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By GREGORY N. HEIRES
The money is not trickling down.
Evidence continues to grow about the persistence of deepening inequality in our society as beltway politicians consider raising the minimum wage.
And working families have little reason to be optimistic about their economic future as Washington fails to deal with the $1.2 trillion automatic spending cuts scheduled to begin in March 1. Economists believe the austere government policy will reduce economic growth by at 0.5 percent and cause the loss of 700,000 jobs.
A recent study shows that the economic recovery has only benefited the wealthy, suggesting that 99 percent of families are unlikely to see their living standards improve anytime soon unless there is tax fairness.
Average real income of families grew modestly from 2009 to 2011, according to University of California economist Emmanuel Saez. In January, Saez updated his study “Striking it Richer: The Evolution of Top Incomes in the United States,” to include 2011 estimates.
So, although the economy is officially recovering from the Great Recession of 2007-2009, the gains are not being distributed equally.
While the top 1 percent of families saw their income grow by 11.2 percent during 2009 to 2011, the bottom 99 percent actually experienced a decline of income of 0.4 percent.
“Looking further ahead, based on the US historical record, falls in income concentration due to economic downturns are temporary unless drastic regulation and tax policy changes are implemented and prevent income concentration from bouncing back,” Saez writes.
So, without changes in government policy on taxes and regulation, we can expect the wealthy to continue to benefit from economic growth while everyone else stays in place or falls behind.
“The policy changes that are taking place coming out of the Great recession (financial regulation and top tax rate increase in 2013) are not negligible but they are modest relative to the policy changes that took place coming out of the Great depression,” Saez writes. “Therefore, it seems unlikely that US income concentration will fall much in the coming years.”
With economic inequality at Great Depression levels and the United States set to implement European-like austerity policies, it’s time for a dramatic overhaul of our tax system.
To begin with, the government should look at raising capital gains taxes. Besides reducing inequality, a higher capital gains tax would provide the government with substantial additional revenue.
A new study shows how capital fueled inequality in recent years.
The study, cited by blogger Greg Sargent of The Washington Post, concludes that income from capital gains and dividends are the primary cause of the rise in inequality during a recent 15-year period. Thomas Hunderford of the non-partisan Congressional Research Service did the study, which covers 1991 to 2006.
“The reason income inequality has been increasing has been the rising income going to the top one percent,” told Sargent in an interview. “Most of that has come in capital gains and dividends.”
A New York Times editorial on Feb. 21 points out that the new top income tax rate of 39.6 is “historically low.” The editorial also noted that nearly $1.1 trillion in annual deductions, credits and other tax breaks disproportionately benefit the affluent—and cost more each year than Medicare and Medicaid combined.
A financial transactions tax would ensure a steady flow of revenue to the federal government, putting an end to the deficit hysteria that led to the sequestration, which calls for slashing $1.2 trillion over 10 years. A 1 percent tax on stock and bond trades and a 0.1 percent on derivative trades would bring in $750 billion in revenue each year, according to Ellen Brown, an attorney and author of 11 books, including “Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free.”
As conservatives continue to screech about the deficit and demand deep cutbacks in government spending, it’s time we examine more closely the public policies that brought us here.
We face a manufactured crisis that could be remedied rather painlessly if only the politicians who claim to be the defenders of working families had the will to do it.
This article (http://www.dailykos.com/story/2013/02/18/1188129/-You-will-Receive-Less-if-a-Technical-Change-to-Determine-Social-Security-Benefits-is-Adopted?showAll=yes) was first published at the Daily Kos on February, 18, 2013.
By GREGORY N. HEIRES
As deficit talks resume in the coming months, Social Security will once again likely be targeted for cuts.
One of the more popular proposals among Washington insiders is to change how inflation is calculated when benefits are set each year.
Now the White House has given new life to the proposal, which earlier floated by the administration—and supported by House Speaker Nancy Palosi–during the debate over the tax deal at the end of 2012.
Proponents like to depict the adjustment as a technical tweaking that provides for a more accurate measure of inflation. But, in reality, the change is about cutting Social Security.
The new inflation measure, known as the “chained” Consumer Price Index, would reduce the annual cost-of-living adjustment by 0.3 percent.
A small amount?
Well, no, if you rely on Social Security for most of your retirement monthly income, which is the case with most retirees.
The reduction would slash the Social Security benefit by 3 percent over 10 years ($135 billion)–and 6 percent over 20 years. That’s a substantial sum when you’re living on a fixed income, so this change would be a big hit on the poor. Average 65-year-olds would get $650 a year less in benefits when they turn 75 and see a $1,000 a year cut when they turn 85, according to Sen. Bernie Sanders (I-VT.).
How does this change work?
Currently, the adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is calculated by using price changes in a number of consumer goods.
The “chained” CPI is determined by tracking price changes according to how consumers switch their preferences and expenditures by deciding to spend more on, say, chicken when the price of meat goes up.
