HBR blogs: Western malaise spawns extremist parties

Mr. Haque at Harvard Business Review offers us as good a summary as any of the Western economic malaise [emphasis mine]:

While the super-rich are vastly disproportionately enjoying the fruits of global prosperity, too many are being left behind. What is common in societies with extremists on the rise? The poor and the middle feel cheated — because they are. In the sterile parlance of economics, their wages aren’t comparable to their productivity — but more deeply, their lives are literally not valued in this system. And so they turn, in anger and frustration and resignation, to those who promise them more.

In all these societies, social contracts prize growth over real human development. Economies “grow”; but the benefits of growth are enjoyed vastly disproportionately by a small coterie of people — usually those politically connected; at the very top of a socially constrained pecking order; a caste society. We are told this is capitalism; in fact, it’s a perversion of free markets I call “growthism.”

Indeed, we were never meant to worship at the altar of GDP, the DOW or Nasdaq as real indicators of people's well-being.  

And as I've remarked before, U.S. workers are the most productive in the world; meanwhile, U.S. labor practices are among the most efficient (meaning, hands-off) -- 4th in the 2013-14 WEF rankings -- in the globalized economy. So why do U.S. workers feel so insecure and put-upon?  

As before, John Maynard Keynes foresaw this and pointed the way [emphasis mine]:

Yet, today, the situation Keynes foresaw is repeating itself — only more subtly. The problem today isn’t a small number of creditor nations, to whom the vast benefits of global wealth are flowing. It is a small number of super rich individuals: oligarchs, monopolists, scions. In a sense, the same problem, of vast, unjust imbalances, has reemerged; this time beyond national boundaries. Today, the super-rich and their empires span multiple nation-states; whisked from home to home and country to country by private transport, they use different infrastructure (who cares if roads and airports are crumbling when you’ve got a helipad?), play by different rules (do tax laws really matter if your assets are all offshore?), and even different methods of wielding political influence (why knock on doors when you can fund your own super-PAC?).

Here's how Haque sums it up:

The paradox of prosperity is this. It is at times of little that we must plant the seeds of plenty; not fight another for handfuls of dust. And it is at times of plenty when we must harvest our fields; and give generously to all those who enjoy the singular privilege of the miracle we call life.

(Nope, extremists; that’s not communism — not government redistribution of dust. It is, as Keynes foresaw, just common sense).

Once again I tip my hat to Keynes, a giant among men.

Our Economic Malaise Is Fueling Political Extremism

By Umair Haque

June 5, 2014 | HBR Blog Network

URL: http://blogs.hbr.org/2014/06/our-economic-malaise-is-fueling-political-extremism/

Reich: 2013 saw huge wealth redistribution

Trickle-down economic theory vs. trickle-up economic fact.

I can't say it any better than this. Read the whole thing and get back to me with any questions!

The Year of the Great Redistribution

By Robert Reich

January 5, 2014 | Huffington Post

One of the worst epithets that can be leveled at a politician these days is to call him a "redistributionist." Yet 2013 marked one of the biggest redistributions in recent American history. It was a redistribution upward, from average working people to the owners of America.

The stock market ended 2013 at an all-time high -- giving stockholders their biggest annual gain in almost two decades. Most Americans didn't share in those gains, however, because most people haven't been able to save enough to invest in the stock market. More than two-thirds of Americans live from paycheck to paycheck.

Even if you include the value of IRA's, most shares of stock are owned by the very wealthy. The richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent. So in the bull market of 2013, America's rich hit the jackpot.

What does this have to do with redistribution? Some might argue the stock market is just a giant casino. Since it's owned mostly by the wealthy, a rise in stock prices simply reflects a transfer of wealth from some of the rich (who cashed in their shares too early) to others of the rich (who bought shares early enough and held on to them long enough to reap the big gains).

But this neglects the fact that stock prices track corporate profits. The relationship isn't exact, and price-earnings ratios move up and down in the short term. Yet over the slightly longer term, share prices do correlate with profits. And 2013 was a banner year for profits.

Where did those profits come from? Here's where redistribution comes in. American corporations didn't make most of their money from increased sales (although their foreign sales did increase). They made their big bucks mostly by reducing their costs -- especially their biggest single cost: wages.

They push wages down because most workers no longer have any bargaining power when it comes to determining pay. The continuing high rate of unemployment -- including a record number of long-term jobless, and a large number who have given up looking for work altogether -- has allowed employers to set the terms.

For years, the bargaining power of American workers has also been eroding due to ever-more efficient means of outsourcing abroad, new computer software that can replace almost any routine job, and an ongoing shift of full-time to part-time and contract work. And unions have been decimated. In the 1950s, over a third of private-sector workers were members of labor unions. Now, fewer than 7 percent are unionized.

All this helps explain why corporate profits have been increasing throughout this recovery (they grew over 18 percent in 2013 alone) while wages have been dropping. Corporate earnings now represent the largest share of the gross domestic product -- and wages the smallest share of GDP -- than at any time since records have been kept.

Hence, the Great Redistribution.

Some might say this doesn't really amount to a "redistribution" as we normally define that term, because government isn't redistributing anything. By this view, the declining wages, higher profits, and the surging bull market simply reflect the workings of the free market.

