Class Warfare Blog

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 18, 2017

GOP Gives Lie to Their “Small Government” Goal

The GOP has clamored for smaller government, mostly at the federal level, for many decades. “Big Government” was a term said only as a slur. In particular, the GOP has advocated that the federal Department of Education should be dispensed with as education was the responsibility of the states. (I do not argue with that point.)

But, well, times have changed. In particular, the GOP is in power and positioned to do almost anything they want to do. So what do we get? According to a press release from the American Association of School Administrators:
“Alexandria, Va. – May 17, 2017 – Legislation pending in Congress would create new opportunities for corporations and successful investors to earn huge profits by transferring public funding to private schools, according to a report released today by AASA, The School Superintendents Association, and the Institute on Taxation and Economic Policy.
“The legislation—the Educational Opportunities Act—would put two new federal voucher tax shelters within reach for many more Americans and lead to an explosion in funding for private schools. It would also keep in place an existing federal loophole that permits savvy taxpayers to benefit from ‘double dipping’ practices, where they receive a federal deduction and state tax credit on the same donation to a private school entity. At present, high-income taxpayers in nine of the 17 states offering voucher tax credits can turn a profit using this technique.

So, apparently, federal meddling in the state’s business of educating the next generations is now okay now, because … money.

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 8, 2017

Twenty Questions—Plus Four

Filed under: Politics — Steve Ruis @ 9:14 am
Tags: , , ,

Remember the game of 20 Questions? Here are twenty-four commonsensical questions about our stance in the world that, if answered, would clarify our relationships with all other nations greatly.

I strongly recommend you read “Andrew Bacevich: What Obsessing About Trump Causes Us To Miss”.

May 5, 2017

Negotiating 101: Big Budget Victory? Hah!

Filed under: Politics — Steve Ruis @ 1:06 pm
Tags: , ,

Scientific American magazine crowed with an article title “Science Wins Reprieve in U.S. Budget Deal.” They, of course, used the word “win” more than once, e.g. “The biggest winner is the National Institutes of Health (NIH)….”

Winners, right …

It is a standard negotiating ploy to threaten to take something away and then elicit concessions to be allowed to keep that thing. This is a no cost ploy as nothing needs to be traded for those concessions, only threats need be made (and, boy, are they cheap).

Was any progress made? Was any action taken against Climate Change, or the infant mortality rate, or any action taken for any scientific effort?

No.

Not a victory, folks.

For you science-types out there, it is called Round 1.

 

 

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.

May 2, 2017

Please Stop with the “Trump This …” and the Trump That …”

Recent articles have crowed about the GOP cave-in on the budget by talking down Mr. Trump’s vaunted “negotiation skills,” as if the President actually negotiated budget agreements (none do). These headlines are part of a long series of headlines claiming the source of this or that activity by “Trump …” when clearly they are not Mr. Trump’s ideas or initiatives.

To wit: can you name one idea that is Mr. Trump’s and Mr. Trump’s alone? The Wall? Remember John McCain’s campaign stop in Arizona at “the Wall?” Heck, it was being built before Mr. Trump even mentioned it. How about tax reform? (Please, this is as common as there are people with tax axes to grind.) Money for the military? Get tough on NATO … the Chinese (currency manipulators?) … the Russians? All pre-existing ideas.

Can you name one initiative of the GOP that Mr. Trump has tried to husband through? (Hint: There is only one.) The GOP health care initiative? (Got it in one! Good job!). Mr. Trump actually picked up the phone and called some fence-sitting legislators about this one, but clearly this was not Mr. Trump’s plan, it was a mishmash of whatever the GOP thought it could get away with and call it “health insurance reform” or rather “The Repeal of Obamacare!” Mr. Trump did blurt out that he was releasing a tax reform plan within a week, which resulted in that bizarre one page memo that was anything but. Where is the vaunted organizational skills of the GOP on display. Can’t they enroll their usual allies in the Think Tank World to crank out some of these plans, on topics they know they want to address? How could they not come up with a decent tax reform plan? (I can understand the health care miasma (It’s complicated; who knew?), but tax reform is low hanging political fruit.)

