, why should we think there is any big problem with a larger deficit. This does not mean we want to give more tax breaks to rich people and have useless or even harmful military spending.
Regarding the interest burden of the debt, it remains below the 1990s level when measured as a share of GDP. That is likely to be the case for many years to come under plausible scenarios.
Furthermore, the burden of interest on the debt is enveloped by the burden the government created by its grants of patent and copyright monopoly. These cost us almost $400 billion a year (2 percent of GDP) in higher prescription drug prices alone. And, if you don't understand how the burden from government-granted patent and copyright monopolies are like the burden of debt, it's time you do your homework.
'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.”[...]