But this overlooks the fact that government sets the rules of the game. Federal and state budgets have been cut, for example -- thereby reducing overall demand and keeping unemployment higher than otherwise. Congress has repeatedly rejected tax incentives designed to encourage more hiring. States have adopted "right-to-work" laws that undercut unions. And so on.

If all this weren't enough, the tax system is rigged in favor of the owners of wealth, and against people whose income comes from wages. Wealth is taxed at a lower rate than labor.

Capital gains, dividends, and debt all get favorable treatment in the tax code - which is why Mitt Romney, Warren Buffet, and other billionaires and multimillionaires continue to pay around 12 percent of their income in taxes each year, while most of the rest of us pay at least twice that rate.

Among the biggest winners are top executives and Wall Street traders whose year-end bonuses are tied to the stock market, and hedge-fund and private-equity managers whose special "carried interest" tax loophole allows their income to be treated as capital gains. The wild bull market of 2013 has given them all fabulous after-tax windfalls.

America has been redistributing upward for some time -- after all, "trickle-down" economics turned out to be trickle up -- but we outdid ourselves in 2013. At a time of record inequality and decreasing mobility, America conducted a Great Redistribution upward.

MB360: FIRE sector is back, big time

MB360 gives us great stats to illustrate starkly the so-called financialization of the U.S. economy: 

In 1947, the FIRE side of the economy made up roughly 10 percent of GDP. Today it is 21 percent.  On the other hand manufacturing in 1947 made up 25 percent of GDP while today it is closer to 11 percent.

Near-zero interest rates by the Fed and TBTF bank bailouts are direct federal government aid to the FIRE sector.  It's called socializing risk and privatizing rewards.  

Meanwhile, bizzaro conservatives assure us that if only Americans would stop being so lazy and collecting food stamps, then our economy would turn around. [Facepalm].  Foks, this is government-sponsored upward redistribution of wealth.  

If only the Tea Parties would brandish their pitchforks over the real redistribution problem in America!

Long live the reemergence of the FIRE economy: Over the last decade GDP is up $5.2 trillion while the total credit market debt owed is up $24.5 trillion.

Posted by mybudget360 

August 27, 2013

The current economy is juiced on the rivers of easy debt.  An addiction that is only getting worse.  Want to go to college?  You’ll very likely go into deep student debt given the rise in college tuition.  Want a home?  Prices are soaring because of speculation but you’ll need a bigger mortgage to buy.  Want a modest car? A basic new car that has four wheels will likely cost $20,000 after taxes after fees are included.  Need gas for that car?  The price of a gallon has quadrupled since 2000.  Combine this with the reality that half of Americans are living paycheck to paycheck and you can understand why the debt markets continue to grow at an unrelenting pace.  Here is some food for thought; in the last 10 years, GDP has gone up $5.2 trillion however, the total credit market has gone up by $24.5 trillion.  An increasingly large part of our economic growth is coming from massive leverage.  This is why the market sits fixated on the Fed’s next move regarding interest rates even though in context, rates are already tantalizingly low.  The FIRE economy is driving a large portion of corporate profits yet most Americans are left in the cold winds of austerity.

GDP being driven by FIRE

More and more of our growth is coming from a massive expansion of debt:

The total credit market is now roughly 4 times the size of our annual GDP (inching closer to $60 trillion in the US).  While some think that this growth is natural and easy, in reality most of it is coming from growth in the financial services side of the economy.  The banking system is currently operating in a way that really does not benefit the typical Americans family.  Take a look at two employment sectors over the last few years:

In 1947, the FIRE side of the economy made up roughly 10 percent of GDP.  Today it is 21 percent.  On the other hand manufacturing in 1947 made up 25 percent of GDP while today it is closer to 11 percent.  It comes as no surprise especially as we now see big banks and hedge funds crowding out the real estate trade.  Prices in real estate continue to rise at levels last seen during the bubble yet the homeownership rate continues to fall.  We keep adding more and more Americans as “non-workers” and then wonder why we have 47 million on food stamps:

The number of Americans not in the labor force is booming because of demographics but also because people are dropping out of the workforce.  This certainly doesn’t coincide with some of the data being produced from other channels.

The reason why most Americans are not feeling the recovery trickle down to them is that the FIRE side of the economy is capturing a large share of the profits (more fuel for the growing income inequality trend).  Just take a look at how much of the recent growth has come courtesy of financial engineering:

Corporate profits as a percent of GDP are at generation high levels.  Yet GDP growth is weak (especially if you consider how much growth is coming from FIRE activity).  This is reflected in stagnant household income growth and the reality that wealth continues to shift into the hands of a very few Americans.

Redoing the last bubble

The problem with all of this is that we are simply redoing the last bubble.  This is a similar variation of our last bubble (i.e., financial sector deep into speculation, quickly rising real estate, no income growth, leveraging on debt, etc).  The finance and real estate side of the economy is driving profits and speculation, yet we see that for most Americans, the gains are simply not there.  This is just part of the financialization of our current system.  It is odd that big banks and firms are so interested in rental real estate yet they can extract money from Americans via this measure because the Fed is basically offering zero percent rates to member banks.  In other words, it is a riskless trade so why not grab all the real assets you can while the Fed continues to devalue the purchasing power of Americans?

