Showing posts sorted by relevance for query social security. Sort by date Show all posts
Showing posts sorted by relevance for query social security. Sort by date Show all posts

Sunday, July 31, 2011

"Entitlements" part 2

As should be clear from the previous post, if everyone in the USA currently earning $106,800 or more were to suddenly get a raise of $1,000,000 or even $100,000,000 per year, that wouldn't add one single dime to what any of them would pay toward Social Security. Oh and one more thing I forgot to mention. This is referred to as a "payroll" tax for a good reason. It is not imposed on investment income. So if you don't actually do any work, but simply collect millions (or billions) from your investments, you pay no Social Security tax at all.

Now let's take a closer look at the second part of the payroll tax: Medicare. As opposed to Social Security, which is usually taxed at 6.2% (actually 12.4% -- see previous post), Medicare will take "only" 1.45% out of your wages (actually 2.9%). Sounds like a bargain. Why so little? Because the Medicare portion, unlike that for Social Security, doesn't have that $106,800 limit. Since it's unlimited, it can be considerably less, because much higher incomes are also being taxed (though once again, investment income is immune). Which makes you kinda think: if Social Security were an unlimited tax, we wouldn't have to pay nearly as much for it, would we?

And speaking of that $106,800 limit, what's that all about? Where does that figure come from? Beats me. Maybe someone reading here can enlighten us. If it's an arbitrary number, which it certainly appears to be, then why not make it $206,800? Or $300,000? Or $1,000,000? Or $100,000,000. Or why not just remove the Soc. Sec. limit altogether, and tax it the way Medicare is taxed?

If in fact the limit were removed altogether, then this tax, which is such a huge burden for so many working people, could be lowered considerably. AND, with some astute actuarial assistance, a figure could be arrived at that not only lowered the percentage, but also made up for whatever shortfall now exists in the Social Security trust fund. End of crisis!

But why stop there? Social Security is, at present, what is called a regressive tax -- because the more money you earn over and above the limit, the less percentage of your total earned income you pay. If the limit were removed, it would be what is called a flat tax, with everyone (aside from those with unearned income) paying the same percentage. Many would consider that fair. But that has not been the policy in the USA with respect to income taxes, which have for a very long time now been progressive, with those in higher income brackets paying a greater percentage of total income than those in lower brackets (theoretically, since wealthier people typically find all sorts of convenient loopholes).

Once upon a time, during, say, the Nixon era, those in the highest income brackets paid a considerably higher percentage in income taxes (again, theoretically, since there were many loopholes for the wealthy), with the top bracket taxed at 70%. A few years ago, the top fell to 39.6% and with the Bush cuts (still in effect) that dropped even lower, to 35%. Nevertheless, federal income tax remains a progressive tax, with lower income people paying a lower percentage. Seems fair to me, since the higher your income, the less of it you actually need.

So why can't our payroll taxes, for both Social Security and Medicare, also be progressive? And if Medicare can be taxed on a progressive basis, then surely the actuaries can come up with a formula that would, miracle of miracles, actually put Medicare on a sound financial footing, thus eliminating that "crisis."

Gosh, what am I missing here? What is it I don't understand? Oh yeah. The wealthiest of the wealthy, our bankers, our financiers, our captains of industry, the ones whose reckless investment practices and selfish outsourcing and downsizing led to the collapse of our economy just three years ago, these people don't want to be taxed at all, period. On principle! After all, isn't taxation simply theft?


(to be continued . . . )

Saturday, July 30, 2011

Them Danged "Entitlements"

Gosh, if only we could take control of those darned "entitlements." Right! You hear it continually from Republicans, which should go without saying. But also from our President,and many other Democrats, which is a disgrace!

For one thing, "entitlements" is a misleading term. What it really means is money ordinary citizens are entitled to. Why? Because they paid for them. Yes, believe it or not, both Social Security AND Medicare are paid for by you, the citizens of the US. To hear Republicans talk about these programs, they're something ordinary folk THINK they are entitled to. "Well, what makes YOU think you are entitled to all these benefits, you lazy slacker?" "Uh, excuse me, but I PAID for them!"

Not only have we paid for them, but we've paid through the nose for them.  Here's how our taxes for both Social Security and Medicare break down, according to this Wikipedia article:
Federal social insurance taxes are imposed equally on employers and employees, consisting of a tax of 6.2% of wages up to an annual wage maximum ($106,800 in 2010) plus a tax of 1.45% of total wages. For the year 2011, the employee's contribution has been temporarily reduced to 4.2%, while the employer's portion remained at 6.2%.
This is misleading. The taxes are NOT imposed equally on employers and employees. I know because I was once on the Board of Directors of an organization that was hiring, and the first thing we did in determining what wages we would offer was calculate what our Social Security obligation would be. This was then factored in to our wage offer. I'm sure all employers do the same math when hiring. So what that means is that the Soc. Sec. tax is in effect borne entirely by the worker, and it amounts to 2 * 6.2%, or 12.4%  (prior to the temporary reduction, natch, which is due to expire). Moreover, if you happen to be self-employed, the owner of a small business, a consultant, or an "independent contractor" (a handy category used by employers who refuse to deal with Soc. Sec. at all) you pay the FULL amount without benefit of subterfuge.

