Ron Kent Hooper posts the following article to explain how Billionaires Koch Brothers and other members of the privileged super rich class, united with Fox News and the Military-Industrial-Health-Care- Prison complexes, to brain wash Tea Baggers followers, and created an American Apartheid (which comes from the Afrikaans word for apartness) that endorses political, religious, class based economic discrimination. William H. Gross is an author, financial manager and co-founder of investment firm Pacific Investment Management Company. PIMCO is one of the largest active global investment firms in the world, with over $2 TRILLION in assets under management in 2012. Wall Street Legend Admits: ‘We Got Rich Off the Backs of Workers’ Posted by: Richard Rowe in Economic Issues, Human Interest, Liberals in Action, Most Popular on AATTP, TEApublican Smack Downs November 2, 2013 People are afraid of chance, afraid of the dark. A human’s power is in his intelligence, and the nature of intelligence is that of pattern recognition; without a recognizable pattern, we’re left with chaos, powerlessness and fear. We fear the dark we can’t see into. To put order to the chaos, some people pray, others create conspiracy theories and still others grasp desperately for retroactive evidence of divine design and will. Those young and privileged by chance will often talk themselves into believing that they were granted privilege by God, or by some dint of inherent superiority. That’s the heart of Divine Right — the belief that you DESERVE whatever fate has handed you, absent of any real evidence to that effect. For some, denying chaos is the only means to defeating a fear of the dark, of grasping at the illusion of security in a frighteningly random world. For those willing and able, it is the very pattern recognition of intelligence that allows it to solve the paradox of good fortune. But the desire to solve that paradox rarely comes up, except for the self-made wealthy who in the search for wealth, have had to question if they’ll know when enough is enough. Self-made men like Warren Buffett and Bill Gates have faced that chaos, and have come to the same peace with it that did their spiritual forebear, Andrew Carnagie. These super-rich have seen the chaos for what it is, and realized that they were, more than anything else, just very, very lucky. That’s a frightening thing to face, because that realization precedes another and far fiercer emotion than fear of the dark: Fear for ones’ very humanity. Gross has been donating to charitable causes like Duke University, Doctors Without Borders and to various hospitals and medical foundations. Gross is known for his colorful memos and letters to investors, and this one may be the missive to top them all. Thanks again to Bill Gross, who among a few very respected others, shows us what great men can do when they’re not afraid of the dark. With the budget and debt ceiling crises temporarily averted, perhaps a future economic priority will be to promote economic growth; one way to do that may be via tax reform. How to proceed depends as always on the view of the observer and whether the glasses are worn by capital, labor or government interests. Having benefited enormously via the leveraging of capital since the beginning of my career and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes, I now find my intellectual leanings shifting to the plight of labor. He often tells his wife Sue it’s probably a Kennedy-esque type of phenomenon. Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off, writing very public Investment Outlooks that “dis” the success that provided me the soapbox in the first place. If your immediate reaction is to nod up and down, then give yourself some points in this intellectual tête-à-tête. Still, I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you’ve been privileged to make. In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from 10% in the 1970s to 20% today. Admit that you, and I and others in the magnificent “1%” grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living. Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions. You’ll still be able to attend those charity galas and demonstrate your benevolence and philanthropic character to your admiring public. You’ll just have to write a little bit smaller check. Scrooge McDuck would complain but then he’s swimming in it, and can afford to duck paddle to a shallower end for a while. If you’re in the privileged 1%, you should be paddling right alongside and willing to support higher taxes on carried interest, and certainly capital gains readjusted to existing marginal income tax rates. Stanley Druckenmiller and Warren Buffett have recently advocated similar proposals. The era of taxing “capital” at lower rates than “labor” should now end. There was a time in Pimcoland long, long ago; so long ago that it now seems like a fairytale – except it wasn’t. I had criticized a large Fortune 500 company about its balance sheet and use of commercial paper. It wasn’t really meant to be company-specific but more indicative of the growing amount of leverage