Class Warfare Blog

September 24, 2018

A Failure to Communicate

I read just now the following:

Alexandria Ocasio-Cortez … was on Jake Tapper’s show on CNN the other day, the host grilled her about how she would come up with the forty trillion dollars needed to fund Medicare for all, housing as a federal right, a federal jobs guarantee, tuition-free public college, and canceling all student loan debt.

She apparently could not answer the question … <sigh>.

Let me just address funding “Medicare for All (MFA)” for the nonce. Currently, the average family of four pays in excess of $16,000 per year for their health insurance. Mostly this goes unnoticed because these payments are made by their employers as part of their compensation. How much do you think the actual value of that insurance is? If you compare it with costs in other developed countries and look at how inflated the costs are and consider that the insurance companies providing the “insurance” are quite an unnecessary layer of bureaucracy (Medicare has a 3% overhead. If private insurance companies likewise have a 3% overhead, where do all of the handsome profits those companies make come from?). Basically that $16,000 represents a quite unnecessarily inflated cost. Let’s say, for the sake of argument, the actual cost is $9,000 for that family of four. If MFA is invoked, the employers will be required to pay that $16,000 directly to the family and then that family will pay, say $10,000 in taxes (a bit more than their own costs to be able to cover the unemployed, etc.) and pocket the other $6000! (Note: these are not the actual numbers, but even if $100 ends up in your pocket, you would be making money on the deal.)

Once we have Medicare for All, we also have group buying of pharmaceuticals, something Big Pharma has spent billions to avoid (why they are opposed to such a system is it would squeeze its profits down from the astronomical to merely lavish). This will reduce the cost of medicinals, at least to what other countries are paying (for the same drugs from the same companies … yes, they are gouging the Rich Gringos because they can). Similarly there are a multitude of large cost savings that can be wrung out of the system (e.g. there would be only one billing process, not hundreds, for doctors and hospitals to contend with).

Currently the US spends about double what any other rich nation spends on health care per capita. This means we could spend 10%, 20%, or even 30% less and still be spending more than any other country on health care. If you remove the costs of private health insurance companies, we can save even more.

Conservative pundits always focus on the cost/taxes and never mention the cost savings. Ms. Ocasio-Cortez should be better prepared if she is going to go on camera to defend our ideas.

PS The Federal Reserve “printed” several trillion dollars to bail out the banks and Wall Street firms during the Great Recession and these same pundits didn’t blink. Plus that “forty trillion dollars” is not for just one year and they are careful not to mention that.

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September 20, 2018

Our Great Response to the Great Recession

Note The title I wanted and could not create is “Our Great Awful Response to the Great Recession” (mostly due to all of the recent “pat on the back” looks back at our response to the financial collapse).

On the Naked Capitalism website there is a great interview of Michael Hudson in which he simply and clearly points out that our economy is currently still in the tank because of decisions made to bail out political donors and screw average Americans, mostly by President Obama (a corporate Democrat), which were unnecessary and counter to what has worked in the past.

Check it out:

Michael Hudson: 10 Years Since Lehman Brothers Bankruptcy – Did the Economy Really Recover?

 

September 8, 2018

Artificial Intelligence—The Promise

I am a big fan of digital technology and someone who is hopeful of the future. It is harder and harder for me to maintain that stance, however.

Currently there seems to be a widespread debate regarding the development of Artificial Intelligence (AI). Since we know so little the positions staked out are quite broad. At one end is a new future where machines take over dangerous and boring jobs and human beings have more leisure. At the other end, autonomous drones are the first step toward Skynet (the “bad guy” in the Terminator movies) and the extermination of human beings by intelligent killing machines.

There seems also to be many opinions in between the two extremes.

Something I do know is that it will not be the machines that determine the outcome. In every case of new technology impactful enough to change the course of history, the tech has been used to coerce and oppress the labor of the masses to serve the interests of the elites.

Consider the following photograph.

This is an Amazon warehouse. Amazon is a tech company. So, how do those who work in Amazon’s warehouses fare? Amazon uses personal monitoring algorithms to make sure that its employees do not waste time taking short breaks to catch their breath or go to the bathroom. They are to stay on task as long as Amazon wants them to … or else.

Jeff Bezos, creator of Amazon, makes huge profits by paying his warehouse employees wages that are so inadequate that many of them need public assistance just to get by. Thousands of Amazon workers are forced to rely on food stamps, Medicaid, and public housing because they can’t survive on the wages they receive. Meanwhile, Jeff Bezos is now worth $158 billion, and his wealth increases by leaps and bounds. (And who pays for the public assistance subsidizing Mr. Bezos’ wealth? You and I do, of course.)

