Blog

By Paul Buchheit
Author, editor, expert on income inequality

Ayn Rand’s novel “Atlas Shrugged” fantasizes a world in which anti-government citizens reject taxes and regulations, and “stop the motor” by withdrawing themselves from the system of production. In a perverse twist on the writer’s theme the prediction is coming true. But instead of productive people rejecting taxes, rejected taxes are shutting down productive people.

Perhaps Ayn Rand never anticipated the impact of unregulated greed on a productive middle class. Perhaps she never understood the fairness of tax money for public research and infrastructure and security, all of which have contributed to the success of big business. She must have known about the inequality of the pre-Depression years. But she couldn’t have foreseen the concurrent rise in technology and globalization that allowed inequality to surge again, more quickly, in a manner that threatens to put the greediest offenders out of our reach.

Ayn Rand’s philosophy suggests that average working people are ‘takers.’ In reality, those in the best position to make money take all they can get, with no scruples about their working class victims, because taking, in the minds of the rich, serves as a model for success. The strategy involves tax avoidance, in numerous forms.

Corporations Stopped Paying

In the past twenty years, corporate profits have quadrupled while the corporate tax percent has dropped by half. The payroll tax, paid by workers, has doubled.

In effect, corporations have decided to let middle-class workers pay for national investments that have largely benefited businesses over the years. The greater part of basic research, especially for technology and health care, has been conducted with government money. Even today 60% of university research is government-supported. Corporations use highways and shipping lanes and airports to ship their products, the FAA and TSA and Coast Guard and Department of Transportation to safeguard them, a nationwide energy grid to power their factories, and communications towers and satellites to conduct online business. (more…)

By Dave Johnson
Fellow, Campaign for America's Future

President Obama was in Texas last week to launch a “Middle-Class Jobs and Opportunity Tour” that focuses on manufacturing.

The president announced an executive order creating three “manufacturing hubs” — Manufacturing Innovation Institutes — with $200 million from the Departments of Defense, Energy and Commerce, and the National Science Foundation and NASA budgets. The president is asking Congress to invest an additional $1 billion to create a nationwide network of 15 such institutes. (For more information on manufacturing hubs see my posts, Sen. Sherrod Brown Proposes National Network of Manufacturing Innovation, Ohio 3D-Printing Manufacturing Hub Initiative and Obama’s Four Steps For Manufacturing.)

According to the NY Times, “These steps are not a substitute for the bold Congressional action we need to create jobs and grow the economy, but they’ll make a difference,” a White House official said, speaking on background ahead of the president’s official announcement.

Open Data Policy

Another executive order declares an “Open Data Policy” that requires government data be put into open and machine-readable formats and made available to the public and entrepreneurs. The project will help “achieve the goal of making troves of previously inaccessible or unmanageable data easily available to entrepreneurs, innovators, researchers, and others who can use those data to generate new products and services, build businesses, and create jobs.” (more…)

Robert Borosage
Co-Director Campaign for America's Future

This week, President Obama will travel to Austin, Texas to call for action on jobs. The proposals the president put forth in his State of the Union address – investing in infrastructure, expanding preschool, bolstering manufacturing assistance centers, raising the minimum wage – have been blocked in the Congress, and disappeared from the public debate.

The president wants to revive his jobs agenda while still touting the economic recovery. In his commencement address at Ohio State University last weekend, he reassured students:

“While things are still hard for a lot of people, you have every reason to believe that your future is bright. You’re graduating into an economy and a job market that is steadily healing.”

The White House points to 38 straight months of private sector jobs growth, but in reality, jobs have been largely left behind in the recovery. The stock market is setting new records, but over 20 million people still are in need of full-time work. The labor force participation rate – the percentage of workers who have a job or are looking for one – is down to levels not seen since 1979. The jobs being created pay less with fewer benefits than the jobs that were lost.  As a result, inequality is still growing; the middle class is still sinking. And young people are graduating into one of the worst jobs markets since the Great Depression.

In many ways, the fact that the economy is “steadily healing” back to the old economy is the problem, not the solution. That economy featured growing inequality and a declining middle class. It was built on debt and speculative bubbles. Trade deficits hit new records as multinational companies shipped good jobs abroad.

In his first year in office, President Obama argued that we couldn’t go back to that economy and shouldn’t want to. We had to build a new foundation for growth. But in fact, gridlock in Washington has virtually ensured that we would drift back into the old economy.

