It’s Not The Weather: Industrial Production Is Rolling Over, Yet The Fed Is Clueless About Its Own Index

On April 15, 2015, David Stockman writes on Contra Corner:

Another day of “incoming data” and still more evidence that this isn’t your father’s business cycle. This time it comes from the Eccles Building itself, but don’t expect the Keynesian money printers domiciled there to recognize that the industrial production report they issued today constitutes yet another rebuke to their entire macro model.

The March index slipped badly (0.6%) and thereby predictably elicited a “do not be troubled” assurance from the talking heads. It was just aberrant weather again. Well, that’s actually right. March was so much warmer  than February that the utility component of the index plunged by 5.9%.

Indeed, as another branch of the Fed revealed a few days ago, March was actually warmer than normal for the month. Presumably this means the punk economic data for March can’t be explained by winterish weather—-since it is the very opposite condition which explains last month’s steep drop in utility production.

So the better part of wisdom would be to keep the weather and its unpredictable impact on monthly power plant demand out of it. And, as it happens, the trends in the other two components of the index—–mining and manufacturing—-do offer some very pertinent clues about the dismal state of the US economy.

In a word, both of these indices are rolling over on a short-term basis and reflect trend lines which implicate the destructive doings of bubble finance, not the Fed’s pretension that it is rejuvenating the main street economy.

In the case of mining, the March index was down 4% from its December level, yet the decline in actual shale patch output has not yet even started. The recent rollover in the index is mainly attributable to the plunge in coal production, which is now down 20% from it peak three years ago.

In sum, the 30% gain in mining production since the pre-crisis peak is all in the rearview mirror. Mining accounts for about one-seventh of the industrial production index, and, as George W. Bush once said in another context, this sucker is going down.

In fact, buried in the mining index is the true handiwork of the global convoy of money printing central banks—-that is, the U.S. crude oil production subcomponent. The People’s Printing Press of China stimulated the greatest construction and industrial boom in recorded history, thereby ballooning the demand for crude oil. At the same time, the Fed drove interest rates to the zero bound, thereby touching off a massive scramble for yield among institutional investors and mutual fund chasing homegamers alike.

So taken together——booming global demand reflected in $115 per barrel oil prices and dirt cheap and plentiful junk bonds and related forms of subordinated capital—-the central banks generated a perfect storm of malinvestment. In less than a decade, the oil rig count went from 200 to 1600 and US oil production surged from 5 to 9 million barrels per day.

Accordingly, the Fed’s index of crude oil production soared. At its current level, which is the highest since 1973, it is up 82% from the pre-crisis peak, and a stunning 133% from the bottom in September 2008.

Needless to say, the shale production surge is not a miracle of capitalism; its an aberration of central bank financial repression. Indeed, cheap and plentiful capital is to shale output what green grass is to a goose. That is, it goes from one end to the other in a remarkably short period of time!

In fact, after two years from completion, production from a typical shale well declines by 80%. So given the record plunge in oil drilling rigs since last October’s 1600 peak, the oil production index is destined for some considerable retracing to the downside in the years just ahead.

US-rig-count_1988_2015-03-13=oil

In the case of manufacturing output, the index has been slipping for five months now, but the real story is that it had no place to slip from in the first place. At the March value of 103.1, the index is just 2.2% higher than it was seven years ago in November 2007.

So virtually the entire rise in the manufacturing index that has been celebrated month-after-month by the talking heads has been “born again” production. What they have forgotten to mention was that the build-up of excess inventories and unsustainable production during the Greenspan/Bernanke housing bubble was so extreme that production dropped all the way back 1998 levels at the Great Recession’s bottom.

That is a dramatic contrast with past cycles, and underscores how the Fed’s conventional reflation policy has so completely failed. Compared to the 2.2% growth of manufacturing output during the past seven years, the index rose by 12.5% in the comparable period after the 2000 peak; and, more importantly, it rose by 25% during the seven years after the 1981 peak and 33% during the 1990-1997 cycle.

In other words, the current so-called recovery is not even in the same league. The fact that production is now rolling over—–and the internals reviewed below make that abundantly clear—is powerful evidence that the Fed is pushing on a string when it comes to the main street economy.

Consequently, as it foolishly continues to keep interest rates pinned to the zero bound it is only inflating an even more fantastic financial bubble—–the inevitable bursting of which will send the manufacturing  index plunging once again.

Even this picture is too strong. The minor gains from the 2007 top are entirely attributable to autos, defense and metal fabrications—–much of which went into the booming energy patch and related pipelines and support industries. All of these gains are fueled by cheap debt including the subprime lending boom behind autos.

By contrast, the index for non-durable manufactures is still 5.5% below its pre-crisis peak, and has not yet even regained the level it posted in December 1997. Stated differently, a component which accounts for fully one-fifth of the industrial production index has been going nowhere for 18 years.

 The same is true of consumer goods production outside of energy, autos and high tech. The index for March was still 11% below the pre-crisis peak, and also below the level first attained in September 1996.

Even technology oriented sectors are nothing to write home about. The information processing index, which includes computers and related products, is down 3% from December and is essentially flat with its level in late 2007. In fact, after the enormous boom in which output rose by 5X between 1990 and 2007, the index has essentially flat-lined ever since.

By contrast to the numerous floundering components of the industrial production index reviewed above, there are enormous vulnerabilities among even those sectors which have experienced meaningful gains in recent years. Front and center on that score is the index for defense and space equipment.

As shown below, the Bush/Obama wars resulted in a 75% gain between 2000 and July 2014.  But even the defense bonanza has plateaued out—-a victim of war fatigue in the nation and the sequester caps on defense spending that have finally brought the Pentagon’s procurement spree to a halt.