But if the supporters of the chained CPI really cared about improving the accuracy of calculating inflation—and not finding a spurious justification for cutting Social Security—they would be talking about using another U.S. Bureau of Labor Statistic index based on the actual spending of seniors. But guess what? That index shows that the price increases of the products seniors purchase fall below the standard measure of inflation.
The chained CPI came up at a White House news conference on Feb. 11, and Press Secretary Jay Carney indicated that Obama would be sympathetic about including the method for recalculating the Social Security benefit within a comprehensive agreement to reduce the $4 trillion deficit that the administration and U.S. Congress will soon consider. This dashes hopes of opponents who had hoped the proposal died last year.
Asked by a reporter if Obama would consider reducing the annual cost-of-living increase for recipients, Carney said, “Again, as part of a big deal, part of a comprehensive package that reduces our deficit and achieves that $4 trillion goal that was set out by so many people in and outside of government a number of years ago, he would consider the hard choice that includes the so-called chained CPI — in fact he put that on the table in his proposal — but not in a cherry-picked or piecemeal way.”
The chained CPI controversy with all its technicalities is a debate that policy wonks love to engage in and doesn’t enter the radar screen of most of us. But if implemented by the U.S. Congress and the Obama administration, the change would drive down our living standards—and the middle class and the poor will be hurt the most.
The adoption of the chained CPI would also be another blow to retirees and baby-boomers approaching retirement.
Already, middle-class retirees are squeezed because of low interest rates, which have significantly reduced earnings from their savings. Workers nearing retirement—who have already been walloped by the 2008 financial debacle and now realize that their 401(k) plans are going to fall short—are in line to take another dagger.
The chained CPI would be a new factor—added to the end of traditional pensions, failure of the 401(k)s as reliable retirement savings plans, and stagnating and falling wages–forcing workers to remain in the labor force until they drop. Will this never end?
The Social Security crisis is a phony crisis. The system will remain solvent until 2033, according to the trustees’ estimate.
The projected deficit of Social Security would be largely wiped out if only Congress would lift the payroll cap—currently $113,700—and require the wealthy to pay more.
Most workers earn less than the cap, so they are being taxed on their full income. Why not ask the wealthy to assume that same burden instead of adopting the chained CPI, which will be yet another blow to the middle class and the poor?
www.thenewcrossroads.com Posted February 23, 2003.
By GREGORY N. HEIRES
Shortly after President Barack Obama called for raising the minimum wage in his State of the Union Address, members of the Party of No lined up to denounce his proposal.
Republican leaders exposed their class interest as they declared that an increase in the minimum wage—whose real value is significantly below what it was a half century ago—would be bad for business, the economy and even workers. Their party line was also filled with mistruths, distortions and callousness.
In effect, these naysayers are declaring that the minimum-wage workers and others who make up the working poor—around 50 million people—don’t deserve to have a decent standard of living. Maybe that’s only to be expected, considering that the Republican Party’s 2012 presidential candidate, Mitt Romney, wrote off 47 million voters, “the takers,” whom he characterized as social leeches dependent on government generosity outside the GOP voting bloc.
“I don’t think a minimum wage law works,” said Sen. Marco Rubio (R-Fla.).
“I want people to make a lot more than $9,” Rubio said. “Nine dollars is not enough. The problem is that you can’t do that by mandating it in the minimum wage laws. Minimum wage laws have never worked in terms of helping the middle class attain more prosperity.”
U.S. House Speaker John Boehner (R-Ohio), appearing at a news conference with Senate Majority Leader Mitch McConnell (R-Ky.), said increasing the minimum wage would actually hurt the working poor. “When you raise the price of employment, guess what happens? You get less of it,” he said.
“A lot of people who are being paid the minimum wage are being paid that because they come to the workforce with no skills,” Boehner said. “And this makes it harder for them to acquire the skills they need in order to climb that ladder successfully.”
Sen. McConnell launched into an ideological rather than a substantive attack of the proposal.
He described Obama’s address as “pedestrian, liberal boilerplate.” Ignoring the poor’s need for an immediate improvement in their living standard, McConnell said that Obama “spoke of workers’ minimum wages, instead of their maximum potential.”
Rubio’s comments reflected an ideologically driven view that we all will prosper if we allow the free market to operate on its own. But his position falls flat on its face once reality stares you in the face.
As the federal government has allowed the real value of the minimum wage to fall over decades, the invisible hand of the market has clearly failed to boost the pay of workers.
Boehner apparently believes that the minimum wage is bad because it discourages workers from building up their skills. Actually, what’s occurred in the last three decades is that business practices and poor public policy—downsizing, privatization, trade policies that have encouraged the export of U.S. jobs, cutbacks in the public sector, the attack on private-sector unions, technological unemployment, the erosion of the minimum wage and globalization—have combined to eliminate millions of good jobs in the United States. Today, the prospects for U.S. workers are poor because most future opportunities are in low-paying jobs in the social-service sector.