Meaning that out of a modest salary of $30,000, you get to pay 30,000 * .124 = $3,720! (Not counting Medicare, natch.) And there's no getting around that. No deductions, no loopholes, no special consideration for working families with lots of kids, etc.

You might be curious to learn what someone earning $1,000,000 a year pays. Do the math. 1,000,000 * .124 comes to $124,000. Nice chunk of change. But wait! Think again. Because the "annual wage maximum" on Social Security is only $106,800. If you earn more than that, this additional income is TOTALLY free from Soc. Sec. taxes. So what you pay for Soc. Sec. if you earn $1,000,000 or $2,000,000 or $200,000,000 or $1,000,000,000 is exactly the same: $106,800 * .124 =  $13,243 -- which amounts to 1.3243% of a million dollars -- and .013243% of a billion dollars. So while the great majority of us pay over 12%, the millionaires pay only a little over 1% -- and the billionaires pay only a minuscule fraction of what they take in. (I was going to write "earn," but nobody actually earns a billion dollars, do they?)

We're continually being reminded that Social Security is in trouble, that the reserve will run out in a few years, that thanks to the Baby Boom there are many more older people around now than ever before, etc., and that this amounts to a huge crisis unless the benefits are drastically reduced. But what we do NOT hear is that there are also far more millionaires and billionaires living in the USA than ever before.

We are constantly reminded that we are in over our heads financially and accumulating a huge national debt, but no one seems interested in the fact that the USA is by far the wealthiest country that ever existed in the history of the world. True, the national debt looks high: well over $14 trillion and climbing. But our total national household wealth is estimated at over $52 trillion. In other words, if we were to institute a one time only wealth tax of roughly 27% we would instantly eliminate our entire national debt! And when you consider that during the 1950's the tax rate on the highest incomes was over 90%, a 27% tax doesn't seem all that unreasonable. Don't get me wrong, I'm not advocating such a tax, only trying to put things into perspective.

So. Are we really in the midst of an entitlements crisis? Or does the real problem lie in another direction entirely?

(to be continued . . .)

Saturday, January 31, 2009

Fidel Castro on economics and the future of socialism.

From ikke til sag website, dated June 23, 2000:

At the beginning of the month of June, a French magazine published a summary of the notes taken by Mr. Federico Mayor Zaragoza, former Director General of UNESCO, during a conversation with President Fidel Castro last January 28 while he visited Cuba to take part in the II International Economists Workshop held in Havana from the 24th to the 28th of that month. . .

Following are the questions and answers:

[I have placed some of the most relevant passages in bold type.]

FEDERICO MAYOR.- With China, Vietnam and North Korea, Cuba is considered the last bulwark of socialism. Yet, 10 years after the fall of the Berlin Wall, does the word "socialism" make sense any more?

FIDEL CASTRO.- Today I am more convinced than ever that it makes a great deal of sense.

What happened 10 years ago was the naive and unwitting destruction of a great social historical process that needed to be improved, but not destroyed. This had not been achieved by Hitler’s hordes, not even by killing over 20 million Soviets and devastating half of the country. The world was left under the aegis of a single superpower, which had not contributed even five percent of the sacrifices made by the Soviets in the fight against fascism.

In Cuba, we have a united country and a Party that guides but does not nominate or elect. The people, gathered in open assemblies, put up candidates, nominate and elect delegates from 14,686 districts; these are the foundation of our electoral system. They make up the assemblies of their respective municipalities, and nominate candidates to the provincial and national assemblies, the highest bodies of state power at those levels. The delegates, who are chosen through a secret ballot, must receive over 50% of the valid votes in their corresponding jurisdictions.

Although voting is not compulsory, over 95% of eligible voters take part in these elections. Many people in the world have not even bothered to look into these facts.

The United States, such a vocal advocate of multi-party systems, has two parties that are so perfectly similar in their methods, objectives and goals that they have practically created the most perfect one-party system in the world. Over 50% of the people in that "democratic country" do not even cast a vote, and the team that manages to raise the most funds often wins with the votes of only 25% of the electorate. The political system is undermined by disputes, vanity and personal ambition or by interests groups operating within the established economic and social model and there is no alternative for a change in the system.

When the small English-speaking nations of the Caribbean achieved independence, they put into place a more efficient parliamentary system where the ruling party remains in power as long as it enjoys consensus. This is much more stable than the presidential regime imposed to the rest of Latin America, which copied the U.S. model. And, nothing has changed in almost two centuries.