Finally, since the June 2009 bottom and GM’s quick rinse discharge from the White House bankruptcy/bailout court, motor vehicle production has been a booster rocket. Output has more than doubled from the 2009 bottom.

But even here there is much less than meets the eye. The 50% plunge of the auto production index during the Great Recession was an artifact of Washington’s machinations before and during the financial crisis.

In the first instance, it reflected a massive inventory liquidation on the dealer lots during 2008-2009. Several million excess vehicles needed to be sold-down in order to make room for new production—–a distortion which, in turn, had been fueled by the Wall Street subprime lending boom enabled by the Fed.

On top of that, the complete disruption of production at Chrysler and General Motors owing to the bailouts and bankruptcies during 2009 further depressed production. During most of late 2008 and early 2009, the entire executive leadership of the auto industry was running to Washington rather than running their plants and operations.

So much of the “born again” recovery in auto production shown in the graph below was simply a rebound from the prior Washington orchestrated disruption. Now that inventories have been rebuilt and then some, however, the pace of expansion has sharply slowed.

At the same time, the resurgent sub-prime auto credit boom of the past two years is getting long-in-the-tooth. Delinquency rates on newly issued credits are now rising rapidly, and the issuance rate has flattened out in recent months.

In any event, after soaring by 130% between June 2009 and June 2014, auto production has essentially flat-lined since then. Indeed, with sales at the 17 million mark and the subprime market tapped-out, it is hard to see where any further gains will occur in motor vehicle production.

The more likely direction is down. Indeed, that is a guaranteed outcome when the Wall Street bubble finally bursts. Like last time, it will shatter confidence among the gamblers who essentially fund the purchase of low end vehicles in the subprime market, thereby drying up demand in what amounts to the rent-a-car industry.  By the same token, the top 10% of households, which own the stock and buy the luxury end of the auto market, will be sidelined trying to reach their brokers.

At the end of the day, the meaning of today’s incoming industrial production data is that the Fed has not fueled an industrial recovery in any meaningful sense of the word. Outside of energy and defense, which are reversing, and motor vehicles, which have tapped out the household sector’s remaining credit veins, there have been virtually no industrial production gains at all.

So once again the Fed is pushing on a string and inflating a gargantuan financial bubble. That much is plainly evident in the Fed’s own data releases. Indeed, the real truth is that the Fed’s massive money printing during this entire century—-which has expanded its balance sheet by 9X from $500 billion to $4.5 trillion—-has done nothing for the industrial economy.

As shown below, the March index for production of fabricated metal products posted at 99.2 or almost exactly where it stood in June 2000. During the 15-year interim there was a long-lived, but artificial oil production boom and two auto production cycles—-both of which sectors are heavy users of fabricated metal components. Yet those tailwinds were not enough to lift the index, nor did the Fed’s massive money printing campaigns make any difference.

Unfortunately, there is no prospect that Janet Yellen and her merry band of money printers will shed their Keynesian blinders at any time soon. So they will dither until the bubble bursts under its own weight and sends the industrial production index into another round of cliff-diving.

Maybe then someone will ask exactly how it is that real production and wealth can come out the end of a printing press. The Fed’s own data series proves overwhelmingly that it doesn’t.

http://davidstockmanscontracorner.com/its-not-the-weather-industrial-production-is-rolling-over-and-the-fed-is-clueless-about-its-own-index/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Wednesday

 

The Capitalist’s Case For A $15 Minimum Wage

On June 19, 2015, Nick Hanauer writes on Bloomberg View:

The fundamental law of capitalism is that if workers have no money, businesses have no customers. That’s why the extreme, and widening, wealth gap in our economy presents not just a moral challenge, but an economic one, too. In a capitalist system, rising inequality creates a death spiral of falling demand that ultimately takes everyone down.

Low-wage jobs are fast replacing middle-class ones in the U.S. economy. Sixty percent of the jobs lost in the last recession were middle-income, while 59 percent of the new positions during the past two years of recovery were in low-wage industries that continue to expand such as retail, food services, cleaning and health-care support. By 2020, 48 percent of jobs will be in those service sectors.

Policy makers debate incremental changes for arresting this vicious cycle. But perhaps the most powerful and elegant antidote is sitting right before us: a spike in the federal minimum wage to $15 an hour.

True, that sounds like a lot. When President Barack Obama called in February for an increase to $9 an hour from $7.25, he was accused of being a dangerous redistributionist. Yet consider this: If the minimum wage had simply tracked U.S. productivity gains since 1968, it would be $21.72 an hour — three times what it is now.

CULTIVATING CONSUMERS

Traditionally, arguments for big minimum-wage increases come from labor unions and advocates for the poor. I make the case as a businessman and entrepreneur who sees our millions of low-paid workers as customers to be cultivated and not as costs to be cut.

Here’s a bottom-line example: My investment portfolio includes Pacific Coast Feather Co., one of the largest U.S. manufacturers of bed pillows. Like many other manufacturers, pillow-makers are struggling because of weak demand. The problem comes down to this: My annual earnings equal about 1,000 times the U.S. median wage, but I don’t consume 1,000 times more pillows than the average American. Even the richest among us only need one or two to rest their heads at night.

An economy such as ours that increasingly concentrates wealth in the top 1 percent, and where most workers must rely on stagnant or falling wages, isn’t a place to build much of a pillow business, or any other business for that matter.

Raising the minimum wage to $15 an hour would inject about $450 billion into the economy each year. That would give more purchasing power to millions of poor and lower-middle-class Americans, and would stimulate buying, production and hiring.

