Parade Magazine and ts What Do People Earn: What People Think?

Parade Magazine every once in awhile shows all the readers of its Sunday magazine how much a variety of Americans earn in the US. You can deduce from that information, which Americans have the best chance of having the wealth in the country: owning stocks and bonds, real estate, etc.

But, surprise, most people in the U.S. don’t know how much wealth others have.  This chart is from a paper called “Building a Better America One Wealth Quintile at a Time” by Dan Ariely and Michael I. Norton. The first line shows the actual distribution of wealth in the US. The tops 20% hold over 85% of the land, assets, etc. Yet, folks perceptions are way off. Find your estimated income and then look at the chart to see how close your income group comes to knowing how the money is spread in the US.

Best of all, look at how the various income groups and voters think that the income ought to be distributed in the US. It is so different from the way it is, that the disconnect is not funny but pathetic.

What Recovery?

Have the last few years since the Recession in 2007-2009 gotten better for you? Hear all the television news reports crowing about the growth in jobs, and unemployment dropping below 8%?

Well, here’s news, 99% of Americans lost 0.4 percent of their income since the Recovery. The top 1% have gained over 11% in their income over the same period.

See:

http://www.nytimes.com/2013/02/16/business/economy/income-gains-after-recession-went-mostly-to-top-1.html?_r=0

Compassion for Others?

With all the talk in Washington and in Wall Street about the need to cut Medicare, Medicare and Social Security, one has to wonder where is the concern fora nyone other than theirselves? The economic gains made during the last few years have gone disproportionately to these same people who want to cut the government’s benefits to others. The wealthiest 1% of Americans gained 125% of the growth. Which means the rest of the 99% got only 75% of that growth.

This is bad policy in an American economy that gets 70% of its growth from consumer spending. How do you spend when you’re unemployed, underemployed, or getting less even if you have a significant job! But ultimately, the key question to ask the one percent is: Where is the concern for others in general?

As many people know, the old days, (the 1950s through 1970s) when the company provided a pension for an employee are long gone. That was a big portion of the retirement nest egg and it was taken away from employees by companies that wanted to maximize profits so that their stock prices would go up. The stockholders would get wealthier on the back of the companies retired employees.

Columnist Harold Meyerson illuminates this point in the editorial below:

To the let’s-cut-entitlements crowd, what’s wrong with America is that seniors are living too high off the hog. With the cost of medical care still rising (though not as fast as it used to), the government is shelling out many more dollars per geezer (DPG) than it is per youngster (DPY). The solution, we’re told, is to bring down DPG so we can boost DPY.

We do indeed need to boost DPY. And we need to rein in medical costs by shifting away from the fee-for-service model of billing and paying. But as for changing the way we calculate cost-of-living adjustments for seniors to keep us from overpaying them — an idea beloved of Bowles, Simpson, Republicans and, apparently, the White House — this may not be such a hot idea, for one simple reason: An increasing number of seniors can’t afford to retire.

Nearly one in five Americans age 65 and over — 18.5 percent — were working in 2012, and that percentage has been rising steadily for nearly 30 years. In 1985, only 10.8 percent of Americans 65 and older were still on the job, and in 1995, that figure was 12.1 percent.

Both good news and bad news have contributed to this increase. The good news is that more seniors both can and want to work than in years past, as health care and medical science have extended their capabilities, and as the share of Americans in desk jobs has increased while the number on the factory floor has shrunk. A 2011 survey by the Society of Actuaries reported that 55 percent of working seniors said they had stayed employed because they wanted to stay active and involved. But the same survey showed that 51 percent were working because they needed the money.

What advocates for reducing Social Security adjustments fail to consider is that corporate America’s shift away from defined-benefit pensions to defined-contribution 401(k) plans — or to no retirement plans at all — has diminished seniors’ non-Social Security income and made the very idea of retirement a far more risky prospect. Today, more than half of U.S. workers have no workplace retirement plan. Of those who do, just 35 percent still have defined-benefit pensions. In 1975, 88 percent of workers with workplace retirement plans had defined-benefit pensions.

The shift from traditional pensions to 401(k)s is one of the main reasons most seniors aren’t able to set aside enough income to guarantee a secure retirement. A 2010 survey by the Federal Reserve found that the median amount saved through 401(k)s by households approaching retirement was $100,000 — not nearly enough to support those households through retirement years, as seniors’ life expectancy increases. And as most Americans’ wages continue to stagnate or decline, their ability to direct more of their income to 401(k)s diminishes even more.