that our credit system was accommodating. The company took it personally. Sorry about that. I mention it now in the age of the golden Scrooge McDuck because another large company – I shall name it Company X to be safe – is again representative of an excess that may haunt America’s future. X is a well-known corporation that, to put it simply, has grown earnings and earnings per share accompanied by nearly flatline revenues. This troubling trend began nearly a decade ago – sales having increased by only 9% since 2003 – barely a percentage point a year. Its most recent quarter in 2013, as a matter of fact, showed no improvement, with revenues actually declining by 1% instead of moving up. Profits, however, increased because the company cut expenses along the way. Earnings per share (EPS) did even better, because X used some of its cash flow to buy back stock instead of reinvesting much of it in new plant and equipment. What struck me was not this unmasking of company X’s secret sauce to elevate its stock price, but the similarity of this corporation to the plight of the broader U.S. and even global economy. Never have American companies sent a greater share of their sales to the bottom line. Even when S&P 500 companies have witnessed a decline in corporate earnings, as shown in Chart 1, they have still experienced EPS gains. X and many companies in the S&P 500 are remarkably similar. The U.S. economy and Company X are lookalikes as well, perhaps even twins. Revenue growth in the U.S., for instance, can best be shown by national income or its proxy, more commonly known as nominal GDP. While our annualized nominal GDP growth rate has been a tad better than the 1% that Corporation X has shown over the past 10 years, our five year moving average has slowed from nearly 7% to just above 3% in recent years and struggled to do just that, as shown in Chart 2. “Expenses” have been cut significantly as the share of wages to GDP has declined from 47% to 43% during the past decade. Before-tax profits as a percentage of GDP on the other hand have increased from 10% to 14% over the same period, mimicking what has happened with Company X. And here’s a rather incredible kicker to this theoretical comparison. The U.S. economy – thanks to the Fed – has been operating a 1 trillion dollar share buyback program nearly every year since late 2008, buying Treasuries but watching much of that money flow straight into risk assets and common stocks instead of productive plant and equipment. My goodness! If X can’t grow revenues any more, if X company’s stock has only gone up because of expense cutting and stock buybacks, what does that say about the U.S. or many other global economies? Has our prosperity been based on money printing, credit expansion and cost cutting, instead of honest-to-goodness investment in the real economy? The simple answer is that long-term growth for each company, and for all countries, depends not on balance sheet alchemy and financial wizardry, but investment and the ultimate demand for a company or a country’s “products.” In the U.S. we have had little of that, watching our investment (ex housing) as a percentage of GDP decline from 14.6% to 12.2% over the past 13 years. Similarly, our net national savings rate (total savings after depreciation) has sunk below ground zero over the past few years before rebounding recently, as shown in Chart 3. Without savings there can be no investment. Without investment there can be little growth. President Obama just this past week finally sounded a faint alarm, mounting a campaign to bolster foreign investment in the U.S. – amidst evidence like that presented in Chart 3 that the U.S. is falling far behind less developed nations such as Mexico in the race for investment and future productivity. “It’s time for folks to…focus on doing everything we can to spur growth and create new, high-quality jobs,” he said last Friday. Folks? Ordinary folks, the 99%, don’t have money anymore, Mr. President. The rich 1% and corporations do. Perhaps your Administration could focus some attention these next few weeks and months on an effort to engage foreign investors, corporate America and the 1% in investing in the U.S. If there’s not a profitable new “iGIZMO” or a dynamic biotechnological breakthrough worthy of investment, how about simply a joint effort between government and private enterprise in an infrastructure bank where our third world airports, third world city streets and third world water systems are modernized? And back to my original point. Developed economies work best when inequality of incomes are at a minimum. Right now, the U.S. ranks 16th on a Gini coefficient for developed countries, barely ahead of Spain and Greece. By reducing the 20% of national income that “golden scrooges” now earn, by implementing more equitable tax reform that equalizes capital gains, carried interest and nominal income tax rates, we might move up the list to challenge more productive economies such as Germany and Canada. Our problems are significant, Mr. President, and “Obamacare” and the signing up for it is far down the list of what we need to correct in order to move in the direction of “old normal” growth rates. Surely a few astute observers in Congress know that as well. Until we can more equitably balance “Scrooge McDuck” tax rates to rebalance wealth and “GINI coefficients,” while at the same time focusing on investment in the real as opposed to the financial economy, then the prospects for markets – whatever the asset class – are anything but “golden.” Scrooge McDucks Speed Read 1) Growth depends on investment and investment in part depends on an equitable rebalancing of personal income taxes, capital gains and carried interest. 