Class Warfare Blog

January 12, 2018

Oh, If Someone Else Will Pay For It, Sure

Walmart, the nation’s largest private employer, said on Thursday that it would raise its starting wages, give bonuses to some employees and vastly expand maternity and parental leave benefits for its army of more than one million hourly workers. The retailer said that it would use some of the money it expects to save under the recently passed Republican tax bill to pay for the raises and enhanced benefits.

Walmart said it would increase its starting hourly wage from $9 to $11, and provide one-time cash bonuses of up $1,000 to hourly workers, depending on how long they have been with the company. The wage increase brings Walmart in line with some of its other retail-industry rivals amid a tightening labor market. Target raised its base pay to $11/hr last fall.

So, Walmart is struggling to keep up with Target? WTF?

Within hours of its self-serving announcement, Walmart undercut its triumphal message when news leaked that it was closing 63 of its Sam’s Club stores.

So, was the wage increase a smoke screen? Some “good news” to cover the “bad news” to follow? Otherwise why make the announcements on the heels of one another?

And, since Walmart is using its “tax cut” to pay for some of these employee benefit increases, how much of it we do not know, are they saying “Gee, now we can afford it?” Walmart has made huge profits for its owners and investors for decades, large enough that they could have been a leader in how to treat their employees. But no, Walmart would rather their primaries get to become billionaires than their workers to have a living wage.

And if anyone claims that Walmart is paying the “market price” for its labor, I will scream! The “market” is not magic, in fact it is a political construct that has been manipulated to create the lowest possible labor costs for its participating companies. The “market” is something that is a lousy guide for any endeavor. Worse are “free markets.” Any decent economist can tell you that unregulated markets doom the sectors they serve. In fact markets cannot thrive without regulation. So, why is one of our major political parties campaigning on a “regulations are bad, we must get rid of them” plank? Ask the people who are paying for those opinions to be espoused and actions taken. (Hint: it ain’t you or me.)

As to who will actually pay for those raises, look forward shortly to the Repubs to cut benefits to poor people. Why? Because the tax jiggering they have pull off is going to lower federal tax receipts and “we won’t have the money” to pay for such frivolous expenditures. Look for Walmart employees, a class of workers who benefit from the government programs lined up for haircuts by the GOP, even with their raises and bonuses to be less well off a year from now than they are now.

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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?

December 18, 2017

Rigged, Rigged, Rigged … for the Elites, Of Course

The elites learned long ago that if you have to coerce people through physical threat, they were in jeopardy immediately. If a strong man in a tribe tried to bully all of the others, well all you needed were three people with clubs willing to take eight hour shifts and, well, the strong man has to sleep sometime and when he does … bam, his brains get used for decorations.

The elites learned that it is far easier to use another tool of oppression: culture. (Note Please do not think I am claiming that culture is only used to oppress. I am merely claiming it can be.) We use “tradition” to defend the status quo, for example. What is tradition but a claim that “we have always done it this way?” In more primitive times, when we didn’t have the ability to determine the best of a large number of options, sticking to the “tried and true” was a good strategy, but this strategy doesn’t allow for any positive innovations while disallowing negative changes. Religion is also a powerful coercive tool, being based on obedience … solely.

Consider the situation in the U.S. in which the elites have manipulated the system to their and only their advantage. For example, for the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0%. This is a rough measure of what the wealth of the elites gets in the way of a “return on their investment” (ROI). Have you been getting 7% on your saving accounts? No? I get about 1.2% on mine because they are ordinary savings accounts. Even special savings accounts don’t get much more than 3%. So, is the elite’s money special or something? Yes, it is.

The elites money has an artificially inflated ROI in that they have created a new culture in the corporate world around “shareholder value.” Many corporations now claim that their sole reason for existing is to maximize shareholder value. If you had suggested this to corporation executives in the 1960’s, they wouldn’t have known what you were talking about. Corporations used to have a manifold of reasons they existed. Creating a return on the investments of their shareholders would be one of them, but not the most paramount. They might have listed expansion of the business No. 1, or a transformation of the business to serve a changing market as No. 1, or quality as No. 1, and they certainly would have had goals portraying the corporation as a steward of their properties and as good citizens in their communities. Many of these could have been lip service only, but at least they were there. Now, goal one is “shareholder value” and there is no goal two or three.