I know it is traditional to put the president’s name on all initiatives of his administration, but this is giving our president too much of what he clearly craves: attention. If he deserves it, fire away. Otherwise direct your comments where they belong, at the people leading the charge.

I can’t wait for some foreign leader, when asked to respond to one of Mr. Trump’s tweets or one page memos, to say: “Mr. Trump says many things. We will wait until he actually does something to comment.”

What he has done so far can be described as “a number of things done in the last administration have been undone.”

April 26, 2017

Dishonesty About Taxes

The Current Administration wants to cut business taxes. They say the current rate, 35%, is too high and a 15% rate would be better for one and all.

Ah, please cut the crap.

When you add up all of the corporate taxes and income for 2016, it turns out that corporations paid about 14% as an effective tax rate. Individuals paid an effective rate of about 13.5%.

The reason these actual tax rates are much lower than the statutory marginal tax rate, is the rate most often stated is the maximum rate which doesn’t kick in until you have made a shitload of money. Even the 28% personal marginal rate doesn’t even begin until you make just under $92,000 dollars in any particular year. On the first bit you pay 10%, the next bit, you pay 15%, after that you pay a 25% on the amount above that amount up to about $91,000, as mentioned. Everybody pays this way. The only way someone can pay close to the maximum rate is to make a shitload of money … and have no deductions.

“‘In each year from 2006 to 2012, at ‘least two-thirds of all active corporations had no federal income tax liability.’ So much for corporations paying their fair share.”

The US Tax Code is a bloated document, not because of statutes that address personal income but because of the myriad tax breaks that sometimes only single companies get. This is why businesses spend money lobbying Congress, it really pays off in tax perks. Somebody recently calculated that for each $1 a company spent in lobbying Washington, it got a return of $28. That is one hell of an investment! According to the GAO “In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability.” So much for corporations paying their fair share.

There used to be a tax principle that said that people who make money by investing money (the “you know who”) should pay more in taxes than people who made money by the sweat of their brow. This has been reversed so that if you work for a living, you pay more in taxes than those who simply move money around (proportionately, not absolutely). Another tax dishonesty: “The rich pay more in taxes that you!” yeah, 10% of 100 million dollars is a lot more money than 10% of $50,000 but it is still 10%.

It used to be the case that companies paid more tax than individuals. That was back before the companies realized that they could buy the government and stack the deck in their favor.

These are same people who back the claim that corporations are people. Now they want to establish that corporations are better than people. (They worship them and want us to also.)

April 25, 2017

International Test Scores … and Other Meaningless Drivers of Policy

In yet another piece by a think tank on education [(Brown Center Chalkboard) “What International Test Scores Reveal About American Education” by Louis Serino, April 7, 2017] we are treated to a fairly typical display of data showing “some progress” but still typically mediocre results. (We are America, for Christ’s sake; shouldn’t we be #1!)

At the end of the article comes the important segment, which many will not read far enough to partake of:

“Why Do These Scores Matter?

Rankings based on international assessments are simple to understand—but they can also mislead. While researchers often shy away from using rankings in serious statistical analyses of test scores, they can have a substantial impact on political rhetoric, and consequently, education policy. Media outlets often take these lists and use them in headlines or sound bites, providing little context and furthering educational policy discussion that can often be misleading. To get the most value from U.S. participation in PISA and TIMSS, policymakers—and the public—should closely analyze the trends on both tests with caution and context.”

What almost all of these pieces leave out is a simple question: are we comparing apples to hand grenades? “Apples to oranges” is the usual forn of this cliché but that form instills some similarity in that the comparison is at least fruit to fruit, which is too close of a match for what these articles do.

To compare “fruit to fruit” we might ask “Has the U.S. ever done well in these international tests?” The answer is No! We have never, ever, ever done really well on those tests. There are many reasons for this but let me point out that our school children scored fairly mediocre in international math testing one year, the same year in which our school children won the prestigious and highly competitive Math Olympics. Also, since about the 1960’s we have had these “mediocre international test scores” but still had a university system the envy of the world, and innovation that was the envy of the world, an economy … well, you know.

