Class Warfare Blog

September 21, 2017

Wealth Concentration Has Consequences, Severe Ones

I guess I can’t recommend to economic good sense of Yves Smith enough. In her latest post, Insanely Concentrated Wealth is Strangling our Prosperity she makes the simple point, and backs it up with irrefutable evidence, that the biggest problem with wealth concentration is that the wealthy don’t spend their wealth. As they accumulate more and more, that is wealth taken out of circulation, and becoming idle it does no one else any good. Job Creators, my ass.

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September 17, 2017

Why We Do and They Don’t Want National Health Care System

We are talking here about the healthcare systems such as Canada and France have as examples, you know, all of the other advanced western nations. Names such as Medicare For All have been bandied about for such a system here in the U.S., which is just one such option.

Here in a nutshell is why we want to do this and the conservatives and their paymasters do not:

Per Capita Spending Health Care 2015
United States: $9451
Canada: $4608
France: $4407
Japan: $4150
United Kingdom: $4003
Miraculous Finland: $3984

When we see this list, we see “Gosh, we could have quality healthcare for only about half of what we are spending now!” and “We could use some of what we save to make sure that all Americans are covered.”

When they see this list, they see “Oh my gosh, look at the profits we will lose under national healthcare.”

We spend twice what most other countries spend on healthcare and only the very rich get a commensurate healthcare outcome. Most people spend more and get less than they get in other countries. For those of you who think Canada and France do not have quality healthcare systems, you might want to consider how you learned that … Fox (sic) News, maybe? We have a higher rate of infant mortality than most of those other countries. We have shorter life spans than people in those other countries. The middle class incomes in those other countries often exceed ours, especially when you include the fact that we pay so much for healthcare. We also have millions of people with no health insurance at all, who simply go to a county hospital when they are very, very ill and plead for charity care. In the meantime, those sick people spread diseases and die much younger than they could have.

Whatever your position, do realize that the opposition to “socialized medicine” comes from those making megabucks off the current system: doctors (lead by the AMA, so their faces don’t get shown), Big Pharma (surprise, surprise) and, of course, the health insurance industry.

The insurance companies are playing a game. Through accounting procedures, they are claiming big losses through Obamacare. These losses are being used to argue for large premium increases under the system. But if you look closely, these very same corporations are claiming record profits and their CEO’s are receiving big bonuses. There stocks have soared even higher than the record stock price surges under President Obama. Huge losses, record profits, skyrocketing share prices! Some companies made so much profit that they exceeded the 20% allowed under Obamacare and had to issue refunds! This can be compared to the 3% total overhead for Medicare.

Look at that list again and ask yourself, as Ian Welsh has over and over: why don’t we see those numbers on the news over and over and over again … instead of never. Who controls the news?

August 6, 2017

The Invisible Lesson of Martin Shkreli

The New Yorker described Mr. Shkreli as “A former hedge-fund entrepreneur and drug-company C.E.O., Shkreli came to prominence while he was running a company called Turing Pharmaceuticals. During his tenure, Turing bought a drug called Daraprim, which is used to treat rare but serious parasitic infections in AIDS patients, and Shkreli raised the price per pill from thirteen dollars and fifty cents to seven hundred and fifty dollars, sparking public condemnation and outrage.”

That guy. He just lost a lawsuit, brought by the government, that accused him of fraud.

What’s missing here is something you should not mistake. In all of the current discussions regarding freedom, religious freedom, political freedom, campaign finance freedom, etc., Mr. Shkreli’s was the freedom they were talking about, not your idea of freedom.

The plutocratic cabal, now in charge of our governments, by and large wants the freedom to pursue their interests (primarily involving getting as rich as they may) without collective opposition. They do not want laws being passed, or movements recognized, or any group activity whatsoever being recognized. They want labor unions gone, they want government limited to very basic basics, they want their right to do business as they see fit unfettered. If indentured servitude were to be promoted now, they would not be opposed.