Gosh, who would this benefit? Obviously shareholders, but who are those people? Oh, they are the elites, right? They own the vast majority of the stocks. So, the stock market has been captured by the elites to serve the elites and now only the elites.

This was pulled off by a change in corporate culture. How was this pulled off? Well, you start with a leashed economist who produces a “theory” that corporations are more efficient/profitable/whatever if they have that goal and that goal only. This was not a theory by the way, but it was called one. The rest of us would call it a “guess,” or and “idea,” or an “argument,” at best an “hypothesis.” It was never proven, just used as support for a culture change that was driven by prominent “shareholders.” (Please note that CEOs are now the largest segment of the elites and that taking much of their remuneration in the form of stock options was not their idea, but once it was, they became more accepting of the “shareholder value” focus of their corporations.)

Now it is a matter of “normal” business that the elites get a 7% ROI on their much larger amounts of wealth and we get ca. 1% ROI on our saved wealth. They start with more money than us and get a higher ROI, so their wealth “lead” keeps expanding because of the rigged system (7% of a larger number grows much faster than 1% of a much smaller number).

And this is just one aspect of the rigging of our systems. The stock market, as a whole, no longer plays the role you were taught in school. It is basically a rigged speculation market now, one that extracts wealth from corporations and funnels it to the elites, who use that money to buy more political and cultural changes. And guess who those changes favor …

December 17, 2017

The Insanity of the New Tax Bill

Filed under: Politics — Steve Ruis @ 10:23 am
Tags: , , , ,

In the GOP’s new tax bill (they wrote it; they own it) there is an attempt to diminish or eliminate the current federal tax subsidies for wind and solar power. One must ask why they are doing this as it is particularly insane.

The GOP is not against such subsidies. In 1918, the federal government created subsides for the then new petroleum extraction and refining industry. Those subsidies are still going, to the tune of 8+ billion dollars a year, to … what, help a struggling new industry develop? This is one of the most profitable industries worldwide at this point and we are still subsidizing them? Attempts to repeal them have been voting down over and over, alwasy with the help of the GOP.

The current wind and solar tax credits were introduced in 1992 and those industries are still getting their legs under them.

The GOP also wants to slash tax credits for electric vehicles. I wonder if they also want to bring back coal-fired train locomotives? Maybe coal-fired automobiles are in our future?

November 21, 2017

We’re No. 1 … We’re No. 21! Wait … WTF?

The new 2017 Credit Suisse Global Wealth Report helpfully calculates median net worths of countries. Switzerland and Australia top the global list. (Reminder: a median is the value in the middle, not an arithmetic average.) The median Swiss adult has a net worth of $229,000. The typical Australian, $195,400. And the typical American? A mere $55,876. Twenty nations in all have higher median adult net worths than the United States. So, we are No. 21.

Wait, we’re the richest country in the world, how come we are 21st in median wealth?

The really rich, those with at least $50 million in net worth, have multiplied five-fold since the year 2000 globally. About half of these, 49 percent, reside today in the United States. Credit Suisse counts 72,000 of these ultra-rich Americans. In context: China, the host to the world’s second-highest collection of $50 million-and-up personal fortunes, has only 18,100. The United States hosts more ultra-rich individual fortunes than the nations with next nine highest ultra-rich totals combined.

So, here in the U.S. the rich are getting richer, but the rest of us are falling very far behind.

Let’s consider the Australians, as we have a bit in common.

Australians used to see their nation as a relatively equal society. They don’t anymore. Rising inequality has become a major Australian political issue. But Australia remains far more equal a society than the United States. The top 1 percent in Australia only holds an estimated 15 percent of the nation’s wealth. (In the US, it is 38.6%.) So we are the wealthiest country in the world but we don’t have the wealthiest citizens as most of the wealth has flown into the pockets of a very few people.

And this is not a matter of that they are wealthy, it is what they do with the wealth they have accumulated. Basically, they don’t spend it. Poor people spend all of their money. Middle class people spend almost all of their money. That money goes to buying things from companies who provide jobs for people. The rich don’t spend anywhere near as much of their income. If they buy anything, it is investments which increase their wealth even more. None of that activity positively affects the economy.

Teachers Unions? Bah, Who Needs Them?

Six years ago, the state of Wisconsin passed the highly controversial 2011 Wisconsin Act 10, which virtually eliminated collective bargaining rights for most public-sector workers, as well as slashed those workers’ benefits, among other changes.