2) The era of taxing “capital” at lower rates than “labor” should end. 3) Investors in the U.S. and elsewhere must look for investment in the real economy, not share buy-back maneuvers that artificially elevate stock prices. William H. Gross Managing Director See more at: aattp.org/wall-street-legend-admits-we-got-rich-off-the-backs-of-workers/#sthash.OaLyeXLm.dpuf October 29, 2013 America’s billionaire welfare queens: the high cost of the wealthy on the rest of us by UTMB. For anyone who wonders why the deficit is so large and why, at the same time, income inequality between the super-wealthy and the rest of us is at a record high, consider the various ways which the Republican Party, starting with Ronald Reagan, has gamed the system to funnel our incomes directly into the bank accounts of the one-percent. THANK RONALD REAGAN AND HIS TRICKLE-DOWN REAGANOMICS. GOP tax bonus for the rich ignores failure of Reaganomics---REAGAN / JULY 1981: This represents $750 million in tax cuts over the next five years. And this is only the beginning. RACHEL MADDOW: And thus was born a new economic philosophy Reaganomics, cutting government spending, cutting regulation and cutting taxes--cutting taxes especially for the richest Americans. President Reagans tax plan cut the top tax rate for the wealthiest Americans from 70 percent to 50 percent. Why cut taxes so dramatically for the richest of the rich in the middle of a recession? [...] Trickle-down economics. The idea of trickle-down economics is basically this: you cut tax rates for the richest Americans, therefore the richest Americans have more. They have more money in their pockets, therefore they have more money to spend and invest. And as they spend and invest, the effect of rich peoples good fortune and rich people spending trickles down to everybody else in the economy. A rising tide lifts all boats, right? That was the idea. That was the plan. That did not happen. Reaganomics was a spectacular success in some ways. It was a spectacular success for the richest Americans in the country who benefited the most from President Reagans historic debt- exploding, budget-busting tax cuts. In 1980, the top one percent of Americans earned wages about $110,000 a year. By 1990, after about 10 years of Reaganomics, the top one percent had seen their wages rise by 80 percent. Trickle-down economics, though, right? Whats good for the rich is good for all of us, right? Not quite. Heres the average wages in the rest of the country in 1980 and here is what happened for the rest of the country after about 10 years of Reaganomics flat. A whopping three percent rise in wages in 10 years. The richest people see their fortunes go up like the Matterhorn. Everybody else, nothing. This is what family income growth looked like during the 1980s: THEN THANK RONALD REAGAN FOR HIS GOVERNMENT IS THE PROBLEM NOT THE SOLUTION message, which the tea party carries on today: The Abject Failure of Reaganomics. Reagan sold Americans on his core vision: “Government is not the solution to our problem; government is the problem.” Through his personal magnetism, Reagan then turned taxes into a third rail of American politics...“[Reagan] convinced many voters that the government’s only important roles were funding the military and cutting taxes.” Yet, instead of guiding the country into a bright new day of economic vitality, Reagan’s approach accelerated a de-industrialization of the United States and a slump in the growth of American jobs, down to 20 percent during the 1980s. The percentage job increase for the 1990s stayed at 20 percent, although job growth did pick up later in the decade under President Clinton, who raised taxes and moderated some of Reagan’s approaches while still pushing “free trade” agreements and deregulation. Hard-line Reaganomics returned with a vengeance under George W. Bush – more tax cuts, more faith in “free trade,” more deregulation – and the Great American Job Engine finally started grinding to a halt. Zero percent increase. The Great American Middle Class was on life-support. Through its ideological media and think tanks, the Right continues to hammer home the Reagan-esque theory that “government is the problem.” Meanwhile, the Left still lacks comparable media resources to remind U.S. voters that it was the federal government that essentially created the Great American Middle Class – from the New Deal policies of the 1930s through other reforms of the 1940s, 1950s and 1960s, from Social Security to Wall Street