In comparing “fruit to fruit” why should we compare how we did with how well Singapore or Shanghai did? Are they countries of similar population? (Hint: They aren’t even countries!) We break up high school football championships into myriad categories by size of the schools, but we compare a 300 million population country (us) with Singapore (pop. 5 million)? We are also compared negatively with Finland, an actual country, but one which has a population the same as Singapore’s. Sheesh!

And, what about breakouts? When we separate out some U.S. states, we can’t help but notice that Massachusetts does as well as any country on the list, all by itself. That is not often noted because you can’t claim that “public education is an abject failure” when there are examples galore of it kicking ass. Now there would be policy recommendations you could get from that one breakout factoid, maybe “Massachusetts seems to be able to make public education work for American students, lets all do it like Massachusetts.” That would be a viable policy recommendation if … if what Massachusetts does didn’t counter the narratives of some of the current crop of education reformers.

Would the automobile industry accept all of the input from think tanks, political groups, privately-funded reform groups, were they to insert themselves into the business of making cars? I think those entities would be more or less politely told to go suck eggs.

I think it is time for the education reformers to be told to go suck eggs. They do not know what they are doing. They do not know how to really analyze the data. And they have no special perspective you couldn’t get from a hired bean counter. They need to just go away and return education to the people closest to it.

 

 

April 23, 2017

There is No Real Anti-Science Movement

There was a March for Science across this country yesterday. It did not draw huge crowds but the participants were enthusiastic. Unfortunately, many of the participants seem to be close to declaring that there is a war on science or some other foolishness. There is not.

To show you this, consider the staunchest climate change denier. If they went to the doctor and were diagnosed with a serious disease and were offered a treatment produced by the finest medical science in the world, do you honestly think they would say “Science? I want none of that. Send for an exorcist.”?

A climate change denying businessman looking to upgrade his IT infrastructure looks at the proposals and decides “We want none of this ‘high tech nonsense,’ we want biblically-inspired computers.” Whadya think?

Photo by Jessica Kourkounis/Getty Images

The opposition to climate change is there because of economic interests that fear that taking it seriously will crimp their ability to make money. All of those politicians who say “the jury is not yet in on climate change” have no idea whether it is or it isn’t, but they are being paid to say it is not. The order President Trump made to have NASA stop studying the climate is not fueled by some “science is a waste of time and money” attitude on the part of the President. His party is being paid to do this.

Similarly, there is no scientific controversy over the Theory of Evolution. It is an established scientific paradigm. The religious have no problem with the theory (actually very few of them seem to even understand the basics); they have a problem with its findings. If the theory of evolution is true, then any creation story that contradicts it is false and, if you are from a religion that paints the Bible as being ultimate truth, you have a problem. The same thing goes for those religiously-minded who claim the earth is only 6000-8000 years old. To believe the scientific findings (the Earth is over 4,000,000,000 years old) is to toss one’s religion’s creation stories in the trash can and the beginning of “if the Bible got that wrong, what else does it get wrong?”

Science is all about living with doubt. Politics and religion are all about being absolutely sure you are right. Hence the conflict.

But do realize, it is the scientific results these people have a problem with, very specific results. On one hand, unborn children’s lives are sacred and on the other the Mother of All Bombs is a really cool outcome of war science. It is not “science” they question, only when science tells a narrative counter to one they cherish that they “oppose the science.” And since they can’t be bothered to learn the science to try to counter it (probably a futile effort anyway), they disparage it emotionally (I ain’t no kin to no monkey!) and politically (it is too expensive to invest a huge amount of money in uncertain science).

Targeted opposition to specific scientific findings is, however, feeding an anti-science attitude among those who do not want to get involved enough to see for themselves. I can’t see how this is helpful.

But, then, these are the same people who promoted an anti-government attitude (The government is tyrannical!) before they decided to run the government for their own benefit. I do not think they even bother thinking about the long term effects of their actions. There is too much money to be made in the short-term.

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