Jacob Lew Calls For ‘Economic Patriotism,’ Seeks To Limit Offshore Tax Moves

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Treasury Secretary Jacob Lew says a trend of U.S. companies reorganizing as foreign firms serves “to hollow out the U.S. corporate income tax base.” Above, Lew at a forum this month in Washington. (Saul Loeb / AFP/Getty Images)

On July 17, 2014, Jim Puzzanghera writes in the Los Angeles Times:

Calling for “a new sense of economic patriotism,” a top Obama administration official urged Congress to take immediate action to stop U.S. companies from reorganizing as foreign firms to avoid paying taxes.

The maneuver, known as tax inversion, serves “to hollow out the U.S. corporate income tax base,” Treasury Secretary Jacob J. Lew wrote in a letter Tuesday to congressional leaders that was obtained by the Times.

“What we need as a nation is a new sense of economic patriotism, where we all rise or fall together,” Lew wrote to the top Democrats and Republicans on the congressional tax-writing committees.

“We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes,” he said.

Some lawmakers have pushed to restrict the practice, in which a U.S.-based multinational company restructures so the parent company is a foreign corporation.

The maneuver allows firms to avoid paying corporate taxes in the U.S., which has the highest rate among major developed nations.

Starting Salaries For College Grads Lag Behind Pay For Workers Overall

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A new report says the median wages of recent college graduates have not kept pace with the pay of the overall U.S. workforce. Above, UCLA’s 2013 commencement. (Wally Skalij / Los Angeles Times)

On July 22, 2014, Chris Kirkham writes in the Los Angeles Times:

Starting salaries for recent college graduates have risen far more slowly than the average earnings of all U.S. workers since the recession, an analysis by the Federal Reserve Bank of San Francisco found.

The study, released Monday, found that median earnings for recent college graduates rose only 6% in the seven years between 2006 and 2013, less than half the rise of 15% for the overall U.S. workforce over roughly the same period.

Such disparities in pay growth rates have been seen in previous recessions, but the report says the current one “is substantially larger and has lasted longer than in the past.”

“The gap between the two groups of employees appears to be substantially wider and their paths appear more divergent,” the report found.

College graduates are particularly susceptible to wage stagnation during weak labor markets because older, experienced employees tend to have more job protections.

In trying to pinpoint the lackluster wage growth for recent college graduates, researchers at the San Francisco Fed had a key question: Are graduates getting different jobs that pay lower wages, or are salaries in the traditional career fields not growing?

The study concluded that college graduates are going into the same fields as before the recession, but that wage growth has been slow. In the two most popular categories for recent graduates — professional occupations and management, business & finance — there was only a 2.6% growth in median earnings since 2007.

“For almost all occupations and skill groups … we find that recent graduates experienced lower wage growth than other workers,” the report said.

Such sluggish growth could dissuade potential college students from enrolling, the report said, but the authors cite ample research showing that the lifetime earnings of college graduates far outpace those of non-graduates.

Entering the job market during an economic downturn, however, is likely to make it more difficult to pay back debt in the near term, the report finds.

“Low growth in starting wages does not mean that going to college is a poor investment,” the study concluded. “It just reflects that it will take longer to recoup the cost of the college.”

Just what IS the purpose of an education? To pay a few gazillion dollars to prepare you for a job that doesn’t exist? Or is there something else?

Conventional wisdom says you need to get a “good education” to get a “good job.” A college diploma is a sure ticket to a lifetime of employment with the money just rolling in… hopefully enough to repay all those student loans that were taken out to pay for the education that was guaranteed to get you that good job.

That’s the economics of the wage system, yet why is it that college graduates are having such a hard time finding jobs at all, much less “good” ones that pay well.

As for those majoring in economics: “The Georgetown University ‘Hard Times’ study reports that recent graduates of economics have an unemployment rate of 10.4 percent. That seems quite high for a degree that, according to the College Board, teaches important lessons on how to understand economic models and how factors such as labor disagreements, inflation, and interest rates affect them. . . . [E]conomics degrees often have a strong theoretical component but not enough real-world, practical experience to entice an employer.”

Of course, as a culture we never really address the question of what an education is for. Did you go to school to get a job? Or to get an education? For those who went to school to get a job they will eventually learn a lesson in supply and demand when it comes time for he or she to pay for the education that supposedly will guarantee him or her a good job. What you are supposed to learn in college is theory. The practical experience comes after you get out of college.

A primary reason that the American and other global economies are empowering their citizens to fulfill their desires for prosperity, affluence, opportunity and economic justice is the economics taught today is such a concatenation of bad assumptions and worse theory that all it’s good for is getting a Ph.D. to teach bad assumptions and worse theory to new generations of students and old generations of politicians.

To get a good grade, the students tell the professor what he or she wants to hear, while to get a good grant, the professor tells the politicians what they want to hear. In neither case does anybody truly address what is really true or practical.

Sound theory leads to good practice and planning begins with a goal. If a practice is bad, first look to the underlying theory. Are employers finally catching on to the fact that so-called “mainstream” economics doesn’t exactly reflect reality?

My colleague at the Center for Economic and Social Justice (www.cesj.org) poses the question: “As an employer, are you going to hire somebody who is convinced that the government produces wealth, and your goal as a company should therefore be to become as dependent on government as possible as the source of all wealth? Or are you going to hire somebody who believes in the Just Third Way principle based on Say’s Law of Markets that the only way to have wealth is to produce it yourself by means of your labor and capital?

“Who is the better prospect for employment? The guy who is waiting for government to redistribute what somebody else produced, or the gal who rolls up her sleeves and gets to work helping the company produce a marketable good or service?”

In today’s technological world where tectonic shifts in the technologies of production are destroying jobs and devaluing the worth of labor, even if EVERY citizen achieved a Ph.D they would still be faced with the reality that labor’s input in the production of products and services is exponentially declining with fewer and fewer job opportunities that pay well. Given this reality then how is one to contribute to society as a productive citizen? The answer is to structure the economy so that there would be an infusion of credit into productive capital investment. This would result in a majority of Americans earning additional income from wages and salaries and dividends, interest, and capital gains from other opportunities created beyond the dividend income payout from the productive capital investments. The accelerated growth rate would produce jobs that pay well and would significantly expand markets due to rising consumer demand, which in turn would generate greater business profits and opportunity for more productive capital investment. Everyone would benefit––rich and poor. There would be lower unemployment (making for the elimination of make-work), higher personal incomes, lower deficits due to greater tax revenues, lower tax rates, and better government services, with every citizen benefiting from a higher standard of living.