With the eclipse of the defined-benefit pension, Social Security assumes an even greater role in the well-being of American seniors. But advocates of entitlement cuts don’t even discuss the waning of other forms of retirement security: Listening to Alan Simpson, you’d never know that America’s elderly aren’t getting the monthly pension checks their parents got.

And it’s not as if those employers are suffering. Just as U.S. businesses have been able to raise the share of corporate profits to a half-century high by reducing the share of their workers’ wages to a half-century low, so, too, their ability to reduce pension payments has contributed not just to their profits but also to the $1.7 trillion in cash on which they are currently sitting.

So here’s a modest plan to enable seniors to retire when they wish, rather than having to work into their 70s and even beyond: Require employers to put a small percentage of their revenue, and a small percentage of their workers’ wages, into a private, portable, defined-benefit pension plan. To offset the increased costs, transfer the costs of paying for workers’ health care from employers and employees to the government, and pay for the increased costs to the government with the kind of value-added tax that most European nations levy. (The tax burden is higher in Europe, but because the level of benefits is higher as well, the tax has wide public support.)

The odds of such a plan being enacted today, of course, are nil. (Then again, the odds of any bill getting through Congress these days are close to nil.) But until we compensate for, or reverse, the abdication of corporate America from any major role in providing its workers with retirement security, we should lay off monkeying with Social Security to reduce the program’s future payments. As for all those cash-drenched chief executives who proclaim that we must cut entitlements, how about they make up the difference by restoring the pensions their companies slashed?

Progressive Politics

Rocky Anderson ran for President in 2012. Didn’t hear of him. Think he’s a loony or nut job? No, he’s one of the most progressive political figures out there in the US today.

Drones: creating more enemies for the US than they are killing.

Wall Street: How come no bankers have been brought to trial.

Raising the minimum wage: How about putting $30 billion more dollars in the hands of the country’s vast majority of working people. Do that and you’re consumer economy will grow and create some new jobs.

Here he is on one of my favorite tv shows, The Young Turks

 

Progressives Active In US Congress

Yes, the Congress and President Obama barely got a bill enacted that actually lowered all income tax rates. The famous 99% of the population will not pay anywhere near as much in taxes as they were slated to pay after the end of the Bush era tax cuts. Fine.

What about the infamous 1%. Well, let’s see. They get to pay slightly less than 40% on their income. Ok. Sounds good, except that most of these individuals get their income through capital gains. Unfortunately, that income will be taxed at significantly less than the tax rate for the money earned by the 99%. The rate will be a paltry 20%, or a grand increase of 5% over what they paid under the Bush era.

This will certainly hamper the amount of revenue that the federal government will bring in. That might make it harder to run the government in general which raises the next issue to fight over, how much and where will the federal government spend its money. For all the talk about cutting federal spending, when specifics are mentioned, different groups of people start yelling that the cuts will hurt them so go cut somebody else’s because they don’t deserve it like my group supposedly does.

Fortunately, Representative Keith Ellison came on The Young Turks and offered some important specifics of what should be offered up as cuts. How about saving billions from cutting the tax breaks to oil and gas corporations, like ExxonMobil. How about making Medicare D Prescription Drug Plan open to fair market competition and save billions there too.

http://current.com/shows/the-young-turks/videos/rep-ellison-if-republicans-want-to-do-cuts-we-should-do-cuts-from-corporate-welfare

Tax The Wealthy

Let’s not forget that the “Fiscal Cliff” is around the corner. Obama has  toured the country and talked about the need to tax the wealthy. A former cabinet member, Larry Summers, completed an editorial that pointed out where the real tax gains can be made to increase the fairness of the US Tax Code and bring in more revenue for the federal government.

My one question after reading the piece: where were these ideas when he was part of the Obama Administration?

No, it is not the mortgage deduction. This helps homeowners in all classes of the country. It could be modified to limit the amount of money that one could write off so that the public is not financing some wealthy individuals McMansion. But, ultimately, we need to keep that deduction.

The changes need to come on capital gains tax rates. We’ve all heard that the wealthy don’t pay a fair percentage of their income but that is because so much of it is taxed at a much lower rate than earned income. So, first raise the tax rates on this income. Second, as Summers notes, get rid of the laws that have been added over the years that shield a lot of the income of the wealthy from being counted as money that they earn.

Summers writes: the numerous exclusions from the definition of adjusted gross income that enable the accumulation of great wealth with the payment of little or no taxes. The issue of the special capital gains treatment of carried interest — performance fee income for investment managers — is only the tip of a very large iceberg. Far too many provisions favor a small minority of very fortunate taxpayers. They effectively permit the accumulation of wealth to go substantially underreported on income and estate tax returns, which forces the federal government to consider excessive increases in tax rates if it is to reach any given revenue target.

