Article 43
Monday, September 27, 2010
Social Security Again
GOP’s ‘Pledge to America’ Would End Up Privatizing Social Security
By John Nichols
The Nation
September 24, 2010
The House Republican ”PLEDGE TO AMERICA” would make permanent GEORGE BUSH’S tax cuts for the wealthiest Americans, at a cost of more than $3 trillion over the coming decade.
Yet, the GOP GAMEPLAN proposes to address the massive shortfall with a freeze on only some domestic programs that would save about $100 billion next year—“approximately 7.7 percent of the projected $1.3 trillion budget deficit,” according to the Baltimore Sun.
How will the rest of the massive budget deficits proposed in the GOP pledge be offset?
BURIED in the twenty-one-page documentis the real pledge: a discussion of “reviewing” Social Security and other entitement programs” and a commitment to a program “requiring a full accounting of Social Security.”
DC bureaucrat-speak, to be sure. But it is not hard to translate.
“What’s hidden in this pledge is the Republican pledge to privatize Social Security,” SAY CONGRESSWOMAN DEBBIE WASSERMAN SCHULTZ, of Florida.
Privatization of Social Security, a longtime GOP priority, was the first focus of former President Bush and the Republican Congressional majorities the last time they won an election cyclein 2004. And, with they scheme to lock in Bush’s tax cuts for the wealthy, the only way Republicans will avoid creating the largest deficits in American history is by ending the nation’s commitment to its seniors and to its most vulnerable citizens - by gutting Social Security and functional Medicare and Medicaid programs.
“They clearly support privatizing Social Security. They clearly support turning Medicare into a voucher program,” says Congresswoman Wasserman Schultz. noting that two key players in the House Republican Caucus - Wisconsin Congressman Paul Ryan and Virginia Congressman Eric Cantorחhave are busy championing such proposals. “Paul Ryan and Eric Cantor wrote a book about it and are in the middle of a book tour promoting that.”
Ryan and Cantor will have plenty of company if Republicans sweep this year’s mid-term elections. Some of the party’s leading contenders are explcit about their disdain for Social Security.
Appearing this week on an Alaska radio show, Republican Senate candidate Joe Miller, Sarah Palin’s personal favorite - referred to maintaining Social Security programs as federal initiative where “government is into something that it shouldn’t have gotten into.”
Miller is blunter than Republican leaders. But the “Pledge to America” makes the agenda clear enough. Either the pledge is an outline for massive new debts and deficits or it is a roadmap to the privatization of Social Secuity, Medicare and Medicaid.
To suggest otherwise would be to engage in what another George Bush once described as “voodoo economics.”
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Sunday, September 12, 2010
It’s Not Just About Light Bulbs
Under the pressures of globalization, the number of manufacturing jobs in the United States has been shrinking for decades, from 19.5 million in 1979 to 11.6 million this year, a decline of 40 percent.
Light bulb factory closes; End of era for U.S. means more jobs overseas
By Peter Whoriskey
Washington Post
September 8, 2010
The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s.
The remaining 200 workers at the plant here will lose their jobs.
“Now what’re we going to do?” said Toby Savolainen, 49, who like many others worked for decades at the factory, making bulbs now deemed wasteful.
During the recession, political and business leaders have held out the promise that American advances, particularly in green technology, might stem the decades-long decline in U.S. manufacturing jobs. But as the lighting industry shows, even when the government pushes companies toward environmental innovations and Americans come up with them, the manufacture of the next generation technology can still end up overseas.
What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.
The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.
Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.
Consisting of glass tubes twisted into a spiral, they require more hand labor, which is cheaper there. So though they were first developed by American engineers in the 1970s, none of the major brands make CFLs in the United States.
“Everybody’s jumping on the green bandwagon,” said Pat Doyle, 54, who has worked at the plant for 26 years. But “we’ve been sold out. First sold out by the government. Then sold out by GE. ”
Doyle was speaking after a shift last month surrounded by several co-workers around a picnic table near the punch clock. Many of the workers have been at the plant for decades, and most appeared to be in their 40s and 50s. Several worried aloud about finding another job.