Under capitalism it is the large national and international companies that actually govern, even in the most highly industrialized nations. It is they who make the decisions on investment and development. It is they who are responsible for material production, essential economic services, and a large part of social services. The state simply collects taxes and then distributes and spends them. In many of these countries, the entire government could go on vacation and nobody would even notice.

The developed capitalist system, which later gave rise to modern imperialism, has finally imposed a neoliberal and globalized order that is simply unsustainable. It has created a world of speculation where fictitious wealth and stocks have been created that have nothing to do with actual production, as well as enormous personal fortunes, some of which exceed the gross domestic product of dozens of poor countries. No need to add the plundering and squandering of the world’s natural resources and the miserable lives of billions of people. There is nothing this system can offer humanity. It can only lead to its own self-destruction and perhaps along with it to the destruction of the natural conditions that sustain human life on this planet.

The end of history, as predicted by a few euphoric dreamers, is not here yet. Perhaps it is actually just beginning.

F.M.- Forty-one years after the Revolution, and despite all of the difficulties it has had to confront, the regime that you established has endured. What could be the reason for this longevity?

F.C.- The tireless struggle and work alongside the people and for the people. The fact that we have settled for convictions and acted accordingly; that we believe in humankind and in being our country’s slaves and not its masters. We believe in building upon solid principles, in seeking out and producing solutions, even in apparently impossible and unreal conditions; in preserving the honesty of those with the highest political and administrative responsibilities, that is, in transforming politics into a priesthood. This could be a partial answer to your question, setting aside many other elements particularly related to our country and this historical era.

Of course, everybody thought that Cuba would not survive the collapse of the socialist bloc and the USSR. One could certainly wonder how it was possible to withstand a double blockade and the economic and political warfare unleashed against our country by the mightiest power ever, without the International Monetary Fund and the World Bank, without credits. However, we managed to achieve this feat. At a summit meeting recently held in Havana, I somewhat ironically said to our guests that it had been possible because we had the privilege of not being IMF members.

There were times when we were swimming in a sea of circulating money. Our national currency experienced an extraordinary devaluation, and the budget deficit reached 35% of our gross domestic product. I could see intelligent visitors almost faint from shock. Our peso, the national currency, dropped to a value of 150 to the dollar in 1994. In spite of this, we did not close down a single health care center, a single school or daycare center, a single university, or a single sports facility. Nobody was fired and left on his own without employment or social security, even when fuel and raw materials were most scarce. There was not even a trace of the customary and hideous shock policies so highly recommended by the Western financial institutions.

Every measure adopted to confront the terrible blow was discussed not only in the National Assembly, but also in hundreds of thousands of assemblies held in factories, centers of production and services, trade unions, universities, secondary schools and farmers’, women’s and neighbors’ organizations as well as other social groups. What little was available, we distributed as equitably as possible. Pessimism was overcome both inside the country and outside.

During those critical years, the number of doctors was doubled, and the quality of education was improved. The value of the Cuban peso increased sevenfold, from 150 to the dollar to 20 to the dollar, between 1994 and 1998, and has since remained consistently stable. Not a single dollar fled the country. We acquired experience and efficiency on a par with the immense challenge facing us. Although we have still not reached the production and consumption levels we had before the demise of socialism in Europe, we have gradually recovered at a steady and visible pace. Our education, health and social security rates, as well as many other social features, which were the pride of our country, have been preserved, and some have even been improved.

The great hero in this feat has been the people, who have contributed tremendous sacrifices and immense trust. It was the fruit of justice and of the ideas sowed throughout over 30 years of Revolution. This genuine miracle would have been impossible without unity and without socialism.

Tuesday, February 3, 2009

The Shape of Things to Come -- Part 3

Before discussing what I believe will ultimately take place, I want to offer an alternative that ought to be considered, despite the fact that there is little likelihood of its being implemented:

Let the system fail. Not just the banks but the entire financial system, the whole shebang. Just leave it be and let it fall of its own weight. Ironically, many of the most extreme neo-conservative Republicans have also taken this position, but for all the wrong reasons. I won't waste time discussing their take on the present crisis because they are clearly in a state of shock characterized by totally irrational denial. There is no course of action or inaction that could be taken at this point that could possibly advance the neo-conservative agenda. Their day is done!

Once the system has been allowed to totally and completely fail, not because of any action on the part of the government or any other entity, but simply as a result of the inherent limitations built into any Ponzi scheme, there will be an enormous destruction of something called "wealth." Not only will the investment banks we are now trying so desperately to save lose essentially all their value, along with all the tranched up bonds and other "toxic assets" no one understands how to value anymore (because they are essentially worthless), but the "market" (i.e., Wall St.), venerated for so long as the ultimate object of worship in the economic pantheon, will also dissolve, essentially, into nothing, diving, in all likelihood from a Dow now hovering around 8000 all the way back down to 1000 or below -- ideally down to nothing at all. Goose egg! (My old algebra teacher's nickname for the number zero.)

