Class Warfare Blog

October 11, 2019

Something is seriously wrong with this system.

Filed under: Economics,Politics,The Law — Steve Ruis @ 10:04 am
Tags: , ,

Over at the Naked Capitalism site there is a significant post on the costs of healthcare insurance—Wolf Richter: How Employees & Employers Get Bled by Health Insurance.

It is no secret that the healthcare insurers figured out that union-negotiated healthcare insurance was a spigot to tap the wealth of the nation so as to flow into their coffers.

The unions thought that they were negotiating a “fringe benefit,” a non salary-based benefit and that this would make sense for one and all. Everyone needed access to healthcare services, so making it a fringe benefit made sense. It also allowed a larger “purchase” to be made, thereby holding down the costs.

But insurers recognized that the prices they charge were made invisible to the employees and so they used the specter of employee unrest to jack up prices wholesale. Even employers were caught off guard.

Here’s a taste of the article, check out this graphic. It covers only a 20 year span, in which healthcare “costs” increased at a substantially higher rate than, well, anything else. (Why? Because there was no one in charge?)

As a contrast to this consider the school textbook market. All states buy textbooks for their schools. Some states, like Texas and California, are so large that textbook publishers cannot lose sales to those states, so they cater, fawningly over the states with the most buying power. Imagine if there were one giant healthcare insurance customer. Imagine the buying power. Imagine the ability to oversee this entity (as there will be only one customer, with only one suite of paperwork, one set of reports, etc.). Imagine the pressure on drug manufacturers and all of the rest to make sure they get their piece of the pie.

Can’t possibly work, you say? Well it is working . . . in numerous places around the globe . . . and even right here in River City. In the form of Medicare and the Veterans Health Administration.

 

 

 

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September 11, 2019

Socialism Bad, Capitalism Good

I am not going to state anything novel here but will reinforce things already said. Currently there is an aspect of our political discourse that is summed up by the title of this post. It is, of course, false. What the “defenders of capitalism” are arguing for is the status quo in which we have a quasi-capitalist system, but one that protects the rich and screws the poor.

Think back on the Great Recession of 2008. If you are a pure capitalist, then a great many financiers, bankers, investors, and brokers should have lost all their money (everything but the bare minimums allowed in bankruptcy proceedings). Through greed they backed the wrong horses.

But the word “bailout” then comes to mind. To coin a phrase “there are no bailouts in capitalism” just as “there is no crying in baseball.” If you have taken college-level courses in capitalism, nowhere will you find governmental bailouts as a structural part of capitalism. These sweet deals are brokered by rich people with the people who serve them to protect their wealth.

It was argued that “we couldn’t let such-and-such a bank or insurance company fail.” Wha? Failures is what capitalists brag about. It is what keeps them sharp. It is the leading edge of “competition.” Without failure, just what is capitalism? All of those people should have failed and learned from the experience . . . or not. So, what did they learn instead? A sucker is born every minute?

So, when you hear anti-socialist rhetoric realize that it is from the wealthy, or paid for by the wealthy, to protect the good deal they have going, nothing more and nothing less. And this is actually rebounding upon the rich. Younger Americans hear the anti-socialism rhetoric and they think “Ah, this is what we need to counter those greedy ass hats.” The young are embracing socialism more and more as the rhetoric against it is ramped up. And the harder the rich squeeze the poor and middle class, the more these younger Americans are embracing some form of democratic socialism.

They also aren’t stupid. They see countries like Sweden which are capitalist, just not capitalist as we are. They have a form of democratic socialism, in which the inherent negatives associated with capitalism are suppressed. The government acts on behalf of the people and offers basic services that seem to be the norm in civilized countries. They recognize, as do all thinking people except captured economists and bought politicians, that capitalism is self-destructive unless it is controlled significantly. In this country, the wealthy have turned phrases such as “government regulation” and “unearned income” into either non-terms or epithets. Why would they want there to be no controls on capitalism? Because in this country, when things go well, they profit enormously, and when the crashes inevitably happen, their paid-for politicians step in and the “public” bails them out. This heads I win, tails you lose system benefits only the wealthy, so their support of it is no surprise. The actual surprise is the support existing in the general population for this robber baron mentality.