As the debate over the minimum wage unfolds, we should expect conservatives to argue that an increase will hurt small businesses, kill jobs and only helps teenagers.
But these conservative arguments aren’t very persuasive and are a bit misleading:
•Studies about the impact of the minimum on employment aren’t conclusive. But by and large they show that modest increases in the minimum wage haven’t resulted in insignificant job losses. •Two-thirds of low-wage earners work for big companies, which are better able than small businesses to absorb modest pay increases.
•Though teen-agers are commonly identified as minimum-wage workers, a recent Economic Policy Institute report found that nearly 90 percent of workers paid the minimum wage are 20 years old or older. More than a third are married and over 25 percent are parents, according to the report.
No, raising the minimum wage doesn’t amount to unsound public policy.
Raising the minimum wage would be good for economy. It would be a great help to the working poor. Obama’s proposal reflects government’s appropriate role of correcting the injustices of the free-market economy.
So, what are some of the most compelling arguments for raising the minimum wage?
First, economists cite the drop in value of the minimum wage as one of the major factors explaining the declining and stagnating incomes that have walloped the poor and middle class over the past 30 years. Raising the minimum raise would significantly increase the household income of the working poor and attack one of the principal factors driving the erosion of income of nearly everyone by the 1 percent.
Second, the decline of the minimum wage has hurt the standard of living of millions of Americans and immigrants by forcing them to take on second and even third jobs to get by.
Third, the lowering of the minimum wage has hurt the economy by curtailing the purchasing power of the working poor. Compared to higher-income groups, the working poor spend a greater percentage of their increases in their disposable income.
Fourth, raising the minimum wage is a matter of economic fairness. Low-wage workers have especially come out short as economic inequality has risen in recent decades.
The Republican arguments against the minimum wage are particularly offensive given that Obama’s proposal is very modest—even inadequate, according to liberal and leftist critics.
Only 5.2 percent of hourly workers, or 3.8 million workers, are paid minimum wage or less. While the percentage of the work force paid the minimum wage is not that high, the minimum wage provides a benchmark for setting the pay rates of millions of low-wage workers.
The last increase in the minimum wage occurred in 2009. The minimum wage would now be $21.72 an hour if it had increased at the same rate as productivity, according to according to a 2012 study of the Center for Economic and Policy Research.
The CEPR study also found that the minimum wage would be $10.52 an hour if it had kept up with inflation since its real value peaked in 1968. Obama’s proposal would link increases in the federal minimum wage to the rate of inflation.
But apart from the technical arguments in favor of raising the minimum wage, the government should boost it from $7.25 to $9 an hour simply because that’s the right thing to do. As Obama said in his State of the Union Address: “Today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.”
Why doesn’t the Party of No just have a heart and agree to help out the working poor?
www.thenewcrossroads Posted on February 21, 2013
By GREGORY N. HEIRES
With deep cutbacks in government spending looming and conservatives pushing for reduced expenditures on Social Security and Medicare, the United States need only look across the Atlantic Ocean to consider the consequences.
Three years of austerity has devastated Europe.
The region is engulfed in a political, economic and social crisis, struggling with record unemployment, rising homelessness, increasing inequality, more crime, low and even negative growth, an erosion of health-care and other public services, and reduced pensions.
Cutting taxes and slashing spending during a period of weak economic growth has only made the region’s economies worse. Decades ago, of course, economist John Maynard Keynes warned against doing that, but European policy makers chose to follow the dictates of international bankers instead.
Do we really want this in the United States?
Polls show a majority of Americans oppose cuts in government services, Medicare and Social Security. But many of the Washington elite and their misguided conservative supporters do—and they are driving the debate over the role of government in our society.
On a positive note, President Barack Obama did express concern in his State of the Union Address on Feb. 12 that deep automatic spending cuts scheduled to begin March 1 could set back the U.S. economy’s recovery and warned against ideologically-driven budget reductions.
While Obama didn’t mention the economic crisis in Europe, the austerity experiment there is a clear warning that if the U.S. government follows the European public policy prescription, we could be headed for a deep economic malaise and further downward social mobility after many of us hoped his re-election would put a stop to decades of stagnating and falling wages. An attack on our public sector would put us over a fiscal cliff.
Let’s look at the dismal track record of Europe’s austerity:
- Greece and Spain, where unemployment is close to 25 percent, are struggling with depressed economies.
- The women’s employment rate in 22 countries is back to 2005 levels, way below the European Union’s goal of 75 percent employment in 2020. The drop in employment has resulted from policies that have cut public sector jobs and wages, reduced services and benefits and slashed funding for women’s rights and gender equality, according to the European Women’s Lobby.
- Youth unemployment in Europe was 36.6 percent (or 19.5 million people) in 2011, the worst on record, according to a study released in October by the European Foundation for the Improvement of Living and Working Conditions (Eurofound), an autonomous body of the European Union. Youth unemployment has reached over 50 percent in Spain and Greece. “The consequences of a lost generation are not merely economic, but are societal, with the risk of young people opting out of democratic participation in society,” the report said.