Such a path to prosperity would empower ordinary citizens, the majority of which are capitalless, to own a substantial percentage of the future productive capital formation creating the growth of the economy. The GOAL would be to assure that every child, woman and man would be able to accumulate a portfolio of productive capital assets large enough to provide a secure source of income. After a few decades, dividend income from the ownership of productive capital assets would become the primary source of income, though well-paying job opportunities would be plentiful for those who want to work for the satisfaction that can come from employment, whether in business, education, healthcare, science, and government or other self-rewarding contributions to society.

What our leaders and those in academia need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is that paradigm shift. It calls for a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

http://www.latimes.com/business/la-fi-college-graduate-earnings-20140721-story.html

Krugman’s Latest Debt Denial: Why His Two Magic Numbers Don’t Cut It

On July 22, 2014, David Stockman writes on Contra Corner:

Professor Krugman is at it again—–conjuring fairy tales about a benign long-term fiscal outlook. Notwithstanding that the public debt has surged from 40% to 75% of GDP during the six short years since 2008, he claims there is no reason to fret and that there is no debt spiral anywhere in the future. In part that’s because the Keynesian priesthood has declared that interest rates have down-shifted on a permanent basis. CBO has therefore dutifully incorporated this assumption into its long-term projections:

“This (interest rate) markdown has the effect of making the budget outlook — which was already a lot less dire than conventional wisdom has it — look even less dire. But there’s a further point worth emphasizing: the CBO has just declared an end to the debt spiral.”

Even accepting CBO’s “rosy scenario” outlook (see below), it’s not evident that it has declared an end to the debt spiral. In fact, it projects publicly-held treasury debt to soar from $12 trillion today to about $52 trillion by 2039. Most people would judge that a spiral. Indeed, as shown in the CBO graph below based on “current policy”, the public debt ratio is heading sharply upwards to more than 100% of GDP.

Federal Debt Held by the Public

So how does professor Krugman turn this dismal chart into an “all clear” reassurance–when it actually shows public debt heading to above WWII levels at a time when the baby boom is at peak retirement? Well, it seems that Krugman unearthed two numbers in a 182 page report that purportedly render harmless the $52 trillion of bonds, notes and bills that CBO projects will need to find a home at the historically low interest rates it forecasts for the next 25 years.

“So we turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all.”

A GDP growth rate higher than the average carry cost of the public debt sounds all good, but here’s the thing. Given outcomes during the 21st century to date, there is simply no plausible reason to believe that nominal GDP can grow at a 4.3% CAGR for the next 25 years. In fact, since the pre-crisis peak in early 2008, nominal GDP has grown at only a 2.5% CAGR, and even during the last two years when “escape velocity” was expected any day, the compound growth rate has been only 3.0%. Indeed, during the entire 14 years of this century—encompassing nearly two complete business cycles—-nominal GDP has expanded at just 3.8% per annum.

Needless to say, when you are crystal balling a quarter century ahead, CAGRs make a big difference, and that’s profoundly true of the Federal budget. Specifically, revenue is highly sensitive to nominal GDP growth because it is always money income, not real GDP, that is on the radar screen of the tax-man.

Thus, owing to the miracle of compounding under the CBOs 4.3% CAGR, nominal GDP is projected to amount to about $49 trillion by 2039. By contrast, if money incomes grow at a 3.3% CAGR, or at the upper end of the last seven year’s experience, nominal GDP a quarter century forward would be only $38 trillion. And at CBO’s 19.4% of GDP tax take on the $11 trillion difference—-that’s nearly a $2.0 trillion annual revenue shortfall by the terminal year.

At the same time, the spending side will be driven by the soaring social insurance tab for retiring baby boomers during the decades ahead, regardless of nominal GDP. Accordingly, CBO forecasts that outlays for Social Security and Medicare will rise from 8% to 11% of GDP during the next quarter century, and that this will cause primary Federal spending (i.e. ex-interest expense) to grow at a 4.8% CAGR.

But that’s where professor Krugman fairly tale of two magic numbers hits the shoals. Based on the above demographic/social insurance dynamics, CBO projects that non-interest Federal spending will rise from $3.3 trillion this year to about $10.3 trillion by 2039. Yet were nominal GDP growth to track the lower 3.3% CAGR suggested above, there would be little off-setting reduction in the primary spending path.

That is especially the case because CBO’s forecast continues to embody a modern version of “rosy scenario”—that is, it assumes that real output will grow at a 2.3% CAGR for the next 25 years. Yet that ignores the numerous and compounding headwinds lurking down the road. These include baby boom demographics and the massive overhang of $60 trillion of public and private debt domestically; and global troubles everywhere—from the bankrupting old age colony in Japan, to the tottering house of cards known as “red capitalism” in China, to the crushing burden of the socialist welfare state in Europe. Given these adversities, there is no reason to assume that US real growth will sharply accelerate from the tepid trends of the recent past.

To wit, real GDP has averaged only 1.0% annually since the pre-crisis peak in early 2008, 1.5% during the last 8 quarters, and just 1.8% during the last fourteen years—including the false prosperity of the Greenspan housing and credit bubble after 2001. So why will GDP growth accelerate by nearly one-third for a quarter century running—when even under CBO’s own forecast, labor force demographics will turn sharply negative in the years ahead?

Whereas 1.0-1.5% of annual real output growth during the second half of the 20th century was accounted for by labor force expansion, CBO projects this foundational component will drop to just a 0.5% annual rate during the next several decades. This demographically baked in reality, in turn, requires CBO to project that labor productivity will rise by 1.8% annually in order to meet its 2.3% output growth bogey.

But that just can’t happen. During the next 25 years the US economy will be shedding its most productive labor—which is to say, the now aging baby boom work force. At the same time, the US economy will also be laboring under a severe, cumulative deficit in domestic investment in productive plant and equipment—the sine quo non of future labor productivity growth. Since the turn of the century, in fact, real CapEx growth have averaged only 0.8% annually, or hardly one-third of its prior historical rate; and the true measure of future productivity growth— net investment in real plant and equipment after capital consumption allowances—has actually declined by 20% since 1999-2000.

Real Business Investment - Click to enlarge

Real Business Investment – Click to enlarge

In a word, the shortfall from CBO’s 4.3% nominal growth scenario is likely to come almost entirely out of the “real” component of GDP rather than its 2.0% GDP deflator assumption. This means that nominal Federal spending would likely remain consistent with CBO’s projections as outlined above (i.e. COLA adjustments would be about the same), and could possibly rise considerably higher due to a larger caseload of safety net beneficiaries.