The FIRE economy is back in a big way.  Of course you shouldn’t be surprised that this isn’t helping most Americans prosper.

Eskrow: Where did U.S. wages go?

Here's Eskrow's key observation, one that you cannot even make nowadays in America without being accused of a socialist bent [emphasis mine]:

We don't have a problem of inadequate wealth. The problem is inadequate wealth distribution. For 99 percent of Americans, wage growth has lagged significantly behind increases in productivity. As the authors [of the briefing paper "A Decade of Flat Wages"] note, this is true "regardless of occupation, gender, race/ethnicity, or education level." Since the Great Recession productivity has grown by 7.7 percent, while wages have actually fallen for the bottom 70 percent of earners.

[...] Between 2001 and 2012 productivity grew by 22.2 percent, while wages grew only 0.8 percent. 

My Republican friends, take special note of the phrase, "...regardless of occupation, gender, race/ethnicity or education level."  This phrase should stifle your knee-jerk reactions to blame those other people for America's economic woes.

So the facts are indisputable.  The question is: what are the causes? Eskrow points out a few:

A companion report from EPI, The State of Working America, 12th Edition, identifies some of the causes: Growing inequality. Policy inaction which eroded the value of the minimum wage. The weakening of employees' rights. Tax policy. Wall Street deregulation.

Other factors are left unmentioned, including problems in corporate governance and the distorting effect of changing executive compensation on corporate management practices.

Eskrow also blames another cause: "centrist" Democrats, aka 1990s-era Republicans who today call themselves Democrats: 

The word "centrist" is placed in quotation marks because polls show that their economic views are to the right of the American mainstream. On issues such as corporate taxation, Social Security benefits, and free trade, they stand to the right of most Americans -- and sometimes to the right of most registered Republicans.

Forget Republicans in Congress, they're nuts.  We need Democrats to be Democrats again, grow a spine, or get out of office.

Where Have America's Wages Gone?

By Richard (RJ) Eskrow

August 28, 2013 | Huffington Post

URL: http://huff.to/1ds6Asl

U.S. tax system targets workers

Everybody in America -- but especially anti-tax conservatives -- needs to read and understand this:

To sum up: The overall rate for wealth-based taxes has been decreasing while the overall rate for labor-based taxes has been increasing. At the same time, the potential base for labor-based taxes is migrating to the wealth-based tax side. And an ever-increasing portion of that potential base for wealth-based taxes faces no tax at all.

Lord and Pizzigati also note what I've been saying for a while now, that redistribution of wealth is alive and well in America -- but from the bottom-up, from workers to shareholders and managers -- not from the rich down to lazy welfare moochers:

Here's how. Until around 1980, wages kept pace with gains in productivity. Since then, productivity has continued to increase while wages have stagnated. The result? The allocation of income between labor and wealth has shifted, with more dollars going toward higher corporate profits, dividends and capital gains than toward wages. Tax rates are shrinking for booming profits, while rising for shrinking wages.

A tax system that targets workers

By Bob Lord and Sam Pizzigati

June 20, 2013 | Los Angeles Times

Imagine a society with two tax systems. One taxes the wealth people have accumulated. The other taxes the labor people perform. This society seems to be getting along well enough, raising enough tax revenue to finance the public goods and services that voters have told lawmakers they want to see supported.

Now imagine that lawmakers have decided to cut the tax rates on wealth and raise them on labor. At the same time, the amount of wealth subject to the lower tax rates is rising as income from labor is shrinking.

That society, we would agree, is asking for trouble. In real life, would any society choose to take such an unsustainable course? One already has — the United States since 1980.

In America today, virtually all the taxes that local, state and federal governments levy can be classified as either wealth-based or labor-based.

The wealth-based taxes include the state and local property taxes we pay on an annual basis and the one-time taxes on large inheritances and estates. Wealth-based taxes also include taxes on the income people get from holding wealth — dividends and interest, for instance — and the capital gains income from buying and selling assets. Throw in the corporate income tax here, too.

Labor-based taxes obviously cover the levies paid on the income we earn from the work we do. These include personal income taxes and the payroll taxes that fund Social Security and Medicare.

These labor-based taxes also include the more difficult to categorize sales and sin taxes. The lion's share of the revenue raised from these taxes, we would argue, comes from people spending their labor-based income on basic living expenses or, in the case of sin taxes, on cigarettes and alcohol.

What has happened to the rates in these two tax systems?

Over the last three decades, the rates for wealth-based taxes have been plummeting.  In 2011, the effective corporate income tax rate dropped to a 40-year low of 12.1%. The top federal estate tax rate has sunk from 70% to 40% since 1981. Estate-tax avoidance strategies have brought the actual rate paid on large estates down to less than half that. Many states have abandoned the state inheritance tax altogether.

The tax rate on capital gains did recently increase at the federal level, but the long-term trend has been downward, and the rate of tax on dividends has fallen dramatically, from 70% in 1980 to 20% today. Finally, beginning with the passage of California's Proposition 13 in 1978, average property tax rates nationwide have declined sharply.

Meanwhile, the rates for labor-based taxes, taken together, have increased.  Average Americans do pay federal income taxes at a slightly lower rate than 30 years ago. But the effective payroll tax rate has increased sharply, as the ceiling on wages subject to Social Security taxes has risen and the ceiling on wages subject to Medicare taxes has been removed entirely.