“When you’re 50 years old, no one wants you,” Savolainen said. It was meant half in jest, but some of the men nod grimly.
If there is a green bandwagon, as Doyle says, much of the Obama administration is on board. As a means of creating U.S. jobs, the administration has been promoting the nation’s “green economy” - solar power, electric cars, wind turbines - with the idea that U.S. innovations in those fields may translate into U.S. factories. President Obama said last month that he expects the government’s commitment to clean energy to lead to more than 800,000 jobs by 2012, one step in a larger journey planned to restore U.S. manufacturing.
But officials are working against a daunting trend. Under the pressures of globalization, the number of manufacturing jobs in the United States has been shrinking for decades, from 19.5 million in 1979 to 11.6 million this year, a decline of 40 percent.
At textile mills in North Carolina, at auto parts plants in Ohio, at other assorted manufacturing plants around the country, the closures have pushed workers out, often leaving them to face an onslaught of personal defeats: lower wages, community college retraining and unemployment checks.
In Obama’s vision, the nation’s mastery of new technology will create American manufacturing jobs.
“See, when folks lift up the hoods on the cars of the future, I want them to see engines stamped “Made in America,” Obama said in an Aug. 16 speech at a Wisconsin plant. “When new batteries to store solar power come off the line, I want to see printed on the side, “Made in America.” When new technologies are developed and new industries are formed, I want them made right here in America. That’s what we’re fighting for.”
But a closer look at the lighting industry reveals that isn’t going to be easy.
At one time, the United States was ahead of the game in CFLs.
Following the 1973 energy crisis, a GE engineer named Ed Hammer and others at the company’s famed Nela Park research laboratories were tinkering with different methods of saving electricity with fluorescent lights.
In a standard incandescent bulb, in which the filament is electrified until it glows, only about 10 percent of the electricity is transformed into light; the rest generates heat as a side effect. A typical fluorescent uses about 75 percent less electricity than an incandescent to produce the same amount of light.
The trouble facing Hammer was that fluorescents are most efficient in long tubes. But long, linear tubes don’t fit into the same lamp fixtures that the standard incandescent bulbs do.
Working with a team of talented glass blowers, though, Hammer twisted the tubes into a spiral. The new lamps had length, but were also more compact.
“I knew it was a good lamp design,” he recalled recently. In retrospect, in fact, it was a key innovation. The Smithsonian houses Hammer’s original spiral CFL prototype.
At the time, however, the design had one big problem. Bending all that glass into the required shape was slow and required lots of manual labor.
“I used to say you would need 40,000 glass blowers to make the parts,” Hammer said. “Without automation, it was economically unfeasible. It was a lamp before its time.”
The company decided to make investments in other types of lighting then being developed.
Years passed. The next major innovator to try his hand at CFLs was Ellis Yan, a Chinese immigrant to the United States, who had started his own lighting business in China and then in the early ‘90s turned his attention to the possibilities of CFLs.
To make CFLs, he had workers in China sit beside furnaces and bend the glass by hand. Even with the low-wages there, the first attempts were very expensive, clunky and flickered when turned on, he said. But he persisted.
“Everybody [in the industry] stayed back and was watching me,” he recalled. “No one else wanted to make the big investment for the next generation of technology.”
The business prospered and Yan’s factories in China employed as many as 14,000 - not so far off from the 40,000 glass blowers that Hammer had once imagined would be necessary. With new automation techniques, Yan is seeking to cut the number of his employees in China, where wages are rising, to 5,000 by year’s end.
Today, about a quarter of the lights sold in the United States are CFLs, according to NEMA, an industry association. Of those, Yan says, he manufactures more than half.
Someday soon, Yan says, he hopes to build a U.S. factory, though he so far has been unable to secure $12.5 million in government funding for the project.
Manufacturing in the United States would add 10 percent or more to the cost of building a standard CFL, he said, but retailers have indicated that there is a demand for products manufactured domestically.
“Retailers tell me people ask for ‘Made in the USA’ “ Yan said. “I tell them the product will cost 45 to 50 cents more. They say people will pay for it.”
Sales of the CFLs began slowly, but they spiked in 2006 and 2007, when federal and state government efforts promoted their use.