- Gross disposable income has declined in most European Union countries since 2009.
- “Economic suicide” is a new term in the European lexicon. Studies show that for every 1 percent rise in the unemployment rate, the rate of suicides goes up by 0.8 percent, according to Silvana Enculescu, communications manager at Mental Health Europe.
- The Gross Domestic Product of the Eurozone is expected to contract this year, according to some forecasts. Growth in the leading economy of the region, Germany, is even expected to be flat.
- As wages fall and job losses occur, homelessness is on the rise. Service providers estimate the demand for homeless services has increased 25 to 30 percent in Portugal, Spain and Greece since the onset of the crisis, according to a report by the European Federation of National Organisations Working with the Homeless. Homelessness is up an estimated 10 percent in Europe’s strongest economy, Germany. “These increases in homelessness reflect increased unemployment and loss of income which mean more people have difficulty meeting housing costs,” the report says. “At the same time, austerity budget cuts are diminishing capacity to respond to homelessness.”
So, how did we get here?
Since the financial crisis of 2008, European countries have embarked on a path of austerity, selling off public assets, reducing collective bargaining rights and the power of unions, cutting pensions and slashing government services.
Governments adopted austere policies as they came under pressure from the financial sector to reduce their debt obligations.
In March 2010, the Organization for Economic Co-operation and Development (OECD) recommended that Europe adopt a program of austerity for six years. The Financial Times called the proposal “highly sensible.”
Some critics believe the financial elite and their political allies, led by Germany Chancellor Angela Merkel, exaggerated the threat of the debt crisis to carry out an agenda of smashing the welfare state.
But “labor flexibility” and “structural reforms” have failed to jump-start troubled economies like those of Greece, Spain, Portugal and the United Kingdom. Instead, the region now grapples with 11 percent unemployment and depressed economies.
The European Union’s budget policies of cutting in health care, public pensions, education and other social services have led to falling income, which has hurt demand in the private sector.
There is growing frustration in the Eurozone that individual countries have insufficient control over their own economies since their use of the euro means they don’t have the option of devaluing their own currency. Instead, they are left only with the policy of gutting the public sector.
As Europe continues down the road to austerity, dissident voices are speaking out more forcefully. “We want to get the message across that austerity kills,” said Gabi Zimmer, a member of the European Parliament, in an article on publicserviceeurope.com. “Too often we hear of policies and measures that promise ‘stability’, but we need to ask the question: who is this stability for? Stability for banks and the financial sector–the main drivers behind the financial crisis.
Anti-austerity demonstrations swept Europe on Nov. 14, a sign that ordinary people are getting fed up with the relentless assault on their living standards.
In January, the presidents of the medical associations in Spain, Ireland, Portugal and Greece expressed their alarm over inadequate funding for health care that they said has caused “extensive and deep human suffering” and “an increased number of situations that defy our ethics and basic notions of human dignity.”
Their statement, signed also by leading figures in the medical and academic communities, called upon governments to adopt policies to “prevent further deterioration of health and health services.”
A health-care crisis. Homelessness. Rising inequality. Mass unemployment.
The track record of Europe’s experiment with austerity is a warning to the United States not to go down the road to economic and societal malaise.
www.thenewcrossroads.com. Posted February 17, 2013.
By GREGORY N. HEIRES
As deficit talks resume in the coming months, Social Security will once again likely be targeted for cuts.
One of the more popular proposals among Washington insiders is to change how inflation is calculated when benefits are set each year.
Proponents like to depict the adjustment as a technical tweaking that provides for a more accurate measure of inflation. But, in reality, the change is about cutting Social Security.
The new inflation measure, known as the “chained” Consumer Price Index, would reduce the annual cost-of-living adjustment by 0.3 percent.
A small amount?
Well, no, if you rely on Social Security for most of your retirement monthly income, which is the case with most retirees.
The reduction would slash the Social Security benefit by 3 percent over 10 years ($135 billion)–and 6 percent over 20 years. That’s a substantial sum when you’re living on a fixed income, so this change would be a big hit on the poor.
How does this change work?
Currently, the adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is calculated by using price changes in a number of consumer goods. The “chained” CPI is determined by tracking price changes according to how consumers switch their preferences and expenditures by deciding to spend more on, say, chicken when the price of meat goes up.
But if the supporters of the chained CPI really cared about improving the accuracy of calculating inflation—and not finding a spurious justification for cutting Social Security—they would be talking about using another U.S. Bureau of Labor Statistic index based on the actual spending of seniors. But guess what? That index shows that the price increases of the products seniors purchase fall below the standard measure of inflation.
Unfortunately, the chained CPI controversy with all its technicalities is a debate that policy wonks love to engage in and doesn’t enter the radar screen of most of us. But if implemented by the U.S. Congress and the Obama administration, the change would drive down our living standards—and the middle class and the poor will be hurt the most.