On top of that, sales taxes have also increased steadily, as have sin taxes.

The two tax systems, however, don't operate on a totally separate basis. The money that makes up the base in one system can migrate to the other. Over the last three decades or so, the available tax base from our labor-based tax system has been migrating to the wealth-based tax system.

Here's how. Until around 1980, wages kept pace with gains in productivity. Since then, productivity has continued to increase while wages have stagnated. The result? The allocation of income between labor and wealth has shifted, with more dollars going toward higher corporate profits, dividends and capital gains than toward wages. Tax rates are shrinking for booming profits, while rising for shrinking wages.

But that's not the worst of it. Tax rates in the wealth-based tax system aren't just decreasing. An increasingly higher share of the dollars in that system escape taxation entirely.

This growing exempt pool of wealth includes pension plans, IRAs, 401(k) plans, life insurance and annuity policies, municipal bond portfolios and funds held offshore. Most of this wealth sits in the portfolios of the richest families. Over recent decades, this tax-exempt chunk of American wealth has grown faster than our aggregate wealth — about $20 trillion, not including what may be as much as $10 trillion in wealth parked in offshore tax havens.

In the estate tax arena, it's the same dynamic. The exemption from estate tax has swelled. In 1981, the first $175,625 of the estate an affluent American left behind faced no estate tax. Today, the first $5,250,000 is exempt. And with the help of a decent estate planner, that exemption can be leveraged into a much higher number.

To sum up: The overall rate for wealth-based taxes has been decreasing while the overall rate for labor-based taxes has been increasing.  At the same time, the potential base for labor-based taxes is migrating to the wealth-based tax side.  And an ever-increasing portion of that potential base for wealth-based taxes faces no tax at all.

This is unsustainable.

Racist joke shows whites' real beef with 'welfare'

Pardon me for forwarding the ugly "joke" below that was forwarded to me by an old Tea Partyer, but it's a clear admission by white conservatives what their real beef is with "welfare" and a teachable moment for the rest of us: they really believe these federal programs are deliberate wealth redistribution from hardworking whites to lazy blacks.  (Or to "lazy brown-skinned people who speak gibberish, hate work and wipe their asses with American flags," to quote a true genius.)

In his recent op-ed "Why white America thinks ‘too much welfare’ is a black thing," Dr. Jason Johnson sums it up pretty well:

First, most social science research shows that to white Americans welfare automatically conjures up images of lazy promiscuous black women in the inner city, popping out babies like rabbits and turning government cheese vouchers into gold chains and plasma screen televisions.

Consequently for many Americans any question about welfare and the economy is really a question about race. This is not new, but in fact a longstanding narrative in American politics where during times of economic stress business and political elites have ‘protected’ the majority of whites from swallowing the harsh realities of American economics with a sugary dose of racial distraction.

The actual facts about welfare have always been pretty clear; whites and children are the greatest recipients and beneficiaries of various programs, but that’s not good fodder for talk radio.  From the beginning of government sponsored welfare programs, discriminatory policies were enacted to keep blacks off the rolls (like excluding farm workers and domestics in the 1950’s) and even once those policies were removed media and politicians, especially on the right, insisted on maintaining the myth that the face of poverty in America was a black thing.

In fact the racist joke below was told by Arkansas Tea Party leader Inge Marler at at an Ozark Tea Party rally in June 2012, although perhaps it's been around even longer.  The TP crowd loved it.  

---

From:
To:
Subject: Fw: Racism Explained
Date: Tue, 18 Jun 2013 19:15:53 -0400

Subject: Racism Explained

RACISM EXPLAINED

A black kid asks his mother, "Mama, what's a Democracy?" 

"Well, son, that's when white folks work every day so we can get all our benefits, you knows, like free cell phones, rent subsidy, food stamps, welfare, school breakfasts and lunches, free healthcare, utility subsidy, & the list goes on & on, you knows."

"But mama, don't the white people get pissed off about all that?

"Sure they do, son, and that's called racism." 

Sanders: Don't accept the 'new normal'

Too bad Bernie's retiring.  He'll be difficult to replace:  

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

The United States Congress and the president must begin listening to the American people. While there clearly has been some improvement in the economy over the last five years, much more needs to be done. We need a major jobs program which puts millions back to work rebuilding our crumbling infrastructure. We need to tackle the planetary crisis of global warming by creating jobs transforming our energy system away from fossil fuels and into energy efficiency and sustainable energy.

We need to end the scandal of one of four corporations paying nothing in federal taxes while we balance the budget on the backs of the elderly, the children, the sick and the poor.

What we have now is upwards wealth redistribution, from the pockets of workers to the corporate managers and stockholders.  Then these same people tell us we need to balance our federal budget.  They should be run out of town with torches and pitchforks!

We must not accept this economic 'new normal'

By Senator Bernie Sanders

June 2, 2013 | Guardian

URL: http://gu.com/p/3g9f3

The morality of capitalism v. redistribution

Where to begin with the question "Is capitalism moral"? Let's start with the title. Kind of a loaded question. Anyway let's be precise. Pearlstein is really discussing political economy, i.e. how our laws and governance influence commerce and the general welfare. Pearlstein means to debate the role that government should play in the economy. 