Funny thing about this thing called "wealth." After all that devastation, you'll look around you in every direction and not notice one single thing of any real importance that's any different from the way it was before. Well, maybe just one little thing. The Wicked Witch will be dead. The evil Kastchei will be destroyed. Lord Voldemort will be defeated. Darth Vader will be crushed. The vast wealth of the likes of Richard Fuld, John Thain, Donald Trump, a host of oil sheiks, Russian oligarchs, "geniuses" of high finance and "Masters of the Universe" will be reduced to a piddling few millions, hardly enough to fuel their private jets.

But (gasp) won't that also be a disaster for all us "little people" out there, the ones depending on the health of "the market" to preserve our precious 401 (k)s and other assorted retirement investments? Isn't the financial well being of "Main Street" dependent on the well being of "Wall Street"? Interesting question.

Think of it this way. If Donald Trump owed you $10,000 and was faced with imminent bankruptcy would you expect the US congress to bail him out with a gift of, say, $100 million so you could get your money back? Or would you be satisfied with an arrangement by which Trump's creditors would have to be paid back first, before he went bankrupt?

Let the system fail. Do not invest that trillion dollars in an attempt to shore up the wealth of all those billionaires just so some small fraction of it might trickle down to the rest of us -- an effort that will ultimately prove futile in any case. Let the whole thing crash totally and completely into nothing.

Next, nationalize all those banks. Take over all those foreclosed homes -- and put their former mortgage holders back into them (see my earlier post, "Just a Thought"). While you're at it, nationalize every failing business, and get people working again on their old jobs. Then take that trillion and spend it on infrastructure, well paying jobs, a meaningful social safety net, expanding Social Security, implementing universal health care, providing adequate clothing, food, prescription drugs, etc., drastically lowering the cost of higher education, etc. With an adequate safety net in place for the retired, the losses on all those 401 (k)s won't matter anymore. "Main St." will be in excellent shape. And Wall St. (the wicked witch of the East) will be dead.

A complete restructuring of not only the economy but government itself, along more or less socialist lines, would of course be necessary. On a worldwide basis, because the whole world is in this together. Every failing bank, every failing business should be (inter)nationalized. An international council modeled on the S. African Truth and Reconciliation Council should be convened, in order to forgive all debts and systematically redistribute all wealth worldwide on the basis of need, ability and willingness to work. Not too long ago such an idea might have seemed hopelessly Utopian. Now it just seems like the most practical (and possibly the only practical) recourse.

The above proposition makes a great deal of sense to me. But, for obvious reasons, there is no way anything like such a scenario could actually play itself out, given the current political climate, not only in the USA, but the world at large. In my opinion we are nevertheless headed in more or less the same direction. But via a more circuitous -- and no doubt far more painful -- route. Which will be the topic of my next post in this series. Stay tuned . . .

Thursday, April 28, 2011

Toasting the (Mad) Tea Party

Sorry for neglecting this blog for sooooo long. But I've got an excuse, because I've been busy with more "pressing" commitments, as the saying goes. But what could be more pressing (or amusing) than the coming debate over the national debt ceiling? Way back in Feb. I wrote as follows:
The Tea Party is toast. That's my prediction. What a huge laugh. The oligarchs pulling their strings convinced them "big government" is the problem, so they bought that line and are now intent on bringing "big government" down. And they'll be given a great opportunity very soon, when it's necessary to raise the limit on the national debt.
Well that day (D day!) is well nigh upon us. And the hand wringing has begun in earnest. Witness former Clinton Treasury Secy. Robert Reich, whose blog I can't resist quoting. The blaring headline reads: Extortion Politics: Why Won’t American Business Stop the GOP From Threatening to Blow Up The Economy?
As the government approaches its borrowing limit of $14.3 trillion, Republicans are seeking political advantage over what conditions should be attached to raising that limit. This is a scandal — or should be. Raising the debt limit shouldn’t be subject to party politics. Economic extortion should be out of bounds.
Actually I shouldn't be mocking Reich, because I agree with him almost all the time, he's one of the good guys, I admire him and I'd probably vote for him, if he chose to run for something -- anything. But on this matter, he's being much too serious. He just doesn't get how funny it is.
Not only would the government be unable to issue Social Security or Medicare checks but the United States couldn’t pay interest on its current debt. We’d go into default. The full faith and credit of the United States would be in jeopardy. Treasury bonds would go into free fall. Interest rates would skyrocket. We, and most of the rest of the world, would fall into financial chaos.
Ta da ta da, blah blah. So WHAT????? First of all, financial chaos isn't the same as real chaos. Real chaos is what is now happening in Egypt, Libya, Tunisia, Yemen, Bahrain, Syria, and is on the verge of descending on the rest of the inegalitarian world like a plague. Maybe a good plague, let's hope -- but chaos nevertheless. On the other hand, financial chaos, can, like greed, be "a good thing," to quote the honorable Gordon Gekko.