Studies by the Economic Policy Institute show that a $15 minimum wage would directly affect 51 million workers and indirectly benefit an additional 30 million. That’s 81 million people, or about 64 percent of the workforce, and their families who would be more able to buy cars, clothing and food from our nation’s businesses.

This virtuous cycle effect is described in the research of economistsDavid Card and Alan Krueger (the current chairman of the White House Council of Economic Advisers) showing that, contrary to conventional economic orthodoxy, increases in the minimum wage increase employment. In 60 percent of the states that raised the minimum wage during periods of high unemployment, job growth was faster than the national average.

Some business people oppose an increase in the minimum wage as needless government interference in the workings of the market. In fact, a big increase would substantially reduce government intervention and dependency on public assistance programs.

FEDERAL BENEFITS

No one earning the current minimum wage of about $15,000 per year can aspire to live decently, much less raise a family. As a result, almost all workers subsisting on those low earnings need panoply of taxpayer-supported benefits, including the earned income tax credit, food stamps, Medicaid or housing subsidies. According to theCongressional Budget Office, the federal government spent $316 billion on programs designed to help the poor in 2012.

That means the current $7.25 minimum wage forces taxpayers to subsidize Wal-Mart Stores Inc. and other large employers, effectively socializing their labor costs. This is great for Wal-Mart and its shareholders, but terrible for America. It is both unjust and inefficient.

A higher minimum wage would also make low-income families less dependent on government programs: The CBO report shows that thefederal government gives about $8,800 in annual assistance to the lowest-income households but only $4,000 to households earning $35,500, which would be about the level of earnings of a worker making $15 an hour.

An objection to a significant wage increase is that it would force employers to shed workers. Yet the evidence points the other way: Workers earn more and spend more, increasing demand and helping businesses grow.

Critics of raising the minimum wage also say it will lead to more outsourcing and job loss. Yet virtually all of these low-wage jobs are service jobs that can neither be outsourced nor automated.

Raising the earnings of all American workers would provide all businesses with more customers with more to spend. Seeing the economy as Henry Ford did would redirect our country toward a high-growth future that works for all.

(Nick Hanauer is a founder of Second Avenue Partners, a venture capital company in Seattle specializing in early-stage startups and emerging technology. He has founded or financed dozens of companies, including aQuantive Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and “The Gardens of Democracy.”)

To contact the writer of this article: Nick Hanauer atNick@secondave.com.

http://www.bloombergview.com/articles/2013-06-19/the-capitalist-s-case-for-a-15-minimum-wage

 

Bernie Sanders Drops A Bomb On Greedy Corporations With Bill To Make Them Pay Their Fair Share

On April 14, 2015, Jason Easley writes on Politicus USA:

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Sen. Bernie Sanders (I-VT) drops a bomb on corporations who are dodging taxes by hiding money overseas by introducing new legislation that will force tax dodgers to pay their fair share.

Here is part of what The Corporate Tax Dodging Prevention Act of 2015 would do:

1. Ending the rule allowing American corporations to defer paying federal income taxes on profits of their offshore subsidiaries. (Section 2 of the bill.)

Current law allows American corporations to defer paying U.S. income taxes on profits of their offshore subsidiaries until those profits are “repatriated” (officially brought to the U.S.) which may not happen for years, if ever. As a result, American corporations would rather report foreign profits than domestic profits to the I.R.S. Deferral therefore creates an incentive to either move operations and jobs to a lower-tax country, or to use accounting gimmicks to make U.S. profits appear to be earned in a lower-tax country.

The Congressional Research Service has indicated that the cost of this tax avoidance to the U.S. Treasury approaches or exceeds $100 billion annually. The Corporate Tax Dodging Prevention Act would end this tax avoidance by ending the rule allowing deferral of U.S. income taxes on offshore profits.

Under this legislation, American corporations would still be allowed a credit that reduces their federal income tax liability by an amount equal to income taxes paid to foreign governments on these profits. This foreign tax credit exists under current law and already prevents double-taxation of profits.

2. Closing loopholes allowing American corporations to artificially inflate or accelerate their foreign tax credits. (Section 4 of the bill.)

When U.S. corporations earn profits overseas, taxes paid to the foreign country are credited against U.S. tax liabilities, in order to avoid double-taxation. Under current rules and tax planning strategies, corporations are allowed to claim foreign tax credits for taxes paid on foreign income that is not subject to current U.S. tax (meaning foreign tax credits in excess of what is needed to avoid double-taxation). As a result, companies are able to use such credits to pay less tax on their U.S. taxable income than they would if it was all from U.S. sources – providing them with a competitive advantage over companies that invest in the United States. Under the Corporate Tax Dodging Prevention Act, foreign tax credits generated by profits earned in one country could not be used against U.S. income taxes on profits earned in another country.

3. Preventing American corporations from claiming to be foreign by using a tax haven post office box as their address. (Section 5 of the bill.)

At a news conference to unveil the legislation, Sen. Sanders said, “”At a time when we have a $18.2 trillion national debt and an unsustainable federal deficit; at a time when many of the largest corporations in America are paying no federal income taxes; and at a time when corporate profits are at an all-time high, it is past time for corporate America to pay their fair share in taxes so that we can create the millions of jobs this country needs.”

The House companion measure to The Corporate Tax Dodging Prevention Act of 2015 is being introduced by Rep. Jan Schakowsky (D-IL), who said, “Over the past 30-40 years, virtually every time Americans have been asked to make ‘tough choices,’ it has resulted in disproportionate harm to low- and middle-income individuals and families. Cuts to programs that help Americans get ahead and stay ahead have been significant, while tax breaks have been handed out like candy to captains of industry and the behemoth corporations they run. Most perversely, these tax breaks have incentivized moving revenue and jobs overseas. It’s time that we end that skewed system, and the Stop Corporate Tax Dodging Act would help us do that.”

