Class Warfare Blog

April 17, 2018

Taxing the Rich: A Good Idea or Not?

To those whom much is given, much is required.

The standard narratives regarding not taxing the rich are quite bankrupt but are still used, much like the tired old arguments of religious apologists (there is always a new audience to whom these arguments make sense). The usual thing touted is that the rich are the job creators and if you tax them (at all?) they won’t take risks and start new companies which hire workers and we all suffer thereby.

As a counter narrative consider the story of Toys R Us, a huge entrepreneurial success story, which ended in a financial meltdown. The company, however, made its owner rich when individual and corporate taxes were ever so much higher and met its demise in a time when those taxes became ever so much lower.

Read this fascinating story here.

The “standard narrative” of the rich about the rich is they made their money “themselves,” so they “deserve” the rewards. But in reality, does anyone make it themselves? Or is it like personal gifts one is born with and developed, in which we deserve some credit for the development but much of what happens to us and because of us depends upon things like genetics, luck, externalities (like available electricity and good roads provided to all), circumstances of birth (being born into a rich family is a strong marker for “becoming” rich)?

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March 27, 2018

Determinism and Free Will

Filed under: Economics,Philosophy,Science — Steve Ruis @ 12:10 pm
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I have written more than a little about free will and this post is a supplement to that. I have been reading a little about the alternatives to free will, primarily determinism, which is a claim that every decision we make is caused by events outside of our control. I have no problem with that argument, just the driving of it home saying that Determinism Rules, Dude! I think this is yet another example of human exuberance to come up with an answer when we are not yet ready for one. This is my position of free will, too. I think most decisions are made sub- or unconsciously and we understand so little about those processes that to exclude them from discussions of free will thwarts any chance at a reasonable conclusion.

So, are all of our decisions caused? Are our behaviors ruled by the “cause and effect” that works so well in the sciences?

I have been reading Nassim Nicholas Taleb’s works. I just finished “Fooled by Randomness” and have started “The Black Swan.” Mr. Taleb (he has a Ph.D. but doesn’t flaunt it) got his start as a financial instruments trader. He points out over and over, that most human activities are ruled by chance, yet we stubbornly refuse to admit that, seeing systems and patterns in behaviors and numbers that we believe show underlying structures that make things like the stock market predictable. He points to daily stock market reports, an example of which is “the market tumbled 1.7 points today, reacting to the announcement that blah, blah, blah.” He says that statements like this makes financial reporters entertainers rather than journalists. The market indices fluctuate during the day and from day to day. All of them fluctuate more than 1.7 points per day, so a change in any index of 1.7 index points cannot be distinguished from noise. Yet we insist on ascribing reasons to these fluctuations. We also know that the ocean’s tides rise and fall twice a day, so measuring the height of the water depends on what time you measure it. We also know that waves create artificial highs and lows that will move a float up and down in mere seconds. No oceanographer would mistake these normal fluctuations for changes that require action (like sea level rise), but we often do in settings like the stock market.

Our brains were shaped by evolution to do some amazing things. Unfortunately some of these things are counterproductive. For example, we judge the likelihood of something happening by the frequency we encounter that thing. This worked really well when we only encountered things in real life, like when was the last time you witness a murder directly, for example? But, we see the evidence of crime after crime on the nightly news day after day and conclude crime is on the increase; it is not; crime reporting on the news is on the increase, crime itself is decreasing and has been for decades. So, it is easy to fool ourselves using our very best mental skills.

One of our strongest mental skills is pattern recognition. It is so strong we see patterns where none exists, even in sets of random dots and numbers. In the case of financial markets we are making an even bigger mistake. In science we postulated first that invisible entities controlled the behavior of natural phenomena (spirits and ghosts). We then had a bunch of people argue that natural phenomena obeyed laws (the law of gravity, conservation of energy, conservation of momentum, etc.) and that the behaviors of physical objects was predictable based upon these laws and so they were! (Damn!) So, we came to believe in physical cause and effect. Now if we apply this belief to social systems, like financial markets and free will, will it also work? Well, the physical laws have an underlying structure that supports those laws existing. Do morals and financial markets and the like have such a basis? I do not think so, but more importantly, if there is it hasn’t been demonstrated that there is. In order to prove that nature was based upon laws, a whole lot of predictions had to be made and prove out to be right before people accepted that a root foundation for physical laws existed and could be relied upon.