August 13, 2019

Have You Ever Heard of Unearned Income?

How do you describe “pure” socialism? For most people it is “the government” (aka “We The People” in the US) owns the “means of production.” So, the government owns all of the businesses, factories, etc. and we all work together to benefit one another. Unfortunately, this ideal too often became totalitarian socialism, in which a political elite took over the system and it served the elite much more than it served the people as a whole. In some modern countries, the idea of democratic socialism seems to be working better.

What brought this to mind is I was reading an interview of an author on the Naked Capitalism website and the interviewer, John Siman, stated and asked the following:

John Siman: You have got me thinking about what economics—political economy—was originally supposed to be: a liberation from feudalism, from greedy rentiers and so the freedom for the common man to enjoy the fruits of his own labor and for the enterprising man to undertake great business projects. We should tax only unearned income!—that’s what the classical economists taught, right? So my deep worry: Are our academic neoclassical economists really latter-day medieval theologians, using arcane learning to uphold the privileges—specifically, to protect the unearned income—of a corrupt elite? After two or three centuries is the Enlightenment over as we enter a new feudalism? (It seems to me that we are already in a new Gilded Age.)

To unpack this (there is a lot going on) you need to know a few things. For one “rentiers” are not “renters” or even landlords per se, they are “people living on income from property or investments.” A good example of such are shareholders in a corporation. They receive dividends or profit on sales from that stock and that money was, for a very long time, referred to as “unearned income,” money earned by means other than the “sweat of one’s brow.” And, “political economy” was the original name for the study of economics, politics referring to interactions of people and economy being “involving money.”

You probably learned about feudalism in school. This was a system whereby “royals” owned the land and, basically, the people who worked it (serfs). They didn’t claim absolute ownership, but serfs were not free to pack up and leave, they were “tied to the land.” And even if they did pack up and leave, there were no “jobs” to be had in nearby locations. It strikes me that feudalism was a form of socialism. “The government” absolutely owned the means of production (including the serfs). This was not benign socialism, this was totalitarian socialism. (Not that the “rulers” didn’t ever do anything for the “ruled.” There were limits to what the “rentiers” could extract. Abuse your serfs/slaves too much, e.g. starve them by confiscating too much of the crops they raised, and they wouldn’t be able to work. And, please, do not try to convince me that having a local “central committee,” as in modern socialism, is substantially different from having a local earl or duke, the “government” in feudal times. “Remote and autocratic” describes both.)

So, as feudalism broke down, capitalism was created. And so was “economics” whose first fruits, apparently, were to craft a “liberation from feudalism, from greedy rentiers and so the freedom for the common man to enjoy the fruits of his own labor and for the enterprising man to undertake great business projects.” (Merchants were the first members of the “middle class,” that is between rich and poor, and widely despised by the elites.) And one of their first ideas was that “We should tax only unearned income!”

This practice balances the playing field, economically, between the rentiers and people who worked for a living. Selling one’s labor is a fine idea, but there is a limit: you only have so much labor to sell. But rentiers are unlimited in the amount of property or investments they can accrue. The well-to-do can become wealthy, the wealthy can become rich, millionaires can become billionaires and I assume we will soon see billionaires become trillionaires. Since wealth can be converted into political power, the scales of politics are tilted heavily in favor of the wealthy. To balance the scales, the early “political economists” established the idea of only taxing that rentier income and not taxing honest labor.