If you think back to the first powered looms to make cloth, it was the workers who had to get along with the machinery, not the other way around. Same was true with the assembly line to make automobiles, etc.

I do not argue that there were no benefits from technology that actually accrue to ordinary people. Henry Ford, no friend of workers, paid more than anyone else as a daily wage to pursue his dominance of the auto market. But that was then and now, wage suppression is the favorite tool of the captains of industry. Much of the advanced tech of today is not available to us because, well it is very simple, we cannot afford to pay for it. We don’t make enough money.

As much as people will squander $1000 on a new iPhone, the really impactful tech, such as a liver transplant, is not available to you … unless you can afford to pay for health insurance and many, many people cannot.

So, AI in and of itself will not necessary oppress ordinary people, coercing our labor for the benefit of the elites, but if rich people have any say in the future, my bet is that a sizable amount of AI will be used for just that purpose. (Jeff Bezos has already begun the application.)

August 20, 2018

CEO Pay Growing Faster than Yours … Still

Filed under: Business,Economics,Politics — Steve Ruis @ 12:14 pm
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A recent report of CEO pay shows that the gulf between CEO pay and the pay of average workers in their companies has grown wider. I am shocked, shocked I tell you!

Articles are asking “How could this have happened?” As I have said over and over, this did not “just happen,” it was managed by the CEO’s. These people sit on each others boards of trustees to make sure that their pay increases will never be threatened. They have lobbied Congress and state houses to get tax cuts and tax provisions that favor them. We call such tax regulations “loopholes,” but loopholes are laws meant for one purpose that are used for another. These laws were passed for the purpose of increasing CEO power and wealth, period.

Take for example, Bill Clinton’s legislation to rein in the growth of “executive pay.” The situation was CEOs, through “golden parachutes” and other nonsense, were getting extravagant compensation for lackluster, even terrible, performances. So, the Clinton administration decided that CEO pay should be tied to CEO performance, an idea not so bad. But instead of tying CEO pay to some standard measure of business performance (income, profit, 5-year profit average, average wages in the company, customer satisfaction, etc.), they tied it to the value of the company’s stock, and therefore to the stock market. CEO’s rapidly took advantage of this and began getting more and more of their compensation in the form of stock options. They also started manipulating their own company’s stock price for their own gain. (I’m shocked, shocked I tell you!)

The most recent iteration of this practice is having the company borrowing money to “buy back” stock in the company. This has the effect of raising the price of the stock that remains and burdening the company with debt. The only people who benefit are stockholders and, oh, CEOs and other execs. This practice (stock buy backs) used to be illegal but as part of the package deal, it was made legal in the same era that started this binge of stock manipulation.

Who in a company is better positioned to manipulate the price of the company’s stock? Gosh, I believe it would be the CEO.

Can you spell insider trading, boys and girls? And it is legal. And it is making CEOs rich beyond their wildest dreams. And that wealth is being applied to our legislative and court processes to make them even wealthier and more powerful.

And, it all “just happened.” If you believe that, I have some lovely prime building land in Florida you may be interested in … but you might have to drain the swamp first.

August 7, 2018

The Deliberate Mischaracterization of the National Debt

Republicans and even a few Democrats are fond of characterizing the National Debt as if it were akin to your household debt and claiming that the size of that debt is a big, big problem.

And I respond with: how do you know when a politician is lying about the National Debt? Answer: when his lips are moving.

Most of the “debt” incurred by the federal government is in the form of Treasury bonds. If one thinks of this as a piece of paper (rather than the electrons they are made of now) printed by the government, it is in effect a promise to pay. If the nominal value of the Treasury bond is $1000, the promise to pay is that $1000 and a smaller amount more. Easy peasy. This is, in effect, the government printing money. What would be the difference between this procedure and the government printing that $1000+ in the form of currency? Answer: there is no difference.

But, but the government has to pay off that debt, doesn’t it? Sure, it issues a new series of bonds and pays off the old bonds with the sale proceeds from the new ones.

But, but … that’s something we cannot do as individuals. Yep, that is why what we have is called a sovereign currency. As a sovereign country we can make as much or little of it as we want.

Consider this, in 1964, the year I graduated high school, the national debt was $312 billion, which constituted 46% of GDP. What do you think people would have said then that in 2018 it would be $21.5 trillion and 108% of GDP? I am sure some would have set their hair on fire and run about, claiming this was disastrous, that the American economy would be in a “failing third world country” state with rapid inflation and that we would be in a severe decline economically. Have you noticed any of this? No? (There are a great many things I do not like about our current economy; that is not my point, my point is that we are not now a banana republic because of our yuge national debt.)