regulation to labor rights to the GI Bill to the Interstate Highway System to the space program’s technological advances to Medicare and Medicaid to the minimum wage to civil rights. Many Americans don’t like to admit it — they prefer to think of their families as reaching the middle class without government help — but the reality is that the Great American Middle Class was a phenomenon made possible by the intervention of the federal government beginning with Franklin Roosevelt and continuing into the 1970s. [For one telling example of this reality -- the Cheney family, which was lifted out of poverty by FDRs policies -- see Consortiumnewss Dick Cheney: Son of the New Deal.] Further, in the face of corporate globalization and business technology, two other forces making the middle-class work force increasingly obsolete, the only hope for a revival of the Great American Middle Class is for the government to increase taxes on the rich, the ones who have gained the most from cheap foreign labor and advances in computer technology, in order to fund projects to build and strengthen the nation, from infrastructure to education to research and development to care for the sick and elderly to environmental protections. 30 YEARS LATER, THE REST OF US ARE SUPPLEMENTING MINIMUM WAGE JOBS WITH GOVERNMENT PROGRAMS, helping corporate officers and shareholders who pay the shitty wages walk away with massive profits. “Taxpayers are spending nearly $7 billion a year to supplement the wages of fast-food workers, even as the leading fast-food companies earn billions of dollars in annual profits, according to a pair of reports released Tuesday.” Washington Post - More than half of the nation’s 1.8 million “core” fast-food workers rely on the federal safety net to make ends meet, the reports said. Together, they collect nearly $1.9 billion through the earned income tax credit, $1 billion in food stamps and $3.9 billion through Medicaid and the Children’s Health Insurance Program, according to a report by economists at the University of California at Berkeley’s Labor Center and the University of Illinois. Overall, the “core” fast-food workers are twice as likely to rely on public assistance than workers in other fields, said one of the reports, which examined non-managerial fast-food employees who work at least 11 hours a week and 27 weeks a year. Even among the 28 percent of fast-food workers who were on the job 40 hours a week, the report said, more than half relied on the federal safety net to get by. [...] Those workers are left to rely on the public safety net even though the nation’s seven largest publicly traded fast-food companies netted a combined $7.4 billion in profits last year, while paying out $53 million in salaries to their top executives and distributing $7.7 billion to shareholders, according to the second report, by the National Employment Law Project, a worker advocacy group… “The cost is public because taxpayers bear it. Yet it remains hidden in national policy debates about poverty, employment and federal spending.” Salon - The first study finds that 52 percent of families of workers employed at least 27 weeks a year and 10 hours a week in rank-and-file fast food jobs are enrolled in Medicaid, the Children’s Health Insurance Program, food stamps, the Federal Earned Income Tax Credit, or Temporary Assistance for Needy Families (the program that replaced Aid to Families with Dependent Children under “welfare reform”). That includes a majority of those workers who are employed at least 40 hours week. The study, “Fast Food, Poverty Wages,” was sponsored by the UC Berkeley Center for Labor Research and Education and the University of Illinois at Urbana-Champaign Department of Urban & Regional Planning, and funded by the labor group Fast Food Forward. The estimates were based on government data. A second study, by the pro-union National Employment Law Project, extended the analysis to individual companies, estimating that McDonald’s workers received $1.2 billion in public assistance while the corporation netted $5.5 billion in Fiscal Year 2012 profits, and devoted $5.5 billion to dividends and stock buybacks. Companies … are basically pushing off part of their costs on the taxpayers. The Guardian - The estimated total cost of $7 billion annually is likely to be low, researchers said, because they only looked at four types of public assistance: food stamps; healthcare; the Earned Income Tax Credit and Temporary Assistance for Needy Families, the program typically best known as welfare. They did not include subsidized housing, school lunches, home heating assistance or state programs in their analysis. The high participation rate of families of core fast-food workers in public programs can be attributed to three major factors: the industrys low wages, low work hours and low benefits, the Berkeley report said. [...] Earlier this year, a report by House Democrats estimated that the cost of Walmart workers reliance on public assistance – including food stamps, healthcare and other programmes –is $900,000 per year at just one of the companys 4,000 stores. For