I have written recently (at least I think it was recently) on the disappearance of the term “unearned income” from public economics discourses. (Economists may still use it privately; I don’t know.) The term has basically vanished. And, out of sight, out of mind. The term is obviously connected to the core idea of those early economists, to only tax unearned income, and it flies in the face of the narrative of the wealthy that “they built it,” that they earned everything they have. My favorite example of this thinking was Mitt Romney, who claimed to have earned everything he owns, while at the same time his rich and powerful father (George Romney: chairman and president of American Motors Corporation from 1954 to 1962, the 43rd Governor of Michigan from 1963 to 1969, and the United States Secretary of Housing and Urban Development from 1969 to 1973, etc.) gave him two $2,000,000 “to get started” and access to his influential and wealthy colleagues. (I remember this figure because during my almost 40 years of work as a teacher, I earned about $2,000,000 (both numbers are uncorrected for inflation). If I had been given $2,000,000 to “get started” I would not have had the gall to make the claim Romney does.)

The disappearance of the term “unearned income” from public discourse was no accident. And, if you use the term now, most people will be confused by it. The elites have scammed the system so well, that they have managed to get earned income taxed at a higher rate than unearned income (through the capital gains tax and others)!

So, capitalism was created to protect us from “feudal socialism.” What now can we get to protect us from capitalism and its captive economists? (Economists aren’t evil people, but their field has been captured by the rich. Oppose the rich strongly enough and you will no longer have either a reputation or a college professorship. Economists do know which side of the bread the butter is on.)

July 2, 2019

The Absurdity of Maximizing Shareholder Value as a Business Goal

I have written about this before, but this post over at Naked Capitalism drives the nails home into the coffin of this very, very bad idea. (Being a Zombie idea will make this turkey very hard to kill.)

Rebel Economist Breaks Through to Washington on How Shareholder Value Theory Rewards the Undeserving

 

June 3, 2019

Why Are There So Many Signs of Distress in a Supposedly Robust Economy?

Over at the Naked Capitalism website there is a post focused on the St. Louis area but I think has application all over this country—St. Louis Fed Study Shows Rising Level of Financial Desperation Among the Poor, Hidden by Aggregates by Yves Smith.

I have blogged recently on economic indicators, basically claiming that if you use indicators of economic health that basically measure the fact the “the rich are getting richer,” you aren’t looking at the right indicators. For example, using the health of the stock market as an indicator of how ell the economy is doing is ludicrous at best.

This post by the wonderful Yves Smith addresses a ZIP code by ZIP code analysis of economic measures of economic distress and wealth accumulation or the lack of it, etc. The basic point is using “aggregate” economic measures (aka averages) masks the real situation.

Also, the “traditional” (aka what has always been recommended) strategy to “get ahead” no longer works. As a youth I was told that if I worked hard, saved some money, and was careful I could achieve the American dream. Because of wage suppression, run away health care costs, and near zero interest rates on savings, this strategy is broke, busted, and we are disgusted.

People work hard, often with more than one job, but sky high rents and health care costs, suck up the majority of what is made and no savings accrue. Actually debt is increasing in the bottom rungs of the economic ladder.

My first full time job made me the grand sum of $9000 per year. Today, health insurance for a family of four is around $16,000 per year. Granted that there has been a considerable amount of inflation since then, but. . . . As another comparison, if one were to work a job, full-time: 8-hours per day, 5 days per week, with 11 unpaid holidays and no vacation, you would gross around $14,400. That’s gross, not net, so taxes (little in the form of income taxes, but payroll taxes) and whatnot have to be taken out to get at the actual amount of income this job would provide. If a household had two such jobs, the total net income might reach $26,000 or about $2170 per month. If this family is four in number (kind of an average) there will be no health insurance in that budget. Even subsidized health insurance would eat up quite a bit of that. In many areas of this country, that would barely cover rent and food, with transportation in the form of a family car (insurance, gas, maintenance) being out of the question.

It seems that the majority in this country now lives pay check to paycheck (I do) and that had been the case for most of the history of this country, but we were starting to get away from that after WW2. Now we are backsliding, with the skids being greased by the greedy rich who have bought Congress and much of the judiciary.

This is an interesting post and I recommend it to any interested in our current economic system.