Once more the Federal Reserve offers the only ballast for the economy by holding interest rates at record lows. The big banks have emerged from the recession bigger and more concentrated than ever. That virtually ensures a reach for increasing risk as we wait for the next bubble. The trade deficit is back over $1 billion a day, despite the natural gas explosion that reduces U.S. dependence on imported oil. The assault on unions has escalated. Part-time minimum-wage jobs proliferate. The richest 1 percent of the country captured a staggering 112 percent of the income growth in the first two years coming out of the recession. The 99 percent on average lost ground. (more…)

By Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future

At least three senators up for reelection in Republican-leaning states next year are defying President Obama by indicating they’ll refuse to support the White House’s Social Security cuts in any “Grand Bargain” on the budget. There are a number of reasons why this is important, including the fact that it may scuttle the chance (if there ever was one) for any deal.

But something else makes this development what the Vice President of the United States might call “a big effin’ deal”: It tells us once and for all where the real political center lies.

Politicians and media types in Washington love to argue that these slashes to Social Security, along with other corporate- or billionaire-backed spending cuts, are something that the “middle” wants. But when it comes time to run for reelection in Republican or Republican-leaning states — in other words, when the rubber meets the road — politicians suddenly remember how to read their polls rather than their pals.

The “chained CPI,” a Social Security cut and middle-class tax hike rolled into one, is despised across the political spectrum. Washington’s “center” is formed by the consensus of lobbyists, politicians, mainstream media employees, and other beneficiaries of corporate largesse. But the real political center – the one where most voters live — loathes these one-percent-friendly cuts.

The president will never run for political office again. Neither will Bill Clinton, who’s pushing this cut. Billionaire Pete Peterson, a major force behind the chained CPI, won’t be running for office either. Nor will the CEOs of “Fix the Debt,” their lobbyists, or the lazy editors and journalists who so cavalierly mislead the public this critical issue.

But these Red State senators understand that their political survival depends on rejecting this repellent, ill-advised, and mean-spirited benefit cut and tax hike.  They, not the cynical hacks in the cut-promoting “Gang of Six,” represent the true center. As the “Gang” members leave office and begin their well-paid corporate afterlives, the real center is taking shape before our very eyes.

It includes Senators Kay Hagan of North Carolina, Mark Begich of Alaska, and Mark Pryor of Arkansas. These Democrats all represent states which were carried by Mitt Romney in 2012.  Cynical journalists may repeat the canard that it’s “fringe” or “leftist” to resist these cuts, but these senators are looking at the numbers at least as fervently as they’re looking into their consciences. (more…)

Mike Lux
Co-founder and CEO, Progressive Strategies

The inside-the-beltway world of Washington, D.C. rarely deals with truly foundational economic issues. When they do, it is only because they are being forced to by crisis or a political movement forcing something onto center stage. The big fundamental issues make the powers that be uncomfortable simply because they may cause big changes that do damage to the wealthy economic incumbents who don’t want their privileged status upended. This is why D.C. seems so disconnected to people in the real world: While Congress is goofing around with stupid stuff like sequesters, the things that really matter to people go unaddressed.

Occasionally, though, the real issues are forced onto the D.C. scene by some combination of smart, gutsy politicians and political movements whose time has come. It’s too early to tell, but on what I believe are the two most central economic issues of the next generation, I’m hoping D.C. is finally going to be forced to pay attention.

The first of these issues is the steady destruction of the American middle class by the massive expansion of the low wage worker economy. There is a movement on this issue that is coming together to take this issue on, and we are seeing the early signs of it in the New York and Chicago fast food strikes, and the huge nationwide day of action at Wal-Marts around the country last year. There will be more to write about this in the coming weeks, so that will be Part 2 of this story, but you heard it here first: This will be a big deal.

Part 1, though, is to discuss the ongoing battle to break up the economic concentration of power in this society, starting with the most important of all industries to break up, the banking industry. The first step in that fight legislatively is the introduction of Sherrod Brown and David Vitter’s bill taking on the Too Big To Fail banks. Brown and Vitter, who to my great delight call their bill the Terminating Bailouts for Taxpayer Fairness (TBTF) Act, put serious pressure on TBTF banks in a variety of ways, and those banks are doing some serious squealing as a result. The banks are saying that if you make them be safer, if you lessen their risk of failure, that it will hurt economic growth. Seriously, guys — you can’t come up with something better than that? I guess I missed all the great things these banks’ speculative unregulated trading did for the economy in that last few years. Perhaps a few waiters’ jobs at high end Manhattan restaurants? (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

So far, the much-dreaded “sequester” — some $85 billion in federal spending cuts between March and September 30 — hasn’t been evident to most Americans.