The baleful bottom line is this. Under the CBO’s rosy scenario, the primary Federal deficit by 2039 is just under $1 trillion annually or a modest 1.8% of GDP, meaning that the primary deficit is not fueling an uncontrolled debt spiral. By contrast, under the 3.3% nominal GDP scenario with realistic assumptions about labor productivity and real growth, the primary deficit would soar to nearly $3 trillion annually, and reach 7.5% of GDP.

It goes without saying that a primary deficit that massive would fuel a hellacious debt spiral—the very opposite of the benign outlook espied by professor Krugman. Rather than the 106% of GDP already built into the CBO forecast, the public debt over the next 25 years would literally spiral off the charts.  We would end up exactly in the fiscal briar patch that professor Krugman so insouciantly mocks:

“… because people will fear that we’re about to turn into Greece, Greece I tell you.”

So talk about unjustified complacency with respect to the public debt spiral! The best outcome we can imagine per CBO’s rosy scenario case is a clearly dangerous level of public debt relative to GDP. But the probable path under sober economics is orders of magnitude worse.  Indeed, with primary debt accumulating at a nearly double digit rate against GDP, the CBO’s average 4.1% interest expense assumption would give way to higher rates, meaning that neither of professor Krugman’s two magic numbers cut it. Under a regime of even modest monetary normalization over the next quarter century, current fiscal policy will lead to interest rates that are far higher, not lower, than the growth rate of nominal income.

So its time to put Greece right back into the front and center of the US fiscal picture, I tell you!

As David Stockman states, “there is no reason to assume that U.S. real growth will sharply accelerate from the tepid trends of the recent past” unless the system is radically reformed to balance production with consumption and simultaneously create new ownership with EVERY child, woman and man a share owner participant as the economy grows.

The  debate about a fairer tax code and ending the Bush tax cuts relates to what percent of Gross Domestic Product (GDP) should the federal government spend and what percent of GDP should be collected in taxes. Unfortunately, the current economy is growing at the Congressional Budget Office projected rate of less than 3 percent. This is pitiful, especially in light of the advances in technological production processes that are capable of producing a quality material lifestyle for ALL American citizens. The focus needs to be on growth with a targeted 20 percent growth rate, which would allow the society to maintain promised health care and Social Security commitments to a growing elderly population, stabilize taxes at 15 percent of GDP, and balance the budget. With growth rates well over 6 percent, health care and Social Security benefits could be increased, taxes could be lowered, while achieving a surplus.

The path to such prosperity requires recharting the financial system to empower ALL citizens to acquire long term viable private, individual ownership portfolios representing full divident-payout assets of new productive capital (the non-human factor of production embodied in super-automated, robotic and computerized processes that require less labor worker or no labor worker input) and pay for their acquisition out of the future earnings of the productive capital investments financed by credit insured by the Federal Reserve.

The accelerated growth rate, due to the the infusion of credit into productive capital investment, would result in a majority of Americans earning additional income from wages and salaries and dividends, interest, and capital gains from other opportunities created beyond the dividend income payout from the productive capital investments. The accelerated growth rate would produce jobs that pay well and would significantly expand markets due to rising consumer demand, which in turn would generate greater business profits and opportunity for more productive capital investment. Everyone would benefit––rich and poor. There would be lower unemployment (making for the elimination of make-work), higher personal incomes, lower deficits due to greater tax revenues, lower tax rates, and better government services, with every citizen benefiting from a higher standard of living.

Such a path to prosperity would empower ordinary citizens, the majority of which are capitalless, to own a substantial percentage of the future productive capital formation creating the growth of the economy. The GOAL would be to assure that every child, woman and man would be able to accumulate a portfolio of productive capital assets large enough to provide a secure source of income. After a few decades, dividend income from the ownership of productive capital assets would become the primary source of income, though well-paying job opportunities would be plentiful for those who want to work for the satisfaction that can come from employment, whether in business, education, healthcare, science, and government or other self-rewarding contributions to society.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What our leaders and those in academia need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is that paradigm shift. It calls for a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

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.

http://davidstockmanscontracorner.com/krugmans-latest-debt-denial-why-his-two-magic-numbers-dont-cut-it/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday

Nick Hanauer Wants The Fat Cats To Save Themselves. Here’s Why They Won’t.

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On July 21, 2014, Joseph Thorndike writes in Forbes:

Nick Hanauer is a rich guy with a conscience. Over the last few years, he’s become the poster boy for plutocratic guilt, urging his fellow 1 percenters to get serious about surging inequality. In particular, he’s been a champion for raising taxes on the rich and boosting wages for the working poor.

But Hanauer is no bleeding-heart liberal. In fact, he’s driven by self-interest, not self-loathing. Rich people should be worried about inequality, he insists, not because it’s wrong, but because it’s dangerous.

“If we don’t do something to fix the glaring ineqities in this economy,” he recently declared in an article for Politico, “the pitchforks are going to come for us.”  Hanauer is a colorful and compelling guy. Like any good polemicist, he speaks in broad strokes and strong terms. This doesn’t leave him much room for subtlety or nuance. “No society can sustain this kind of rising inequality,” he insists in a typical passage:

“In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.”

Not much wiggle room in that sociohistoric statement. But it’s certainly overstated. Sure, the aristocrats of the ancien régime ended up at the guillotine. But they had a pretty good run before heads started rolling. Revolution may be inevitable, but only if you take a very long view of history. In the United States, inequality has been rising for about 40 years, so the plutocrats can probably slip in a few more rounds of golf before things start to heat up.

But this is nitpicking. Hanauer’s basic point is valid: Inequality does have social and political consequences. And rich people ignore them at their (eventual) peril.

Hanauer is not the first rich guy to have this insight. In fact, he’s only the latest in a long string of “corporate liberals” who have championed redistribution as a way to protect wealth from the forces of envy, privation, and injustice.

Hanauer gives a nod to this history, especially as it played out during the 1930s. Writing of inequality, he declares:

“If we do something about it, if we adjust our policies in the way that, say, Franklin D. Roosevelt did during the Great Depression – so that we help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks – that will be the best thing possible for us rich folks, too. It’s not just that we’ll escape with our lives; it’s that we’ll most certainly get even richer.”

Hanauer’s point is a good one, but it skirts an inconvenient truth: Redistribution has never been popular with the rich, even when it was in their best interest. Those farsighted policies of the New Deal? They were enacted over the vigorous and nearly unanimous opposition of the nation’s economic elite.

