Economic Inequality · Paul Krugman

Paul Krugman slams Wall Street for “undermining our economy and our society”

Paul Krugman slams Wall Street for "undermining our economy and our society"
Paul Krugman (Credit: AP/Lai Seng Sin)

I know this is the second consecutive Salon article, but economist, Paul Krugman has something to say and I wanted to share it…

Salon

The New York Times columnist argues that America’s large financial sector has done more harm than good

In his latest column for the New York Times, best-selling author and award-winning economist Paul Krugman argues that the financial sector of the American economy is not only outsized but that it’s hurting the economy and making Americans’ lives worse.

Citing journalist Michael Lewis’ new book on high-frequency trading — which opens with a story about an expensive tunnel being drilled for fiber-optic cable to cut down the communication time between Chicago’s futures markets and the stock market in NYC by three milliseconds — Krugman argues that American public policy has become overly influenced by high finance, with inequality and economic instability as a result. “[American] society,” Krugman writes, “is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.”

After claiming that the large financial sector in the U.S. doesn’t increase overall prosperity and doesn’t promote economic stability, Krugman writes that its primary function seems to be to prey off of less powerful economic actors. “[Wall Street’s] playing small investors for suckers,” Krugman says, “causing them to waste huge sums in a vain effort to beat the market.” The result, Krugman posits, is a select few Wall Street players making a lot of private profits while contributing little to the overall public.

Krugman continues:



In short, we’re giving huge sums to the financial industry while receiving little or nothing — maybe less than nothing — in return. [NYU Professor Thomas] Philippon puts the waste at 2 percent of G.D.P. Yet even that figure, I’d argue, understates the true cost of our bloated financial industry. For there is a clear correlation between the rise of modern finance and America’s return to Gilded Age levels of inequality.

So never mind the debate about exactly how much damage high-frequency trading does. It’s the whole financial industry, not just that piece, that’s undermining our economy and our society.

 

Economic Inequality · Jon Stewart

Jon Stewart Hammers Conservatives For Their Hypocrisy On Income Inequality

Jon Stewart

PoliticusUSA

Jon Stewart came out with both barrels blazing on Thursday night’s episode of The Daily Show. He had the right-wing squarely in his crosshairs and he had no qualms firing upon them. The first segment of the show was regarding income inequality and how the right seems to show complete disdain for the poor and find excuses not to help them, all the while constantly making excuses for giving more and more to the rich. It was a beautiful display by Stewart of showing the complete hypocrisy the right shows when it comes to discussing income inequality, as well as basically showing how totally cruel and insensitive they really can be.

The whole segment was essentially a montage of conservatives saying douchey things in regards to poor people, while at the same time making sure to constantly come to the defense of the rich. It started out with clips of pundits and politicians railing on about the takers. Then, it segued into Republicans providing reasons why long-term unemployment benefits shouldn’t be extended. First, he showed them saying this was just supposed to be temporary relif. After that, it went into them saying that this was something that needed to be paid for. However, as Stewart highlighted, things were different when it was suggested that Bush-era tax cuts needed to be paid for.

Stewart really got into a groove after that. He did little to hide his anger and frustration at the clips he was showing of conservative pundits and Republican lawmakers saying idiotic things regarding social programs and poor people. He pinpointed how conservatives think that welfare programs provide too much to poor people, giving them less incentive to work. However, at the same time, they feel that it is fundamentally unfair to raise the minimum wage. Obviously, since there are some people taking advantage of social welfare programs and committing fraud, it is reason to not provide benefits for ANYBODY. Yet, we should not judge Wall Street for the actions of a few bad apples and make the industry adhere to more regulations.

This is when Jon Stewart is at his best. When he is passionate about something and displays true righteous indignation, nobody is better. When he aims his comedic gun at a deserving target, watch out! Stewart truly is a master at highlighting hypocrisy and completely shredding those who practice it.