The Energy Department teamed with Disney to develop a public service announcement based on the Disney Pixar film “Ratatouille” to encourage the adoption of technologies such as CFLs. It was shown on CNN, HGTV and the Food Network.
Lawmakers in California and Nevada drafted legislation calling for higher efficiency standards for light bulbs. And in December 2007, Congress passed its new energy standards.
GE balked at the standards at first, knowing that they could impact their U.S. manufacturing. But the company also saw that with restrictions gaining momentum in more states and other countries, some kind of legislation was unavoidable. They decided to support the bill as long as it didn’t amount to a ban on traditional incandescents, but instead simply set energy standards.
“We obviously pointed out to legislators that the impact of an outright ban would be an elimination of some manufacturing operations,” said Earl Jones, senior counsel in government relations and regulatory compliance at the company. “But it was inevitable that some kind of legislation would be coming to the U.S.”
As expected, the new standards hurt the business in traditional incandescents.
The company developed a plan to see what it would take to retrofit a plant that makes traditional incandescents into one that makes CFLs. Even with a $40 million investment and automation, the disparity in wages and other factors made it uneconomical. The new plant’s CFLs would have cost about 50 percent more than those from China, GE officials said.
The company also makes halogen light bulbs, which are an innovative type of incandescent, and Sylvania is transforming its incandescent light bulb factory in St. Marys, Pa. to halogen as well.
But the era of traditional incandescents built in the United States was coming to an end.
In announcing the plant closure here, GE said in a news release that “a variety of energy regulations,” including those in the United States, “will soon make the familiar lighting products produced at the Winchester Plant obsolete.”
“For those who make incandescent bulbs the law was bad for business,” Yan said. “For people like us, it was very good.”
Temperatures at the traditional incandescent plant here can be sweltering because of the heat coming from the machines that melt the glass. It’s noisy, too, and workers wear ear plugs and safety glasses. And the pace of the work demands constant hustle, an atmosphere created by managers over the years who set up competitions among teams of workers striving to meet production goals. The winning line could post a black-and-white checkered flag on their machinery.
Jobs at the plant have been prized locally for years: They pay about $30 an hour.
One day after punching out recently, the workers gathered around the picnic tables by the employee entrance.
Some expressed grievances with the plant managers, who they note will get new jobs elsewhere, or with Congress for passing the energy legislation. Several took aim at the new new technology itself, noting that CFLs have mercury in them.
Some at the plant will be able to retire off their severance packages. Those with less time on the job, or those who are younger, have braced themselves for whatever comes next.
Some are taking classes at the Lord Fairfax Community College, hoping that familiarity with solar panels or HVAC might land them a job. Others scan the want-ads but don’t see how they will replace what they were making at the factory.
This small town has not been terribly hurt by the recession; local unemployment is running at 7.5 percent, well below the national average.
But good-paying jobs in manufacturing, they said, have become difficult to find.
Beverly Carter, 50, who feeds cardboard sleeves into a machine and makes sure it doesn’t jam, has worked at the plant for 32 years.
“It’s very hard to find a job like that around here,” she said.
Moreover, because many of the workers are in their 40s and 50s, some were nagged by worries that other employers would see them as washed up.
“We gave GE the best years of our lives,” Savolainen said.
Matt Madigan, 40, and his twin brothers, Wayne and Dwayne, also work at the plant.
“We’ve always had a lot of industry here in the valley, I’ve never had a problem finding a job,” he said. “A person really wanted to work, you could go from one factory to another. Everything nowadays is tougher.”
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Tuesday, September 07, 2010
Money Buys Happiness
Do We Need $75,000 a Year to Be Happy?
A new study by Princeton University researchers puts a figure on happiness: $75,000 a year
By Belinda Luscombe
Time
September 6, 2010
People say money doesn’t buy happiness. Except, according to a new study from Princeton University’s Woodrow Wilson School, it sort of does up to about $75,000 a year. The lower a person’s annual income falls below that benchmark, the unhappier he or she feels. But no matter how much more than $75,000 people make, they don’t report any greater degree of happiness.