To start, Pearlstein correctly notes that, "For most of the past 30 years, the world has been moving in the direction of markets," and yet increasingly over that same period we have "stagnant incomes, gaping inequality, a string of crippling financial crises and 20-somethings still living in their parents’ basements."

Thus Republicans have pivoted, Pearlstein says, to focusing on capitalism's moral superiority because they certainly can't make a prima facie case for capitalism's benefits. Unfortunately, Pearlstein takes their bait and tries to analyze, more or less objectively, which side -- the "free-market capitalists" or the "redistributionists" -- is indeed morally superior, and the flaws with each.

The truth, as with most things, is muddled and complicated.  But I want to lay down a few markers. First, very few liberals/progressives/Democrats insist on having this "moral" debate. Why? Because we liberals are outcome-based. By contrast, conservatives and free-marketeers believe that one's moral principles should determine the rules of the game, and if one's moral principles are sound, then ipso facto, the results will take care of themselves. More precisely, conservatives believe that economic results are morality-free; only our political economics must be morally sound.

Let's admit though that his whole debate has been predicated by recent shitty economic outcomes. For a liberal, a more appropriate question would be to ask: whose political economy is the most responsible for the shitty state of today's economy?  True liberals would be even more precise: what specific policies have led us to these terrible outcomes? Conservatives would obviously like to dodge this question, and instead talk in philosophical or moral abstractions, parables and anecdotes, because the facts -- the results -- of their 30 years of neo-liberal rule do not support the morality of their political economy.

Second marker: to quote Paul Rosenberg: "economics used to be called 'political economy', because the great classical economists never lost sight of the fact that economics was a thoroughly political activity, not something outside of the life of a political community." In other words, economics never, ever, ever happens in a political vacuum. Thus, the notion that, in some ideal country, the free-market capitalism of Adam Smith hums and churns along for the betterment of all, unfettered by and independent of government, is naive and silly. Government has a role to play, it sets the rules of the economic game, we all know that.  To what extent government is involved is a matter of degrees. 

Again, liberals believe that government's role should be evidence- or outcomes-based, i.e. tweaked according to the outcomes achieved, whereas conservatives believe that outcomes, like people, should take care of themselves. What's important for them is to set up a system of rigid, unchanging moral conditions under which people operate.

Third marker: noting the terrible results of recent deregulation, privatization-outsourcing and tax cutting is not the same as saying "capitalism is bad." Conservatives and perhaps Pearlstein would like to provoke us liberals into saying that. It's not necessary, or rather, it's an academic argument rather than a real one, since we have not had a "free-market" system for a very long time, if ever. Indeed the U.S. Government has been "meddling" in the economy for a very long time, just in different ways and to varying degrees. 

The recent political-economic bag is mixed: just as union membership has been plummeting, charter schools have been blooming, taxes on the One Percent were being cut, and regulations on Too Big To Fail banks were being torn down, so was USG spending on the military-industrial complex going through the roof (Afghanistan, Iraq, and the Department of Homeland Security apparatus), not to mention Dubya's tremendous addition to the Medicare entitlement -- altogether resulting in a 91 percent increase in our national debt from 2002-2009. 

To be sure, we also had the Great Recession from 2007-2009 that is almost entirely to blame for our persistently high unemployment and deficits since then. This begs the question: what political-economic philosophy was more responsible for the Great Recession? Because we wouldn't be having this discussion right now if it weren't for the Great Recession. You could skip all the junk I wrote above and below, and if you answer this one question correctly, then you are nearly at the truth....

But anyway, back to Pearlstein. He critiques liberals because "they have yet to articulate the moral principles with which to determine how far the evening-up [redistribution] should go -- not just with education but with child care, health care, nutrition, after-school and summer programs, training, and a host of other social services."  There are two big problems with where Pearlstein is going with this.

First, his critique is simply untrue. Liberals have laid out their moral principles, most eloquently in President Roosevelt's 1941 "Four Freedoms" speech that included the "freedom from want," and then in President Johnson's "Great Society" initiatives in the 1960s.  

In fact, our moral calculus is much easier to understand than conservatives'. We believe that, in the richest, most powerful nation in the history of the world, nobody should go hungry, uneducated or without health care. Furthermore, we believe that our nation's children, elderly and disabled deserve special care and protection, including additional food, medical and housing assistance. This is pretty easy to understand, and to verify. Can a child perform well in school relative to his peers? Does a person go hungry or malnourished? Does a child have a roof over his head? And so on. Depending on the answer, we have a moral obligation to do something. It couldn't be easier to understand.

Second problem: Pearlstein asks liberals to lay out: 1) our moral principles [check]; but also, unfairly, 2) a formula for government redistribution that is clear and will work forever and ever, amen. That's just childishly naive, I'm sorry. Pearlstein needs to get real. First, he ignores political reality that demands compromise. Nobody gets his way all the time, 100%. And let's just remind ourselves why this matters: if tomorrow President Obama would say that a "fair share" of taxes on the One Percent was, say, 30 percent, then this would be all anybody could talk about. Conservatives and their armies in think tanks, cable and talk radio would parse and mince it to death for weeks and months. When in fact it's all relative; and liberals don't care what the number is, as long as it generates sufficient revenues and ensures economic growth. (But historically, until the 1980s, the top marginal rate didn't fall below 70%).  At the end of his essay, Pearlstein admits as much:

Moral philosophers since Adam Smith have understood that free-market economies are not theoretical constructs -- they are embedded in different political, cultural and social contexts that significantly affect how they operate. If there can be no pure free market, then it follows that there cannot be only one neutral or morally correct distribution of market income.