As Gov. Scott Walker (R-WI) argued, “We no longer have seniority or tenure. That means we can hire and fire based on merit, we can pay based on performance. That means we can put the best and the brightest in our classrooms and we can pay them to be there.”

Well, did they?

What do you think will happen to an employer who slashes wages and benefits? People will leave their employ. Who leaves first? The people who have the most confidence they can find another job, that is the best workers. Who stays. The sluggards, the unimaginative, the fearful … not all, of course, but a higher concentration of these stay. (Studies have shown this to be the case.)

Action Reaction
An analysis of the effect of Act 10 has found:

  • In the year immediately following the law’s passage, median compensation for Wisconsin teachers decreased by 8.2 percent in inflation-adjusted terms, with median benefits being cut by 18.6 percent and the median salary falling by 2.6 percent. Median salaries and benefits continued to fall during the next four years so that median compensation in the 2015-16 school year was 12.6 percent—or $10,843 dollars—lower than it was before the passage of Act 10.

  • The percentage of teachers who left the profession spiked to 10.5 percent after the 2010-11 school year, up from 6.4 percent in the year before Act 10 was implemented. Exit rates have remained higher than before, with 8.8 percent of teachers leaving after the 2015-16 school year— the most recent school year for which data are available.
  • The percentage of teachers with less than five years of experience increased from 19.6 percent in the 2010-11 school year to 24.1 percent in the 2015-16 school year.
  • Average teaching experience decreased from 14.6 years in the 2010-11 school year to 13.9 in the 2011-12 school year, which is where it remained in the 2015-16 school year.
  • Interdistrict moves—when a teacher leaves one Wisconsin district to teach at another the next school year—has increased from 1.3 percent before the passage of Act 10 to 3.4 percent at the end of the 2014-15 school year.

Are you surprised?

The False Narrative
The core of the false narrative is in plain sight; it is “That means we can hire and fire based on merit, we can pay based on performance.” This is a business model. The problem is that in a business, the “boss” owns the company (or the boss’s boss or the …). The owner has the right to hire and fire inherent in his ownership. In a public school, the “owner” is the public, the taxpayers of the school district. There is no mechanism by which those owners can fire anyone (by state law). Prior to Act 10, the “owner” of each school district elected a school board which carried out negotiations with the employees to determine wages and working conditions. In no school district of which I am aware are teachers getting rich. When you think of employees getting rich, you think of doctors, lawyers, stock brokers, high level executives, but teachers … not so much. Having high educational attainment did not result in abnormally high wages for teachers, but there were tradeoffs: instead of higher salaries, better benefits and working conditions were offered and accepted, through negotiation. Act 10 chopped the head off of local control and took it over at the state level. (Republicans in favor of local control? Not so much.)

So, how did the minions of the schools (principals?) do in hiring the best and the brightest? How did they do in paying for performance? How did they do with getting the bums out of the racket? Aren’t these business types always talking about how important good management is? Was there any effort to improve the quality of the people in charge? No? (No.)

As usual, the actual motives for Act 10 was not in the bullshit offered by proponents. The Koch Brothers-fueled politician, Scott Walker, was executing a typical anti-union action for the billionaire class. Unions are the only organization with enough power to resist the oppression of workers by employers, hence they have to go. (Plus they tend to vote Democrat.)

But actions have reactions. Too bad Scott Walker doesn’t feel any of the reaction … just the teachers and the students and the “owners” of the school district. The Koch Brothers, in reaction, kept pouring money into Scott Walker’s presidential candidacy and into his gubernatorial re-election campaign coffers. If you want quality workers, you gotta pay them!

November 7, 2017

Shocking News! White House NRA Spokesman Lies

White House NRA spokesman Donald J. Trump added that if “Good Samaritan” Stephen Willeford had not had a gun, “instead of having 26 dead, you would have had hundreds more dead” in reference to the latest mass shooting in Texas.

Uh, this doesn’t quite add up. At the scene and in the perpetrator’s vehicle, authorities found at least 15 empty 30-round ammunition magazines along with two handguns, a Glock 9mm and a Ruger 22, found in his car.

I do not want to diminish the bravery of the two gentlemen who distracted the shooter, but if he still had enough ammo to shoot “hundreds more” why did he run from two guys, one of whom was unarmed? No mention has been made of any full ammo clips fitting into his AR-15 clone being found, so was he going to shoot down “hundreds” with the Glock and Ruger .22?