The adoption of the chained CPI would also be another blow to retirees and baby-boomers approaching retirement.
Already, middle-class retirees are squeezed because of low interest rates, which have significantly reduced earnings from their savings. Workers nearing retirement—who have already been walloped by the 2008 financial debacle and now realize that their 401(k) plans are going to fall short—are in line to take another dagger.
The chained CPI would be a new factor—added to the end of traditional pensions, failure of the 401(k)s as reliable retirement savings plans, and stagnating and falling wages–forcing workers to remain in the labor force until they drop. Will this never end?
The Social Security crisis is a phony crisis. The system will remain solvent until 2033, according to the trustees’ estimate.
The projected deficit of Social Security would be largely wiped out if only Congress would lift the payroll cap—currently $113,700—and require the wealthy to pay more.
Most workers earn less than the cap, so they are being taxed on their full income. Why not ask the wealthy to assume that same burden instead of adopting the chained CPI, which will be yet another blow to the middle class and the poor?
www.thenewcrossroads. Posted Feb. 7, 2013
By GREGORY N. HEIRES
As the global elite met last week at the annual Davos economic summit, an estimated 200,000 people around the world died during the five-day conference because of poverty-related—and avoidable–afflictions.
The persistence of poverty and rising inequality are stark reminders of how neo-liberal policies promoted by many of the politicians and business leaders at Davos have left behind billions of people as a tiny elite benefits from those policies.
Deregulation, privatization of public assets, tax cuts, austerity, downsizing of government services, the gutting of labor protections and the attack on unions have allowed a small group to accumulate vast sums while the vast majority of the globe’s people cope with stagnating and falling incomes.
But a little redistribution and progressive economic policies could go a long way toward addressing poverty and inequality.
The richest 100 billionaires in the world are worth $1.9 trillion—slightly less than the GDP of the United Kingdom. In 2012, their net income was $240 billion, which a report by the London-based international group Oxfam says “would be enough to eliminate extreme global poverty four times over.” The study was released Jan. 21, two days before the opening of the World Economic Forum in Davos, Switzerland.
“Concentration of resources in the hands of the top 1 percent depresses economic activity and makes life harder for everyone else–particularly those at the bottom of the economic ladder,” said Jeremy Hobbs, Oxfam’s executive director.
“We can no longer pretend that the creation of wealth for a few will inevitably benefit the many–too often the reverse is true,” he said. “In a world where even basic resources such as land and water are increasingly scarce, we cannot afford to concentrate assets in the hands of a few and leave the many to struggle over what’s left.”
Oxfam reports that extreme wealth and extreme inequality are worsening dramatically.
The top 1 percent have enjoyed a growth of income of 60 percent during the past 20 years, according to the Oxfam report, “The Cost of Inequality: How Wealth and Income Extremes Hurt Us All.” Meanwhile, wages in many countries have barely risen in real terms for many years, with most of the gains going to capital, the report says. As inequality has risen, social mobility has fallen rapidly in many countries, according to the report.
In many countries, economic inequality has skyrocketed over the past three decades:
• The share of income of the top 1 percent in the United States has doubled since 1980, increasing from 10 percent to 20 percent. The income share of the top 0.01 percent has quadrupled, which is unprecedented.
• In China, the top 10 percent take home nearly 60% of the income.
• Inequality has increased in many developing countries.
The top 1 percent—60 million people, including 1,200 billionaires–continued to increase their share of income, even after the financial crisis hit in 2008. The luxury goods market has registered double-digit growth every year since then. “Whether it is a sports car or a super-yacht, caviar or champagne, there has never been a bigger demand for the most expensive luxuries,” Oxfam says.
The Oxfam report comes a month after an International Monetary Fund report highlighted global inequality. That report, which studied advanced and developing economies from 1990 to 2005, found that inequality increased in:
•15 of 22 advanced economies and in 20 of 22 emerging market economies in Europe,
•11 of 20 countries in Latin America and the Caribbean (though it subsequently improved in most of them),
• 13 of 15 countries in Asia and the Pacific, and
• 9 of the 12 countries in the Middle East and North Africa.
In Sub-Saharan Africa, inequality increased in 10 of 26 countries. Inequality did, however, go down across the region.
Why Inequality Matters
Conservatives typically argue that inequality doesn’t matter as long as most of us enjoy a decent standard of living. But while that argument may seem to hold some truth in developed countries, it certainly cannot be made in the case of the developing world, where billions live in abject poverty despite economic progress. In fact, the Oxfam, economist Joseph Stiglitz and others make a strong case that inequality undermines the economy–and democracy.
The concentration of wealth and capital in a few hands depresses demand by limiting the spending power of the vast majority of the population. Years ago, a Citigroup report made that point by noting that U.S. corporations are increasingly directing sales to the elite in foreign markets as the purchasing power of the middle class declines in the United States.