There is a mounting wave of outrage building against corporations who are dodging their taxes by hiding profits overseas. There is a consensus on the left and right that this money needs to be brought back home. The problem is that many Republicans don’t believe that corporations should have to pay their fair share. In fact, the Republican budgets passed by both the House and Senate include big tax breaks for the wealthy and corporations.

As millions of hard working Americans and small businesses file their tax returns, it is important to remember all of the big and extremely profitable corporations who are forcing you to pay more while they pay nothing, or even get a rebate.

The issue is one of fairness. Those who make their money off of American consumers should be paying their share of taxes. The era of the free ride must come to an end for greedy corporate deadbeats, and Bernie Sanders is proposing the legislation that will accomplish this goal.

http://www.politicususa.com/2015/04/14/bernie-sanders-drops-bomb-greedy-corporations-bill-pay-fair-share.html

How Worker Co-ops Are Moving Beyond Capitalism

Cooperatives041315

It’s time we transition to a people-powered economy with co-ops at the center. The documentary, “Own the Change: Building Economic Democracy One Worker Co-op at a Time,” shows the potential of these new alliances.

The End Of The U.S. Boom?

A demonstrator holds a sign during a rally outside Wall Street in New York

With a sharp slowdown and a relatively weak jobs report, the boom in the U.S. economy has come to an end. Why is it that so many professional economists and economic reporters mistook the strength of the U.S. economy?

On April 14, 2015, Dean Baker writes on Nation Of Change:

The Labor Department reported the U.S. economy created 126,000 jobs in March. This was a sharp slowdown from the 290,000 average over the prior three months. This relatively weak jobs report led many economic analysts to comment that the economy may not be as strong as they had believed.

This reassessment is welcome, but it really raises the question of why so many professional economists and economic reporters could be so badly mistaken about the strength of the economy. There never was much basis for claiming a boom in the U.S. economy and the people claiming otherwise were relying on a very selective reading of the data.

Just starting with the most basic measure, real GDP in the United States grew at just a 2.2 percent annual rate in the fourth quarter of 2014. This is a pace roughly in line with most estimates of the economy’s potential rate of growth. This means that the economy was just keeping up with the growth in its potential, filling none of the large gap between potential GDP and actual GDP that still persists from the 2008–2009 recession.

Those pushing the boom view were prone to treat the modest fourth quarter growth number as an anomaly, pointing out that the economy had grown at an average rate of 4.8 percent in the prior two quarters. But this reasoning was obviously fallacious. The strong growth for the second and third quarters was just making up for negative growth in the first quarter of 2014.

As a result of a number of factors, most importantly weather and a brief government shutdown, the economy actually shrank at a 2.1 percent annual rate in the first quarter. With more normal weather and no further shutdowns in the rest of the year, the first quarter decline virtually guaranteed strong growth in subsequent quarters. The average growth rate for the first three quarters of 2014 was just 2.5 percent, not very different from the fourth quarter figure.

Other data also should have caused analysts to shy away from any boom view. Investment in plant and equipment has been running just slightly ahead of year ago levels. Home construction is on a slight upward path, but not enough to provide a major boost to the economy. The saving rate is already relatively low, meaning that any big uptick in consumption is implausible barring a surge in income. The trade deficit has been trending upward, partly in response to the rise of the dollar, putting a further drag on growth. And, the proponents of austerity are ensuring that there will be no major boost to demand from the government sector.

In this context, the relatively strong employment numbers had been an anomaly. In an economy with weak GDP growth, strong job growth implies low productivity growth and that is in fact what the U.S. has been experiencing. Productivity growth has averaged less than 1.0 percent annually in 2013 and 2014. This is far below almost anyone’s estimate of trend productivity growth.

The implication is that if there is not a pickup in GDP growth, employment growth will have to slow, as it did in March. There will always be erratic factors affecting a single month’s data, and the March numbers were almost certainly held down by bad weather, but the 126,000 number for March is almost certainly closer to the underlying trend than the 290,000 average originally reported for the prior three months. (These numbers were revised down in the March report.)

There is a lesson here that goes beyond the jobs numbers. The fact that such a wrongheaded view of the economy could get wide acceptance speaks to the nature of debate in economic policy circles. It remains the norm to repeat what more important economists are saying rather than do independent analysis. That is why economic policy types continually get surprised by the economy, as when they were surprised by the collapse of the housing bubble and the ensuing recession.

This lack of independent analysis stems from the nature of incentives in the profession. As we saw following the collapse of the housing bubble, no one ever suffers any career consequences from being wrong in the same way as the consensus. It would be difficult to identify anyone at the Federal Reserve Board, International Monetary Fund, or any other major economic policy or regulatory agency who lost their job because they failed to recognize the housing bubble and the risks it posed to the economy. It is unlikely anyone even missed a scheduled promotion.

This means that there were absolutely no negative consequences to being disastrously wrong on an issue where it really should not have been hard to be right. (There was no precedent for the massive run-up in house prices and it was not reflected in any remotely corresponding increase in rents.) On the other hand, standing outside the consensus will always carry risks. No one can ever be certain in their assessment of the economy and people in general are likely to be hesitant to conclude that the leading economists are wrong on major issues.