I once devised a test to tell how "hip" somebody is. It's simple. You just ask them: "are you hip?" If they simply say "yes," or if they simply say "no," then they are definitely hip. Hand them a Tootsie Roll and move on. But if they start whining about "how do you really know what 'hip' means," or "how can you possibly say whether someone is 'hip' or not?" or "sorry but I refuse to participate in such a meaningless exercise," etc., then they are DEFINITELY not hip and you can forget about them, they are useless. Sorry, Robert, but you are not hip. Not even close. Maybe it doesn't really matter, but . . .

For one thing, what is at stake here is NOT the future of the United States or the World, or the welfare of ordinary people, or civilization as we know it, but the future of Capitalism, more specifically, so-called "free market Capitalism." If the debt limit weren't raised and the US Government actually went into default, then we'd be kissing free market Capitalism (with a capital capital) goodbye. Which is the great irony here, because the Tea Party sees itself as Capitalism with a capital capital for sure. And what they would be voting for would not be Capitalism (with a capital whatever) but: SOCIALISM. (With EVERY letter capitaled.) Because once the "public sector" goes under (which is what will happen) there will be no alternative but for "big governments" all over the world to nationalize everything and institute planned economies everywhere -- whether they want to or not!

I wouldn't be picking on Reich at all if it weren't for the following bit:
The biggest surprise is the silence of American business and Wall Street. They have as much if not more to lose as anyone if this game ends in tragedy. Yet the GOP — which big business and Wall Street fund — insists on playing it.
What's hugely funny here, and what will mark Reich forever in my mind as hopelessly UN-hip, is the hugely naive assumption that American business and Wall Street are remaining silent on this matter. I can guarantee this is NOT the case. By this time, I can assure you that every single Mad Hare and Hatter in the Mad Tea Party is getting an earful from the puppet masters who created them -- and would destroy them in a digital trader's micro-millesecond if they even considered letting the US govt. default on its precious debt. Let the games begin, sez I. And let's hope the Democrats don't cave, because if they are as thoroughly un-hip as Robert Reich, then Capitalism will not only be saved, but it will RULE. And the rest of us will be royally screwed.

Saturday, January 31, 2009

The Shape of Things to Come -- a prose poem -- Part One

First, a brief look backward:
As far as the vast majority of US citizens are concerned, the real crisis came into being many years ago, back in the days of "downsizing" (haven't heard that word in a long time), followed by "outsourcing," NAFTA, and the development of a "new world order" based on the dubious benefits of "globalization." Rosy unemployment figures belied the fact that far too many were employed slinging hamburgers, delivering pizza, bagging groceries, etc., for little more than minimum wage. College graduates with Ph.D's were working as part time adjuncts for $2,000 per class or in some cases $18 an hour (I know because I taught such classes); accountants were being hired by H&R Block for $6.00 an hour (believe it or not -- I met one and he told me) and highly educated bookworms were being lured to Barnes & Noble for $7.00 an hour and an employee discount (I know because I briefly held such a job). Hardly any of these jobs came with any benefits whatsoever, and many people were hired as "independent contractors," meaning the company didn't have to pay its share of their Social Security and Medicare deductions, sticking the employee with a whopping 15% payroll tax over and above federal, state, local and sales taxes. Far too many were staying afloat only because they'd figured out how to "manage" their credit cards, by making only the minimum payment each month or "rolling over" from one card to the next when the balance on the first one got too high. What was clearly an unmitigated disaster for so many was hailed by those in power as a thriving, healthy "economy," forging ahead full speed and doing just great.

Now, a brief consideration of our present situation:
What's new, and important, as far as the average underpaid, overworked, overtaxed, unemployed or underemployed worker is concerned, is that the "economy" that did so well for so many of the hugely overpaid and ridiculously undertaxed "Masters of the Universe" for so many years is not simply in crisis, but spiraling out of control and into oblivion. For a great many of the privileged elite this is indeed a disaster, because, unless some dramatic action is taken very soon, they could lose large chunks of the billions they "earned" prior to the current collapse. (Never mind that this money was never really earned, because all such "profits" were based on manipulation if not theft from a system already built upon layer after layer of self-delusion and outright deceit.) But for the rest of us the new situation holds great promise. For the first time our plight is being recognized by the powers that be. For the first time, the high rollers all over the world are realizing that their fate is tied to ours. Not because what's good for Wall St. is also good for Main St., as Henry Paulson has so strenuously argued. But because the working and middle class people so ignored and even despised for so many years are suddenly, lo and behold, being recognized as the all important "consumers" whose financial well being is essential for the consumption of all the many products that absolutely positively MUST be consumed, in mass quantities, Conehead style, if that all important "economy" is to be preserved, so the billionaires can go back to accumulating even more billions, as in the past.