But financial markets, well that’s another story. After every catastrophic collapse of some market or other, the market gurus go around and find one of their kind who predicted that the collapse would happen, and hype them as someone with special knowledge. The problem is that at any point in time, every possible outcome is being predicted and no matter what happens, you can find somebody after the fact that will have predicted correctly. This is not a successful prediction. In science, once you work out the laws involved, you can teach them to others and everyone ends up making correct predictions, not just a person here or there.

Human overreach in pattern-recognition puts, I suspect, too much faith in cause and effect, the underlying mechanism of determinism. We know that quantum mechanical effects are far from cause and effect rooted. We know that a great deal is “caused” by randomness. (If you go out to dinner, you are going to eat something. If you go to an Italian restaurant, you are very likely to eat something Italian. If …). Are we ready to conclude that free will is an illusion and all things are determined by cause and effect? I do not think so.

March 26, 2018

Oh, The Irony!

When the American Experiment in self-governance began, the creators of the government we now possess were significantly concerned that the hoi polloi, the “middling sort,” as they called them, not get too involved in the process. The Founding Fathers were elitists, by design. They felt that only people like them had the education, the perspectives, and experience to lead the government.

One of the fears expressly stated was the fear that if the poor got control of  the government that they would use the government’s powers to strip the wealthy of their wealth. Most of the FFs were quite well-to-do, don’t you know. (Like you I was shocked, shocked, I tell you!)

This fear: that the poor would go after the wealth of the wealthy, has lived on in the hearts of most of the wealthy persons since the later eighteenth century and exists today.

In all of that time, I can only think of one period in which the wealth of the wealthy was effectively restricted and that was due to the New Deal of the quite wealthy President Franklin D. Roosevelt (who was called a “traitor to his class” for his efforts). People often point to the 90% tax bracket introduced during WW2 and kept there after (even under Republican Dwight Eisenhower) as an example of  wealth stripping by “the people.” But this doesn’t hold up. This onerous tax bracket didn’t kick in until one had an annual income in excess of $100,000. Considering that the average worker’s income was around $3000, this was quite a lofty salary. So this 90% tax bracket applied to very few people. Plus SS taxes were quite low in the 1950’s as opposed to now. (Thank you, Ron Reagan!) And one can argue that effective tax rates (the rates people actually pay, not listings in tax tables) are higher now than in the 1950’s, so this does not wash as an example of a time in which the rich were attacked by the poor. The actual slowdown of the accumulation of wealth in the 1950’s was, I believe, caused not so much by policy (some was) but by a feeling of “we are all in this together” due to the war, making it harder to screw your neighbors.

There are, however, more than a few periods, including the one in which we are in now, in which the wealthy have joyfully robbed the poor and middle class. (Oh, the irony!)

If you are unfamiliar with wealth inequality (really it should be termed wealth inequity because really no one is arguing that all should be equally wealthy) you need to educate yourself on this very hot topic. Wealth “inequality” as currently defined is at an all-time high, worse than it was in the Gilded Age or any other period in U.S. history.

The entire process of civilization has been fueled by coercing inexpensive labor out of the masses to benefit the religious and secular elites. Any advantages of civilization that have been gotten down to the poor are the result of trickle down process and we all know how effective those are. Still, a certain amount of this is acceptable but when it gets excessive, as it is now, the torches and pitchforks tend to come out and, well, there are more of us than them.

I think we all need to take a page out of the playbook of the Marjory Stoneman Douglas High School students and establish a single issue voting block. I will no longer vote for any candidate who has an A or B rating from the NRA, in support of their effort. (Vote them out!)