Sure, a few liberal business leaders joined FDR’s drive for economic reform. But they were the exception, not the rule, and their numbers – small to begin with – shrunk steadily over the 1930s. FDR might have been saving plutocrats from their own excesses, but increasingly they saw “that man” as a “traitor to his class,” rather than its savior.

I suspect that Hanauer knows all this; I doubt he expects the 1 percent to heed his dire warnings. Historically speaking, rich people are almost never fans of redistribution. As Hanauer himself acknowledges: “The thing about us businesspeople is that we love our customers rich and our employees poor.”

Of course, Hanauer’s central point is that employees are customers, so beggaring the former will necessarily impoverish the latter. Henry Ford famously embraced that argument in the early 20th century (although his enthusiasm for high wages has been overstated and misunderstood. But few business leaders have chosen to follow his lead.

Hanauer is right: Inequality is dangerous, and rich people should get serious about dealing with it. But that doesn’t mean they will. After all, they never have before.

Nick Hanauer champions an unworkable solution to tax the rich and redistribute the wealth that has been created. Never does Hanauer advocate for simultaneously broadening personal ownership of wealth-creating, income-producing capital assets while growing the economy, which would result in creating new owners of FUTURE capital wealth as well as stimulating REAL job growth as America builds a larger economy that can support general affluence for all citizens.

Here is my comment on Nick Hanauer’s piece that appeared in Politico:

Norman Kurland and  my colleagues and I at the Center for Economic and Social Justice (www.cesj.org) as well as the Unite America Party see Nick Hanauer’s solution (raising the minimum wage) to closing the income gap would necessarily add to the costs of food and other necessities for poor and middle income Americans and would increase the outsourcing of jobs when higher labor cost are added to U.S.-produced goods and services.  The Capital Homestead Act ( http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ ) would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs, finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from billionaires such as Nick Hanauer over their existing assets.  Remember the wage system is the cancer.  The ownership system is the answer to address the problem Hanauer wants to solve.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What Hanauer, other billionaires, the Democrats and Republicans and all third party leaders need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

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.

If Democrats Really Want To Address Inequality, They Need New Ideas

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According to the U.S. Census, in 2011, the richest 1% received almost 47% of all income, the largest percentage since 1917. (Wes Bausmith / Los Angeles Times)

On July 20, 2014, Joseph R. Blasi writes an excellent op-ed in the Los Angeles Times:

The Democrats have a couple of problems when it comes to addressing inequality. First, polling by the White House that was leaked last week apparently found that Americans aren’t much interested in class conflict and punishing the rich. They simply want everyone to do better. And second, even if the party could stir up support for addressing the widening gulf between rich and poor, the time-honored approaches Democrats have relied on in trying to level the playing field just aren’t up to the task. The inequality chasm has grown too deep and too wide to be addressed meaningfully solely by such things as providing welfare for the very poor, increasing the minimum wage and equalizing wages between women and men — though all of those initiatives are worthy and important.

Developing a Democratic Party perspective that truly addresses inequality will require first understanding its dimensions and then designing solutions that address disparities in both income and accumulated wealth. 

Let’s examine income first, since it helps build accumulated wealth. According to the Commerce Department, labor’s share of gross national income has declined from about 67% in the 1980s and ’90s to about 64% today. While there are different ways to measure the labor share, regional Federal Reserve board economists have reported a consensus on its decline. The Labor Department says the ratio of compensation to output has declined from about 63% in the early ’80s to about 58% recently. The Congressional Budget Office looks at income tax returns and reports that labor’s share of income fell from 75% in 1979 to 67% in 2007. There is no evidence that this trend will reverse.

In addition, the share of income going to the top is also highly concentrated. According to the U.S. Census, in 2011, the richest 1% received almost 47% of all income, the largest percentage since 1917.

Conservatives have fairly raised objections that statements about the concentration of income at the top ignore transfer payments such as Social Security, welfare and food stamps to the poorest Americans, and do not include the greater portion of taxes paid by the more well-off. But a fine-grained analysis by the Congressional Budget Office taking those factors into account still found that the incomes of the richest 1% of households grew at more than 15 times the rate of those in the poorest 20% of households between 1979 and 2007.

When we look at the concentration of accumulated wealth, the disparity becomes even more acute. The wealthiest 10% of Americans control more than three-quarters of all U.S. wealth and 80% of all financial assets. Again, there is no evidence that this trend will reverse. The number of citizens owning shares in the stock market is dropping, and the vast majority of mutual funds are held by the wealthiest households.

The poor, by contrast, have few assets other than their cars and, if they are old enough or disabled, their Social Security benefits. They generally have no 401(k) plans or have little money in them. And the concentration of capital ownership compounds, since those who own it reap capital income going into the future.

Recently, the Urban Institute and the Brookings Institution Tax Policy Center reported that the richest 20% of the U.S. population received 86% of all capital gains and capital income such as dividends and interest.

A crucial component of addressing the inequality dilemma must be broadening access for the middle class to capital and capital income, something the traditional Democratic policies simply haven’t addressed.

How might Democrats go about promoting capital ownership and income? They should start by looking to companies that give their middle-class employees access to capital by sharing profits and ownership shares, on top of good wages — multinational corporations like Google and Microsoft and Qualcomm; small businesses with employee stock-ownership plans like W.L. Gore; manufacturing behemoths like Procter & Gamble; and a slew of other firms. Democrats should then look to restructuring the tax code in ways that encourage a broader range of companies to embrace low-risk profit-sharing and employee ownership programs, perhaps even making such programs a condition for receiving federal corporate tax deductions.

They should also look for opportunities to form more private-public ventures such as the Alaska Permanent Fund, which invests money received from leasing oil fields on public lands to major oil companies and then pays dividends to Alaska residents.

Such approaches are necessary to avoid a future in which capital continues to concentrate, which could mean that a small group will own most of future technology. Ownership of future technology and the income from it needs to be broadened through a private market economy. On all of these fronts, Democrats need to develop comprehensive and sensible policy initiatives to expand not only income but also capital ownership to the middle class.

Joseph R. Blasi is a business professor at Rutgers and the author (with Richard B. Freeman and Douglas L. Kruse) of “The Citizen’s Share: Reducing Inequality in the 21st Century.”

Professor Joseph Blasi is the first op-ed I have seen published by the Los Angeles Times which addresses concentrated ownership of productive capital assets. Broadening personal ownership of wealth-creting, income-prooducing FUTURE capital assets is the key to reversing economic inequality.

