Nel's New Day

May 5, 2014

Piketty Highlights U.S. Oligarchy

A study released almost a month ago officially proclaimed the United States as an oligarchy, replete with fraud and wealthy people controlling the country. Since then, Thomas Piketty’s new book, Capital in the 21st Century, has sent shock waves throughout the country, continuing to pit conservatives against progressives.

Piketty has studied income equality since 1991 in both the U.S. and at least 30 other countries. His research shows how the climbing income share of richest U.S. households led to the top one percent taking 22.5 percent of total income, the highest figure since 1928. To Piketty, capital is anything that generates monetary return from real estate to patents and stocks.

In the 1950s, the average CEO salary was 20 times as  much as the typical employee. Last year CEOs made an average of 331 times as their workers. Apple’s Tim Cook made 6,258 times as much the wage of an average Apple employee in 2011.  The next year, Walmart’s CEO made 1,000 times the average Walmart worker. In terms of income generated by work, the level of inequality in the United States is “probably higher than in any other society at any time in the past, anywhere in the world,” Piketty writes.

In the 1950s, the rise of the income tax for the wealthiest to 90 percent and estate taxes to more than 70 percent on the largest land holdings meshed with minimum wages and encouragement of trade unions to produce far less wealth inequality. Spending heavily on infrastructure boosted GDP growth, and firms kept senior executive pay in check. Twenty years later, Ronald Reagan cut government expenditures, decimated the unions, and slashed tax rates on the wealthy. Now the bottom 40 percent is in debt while the top one percent owns more than 35 percent of the nation’s wealth.

Piketty’s solutions anger conservatives. He recommends a tax of over 80 percent on the wealthiest, those with annual incomes over $1 million. This tax would limit the destructive activities of Wall Street traders and investment bankers. He also suggests a one-percent levy on households worth between $1 million and $5 million, increasing the levy to over two percent for greater net worth.

GOP leader Rush Limbaugh referred to the author as “some French socialist, Marxist, communist economist.” Limbaugh missed the part in which Piketty, as a reasonable scholar, pointed out the fallacies of Marxist analysis.  Piketty argues that capitalism does not necessarily reduce inequality, as other economists and even the Pope have already said. The few accumulate capital when growth is slower than the rate of return on capital. The opposite movement results in “dis-accumulating.” Companies can replace workers with machines in times of slower growth, meaning that the owners will acquire a greater share of the income with unequal distribution of that capital.

Conservatives claim that a social safety net compensating workers with tragically low wages allotted by “markets” bolsters their income. This “transfer” system is much less in the United States than in other developed nations. Another conservative response is that redistribution in the U.S. is more difficult because of lower government revenues. If they believe that a better transfer system would help inequality, they need to put more money into the safety net. Nobody on the right, however, is arguing for this solution.

Another conservative argument is that consumption is equal between the bottom and the top fifths of households in the United States. It’s part of the “but they have cellphones” complaint from the right. The spending from the bottom fifth comes from debt, proving that wealth inequality is increasing: the poor go farther into debt, and the rich acquire more wealth. The recent increase in credit car debit comes from unemployment, children, declining home value, and lack of health insurance. The bottom 90 percent can’t save their incomes to establish a net worth.

saving rates comp. wealthy poor

Conservative economists such as Milton Friedman could afford to regard capitalism as an effective way to maintain income equality. Born in 1912, he did much of his work in the Golden Age of income and lived in the top 10 percent of income. The Reagan era built the coffin for a prosperous society. The following chart on shows the shifts in income inequality throughout the last century.

091113inequality-600x466

In the 1990s, President Clinton dropped the regulations on Wall Street, setting in motion the economic disaster excerbated by George W. Bush when he spent like a drunken sailor on wars and drastically reduced taxes for the rich. With almost no control on investment banks or regulations on borrowing, the country lacked resources to save itself from the Great Recession of 2008. The conservatives took over in 2010 and used their philosophy of not spending money to further reduce GDP growth. The solution to Bush’s disaster was increase spending and demand, but conservatives, especially the 2010 crop of Tea Party congressional legislators, depressed demand and thus depressed the recovery.

When the U.S. Supreme Court protects businesses against the rest of the population, they may be following the Constitution. In the early 1900s, historian Charles Beard wrote that the document’s authors wanted to favor wealthy merchants and plantation owners against laborers and small farmers. A primary author of the Constitution, James Madison, believed that government’s main goal is “to protect the minority of the opulent against the majority.” With a philosophy that “the property of landed proprietors would be insecure if elections were open to all classes of people,” he controlled the number of voters to six percent of the U.S. population. The first chief justice of the US Supreme Court, John Jay, believed that “those who own the country ought to govern it.”