Before employers rush to hold - or raise everyone’s salary to $75,000, the study points out that there are actually two types of happiness. There’s your changeable, day-to-day mood: whether you’re stressed or blue or feeling emotionally sound. Then there’s the deeper satisfaction you feel about the way your life is going - the kind of thing Tony Robbins tries to teach you. While having an income above the magic $75,000 cutoff doesn’t seem to have an impact on the former (emotional well-being), it definitely improves people’s Robbins-like life satisfaction. In other words, the more people make above $75,000, the more they feel their life is working out on the whole. But it doesn’t make them any more jovial in the mornings.
The study, by economist Angus Deaton and psychologist Daniel Kahneman, who has won a Nobel Prize for Economics, analyzed the responses of 450,000 Americans polled by Gallup and Healthways in 2008 and 2009. Participants were asked how they had felt the previous day and whether they were living the best possible life for them. They were also asked about their income.
The authors found that most Americans - 85% - regardless of their annual income, felt happy each day. Almost 40% of respondents also reported feeling stressed (which is not mutually exclusive with happiness) and 24% had feelings of sadness. Most people were also satisfied with the way their life was going.
So, where does the $75,000 come into play? Researchers found that lower income did not cause sadness itself but made people feel more ground down by the problems they already had. The study found, for example, that among divorced people, about 51% who made less than $1,000 a month reported feeling sad or stressed the previous day, while only 24% of those earning more than $3,000 a month reported similar feelings. Among people with asthma, 41% of low earners reported feeling unhappy, compared with about 22% of the wealthier group. Having money clearly takes the sting out of adversities.
At $75,000, that effect disappears. For people who earn that much or more, individual temperament and life circumstances have much more sway over their lightness of heart than money. The study doesn’t say why $75,000 is the benchmark, but “it does seem to me a plausible number at which people would think money is not an issue,” says Deaton. At that level, people probably have enough expendable cash to do things that make them feel good, like going out with friends. (The federal poverty level for a family of four, by the way, is $22,050.)
But in the bigger view of their lives, people’s evaluations were much more tied to their income. The more they made, the more they felt their life was going well. The survey asked respondents to place themselves on a life-satisfaction ladder, with the first rung meaning their lives were not going well and the 10th rung meaning it was as good as it could be. The higher their income, the higher the rung people chose. “Importantly, the same percentage increase in income has the same effect on evaluation for everyone, rich or poor alike, even though the absolute dollar amounts differ,” the authors write. So every 10% rise in annual income moves people up the satisfaction ladder the same amount, whether they’re making $25,000 or $100,000. “High incomes don’t bring you happiness, but they do bring you a life you think is better,” conclude the authors. Might it be time for Oprah to give these guys their own show?
Past research on money and happiness has also found that it’s not absolute wealth that’s linked with happiness, but relative wealth or status that is, how HOW MUCH MORE MONEY YOU HAVE THAN YOUR NEIGHBORS.
It’s no surprise, then, that when the same polls are done in different countries, Americans come out as a bit of a mixed lot: they’re fifth in terms of happiness, 33rd in terms of smiling and 10th in terms of enjoyment. At the same time, they’re the 89th biggest worriers, the 69th saddest and fifth most stressed people out of the 151 nations studied. Even so, perhaps because of the country’s general wealth, they are in the top 10 citizenries where people feel their lives are going well, beaten out by such eternal optimists as the Canadians, New Zealanders and Scandinavians.
Right. Now that Princeton researchers have untangled that life mystery, maybe someone at MIT can look into the optimal amount of money required to buy us love.
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Half a million dollars can buy a lot of things, but it’s not clear happiness is one of them
By Trey Williams
Fortune
March 9, 2023
It’s either something about leaving your 20s and gingerly stepping into what inevitably seems to be the rest of your life (or the idea of “late capitalism"), but there’s a question I, my partner, and our millennial friends return to over and over: When is enough enough?
When is it enough stuff? When is it enough nights out and trips taken? When is it enough money? What is enough?
Apparently, enough is somewhere in the realm of $500,000.
A NEW STUDY FROM A GROUP OF SCIENTISTS found that the limit in terms of whether money can buy happiness starts to max out once someone hits $500,000 a year. It’s a far cry from past research, in which one study established the idea that happiness plateaus after $75,000.