If income were spread more equally, demand would be higher, stimulating greater economic growth.
In a recent article in the Guardian, George Monbiot noted that the toleration of inequality, viewed as an incentive for economic innovation, is a benchmark of neo-liberal ideology. And that toleration has proved disastrous.
Monbiot wrote: “The recent jump in unemployment in most developed countries – worse than in any previous recession of the past three decades – was preceded by the lowest level of wages as a share of GDP since the second world war. Bang goes the theory. It failed for the same obvious reason: low wages suppress demand, which suppresses employment.”
The concentration of economic power also has a corrupting influence on politics. The ruling conservative party in the United Kingdom, for instance, receives more than half of its donations from the financial services sector.
Around the world, the financial industry has spent billions lobbying governments to adopt ruinous economic policies, according to Monbiot. “Capture of politics by elites is also very prevalent in developing countries, leading to policies that benefit the richest few and not the poor majority, even in democracies,” the Oxfam report says.
A Global New Deal
What should be done to confront inequality and its corrosive impact on our society?
There are some positive signs. The United States has adopted tax changes that increase what the wealthy pay. And earlier this month, the European Union gave 11 nations the go-ahead to adopt transaction taxes in the financial sector.
Oxfam calls for “a global new deal.”
To begin with, the group proposes the closing of tax havens, which hold as much as $32 trillion, or a third, of all global wealth. That could bring in as much as $189 billion in additional revenue. Other recommendations include:
• reversing the trend toward regressive taxation;
• adopting a global minimum corporation tax rate;
• boosting wages, and
• increasing investment in free public services and the safety net.
“From tax havens to weak employment laws, the richest benefit from a global economic system which is rigged in their favor,” Hobbs said. “It is time our leaders reformed the system so that it works in the interests of the whole of humanity rather than a global elite.”
www.thenewscrossroads. Posted January 29, 2013
By GREGORY N. HEIRES
The people atop the economic pyramid of our grossly inequitable society now want to make ordinary Americans work longer until they can retire.
The Business Roundtable, which speaks for the CEOs of major corporations, is pushing for the retirement age of Social Security to be extended to 70—without raising what the wealthy contribute for the benefit.
Its proposal, announced Jan. 16, is part of a plan to roll back entitlements as the U.S. Congress and Obama administration prepare for negotiations over the country’s deficit and debt.
The proposal to increase the Social Security eligibility age comes as a retirement crisis looms for the Baby Boom generation. Already, many Americans are working longer because the 2008 economic implosion walloped their retirement savings accounts.
The jobs crisis and the replacement of traditional pensions–which guarantee a specific income during retirement–with 401(k) plans—which subject account holders to the uncertainty of the market—have left millions with inadequate funds. Now conservatives want to make the retirement burden for ordinary Americans even worse by unnecessarily pushing back the age to be able to receive Social Security.
The Business Roundtable, which says its members head corporations that together account for a third of the value of the stock market, also wants Medicare coverage to kick in at the same age.
“America can preserve the health and retirement safety net and rein in long-term spending growth by modernizing Medicare and Social Security in a way that addresses America’s new fiscal and demographic realities,” said Gary Loveman, chairman, president and chief executive of Caesars Entertainment Corp. Loveman chairs the Business Roundtable’s health and retirement committee.
The Business Roundtable’s plan would increase the age at which full Social Security benefits are paid when individuals reach 70 years of age. Currently, individuals born between 1946 and 1953 are eligible for full benefits at age 66. A change introduced during the Reagan administration increased the eligibility age for full benefits to 67 for individuals born in 1960 and thereafter.
A Politico-George Washington University poll of voters from “battle ground” states taken before the Business Roundtable unveiled its plan showed strong opposition to raising the retirement age. Sixty-four percent of the respondents were against the idea, and the opposition was greater among younger voters between the ages of 18 and 29 (66 percent) and those approaching retirement, ages 45 to 59 (69 Percent).
On the surface, raising the retirement age would seem to make sense. After all, people are living longer, so they should work longer and pay more for their Social Security benefit, right? Not exactly.
In recent decades, greater longevity has generally been restricted to professionals, well-educated people and the affluent. They tend to have better health care and lead healthier life styles than working-class people. They also tend to enjoy their jobs more and are willing to work longer.
On the other hand, the life expectancy of non-professionals hasn’t changed all that much in recent decades. So, raising the retirement age would be especially cruel to workers in physically-taxing jobs whose life expectancy is lower than that of professionals.
The Business Roundtable plan conveniently does not call for raising the cap on the Social Security payroll tax. Lifting the $113,700 ceiling on the payroll tax would help address concern of the long-term health of Social Security. In fact, according to the independent Congressional Budget Office, raising the ceiling would do three times as much as raising the retirement age to address the projected shortfall of Social Security, whose trustees estimate will no longer be able to full fund benefits by 2034.
Improved economic growth and better wages would also help by increasing the revenue stream into the system’s trust fund.