Given this structure of incentives, economic theory tells us that we should not expect much by way of independent thought on the economy. Most of what we read and hear continues to reflect the consensus view, just as was the case before the housing bubble burst. This is why it is possible for silly views, like the U.S. economic boom, to gain credibility in major news outlets.

http://www.nationofchange.org/2015/04/14/the-end-of-the-us-boom/

This is not a surprise as the world of conventional economic thinking is a closed world fixated on one-factor thinking, that is a labor increases productivity and a job is the ONLY way to earn an income. And if there are not enough jobs, then extract taxes to redistribute income produced by the wealthy, who are wealthy because they OWN wealth-creating, income-producing capital assets. But because the capital OWNERSHIP factor is never addressed conventional economists consistently error. And we entrust the education of our children on such conventionalists whose academia machine ends up ill-educating our children because they themselves are ill-educated. As a result, Americans are failing to pay any attention to the critical issues that impact their livelihoods and to understand why they are getting financially poorer, while a tiny minority is getting richer. Americans are sadly totally unaware of the impact that concentrated, monopoly greed capital ownership is having on their pocketbooks and on the poorer prospects in store for their children and grandchildren.

No one in the national media, academia, or the major political parties appears to concern themselves with the reality that the situation will continue to worsen without addressing the impact that concentrated and monopoly capital ownership has with respect to the technological advancement and tectonic shifts in the technologies of production. Such shifts are destroying manufacturing jobs and reducing the necessity for human labor in virtually every sector of the economy as more and more sophisticated machines, automated processes, robotics, and computerized operations supplant labor workers. With less and less “customers with money” company CEOs are achieving growth by constantly reducing operational costs in the form of laying off workers and piling more work on the remaining workers, shifting production to cheaper labor markets throughout the world, and investing in labor-saving, more efficient and productive non-human capital assets that replace the need for labor workers.

Instead of focusing on broadening personal ownership of FUTURE wealth-creating, income-producing capital assets, the focus of the American people, as taught by academia and heralded by politicians,  remains always on JOBS as their ONLY means for earning an income or dependency on government, tax-payer supported redistributive welfare programs.

We need a new breed of economist who think in terms of two, independent factors of production––human and non-human, and acknowledge that fundamentally, economic value is created through human and non-human contributions.1 America desperately needs leaders that will focus on the “big picture” and who see the wisdom of implementing policies that ensure that as the economy grows, initially slow, then robustly, broadened ownership of newly-created capital assets occurs simultaneously to empower EVERY citizens to become an owner and reap the full-earnings benefits of ownership in our FUTURE productive capacity––thus becoming stronger “customers with money.” This means that corporate finance mechanisms need to shift from retained earnings and debt financing, neither of which creates any new owners, to issuing and selling new stock that is purchased by ordinary Americans, without having to have savings or pledge equity, using insured, interest-free capital credit loans repayable in pre-tax dollars generated by the future earnings of the investments in our economy’s growth.

It is really simple logic that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.

As a nation, we either continue on the path of monopoly greed capitalism (“hoggism”), where the 99 percent are effectively OWNED by the 1 percent and dependent on limited job prospects and redistributive welfare dependency,  or we create a universal OWNERSHIP CULTURE wherein EVERY citizen is an individualized owner and a productive contributor through his or her capital property interests in the FUTURE growth and prosperity of our nation.

The platform of the Unite America Party addresses the REAL problems and provides solutions that other national political parties are encouraged to adopt and advocate. For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

1 NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things.

Republicans Push $269 Billion Handout For Millionaire Heirs And Heiresses

Paper Magazine Presents Neon Carnival With PacSun, "Dope" The Movie And Tequila Don Julio

On April 14, 2015, Zach Carter writes on The Huffington Post:

House Republicans this week will vote to hand the heirs and heiresses of America’s largest fortunes a $269 billion tax break by repealing the federal inheritance tax.

The legislation would shield the very richest families from taxes on the fortunes they inherit. After years of GOP attacks on the inheritance tax, also known as the estate tax, only a few thousand of the wealthiest families are subjected to it — 4,700 total in 2013, according to the Joint Committee on Taxation. Only individual fortunes worth over $5.43 million can be taxed under current law, an amount that doubles to $10.86 million for wealthy couples. The Republican proposal would eliminate all of these estates — which are over 15,700 percent richer than the median American household — from taxation.

Inheritance taxes are at the center of the policy debate over economic inequality. French economist Thomas Piketty has called for a global wealth tax to combat widening economic inequality based on unearned wealth passed between generations. But the Republican bill scheduled for a vote this week would move in the exact opposite direction, eliminating even the limited taxes on family capital that the United States currently deploys.

“There has been a very aggressive lobbying campaign by some of the wealthiest families in the country for a couple of decades now,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a liberal-leaning think tank. “But this is more radical than other recent efforts.”

No Democrats voted for the GOP bill, dubbed the Death Tax Repeal Act of 2015, in committee. And the legislation wouldn’t just eliminate the estate tax — it would also allow heirs to escape the already-generous capital gains tax on any stocks and real estate they receive. The change would significantly alter the meaning of the capital gains tax, since capital gains taxes only hit the wealthy when they actually sell an asset. Moguls could keep their wealth in the stock market and pass it down from generation to generation without ever being taxed.

The result is an economic inequality double-whammy in which two of the most pro-rich elements of the tax code are further weakened, costing the federal government $269 billion over the next 10 years, according to the Congressional Budget Office.

Half of all capital gains flow to the richest 0.1 percent of Americans, and they are taxed at just 20 percent, well below the 39.6 percent rate for ordinary income. But the estate tax is even more regressive, applying to just 0.2 percent of estates a year, at an average effective rate of less than 17 percent, since millions of dollars of the inheritance are exempted from the formal 40 percent rate.

Federal inheritance taxes used to be broader. In the 1970s, according to the JCT, about 6 percent of all estates were subject to the estate tax. During the Great Depression, the rate on the estate tax was 70 percent. But the Republican campaign against it went into overdrive in the 1990s and hasn’t let up, even in the Obama era. Conservatives routinely make a moral argument against what they call “the death tax,” saying it is unfair to tax a family just because one if its members has died.