According to them, Mr. Shkreli’s freedom to change the price of a pill from $13.50 to $750 is his and his alone and everybody else should butt out. For some of this, I tend to agree. I do not think people should be sent to jail for being assholes (too expensive, would need to build too many prisons, etc.) but capitalism is and has been our problem for a very long time. Unregulated, capitalism leads to doom, just like any other economic ideology (communism, socialism, etc.). The people collectively need to confine ideas that have this much scope and reach.

The idiots promoting this “freedom” think that competition is an absolute good, yet they do not really believe this, otherwise their children would be thrown into the public schools to compete and excel and survive and not sent to “country day” schools and then Harvard and then given a lofty position in their family’s company.

The plutocrats are definitely in a “this is good for us but not you” cadre and they need to be restrained from harming the rest of us. Instead they have gotten the upper hand in restraining us from causing them any harm. Look to see Mr. Shkreli’s verdict overturned in a higher court. (The plutocrats own the Supreme Court and a few of the federal circuit courts at this point.)

August 2, 2017

Shareholder Value Supremacy … Put a Fork in It

In this article over at Naked Capitalism, Michael Olenick devastates the idea of corporations functioning with the sole goal of increasing shareholder value, arguing that social responsibilities play a role as they have in the past.

I love Naked Capitalism (Yves Smith)!

July 6, 2017

One Used to Be Able to Assume at Least as Good of a Life than One’s Parents …

Science has the unenviable position of coming along and proving what everyone already knows. I remember reading newspaper stories stating amazement that scientists would even bother proving what everyone already knows. Silly creatures.

But “what everybody knows” doesn’t turn out to be correct all of the time. This is why one constantly checks one’s assumptions, as they can turn up to bite you where it hurts.

So, a new study firmly nails down that the lifetime earnings of Americans are in decline. We are producing new generations that will not do as well as prior one’s. And those results stem not from not working hard, but from the usual culprits, largely wage suppression by the plutocrats.

Read it and weep (Lifetime Incomes in the United States over Six Decades)! (The abstract is free, the article $5.)

And regarding the various claims as to who is waging class war, let it be known far and wide: it is those with the most money.

June 23, 2017

Details of California’s New Single Payer Health Insurance Plan

Filed under: Economics,Politics — Steve Ruis @ 9:32 am
Tags: , ,

My original home state, California, is moving ahead with a plan to create a single-payer, state-run health insurance program for all Californians. If California pulls this off, with over a tenth of the entire population of the U.S.,  it will be a massive demonstration project to use as a model for the whole country. (If it does work, expect the Republicans to drop their line about the states being the laboratories of democracy.”)

The difficulty, so far, is to how pay for this service. According to the Los Angeles Times “How would California cover this $331-billion bill? For the most part, much the same way it covers healthcare spending right now. Roughly 70% of the state’s current spending is paid for through public programs, including Medicare and MediCal. This funding — totaling about $225 billion — would continue, as is required by law. It would simply flow through Healthy California rather than existing programs.
“The state would still need to raise about $106 billion a year to cover the cost of replacing private insurance. This could be done with two new taxes.
“First, California could impose a gross receipts tax of 2.3% on businesses, but with an exemption for the first $2 million of revenue. Through such an exemption, about 80% of all businesses in California — small firms — would pay nothing in gross receipts tax, and medium-sized businesses would pay an effective tax rate of less than 1%.
“Second, the state could institute a sales tax increase of 2.3%. The tax would not apply to housing, utilities, food purchased for the home or a range of services, and it could be offset for low-income families with a 2% income tax credit.

Something doesn’t add up here, but I do not have all of the details. What doesn’t add up for me is the money currently being paid for health care as a “fringe benefit” to workers. In my last job, my health insurance benefit constituted about 7% of my wages. Since employee costs for my company constituted 80% of the total cost of doing business, this means that those benefits cost about 5.5% of the entire enterprise’s budget. If the state supplies health care for a 2.3% tax, businesses are getting a windfall of about 3% of their total expenditures. What happens to that money? Does it go to employees (it is their benefit) or does it revert to employers (as a windfall)?