The dire warnings that had issued from the White House beforehand — threatening that Social Security checks would be delayed, airport security checks would be clogged, and other federal facilities closed — seem to have been overblown.

Sure, March’s employment report was a big disappointment. But it’s hard to see any direct connection between those poor job numbers and the sequester. The government has been shedding jobs for years. Most of the losses in March were from the Postal Service.

Take a closer look, though, and Americans are starting to feel the pain. They just don’t know it yet.

That’s because so much of what the government does affects the nation in local, decentralized ways. Federal funds find their way to community housing authorities, state unemployment offices, local school districts, private universities, and companies. So it’s hard for most Americans to know the sequester is responsible for the lost funding, lost jobs, or just plain inconvenience.

A tiny sampling: Brandeis University in Waltham, Massachusetts, is bracing for a cut of about $51 million in its $685 million of annual federal research grants and contracts. The public schools of Syracuse, New York, will lose over $1 million. The housing authority of Joliet, Illinois, will take a hit of nearly $900,000. Northrop Grumman Information Systems just issued layoff notices to 26 employees at its plant in Lawton, Oklahoma. Unemployment benefits are being cut in Pennsylvania and Utah.

The cuts — and thousands like them — are so particular and localized they don’t feel as if they’re the result of a change in national policy. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Prominent Democrats — including the President and House Minority Leader Nancy Pelosi — are openly suggesting that Medicare be means-tested and Social Security payments be reduced by applying a lower adjustment for inflation.

This is even before they’ve started budget negotiations with Republicans — who still refuse to raise taxes on the rich, close tax loopholes the rich depend on (such as hedge-fund and private-equity managers’ “carried interest”), increase capital gains taxes on the wealthy, cap their tax deductions, or tax financial transactions.

It’s not the first time Democrats have led with a compromise, but these particular pre-concessions are especially unwise.

For over thirty years Republicans have pitted the middle class against the poor, preying on the frustrations and racial biases of average working people who can’t get ahead no matter how hard they try. In the Republican narrative, government takes from the hard-working middle and gives to the undeserving and dependent needy.

In reality, average working people have been stymied because almost all the economic gains of the last three decades have gone to the very top. The middle has lost bargaining power as unions have shriveled. American politics has been flooded with campaign contributions from corporations and the wealthy, which have used their clout to reduce marginal tax rates, widen loopholes, loosen regulations, gain subsidies, and obtain government bailouts when their bets turn sour.

Now five years after the worst downturn since the Great Depression and the biggest bailout in history, the stock market has recouped its losses and corporate profits constitute the largest share of the economy since 1929. Yet the real median wage continues to fall — wages now claim the lowest share of the economy on record — and inequality is still widening. All the economic gains since the trough of the recession have gone to the wealthiest 1 percent of Americans; the bottom 90 percent continue to lose ground.

What looks like the start of a more buoyant recovery is a sham because the vast majority of Americans have neither the pay nor access to credit that allows them to buy enough to boost the economy. Housing prices and starts are being fueled by investors with easy money rather than would-be home buyers with mortgages. The Fed’s low interest rates have pushed other investors into stocks by default, creating an artificial bull market.

If there was ever a time for the Democratic Party to champion working Americans and reverse these troubling trends, it is now — forging an alliance between the frustrated middle and the working poor. This need not be “class warfare” because a healthy economy is in everyone’s interest. The rich would do far better with a smaller share of a rapidly-growing economy than a ballooning share of one that’s growing at a snail’s pace and a stock market that’s turning into a bubble.

But the modern Democratic Party can’t bring itself to do this. It’s too dependent on the short-term, insular demands of Wall Street, corporate executives, and the wealthy. (more…)

Tim Strangleman
Professor of Sociology, University of Kent

A journalist from a Scottish newspaper contacted me last month wanting my reaction to the announcement that 2,300 people had applied for eighteen trainee driver posts to service a soon to be reopened rail line in the Scottish Boarders running to the south of Edinburgh. With nearly 128 applicants for each of these jobs, the reporter was keen to discover what was behind this headlong rush. Well, to be precise, what I think she was after were some conditioned clichés about working on the railway, the romance of the iron road, and how it is (still) every little boy’s wish to be a train driver.