Second, Pearlstein fails to acknowledge that liberals, unlike conservatives, think and act according to feedback loops: from problem/result --> intervention --> result/problem, and so on. Therefore, without observations of actual events, we cannot tell you what will be a fair and equitable taxation rate 5, 10 or 50 years from now, or a fair distribution of wealth. We won't even hazard a guess. 

Such tolerance for uncertainty drives doctrinaire conservatives to conniption. But that's a fundamental difference between us.  Therefore, a real liberal would start with our current and projected expenditures and sources of revenue and go from there; he wouldn't start the analysis with, "Well, it's just plain unfair and immoral for somebody to pay more than x percent of his gross income in taxes."  And besides, if that is my "moral" conviction, then how in the world can we debate that? We'd start at an impasse.

Pearlstein does argue that the distribution of economic rewards will shift over time, but liberals already know this:

[T]he way markets distribute rewards is neither divinely determined nor purely the result of the “invisible hand.” It is determined by laws, regulations, technology, norms of behavior, power relationships, and the ways that labor and financial markets operate and interact. These arrangements change over time and can dramatically affect market outcomes and incomes.

Pearlstein's next critique of liberals is that they "have been able to create a welfare state only by addicting a middle-class majority to government subsidies -- subsidies that now can be financed only by taking more and more money from the rich." 

Do I really need to cite statistics about tax and income inequality and the disappearing U.S. middle class?  If so, read this, this, this, this and this. And don't even get me started about the $29 trillion bank bailouts, that primarily went to save financial markets in which the top One Percent owns 42 percent of all financial wealth, and the top 20 percent owns about 90 percent. The TBTF bank bailouts clearly demonstrate who is really "addicted" to Big Government and to what degree! 

Overall, although Pearlstein leans conservative, he touches on most of the important questions. The main take-aways from our debate are these:

• Pure capitalism (or socialism, for that matter) has never existed anywhere, nor can it;
• We are only worried about rising deficits and redistribution payments because of the Great Recession that in turn resulted from financial deregulation that conservatives support, even to this day;
• Liberals should never feel obligated to justify the morality of their political economy, when if fact we are much clearer on this than conservatives who claim to care about the poor just as much as we do, yet have no idea how to remedy persistent poverty;
• Liberals should not fall into conservatives' trap of naming "ideal" marginal tax rates, debt:GDP ratios, or anything of the kind, because 1) it's unwise tactically, in a political system that demands compromise, and 2) the correct answers will change over time.

A final note on political-economic morality: Pearlstein doesn't mention it but I will: conservatives' economic morality depends on personal pain and suffering. They firmly believe that pain teaches us lessons and can be personally redeeming; therefore, for redistributionist Big Government to deny a person the pain that he "deserves" is to deny him the chance to learn and improve himself.  

There is also a religious conservative variant of this belief: even if one's suffering wasn't caused by one's poor decisions, it may still be part of God's plan for that person; therefore, for redistributionist Big Government to prevent that pain and suffering is to interfere with God's plan for that person. Moreover, government assistance to a suffering person denies true Christians the opportunity to curry favor with God by performing charitable works for that suffering person. 

I hope I don't have to explain how sick and twisted such moral reasoning is, much less why it cannot be the basis for our country's political economy....

Finally, a note on redistribution. I will take the liberty here of quoting myself at length:

[L]et's recall for a minute what the U.S. Government -- any government from the dawn of human civilization -- actually does, in pure basics: it collects taxes from the people how it sees fit, and then spends that money how it wants. It does not, for example, say, "Mr. David Koch, since you contributed 0.01 percent of federal income tax revenues in FY 2011, we are allocating 0.01 percent of the FY 2012 federal budget to you."  

Since our government doesn't do this -- since no government has ever done this, ever -- then by definition, what our government does is redistribute wealth.  Moreover, sooner or later all government spending ends up in private hands -- just not necessarily (and not usually) in the hands that gave it its money in the first place.  If that's not redistribution then I don't know what is.

Is capitalism moral?

By Steven Pearlstein

March 15, 2013 | Washington Post

URL: http://wapo.st/WLTcrp

Video: 92% of Americans agree on ideal wealth distribution!

This video is apparently going viral, so let me jump on the bandwagon.

Seriously though, this is worth watching. Sometimes charts and pictures are way better than blah, blah, blah.

But here's just a little blah-blah:  The top One Percent owns 40 percent of America's wealth and takes in 24 percent of the nation's annual income, while the bottom 80 percent of Americans owns only 7 percent of the nation's wealth. And it's getting worse and more skewed every year.