I know this is a simplistic approach, but my thinking was that employed people were already paying from $6000 to $17,000 per year for their insurance (either as a benefit or out-of-pocket). Note these are rough estimates based upon individual and “family of four” values I have read. Those monies are currently being spent and if those insurance policies became moot and a cheaper state-sponsored policy (cheaper because overhead would be lower, a la Medicare), there would be no need for additional taxes, etc. for those folks, who are still the largest segment of the market. In other words, instead of paying for a business-based fringe benefit or a separate policy, those monies go to the employees and then are paid in taxes to provide the state-run health insurance. There would be no need of a sales tax per se.

Of course, it all depends on the numbers, but I think the drafters of these plans need to provide some information regarding the disposition of the amounts of money currently being paid by employers for health insurance benefits.

Addendum
According to Zane Benefits “In 2015, the average company-provided health insurance policy totaled $6,251 a year for single coverage. On average, employers paid 83 percent of the premium, or $5,179 a year. Employees paid the remaining 17 percent, or $1,071 a year.

“For family coverage, the average policy totaled $17,545 a year with employers contributing, on average, 72 percent or $12,591. Employees paid the remaining 28 percent or $4,955 a year.

Note that when they say “Employers paid,” this actually constitutes part of an employee’s compensation as agreed or negotiated into the employment contract. The question is: what happens to these negotiated sums when another entity takes over the health insurance function? Should the employers keep the money previously paid for private insurance and pay a tax or should the employees get that money and then pay a tax for the service.

Does this make a difference? Hell, yes. If we get the money and then pay the tax, then we can see how much of our tax money is actually going out in taxes. If the businesses pay it, it is hidden from us, plus the businesses have lobbyists who would be chiseling against that tax continuously.

May 20, 2017

An Argument for a Minimum Wage

There have been myriad studies about the impact of having a minimum wage. Some indicate that there is no particularly strong linkage between creating a higher wage for low wage workers and some indicate that a rise in the min wage causes unemployment.

The politicians arguing against a min wage use a very simplified argument: namely that if employers have to pay their workers more, they will only be able to hire so many workers, mostly fewer. This is way too simple in thinking this. For one, if people are paid more money, they then spend more money (what goes around, comes around) which is good for business. There are many more facets to this issue.

If labor costs go up, and they have myriad times due to labor contracts, etc. how, oh how, do companies cope? (Yes, I am being sarcastic.) The amount of money that goes to labor in any company is not a fixed amount or even a fixed percentage of the company’s budget. There are many, many ways that those increased labor costs can be offset. For one, you can raise prices for the goods created. You could decrease profits. You could find other ways to reduce operating costs (reduce energy costs by going solar, etc.).

Knee jerk responses to these actions abound, of course. “If we raise prices, we will reduce sales!” Really? Companies never raise prices, then? C’mon, get real. Just raising prices alone, of course, is the lazy way to deal with increased labor costs; a combination of actions would be better.

Most of these minimum wage discussions are shallow and politically motivated. Basically, the opponents of min wage increases give minimal arguments and only add to them if we don’t accept (aka we reject vehemently) their overly simplistic argument.

Let me explain a real reason for min wage increases. Minimum wage increases are justified for the simple reason is that business interests (aka the plutocrats) have conspired to suppress wages for a long, long time. This involves bribing politicians to undermine union powers and privileges, delaying minimum wage increases, changing the laws in favor of employers over employees, etc. They have been particularly effective over the past 40 years (see the chart below as to the effectiveness of wage suppression over the past 40 years). The only power source of ordinary people to oppose these powerful business interests is government. The cabal wants wages low (too low) and so government must set a floor on wages. It is not simple but at least that is the political dynamic.