Oh, by way of creating a little perspective, the National Debt in 1946, my birth year, just 18 years earlier, the debt was $216 billion, which was a whopping 119% of GDP.

As another point to ponder, realize that the U.S. Federal Reserve, aka “the Fed,” created $2 trillion out of thin air to fund its purchases of stock and creation of bank “reserves” and whatnot to “save the economy” during the recent Great Recession. Did you notice all of the inflation created by the injection of that much “new money” into the economy? No? Neither did I. Inflation was virtually nonexistent. In fact, many were worried about deflation. So much for the claim that printing money causes inflation. Printing money can cause inflation, but it doesn’t have to.

The country’s budget is not like a household budget, not even close. The country’s debt is not like a household’s debt, not even close. If the National Debt really bothers you, the government could print $21 trillion in currency (now done with electrons, not paper) and pay it off entirely. This is not desirable for many reasons; I won’t go into them now. (Whew, I had you worried, didn’t I? But just a teaser … would you make war on someone who owed you a lot of money?)

In an era of “fake news” the claim of there being a “big, big problem with the national debt” is among the fakiest of bits of news. Of course, there is no such thing as fake news, we have had lies in the news since the beginning of the country; those lies are still news. Think of the news as a court transcript; people lie in court all of the time and the transcripts can be used to convict them of that; they are not automatically true, just a record of who said what, just like “the news.” This is why lawyers tell their clients to shut up and not talk about their cases, something President Trump would be wise to do.

This claim of a “big, big problem with the National Debt” is pure propaganda, playing on the general public’s ignorance of national economics to push political agendas that have no good basis otherwise. For example, if you look back in history, if you had a large problem with debt, the last thing you would do is … cut taxes. Think of a corporation which is struggling with a large amount of debt, the last thing they would want is a reduction in income such as you would get if you cut prices. Cutting taxes creates a large reduction in income for the government. If spending stays near the same, a larger amount of debt is created. Have you known of any administration, Republican or Democrat, which has reduced spending? No? Neither have I. This is why Republicans can cut taxes dramatically and not worry. No matter what happens, it will not affect what they want to do. Reagan, Bush 1 and Bush 2, and Trump spent/spend more money than they took/take in, which was fine by them as long as their wealthy sponsors got wealthier, their prime objective. After all, these are the people that claim that they want to “get the government off of the people’s backs” and then create legislation pushing the government into our private lives ever deeper. Pay no attention to what they say, watch what they do.

August 1, 2018

Banning Plastic Straws?

Filed under: Economics,Politics — Steve Ruis @ 8:12 am
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Apparently a number of companies are eschewing the use of plastic drinking straws (Walt Disney and Starbucks, I think) and a number of principalities are considering legal bans. Seattle was the first city to ban them with San Francisco, New York City, Malibu, Miami Beach, and San Luis Obispo on the left and right coasts following suit. The effort is to reduce the amount of non-biodegradable plastic waste that is piling up, well, everywhere.

But, some snowflake conservatives are decrying the loss as tragic. (Possibly these are the same people as were mourning the loss of inefficient incandescent light bulbs.) The reaction seems to be couched as if it were a ban on straws of any kind and not just plastic straws. Could this be a knee-jerk reaction be coming from people who tend to suck … naturally?

In any case, there is a readily available solution in a piece of old tech. If you are old enough, you will remember there were drinking straws before the plastic ones (New! Improved!) were made available. These straws were generally made out of paper that was waxed to make it temporarily waterproof. Both the paper and the wax are (or can be made to be) biodegradable. These straws were occasionally miserable at their function if left exposed to a beverage for too long (they became limp and soggy and collapsed) but they are still a viable option for a disposable drinking straw that won’t hurt the environment. (I am also old enough to remember that hospitals used glass drinking straws, which were sterilizable permanent drinking straws.)

The pushing out of the plastic straw from its economic niche will also stir innovation and I assume a straw made from cornstarch or its ilk will soon be available.

Unfortunately, knee jerk reactions is what today’s “news” consists of, all becoming part of the two pronged approach of the Republican Party’s agenda: the rich get richer and the rest of us get distracted.

July 11, 2018

It Figures

When the Trump tax cuts were imposed (you remember don’t you: the small temporary tax cuts for us and the large permanent tax cuts for corporations and the wealthy) it was claimed by the Repubs that the money saved by the corporations would end up spurring growth, even result in raises for workers. (Right, those results were to be delivered via unicorn, I believe.)