Postscript Any politician who runs around claiming that the economy is robust or strong and beats their chest about it will be crushed at the polls in the next election. People are hurting and having smug elites tell them they are wrong to hurt will just increase the disaffection with the status quo that got us first Barack Obama and then Donald Trump. The GOP is likely to put up Donald Trump again and if the Dems decide on an avatar of the status quo (like Joe Biden) expect the repercussions to be severe.

 

 

May 25, 2019

Now I Understand!

Filed under: Economics,Politics — Steve Ruis @ 11:59 am
Tags: , ,

In a recent post (What, The Huge Trump Tax Cut Didn’t Prevent This?) I pointed out that the Ford Motor Company has been laying off employees and will be laying off even more in an effort to save money. I though this is what the huge tax cut given to corporations like Ford was supposed to solve.

Then I stumbled on this NYT graphic of the corporations in 2018 which paid no federal tax (some even receiving rebates!):

Stunningly FoMoCo was not on this list, which means they have been paying corporate income taxes! (Apparently three out the past ten years!)

No wonder they are having financial problems! Fools!

May 19, 2019

We Are Using the Wrong Economic Indicators

Filed under: Economics,Politics — Steve Ruis @ 12:08 pm
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Currently our “news media” (whatever the heck that is now) are trumpeting things like the US GDP (Gross Domestic Product), unemployment statistics, average wages, and Dow Jones stock index levels as indicators of the “health” of the economy. And, boy is the economy strong!

Wrong, wrong, wrong, wrong.

These indicators were chosen by the elites to serve the elites.

Consider the Gross Domestic Product, a measure of how much we produce in goods and services. How does that reflect on the welfare of the nation’s citizens? It doesn’t. It indicates how “productive” the economy was . . . but in service to whom? If all of the nation’s output was shipped overseas, the GDP wouldn’t change, but the indicator would indicate how well we were serving overseas customers, not Americans. Shouldn’t economic indicators indicate how well our economy is serving our citizens? (We the people, etc.)

Maybe a Gross Consumption Index would be a better measure. No matter how much we are producing, Americans won’t buy things when they are feeling economically insecure. So, it is more important how much Americans are consuming than they are producing. Is there such an index? If so, you couldn’t tell from the news organizations.

And don’t get me started about unemployment statistics. The number of full-time jobs with benefits is still shrinking, only to be replaced by part-time jobs with no benefits and shit wages. But unemployment is at a record low! Oh, and we don’t count people who have officially stopped looking for a job.

Average wages? Give me a break! Median wages, the wage at the exact middle of the wage spectrum has been decreasing! This means that there are more people making less and just a few making much, much more than that number.

The whole purpose of these misleading “economic indicators” is to convince us that the politicians are doing their jobs. Unfortunately, they are doing it for only the wealthiest among us.

May 8, 2019

The Bullshit Scam that Are FICO Scores

We have all been told that FICO credit assessment scores are important. There are even services that will help you improve your FICO score, so you will have more credit opportunities.

It is all bullshit and a scam on the public.

I am a responsible person (IMHO of course). I pay my bills on time with rare exceptions, usually based upon forgetfulness. In any case, I have run up quite a bit of credit card debt, not unlike many Americans. But I was paying them down assiduously. I paid off one card and closed the account, a sign of a good faith borrower, I thought . . . and then my FICO score went . . . down. WTF? I still have plenty of accounts, but if I close one I am less credit worthy? WTF? How does that make sense?

I then paid off a car loan! Woo hoo, I paid off my car and I owned it free and clear . . . and my FICO score went . . . down! Again, WTF?

All of the signs of being an honorable borrower cause my credit score to be decreased?! So, I kept my head down and just paid down what I owed. I paid more than the minimum payment on my credit cards every month, and my FICO score climbed up to 700 and beyond! I was so proud!

But, I wasn’t making enough progress on reducing my credit card dept, so I applied to my Savings and Loan for a signature loan (that had a lower interest rate than my credit cards) and paid off my all of my credit cards (Balance = $0)! Note that I replaced my CC debt with an unsecured loan debt of the exact same amount in this process, so my indebtedness did not change even $1. So what happened?