So the powers that be have devised an interesting "plan." Toss the beggars a bone in the form of a handout here and there, a temporary job (indeed the word "temporary" is one of the hallmarks of the plan) and some piddling tax breaks, in the hope that they'll start spending again, at least until the "economy" can get back on its feet, the status quo re-instituted, with the power elite once more "earning" big money based on the same old Ponzi schemes.
The only problem is . . .

Whew. Maybe it's time for another chorus of Guantanamera:



(This version is sung by its original composer, Joseito Fernandez.)


(to be continued)

Monday, July 25, 2011

Why the Democrats have a good hand and the Republicans have nothing

Readers of yesterday's post may be scratching their heads over my claim that the Republicans are bluffing from a lousy hand, because that is not how it may seem. So, for those of you who, like our President, are not poker players, an explanation may be in order.

I'll begin with some quotes from a previous post of mine, dating from last February: Reading the Tea Leaves.
 [The Tea Partiers] have an Ace up their sleeve -- so they think. If the Democrats won't cooperate, they'll make sure the debt limit isn't raised, which [requires] Republican votes -- lots of them. And if the debt limit isn't raised, why, it will be the end of civilization as we know it. Which is fine with them. Also fine with me, by the way.
Unfortunately for our eager beaver Tea Partiers, it will NOT be fine with the oligarchs whose big money got them to Congress in the first place. Because if the national debt limit isn't raised, the USA will go into default and if the USA defaults, then a whole lot of very wealthy people will be in danger of losing a whole lot of their wealth. . .

So. No WAY are the puppet masters going to allow their puppets to force "big government" into a great big huge default. Their dirty little secret is that they need big government. But they need it to do THEIR bidding, not the bidding of US citizens. Which is why they invented the Tea Party in the first place.
Thus, as I see it, there is no way the Tea Party could maintain its grip on the Republican power structure if they were to vote down a simple yea or nay bill to raise the debt ceiling. Such a move would finish them -- and they know it. (At least most of them do. I don't doubt there are some "true believers" among them, who will sooner or later be in for a rude awakening.)

Which is why the Republican leadership decided to rig the game in such a way that a simple yea or nay vote would never come up. It was a huge con and it looks like it's going to pay off big time. Obama has been hypnotized into believing he has to offer the Republicans something to get their cooperation and Boehner and Co. have been playing that for all it's worth. There's no reason for them to agree to raise taxes (and offend their base) when Obama's been signaling from the start that a default would be unacceptable and he'd do literally anything to avoid it.

The Republicans now smell blood and realize that if they hold out and continue to offer nothing in return for the draconian cuts Obama has already agreed to, then they can't lose. The debt limit will be raised AND Obama and the Democrats will be humiliated and reviled for caving in to unreasonable demands. If they were to make the mistake of actually compromising and agreeing to some tax hikes, then it might look like Obama was the winner. Why would they want to do that?

For the Dems the solution is obvious, but it would take some guts. Offer a very simple bill limited ONLY to the raising of the debt limit. Pass it in the Senate. And force the Tea Partiers in the House to decide whether they really want to take the heat for destroying the US economy AND the wealth of their patrons. Since no tax increase would be on the table, they needn't worry about violating their silly pledge. So all they'd be left with would be the argument that forcing the US into default is preferable to not cutting trillions out of Social Security, Medicare, education and Mom's Apple Pie. Is that a poker hand? I don't think so.

Monday, April 6, 2009

Whichaway -- Part 2

The most fundamental dilemma, the intractable aporia confronting our political and economic leaders: do we allow the largest banking and investment institutions to fail, precipitating a complete breakdown of the world's financial systems? or do we prop them up with endless trillions in loans and freshly minted electronic (aka "paper") money, leaching all value and meaning from the US dollar, leading inevitably to the complete collapse of the world monetary system? Which way to go, which way to go? Our leaders have chosen the latter path, but what they are not telling us is that whichever path we choose to take will be our road to perdition.

Even before we reach the point of total "disaster," there are other, less fundamental, but more urgent and immediate choices confronting us, impossible choices that nevertheless must be made.