Economists point out that shielding unearned inheritances from tax doesn’t encourage any useful activity, and Democrats have typically opposed efforts to chip away at the estate tax. But they have allowed a host of Republican efforts to go through in broad bipartisan deals. In 1997, President Bill Clinton’s budget secured child health care funding in exchange for a GOP item narrowing the estate tax to exclude a host of wealthy families. In late 2010 and again in the 2013 fiscal cliff deal, Democrats included generous inheritance tax measures into a bargain with Republicans.

The GOP has more than enough votes in the House to pass its latest proposal. But the legislation would likely succumb to a Democratic filibuster in the Senate or to a presidential veto. But while the bill has almost no chance of passing on its own, it could spur lawmakers to include a new break for the super-rich in must-pass legislation later this year, when Congress will need to raise the debt ceiling or fund the government, particularly if the GOP is able to peel off a few dozen conservative Democrats to vote in favor of this week’s bill.

http://www.huffingtonpost.com/2015/04/14/republicans-push-269-bill_n_7061458.html?ncid=fcbklnkushpmg00000013

This Republican action will result in further CONCENTRATED CAPITAL WEALTH OWNERSHIP, and thus political power. A few within the wealth ownership class already OWN America, and this proposed repeal of the federal estate tax will ensure that they will OWN THE WORLD.

As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.

Robert Reich: Hillary’s Values Aren’t The Problem

On April 14, 2015, Robert Reich writes on Salon:

It’s a paradox.

Almost all the economic gains are still going to the top, leaving America’s vast middle class with stagnant wages and little or no job security. Two-thirds of Americans are working paycheck to paycheck.

Meanwhile, big money is taking over our democracy.

If there were ever a time for a bold Democratic voice on behalf of hardworking Americans, it is now.

Yet I don’t recall a time when the Democratic Party’s most prominent office holders sounded as meek. With the exception of Elizabeth Warren, they’re pussycats. If Paul Wellstone, Teddy Kennedy, Robert Kennedy, or Ann Richards were still with us, they’d be hollering.

The fire now is on the right, stoked by the Koch brothers, Rupert Murdoch, and a pocketful of hedge-fund billionaires.

Today’s Republican firebrands, beginning with Ted Cruz, blame the poor, blacks, Latinos, and immigrants for what’s been happening. They avoid any mention of wealth and power.

Which brings me to Hillary Rodham Clinton.

In declaring her candidacy for President she said “The deck is stacked in favor of those at the top. Everyday Americans need a champion and I want to be that champion.”

Exactly the right words, but will she deliver?

Some wonder about the strength of her values and ideals. I don’t. I’ve known her since she was 19 years old, and have no doubt where her heart is. For her entire career she’s been deeply committed to equal opportunity and upward mobility.

Some worry she’s been too compromised by big money – that the circle of wealthy donors she and her husband have cultivated over the years has dulled her sensitivity to the struggling middle class and poor.

But it’s wrong to assume great wealth, or even a social circle of the wealthy, is incompatible with a deep commitment to reform – as Teddy Roosevelt and his fifth-cousin Franklin clearly demonstrated.

The more relevant concern is her willingness to fight.

 After a devastating first midterm election, her husband famously “triangulated” between Democrats and Republicans, seeking to find a middle position above the fray.

But if Hillary Clinton is to get the mandate she needs for America to get back on track, she will have to be clear with the American people about what is happening and why – and what must be done.

For example, she will need to admit that Wall Street is still running the economy, and still out of control.

So we must resurrect the Glass-Steagall Act and bust up the biggest banks, so millions of Americans don’t ever again lose their homes, jobs, and savings because of Wall Street’s excesses.

Also: Increase taxes on the rich in order to finance the investments in schools and infrastructure the nation desperately needs.

Strengthen unions so working Americans have the bargaining power to get a fair share of the gains from economic growth.

Limit the deductibility of executive pay, and raise the minimum wage to $15 an hour.

Oppose trade agreements like the Trans Pacific Partnership designed to protect corporate property but not American jobs.

And nominate Supreme Court justices who will reverse “Citizens United.”

I’m not suggesting a long list. Democratic candidates too often offer mind-numbing policy proposals without explaining why they’re important.

She should use such policies to illustrate the problem, and make a vivid moral case for why such policies are necessary.

In recent decades Republicans have made a moral case for less government and lower taxes on the rich, based on their idea of “freedom.”

They talk endlessly about freedom but they never talk about power. But it’s power that’s askew in America –concentrated power that’s constraining the freedom of the vast majority.

Hillary Clinton should make the moral case about power: for taking it out of the hands of those with great wealth and putting it back into the hands of average working people.

In these times, such a voice and message make sense politically. The 2016 election will be decided by turnout, and turnout will depend on enthusiasm.

If she talks about what’s really going on and what must be done about it, she can arouse the Democratic base as well as millions of Independents and even Republicans who have concluded, with reason, that the game is rigged against them.

The question is not her values and ideals. It’s her willingness to be bold and to fight, at a time when average working people need a president who will fight for them more than they’ve needed such a president in living memory.

This is a defining moment for Democrats, and for America. It is also a defining moment for Hillary Clinton.

http://www.salon.com/2015/04/14/robert_reich_hillarys_values_arent_the_problem_partner/?utm_source=facebook&utm_medium=socialflow

Robert Reich continues to “play” the American people with the Democrat play book sans ANY attempt to advocate for broadened individual wealth-creating, income-producing capital ownership simultaneously with the growth of the economy. While he acknowledges that Hilary Clinton is wealthy, and that means is a capital OWNER, and is steeped in a privileged circle of wealthy donors, also capital OWNERS, Reich fails to understand that political power follows property ownership.

