US inequality statistics have been so startling in recent years that they have almost ceased to shock — but they could undergird America’s next financial crisis. That’s because consumers’ increasing reliance on debt in an environment of stagnant wages is leaving more American families financially insecure, to the point where even minor setbacks can be devastating. A new report from the Economic Policy Institute, a liberal think tank in Washington, highlights just how startling the income gap has become.
It found the average CEO of the 350 largest US firms took home $18.9 million in compensation (including realized stock options), a 17.6% jump from just one year earlier. In contrast, the average worker’s compensation climbed just 0.3%. But here’s the real whopper: The average CEO now makes some 312 times what their average employee makes. That compares with a 20-1 ratio in 1965. “Higher CEO pay does not reflect correspondingly higher output or better firm performance,” EPI said in the report. “Exorbitant CEO pay therefore means that the fruits of economic growth are not going to ordinary workers.”
This matters because policymakers, including top Federal Reserve officials, often blame weak productivity gains for a lack of wage growth. But if CEOs are gobbling up all the benefits of any productivity increases, then workers will have to look elsewhere for raises. “Over the last several decades, CEO pay has grown much faster than profits, the pay of the top 0.1% of wage earners, and the wages of college graduates,” the report says. “CEOs are getting more because of their power to set pay, not because they are more productive or have special talents or more education. If CEOs earned less or were taxed more, there would be no adverse impact on output or employment.”
When Donald Trump ran for president, he promised to be a workers’ champion who would deliver “better wages” for America’s working people. But 18 months into his first term, President Trump has neither pushed Congress to take legislative action to raise the federal minimum wage – which has been stuck at $7.25 for a decade – nor taken executive action to boost pay for 12.5 million workers who work in private sector jobs. As a result, Trump is now CEO of America’s top creator of poverty jobs: the U.S. government. A new study from Good Jobs Nation – Promises Broken #1 – shows that Trump’s federal government funds more than 4.5 million jobs in the private sector that pay less than a living wage of $15 per hour. By failing to take action to raise wages, Trump is responsible for more low-wage jobs than our nation’s largest 20 employers combined, according to our research.
As a result, more than one in three private sector workers who serve the American people – from aiding seniors with their Medicare benefits to helping our troops prepare for combat – earn so little that they rely on food stamps and other public assistance programs to survive. The truth is that Trump could take action right now to deliver “better wages” for these workers. All it would take is the stroke of the pen. As CEO of America, Inc., President Trump oversees the more than $1.5 trillion of federal tax dollars spent in the private sector each year. He could mandate that these taxpayer dollars go to corporations that create good living wage jobs for America’s workers. In 2014, President Obama took the first step by signing an executive order to raise the minimum wage on federal contracts to $10.10 an hour declaring that “as a chief executive, I intend to lead by example.” Trump could build on this precedent and deliver on his promises to boost wages for working people. But Trump has yet to turn his campaign rhetoric into reality. In fact, instead of raising wages for these workers, Trump is using his executive power to do the exact opposite.
So the Trump-GOP inspired tax cuts for the rich go to those who need it the least: personal-savings-rate-
As we approach the 10th anniversary of the collapse of Lehman Brothers on Sep. 15 and the onset of the worst economic calamity since the Great Depression of the 1930s, the Federal Reserve Bank of San Francisco released a new study on the lasting and ongoing impact of that financial and economic disaster. The study found that the so-called “Great Recession” that started in 2008 has cost every single person in the United States $70,000, or, to put it differently, almost $23 trillion in total lost gross domestic product (GDP). The study’s conclusion was that much of that loss is permanent: “Our estimates suggest that the economy is unlikely to regain this large output loss and GDP is unlikely to revert to its previous trend level. Financial market disruptions can have large costs in terms of societal welfare by causing persistent losses in the level of GDP.” While the study divided that $23 trillion cost equally among all Americans, we know that the pain and suffering was not equally distributed among the American public. Tens of millions of middle-class Americans were wiped out, losing their homes, jobs, benefits and retirements and taking on thousands of dollars in debt to make ends meet, paying for their kids’ education and so much more.
Meanwhile, not a single financier or Wall Street executive served any time in jail, personally paid any substantial fine or was held accountable in any meaningful way. In fact, many of the same bankers involved in the recklessness and illegal conduct back then are still working in the financial industry today, some in leadership and supervisory roles and many back to collecting big bonuses. That was not due to a lack of evidence. It sadly reflects the unprecedented power and influence of the financial sector and the unwillingness of prosecutors and regulators to enforce the law without fear of or favor to the wealthy, powerful and well-connected. History will judge this dereliction of duty harshly. Importantly, the San Francisco Fed study is not an outlier. In fact, Better Markets conducted a similar study in 2015, finding that the cost then to the United States was $20 trillion and rising. That study detailed the wide-ranging and ongoing devastation from the crash, including historic levels of unemployment, foreclosures, underwater homes, student loan debt, lost savings, personal debt and bankruptcy, business debt and bankruptcy and much more. But just 10 years later after the worst financial crash since 1929, you would think many of our so-called leaders in Washington have forgotten this entirely. With the Trump administration in the lead, many of them are pushing to weaken, loosen or eliminate the very safeguards put in place after that crash to prevent another one from happening. The amnesia is so severe that it makes one wonder if it’s on purpose.