Economic Inequality

Corporate Profits Have Risen Almost 20 Times Faster Than Workers’ Incomes Since 2008

The Left Wing Media has talked about this ad infinitum, yet no one in mainstream media has spread this information.

Think Progress

Corporate profits hit record highs in the second half of 2012, but that prosperity hasn’t led to the creation of jobs, since America’s biggest firms are sitting on stocks of cash instead of investing them back into the economy.

At the same time, wages hit record lows, and corporate earnings are rising nearly 20 times faster than disposable incomes, the New York Times reports:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

From 2009 to 2011, 88 percent of national income growth went to corporate profits while just one percent went to workers’ wages, and hourly earnings for workers actually fell over that time. And while they aren’t investing in job growth, corporations are also paying taxes at a rate that hit a 40-year low in 2011.

 

Economic Inequality · Economy

Would A $15 Minimum Wage Work?

Jobs Cityscape   -   http://mariopiperni.com/

Seems there’s no real concern for “the people”…just “the corporations”.  Ask the SCOTUS Justices who voted to allow Citizens United.

Mario Piperni

Diana McGinness believes so.

“Cut, cut, cut entitlements!”

“Reduce the debt!”  We need to broaden the base (i.e more taxes on the 47%)!

“Reduce the size of government!”

Turn on any cable news network and that’s all you’ll hear.

And the only answers the politicians have are:  raise more taxes and/or cut entitlements (not defense, of course) or both.

We hear the GOP wants to cut food stamps and other programs that help the poor.  That something must be done with SS and Medicare because they’re going broke and Medicaid needs to be cut back, too, because we just don’t have the money.  And the Democrats refuse to let these programs take a hit.

People are tired of paying taxes to help the “lazy 47% who don’t pay taxes, is the complaint.

The economy is too sluggish, it’s not growing!

So we’re in gridlock as usual with no answers that either side is willing to accept.

Is there an alternative?  Maybe.

What if we could add  $169,260,000,000 to the economy?

Add $25,389,000,000 to the treasury each year in the form of taxes (without increasing anyone’s taxes.  Over 10 years, that’s $2.5 trillion add to the Treasury that could be earmarked to reduce the debt/deficit.

Reduce the costs of programs providing food stamps, housing vouchers, and the big one – Medicaid?

Collect $10,494.120,000 more annually in FICA premiums to shore up Social Security and Medicare.  That’s over $1 trillion in 10 years, that would surely strengthen each of these programs for the coming years without making major changes in the program.

How, you ask?

Increase the minimum wage to $15.00.

Using 2010 numbers, the poverty level for 1 person under 65 was $11,344.  That’s someone making $218.15 per week, or $5.45 an hour.  The working poor receive assistance in the form of housing vouchers, food stamps, and Medicaid and pay little, if anything in the form of federal taxes.

Using the federal minimum wage in 2010 of $7.25 and the then number of working people making poverty level or less in wages of 10,500,000 you can extrapolate those numbers as follows:

10,500,000 x $7.25 per hour for 40 hours @ 52 weeks = $158,340,000,000 in wages annually. FICA at 6.2% for these workers would contribute $9,817.080.000 to SS/Medicare. Of course, some of these are part-time jobs, so this is merely an example.  But for every person who can be removed from government assistance, that’s less tax dollars needed to support them.

And if you think a person flipping burgers doesn’t deserve $15 per hour, consider how much of your tax dollars are going to subsidize their wages so they can be paid $7.25 to flip those burgers.  One way or the other, the consumer/tax payer is paying a considerable amount to get that burger flipped.

Now change the minimum wage to $15.00 per hour and extrapolate the numbers:

10,500,000 x 15.00 per hour 40 hours @ 52 weeks = $327,600,000,000 in wages annually.  FICA would be a contribution of an additional $10,494,120,000.  Over 10 years that would be over $1.4 Trillion dollars.

With a 15% tax rate, those wages would contribute $25,389,000,000 annually in revenue to the Treasury and could be targeted to directly reduce the debt.  Over 10 years that would be a $2.5 Trillion deduction, in addition to the reduced expenditures for food stamps, housing vouchers, and Medicaid.