How about a wealth inequality inequity single issue voting block? Establish a few parameters and then VOTE THEM OUT. Unfortunately this will go badly for all Republicans and the corporate Democrats. On second thought, strike the word “unfortunately.”

February 17, 2018

Misuses of Science?

Filed under: Economics,Science — Steve Ruis @ 9:37 am
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There is a term being bandied about, scientism, to describe the intrusion of science into fields where it is felt to be inappropriate (ethics, for example). I think this “defense” is unnecessary as science is experimental, it either proves useful or it does not. The real problem, I believe, lies in a misunderstanding of what science does and is useful for.

Obviously, science applies well in “scientific” fields: physics, chemistry, biology, etc. So well, in fact, that these areas of study are called “sciences.” The application of scientific methods to other areas is more “iffy” for a good reason. Take the analysis of financial markets, for example. In recent years, college graduates who used to go into scientific fields have been attracted into the financial world. They even have a nickname, “quants,” because of their application of quantitative tools previously only applied in scientific pursuits. The inherent problem here is, even though markets watchers refer to “the market” in phrases like “the market was calm today” or “the market was perturbed today” as if it were some sort of exotic animal, unlike the sciences, there may be no controlling behaviors built into the system. A physicist doing a scientific investigation believes there may well be a fundamental behavior of matter underlying the patterns he/she is studying. That belief is well-founded as such have been found so often in the past. In finance or economics, the belief there is some underlying structure or principles is an open question as such have not been established as fact.

It is a little like Disney’s The Sorcerer’s Apprentice; the apprentice waves a tool around and mutters incantations hoping to invoke powers he clearly doesn’t understand. He is not even aware what those powers are, except he has seen his master do similar things and get some results. So, in finance, people who mutter incantations and get results are the new masters (by seeming to understand things at a fundamental level others do not) and because it is assumed they have found the underlying structures that create success. Clearly they have not and their results are not attachable to any underlying truths, but they look good to those hoping to find success. (People are still talking nonsense about financial markets as if they were truths.)

Economics is another “science” (it is not) that has adopted the trappings of science without there being much, if any evidence, there are fundamental structures underlying economies. But, by making economics “scientifical,” it has the appearance of being more founded in reality, even though there is no evidence of that.

If the people applying scientific methods to their fields are serious, they need to establish whether there are, indeed, any underlying structures that can be discovered, that help us to understand their fields. Just waving scientific tools around in the air may make one’s studies look more prestigious, but in the end they will just look foolish.

The sad thing is the general populous can’t tell the difference between science rooted in reality and speculative science being employed in the hopes it will work. This, using science speculatively, seems to be a handle that the science deniers are using to discredit solid science. And that will not help us make progress.

January 19, 2018

Bollocks, A Steaming Load In Fact

Filed under: Economics,Education — Steve Ruis @ 1:06 pm
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Maryville University, of St. Louis, Missouri, USA, has been running a television commercial touting its services. Up front they say “Maryville University has been disrupting Higher Education by putting students first.” Whoa, this must be some place.

I wonder when this began. Maybe it was in 1921 when it converted from a secondary school to a junior college. Or maybe in 1923 when it became a four year college. Huh, two years of experience as a college of only freshmen and sophomores and they learned how to serve juniors and seniors as well. Now, that’s creative disruption.

But then maybe it was in 1961 when it became a liberal arts college, or 1968 when it became co-ed. No, it was 1991 when it became a university, surely that’s when it began.

This university could not have a more mundane history, jumping through hoops, moving up the academic hierarchy, playing by all of the rules.

The commercial says that “the higher education system is broken.” Really? Maybe it is due to all of that creative disruption on Maryville’s part.

I have been a vocal critic of higher education for at least the last 50 years, but the system is far from broken. Most of the countries around the world would die to have such a system in their country (China foremost on the list). But, costs to students have been spiraling out of control for quite some time and I do not see anything, including market forces, doing anything to curb these. Maryville is a private university that has tuition, I am sure. Let’s see … “Tuition for Maryville University of Saint Louis is $25,558 for the 2015/2016 academic year. This is 5% cheaper than the national average private non-profit four year college tuition of $26,851. The cost is 57% more expensive than the average Missouri tuition of $16,299 for 4 year colleges (my emphases).” Gee, I wonder if this is what they mean by “putting students first?”