The current Roberts court has sided with business 71 percent of the time compared to the 43 percent during the time under former Chief Justice Warren E. Burger between 1981 and 1986 and in 56 percent of cases decided during William Rehnquist’s tenure as chief. Carefully managed elections give voters a choice of candidates chosen by the corporations and the billionaires. Nomi Prins, a former managing partner at Goldman Sachs writes:

“With so much power in the hands of an elite few, America operates more as a plutocracy on behalf of the upper caste than a democracy or a republic. Voters are caught in the crossfire of two political parties vying to run Washington in a manner that benefits the banking caste, regardless of whether a Democrat or Republican is sitting in the Oval.”

The result is the Trans Pacific Partnership, a secretly negotiated trade agreement written by 600 corporate advisers; the attempt to do away with net neutrality and free transmission of data on the internet; and lack of criminal prosecutions for Wall Street regulation violations. Corporations like Monsanto defraud farmers and damage the health of people who suffer from their pesticides and GMOs. The Affordable Care Act, while helping many people, still enriches the insurance industry. The Keystone XL Pipeline comes ever nearer to completion so that wealthy companies can destroy the country’s resources in order to sell oil out of the country. The self-appointed militia is still terrorizing people in Nevada. And every minute the income inequality grows.

With the loss of income inequality comes the loss of rights—freedom of speech, freedom of assembly, voting rights, access to the internet.

May 1, celebrated last week, has many different meanings. It was originally a pagan celebration of spring and then commemorated the working class. In 1884, the Federation of Organized Trades and Labor Unions declared that “eight hours shall constitute a legal day’s labor from and after May 1, 1886.” Employers who refused could be faced with strikes and demonstrations. On that date, over 300,000 workers in 13,000 businesses walked off their jobs.

Frightened by a celebration of labor and bolstered by prejudice, the GOP declared May 1 as “Americanization Day” by 1921. In 1958, Eisenhower named May 1 as “Law Day,” and the Congress then changed “Americanization Day” to “Loyalty Day” when people are to affirm “loyalty to the United States.” The changes were meant to “suppress the celebration of May Day.” Adding to the multitude of “celebrations” this year is that the “National Day of Prayer,” designated on the first Thursday of May, also fell on May 1.

I live in one of the few towns that still celebrates “Loyalty Days” with a royal court, parade, and carnival. Last weekend I looked out my window at heavy wind and rain that may have ruined a bit of the “loyalty” fun and thought about the people who sacrificed their jobs and lives so that the middle class and the poor of the United States could have better lives. They deserved better from their efforts than the condition of the United States today. Thomas Piketty’s book on the growing income equality of the country may bring people closer to the tipping point where they refuse to accept the status quo of oligarchy.

April 17, 2014

Media Fails to Publish News

oregonianI tolerated The Oregonian, Portland’s newspaper, despite its conservative bent because I support newspapers. Founded in 1850, it’s the oldest continuously published newspaper on the West Coast. The newspaper went to delivery only four times a week in city areas and got thinner and thinner. I wondered why I was paying for it, but I’m a newspaper supporter. The last straw was when it switched to a tabloid image—or broadsheet format—with much more colored ink and much less news. [New format on right.]

To show my allegiance to newspapers I’ll keep Eugene’s Register Guard, but most of my news will come from the internet that gives me information that I don’t get anywhere else. Here’s a sample of news that doesn’t appear in my newspaper:

Outsourcing (or offshoring) is the biggest reason for unemployment. In 14 years, U.S. multinational corporations, accounting for 20 percent of the labor force, have cut 2.9 million jobs in this country while increasing overseas employment by 2.4 million. Offshoring is a bigger contributor to unemployment in the U.S. than laziness, the way that the GOP claims.

In 2010, the bottom 80 percent of the people had 12 percent of the net worth, two-thirds of the 18 percent they had in 1983. The top 20 percent had the remaining 88 percent in 2010, and the top 1 percent alone had 35 percent of all net worth.  This map shows the percentage of the United States that people own.

land mass

The corporate-controlled American Legislative Exchange Council (ALEC) drafts laws and passes them to lawmakers to implement. These are some of ALEC’s laws: Stand Your Ground, voter ID, right to work that eliminates unions, health savings account bills to benefit health care companies, and tobacco company privileges.

The United States has more people in prison than any other country. With 5 percent of the world’s population, the U.S. holds 25 percent of the world’s prisoners. China, with a population four times the size of the U.S., has 1.6 million people in prison—700,000 fewer than the 2.3 in the U.S. That’s more than 6 and a half times the 350,00 prisoners in the U.S. 40 years ago

incarcerated_americans_zpsb7c891bd

In 2009, non-Hispanic blacks, 13.6% of the population, accounted for 39.4% of the total prison and jail population. At the same time, whites accounted for 69.2 percent of arrests in 2011.

U.S. health care costs are the highest in the world at $8,233 per person. Norway is second at $5,388. The percentage of GDP is also much higher in the U.S., 17.6 percent in the U.S. with the next country, the Netherlands, at 12 percent.