The fact that “Americans aren’t much interested in class conflict and punishing the rich… and simply want everyone to do better” is the basis from which to construct a new reformed economic system that promotes prosperity, opportunity, and economic justice. As Blasi states, “even if the party could stir up support for addressing the widening gulf between rich and poor, the time-honored approaches Democrats have relied on in trying to level the playing field just aren’t up to the task. The inequality chasm has grown too deep and too wide to be addressed meaningfully solely by such things as providing welfare for the very poor, increasing the minimum wage and equalizing wages between women and men.”

The current system is monopolistic, owned and controlled by oligarchs. The Federal Reserve policy, as currently constructed, will continue to concentrate capital asset ownership among the already wealthy ownership class, and result in continued anemic GDP growth.

While the focus has ALWAYS been on job creation, the composition of jobs has improved little over recent times. Businesses still looking for flexible, low-cost labor will continue to rely on temporary, part-time, and low-wage workers, resulting in the disconnect between above-consensus top-line job creation and stagnant wage growth. Also if forced to raise labor rates, global competitive pressures will require businesses, in order to stay competitive, to continue to change their ways of thinking and their ways of doing as they embrace technological innovation at an exponential rate. Such tectonic shifts in the technologies of production will continue to destroy jobs and devalue the worth of labor. In a society with such a narrow focus on JOBS only, without wage pressures and income growth, consumers remain constrained, growth remains limited and the Federal Reserve remains on hold indefinitely. The consumer will continue to be restrained by limited spending, with a Q2 GDP forecast of near 2 percent––an anemic rate. By shifting our focus to productive CAPITAL OWNERSHIP individual and family income growth would be unconstrained and the economy could achieve GDP growth of at least 15 percent. How, by adopting the platform of the Unite America Party and the Capital Homestead Act. These two measure should be a no-brainer for Democrats as well as ALL political parties.

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.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://www.latimes.com/opinion/op-ed/la-oe-blasi-inequality-democrats-20140720-story.html

 

The Free Market Is An Impossible Utopia

On July 18, 2014, Fred Block and Margaret R. Somers write in The Washington Post:

Fred Block (research professor of sociology at University of California at Davis) and Margaret Somers (professor of sociology and history at the University of Michigan) have a new book, “The Power of Market Fundamentalism: Karl Polanyi’s Critique” (Harvard University Press, 2014). The book argues that the ideas of Karl Polanyi, the author of “The Great Transformation,” a classic of 20th century political economy, are crucial if you want to understand the recession and its aftermath. I asked the authors a series of questions.

HF - Your book argues for the continued relevance of Karl Polanyi’s work, especially “The Great Transformation.” What are the ideas at the core of Polanyi’s thought?

FB & MS – Polanyi’s core thesis is that there is no such thing as a free market; there never has been, nor can there ever be. Indeed he calls the very idea of an economy independent of government and political institutions a “stark utopia”—utopian because it is unrealizable, and the effort to bring it into being is doomed to fail and will inevitably produce dystopian consequences. While markets are necessary for any functioning economy, Polanyi argues that the attempt to create a market society is fundamentally threatening to human society and the common good In the first instance the market is simply one of many different social institutions; the second represents the effort to subject not just real commodities (computers and widgets) to market principles but virtually all of what makes social life possible, including clean air and water, education, health care, personal, legal, and social security, and the right to earn a livelihood. When these public goods and social necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.

Free market doctrine aims to liberate the economy from government “interference”, but Polanyi challenges the very idea that markets and governments are separate and autonomous entities. Government action is not some kind of “interference” in the autonomous sphere of economic activity; there simply is no economy without government rules and institutions. It is not just that society depends on roads, schools, a justice system, and other public goods that only government can provide. It is thatall of the key inputs into the economy—land, labor, and money—are only created and sustained through continuous government action. The employment system, the arrangements for buying and selling real estate, and the supplies of money and credit are organized and maintained through the exercise of government’s rules, regulations, and powers.

By claiming it is free-market advocates who are the true utopians, Polanyi helps explain the free market’s otherwise puzzlingly tenacious appeal: It embodies a perfectionist ideal of a world without “coercive” constraints on economic activities while it fiercely represses the fact that power and coercion are the unacknowledged features of all market participation.

HF -  How do those ideas help us understand the vexing economic problems we still face today?

FB & MS – By putting government and politics into the center of economic analysis, Polanyi makes it clear that today’s vexing economic problems are almost entirely political problems. This can effectively change the terms of modern political debate: Both left and right today focus on “deregulation”—for the right it is a rallying cry against the impediments of government; for the left it is the scourge behind our current economic inequities.  While they differ dramatically on its desirability, both positions assume the possibility of a “non-regulated” or “non-political” market.  Taking Polanyi seriously means rejecting the illusion of a “deregulated” economy. What happened in the name of “deregulation” has actually been “reregulation,” this time by rules and policies that are radically different from those of the New Deal and Great Society decades. Although compromised by racism, those older regulations laid the groundwork for greater equality and a flourishing middle class.  Government continues to regulate, but instead of acting to protect workers, consumers, and citizens, it devised new policies aimed to help giant corporate and financial institutions maximize their returns through revised anti-trust laws, seemingly bottomless bank bailouts, and increased impediments to unionization.

The implications for political discourse are critically important: If regulations are always necessary components of markets, we must not discuss regulation versus deregulation but rather what kinds of regulations we prefer: Those designed to benefit wealth and capital? Or those that benefit the public and common good? Similarly, since the rights or lack of rights that employees have at the workplace are always defined by the legal system, we must not ask whether the law should organize the labor market but rather what kinds of rules and rights should be entailed in these laws—those that recognize that it is the skills and talents of employees that make firms productive, or those that rig the game in favor of employers and private profits?

HF – Polanyi argued against a line of thought that you describe as “market fundamentalism,” which perhaps has its beginnings in Malthus’s arguments two centuries ago. Why does Malthus’s way of thinking still resonate in U.S. political debates over welfare and economic ‘reform?’  

FB & MS – Malthus’s enduring contribution to social policy was to make scarcity the virtuous disciplinary necessity upon which rests the very possibility of a productive workforce. Polanyi explains how the original invention of a market economy that could function independently of the state depended entirely on a new body of ideas that began in earnest not with the liberalisms of Hobbes, Locke or even Adam Smith, but with the new political economy of Malthus and Ricardo. This way of thinking, which we call social naturalism, conceived of society as governed by the same laws that operate in nature—a conceit that is necessary to make the idea of a self-regulating market even plausible.  Social naturalism displaced rationality and morality as the essence of humanity, and imposed biological instincts in their place, making human motivations no different from those of the rest of the animal kingdom: We are incentivized to labor (and earn wages) only because of our primary biological drive to eat; and we are likewise content to rest once the drive of hunger is satisfied.