Really, what does “putting students first” mean? First in line at the cafeteria? Certainly first in line at the Bursar’s Office to pay their tuition (57% higher than the average Missouri tuition).

And the whole idea of “creative disruption” was bogus from the get go. No such phenomenon seems to exist except in the minds of business consultants.

So, this TV advert is just another load of bollocks to get people to pony up four times $25,558 (that’s $102,232 … if you can finish in four years (most cannot)) for a four-year education. We can only hope it was written by an intern in one of their communications programs.

Listen, I was either a student or a professor in colleges from 1964-2006, that’s … 42 years … yeah, that’s right, and I never even heard of a college or university that didn’t believe that their primary mission was to serve … society … by serving students. Students do not come first, but they were and are the focus of everything done. Students do not set the standards, they do not determine the curriculum, they certainly don’t determine times, dates, places, costs, etc.

But they are the main focus of everything done.

Please do not misunderstand me. I had colleagues more interested in their careers than their students. They do exist! (They are … out there!) But they are not the norm, nowhere near it. Most teachers are good hearted people who want to do a better job than they did before. The staff and administrators were very much the same. The Boards of Trustees were focussed on students, too, even though they were about as removed from the process as you can be and still be a part of it.

But students are the main focus of everything done … everywhere in U.S. Higher Ed.

Well, except when it comes to big-time college athletics … allow me to … <grumble, grumble, grumble …>

 

January 12, 2018

Three Billion = Not Enough

Today, Carrier, the profitable heating/ventilation/air conditioning company, owned by United Technologies Corporation, a federal contractor whose climate, controls, and security division, of which Carrier is a part, reported three billion dollars in operating profit in 2016—is letting go of more than two hundred employees in its second and final wave of Indiana-based layoffs, which began last July. In total, the company will be laying off more than five hundred employees as it moves manufacturing jobs to Monterrey, Mexico. Many of those employees voted for Donald Trump, who made saving Carrier’s “big, beautiful plant” one of his most repeated campaign promises. It was part of his broader pre-election claim that “A Trump Administration will stop the jobs from leaving America.”

Do realize that careful analyses of such moves often show the savings are minimal. Because the jobs are no longer near the U.S.-based managers, another level of managers has to be hired. Then there is transportation costs, and…. One thing you can be sure will be affected is their stock price. “Shareholders” love these moves, why no one knows. I suspect it is the choir praising the minister as both managers and shareholders belong to the same church, the Church of Greed.

Three billion dollars in profits in just one year and a sterling reputation for quality and … oh, we have to move to save the company? WTF?

January 5, 2018

Our Current Crop of Economists” Wrong, Wronger, or Wrongest?

Filed under: Economics — Steve Ruis @ 8:30 am
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If you want a completely different take on what economics could be, showing us why the current path we are on is one to oblivion, this is a must read. And it makes a lot more sense than the gibberish we are currently being fed.

More Power to the Workers: Seymour Melman on Extraction by the Military, Managers, and Finance

If you want to understand the modern world, the Naked Capitalism site is an absolute help.

December 30, 2017

The Only Way to Less Inequality?

Here is a devastating assessment of the actual cost of the GOP’s recent tax bill. It is by Bill Honig, who I have met and consider to be a smart and honorable man.

http://www.buildingbetterschools.com/2017/12/26/faq-for-gop-trump-tax-bill/

Much of the GOP tax bill has been labeled as “bad news,” so I do not think you will be surprised to find out the news is worse that we thought. I bring this up because a new book has come out that addresses the history of inequality and the only forces that seem to reverse it for even small periods of time. The book is “The Great Leveler” by Walter Scheidel. Here is part of the description of that book (from Amazon.com):

How only violence and catastrophes have consistently reduced inequality throughout world history
Are mass violence and catastrophes the only forces that can seriously decrease economic inequality? To judge by thousands of years of history, the answer is yes. Tracing the global history of inequality from the Stone Age to today, Walter Scheidel shows that inequality never dies peacefully. Inequality declines when carnage and disaster strike and increases when peace and stability return. The Great Leveler is the first book to chart the crucial role of violent shocks in reducing inequality over the full sweep of human history around the world.

