Talking Point: US Government Debt and Jobs

Job, Jobs, Where are the Jobs?

The talking point is simple. Average Americans are not spending money, and the economy is stalled, because they don't have much money. It's no use giving tax breaks and low interest rates to product manufacturers, because the people who would normally buy their products don't have money. People need jobs.

It is debatable whether the American public is responsible for 70% of domestic spending on goods and services, but by sheer number their spending potential is huge. They might make up 70% of domestic spending if they had money to spend, but they don't have good jobs.

Why not? Government policies over the past several decades, supply-side (trickle-down) tax policies and corporate globalization policies, have created a record wealth gap. A study by three Citigroup analysts indicates that the top 1% of Americans earn as much annual income as the bottom 60% and the top 1% possess as much wealth as the bottom 90% of Americans. The analysts concluded “economic growth [in the US] is powered by and largely consumed by the wealthy few.” [1] This is borne out by recent statistics showing that growth in domestic product sales have declined at discount stores and have grown in high-end stores and luxury products.

The Solution:

The government needs to set policies to put money in the pockets of average Americans, and I'm not talking about a $600 check; it needs to be tens of thousands per year, which simply put means temporarily creating jobs. The money for these jobs needs to come from the places that it is being hoarded: The richest 1% of Americans and transnational corporations who have benefited greatly from government policies over the past few decades.

After people have had government-sponsored jobs for several years, they will have the money to buy more products and services they need. This will create a market for private sector products and, in turn, support more jobs in the private sector. Eventually, the government can get out of business of job creation.

And yes, these jobs will require more government revenue in the near-term, but will also generate new revenues. In the long run, we'll be more likely able to pay down the US Government debt.

Agree? Let policy makers know:

• Contact the Broadcast Media
• Contact the US Senate
• Contact the House of Representatives

Update: Listen to a professional, Bill Gross, founder and co-chief investment officer of the investment management firm Pimco. "America’s debt is not its biggest problem", Washington Post, August 10, 2011.

Sources:

1. Can the Middle Class be Saved? Atlantic Monthly, September, 2011.

As the Empire Crumbles

Observations by Noam Chomsky:

The peak of U.S. power was after World War II, when it had literally half the world's wealth. But that naturally declined, as other industrial economies recovered from the devastation of the war and decolonization took its agonizing course. By the early 1970s, the U.S. share of global wealth had declined to about 25%

There was also a sharp change in the U.S. economy in the 1970s, towards financialization and export of production. A variety of factors converged to create a vicious cycle of radical concentration of wealth, primarily in the top fraction of 1% of the population -- mostly CEOs, hedge-fund managers, and the like. That leads to the concentration of political power, hence state policies to increase economic concentration: fiscal policies, rules of corporate governance, deregulation, and much more. Meanwhile the costs of electoral campaigns skyrocketed, driving the parties into the pockets of concentrated capital

Sources:

Is the World Too Big to Fail? The Contours of Global Order, Truthout, Noam Chomsky, April 21, 2011.

Wealth Gap and Revolution

Lately I've been dwelling on the social strains caused by the wealth gap in the US. Everyone should know the difference between "income gap" and "wealth gap;" income being the annual revenues and wealth being the accumulated revenues or savings. The wealth gap is actually more pronounced than the income gap, but both have been growing for several decades. A recent statistic on wealth gap:

The top 1% of Americans own 40% of the wealth.

The word hoarding comes to mind as does a famous quote:

There is, inherent in the capitalist system, a tendency to self-destruct. - Schumpeter, 1942.

We see it happening before our very eyes playing out in the Washington budget debate. The notion, that giving the wealthy class, or owner class, tax cuts to spur growth is a widely held belief in our society. But this simplistic rule only makes sense when money is tight and production capacity at factories is tight and in need of investment to expand, neither of which hold today; we don't need any more production capacity and even if the owner class were to produce more, the commoners don't have the money to buy the stuff.

What we face is a market that is saturated with production capacity, but no money among we the little people, because the money is being hoarded and used for non-productive speculation. Buying commodities, like grains, industrial metals, oil & gas, have become disconnected from the real economy and turned into a gambling playground for the wealthy (not just Americans).