From this perspective, it is the “natural” condition of scarcity alone that disciplines the unemployed into voluntarily taking up the bitter task of paid labor.  If one removes that scarcity by “artificial” means—by providing food stamps, unemployment benefits, an adequate minimum wage—so too the incentive to work disappears. Hence the refrain made famous during the 2012 election that 47 percent of Americans are “takers;” that poverty relief will inevitably turn the safety net into a “hammock;” and that food stamps and other hunger-relieving interventions have turned the “inner city” into a “culture of dependence.”  One would be hard pressed to draw any substantive distinctions between the current conservative rhetoric, and that which flourished in the early 19th century when Malthus led the campaign against social insurance and the safety net. The reality, of course, then as now, is the poor have always struggled to make do in the face of structural forces that they cannot control.

HF – You suggest that Polanyi’s arguments about the “double movement” help explain the tea party movement among conservatives. What is the “double movement” and what forces is it giving rise to in U.S. politics today?

FB & MS – Polanyi argued that the devastating effects on society’s most vulnerable brought on by market crises (such as the Great Depression in the 1930s) tends to generate counter movements as people struggle to defend their livelihoods, their neighborhoods, and their cultures from the destructive forces of marketization.  The play of these opposing dynamics is the double movement, and it always involves the effort to remobilize political power to tame the apparent over-extension of market forces.  The great danger Polanyi alerts us to, however, is that mobilizing politics to protect against markets run wild is just as likely to be reactionary and conservative, as it is to be progressive and democratic. Whereas the American New Deal was Polanyi’s example of a democratic counter movement, fascism was the classic instance of a reactionary counter-movement; it provided protection to some while utterly destroying democratic institutions.

This helps us to understand the tea party as a response to the uncertainties and disruptions that free market globalization has brought to many white Americans, particularly in the South and Midwest. When people demonstrate against Obamacare with signs saying “Keep Your Government Hands off My Medicare,” they are trying to protect their own health care benefits from changes that they see as threatening what they have.  When they express deep hostility to immigrants and immigration reform, they are responding to a perceived  threat to their own resources—now considerably diminished from outsourcing and deindustrialization.  Polanyi teaches us that in the face of market failures and instabilities we must be relentlessly vigilant to the threats to democracy that are often not immediately apparent in the political mobilizations of the double movement.

HF – The European Union’s single currency creates many of the same tensions between international rules and domestic society as the gold standard did a century ago. What are the political consequences of these tensions?

FB & MS – We just saw in the European elections that right-wing, seemingly fringe parties, came in first in France and the U.K.  This is a response to the continuing austerity policies of the European Community that have kept unemployment rates high and blocked national efforts to stimulate stronger growth.  It might still be largely a protest vote—a signal to the major parties that they need to abandon austerity, create jobs, and reverse the cuts in public spending.   But unless there are some serious initiatives at the European Community and the global level to chart a new course, we can expect that the threat from the nationalist and xenophobic right will only grow stronger.

“Free market doctrine aims to liberate the economy from government “interference”, but Polanyi challenges the very idea that markets and governments are separate and autonomous entities. Government action is not some kind of “interference” in the autonomous sphere of economic activity; there simply is no economy without government rules and institutions.”

We need government regulations and oversight to ensure that the economic “system” works to the benefit of EVERY citizen, not just to further enrich the already wealthy ownership class, which has benefited from policies self-direct to enhance their ability to monopolize ownership of wealth-creating, income-producing non-human capital assets.

Americans need to WAKE UP and support and rally for a peaceful and more just Second American Revolution to unite all Americans, based on a moral recognition that freedom and political democracy must be based on a foundation of universal principles of economic justice and economic empowerment.The path to a more just Second American Revolution is spelled out in the national Platform of the Unite America Party at http://www.cesj.org/wp-content/uploads/2014/05/UAP-Platform.pdf. The full document was posted on the blogs of HuffingtonPost (http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html), Nation of Change (http://www.nationofchange.org/platform-unite-america-party-1402409962), and OpEd News (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).

http://www.washingtonpost.com/blogs/monkey-cage/wp/2014/07/18/the-free-market-is-an-impossible-utopia/

Factory Output In California Surging Despite Job Losses

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Factory employment has fallen nearly 34% in the last 15 years. Above, Manuel Espinoza works on guitar bodies last year at the Fender plant in Corona. (Matt York / Associated Press)

On July 15, 2014, Tiffany Hsu writes in the Los Angeles Times:

California manufacturers really can do more with less.

The output of state factories has surged 73% during the last 15 years — twice as fast as the rest of the nation — even as the sector bleeds jobs, according to a new report from the Los Angeles County Economic Development Corp. Employment declined nearly 34% during the same period.

The surge in production owes itself to innovations in machinery and materials, digitization and computing power, along with a strong network of industry clusters.

Under pressure from automation, offshoring and aggressive cost-cutting, the state’s manufacturing workforce shriveled to 1.2 million in 2012 from 2.1 million jobs in 1990 — a faster rate of decline than the nation as a whole.

The difference exceeds the total number of current manufacturing positions in all of Southern California.

“The composition of manufacturing is going to change and has been changing,” LAEDC economist Christine Cooper said. “It’s becoming more advanced and technologically intensive. And it’s more lean.”

Key California industries such as aerospace, biomedicine and fashion benefit from having entire supply chains in the same region or even within a few square blocks, encouraging innovation and boosting efficiency, according to the report.

Nationwide, manufacturing accounts for three-quarters of private sector research and development and the majority of patents issued, Jason Miller, special assistant to President Obama for manufacturing policy, said in a Brookings Institution presentation last week.

In 2013, manufacturing entrepreneurship grew at its fastest pace in 20 years, Miller said. That’s due in part to new technological advances, such as 3-D printers and digital production, which lower the cost of manufacturing and reduce the time required to make prototypes and commercialize new items.

“Manufacturing is inextricably linked to our country’s ability to innovate, and therefore linked to our future economic growth potential,” Miller said. “We like to say manufacturing punches above its weight.”

As of 2012, the largest group of California manufacturing jobs were those producing semiconductors and other electronic components. The cluster, largely in Northern California, accounts for more than 7% of the state’s manufacturing jobs, according to the LAEDC report.

Southern California hosts the second-largest category of workers, which makes navigational and control instruments for aerospace companies, according to the LAEDC report. That sector claims a 6.6% share of state manufacturing employment.