The study, which surveyed 33,391 working U.S. adults, is presented as an “adversarial collaboration.” In 2010, psychologist Daniel Kahneman and economist Angus Deaton PUBLISHED A PAPER in which they asserted that emotional well-being, or happiness, increases along with income until the point where it starts to level out, or plateau, when the person makes between $60,000 and $90,000.
In contrast, A 2021 STUDY by Harvard doctoral student Matthew Killingsworth researching the same idea, found no real financial plateau to happiness.
The new paper, published by Kahneman, Killingsworth, and psychologist Barbara Mellers, finds that the plateau exists among the unhappiest 20% of people once they start earning more than $100,000. That, the paper says, is the point at which remaining miseries - bereavement, clinical depression, heartbreak, etc. - aren’t alleviated by more money.
For other Americans, however, higher levels of happiness did seemingly equate to making more money. For the happiest 30%, the level to which their happiness increased continues beyond $100,000. And though the study included people who earned more than $500,000, researchers said discerning whether the same effect was present for people earning that amount was impossible to say for sure.
“For very poor people, money clearly helps a lot,” KILLINGSWORTH TOLD NEW SCIENTIST. “But if you have a decent income and you’re still miserable, the source of your misery probably isn’t something money can fix.”
The median American yearly income sits just above $54,000, and only about 17% of Americans earn more than $100,000 a year, ACCORDING TO RESEARCH FROM FIRST REPUBLIC. Whats more, people making $500,000 a year are considered to be among THE TOP 1% OF EARNERS IN AMERICA.
The researchers say that in truth, the idea that money can be enough to make someone happy is unfounded. They found, in fact, the emotional impact of more money was small compared to something as simple as the weekend.
“The correlation between income and well-being is much discussed, both by the public and by social scientists and has been the focus of considerable research,” the paper reads. “Yet its important to note that the relationship is weak, even if statistically robust.”
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Americans say they need to have $500,000 in savings to feel financially secure, survey finds
By Jessica Dickler
CNBC
July 28, 2021
More than a year into the COVID, most people have a clearer picture of what it means to be financially secure.
When asked how much money they need to have saved to consider themselves financially healthy, Americans put the number at $516,433, on average, according to a new report by financial services company PERSONAL CAPITAL. About 20% said they would need more than $1,000,000.
Although responses varied widely, most said having $500,000 in the bank would be enough to cover bills and expenses, as well as future needs, including some retirement savings, without worry, the report found.
“For the average working American, $500,000 would be plenty of money,” said certified financial planner Dave Totah, a senior wealth advisor at Exencial Wealth Advisors in Frisco, Texas.
Generally, personal finance experts recommend having three months to six months - or even longer - of living expenses on hand in case of an emergency. For retirement, there are a few simple rules of thumb, such as SAVING 10 TIMES YOUR INCOME by retirement age.
For many, the pandemic has been a financial wake-up call that’s prompted them to rethink how they plan for their futures. Still, most people struggle to save enough for a comfortable cash cushion.
Before the pandemic, A FEDERAL RESERVE REPORT found that 40% of Americans would have difficulty paying for an unexpected $400 expense. A survey released by BANKE RATE in January indicates that those cash reserves still fall short for many people, with only 39% of people able to pay for a $1,000 emergency expense out of savings.
Just 19% of Americans have enough to cover three to five months and 25% have enough to cover six months or more, BANKRATE ALSO FOUND. Only 17% of adults said they have more emergency savings now than they did pre-pandemic.
And still, more than half of Americans, or 51%, have less than three months stashed in an emergency fund.
To bolster your savings, Totah recommends scaling back your spending, for starters. “Take a hard look at your budget, you can cut out the nice-to-have’ things and carve out a little bit of additional savings.”
Then, bump up your 401(k) contribution or, at the very least, contribute enough money to get the company’s full matching contribution. “You can pick up some more free money that way,” he said.
Totah also advises clients to put some money aside in a HEALTH SAVINGS ACCOUNT. Not only is the money contributed to an HSA tax-deductible, but both the earnings and withdrawals - as long as they’re for health-care expenses - are also not taxed.