the vast majority of these workers, there’s little hope they’ll ever move up the socioeconomic ladder and escape this cycle of poverty and dependency. Time - This combination of low pay and limited work hours yields an average annual salary of only $11,056.14. And while it’s certainly true that some people flipping burgers and taking drive-thru orders are teenagers, that report finds that only 18% are under the age of 18 and living with their parents. Even when you includes minors who don’t live with their parents and college kids living at home, the total adds up to just under a third of all fast food workers. Of course, fast food companies aren’t the only ones that rely on minimum- and low-wage workers; big-box retailers like Wal-Mart have also come under fire for what they pay employees. But researchers found that 44 percent of restaurant and food service workers were enrolled in one or more assistance programs, the highest of any industry. Naked Capitalism - how low the pay really is: Medium Hourly wages and Employment in The Fast Food Industry. Managerial, Professional and Technical Occupations: $21.92 Medium Hourly Wage, 88,340 employed. First-Line Supervisors (Crew Supervisors): $13.03 Medium Hourly Wage, 355,570 employed. Front-Line Occupations (Cashiers, Cooks, Crew): $8.94 Medium Hourly Wage, 3,655,550 employed. Source: NELP analysis of Occupational Employment Statistics data. All values expressed in 2012 dollars. How is supplementing minimum wage jobs with taxpayer-funded government programs NOT income redistribution? Especially when you consider the results. THE REPUBLICAN PARTY HAS TAKEN GOVERNMENT AWAY FROM THE REST OF US to benefit the one percent exclusively. Transplanting Taxes from Corporations to the Rest of Us 30 YEARS LATER, THE REST OF US ARE SUPPLEMENTING MINIMUM WAGE JOBS WITH GOVERNMENT PROGRAMS, helping corporate officers and shareholders who pay the shitty wages walk away with massive profits. “Taxpayers are spending nearly $7 billion a year to supplement the wages of fast-food workers, even as the leading fast-food companies earn billions of dollars in annual profits, according to a pair of reports released Tuesday.” In the 1950ies corporations paid nearly a third of Government’s bills. Last year corporate revenue only accounted for a tenth of Uncle Sam’s total revenue. Source The Contributor 98. Last year, thanks to the antics of Pfizer and other examples of overly creative accounting, corporate income taxes accounted for less than a tenth of Uncle Sam’s total revenue. This dramatic shortfall shows up in two ways — federal budget deficit growth and the growing trend of individual taxpayers paying an increased share of the costs of government. Naturally, thats resulted in some income inequality: The top 1% of US earners collected 19.3% of household income, breaking a record previously set in 1927. The income gap between the richest 1% of Americans and the other 99% widened to a record margin in 2012, according to an analysis of tax filings... Income inequality in the US has been growing for almost three decades. Overall, the pre-tax incomes of the top 1% of households rose 19.6% compared to a 1% increase for the rest of Americans. And the top 10% of richest households represented just under half of all income in the year, according to the analysis. So 30 years after Ronald Reagan...here we are. With George W. Bushs unpaid wars and tax cuts and bank bailouts, were left with a record deficit, no new revenue (the GOP insists on spending cuts only to entitlement programs!), no manufacturing (most of it off-shored by companies like Bain Capital years ago), a crumbling infrastructure, millions of people working minimum wage service-sector jobs, and with income inequality at a record high. The rich are richer than ever! And yet for the past few years, the Republican Party has spent all of its time and energy trying to defund or postpone a law which will make health insurance more affordable for most Americans---this month even going as far as shutting down the government, risking default, and costing the rest of us ANOTHER $24 BILLION and a loss of services and programs for 16 days. What Republicans really mean when they say government is the problem is: (1) its a problem if the wealthy have to contribute / dont profit and (2) its a problem if the not-wealthy benefit from government services / dont help the wealthy to profit. The GOP has redefined the purpose of government and who it should benefit. Where everyone used to contribute for the good of most, now most people contribute for the benefit of only a few---and those few happen to be worth millions, if not billions. The one percent reap all the rewards of living here without having to invest or contribute a proportional amount of their fortunes. And the rest of us, the American taxpayers, subsidize their lifestyles with money that could be benefiting us personally and building a better future for our children. Whats really the bigger problem today: government or living with the Republican Partys economic plan for the past 30 years?
Posted on: Wed, 06 Nov 2013 18:37:55 +0000