Add an additional $169,260,000,000 increased purchasing power to the economy.

Increasing the minimum wage would also add to the treasuries of states in the form of sales tax, income tax, among other taxes these dollars would generate.

A two-person working household could generate $30 per hour providing them income to save and possibly purchase a home.

The counter-argument will be that increasing the minimum wage will reduce jobs.  There are many studies that disprove that argument. There are several papers (links here) that refute that argument.

The other counter- argument will be that the cost of everything will go up and the jobs will move overseas.

First, these are service industry jobs…now 7 out of 10 in the U.S.  – it’s going to be hard to ship them overseas.  Are you going to order your burger from the McDonald’s in China and have it flown over to the pick up window?  I think not.  Nor is the Wal-Mart worker going to be shipped over there either so you can restock the shelves yourself.

As for the cost…two things to consider.  Are you going to pay $15-30 for a McDonald’s Big-Mac?  I think not.

Prices are determined based on the floor (the lowest price a seller can sell a product for) and the ceiling (the highest amount a consumer is willing to pay), and on competitor pricing.

And while the prices may go up — if the consumer is willing to pay and competitors are not competing — the consumer/taxpayer is already paying.  If the end game allows your taxes to be reduced and you, the consumer, have the freedom to choose where you will make your purchases — based on competitive prices and your willingness to pay and the fact that you have more money to spend then haven’t we all won?

When you look at the trillions of dollars that are currently not being invested in our economy via our workers, but are sitting on the shelf waiting to invest…the only question I have is is – who better to invest in than the workers and our economy?

An interesting idea but my concerns would be the impact a $15 minimum wage would have on American competitiveness in global markets. Diana addresses this point.

Yes, that is an argument for manufacturing jobs – but most of those are gone already – some are coming back because, in part, the Chinese are demanding higher wages.

But the service industry jobs are what I’m referring to – they can’t take those overseas.  And with so many of our jobs now in that category (7 out of 10) and these being the lowest paying jobs out there, it’s a place to begin.

Your thoughts?

Economic Inequality

STUDY: Super-Rich Hiding At Least $21 Trillion In Tax Havens

Not only is this a national security issue for our country, it’s a global security issue as well…

Think Progress

According to a new study, the world’s super-rich are shielding at least $21 trillion in secret offshore tax havens. Using data from the Bank of International Settlements, IMF, World Bank, and national governments, the Tax Justice Network found that an astonishing 100,000 people worldwide hold nearly $10 trillion of offshore wealth, equivalent to the size of the Chinese economy. According to the study:

1. Big banks manage the wealth. The three private banks handling the most assets offshore are UBS, Credit Suisse, and Goldman Sachs.

2. Offshore wealth is creating a global economic “black hole.” If the $21 trillion in offshore earned a conservatively-estimated 3 percent rate of return, and that income was taxed at just 30 percent, this would generate tax revenues of nearly $200 billion — roughly twice the amount OECD countries spend on international development assistance.

3. High impact on developing countries. In the 139 developing countries highlighted in the report, the richest citizens had amassed $7.3 to $9.3 trillion of unrecorded offshore wealth that is beyond the reach of local tax authorities. The report reveals that many developing “debtor” countries are actually quite wealthy, but the money is held by a few individuals.

4. Huge tax haven growth in the last few years. In 2005, the world’s top 50 banks managed $5.4 trillion in offshore money. By the end of 2010, the figure is over $12 trillion, representing an average annual growth rate of more than 16 percent.

This tax avoidance study comes at a time when many are questioning presidential hopeful Mitt Romney’s use of tax havens. As an executive at Bain Capital, Romney routed investmentsthrough companies in Bermuda or the Cayman Islands to allow investors to avoid U.S. taxes.

– Steven Perlberg

Economic Inequality · Economy · GOP Malfeasance

Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, Just One Percent Went To Wages

This sort of information needs to be shouted from every rooftop in America.  Americans should know the just how the economy has been manipulated to allow such an income disparity between the rich and the middle class and working poor.