It was pointed out that the last time such a tax cut was implemented, corporations spent the bulk of the savings in buying back shares of their own companies. Well, surprise, surprise, the same thing happened this time. (Who’d have known it could be this complicated?) In a post on the Naked Capitalism web site (Michael Olenick: Update Confirms That Share Buybacks Are Still Corporate Suicide) extensive studies on the effects of such buybacks show that “not only do buybacks not lead to growth in a company’s market value, they are strongly correlated to a declining market value.”

In other words, the effect of their behaviors is not to “grow” the companies but actually to “shrink” them! To quote from the piece:

Corporate executives and directors are apparently bereft of ideas and the confidence to make long-term investments. Rather than using record profits, and record amounts of borrowed money, to invest in new plants and equipment, develop new products, improve service, lower prices or raise the wages and skills of their employees, they are “returning” that money to shareholders. Corporate America, in effect, has transformed itself into one giant leveraged buyout….

And since “everyone” is doing it …

The most significant and troubling aspect of this buyback boom, however, is that despite record corporate profits and cash flow, at least a third of the shares are being repurchased with borrowed money, bringing the corporate debt to an all-time high, not only in an absolute sense but also in relation to profits, assets and the overall size of the economy.

This not only burdens those corporations, but also drags down the entire economy.

So, if these buybacks are not what anyone might call the best use of those tax savings, why are they being done?

Okay, boys and girls, whenever anything political happens what are we supposed to do? (Follow the money!) That’s right! So, who benefits from these buybacks the most? It turns out that … wait for it … it is the corporation executives who actually benefit the most. You see the buybacks inflate the prices for the corporation’s stock. CEO’s and their ilk are now being remunerated largely via stock options. And, corporation executives constitute the largest segment of the 0.1% of “earners.” And that class of “earners” is the one making the bulk of political contributions currently. Does the picture now come together for you?

Think of the corporation executives as sort of modern pirates. (Can you see the eye patches and hear the “aaaarghs”?) These executives started out as treasure ship captains but, well the temptation was too great, and they stole their own ships. Well what is the government’s politicians to do? When they sailed into action to recapture the ill gotten gains, they received handsome “gifts” from the pirates to the extent that they have become dependent upon those “gifts” and now seek to facilitate the pirate’s behaviors. The government stopped pursuing the pirates for taxes and actually invited them to submit their ideas on how the government could be run better.

And all of the rich assholes lived happily ever after.

When are we going to wake up? Stock buybacks should be illegal or strictly regulated (as they used to be). They are tools to manipulate the stock market by insiders, for Pete’s sake! But when we ask our politicians what the intend to do all we get is “Arrgh!” and a wink from under an uplifted eye patch.

July 9, 2018

The Truth About Tariffs

Filed under: Economics,Politics — Steve Ruis @ 1:27 pm
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I ran across a Wisconsin cheese maker (Jim Sartori, chief executive of Sartori Cheese) making this comment recently:
“I’m not an expert but I have never found an example where tariffs have been used as an effective trade policy.”

Yep, he is not an expert.

Now, please note at the start, I am not supporting President Trump’s trade tariffs, quite the contrary. Throwing tariffs around like a drunken sailor, imposing them on former enemies, long time allies, and random other countries makes no sense at all. There is no defense for his actions whatsoever. The supposed justification, that we are being played like chumps surrounding trade, is ludicrous on the surface and ludicrous all of the way down. If anything, we have been the trade bullies extraordinaire (in our historical time). Ask Hawaii about being a trade bully. The U.S. government got behind some rapacious pineapple farmers and staged a coup to make their business efforts more successful. Hawaii was a sovereign nation, and then we “annexed” it. (That is government speak for invaded and overthrew the rightful government.)

But “tariffs as an effective trade policy” Holy moly! Tariffs have been the primary positive factor in creating all of the major global economies existent. I can’t think of a country’s economy that got to any size without a strong program of tariffs.

Mainstream economists, you know the deluded kind, have pushed the “law of comparative advantage” for ages. According to this law, an undeveloped country is better off selling a developed country its raw materials and then buying back the goods manufactured by the more developed country, paid for from the receipts from the sale of their natural resources. Everyone sticks to what they are good at. Sounds sensible, doesn’t it? Of course, the economists don’t point out that using their own concepts, the “value added” to the raw materials makes the manufactured goods more expensive than the raw materials and the less developed country cannot afford much of the good stuff. It also means that the less developed countries will never have the capacity to make their own stuff as the other countries are always better at what they need done. This is exactly the way the developed economies want it; no more competition please. All of you undeveloped stay just the way you are, please.