After the Wall Street crash in 1929, the Glass-Steagall Act protected the people in the country for 66 years. It separated risky financial investments from government-backed deposits by stopping banks from using federally-insured savings to make risky investment. Without this separation, taxpayers cover the cost of losses from risky investments. In 1999, the Act was overturned in the Gramm-Leach-Bliley Act. Less than ten years later the country went into a deep recession that continues because of Wall Street’s control.

The GOP sweep of over half the states in the country allowed them to rearrange congressional districts after the 2010 census. The Republican Redistricting Majority Project was so successful that they could take over the House of Representatives with fewer Republican than Democratic votes. In 2012, 1.4 million more votes came from Democrats than Republicans, but the GOP took the House by 234 to 201 seats. Through gerrymandering, GOP state legislators redrew districts in Arizona, Florida, Michigan North Carolina, Ohio, Pennsylvania, Texas, and Virginia with the goal of putting Democrats into just a few districts. In North Carolina, 51 percent of the state voted Democratic, but the state sent 9 Republicans to the House as compared to only 4 Democrats. In the same way, these Republican legislators keep their seat although the majority of voters oppose them.

votes

The new majority in a Senate of 100 is now 60. President Obama’s first term saw a record number of filibusters, and 375 bills didn’t even come to a vote in the Senate because GOP members just threatened to filibuster. During the first six months of 2013, Congress passed only 15 bills that were signed into law. This is 8 fewer than the first six months of 2012 and 19 fewer than 2011. When Senate Democrats threatened to reform the filibuster, the GOP had held up 79 nominees for the U.S. Circuit Court and Courts of Appeal despite their qualifications.

Nixon’s Southern Strategy was designed to gain political power by exploiting the greatest number of ethnic prejudices. In 1970, Kevin Philips, Republican and Nixon campaign strategist, believed that the GOP couldn’t get more than 10 to 20 percent of the black vote but that would be enough to elect Republicans. He said:

“Republicans would be shortsighted if they weakened enforcement of the Voting Rights Act. The more Negroes who register as Democrats in the South, the sooner the Negrophobe whites will quit the Democrats and become Republicans. That’s where the votes are. Without that prodding from the blacks, the whites will backslide into their old comfortable arrangement with the local Democrats.”

The GOP used this strategy in 2008 and 2012 when it attacked Medicaid, Social Security, labor unions, and Obamacare. These programs benefit more white seniors, retirees, women, and children, but Republicans have convinced many in the United States that they are handouts to lazy, undeserving blacks and minorities. That’s the reason that GOP legislators and candidates continue to fight these programs although the majority of their constituents benefit from them. 

GOP tax plans shift the tax burden from the wealthy and onto working people. For example, when Ohio repealed the estate tax, the only people who benefits were those with estates bigger than $338,000. GOP wants to change from income to consumption taxes because the latter are paid primarily by people who earn the least. The GOP keeps capital gain taxes low, 20 percent, instead of the 39.6 percent top rate of other income for the wealthy. Despite their belief that they refuse to raise taxes, Republicans were comfortable with letting the payroll tax expire because these are only for the first $117,000 of wages.

shares of taxes

The United States has lost 40-50 percent of the country’s commercial bee hives this year because of colony collapse disorder. This is important because one-fourth of food in the country depends on honeybee pollination. Instead, the media typically reports something like this: “Thousands of Bees Attack Texas Couple, Kill Horses.” The loss of bees is connected to toxic chemicals in pesticides from Bayer and Monsanto. Acting like a nerve agent, the main chemical compromises a bee’s ability to feed and make its way back to its hive. These chemicals have long been banned in Europe.

The number of temporary workers has grown by more than 50 percent to almost 2.7 million since the recession ended. Including freelancers, contract workers, and consultants raises the number to almost 17 million workers who not directly employed by the companies who hire them. That’s 12 percent of the workforce. Temporary workers receive low pay, fewer benefits, and almost no job security. Because they cannot spend as freely as permanent workers, the economy suffers.

In 2011, only 22 percent of the people had heard of the Citizens United Supreme Court decision. A 2013 Gallup poll showed 79 percent of Americans want restrictions on campaign contributions to House and Senate candidates. Also 50 percent support a publicly funded campaign finance system with private contributions completely eliminated. The McCutcheon v. FEC Supreme Court decisions that put far fewer restrictions on campaign contributions was far more widely announced this spring. The media need to keep talking and writing about a decision that has made the United States an oligarchy, owned by the wealthy, just like Ukraine.

Six corporations–Time Warner, Disney, News Corporation, Viacom, Comcast, and CBS–control about 90% of the media in the U.S. They want to make money so they use the guidelines, “if it bleeds, it leads.” They print what Democrats and Republicans say but not any facts. They skip “dangerous” facts about global warming, peak oil, population growth, political lobbying, defense spending, etc. Public broadcasting, including NPR, is becoming farther right as people like the Koch brothers buy the media organization. When two comedy shows, The Daily Show and The Colbert Report, have more news than the so-called news shows, people are not receiving the news.

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