My FICO score soared from ca. 700 to ca. 800! I was now much more credit worthy than I was before, even though my indebtedness was exactly the same! Also, I did not prove my ability to pay off loaned funds at all! But, now I was an “excellent” credit risk where before I was only a “good” credit risk.

Ironically, my S&L checked my FICO score to assess whether I was worthy of the signature loan (aka no collateral loan) when they processed my loan application.

So, what do I conclude from all of this?

I conclude we have been conned. FICO scores (created by a private credit scoring concern . . . I wonder what their corporate values are?) are part of an institutional effort to make sure we are indebted to the system to the max. They are designed to make sure that we can borrow much more than we are prepared to repay in any one year or even one decade. They are a tool of the lending institutions and the financial elites who are now running the whole fucking show!

That Donald Trump is one of their minions doesn’t help one fucking bit. I feel I want to go around the world apologizing to people in all of the countries of the planet for electing the abomination who is Donald Trump and for supporting an American system that oppresses so many people, including our own.

 

April 11, 2019

Is Capitalism Given Too Much Credit?

Filed under: Economics,History — Steve Ruis @ 8:27 am
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Over at Ian Welsh’s website, Mr. Welsh has posted yet another brilliant takedown of our common knowledge/wisdom, aka “everybody knows.” he points out that many of the benefits claimed for capitalism were actually a result of industrialization, something that allowed the nascent Soviet Union to outgrow most other countries for quite some time.

Don’t Confuse Capitalism with Industrialization

Here’s a taste:

“We need to stop being nodes in a shitty resource allocation algorithm, and we need to start actually making sane decisions based on group autonomy and welfare.

“And capitalism, capitalism doesn’t do that.”

A very important perspective.

This is typical of what people do. If they like something they attribute positive properties to it whether or not they are possessed by that thing. I recall a teaching colleague who regularly received high marks for her sense of humor in her mathematics classroom. She points this out because she used no humor whatsoever in her teaching. But she was a very good teacher and was also kind and understanding as the teacher of a topic some find quite difficult, so she received high marks for everything surveyed.

Have we done the same for capitalism? I believe so. In addition to this normal tendency, there are people who have much to gain who propagandize the topic. These people often claim that “capitalism is the greatest economic system ever invented,” but if you query them on their knowledge of other economic systems, they are woefully ignorant. How can one claim A is better than B when they have no real idea what B is?

Read the piece, highly recommended . . . and it is short!

April 2, 2019

And Forgive Us Our Debts

Michael Hudson is writing a series of books on the topic of debt forgiveness as a necessary component for capitalism to work. This topic evoked in me a memory of a conversation I had with my mother when I was a lad. She commented in church that the original version of the Lord’s Prayer included the phrase “… and forgive us our debts as we also have forgiven our debtors” but this was not approved of by the wealthy so it was transformed into “… and forgive us our trespasses as we also have forgiven our trespassers.” (By sixteenth century Anglicans?) There are a number of variations of these “translations,” but whatever was come up with (trespasses, sins, etc.), it was to get debt forgiveness (part of Mosaic law) out of that prayer.

A bit of this history is to be had at Naked Capitalism in the form of:

The Delphic Oracle Was Their Davos: A Four-Part Interview With Michael Hudson About His Forthcoming Book The Collapse of Antiquity (Part 1)

Highly recommended.

Some Enticing Teasers:
• “Rome was turned into an oligarchy, an autocracy of the senatorial families. Their “liberty” was an early example of Orwellian Doublethink. It was to destroy everybody else’s liberty so they could grab whatever they could, enslave the debtors and create the polarized society that Rome became.”
• “That’s why you don’t have any history of economic thought taught anymore in the United States. Because then you’d see that Adam Smith, John Stuart Mill and the “Ricardian socialists” and indeed most of the 19th century had a completely opposite idea of what constituted a free market … (o)pposite from the neoliberal idea that freedom means freedom for the wealthy to indebt and destroy the economy. Opposite from the liberty of Brutus to overthrow the Roman kings and establish an autocratic oligarchy.”

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