So, the alarm over Social Security’s financial health is itself exaggerated and appears to be a ploy to gut benefits. Whatever shortfall exists can be addressed without burdening the 99 percent, and progressives should fight to prevent Social Security from being a casualty of deficit and debt hysteria.
www.thenewcrossroads. Posted January 23, 2013
By GREGORY N. HEIRES
Conservatives are using the looming showdown over the debt ceiling and deficit as an opportunity to gut Social Security.
But progressives are fighting back by arguing that Americans’ most popular program technically doesn’t contribute to the federal debt or deficit and is securely funded for decades.
“Well, we’ve got to make the president and Republicans and any Democrats that want to cut Social Security an offer they can`t refuse, and that is tens of millions of people have got to make it very clear to Congress — Social Security has nothing to do with the deficit,” Sen. Bernie Sanders (I-Vt.) said Jan. 4 in an interview with MSNBC’s Ed Schultz.
Sanders’ comment reflected the position of some Democrats during the fiscal cliff negotiations late last year when they feared Social Security cuts would be a part of the deal to ensure that scheduled tax cuts and deep budget reductions didn’t go into effect.
“Social Security does not add one penny to the deficit,” Sen. Dick Durbin (D-Ill.) said in an appearance on ABC’S This Week on Nov. 25. “Not a penny. It’s a separate funded operation, and we can do things that I believe we should now, smaller things, played out over the long term that gives it solvency.”
“Over 77 years and now through 13 recessions, Social Security has not added one penny to our deficit or our debt,” Rep. Xavier Becerra (D-CA) said during a fall meeting of the House Ways and Means Social Security subcommittee.
As it ended up, the entitlement programs were spared the ax in the fiscal cliff deal. But deficit hawks are hoping that Social Security will be part of a grand bargain on the federal debt and deficit in the coming months that will be linked to the discussion over the debt ceiling. Durbin proposes that Social Security be removed from these negotiations and instead be assigned to a commission.
Recently, defenders of Social Security have enjoyed backing their position by looking back a few decades to cite the Republicans’ favorite president of modern times, Ronald Reagan–surely much to the horror of many conservative ideologues.
In 1984, Reagan said, “Social Security, let’s lay it to rest once in for all…Social Security has nothing to do with the deficit. Social Security is totally funded by the payroll tax levied on employer and employee. If you reduce the outgo of Social Security, that money would not go into the general fund to reduce the deficit. It would go into the Social Security trust fund. So Social Security has nothing to do with balancing the budget or erasing or lowering the deficit.”
Social Security is a pay-as-you-go program that relies on its own funding stream—not federal income taxes—from the payroll tax. It has its own trust fund, which is separate from the government’s budget for discretionary and military spending. The U.S. Congress, however, borrows from the Social Security trust fund to pay for government programs.
As a pay-as-you go-program, the Social Security system is not allowed to borrow to pay out benefits. Making that point, Dean Baker, co-director of the Center for Budget and Policy Priorities, explains that, “Social Security is prohibited from spending any money beyond what it has in its trust fund. This means that it cannot lawfully contribute to the federal budget deficit, since every penny that it pays out must have come from taxes raised through the program or the interest garnered from the bonds held by the trust fund.”
What is actually going on here is that conservative groups like corporate-funded Fix the Debt are using deficit hysteria as a bogus justification for reducing Social Security benefits and undermining the program, which right-wingers have hated ever since its was created in 1935. Groups like the libertarian Reason Foundation for decades have described Social Security as a Ponzi scheme as they call for privatization. As privatization effort of President George W. Bush failed, the fallback plan of conservatives seems to be to try to chip away at the program.
Yet for all the alarm over Social Security and its supposed contribution to the federal debt and funding problems, the program is on solid ground for the foreseeable future.
Social Security will become exhausted—unable to pay fully for benefits through the payroll tax–in 2033, according to the 2012 report of the Social Security trustees. But even without any tinkering, the program will still be able to cover 75 percent of its benefits if the current payroll tax remains the same.
Economic projections beyond five years are notoriously uncertain. So the trustees’ projections could prove to be wrong if, say, the U.S. economy (in an admittedly unlikely scenario) enters a long period of high growth, which would boost the funding from the payroll tax. The projected shortfall could be addressed substantially by raising the income cap—$113,700 in 2013—on the payroll tax. In any event, claims of Social Security’s pending doom and contribution to the deficit and debt go against the facts.
“Social Security is not part of the problem. That’s one of the myths the Republicans have tried to create,” Senate Majority Leader Harry Reid (D-Nev.) said.
www.thenewcrossroads.com Posted Jan. 16, 2013
By GREGORY N. HEIRES
Now that the U.S. Congress has raised taxes on the wealthy for the first time in two decades, right-wing politicians are stepping up the cry for spending cuts, falsely claiming that our government can’t afford entitlements like Medicare and Social Security.