Ever since humans began to farm, herd livestock, and pass on their assets to future generations, economic inequality has been a defining feature of civilization. Over thousands of years, only violent events have significantly lessened inequality. The “Four Horsemen” of leveling—mass-mobilization warfare, transformative revolutions, state collapse, and catastrophic plagues—have repeatedly destroyed the fortunes of the rich. Scheidel identifies and examines these processes, from the crises of the earliest civilizations to the cataclysmic world wars and communist revolutions of the twentieth century. Today, the violence that reduced inequality in the past seems to have diminished, and that is a good thing. But it casts serious doubt on the prospects for a more equal future.

This book supports my view that the fundamental purpose of civilization is to create inequality of income, wealth, and opportunity, for the benefit of the elites, both secular and religious, with the costs to be born by everyone else. And I have advocated, sometimes tongue in cheek, that it was time to get out the pitchforks and torches, but if this author is correct only “mass-mobilization warfare, transformative revolutions, state collapse, and catastrophic plagues—have repeatedly destroyed the fortunes of the rich” we are in quite dire straights. We have been making war on other countries for over 200 years of our existence, and it is a very rare occasion for war to intrude on our shores, and a “mass mobilization” for war means the war has to be very, very large indeed. That is a path, in this age of nuclear weapons, I do not wish to take. State collapse and catastrophic plagues aren’t appealing, so that leaves “transformative revolutions” to us. Such revolutions can be non-violent (rare) or violent and considering the polarization of the U.S. and our massive personal stockpiles of weaponry, it looks like a peaceful revolution will be a very good trick to pull off, indeed.

I do note, however, that the only way to avoid the toxic effects of wealth is to make sure great amounts of it either do not occur or are reduced when they occur. This means that a major function of a democracy is to … wait for it … wait … redistribute wealth away from the wealthy. Unfortunately, our governments have been captured by the wealthy who have been busy redistributing wealth to the wealthy for the past 40 years.

My only hope to avoid large scale violence is that the GOP’s paymasters will so overplay their hand that there will be a quasi-socialist revolution that will give power back to the people and defang the wealthy elites now running the show. My preference is for new political parties (two at least) as the ones we have have failed miserably and have too much baggage to carry into the future.

December 20, 2017

The Difference Between Corporate Taxes and Personal Taxes

Filed under: Economics,Politics — Steve Ruis @ 11:35 am
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There seems to be a cottage industry in glossing over the differences between corporate taxes, aka business taxes, and personal taxes. I have to assume that this is motivated primarily by ignorance but I suspect some willful “muddying of the waters” also.

Corporations/businesses are taxed only on their “profits”’ (or “operating surplus” or “earnings”) which are the businesses gross income minus the costs of doing business. For example, and as I have mentioned, in 2016 Walmart had earnings of about $126 billion but only about one fifth of that was taxable, on which they paid about $6 billion in taxes. Walmart claims that represents a 20+% tax rate and it does, based upon how taxes are calculated for businesses.

Consider what your personal income taxes would be if you were a corporation (consider it as an option; you’d still be able to vote, make political donations, etc.). Your total earnings for the year is in the form of salaries and interest on savings, etc. This is your “Total Income” on your IRA 1040. You get to make various “adjustments” to this by law and to come up with the famous “Adjusted Gross Income.” Last year I was able to knock off $105 from my total income this way. Then you are allowed “personal deductions” involving various and sundry things and voila, you end up with your “Taxable Income.” Last year, my taxable income was just under 83% of my adjusted gross income. For Walmart, their process reduced their income by roughly 80% while mine was reduced by less than 20%. And then tax was applied.