Wealth Inequality in America

By politizane

November 20, 2012 | YouTube

How Chinese and U.S. labor are alike

And as fellow WaPo columnist E.J. Dionne pointed out: 

... the way Gov. Rick Snyder (R) and the Republican Michigan Legislature rushed right-to-work through a lame-duck session was insidious. The anti-union crowd waited until after the election to pass it. Snyder had avoided taking a stand on right-to-work until just last week, when he miraculously discovered that it would be a first-rate economic development measure. The law was included as part of an appropriations bill to make it much harder for voters to challenge it in a referendum.

As we all know, U.S. wages have been stagnant in real terms since the 1970s. And this freeze in workers' wages corresponds suspiciously to the decline in power of labor unions. Meanwhile, U.S. workers' productivity has gone up considerably, along with stock prices and corporate profits, which hit an all-time high under President Obama. This is the very definition of redistribution of wealth, folks -- from the pockets of workers to managers and shareholders.

The Lansing-Beijing connection

By Harold Myerson

December 11, 2012 | Washington Post

China has a problem: rising inequality. The gap between profits and wages is soaring. Although elements of the government have sought to boost workers’ incomes, they have been thwarted by major companies and banks “that don’t want to give more profit to the country and let the government distribute it,” Qi Jingmei, a research fellow for a government think tank, told the Wall Street Journal.

Of course, if China permitted the establishment of unions, wages would rise. But for fundamentally political reasons — independent unions would undermine the Communist Party’s authority — unions are out of the question.

Meanwhile, the United States also has a problem of a rising gap between profits and wages. The stagnation of wages has become an accepted fact across the political spectrum; conservative columnists such as Michael Gerson and David Brooks have acknowledged that workers’ incomes seem to be stuck.

What conservatives haven’t acknowledged, and what even most liberal commentators fail to appreciate, is how central the collapse of collective bargaining is to American workers’ inability to win themselves a raise. Yes, globalizing and mechanizing jobs has cut into the livelihoods of millions of U.S. workers, but that is far from the whole story. Roughly 100 million of the nation’s 143 million employed workers have jobs that can’t be shipped abroad, that aren’t in competition with steel workers in Sao Paulo or iPod assemblers in Shenzhen. Sales clerks, waiters, librarians and carpenters all utilize technology in their jobs, but not to the point that they’ve become dispensable.

Yet while they can’t be dispensed with, neither can they bargain for a raise. Today fewer than 7 percent of private-sector workers are union members. That figure may shrink a little more with new “right to work” laws in Michigan — the propagandistic term for statutes that allow workers to benefit from union contracts without having to pay union dues.

Defenders of right-to-work laws argue that they improve a state’s economy by creating more jobs. But an exhaustive study by economist Lonnie K. Stevans of Hofstra University found that states that have enacted such laws reported no increase in business start-ups or rates of employment.Wages and personal income are lower in those states than in those without such laws, Stevans concluded, though proprietors’ incomes are higher. In short, right-to-work laws simply redistribute income from workers to owners.

Why, then, are such laws being enacted? The gap between U.S. capital income and labor income hasn’t been this great since before the New Deal; why widen it still more? The answer, in Lansing no less than in Beijing, is political. The Republicans who took control of the Michigan statehouse in 2010 understand that Democrats’ foot soldiers come disproportionately from labor. GOP efforts to reduce labor’s clout help Republicans politically far more than they help any Michigan-based businesses or local governments. (The legislation, which Gov. Rick Snyder (R) signed into law Tuesday evening, establishes right-to-work requirements for the public sector, too.)

Those who doubt that the intent of Michigan’s laws is more political than economic should consider the two kinds of unions exempted from its reach: police and firefighter unions. Their contracts are among the costliest that local governments confront: Police and firefighters generally (and rightly) retire earlier than do other public employees, with relatively generous pension benefits. But in Michigan, police and firefighter unions often endorse Republicans. Shrinking their treasuries and political power by subjecting them to right-to-work strictures would only damage Republicans’ electoral prospects (and may well play poorly to voters).

With Snyder’s signature, Michigan becomes the second state in the once-heavily unionized, industrial Midwest to adopt such a statute; hitherto, such laws had largely been confined to states in the South, the Plains and the Mountain West. The United Auto Workers (UAW) was once the colossus of Michigan politics, but the union’s membership has shrunk to 381,000 — roughly one-quarter of its size 35 years ago — a casualty of globalization and the legal and cultural obstacles the UAW has encountered to organizing new members.

Michigan Republicans have seen a chance to weaken the UAW and labor’s power at election time. Doing so further diminishes the number of workers who can bargain for a raise. It’s nice that conservatives are finally acknowledging that workers’ incomes are stagnating. But workers don’t get raises if they can’t bargain collectively, and all the hand-wringing about our rising rates of inequality will be so much empty rhetoric unless we insist — in Lansing and Beijing — on workers’ right to form powerful unions.

Romney's anti-Obama bombshell goes 'pfffft-sizzle-poof!'

Romney's campaign has obviously been holding back this "bombshell" audio recording of Obama for the right moment, and they decided that now was the time, in light of the campaign-killing secret recording of Romney's remarks to a group of rich private donors in Florida in May.