For example, how is it possible to determine what price to ask for any given commodity or service? If we were simply in a deflationary phase, as many economists seem to think, prices would continually be falling, along with wages. This would actually be a good thing for retirees and others on a fixed income, or those who invested wisely enough to still have some real money safely stashed away. Those savings along with the steady Social Security income would definitely go farther if, in fact, we were in a period of true deflation. However, the overhead costs of many companies have not in fact gone down, so for them lowering prices isn't really a viable option. They're convinced that, to survive, they must, on the contrary, raise their prices -- and that's exactly what many are now doing, despite all the hand-wringing over a looming "deflationary spiral." But how can you raise prices in an economy where job losses are steadily mounting, incomes are decreasing, investments have tanked, housing prices are in free fall, and retirement accounts have lost anywhere from 30% to 50% of their value? Which way to go, which way to go? Logically, prices should be steadily going down, but I'm wondering whether anyone has actually noticed that. Aside from gasoline prices, now going up and down unpredictably, and housing prices, which have obviously taken a nosedive, I myself see only prices that either remain steady, or, as in the case of food, are steadily, and alarmingly, rising. If food prices come down, more of us will be eating better, but more supermarket chains will be going out of business. Looks like they'll be going out of business no matter what.

An issue that never ceases to fascinate me is the cost of tuition. For years it's been heading increasingly into the stratosphere, for no good reason that anyone can see -- except for the availability of all that oh so easy credit. But credit is now, supposedly, tight. You'd think in the wake of all those job losses, investment nightmares, and credit crunches, that colleges and universities would be drastically lowering tuition. But I've seen no sign of that either. How can they lower tuition when their endowments have lost so much, due to all that misguided, irresponsible investing? In their eyes, tuition can only continue to go up, up, up and away. But how can they continue to pull off that particular scam when easy credit ain't so easy anymore, and so many families are now faced with unemployment, if not imminent eviction? They "can't possibly" lower tuition, because they need the money. But if they don't lower their tuition, or stubbornly continue to raise it, which many seem bent on doing, new enrollments will wither and already enrolled students will start dropping out in droves.

We have a similar aporia regarding the auto industry. If we bail out General Motors, we'll be saving jobs. But in order for the company to be viable, jobs must be cut. How can we justify forcing such a huge company to cut jobs when so much money is now being spent on a stimulus designed to create jobs? Whichaway, whichaway?

And how about taxes, what's to be done on that front? To preserve some semblance of fiscal responsibility taxes must be raised. But to stimulate the economy taxes must be lowered. We can, of course, raise taxes on the wealthy, something long overdue in my book. But so many millionaires and billionaires have lost so much in the past year, that most will probably wind up paying no taxes at all! And you can't tax anyone on the basis of all those multi-million dollar bonuses, because the taxes on most of that accumulated loot have already been paid. Again, whichever way we choose to go it apparently makes no difference. All paths lead to the same hard, stone wall of utter futility.

Now for the moral of our story. Which I'll save for my next post.
(to be continued . . . )

Wednesday, January 28, 2009

The C-word

The great tower Moloch built for itself is about to fall. All we need to do is let it. Instead, political leaders all over the world, many of them well-meaning souls with the best of intentions, are struggling to find some means, any means, of propping it up. It's as though Goliath had stuffed himself so full that he'd collapsed of his own weight. And David were desperately trying to revive him, so the Philistines could reassuringly maintain the accustomed level of tyranny. Such is the power of the status quo, tradition, inertia, timidity, call it what you will.

President Obama is working on a plan. The Democrats are working on a somewhat different, probably better, plan. And the Republicans are -- well -- being Republicans. Some things never change. Columnist Bob Herbert, of the New York Times, wrote eloquently the other day about this rather quaint society of self-righteous fools and knaves, in an article titled The Same Old Song.
What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?
He continues, writing very sensibly about the pickle we are now in, and the complicity of the Republicans in putting us there. But this is the passage that really got to me:
The question that I would like answered is why anyone listens to this crowd anymore. G.O.P. policies have been an absolute backbreaker for the middle class. (Forget the poor. Nobody talks about them anymore, not even the Democrats.) The G.O.P. has successfully engineered a wholesale redistribution of wealth to those already at the top of the income ladder and then, in a remarkable display of chutzpah, dared anyone to talk about class warfare.
Finally, someone in the mainstream liberal media has had the guts to invoke the dreaded words: "class warfare." To be safe, he puts the phrase in the mouth of the Republicans themselves. Fair enough, since they've been the only ones to even raise this issue. But what they, in their paranoia, see lurking in the deep dark recesses of Democratic party ideology, is exactly what is lacking in that ideology. In the daily barrage of media coverage on the economy and what's happened to it, the 800 pound gorilla lurking in the background is what no one wants to see.

The "wholesale redistribution of wealth" from the middle class to the "Masters of the Universe," accompanied by a relentless process of grinding the working class and the poor into the dust, has been going on for some time. It is not simply a result of the current economic meltdown. Too many people had been working for too long at too many $6 or $7 an hour "MacJobs" to support themselves, not to mention their families. (Barbara Ehrenreich has told this story with great eloquence -- and indignation.) Their only recourse was that credit card, what else could they be expected to do? And when they discovered that the house they were struggling to pay the mortgage on was apparently appreciating in value, well why not take advantage of the added equity to put a nice chunk of cash in their pockets by taking out a second mortgage? What these people didn't know was that the toxic debt they were being talked into accumulating at such an alarming rate was actually a commodity, to be bought and sold for literally billions in profit by the Masters of the Universe, who sliced it and diced into so many "tranches" no one knows any more how to keep track of it.