There are many more inequitable items in the current tax laws that cry out for reform. Here is Summers again:

Current valuation practices built into the tax code make it possible for investment partners to end up with $50 million or more in tax-free individual retirement accounts when most Americans are constrained by a $5,000 annual contribution limit.

Our estate tax system is broken. Assets passed to relatives or other personal relations are often badly misvalued relative to what they cost on an open market. The total wealth of American households is estimated at more than $60 trillion. It is heavily concentrated in very few hands. An estimated $1.2 trillion, or 2 percent, is passed down each year, mostly from the very rich. Yet estate and gift taxes raise less than $12 billion, or 1 percent of this figure, annually.

But real estate investment operators, who sell properties whose value is measured in the hundreds of millions — if not billions — of dollars, are able to take tax deductions for “depreciation” on their properties. They are then able to sell these properties at an appreciated price while avoiding capital gains tax through what is known as a “like kind exchange.” This is in fact a sale.

Mortgage Crisis, Good Government from the FDIC

Sheila Bair’s book, Bull By The Horns offers a fascinating view of the mortgage crisis from a lifelong Republican with conservative values and a respect for an effectively regulated market. I highly recommend you read this analysis from the Federal Deposit Insurance Corporation Chairman from 2006 through 2011 but here’s my summary.

Everyone knows that many of the largest banks, mortgage institutions and other financial dealers on Wall Street exploited the lack of regulation, customers, and investors to make windfall profits. We know that these Wall Street players, big and small, all viewed themselves as “Masters of the Universe,” and so fervently believed in a boundless free market, that they exhibited little caution. Yet the details that Bair provides makes the exploitation seem more unjust, immoral, and insane that it was allowed to happen.

These financial wizards made little provisions for a rainy down (the end of the bubble). They took profits for themselves and did little to reinvest in the companies whose health they were responsible to uphold. The CEOs, Presidents, and board members of the banks and financial institutions keep little capital on hand that would have provided more balance to their books. One of Bair’s prescriptions for the future is raising the capital requirements for these institutions. The Masters were able to pass their risk of thee questionable securities, such as credit default swaps, down to investors who were often misinformed about the true value of the security, Moody’s famously rated these virtually worthless swaps at triple A. Bair suggests that banks and others be required to retain a degree of risk through having to absorb a loss of 5 to 10 cents for each dollar of loss that an investor takes on the investment that the bank sold to them.

I maintain my attitude that what many of these bankers did was knowingly fraudulent. The subprime mortgages were predatory lending practices. These bankers sold mortgages with steep payment resets and exorbitant prepayment penalties that trapped the mortgage holder into an endless cycle of needing to renegotiate the terms of their mortgage and pay the bank fees.

I agreed wholeheartedly with Bair’s expectation that as a condition of the bailout/TARP many of these Masters of the Universe would have been forced to resign after leading their financial institutions toward the abyss. Instead those provisions that could have been attached to the bailout were not included. It appears that occurred because of the comfortable relationships that several members of the Bush and Obama Administrations had with the Wall Street crowd. Of course, this was true of Hank Paulson who came from the Goldman Sachs to run the Treasury Department. Unfortunately, it was also true for Obama’s Treasury Secretary former NY Fed Chair Tim Geithner. Bair and Geithner bash heads throughout the book. If one needs to find an antagonist, look no further.

As a government worker it was painful to read about Geithner and some of the other public servants. They forgot about the basic tenet of their position, do the public’s bidding and do good work for the public. Geithner comes off as much more concerned about the Masters of the Universe, the financial institutions, and the creditors holding the bank’s securities than protecting the public’s money. Regulators in the former Office of Thrift Supervision (OTS) worried more about how the news of a certain bank’s bad actions would make them look as regulators than in doing the public’s interest. Finally, the details the book provides regarding the efforts made toward helping the homeowners during the crisis are painful because of how limited the actions were and how frequently members of both administrations showed little concern and compassion for these people.