Crony Capitalism is creating bad policy decisions
I found this next WaPo article especially interesting. It points out the problems with our political system & struggling middle-class stem in large part from political leadership (& even the courts) making decisions favoring large corporate interests, those big money players who maintain an outsized influence in shaping opinions over the political process. That means the interests of the American people have become the lesser priority. Lack of enforcement in antitrust laws is just one of many examples where the big donors have gained undue sway over policy decisions. These excerpts are posted from theworldpost/wp/2018/08/
Corporate concentration in the United States is not only increasing inequality but also undermining competition and consumers’ standard of living. Politically, the commensurate lobbying influence of big tech, big finance and other large conglomerates has created what political scientist Francis Fukuyama calls a “vetocracy” — where vested concerns have amassed the clout to choke off legislative reforms that would diminish their spoils. Why the opposite is happening in the European Union is an unfamiliar tale of how governance one step removed from electoral democracy has been able to resist the lobbying of organized special interests to make policy that benefits the average person.
Active antitrust policies in the second half of the 20th century fairly leveled the playing field of American commerce. “But starting around 2000, U.S. markets began to lose their competitive edge,” Germán Gutiérrez and Thomas Philippon write, based on a new study of theirs. “Now, Internet access and monthly cellphone plans are much cheaper in Europe than in America, as are flights. Even in Mexico, mobile data plans are better priced than in the United States. … Meanwhile in the United States, deregulation and antitrust efforts have nearly ground to a halt. The United States has not completed a major reform to the goods and services market since 1996, and as a result, its industries have grown increasingly concentrated.”
What explains this stunning shift is deliberate policy choices. As the authors relate: “European countries created the single market, which took effect in 1993, and deregulated their domestic markets. Today, most European Union countries score better than the United States in enacting policies that make industries more competitive. Not surprisingly, antitrust enforcement remains active in Europe, with two recent cases against Google resulting in over $7.7 billion in fines. European markets are also less concentrated than U.S. markets.” Gutiérrez and Philippon argue that “free markets are supposed to discipline private companies, but today, many private companies have grown so dominant that they can get away with bad service, high prices and deficient privacy safeguards. … If America wants to lead once more in this realm, it must remember its own history and relearn the lessons it successfully taught the rest of the world.”
Mario Monti — who was Italian prime minister from 2011 to 2013 as well as the E.U. competition commissioner from 1999 to 2004 and is famous for “shooting down mergers in flames” — agrees with Gutiérrez and Philippon. But he adds an important dimension they don’t discuss: how the much-maligned “technocratic” European Commission has been more able than American antitrust authorities to resist undue corporate influence over policy decisions. While antitrust efforts in the United States are highly sensitive to election cycles and outcomes, Monti points out, the European Commission (which is indirectly elected by the European Parliament) operates at arm’s length from politics and can make decisions that are independent from lobbyist pressures on parliaments at both the national and European level. As he put it in a recent interview, “the more far away you are, the less you feel under pressure.”
Making a market that works for the average citizen requires government that acts in the public interest, not at the behest of the largest players in the economy who underwrite the electoral and legislative process. To the extent that elected legislatures are captured by organized special interests, the “vetocracy” can be circumvented either by indirectly elected technocratic authorities or by direct democracy through the citizens’ ballot initiative. The experiences with antitrust and privacy regulation examined in The WorldPost this week suggest that a mixed system that combines disinterested technocrats, elected representatives and direct democracy — each as a check and balance on the other — would be the most intelligent form of governance.
Carrying on this theme of our corporate-controlled DC leadership, another example of American plutocracy at work is found inside the next couple links. Trump’s biggest piece of legislation he raves about basically just illustrates government kowtowing to the wealthy. Despite all the rhetoric we heard to the contrary, the tax bill (tax cuts for the rich) really weren’t meant for the working middle class as promised, but were designed to enrich the fat cats. Sure, they do hire people, but they also tend to suppress wages & smaller competitors. So we’ve evolved into an economy divided by the haves & have-nots. And in the category of I’ll scratch your back if you’ll scratch mine, there is irrefutable evidence that as the tax bill mostly benefited the wealthy, the big donors are returning the favor by filling up GOP campaign coffers. And that money will be used for more distorted political campaign attack ads which are really misleading propaganda taken out of context. Click on most-republicans-have-
Republicans are struggling to make the $1.5 trillion Trump tax cuts a winning issue with voters in the midterm congressional elections, but the cuts are helping the party in another crucial way: unlocking tens of millions of dollars in campaign donations from the wealthy conservatives and corporate interests that benefited handsomely from it. Billionaires and corporations that reaped millions of dollars in tax cuts are pumping some of that windfall into the Congressional Leadership Fund, a “super PAC” closely aligned with Speaker Paul D. Ryan that is flooding the airwaves and front porches of swing congressional districts with increasingly sharp attacks on the Democratic candidates vying to wrest control of the House. Well over a quarter of the group’s donations have come through the American Action Network, a separate legal entity that focuses on issues and does not reveal donors, but that spent heavily to promote the tax cuts before and after President Trump signed them into law late last year.