Already, back in 2006, at least one person was aware of what was happening -- and wasn't afraid to use the C-word. Amazingly enough this prescient individual was no less than the greatest "Master" of them all: Warren Buffet. A remarkable NY Times interview with Buffet actually had the dreaded word in its title: In Class Warfare, Guess Which Class Is Winning. This piece is definitely worth a read. Here's a sample:
Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap.

Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
So. Almost three years ago, it was evident even to Warren Buffett that something was very wrong. And, of course, the tax code was only one small part of the general assault of the wealthy and super-wealthy on the classes they perceived to be so far beneath them as hardly worth acknowledging at all.

(There's a lot more to this article, which, by the way, was written by someone who describes himself as a conservative. Here's the link again in case you missed it the first time: Class Warfare. The whole thing is definitely a must read for anyone trying to evaluate the latest bailout proposals, from both left and right.)

But the Masters finally outsmarted themselves. Their tower of greed has been shaken to its foundations and will soon crumble of its own weight. Since everyone on the left side of the congressional aisles is afraid of the C-word, however, what we are hearing over and over again is that by bailing out Wall St., we are also protecting "main street." Nothing could be further from the truth. Class differences are real. Class warfare is real. The 800 pound gorilla may still be lurking in the background. It's only when he decides to pounce that there will be any real hope for meaningful democratic change.

The tower must be allowed to fall.

Wednesday, March 4, 2009

Rush and Me

Yeah, you guessed it. Rush Limbaugh. From time to time I listen to his show, mostly for laughs. But sometimes it gets downright scary. Scariest of all is when I find myself agreeing with him. He wants our President's economic policy to fail. So do I. How embarrassing!

It's still good for a laugh, however, because the outcome he says he fears the most is the only outcome that makes sense to me. He's against Obama's policies because he's convinced that, if they succeed, they will lead us to socialism. I'm against them because I'm afraid that, if they succeed, they will re-instate the same phoney, "market-based," "private-sector," "free-market," bubble-driven, cut-throat, free-for-all of corruption and out of control greed that produced the current crisis in the first place.

Obama's misguided attempt to "jumpstart the economy," if successful, would also re-instate the power of the oligarch/plutocrats (plutogarchs?) and along with it, the subjugation/exploitation of the working class (yes, you heard me right -- the "c" word!), struggling for far too long (well before the current financial crisis) on 7 to 9 dollars an hour, no benefits, "independent" contractor, part-time, whatever, anything at all to get by, pseudo jobs. No one paid much attention at all to the hourly or day to day workers, the struggling adjuncts, "office managers," data entry clerks, "associates," substitutes, security guards, crossing guards, free-lancers, temps, etc. (I'm in there somewhere, by the way), not to mention the zillions of ghetto kids with not much hope of anything better than grocery bagging or drug dealing, etc., etc. -- no one paid much attention to the needs of the millions being nickled-and-dimed to death in the "global economy" until the whole thing started unravelling, and suddenly they need us to shop shop shop, spend spend spend. With what, may I ask? Once that credit card was maxed out, there was no more to spend. Because 7, 8, 9, or 10 dollars an hour on its own won't buy much, let me tell you.

Restoration of such a thoroughly unfair, undemocratic, and out of control financial system into the hands of the "private sector" is an outcome only someone as thoughtless, insensitive, selfish and vulgar as Rush and his well-heeled patrons could love. So why doesn't he?

Two possibilities. Either he's as clueless as Obama and his team of recycled "Masters of the Universe" and actually sees some possibility of success for this seriously flawed scheme -- and fears that it could bring with it some degree of social and economic reform. Or he realizes, as so many are now coming to realize, that it is doomed to fail, and, when it does, some form of socialism will be the only remaining recourse. It would be interesting to learn whether Limbaugh has any alternative proposal to offer, other than simply "letting the market take its course," with no government interference, which would immediately cause the world economic edifice to collapse into dust. What would you propose we do at that point, Rush? Leave it to the "private sector" to bring us back? What private sector? All that wealth will be gone, caput, vanished into the same hot air from whence it emerged.

Please don't get me wrong. I voted for Barack Obama, I believe in him still. I think he's the most promising American politician to emerge since Roosevelt, and also I just plain like him a whole lot. I want very badly for him to succeed. But not on the basis of the lame, half-hearted and doomed economic policy he is now promoting, which can never work and will only weaken both him and the Democratic party.
 
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