I’m thrilled to have read the book. I feel more informed. I feel much sadder and angrier than prior because of how little members of the administrations seemed to care about the public that they are in position to represent. Government workers promise to work for the greater good. By doing that we create an improved country and world for all citizens. That requires us to make choices sometimes about who needs our help and protection. Regardless of whether you come from the ranks of the working-class or the elite, as a government worker you make the choice that helps the vast majority of people, not the one that helps the special interests or the group to which you want to get a job in the future. We need to return to the efforts of good government and protect the interests of the majority to make the country and the world a better place. The kind of choices that will enable more people to benefit, to live an improved life. Time to rise up against the Plutocracy. The craven and venal natures of the leaders of the major banks is disgusting at best. The book is a real eye opener and I wish that its message could be put on bumper stickers around the country. It’s time to make a wholesale change among the plutocrats! Damn, time to get back to good government!!!

 

Election 2012: Clash Style

Rock and Roll Perspective: Speaking Out for The People

White Man in Hammersmith Palais by The Clash

Be realistic about revolt: Cause it won’t get you anywhere fooling with your guns. The army is waiting out there and it weighs 1500 tons.

This country can’t decide to tax peoples’ earnings at a level that would provide for more equitable contributions to the federal government or to pare down the debt.

White Youth/Black Youth better find another solution: Why not phone up Robin Hood and ask him for some wealth distribution.

The inevitable commercialization of peoples’ rebellion whether in punk music or rap music:

The new groups are not concerned with what there is to be learned. They got Burton suits, huh you think its funny, turning rebellion into money.

The sameness of the major political parties, and thee issue of a plutocracy:

All over people are changing their votes, along with their overcoats. If Adolph Hitler flew in today, they’d send a limousine anyway.

Romney’s Tax Returns

MSNBC, Current Television all talk endlessly about Mitt Romney and his releasing only 1 full year and 1 year of projected taxes. The major claim is that every other Presidential candidate has released their returns since 1968 so Romney should also. Seems reasonable. These liberal bent stations tell us that not releasing the information is hurting Romney.

Does the American public care? Apparently, the public is evenly divided with 51% saying it is not something that they need to see. When you divide up the public, liberals are most interested and conservatives are the least concerned. Interestingly, people with lower salaries and younger votes both support the release of the Romney taxes.

 

Columnist Colby King raised this point today in his editorial. It’s not enough for Romney to say he’s paid all taxes that are “legally required.” A person who wants to be president should also be able to say, and to demonstrate, that no ethical lines have been crossed.

The best part of his piece is the succinct explaination for what could be hidden in his tax returns.

Was Romney’s income that was placed in a Swiss bank account reported on his earlier tax returns?

How did Romney’s IRA grow so large (to $100 million) when he could only put in $30,000 over any single year?

Did Romney report and pay gift tax on the funding of these trusts,” or might he have claimed “unreasonable valuations” that “would have exposed him to serious penalties if all the facts were known?”

All of these things raise questions about ethics and legal actions. All US citizens should be following the law when filing taxes; no special deals for the rich. This is especially true for a man who is running to be the person in charge of upholding all US and most international laws as the US President.

Paul Ryan: Reformist Conservative ?

Editorial writer Michael Gerson argues that Paul Ryan is not a Tea partyer. He is not like the Libertarians who want to remove all federal government. No, he is a Reformist Conservative.

What a load that is! He wants to reform like someone wielding an ax wants to do a surgical operation. Ryan’s proposal is to cut all non-entitlement spending (not Social Security, Medicare and Medicaid) to 3.5% of the Gross Domestic Product (GDP). The federal government in order to run all these other operations spends 12.5% of the GDP.

So what happens when you cut 9% of the federal spending on defense, law enforcement, national parks, intelligence operations, archives, and protecting the environment. Common sense tells one that none of these activities can be run anywhere close to effectively without the money. Therefore, endangered species do not receive protection. Strip mining operations can not be watched for illegal labor practices. Museums, archives and national parks can not stay open. Lawyers prosecuting cases, and police gathering evidence comes to a screeching halt.

The argument that the Republicans will make is that they are getting rid of government activities to remove the deficit problem. Half of the current deficit goes to health care, pensions, and paying interest on our debt. These are the areas where the budget is going to grow because of payments due to the increasing number of retirees.

 

 

That only leaves 44% of the budget to cut. Romney promises increased military spending so that takes that 24% off the cutting board. What’s left is 20% of the budget which would make only a small dent in the debt and not address the areas where government expenses are rising.

Instead, that 20% pays for many agencies and thousands of programs. This gets to the heart of the plan. Eliminate those agencies and their programs, regardless of how important federal expenditures in these areas are to maintaining state and local governments in education and social services. Get rid of those programs and you remove the regulations that keep companies and rich people from exploiting workers, ruining the environment, and providing opportunities for kids to receive strong education regardless of their economic class.