If you want to see this playing out right now, consider the current stance of the GOP. The GOP has been the champion of local rights for a long time. Education, for example, should not be a federal issue, but should reside in the states, with the states deferring to local communities and their school boards. So, what has been the GOP response to cities who have enacted their own min wage increases? GOP dominated states are passing laws to roll back those democratically achieved minimum wage increases and to bar such local increases in the future. Local control doesn’t mean a fig when the GOP’s paymasters issue directives (You will keep wages down, or else).

May 15, 2017

Economists Fail and Fail and Fail …

I could envision a role for economists in modern society except they continue to be willfully blind. They are blind because they have their heads so far up their asses.

Follow me now. Before the Great Depression, economists were only interested in small economic exchanges. But the misery of the Great Depression created the impetus to look at the economies of entire countries, even regions. Macroeconomics was born. (The goal was to prevent depressions, even recessions from ever occurring again.)

Like the “old” economics, microeconomics, certain simplifying assumptions had to be made and like the old economics, the simplifying assumptions lead to completely false conclusions. In microeconomics we ended up with the philosophy that markets were self-correcting and created an optimal economic situation. This dogma is, in truth, a piece of wishful thinking on the part of these academics. They wanted something that seemed directed at keeping the fairy systems they created balanced and whole. This belief that markets are benign and create a natural equilibrium inside of a larger economy still exists today as a political goal of those profiting from that mistaken assumption.

Macroeconomics, not to be out done, also had to make some “simplifying assumptions,” in its quest to understand how to prevent events like large recessions and depressions. In order to make things “doable” they decided to include the role banks play in our national economy but leave out finance. For reasons strange to a casual observer to understand, they also decided to leave out private debt. So, what has been the role of finance in the last 40-50 years in the U.S.? It has been to “financialize” the economy to the point that Wall Street doesn’t serve businesses in the manner you learned in school (by providing capital for businesses to modernize, expand, etc.) but now businesses exist to serve Wall Street. The money generated through finance has created a class of oligarchs who have captured the mechanisms of government and are now running it for their own benefit. They went on to shift governmental burdens off of businesses and onto private citizens, so that private debt has ballooned mightily, leaving citizens with little to buy anything with after ordinary expenses and debt service.

And what do economists have to say? “Move along, nothing to see here,” like all good Stormtroopers. One has to wonder whether the rich of a hundred years ago, having taken such a financial beating in the Great Depression, didn’t guide the creation of modern economic theory as a way for them to get back to the top and stay there. And this time, they are serious about hanging on, no matter what it does to you, me, or the country as a whole.

May 5, 2017

Egad, Economic Uncertainty is Real!

During the recent Democratic administration, Republicans often ranted about “uncertainty” with regard to investment. You see, the economy tanked in 2008 and the recovery was feeble (still is). Banks were given huge amounts of money at zero interest with the hope they would loan that money, cheaply but profitably, to businesses looking to expand. The key word was “hope” in that the government attached no strings to those zero interest loans. Consequently the banks bought securities with the money, causing the stock market to “recover” rapidly but no one else. When upbraided about this anti-social behavior, the Republicans countered with there was “too much uncertainty” in the market for business to expand. They rather should have stated there is too much bullshit in politics; that would have been closer to the truth.

The real reason businesses did not expand with all that cheap money around, is that they possessed even cheaper money (U.S. businesses had $2+ trillion dollars in cash reserves at one point.) and they weren’t spending that either. The reason? Simple: no demand. This is shockingly self-evident for people who know nothing about economics other than “supply and demand.” If there is no demand, supply is irrelevant (even though some economists tried to claim the opposite—see Say’s law). There was no demand because those business’s customers were broke, still are.

So, when Mr. Trump was elected and the GOP captured both houses of Congress, well … “Happy days are here again, the skies …” uh, no? No. Even though gasoline is quite cheap now, no one is buying much. Retail business are offering lower and lower pricing and still no surge in buying.