But party leaders say the passage of the law appeased wealthy donors, who had been frustrated by Republicans’ failure to repeal the Affordable Care Act and had threatened to sit out the 2018 campaign. Now, flush with big checks from a handful of deep-pocketed donors, the Congressional Leadership Fund is serving as the party’s best hope of a defense against an electoral defeat in November. The fund’s executive director, Corry Bliss, who runs both that group and the American Action Network, said that some of his donors did not favor all the provisions of the tax law, but that all of them hailed its passage as the rich fruits of total Republican control of Washington. Had the tax bill failed, Mr. Bliss said, “I think they would have been very disappointed and very deflated.” But Mr. Bliss said that donors were more concerned with seeing results from unified Republican control — especially after the failure to repeal the Affordable Care Act — than specifically with the passage of the tax bill.
Deficits
These tax cuts for the rich are causing the red ink to flow more than ever: gop-tax-cuts-are-opiate-
The president’s Office of Management and Budget — not that there really is a meaningful budget getting actual management — projects that the deficit for fiscal 2019, which begins in six weeks, will be $1.085 trillion. This is while the economy is, according to the economic historian in the Oval Office, “as good as it’s ever been, ever.” Leavening administration euphoria with facts, Yale University’s Robert J. Shiller, writing in the New York Times, notes that since quarterly gross domestic product enumeration began in 1947, there have been 101 quarters with growth at least equal to the 4.1 percent of this year’s second quarter. The fastest — 13.4 percent — was 1950’s fourth quarter, perhaps produced largely by bad news: The Cold War was on, the Korean War had begun in June, and fear of the atomic bomb was rising (New York City installed its first air-raid siren in October), as was (consequently) a home-building boom outside cities and “scare buying” of products that might become scarce during World War III. Today, Shiller says, “it seems likely that people in many countries may be accelerating their purchases — of soybeans, steel and many other commodities — fearing future government intervention in the form of a trade war.” And fearing the probable: higher interest rates.
Another hardy perennial among economic debates concerns the point at which the ratio of debt to GDP suppresses growth. The (sort of) good news — in that it will satisfy intellectual curiosity — is that we are going to find out where that point is: Within a decade, the national debt probably will be 100 percent of GDP and rising. As Irwin M. Stelzer of the Hudson Institute says, “If unlimited borrowing, financed by printing money, were a path to prosperity, then Venezuela and Zimbabwe would be top of the growth tables.” Jerome H. Powell, chairman of the Federal Reserve, says fiscal policy is on an “unsustainable path,” but such warnings are audible wallpaper — there but not noticed. The word “unsustainable” in fiscal rhetoric is akin to “unacceptable” in diplomatic parlance, where it usually refers to a situation soon to be accepted.
A recent International Monetary Fund analysis noted that among advanced economies, only the United States expects an increase in the debt-to-GDP ratio over the next five years. America’s complacency caucus will respond: But among those economies, ours is performing especially well. What, however, if this is significantly an effect of exploding debt? Publicly held U.S. government debt has tripled in a decade. Despite today’s shrill discord between the parties, the political class is more united by class interest than it is divided by ideology. From left to right, this class has a permanent incentive to run enormous deficits — to charge, through taxation, current voters significantly less than the cost of the government goods and services they consume, and saddle future voters with the cost of servicing the resulting debt after the current crop of politicians has left the scene. This crop derives its political philosophy from the musical “Annie”: Tomorrow is always a day away. For normal people, however, the day after tomorrow always arrives.
Can’t afford what we really need
Those tax cuts for the rich took away potential funding sources for urgent needs throughout the country like this: its-high-time-for-a-
MAGA? Really?
Trump’s MAGA message that resonated with blue-collar workers envisions a return to high-paying factory jobs that once formed the bedrock of our prosperous middle class. That’s a bygone era. Maybe we can recreate & bring back some of those jobs, but on a wide scale, we need to employ workers in the high-tech industries of the future: tariffs-wont-help-
Midterms
Nate Silver has these insights on the midterms: the-big-picture-in-
Honesty?
We’re not getting honesty from Trump, who has lied to us more than 4000 times since becoming president. We don’t get honesty from Fox fake news & the rest of the echo, who keep doubling down on Trump’s lies. And what of Rudy saying “truth isn’t truth?”: truth-isnt-truth-is-
Honesty is such a lonely word
Everyone is so untrue
Honesty is hardly ever heard
And mostly what I need from you
(Click on image for full video)
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