“It’s a great way to save tax-free,” he said.
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Monday, September 06, 2010
Labor Day Blues 2010
On Labor Day, jobs crisis persists
By Andrea Orr
Economic Policy Institute
September 3, 2010
Monday September 6 will mark the third straight Labor Day that the country has been mired in an unemployment crisis. This year, the Labor Department kicked off the long holiday weekend with a new report that wasnt as bleak as expected: the private sector added 67,000 jobs during the month of August. In fact, while the country was still losing jobs a year ago, it has added jobs to the payroll for the past eight months.
But for the typical worker, this is not cause to celebrate. Far too many Americans cannot find work: The nationwide unemployment rate remains just short of double digits. The August 2010 unemployment rate of 9.6% is barely changed from the 9.7% rate this time one year ago, and it actually rose from 9.5% in July.
This persistently high unemployment rate even as job growth slowly resumes speaks to the depth of the jobs hole resulting from the Great Recession and the tepid nature of the recovery. The United States needs to create about 100,000 new jobs each month just to keep up with population growth, and many more than that to see unemployment rates fall substantially. While RECOVERY ACT INVESTMENTS SUCCEEDED in slowing the pace of job loss and moving the job market in the right direction, job creation is now moving at a pace that EPI Economist Heidi Shierholz recently described as “excruciatingly slow.”
And its not just America’s 14.9 million unemployed and 26.1 million underemployed workers who are feeling the pain. For decades, wage growth has been falling far short of gains in productivity and in recent years the gap has widened, making it difficult even for working Americans to prosper. Earlier this week, EPI published the paper Recession Hits Workers Paychecks, showing that wages are growing at half the rate at which they expanded in the period before the start of the recession in late 2007.
This latest trend of slower wage growth compounds a longstanding problem of workers failing to enjoy the fruits of their labors. Even during the last business expansion, which ran from 2002 until the start of the recession in late 2007, productivity grew but hourly compensation fell for both high school and college-educated workers. In fact, this EPI report shows that workers - including those with college degrees earned less in 2009 than they did in 2000, when adjusted for inflation.
Trends of persistently high unemployment and slow wage growth stand in contrast to other segments of the economy such as corporate profits. Over the summer EPI President Lawrence Mishel compared the change in corporate profits since the start of the recession to the change in the labor market. He found that corporate profits had fully recovered while the labor market remained weak. By the first quarter of 2010, corporate profits were 5.7% higher than in the final quarter of 2007, but the total number of jobs had declined by 5.9% over the same period.
While the official unemployment rate is often used to sum up the health of the labor market, unemployment today would be higher were it not for a large number of workers who have either dropped out of the workforce or not entered it during the recession. Shierholz notes that although unemployment has fallen from its recent peak of 10.1% last October, that does not mean that a larger share of the population is working, but rather reflects the fact that 3.5 million workers are missing from the labor force.
Other troubling signs this Labor Day include the large number of long-term unemployed. Forty-two percent of unemployed workers have been seeking work for more than six months; 21.9% for more than a year. And several segments of the working population are seeing staggering rates of unemployment that make the nationwide rate look mild. The unemployment rate is 16.3% for black workers, 12% for Hispanic workers, and 13.8% for those with less than a high school degree. The share of youth age 16 to 24 who are neither employed nor enrolled in school is 17.9%.
And while Labor Day often calls to mind the sort of well-paying jobs in manufacturing and construction that were once the backbone of the nation’s economy, the United States has lost close to 15% of its manufacturing jobs and more than 25% of all construction jobs since the start of the recession. By contrast, many of the fastest-growing occupations today pay close to minimum wage.
For more detailed data on unemployment by demographic breakdown, consult EPIs new Labor Day Fact Sheet as well as our EconomyTrack Web site.
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Sunday, September 05, 2010
Article 43 Turns Six
I wrote my FIRST ARTICLE on September 4, 2004.
Like this time LAST YEAR - there’s NOT MUCH GOOD TO WRITE ABOUT.
The middle-class is still dying, jobs are still going overseas, while mergers and aquisitions make the big guys bigger, and controllers of our destinies.