No where or at any time has Hilary Clinton EVER advocated for broadening capital ownership as the practical and logical means to ensure that as technological progress ensues and tectonic shifts in the technologies of production continues to eliminate the necessity for masses of human labor, while at the same time devaluing the worth of labor, that EVERY child, woman and man is empowered to acquire personal ownership shares in the corporations growing the economy using finance mechanisms that are insured, interest-free and repayable out of the earnings generated by the investments in our economic future. Nor has Robert Reich advocated such either.

So how do we expect these leaders of the Democrat Party to give us anything but the same old non-workable approaches. That is not to say that all the ideas put forth by Reich in this article are not to be supported, but the REAL systemic solution is to address concentrated capital ownership and prevent it from EVER taking root again.

Now, don’t get me wrong, the Republicans are FAR, FAR WORSE. Their call for ‘freedom-based” laissez-faire economic solutions will FUTHER concentrate capital ownership among the few and consolidate political power even more, further creating a haves and have-nots divide, which is the root of social upheaval.

The problem I have with Hilary Clinton and others announcing for the office of the presidency, as well as with Senators and Congressmen and Congresswomen is that NO ONE is addressing the ever-increasing inequalities in ownership of the non-human means of production and personal incomes––the ultimate source of concentrated political power. If they have any policy ideas they all deal with symptoms of a totally defective money and tax system that creates systematic injustices leading to the virtual political monopoly of the wealthiest 0.01 percent of Americans.

Hillary Clinton nor any other political leader offer a systemic solution (not just a “New Deal” or “Reshuffle Of The Deck” but a “Just Deal”) that could unite at least 90 percent of Americans who own little or nothing. Instead of attacking “big money” why not get newly-created “big money” spread out equally as a fundamental human right (see Article 17(1) of the Universal Declaration of Human Rights). The Federal Reserve Act under Section 13(2) could democratize interest-free, asset-backed “big money power” for financing faster rates of economic growth, new jobs and directly begin to close the ownership, income, and economic power gaps for every citizen, as suggested in the proposed Capital Homestead Act. See http://www.cesj.org/…/capita…/capital-homestead-act-summary/

It would be great for Hilary Clinton to advocate the  UNITE AMERICA PARTY PLATFORM. If she will see that the platform’s message is to the 99 percent, not just to the Democrats but clear across the political spectrum.

Even if the top .01 percent at the top oppose “equality of ownership opportunity” by calling it “socialism,” which many of them will, most of the 99 percent can be armed by the language on the Platform to refute that claim. Hillary Clinton and others such as Elizabeth Warren should educate the 99 percent to refute that claim, assuming they have the intellectual guts to use language in the future that even Tea Party people see would reverse the growing economic power of the State and those controlling money power by democratizing to every child. woman and man future economic and monetary power.

All Hillary Clinton and others (and their gatekeepers) have to do is to recognize that “Wage Slavery” and “Welfare Slavery” concentrates power in the hands of those controlling money power and trickle-down redistribution programs. Democratizing money and ownership power can open up the minds  of the 99 percent to refute the elitists of the left and the right. With the growing sensitivity of moral leaders like Pope Francis and populists throughout the world to the growing inequality within the the existing economic systems in all countries, true populists from the left and the right can win over the elitists who refuse to trust the diffusion of power to every person and his or her family.

Hillary Clinton, if she’s open to new ideas, can wake up academia and turn America around to ensure inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Americans Are Enslaved By The Economic System Of A Dependent Wealthy (VIDEO)

On February 2, 2015, Egberto Willies writes:

Americans are used to being told how to think and what to think. Freedom of choice is cherished yet never really demanded. Americans have allowed the real dependent class, the wealthy, license to enslave.

Those opposed to a true egalitarian society where government, ’we the people’ play a prominent role in deciding what is best for us all claim that government should not pick winners and losers. They claim the ‘free market’ is the best arbiter of the most efficient distribution of capital.

What does that even mean? Potholes, medical needs, alimentary needs, shelter needs, and clothing needs exist irrespective of economic system. If these needs cannot be satisfied within the confines of the economic system it means the economic system is flawed.

The economic system is manmade. Needs for the most part are not. As such it is the economic system that must adapt to a society and not the other way around. Those that practice unfettered capitalism are no different than the ideological clergy who attempt to fit their ancient scripture driven ideologies into today’s realities. The authors of those scriptures likely neither had the tools nor the mental maturity to extrapolate into the future that is now today. But just like many have blind faith and believe in the absoluteness of ancient scriptures, so do those that believe in unfettered capitalism.

It is all about the effectiveness of the tools. No amount of prayer will change the outcome of one who has Lou Gehrig’s disease. No amount of bloviating will change the mathematical certainty that unfettered capitalism destroys the middle-class and provides no pathway for the poor in the aggregate. The mathematics required to illustrate that fact is simple. The narrative necessary to maintain the status quo creates a complexity that gives plausibility to fallacies.

Here are some common sense realities. The income and wealth of the rich are growing at a faster rate than the economy at large. That means income and wealth must be skimmed from the masses to satisfy that growth. That is exactly what has happened. The manifestation of this is lower wages, outsourced jobs to less expensive job markets, followed by the re-importation of jobs at a reduced wage.

How was this accomplished without notice? Economist/Professor Richard Wolff’s Capitalism Hits the Fan lays it out perfectly. He showed how Americans were enslaved by the semblance of prosperity pre 2008 Great Recession.

Why did the middle-class and poor not react as the pilfering was occurring? Detroit activist and Netroots Nation 2014 panelist Maureen Taylor’s frog story explains it best. Very gradual changes go virtually unnoticed in the short term but are profound over time.