Here's what Obama said 14 years ago that is supposedly so damning (note that it was edited for "shock effect" on Rush Limbaugh's program, while I'm giving you an unedited excerpt here):

What we’re going to have to do is somehow resuscitate the notion that government action can be effective at all.  There has been a systematic -- I don’t think it’s too strong to call it a propaganda campaign, against the possibility of government action and its efficacy.  [The next few sentences were deleted by Rush for obvious reasons. - J]  And I think some of it has been deserved. The Chicago Housing Authority has not been a good model of good policy-making. And neither necessarily have been the Chicago public schools.  Uh, what that means then, is that as we try to resuscitate this notion that, uh, we're all in this thing together, leave nobody behind, we do have to be innovative in thinking in, how, what are the delivery systems that are actually effective and meet people where they live. Uh, and, and my suggestion, I guess would be, that the trick -- and this is one of the few areas where there I think there are technical issues that have to be dealt with as opposed to just political issues -- I think the trick is figuring out how do we structure government systems that pool resources and hence facilitate some redistribution -- because I actually believe in redistribution -- uh, at least at a certain level to make sure that everybody’s got a shot.

This is indeed a teachable moment, but not for the reason Rush Limbaugh says.  

Context: Obama said this in 1998, when Bill Clinton was our President, presiding over a budget surplus and a booming economy, but just weeks before a hyper-partisan Republican-majority House of Representatives impeached him, and a few months before the Senate acquitted him.  Like today, Republicans back then were attacking the role of government, saying, like they always do, that it cannot do anything right and must be cut to the bone.  Like today, they were hysterical about Clinton's imminent diabolical plans to make the U.S. socialistic, take away our guns, hand over U.S. sovereignty to the UN, appease every country except our allies, you name it.

Irregardless (that's not a word, but I still use it) of the context of Obama's remarks, let's recall for a minute what the U.S. Government -- any government from the dawn of human civilization -- actually does, in pure basics: it collects taxes from the people how it sees fit, and then spends that money how it wants. It does not, for example, say, "Mr. David Koch, since you contributed 0.01 percent of federal income tax revenues in FY 2011, we are allocating 0.01 percent of the FY 2012 federal budget to you."  

Since our government doesn't do this -- since no government has ever done this, ever -- then by definition, what our government does is redistribute wealth.  Because, sooner or later all government spending ends up in private hands -- just not necessarily (and not usually) in the hands that gave it its money in the first place.  If that's not redistribution then I don't know what is.

And let's remember that Big Government is part of the GDP formula that everybody learns in Economics 101:  GDP = private consumption + gross investment + government spending + (exports − imports), or GDP = C + I + G + (X-M).

So let me put hammer a big fat nail in the coffin of the idea that government redistribution is somehow new, or controversial, or evil, or conceived by American Democrats.  In fact, that's pretty much all the government does, for good or ill. Chew on that epiphany, then try to come up with an example to prove me wrong.  I'll be waiting....

(Irregardless, we all know that America has become a Socialistic country after almost four years of Obama. That's just a fact.  We all wear government-issued gray pajamas and march each morning to work in the People's National iPhone Factory to the tune of revolutionary hymns and munch on moldy government cheese and sawdust-fortified bread 3x a day.  Right.)

We Didn't Need a Tape from 1998 to Tell Us Barack Obama is a Socialist!

September 19, 2012 | The Rush Limbaugh Show

URL:  http://www.rushlimbaugh.com/daily/2012/09/19/we_didn_t_need_a_tape_from_1998_to_tell_us_barack_obama_is_a_socialist

America's hidden social welfare state

"Once tax expenditures for social welfare programs are included in social spending figures, the U.S. welfare state is a similar size to those in Europe."

You don't hear about that every day! Here are some details:

"Based on direct spending on social welfare programs as a proportion of the total economy, the U.S. (at 16.2 percent) lags behind every country in Europe except Slovakia, according to data analyzed by the Organization for Economic Cooperation and Development. By contrast, when it comes to tax breaks with a social purpose, the U.S. -- at 2 percent of gross domestic product -- leads the pack."

You also don't hear that those tax expenditures go to the middle class and especially to the rich.

Social Welfare State, American-Style, Means Relief For The Rich

By Dan Froomkin

January 13, 2012 | Huffington Post

URL: http://www.huffingtonpost.com/2012/01/13/american-social-welfare-state-mitt-romney_n_1205357.html

The revenue scam that is NCAA Div. I sports

Some amazing takeaways from these two economic analyses, which I stumbled upon:

Texas which generates on average almost $50 million a year, has seen incredible sustained growth. In 2003, their profit margin was $34.6 million. In the year 2009? $68.8 million!

Amazingly the state of Alabama is at the top for college football revenue, though the state remains generally poor in GDP/GSP related measures.

Unfortunately, this is the sad truth:

In fact 40 teams averaged a loss in money through football over the 7-year period. It's no wonder that some schools are willing to travel into SEC country year in and year out for a hefty payday even though its [sic] another guaranteed loss. 

Women's sports lose money and only men's basketball/football are profitable.

So you could say that NCAA Division I sports are a microcosm of America: a lot of wealth distributed extremely inequitably, but nobody objects because they hope their winning lottery ticket is coming any day, too. Meanwhile, everybody is distracted by televised glam and spectacle and trying to rub elbows with the super rich.

NCAA Div I College Football Expenses and Revenue

By Vipul Lugade

March 24, 2011 | Matlab Geeks

NCAA expenses and revenue across gender and sport

By Vipul Lugade

March 30, 2011 | Matlab Geeks