The mysterious author over at George Washington’s Blog WRITES ABOUT the eroding middle class and ills that plague this country with clarity…
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The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years
President EISENHOWER re-wrote the tax laws so that they would favor investment abroad. President Kennedy RALLIED AGAINST tax provisions that “consistently favor United States private investment abroad compared with investment in our own economy”, but nothing has changed under either Democratic or Republican administrations.
For the last 50-plus years, the TAX BENEFITS to American companies making things abroad has encouraged jobs to move out of the U.S.
The Government Has Encouraged Mergers
The government has actively ENCOURAGED mergers, which destroy jobs.
For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and PUSHED THROUGH AN AMENDMENT TO THE TAX LAWS which rewards mergers in the banking industry.
This is nothing new.
Citigroup’s former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Alan Greenspan TOLD him, I have nothing against size. It doesn’t bother me at all.
And the government has ACTIVELY ENCOURAGED the big banks to grow into mega-banks.
The Government Has Let Unemployment Rise in an Attempt to Fight Inflation
As I NOTEDlast year:
The Federal Reserve is mandated by law to maximize employment. The relevant statute states:
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
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The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke FAILED TO DO SO.
Ryan Grim ARGUES that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:
The Fed is mandated by law to maximize employment, but focuses on inflation—and “expected inflation”—at the expense of job creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.
Board members expressed concern “that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation.” That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting…
Suffering high unemployment in order to keep inflation low cuts against the Fed’s legal mandate. Or, to put it more bluntly, it may be illegal.
In fact, the unemployment situation is GETTING WORSE, and many leading economists say that - under Mr. Bernanke’s leadership - America is suffering a permanent destruction of jobs.
For example, JPMorgan Chase’s Chief Economist Bruce Kasman TOLD Bloomberg:
[We’ve had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.
The chief economists for Wells Fargo Securities, John Silvia, SAYS:
Companies really have diminished their willingness to hire labor for any production level,Ӕ Silvia said. ItӒs really a strategic change, where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.
And former Merrill Lynch chief economist David Rosenberg WRITES:
The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed - again a record high and this is a proxy for permanent job loss, in other words, these jobs are not coming back. Against that backdrop, the number of people who have been looking for a job for at least six months with no success rose a further half-percent in August, to stand at 5 million - the long-term unemployed now represent a record 33% of the total pool of joblessness.
And see THIS.
In fact, the Fed INTENTIONALLY curbed lending by banks in an attempt to stem inflation, without addressing whether PUBLIC BANKS could provide credit.
The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands
As I POINTED OUT a year ago:
A new report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.
The report shows that:
* Income inequality is worse than it has been since at least 1917
* “The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007”
* “In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth.”
As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.
As I wrote in September:
The economy is like a poker game . . . it is human nature to want to get all of the chips, but - if one person does get all of the chips - the game ends.
In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone’s money, the game ends.
The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed…
This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
It is a question of focusing any government funding which is made to the majority of poker players - instead of the titans of finance - so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.
I noted in April:
FDRs Fed chairman Marriner S. Eccles explained:
As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
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When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the “too big to fails” crowd out everyone else.
And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion’s share of economic activity. If most consumers are out of chips, the economy slumps.
And unemployment soars.
As former Secretary of Labor Robert Reich wrote yesterday:
Where have all the economic gains gone? Mostly to the top.
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ItҒs no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
Whats more, the rich donҒt necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where theyll summon the highest returns җ sometimes thats here, but often itҒs the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.
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THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.
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And as Americas middle class shared more of the economyҒs gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity.
So through it’s policies encouraging the offshoring of jobs, mergers, decreasing of economic activity to fight inflation, allowing wealth to be concentrated in fewer and fewer hands, and other policy mistakes (like pretending that there is a “jobless recovery"), the government has channeled water away from U.S. jobs, creating a worsening unemployment drought.
Note for Keynesians: As I have repeatedly explained, the government hasn’t spent money on the right kind of things to stimulate employment. See this and this.
Note for followers of Austrian economic theory: I have repeatedly railed against the government artificially propping up asset prices and leverage, so that malinvestments can’t be cleared, and we have a stagnant, zombie economy which prevents job creation.
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