What part of “grossly inequitable” does the GOP not understand?  Income levels between the working class and the “well off” should have never gotten to this point.

One could call it greed, which is bad enough and considered one of the seven deadly sins, but this goes beyond greed, these numbers show that the GOP is complicit with corporations in sabotaging our Democracy by making corporations the most powerful “people” in America!  My question is…to what end?

Think Progress

After the longest recession since WWII, many Americans are still struggling while S&P 500 corporations are sitting on $800 billion in cash and making massive profits. Now, economists from Northeastern University have released a study that finds our sluggish economic recovery has almost solely benefited corporations. According to the study:

“Between the second quarter of 2009 and the fourth quarter of 2010, real national income in the U.S. increased by $528 billion. Pre-tax corporate profits by themselves had increased by $464 billion while aggregate real wages and salaries rose by only $7 billion or only .1%. Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. …The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented.”

The New York Times adds, “According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.”

So as average wages fall, and nearly 14 million people remain unemployed, America’s economic recovery has almost entirely benefited corporations. This development adds another chapter to the decline of the middle class, whose incomes are shrinking and wages are stagnating. Last year, top executives’ salaries increased 27 percent, while workers’ salaries increased only 2 percent. At the moment, income inequality in America is the worst it’s been since the 1920s, as the richest 1 percent make nearly 25 percent of the country’s income.

Economic Inequality · Economy · GOP · GOP Agenda · GOP Corruption · GOP Folly · GOP Greed · GOP Hubris · GOP Hypocrisy · Unemployment · Unemployment Benefits · Unemployment Rate

NOTHING FOR THE LITTLE GUY – Bailouts Are For Banks: Unemployed People Get Zilch

As Nancy Pelosi pointed out yesterday in a press conference, the GOP want tax cuts for the top 2% money-makers in the country.  The cost would be about $700 Billion because the Republicans want to add the cost of those tax cuts to the deficit.  Yet…they have told the Dems that the $18 Billion cost of helping the unemployed can only be passed if it’s paid for in advance.  In other words the Dems can’t add $18 Billion to the budget, but the Republicans insist on adding the $700 Billion for tax cuts to their cronies be added to the deficit.

What I don’t understand is why aren’t the Dems shouting from the roof tops  and on every news outlet that the GOP does not want to help the middle class but advocates soley for the rich?

Huffington Post

In Washington, the agenda has long since moved on from bailing out megabanks to figuring out how to stop paying for things that regular people need — luxuries like health care, retirement benefits and unemployment insurance.

In the suburbs of Denver, Anthony Roebuck and his family find themselves confronting an action list that seems cruelly divorced from the proceedings in the nation’s capital: They have to figure out how to keep the heat on through the Colorado winter now that his unemployment check has run out.

The latest extension of emergency unemployment benefits expired on Tuesday, as a dysfunctional Congress let the deadline go without striking a deal to keep the money flowing. That put Roebuck — who drew his last check on Monday — among the two million or so unemployed Americans facing the imminent loss of their benefits between now and the end of the year.

A sheet metal worker by trade, Roebuck, 44, is accustomed to earning his own way through the force of his hands. Since May, he and his family have subsisted on his wife’s paycheck from her job as a university administrator, plus a nearly $500 weekly unemployment check.

They slashed away at their grocery bill, cutting out non-essentials such as the fried snacks favored by his 15-year-old son. They traded in their late-model Jeep Cherokee for an elderly Dodge sedan. They quit going to church on Sunday to save the gas money required to get there.

Now, the math is set to get uglier still, as they contemplate how to run the household minus his unemployment check — a situation that seems not only impossible but also unfair.

How could there have been so many billions for Wall Street, so much room to lower taxes for people with golf memberships and country houses, yet a $500-a-week check to help him pay the rent while he looks for another job suddenly threatens to bankrupt the nation?

Continue reading here…