Overall, the lower half of the state accounts for two-thirds of total manufacturing employment in the state, with more than 814,000 workers.

In May, the U.S. Commerce Department announced that Southern California would be one of the first dozen U.S. regions to receive federal support to lure more manufacturers. The program will try to increase local manufacturing capacity by luring private investment and boosting exports.

Participants will have access to experts in 11 federal agencies and $1.3 billion in funding.

Los Angeles County had more than 365,500 manufacturing jobs in 2012, making up 9.2% of total countywide employment and nearly 30% of all manufacturing jobs across the state. As a producer, the region is most competitive in the fashion and aerospace industries.

But as California’s economy diversifies, manufacturing is becoming a less dominant part of the state’s economic identity.

Manufacturing now accounts for 10.7% of the total value of all goods and services produced in the state, compared with 11.6% in 1990.

The sector suffered more intensely during the recession and recovered more slowly than many other sectors of the state economy. Employment in other California industries soared 22.5% since 1990 as the measure sank for manufacturers.

Most of the manual labor that was used to create high-volume, low-margin products has shifted abroad, said Jim Watson, president of California Manufacturing Technology Consulting. The nonprofit consulting firm in Torrance commissioned the LAEDC research.

“As technology begins to increase productivity and innovation begins to take hold, you’ll begin to see some manufacturing growth, which will lead to some jobs,” he said. “But I don’t believe that many of the jobs that have been lost are going to come back, and if they do, they won’t be the same kinds of jobs.”

The article acknowledges that the “the surge in production owes itself to innovation in machinery and materials, digitalization and computing power, …”  Yet the author never poses the question of who OWNS the machinery and the other wealth-creating, income-producing capital assets that represent the exponential growth of the non-human factor that replaces the need for human labor. The article pictures factory worker Manuel Espinoza working on guitar bodies––a manual job that is certain to be eliminated and replaced by robotics. Yet is Manual Espinoza an OWNER of Gibson?––or the other manual laborers whose jobs are constantly eliminated by robotics or shifted abroad, where labor is far less expensive.
The article mentions that Southern California would be one of the first dozen U.S. regions to receive $1.8 billion in tax-payer supported federal funding, which will benefit the already wealthy ownership class without the condition to broaden ownership among the employees of the manufacturers qualifying.

People will always continue to invent tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in binary economic terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.

Productivity, as a result of the non-human factor of production is becoming increasingly more productive (not labor), keeps growing, as do profits and incomes produced by corporate owners (ultimately vested in individual persons). But jobs and wages are not growing and cannot grow without substantial economic growth, which means more investment in the non-human factor of production––productive capital. The ONLY viable solution that protects the principles of personal private property ownership is to spread the productive capital gains more widely by broadening personal ownership going forward. Otherwise, without EVERY citizen empowered to acquire wealth-creating, income-producing capital with the earnings of capital, our economy will not be able to generate enough demand to sustain itself, and our society will not be able to maintain enough cohesion to keep us together.

The composition of jobs has improved little over recent times. Businesses still looking for flexible, low-cost labor continue to rely on temporary, part-time, and low-wage workers, resulting in the disconnect between above-consensus top-line job creation and stagnant wage growth. Businesses also to stay competitive are constantly changing their ways of thinking and their ways of doing as they embrace technological innovation at an exponential rate. Such tectonic shifts in the technologies of production will continue to destroy jobs and devalue the worth of labor. In a society with such a narrow focus on JOBS only, without wage pressures and income growth, consumers remain constrained, growth remains limited and the Federal Reserve remains on hold indefinitely. The consumer will continue to be restrained by limited spending, with a Q2 GDP forecast of near 2 percent––an anemic rate. By shifting our focus to productive CAPITAL OWNERSHIP individual and family income growth would be unconstrained and the economy could achieve GDP growth of at least 15 percent. How, by adopting the platform of the Unite America Party and the Capital Homestead Act.

Words of wisdom: “I don’t believe in a law to prevent a man from getting rich. It would do more harm than good, So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.” Abraham Lincoln

“I see in the near future a crisis approaching which unnerves me and causes me to tremble for the safety of my country. Corporations [narrowly owned] have been enthroned and an ear of corruption will follow and the money power of the country will endeavor to prolong its reign by working on the prejudices of the people until the wealth of the country is aggregated in a few hands and then the Republic is destroyed.” Abraham Lincoln

http://www.latimes.com/business/la-fi-california-manufacturing-20140716-story.html

Yellen Says Economy Must Improve More Before Fed Raises Interest Rates

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Fed Chair Janet Yellen testifies before the Senate Banking, Housing and Urban Affairs Committee on Tuesday. (Win McNamee / Getty Images)

On July 15, 2014, Jim Puzzanghera writes in the Los Angeles Times:

Warning of past “false dawns” in the economic recovery, Federal Reserve Chairwoman Janet L. Yellen said Tuesday that central bank policymakers need to be cautious about raising rock-bottom interest rates.

Recent data indicate the economy has rebounded from a sharp slowdown in the first three months of the year, Yellen told senators. But the recovery “is not yet complete,” she warned.

“We have in the past seen false dawns … and later events have proven those hopes to be unfortunately over-optimistic,” Yellen said at a Senate Banking Committee hearing.

“We need to be careful to make sure the economy is on a solid trajectory before we consider raising interest rates,” she said.

The labor market continues to improve and inflation is beginning to rise toward the Fed’s 2% annual target after a long period of running well below that level, she said.

Despite an economic contraction in the first three months of the year, Yellen and other Fed officials expected “economic activity will expand at a moderate pace over the next several years.”

The sharp first-quarter slowdown “appears to have resulted mostly from transitory factors,” she said, echoing economists who largely attributed the contraction to severe weather in much of the country.

But recent economic indicators “suggest that growth rebounded in the second quarter.”

Still, Yellen said the economy’s progress “bears close watching.”

The housing market is one area of concern because it “has shown little recent progress.”

And while the Fed’s written monetary policy report to lawmakers Tuesday said there were no signs that the stock market was overvalued, it warned that stock values “appear substantially stretched” for “smaller firms in the social media and biotechnology industries.”

With continued worries about headwinds facing the economy, Yellen said Fed policymakers expect to keep easy-money policies in place for a while.

The economy added a robust 288,000 net new jobs in June and the unemployment rate fell to 6.1%, its lowest level since September 2008.

As the labor market improves — June was the fifth-straight month in which job growth exceeded 200,000 — pressure is building on the Fed to start raising its benchmark short-term interest rate.