People are sitting on the sidelines economically because, well, they are uncertain about the future. When a person’s future is potentially very bad, they hunker down, save their money, and prepare for the worst the best they can.

Mr. Trump’s policies have never been particularly coherent, which was by design. When Mr. Trump claimed he was going to deport 11 million “illegals” from the country, many people translated that into “I will have more job opportunities.” (Right, by picking crops and doing day labor out of the local Wal-Mart?) When Mr. Trump claimed that he was going to transform Obamacare into something better, people applied their own definitions of what “better” meant. But healthcare is a complicated subject (“Who knew?”) and Mr. Trump’s party’s first effort at it was horrifically negative. (Hunker, hunker, hunker,…) Then there was the “tax reform” promised. People thought “my taxes will go down” and “I could use the money.” What they didn’t think of was that rich people’s taxes would go down much more, thus reducing government tax receipts, causing many government programs to be terminated, government programs that ordinary citizens are dependent upon, of course, not the rich. (Hunker, hunker, hunker,…) Then the current administration launches missiles in Syria and threatens nuclear war in North Korea. (Hunker, hunker, hunker,…) and….

The economic uncertainty of businesses as a reason for why they weren’t investing in their own businesses was pure political spin. They were anything but uncertain, in fact they were absolutely sure there was no demand, so no expansions. But the economic uncertainty of individual citizens is palpably real. We are not spending much money right now because we don’t know whether we will have affordable healthcare available, whether Social Security will still exist, or Medicare … all of these have been threatened by the GOP.

All of these threats are coming home to roost. We are in line for another recession, possibly as early as this summer. The ordinary tools used to combat recessions are not available (cut interest rates … why? … how?) and the GOP is dead set against deficit spending (the tool that really works) unless it enriches the rich or the military industrial complex.

Buckle your seat belts, folks. If you think things are uncertain right now, well, winter is coming.

April 25, 2017

They Are Just Better Than Us … and Getting Betterer

Filed under: Economics,Morality — Steve Ruis @ 10:40 am
Tags: , , ,

Notes on How the Class War is Going (Hint: You Are Losing Worse, Much Worse.)

According to an article in Bloomberg News: “… the poorest fifth of 50-year-old American men can now expect to live just past 76, six months shy of the previous generation. The richest 50-year-olds should make it almost to 89, seven years longer than their parents’ generation.

The richest people in the U.S. aren’t just getting several years of extra life, they’re also reaping a financial reward for their longevity – courtesy of the U.S. taxpayer. These trends will be crucial as the new administration and Congress consider any changes to Social Security, Medicare, and other programs. Even tweaks to these programs, from the retirement age to benefit formulas, could affect the rich and poor very differently.

Three decades ago, the richest and poorest retirees could expect about the same amount of benefits out of government programs. The richest generally got larger Social Security payouts, both by qualifying for higher checks and by living longer. The poorest got more out of other programs, such as Medicaid and Social Security disability insurance. Medicare offered about the same benefits to rich and poor.

If you believe that “things just keep getting better,” as I used to, I think you have to expand your thinking to see for whom they are getting better and for whom they are getting betterer, much betterer.

And if you think this is happening by accident, think again. Consider just the attempt to raise the retirement age of Social Security to the age of 70. This would reduce the average number of years of payout for that lower cohort to six years (zero if you are Black) but wouldn’t negatively affect the richer cohort much at all. But it would forestall the most commonsense argument: removing the cap on Social Security wages, currently at $127K and change. So, if you make millions of dollars, you pay SS tax on the first $127K and then nothing on the rest. Removing that cap would dip significantly into the pockets of the rich, something making foregoing five years of SS income pale in comparison. This is why the rich want that solution (age 70 for benefits) rather than the cap removal. So, now you know why such a poor solution to any SS problem gets so much ink. (They own the news media, too, don’t you know.)

If you don’t believe there is a class war going on, it doesn’t matter, you are still losing.

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