As usual the NRA spokesman told these lies in a easy, comforting, reassuring manner, as all NRA spokesmen do. Later he added, “There’s nothing to see here. Move along” and “In lieu of actual legislation, people are urged to send hopes and prayers that this won’t happen to them. In God we trust! he can protects us! Except, well, in schools, and churches, and music concerns, and movie theaters, and … well, you know.”

November 3, 2017

Conservative A-hole Tanks Own Company Because Union

According to the California Today column in today’s NY Times:

“… popular news sites went dark on Thursday after its parent company DNAinfo shut down the entire Gothamist network of city-centric websites.
“The move came a week after reporters and editors at the New York newsrooms of Gothamist and DNAinfo voted to join a union.
“On Thursday, visitors to the websites were greeted by a post from Joe Ricketts, the company’s billionaire owner and founder of TD Ameritrade. He praised journalists who ‘reported tens of thousands of stories that have informed, impacted, and inspired millions of people.’
“But he added, ‘DNAinfo is, at the end of the day, a business, and businesses need to be economically successful if they are to endure.’“Mr. Ricketts, who started DNAinfo in 2009 and bought Gothamist last spring, had been outspoken in his dislike of unions.“As the company’s New York employees moved to unionize last spring, management warned that DNAinfo had been losing money for years. Mr. Ricketts later wrote, ‘I believe unions promote a corrosive us-against-them dynamic that destroys the esprit de corps businesses need to succeed.’”

Conservatives have poisoned their own minds about unions so much that this, er, gentlemen, couldn’t see a major opportunity right in front of himself.

If it were true that the company had been losing money for years (one has to ask why one expands a company by buying another one when one is losing money, but we understand one has to spend money to make money), but I digress, if the company has been losing money for years, open the books to your new union and ask them to be part of the solution rather than part of the problem. Closing the company is still an option, in fact it is a big hammer to use if conventional negotiations were to occur. (I’d rather avoid conventional negotiations and instead prefer interest-based negotiations, but one doesn’t always control how things will go.)

Possibly, if the company were losing money, the union could be a source of ideas as to how to reverse that trend. Certainly it would damper a unions lust after better wages and working conditions for its members.

Companies of European origin who set up shop in the U.S. actively encourage the formation of unions as being effective partners in the running of a profitable company. European countries include union officers on their boards of governors, often by law as well as custom. Of course, in the U.S. they run into conservative state and federal government representatives who put the kibosh on such efforts when they occur. We can’t have examples of working, cooperative unions to be able to point to now, can we?

We would like to know whether Mr. Ricketts has ever been a member of a union, or worked in a union environment, or managed a union-based company. I suspect not. I assume he got his information from other rich assholes like himself, who have no idea what they are talking about and would rather put out their eyes than see what is right in front of them.

In this case the creator of the “corrosive us-against-them dynamic” is certainly not the newly created labor union, it never had a chance to act one way or the other. Gosh, I wonder then, what the source of that “corrosive dynamic” was? Hmm.

October 26, 2017

Capitalism—Good, Socialism—Bad … But Why?

In this country capitalism is the best economic system of them all! Capitalism and Free markets, rule, baby! Capitalism is No. 1. It is an essential element of democracy. Socialism (Boo, hiss.) is evil, the spawn of Satan and is a threat to democracy and all it stands for. (Q: “What do you think Mr. Spock?” A: Fascinating. “Yeah, me too.”)

I ask you to read the following before continuing:

The Mathematics of Inequality

“Seven years ago, the combined wealth of 388 billionaires equaled that of the poorest half of humanity, according to Oxfam International. This past January the equation was even more unbalanced: it took only eight billionaires, marking an unmistakable march toward increased concentration of wealth. Today that number has been reduced to five billionaires.

“Trying to understand such growing inequality is usually the purview of economists, but Bruce Boghosian, a professor of mathematics, thinks he has found another explanation—and a warning. Using a mathematical model devised to mimic a simplified version of the free market, he and colleagues are finding that, without redistribution, wealth becomes increasingly more concentrated, and inequality grows until almost all assets are held by an extremely small number of people.

“’Our work refutes the idea that free markets, by virtually leaving people up to their own devices, will be fair,’ he said. ‘Our model, which is able to explain the form of the actual wealth distribution with remarkable accuracy, also shows that free markets cannot be stable without redistribution mechanisms. The reality is precisely the opposite of what so-called “market fundamentalists” would have us believe.’