Many Republicans want the Fed to start raising rates because they are particularly concerned that the low interest rates could fuel inflation.

The Fed has been reducing its monthly bond-buying stimulus program and Yellen said central bank policymakers planned to end the unprecedented effort in October.

Sen. Mike Johanns (R-Neb.) praised Yellen for the fast pace at which the Fed has been reducing its monthly purchases this year. But he said he was concerned about the Fed’s balance sheet, which the bond purchases have helped swell to nearly $4.4 trillion.

The Fed’s benchmark federal funds rate has remained near zero since late 2008 and policymakers have indicated they don’t plan to start raising it until mid 2015.

Yellen offered no hint that the Fed would start raising interest rates earlier. But she said she and other members of the policymaking Federal Open Market Committee would be monitoring economic progress closely.

“There’s no formula and there’s no mechanical answer I can give you about when the first rate increase will occur,” Yellen told Sen. Michael D. Crapo (R-Idaho). “It will depend on the progress of the economy and how we assess it based on a variety of indicators.”

Sen. Sherrod Brown (D-Ohio) asked Yellen about comments last week by new Fed Vice Chair Stanley Fischer that “actively breaking up the largest banks would be a very complex task, with uncertain payoff.”

Brown and some other lawmakers have been pushing to reduce the size of so-called “too-big-to-fail” banks.

Yellen said the Fed was “completely committed to trying to deal with too big to fail.”

Fischer, a former vice chairman at banking giant Citigroup Inc., was right to warn that mega banks were not the only risk to the financial system, she said.

“He pointed out and I agree that we have to worry about more than the too-big-to-fail firms and we could have systemic risk if a large number of smaller institutions are hit for some reason,” Yellen said.

The Federal Reserve policy, as currently constructed, will continue to concentrate capital asset ownership among the already wealthy ownership class, and result in continued anemic GDP growth.

The composition of jobs has improved little over recent times. Businesses still looking for flexible, low-cost labor continue to rely on temporary, part-time, and low-wage workers, resulting in the disconnect between above-consensus top-line job creation and stagnant wage growth. Businesses also to stay competitive are constantly changing their ways of thinking and their ways of doing as they embrace technological innovation at an exponential rate. Such tectonic shifts in the technologies of production will continue to destroy jobs and devalue the worth of labor. In a society with such a narrow focus on JOBS only, without wage pressures and income growth, consumers remain constrained, growth remains limited and the Federal Reserve remains on hold indefinitely. The consumer will continue to be restrained by limited spending, with a Q2 GDP forecast of near 2 percent––an anemic rate. By shifting our focus to productive CAPITAL OWNERSHIP individual and family income growth would be unconstrained and the economy could achieve GDP growth of at least 15 percent. How, by adopting the platform of the Unite America Party and the Capital Homestead Act.

 

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.

 

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://www.latimes.com/business/money/la-fi-janet-yellen-federal-reserve-economy-20140715-story.html#

California Productivity Surges As Employment Shrinks, Report Finds

la-fi-california-manufacturing-output-employme-001

A worker in Valencia assembles an ultraviolet device to be used in hospitals. Manufacturers have boosted their output while slashing employment, according to a new report from the Los Angeles Economic Development Corp. (Anne Cusack / Los Angeles Times)

On July 15, 2014 Tiffany Hsu, writes in the Los Angeles Times:

Manufacturing jobs in California have decreased dramatically — 40% of them gone in less than 25 years — but productivity in the state is leading the nation.

Even as the workforce has shriveled under the pressure of automation, offshoring and aggressive cost-cutting, manufacturing output has soared in the state, according to a report released Tuesday by the Los Angeles County Economic Development Corp.

The state is the top contributor to nationwide manufacturing output, responsible for 11.4% of U.S. production, compared with 10% from Texas, the report said. The manufacturing industry’s productivity is growing faster than any other part of the California economy, helped along by technological advances, researchers said.

Unlike many other parts of the country, where manufacturers work independently and ship components out of state, California has entire manufacturing supply chains for industries such as aerospace, biomedicine and fashion grouped in geographic clusters.

The proximity to similar companies encourages innovation and boosts efficiency, according to the report.

As of 2012, the largest group of California manufacturing jobs involved producing  semiconductors and other electronic components, centered largely in Northern California and accounting for more than 7% of the state’s manufacturing jobs.

Southern California has the second-largest cluster of such jobs, making components for satellite and radar systems for aerospace companies.

Overall, the lower half of the state accounts for two-thirds of total manufacturing employment, with more than 814,000 workers.

Manufacturers suffered more intensely during the recession and recovered more slowly than many other sectors of the state economy. Employment in other California industries, including government, soared 22.5% since 1990 while plunging for manufacturers.

The state bled jobs at a faster rate than the nation as a whole from 1990 to 2012, the report said, with 842,000 jobs lost — or more than the total number of manufacturing positions that currently exist in all of Southern California.

Less and less a powerhouse player in the California economy, manufacturing now accounts for 10.7% of the total value of all goods and services produced in the state, compared with 11.6% in 1990.

 

The Wizard Of Jobs

On July 15, 2014, Daniel Alpert writes on New America Foundation:

At first glance, the U.S job picture continues to improve with the U.S. economy generating an average of 222,000 new private sector jobs a month in the first half of 2014.  But as Daniel Alpert, a founding member of the World Economic Roundtable, explains in his latest review of America’s job market there is a more sobering reality behind these headline numbers.

Among Alpert’s findings are the following more worrying trends:

  • Some 56 percent of the jobs created in the first half of 2014 paid wages or offered hours that were so low as to produce average weekly gross pay of only $614—a sum well below what we would normally consider a good full-time job.
  • Overall, real wages fell modestly in the first half of 2014, with compensation in high wage jobs declining by an average of 0.16 percent relative to inflation while compensation for low-wage jobs rose modestly.
  • The labor participation rate ended the first half of 2014 at levels not seen since the mid-1970s before the entry of large number s of women into the workforce.

As Alpert notes in conclusion, “the ‘dreams that we dare to dream’ about a normalized labor picture in the U.S. have yet to come true.” Read the entire report here (http://newamerica.net/sites/newamerica.net/files/policydocs/The%20Wizard%20of%20Jobs%20-%202014%20First%20Half%20Jobs%20Report%20Card%20-%20Alpert.pdf)

Jobs, Jobs, Jobs . . . !?!

Oh Please, Learn About Capital Homesteading!

http://newamerica.net/publications/policy/the_wizard_of_jobs_0