The issue, though, is not affordability. The money is there. The real question, of course, is who controls it.
The debate over the deficit reflects differing views over the role of government and ultimately the structure of our society, whether we want to support protections of the welfare state or shred our safety net and force individuals to fend for themselves under savage capitalism. Conservatives want to destroy New Deal and Great Society programs—and sabotage Obamacare.
Unfortunately, the deficit hysteria of the Right is so strong and effective that the mainstream media and many of the pundits who set the terms of the debate in Washington are also hung up on the affordability issue. Their ideological blinders, for instance, lead them to push for cuts in Social Security even though that program doesn’t contribute directly to the federal deficit or debt.
Progressives need to fight back and refuse to bow to this deficit hysteria and vicious assault on the welfare state. They should seize upon the opening provided by U.S. Congress’ decision to raise the tax rate for the wealthy and promote other revenue streams. And they need only to look across the Atlantic Ocean to find hope.
In December, the European Parliament voted for a financial transaction tax as the region confronts massive deficits and soaring unemployment. This makes common sense since speculators and bankers have the deep pockets to contribute their fair share to government programs and they bear a responsibility for wrecking the economy.
Eleven European countries are now considering adopting a financial transaction tax. The London Stock Exchange already has a .5 percent tax on financial transactions, though it has several exceptions.
In the United States, the Economic Policy Institute, the Institute for Policy Studies, National Nurses United, the Center on Budget and Policy Priorities, George Soros, Warren Buffet, U.S. Rep. Keith Ellison, D-Minn., and U.S. Sen. Bernie Sanders, I-Vt., are among those leading the call for a transaction tax, which would provide billions of dollars annually in revenue.
“In its essentials, the idea of a financial market transaction tax is simple,” said economist Robert Pollin, co-director, Political Economy Research Institute at the University of Massachusetts-Amherst. “It would mean that financial market traders would pay a small fee to the government every time they purchased any financial market instrument, including all stock, bond, options, futures, and swap trades. This would be the equivalent of sales taxes that Americans have long paid every time they buy an automobile, shirt, baseball glove, airline ticket, or pack of chewing gum, eat at a restaurant, or have their hair cut.”
The average sales tax rate in the United States that consumers pay on almost all goods and services is 9.6 percent, according to the National Nurses Union. Yet, absurdly, J.P. Morgan, Goldman Sachs, Morgan Stanley, and the other financial giants on Wall Street pay no sales tax on the thousands, even tens of thousands of trades, they carry out every second.
In December, as the debate over the “fiscal cliff”—impending automatic tax increases and spending that the last-minute deal between Congress and Obama administration averted–heated up, the 185,000-member National Nurses Union rallied in 20 cities across the country to call for a transaction tax, also known as the Robin Hood Tax.
“Wall Street’s agenda, of more punishing cuts for working people, and more handouts for the banks, who are the main beneficiaries of policies that put debt payments ahead of protecting seniors and working families, was roundly rejected by voters in November,” nurses union President Deborah Burger said. “Let’s not hand Wall Street the victory they lost at the polls. Instead, it is time to hold the bankers and speculators accountable, and levy a small tax on their reckless behavior to help rebuild the economy they did so much to wreck.”
Ellison has sponsored the Inclusive Prosperity Act. By imposing a 50-cent-tax on every $100 of stock trades and a lesser amount on other financial transactions, the legislation would bring in as much as $350 billion every year.
Sanders’ proposed legislation would establish a speculation fee of .03 percent on the sale of credit default swaps, derivatives, stocks, options and futures. It would raise $350 billion over 10 years.
A study by the Economic Policy Institute says a modest tax on the buying and selling of stocks and other financial products could bring in an estimated $150 billion a year while dampening the speculation and rapid turnover of stocks that contribute to the instability of the economy. That financial instability, of course, was one of the causes of the 2008 economic blowup.
So, in addition to providing a new, substantial revenue stream, a transaction tax would hopefully curb the recklessness of financial traders and speculators. Tens of millions of dollars in computerized trades sometimes occur within minutes, and that can cause market turbulence.
The average holding period of financial transactions has plummeted from four years to 22 seconds, bringing instability to the market and taking $635 billion out of the economy, according to Wallace Turbeville, a senior fellow at Demos and former vice president of Goldman Sachs. Proponents like Turbeville say that even a small transaction tax should contribute to the stability of the market by making hedge funds, investment banks and speculators more cautious.
“The American public provided hundreds of billions to bailout Wall Street during the global fiscal crisis yet bore the brunt of the crisis with lost jobs and reduced household wealth,” said Ellison, when he introduced his legislation last year.
“This is a phenomenally wealthy nation, yet our tax and regulatory system allowed the financial titans to amass great riches while impoverishing the systems that enable inclusive prosperity,” Ellison said. “A financial transaction tax protects our financial markets from speculation and provides the revenue needed to invest in the education, health and communities of the American people.”
www.thenewcrossroads. Posted January 7, 2013