The tendency is for this kind of hoarding to create social instability (dare I say "revolution"?).
People are catching on to this, and the big questions are 1) will we get to the point where enough people become so destitute that they don't have anything, and thus don't have anything to loose if they rise up? 2) will the honest, wise wealthy people change policies before this happens, if only to save themselves?

Stay Tuned.

Sources:

Show Me the Money, Zine, Autumn, 2001, Tony Honeycut.

US Economy in the Pocket of 1/100th of 1 Percent

This graphic is jaw-dropping. The yellow ball, representing the wealth of one one-hundredth of one percent (0.01%), doesn't even fit into the graphic. Whereas the bottom 90% of Americans is the tiny blue ball.

How Rich are the Superrich?

The top 400 of America's richest aristocrats hoard as much wealth as the bottom 155,000,000 people. - Michael Moore at a Madison, WI rally, March 5, 2011.

Sources:

Mother Jones, It's the Inequality Stupid, March/April, 2011.

Slavery & Corporations: The Connection

What's the connection between slavery and corporations? In part, it's about wealth accumulation. It's also about deficiencies in the US Constitution.

Gotta wonder where the wealth accumulated by Brooke and Hubbard is today.

READ MORE


Sources:

"Challenge the Establishment" blog.

Say it to Obmama

It's easy to contact Obmama. Just do it. Here's what I had to say to the poor sap that reads his e-mail:

We support you, BUT

+ Let them prosecute Bush admin officials for crimes. Let us have the justice that legitimizes our nation.

+ Afghanistan is the grave yards of Empires, and the US is an empire. Do the math.

+ "It's wealth distribution stupid" A good bumper sticker, no?

+ did is say prosecute Bush officials? If we don't the fabric of our society will unravel.... people will re-discover vigilante justice because the official system isn't doing it's job.

Psssst... Do Something

Contact Obmama

You Are What You Spend

Letter to the New York Times

A friend wrote the following letter.

To the editor:

W. Michael Cox and Richard Alm (“You Are What You Spend”, Feb. 10, 2008) do an admirable job of proving the very point they wish to skewer. Those of means, by the authors' very own measures, spend far less of their worth on what have come to be seen as life’s necessities. Moreover, using consumption as a surrogate for wealth is flawed logic; many of our society’s problems, whether related to health, economy, national security or environment, stem from our insatiable appetite. Equating consumption to wealth while ignoring savings and security is simply absurd.

I'm not sure what ticked off my friend, but it might have been this bizzare line:

Looking at a far more direct measure of American families’ economic status — household consumption — indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.

By their own measures, the rich are getting richer and the poor are getting poorer:

It’s true that the share of national income going to the richest 20 percent of households rose from 43.6 percent in 1975 to 49.6 percent in 2006, the most recent year for which the Bureau of Labor Statistics has complete data. Meanwhile, families in the lowest fifth saw their piece of the pie fall from 4.3 percent to 3.3 percent.

Cox and Alm go from bizzare to absurd. First they inform us that

The bottom fifth earned just $9,974, but spent nearly twice that — an average of $18,153 a year.

and ask "How could this be?" Most of us immediately think, "Debt" as in credit cards, and "No Money Down" sales. But NOoooo. Cox and Alm inform us these poor people are splurging via

sales of property, like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, or the drawing down of bank accounts.

Most poor people don't have cars. They don't have bank accounts. They live paycheck to paycheck, getting ripped of by check cashers and payday loan sharks.

Then based on the foundation of that logic, we are given the not so brilliant conclusion of Cox and Alm:

if we compare the incomes of the top and bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1.

The logic is sick. Besides, anyone who is familiar with comparisons of rich and poor know that "income" is not the correct measure to use. The more proper measure is "wealth." Rich individuals often don't have, or need, "incomes." They live off the returns on investments, capital gains, which Cox and Alm point out is not counted as "income" and which is taxed at a lower rate than income (can you say, "the system is rigged by the wealthy?"). Furthermore, the rich accumulate wealth over time. The poor are lucky to have a job and live paycheck to paycheck, no accumulated wealth.

Cox and Alm should be ashamed of themselves, but I doubt they have any clue what shame is. There is a time honored solution for this. It's called the guillotine; some heads are going to roll unless people like Cox and Alm wake up and do something to narrow the wealth gap.