“While economists use math for their models, they seek to show that an economy governed by supply and demand will result in a steady state or equilibrium, while Boghosian’s efforts ‘don’t try to engineer a supply-demand equilibrium, and we don’t find one,’ he said. […] ‘The model tracks the data with remarkable accuracy,’ he said. He and his team will soon publish a paper on how it relates to U.S. wealth data from 1989 to 2013.

“‘We have also begun to apply it to wealth data from the ECB, and so far it seems to work very well for certain European countries as well,’ he said [..] It turns out that when agents do well in early transactions, the odds are so increasingly stacked in their favor that—without redistribution from taxes or other wealth-transfer mechanisms—they will get more money, and keep accruing wealth inevitably.

“’Without redistribution of wealth, our market economy would not be stable,’ said Boghosian. ‘One person would run away with all the wealth, and it would keep going until it came to complete oligarchy.’ And even if a society does redistribute wealth, if it’s too small an amount, ‘a partial oligarchy will result,’ Boghosian said.”

Now, of course, that is just the opinion of a few, but does that mesh with your current view of the world?

If so, I ask that you entertain a rephrasing of the title of this post into “Capitalism Good for the Elites, Socialism Bad for the Elites” and that is the truth behind our false beliefs.

So, why would we buy into propaganda fomented by the wealthy so that we believed the exact opposite? Maybe for the same reason we bought into propaganda fomented by rapacious corporations against labor unions, which we created to protect us from rapacious corporations? Maybe for the same reason we believe that people who are anti-abortion and pro-death penalty are pro life? Maybe for the reason we believe it is a good idea to deport parents of children born here because we are “pro family.” Maybe for the reason we still believe that if we give the wealthy even more money, it will trickle down” to us, some how, some way, maybe. (Who knew it could be so complicated?)

October 7, 2017

Want to Know Why You Are Getting Poorer?

Can you imagine borrowing $1000 and then paying back $591,753 and you must still continue paying? This is how our stock market works. Consider the Apple corporation:

“If you buy shares in Apple, for example, you can get a dividend for holding shares and, possibly, a capital gain when you sell the shares. Since 2012, when Apple made its first dividend payment since 1996, the company has shelled out $57.4 billion as dividends, equivalent to over 22 percent of net income. That’s fine. But the company has also spent $157.9 billion on stock buybacks, equal to 62 percent of net income.
“Yet the only time in its history that Apple ever raised funds on the public stock market was in 1980, when it collected $97 million in its initial public offering. How can a corporation return capital to parties that never supplied it with capital? It’s a very misleading concept.
“The vast majority of people who hold Apple’s publicly-listed shares have simply bought outstanding shares on the stock market. They have contributed nothing to Apple’s value-creating capabilities. That includes veteran corporate raider Carl Icahn, who raked in $2 billion by holding $3.6 billion in Apple shares for about 32 months, while using his influence to encourage Apple to do $80.3 billion in buybacks in 2014-2015, the largest repurchases ever. Over this period, Apple, the most cash-rich company in history, increased its debt by $47.6 billion to do buybacks so that it would not have to repatriate its offshore profits, sheltered from U.S. corporate taxes.
“There are many ways in which the company could have returned its profits to employees and taxpayers — the real value creators — that are consistent with an innovative business model. Instead, in doing massive buybacks, Apple’s board (which includes former Vice President Al Gore) has endorsed legalized looting. The SEC bears a lot of blame. It’s supposed to protect investors and make sure financial markets are free of manipulation. But back in 1982, the SEC bought into agency theory under Reagan and came up with a rule that gives corporate executives a “safe harbor” against charges of stock-price manipulation when they do billions of dollars of buybacks for the sole purpose of manipulating their company’s stock price.”

They “borrowed” $97 million and have paid back $57.4 billion (a ratio of 591.753 : 1) and are still paying? Why? Because the stock market is a con game set up by the rich, for the rich. When stock is traded, money changes hands between shareholders, the corporation itself gets no further support. The money extracted from the corporation just keeps flowing (dividends paid to people who didn’t lend the money in the first place).

This excerpt is from How Economists Turned Corporations into Predators by Lynn Parramore on the exquisite web site Naked Capitalism. Follow the link to read more.

Note Naked Capitalism is currently doing a fund raiser. If you want to support high quality economic reporting, toss them a bone; I do.

 

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