She seemed a little crestfallen when I suggested some alternative reasons why these new posts might be so valued.  First, the trainee’s starting salary was $33,230, about average in the UK before you take in to account the rise to $58,400 when fully qualified. I also suggested that recruits could expect a good pension, reduced travel prices, and, above all, the kind of security that many workers can only dream of. This is all in the context of a double dip recession and high unemployment levels. By this time, I could sense that young journalist’s imagined simple story of boyhood romance was morphing into something far more complex and probably less exciting.

She tried one last tack with me. ‘But why’ she asked, ‘were these jobs so good’? My answer was straightforward; railway work in the UK remains one of the strongest bastions of working-class unionisation. When the industry was privatised, or denationalised, two decades ago, conservative politicians made little attempt to hide that their goals included smashing the unions, reducing levels of pay, and eroding conditions of service. Contrary to the conservatives’ hopes, some railway workers have seen their real pay rates increase considerably, and this is especially true of the drivers.

Hot on the heels of the story about the new railway jobs came a similar story from the English Midlands about 1,701 people applying for three full-time and five part-time barista posts with coffee chain Costa Coffee. In other words, these more mundane, less obviously ‘romantic’ vacancies attracted more applicants per position – roughly 212 applicants for each job — than did the train driver openings. Among the biggest differences between the two jobs is the pay rate.  An article in the Guardian pointed out that no barista in London, let alone in the more economically deprived Midlands, gets within ten grand of the national average wage of £26,500.  Another key difference is that driving a train requires a year or more of theoretical and practical training while – and no offence to baristas anywhere – serving coffee does not involve a lengthy apprenticeship, much as some of us may want to fetishize its production. The relatively greater interest in the barista jobs may reflect many things, but it is fundamentally a function of the poorly performing economy and the dire labor market in the UK. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

“Who is going to end up making all the money in the end if Obamacare continues to be in place?” Republican National Committee chairman Reince Priebus growled Monday on Sean Hannity’s Fox News show. “It’s going to be the big corporations, right? And who gets screwed? The middle class.”

The Republican Party makeover is breathtaking. Now, suddenly, instead of accusing Democrats of being “redistributionists,” the GOP is posing as defender of the middle class against corporate America — and it’s doing so by proposing to do away with the most progressive piece of legislation in well over a decade.

Paul Ryan’s new budget purportedly gets about 40 percent of its $4.6 trillion in spending cuts over ten years by repealing Obamacare, but Ryan’s budget document doesn’t mention that such a repeal would also lower taxes on corporations and the wealthy that foot Obamacare’s bill.

According to an analysis by the non-partisan Tax Foundation, Obamacare redistributes income from the wealthy to the middle class. This is mainly because it hikes Medicare taxes on the top 2 percent (singles earning more than $200,000 and couples earning more than $250,000, including their investment income).

This year, for example, families in the top 1 percent will be paying about $52,000 more in Medicare taxes, on average, than they paid in 2012.

And where will the money go? Not to pay for the healthcare of poor families; most of them already receive Medicaid. The rich will be helping middle and lower-middle class Americans.

Obamacare also imposes some taxes and fees on insurance companies, drug makers, and manufacturers of medical devices. Here again, most of this will be borne by affluent Americans, who own most shares of stock (assuming the taxes and fees come out of corporate profits). And, again, beneficiaries are in the middle and lower-middle class. (more…)

By Dave Johnson
Fellow, Campaign for America's Future

Buried in the “pleasant surprise” (NPR) of March 8′s “stunning” (USAToday) February jobs report were some numbers that better-reflect the reality of America’s declining middle class. Things are pretty bad when you call 7.7% — and that due to people giving up on looking for a job — “pleasant.”

The February jobs report was better than a poke in the eye with a sharp stick. If that is the new standard by which we judge the strength and fairness of our economy… well I have a falling-down-due-to-lack-of-infrastructure-repair bridge to sell you. Of the people finally being hired too many are moving into part-time and low-wage jobs. Both part-time workers who would like full-time jobs, and those “marginally attached to the labor force” rose.

From the BLS release,

The number of persons employed part time for economic reasons, at 8.0 million, was essentially unchanged in February. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

… the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.8 million. These individuals accounted for 40.2 percent of the unemployed.

EPI explains the problem, February caps off three years of job growth, but much more is needed to fill employment deficit. (more…)