For those who are serious about the subject of wealth inequality, I direct you to Edward N. Wolff, economics proffessor at New York University. According to Wolff

The bottom 20 percent basically have zero wealth. They either have no assets, or their debt equals or exceeds their assets. The bottom 20 percent has typically accumulated no savings.[2]

Whereas

The top 1 percent of families hold half of all non-home wealth. The richest 10 percent of families own about 85 percent of all outstanding stocks. They own about 85 percent of all financial securities, 90 percent of all business assets. These financial assets and business equity are even more concentrated than total wealth.

Mike, Dick: It's not about "income" or "consumption." It's about "wealth."

Let Cox and Alm, of the Dallas Federal Reserve, know how you feel by contacting the Community Affairs office:
Dal.CommunityAffairs@dal.frb.org

Let Cox and Alm know that you think they need remedial education in "economics" by contacting the Dallas Federal Reserve Director, Economic Education and Special Projects Sherry Kiser:
sherry.kiser@dal.frb.org

Let the New York Times know your views too:
letters@NYtimes.com

The Fellowship of the Pen lives.

Sources:

1. New York Times, Opinions, You are What you Spend, W. MICHAEL COX and RICHARD ALM
Published: February 10, 2008.

W. Michael Cox is the senior vice president and chief economist and Richard Alm is the senior economics writer at the Federal Reserve Bank of Dallas. With "chief" economists like Cox, it's no wonder the US is facing a financial sector melt down.

2. The Multinational Monitor, The Wealth Divide: The Growing Gap in the United States Between the Rich and the Rest, Interview with Edward N. Wolff, May 2003 - VOLUME 24 - NUMBER 5.

Strategy for War Crime Convictions of the Bush Syndicate

The strategy is simple.

1) Ample evidence exists that Bush has diverted billions in government largess to his special interests.

2) We need that money back, and the tax base re-established in order to pay for his war and other needs of the Nation.

3) We begin bringing war crime charges against numerous people in the Bush Administration, from the bottom up, so the talk.

4) We put the squeeze on, with capital punishment "on the table."

5) We negotiate a settlement: War criminals avoid the death penalty in exchange for a return of the largess to the public coffers.

At this point, Bush has succeeded in a massive redistribution of wealth to the corporate fasicist sector of society. It's vital that we recoup that wealth.

Jim Webb on Wealth Gap: 2007 State of the Union Response

Transcript of the Democratic response to president George Bush's 2007 State of the Union Address. The Democrats selected Jim Webb, freshman senator from Virginia, who has populist sentiments. He shared his views on using the economic system for everyone, not just those who have enough money to make more money. This view is taking hold, now that we have several decades of experience that demonstrate the failures free market fundamentalism. The primary failure is that wealth accumulates among a small minority, and away from the vast majority. Jim Webb addressed the wealth gap head on. Hopefully the Democratic Party understands this and will act on it.

Webb framed the issue as, "... how we see the health of our economy, how we measure it, and how we ensure that its benefits are properly shared among all Americans."

When one looks at the health of our economy it's almost as if we are living in two different countries. Some say things have never been better. The stock market IS at an all time high and so are corporate profits. But these benefits are not being fairly shared.

When I graduated from college, the average corporate CEO made 20 times what the average worker did. Today, it’s nearly 400 times. In other words, it takes the average worker more than a year to make the money that his or her boss makes in one day.

Wages and salaries of our workers are at an all time low as a percentage of our national wealth even though the productivity of American workers is the highest in the world. Medical costs have skyrocketed, college tuitions are off the charts. Our manufacturing base is being dismantled and sent overseas. Good American jobs are being sent along with them. In short, the middle class of this country, our historic backbone and our best hope for a strong society in the future is loosing its place at the table. Our workers know this through painful experience. Our white collar professionals are beginning to understand it as their jobs are disappearing also. And they expect, rightly, that in this age of globalization, their government has a duty to insist that their concerns be dealt with fairly in the international market place.

In the early days of our republic, president Andrew Jackson established an important principle of American style democracy. That we should measure the health of our society not at its apex but at its base. Not with the numbers that come out of Wall Street, but with the living conditions that exist on Main Street. We must recapture that spirit today.

See E.J. Dionne commentary, "A Reagan Democrat"
I wouldn't put it that way. He's a populist democrat in the tradition of the agrarian revolt of the late 1800s.