Take, as an example, the Japanese car industry. Japan makes as many cars now as any other country does (save China I believe) and is notorious for their quality. But right after World War 2, they had hardly any industrial capacity at all, because most of what they had had been bombed into dust. If they had taken the economists advice, they never would have gotten their car companies going because other countries made them better and more efficiently than they could right after World War 2. But the Japanese were smart, they realized that all great economies developed from protected roots and they protected their nascent car companies until they could stand on their own feet. Now they are preeminent, all because of the protects of tariffs.

An Aside I have to mention that when the Japanese started making a dent in our car market, we imposed tariffs on them. When we put a tariff on the prices of the cars, they shipped a zillion inexpensive, yet good quality cars in and they sold like hot cakes. Then we imposed a limit on the number of cars they could import here, and they instead started selling luxury cars in large numbers and making huge profits. It is ad it the U.S. didn’t learn anything from the soviets regarding running a controlled economy. End of Aside

Sometimes the Japanese protected native industries like rice growing because they do not want to be dependent upon others for this important staple. Other times their tariffs were to protect growing industries, just like everyone else.

Pay attention, people, every country does this! It is only sensible. It should be standard economic theory, except that the economists and the economics curriculum has been bought and paid for by plutocrats.

Still, what Trump is doing is incoherent, a wailing against the wind, and will be shown to be very ineffective … and then Trump will blame Obama. If he had a better thought out plan, the Wisconsin cheese makers wouldn’t be quaking in their boots right now as the tariffs being imposed upon us are not in the same areas that Trump’s tariffs are: they are in areas very sensitive to Mr. Trump’s base, so mainstream America, brace for the impact of Mr. Trump’s tariffs; they won’t be felt by Mr. Trump but they will be felt by you.

 

June 16, 2018

Lies, Damned Lies, and Economics

Apologies to Mark Twain for stealing his phrase and twisting it to make my title. (His line was that their were “lies, damned lies, and statistics.”

Here are a couple of paragraphs from a recent post over at Naked Capitalism:

“A standard recommendation given to late-industrializing economies by the economic advisors of the World Bank and the International Monetary Fund has been to refrain from imposing regulations on the labor market, or if such regulations are already in place, to abolish them.”

“In this view, labor rights and labor protection are more likely to create additional unemployment and informal-sector under-employment, particularly of unskilled workers or labor force entrants, than lead to higher wages and better working conditions. Right? So, esteemed policymaker, what you should do is simple: reduce already existing employment protection, resist those siren’s calls to higher minimum wages, and curb regulation. Later, once your economy has developed, you can bring back some of those “European-style” luxuries. After all, they are good for social peace.”

“Well, this story is as wrong as it is ubiquitous.”

If you want to learn more see Who Says Labor Laws Are “Luxuries”?

If you want to know who economists serve today, I urge you to follow the political dictum: Follow the Money. As to who the World Bank and the IMF serve, well that has been apparent from the get-go. They are like the charter schools who are saying they are serving minority children when all they are really doing is lining their pockets.

Oh, and while the WB and IMF are prattling their twaddle about the dispensability of labor protections, you might want to take notice that that is the program being executed here in the U.S. for the past 50 years. The abolishing of labor protections is not just for “late-industrializing economies,” it is good for all! Follow the money. The money going into the pockets of economists is coming primarily from one source: those who already have a great deal of money and for whom that is not enough and are willing to step on the necks of anyone in their way to even greater wealth.

 

 

June 5, 2018

The Bizarro World of Credit Ratings

Filed under: Economics,Reason — Steve Ruis @ 1:09 pm
Tags:

I monitor my credit rating because, well, it is free and it might just catch an identity thief. I was rather taken aback a couple of days ago when my FICO credit rating dropped 11 points from the last rating. I had been involved in no credit deals, nor had my credit card balances gone up, nor … WTF? So, I went to the reporting site and looked at the “event” that caused such a significant drop in my credit rating. It took some finding but eventually I found out that the problem was that I had paid off my car loan. I didn’t pay it off early or anything special, I just made the final payment on a four year deal.

There was nothing else.

So, the successful completion of a credit transaction with no black marks associated with it, proving that I was a responsible user of credit, that I met my obligations, that I was trustworthy … was a negative. And now that I no longer had a $300+ dollar car payment every month, I had that much more disposable income to engage in other transactions, if I were truly worthy, which I was not in the eyes of the people creating the algorithms of these rating services.

Welcome to the bizarro world of credit reporting and ratings. And we have given over power to these idiots to rule over whether or not we “qualify” for a credit transaction.

Keeping us enslaved in debt is part of the control mechanism that coerces our labor to serve the interests of the elites. Apparently making credit ratings incoherent is also part of the plan.

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