Now that the profound has occurred and is noticed, why don’t the masses revolt? There are several answers.

Salt Lake City Move to Amend performed a skit called Bread and Circus that illustrates one component. “There is an old theory of how empires used to control their populous,” Ashley Sanders said. “They feed them just enough bread to survive and sedate them with entertainment.” Today you get cheap processed food, reality TV, and a plethora of pointless addicting forms of entertainment.

Another component is the manipulation of our actions through manufactured hate. The gays will destroy your marriage. The Muslims will blow you up or cut your head off. The Liberals will give your hard earned dollars to the lazy Black and Brown people. Liberated women are baby killers. Black and Brown men are to be feared. And on and on. Everyone is fighting each other while keeping their eyes off the real culprit causing them harm.

The most devastating component is the chained American mind. One of the most effective commercials of yesteryears showed a slave liberated from the steel chains. It question if the mind was also liberated. Unfortunately if the mind is still enslaved, one is still a slave. That is the new slavery in America. A slavery not based on race anymore though race and subclasses are used to feed it. Americans have lost their sense of worth.

Americans have been programmed into believing that capital take preeminence over humanity. Americans have been programmed to believe that those with capital are entitled to be the arbiters of everyone’s success or failure. Americans have been programmed to believe that capital determines ones worth.

Every week on Shark Tank a few capitalist flushed with money decide if they will use someone else’s idea to increase their fortune. Americans are mesmerized. These guys, generally devoid of scientific training, numerical analysis, and other skills will make one of the beggars rich based on their hunch.

Americans accept that because these capitalists are risking their capital it is OK to make a fortune that is cumulative based on the knowledge of others while in the aggregate the actual worthy ones get pennies. Americans accept that the risk of the capitalists’ fortune is worth more than the risk of the construction worker losing a limb or life. Americans make many other sacrifices of self to ensure the capitalist is comfortable and his risk is virtually risk free. Donald Trump can be bankrupt one year and in full recovery two years after, Yet middle-class Americans are still unrecovered after 7+ years of crisis and 30 years of decline.

What is true? The average American is in the driver’s seat. Americans can live without capital with basic skills. The average American gives worth to capital, not the other way around. One of these days that light will go off and enough Americans will realize that truth. That is the biggest fear of the wealthy capitalist.

The 47% many of them talk about is a psychological number. In their game 47% are takers — almost half. The other 52% are makers. That 52% are mad. They are working hard while those loafers take their money. The 52% fight for policies that really benefits the 1% under the false belief that they are sticking it to the 47%. Sadly the 47% that are the ‘takers’ are just as important in making the economy run as everyone else. They are not takers at all. Their worth is just discounted in order to create the conflict between the masses to ensure the 1% is not the target as they should be.

The most dependent class in our society is the wealthy. The masses take care of them. The masses keep their factories producing. The masses invent the technologies that make them profits. The masses buy the goods they sell. And on and on.

To move forward the masses must remove the chains from their minds, discount the lies, educate themselves, and demand what is theirs. They must remove the corrosive nature of money out of politics. They must abolish corporate personhood and the tenet that money is speech likely through a constitutional amendment.

Americans must demand the return of ill-gotten gains by structural defects within our fraudulent economy through taxation. Americans must demand unfettered voting rights. They must demand that all employers pay a living wage. If a business cannot pay a living wage it is not a viable business and just an extender of indentured servitude. Preferential treatment of capital appreciation over working income must end. Social Security taxes must be charged on all income. Health care must be declared a right with basic healthcare paid out of general revenue through taxation of us all. Higher education based on merit must be free. Every working American will pay it forward. A large inheritance tax must be reinstituted to ensure cumulative wealth cannot be extractive of middle-class wealth.

America needs President Obama’s middle-class economics on steroids. That is how emancipation begins.

 

 

 

Fewer Investing In Stock Market

Wall Street

Two Sentences That Perfectly Capture What It Means To Be Privileged In America Today

On April 8, 2015, Danielle Kurtzleben writes on Vox:

Numbers are one way to understand America’s growing inequality — countless charts and graphs show how the richest and poorest Americans’ incomes are diverging — but the concept is easier to understand via personal stories. Author Anand Giridharadas used the story of a convenience store robber to explain this in a recent TED talk.

Giridharadas’s point is particularly salient now, as Robert Putnam’s book about the growing fissure between upper- and lower-class America is a hot topic in political circles. Toward the end of his talk (around the 16-minute mark), he hammers home the point that there are two Americas, and that many people who reside firmly in the more privileged version don’t even realize it.

“Don’t console yourself that you are the 99 percent,” he says. “If you live near a Whole Foods; if no one in your family serves in the military; if you are paid by the year, not the hour; if most people you know finished college; if no one you know uses meth; if you married once and remain married; if you’re not one of 65 million Americans with a criminal record — if any or all of these things describe you, then accept the possibility that actually, you may not know what’s going on, and you may be part of the problem.”

Harsh as that sounds, Giridharadas gets at an important point that Putnam also echoed in a recent interview with Vox: as the highest and lowest incomes in the US move further apart, well-off and low-income Americans also know less and less about each other and what it truly means to be from another social class. Indeed, only 1 percent of Americans consider themselves upper-class. As economic segregation grows, it plays a part in keeping people from climbing up the social ladder.

http://www.vox.com/2015/4/8/8325613/privilege-anand-giridharadas-ted

Thomas Piketty is correct in his assessment that the role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets.

But Piketty’s call for a global wealth tax and redistribution is based on faulty reasoning. The reasoning should be that if productive capital is increasingly the source of the world’s economic growth, therefore, productive capital should become the source of added property ownership incomes for all. If both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.