Personal tax rates top out at 39.5%, business tax rates top out at 35% (until the Repubs are done with their current exercise in “democracy,” when this will be reduced to 20% or so). So, there is some commonality there, but the difference is what those rates apply to that makes the comparison stupid.

If you were treated like a business, before your taxes were applied, you would deduct all of the expenses incurred in acquiring your income. So, the cost of your car/truck and its maintenance, and the gas you burn in it to get back and forth to work would be deducted, as would a portion of the cost of your house to store said vehicle, aka the garage. Then you would deduct most of the cost of your house as it is needed to maintain your person so you would be fit to work, that would be deducted. (Some allowance would need to be made for recreational use of the facilities, but the bulk could be “written off.”) All of the cost of the maintenance of your house could be written off as necessary maintenance of facilities. All you spend on utilities could be written off. A percentage of the cost of your food could be written off. And, any investments made to improve the facilities or your vehicle are allowed deductions.

Think about it … what would your tax bill be like if your taxable income were just 20% of your adjusted gross income? Obviously, if this were the case, adjustments to the tax system would need to be made and they have! The adjustments, though, have favored business over and over for the last forty years or so. The biggest change has been in the amount of “payroll tax” paid by wage earners. It now exceeds income taxes for many citizens. (Ronald Reagan got the ball rolling by giving everyone a tax cut, but just slipped a larger payroll tax on top of those, so no one was better off in the end … except, well, the corporations.)

So, when people compare tax rates, realize that before corporate taxes kick in, the bulk of their income has been declared “non-taxable” first. Which of these is not like the other? Personal income taxes and business taxes on profits are not at all alike or even comparable.

And, if corporations are people for political purposes, why are they treated differently from the rest of us? Why are they favored in the tax system?

December 17, 2017

Oh, Boy, Oh, Boy … We’re Number One!

Filed under: Economics,Politics — Steve Ruis @ 10:21 am
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The U.S. is demonstrating our exceptionalism to the rest of the wold not only by making war around the globe, but also now we are number one in income and wealth inequality.

Since 1980, when western Europe and the U.S. showed similar levels of inequality, the gap between the richest and the rest has surged in the U.S., while in western Europe it has increased only moderately.

In both regions, the top 1% of adults earned about 10% of national income in 1980. Today that cohort’s share has risen modestly to 12% in western Europe, but dramatically to 20% of all income in the US. The good times have been especially good for those at the very top in the U.S., with annual income booming by 205% since 1980 for the top 1%, and by 636% for the top 0.001%.

The American population … has it benefited from this wealth trickling down? Nope, the average annual wage of the bottom 50% has stagnated since 1980 at about US$16,000 per adult (after adjusting for inflation and before taking into account taxes and transfers). The idea of trickle down economics was a scam and still is a scam, perpetrated by the elites on the masses. It’s as it this is a tale of two countries: the top half has been growing at roughly the same rate as China, while for the 117 million American adults in the bottom 50%, income growth has been nonexistent for a generation. In western Europe, by contrast, incomes of the bottom half have matched overall economic growth over the last quarter of a century.

The takeway is very simple. For any of the sniveling, GOP dollar sucking economists who try to explain this away as due to “globalization,” or “automation,” or any other phenomenon, their arguments are bogus, because if those arguments were true, the effect on the U.S. and, say, Canada, or western Europe would be roughly similiar … and they are not. They may be having an effect, but they cannot explain the large increase in wealth and income inequality being experienced.

The real reason is class war. The wealthy have captured the mechanisms of government and have used them to benefit the wealthy above and beyond anyone else. If you desire any proof exaimne the Trump administration’s actions. Exhibit No. 1 is the tax bill currently being rammed through Congress. At least 40% of the benefits will go to the top 1%. If you look at the actions taken since its inception, the adminstration has done everything to advantage corporations and rich people and nothing to help the poor or middle class.

And they only call it “class warfare” when we fight back. When will we begin to fight? Or will we just be ground into dust as has happened so often in the history of civilization?

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