Friday, April 13, 2012

Say goodbye to the Middle Class

We’ve had an increase in the Initial Unemployment Claims number for the second straight week, and this may or maybe not bad news. It’s too early to get really worried about it, we’re still way below the 400,000 number that seems to indicate a failing economy these days. The numbers are seasonally adjusted and thanks to global warming we had no winter to speak of causing the normal spring spike in activity to start in January. Low winter heating bills put an average of $400 per family into the economy with twice that in the Northeast. Unfortunately high gasoline prices are taking it back again.

The far right is screaming about hyper-inflation again because of gas prices, and this totally wrong headed thinking is common among Federal Reserve Board members. This is what is spooking the stock market, that the Fed might start “fighting inflation”. Fighting non-existent inflation would trigger deflation and a freefall crash of the markets. Improved sovereign bond sales in Europe did calm the market for awhile. Markets did resume sliding again today, so that wasn’t enough. Let’s be clear, it’s not about the jobs numbers. Wall Street doesn’t give a crap about how many people are unemployed, it‘s the Fed they care about.

Obama is gaining political traction with the proposed Buffet Rule that would force the rich to pay a minimum 30% tax on all income over $1 million (except on municipal bond interest). This would effectively double Mitt Romney’s taxes. His wife might need to get a job (just kidding, she can stay home and hand crank the car elevator to save money).

The problem is that the Buffet Rule only goes half way. History shows that the top rate must be at least 50% to have a stable economy. Income over about $5 million should be taxed at the pre-Reagan rate of 74%, at a minimum. FDR wanted a 100% top tax rate, but settled for 91%. Republicans immediately started drilling holes into that rate with exemptions and loopholes under the excuse of bolstering the economy. It did just the opposite of course, and this allowed them to call for ever more loopholes.

Republicans still make the same excuses today for why the rich should not only be exempted from paying their share, but with a straight face propose paying no taxes at all, but only if you’re rich. The peasants should pay taxes of course, they even claim 48% of Americans pay no taxes. They mean income taxes but don’t say that. FICA taxes bring in almost as much revenue as the income tax does and rich people pay in almost nothing toward that.

Then there are sales taxes that have tripled since Reagan, local taxes and fees have skyrocketed while services are cut in order to give huge tax breaks to big business. In fact the only people who pay no taxes of any kind are the elderly confined to nursing homes.

Then there is the decline in tax revenue caused from wages that have been driven down and manufacturing activity disappearing. Working Americans make half of what they did prior to Reagan and even with 75% of women working, family income is now declining sharply. Only 1 in 10 households had two people working prior to Reagan.

We’ve had massive gains in productivity in the last 30 years, but the gains have all gone to the rich. Plus they are stealing what the middle class already had in wealth to the point that the next big down turn will eliminate the middle class entirely.

Wednesday, April 11, 2012

Don't recycle

The stock market took an upward turn today after a week of steady declines. The corporate news blamed the losses on the “poor” jobs number for March as if 120,000 new jobs was bad thing. The number was really closer to 200,000 but large job losses in construction and retail, as well as from a decline in temp jobs. The number of essential government workers fired in the Red States helped to drag the net gain down as well. Average hours worked stayed about the same so there has been no real downturn in business activity so far.

We should be seeing an up tick in construction as is normal coming out of a Recession. Unfortunately finding a job that pays enough to afford a home is becoming a quaint idea from the pre-Republican era. Too many Americans see this as the new normal with a huge number now predicting that their children will be less well off during their lives then they are. They no longer have the American Dream of upward mobility from hard work, but they have replaced it with a fantasy of lottery winnings or sports contracts.

The Republican base has an even more perverse fantasy of success, they will go into business. Even though they have no money or any new ideas, they are sure that if big government would just get off the backs of business and rich people were no longer taxed that they could succeed at business. No matter that it’s the big corporations that will squash them like a bug and not government. Except for the regulatory capture of government of course, this favors the big corporation over the little guy, and will only get worse as corporations are “de-regulated“.

Already the patent system and the courts are so clogged with corporate churning that companies exist simply to prey upon the small and medium sized businesses that hold patents. These predators will file baseless patent infringement claims knowing that resolution through the courts can take decades. In return for these sharks letting go of their victim they will take 70% or more of the little guy’s flesh. Big corporations routinely capture new technology the same way, or just keep the new innovation off the market until the patent runs out, all the while selling their old uncompetitive product. It’s capital that competes in the so called free market, not good ideas.

Still, nearly half of Americans vote for the Republicans who steal their wealth, steal the future of their children, and steal their dreams replacing them with nightmares. Worse yet, they either see it as normal, or the fault of people even worse off than they are.

Even liberals are not above this kind of thinking. They start to see it all as hopeless if they can’t have all needed reforms in a day, or from one administration. Many preach the “inevitability” of decline from dwindling resources, and so do nothing more meaningful than recycling some trash. The real trash is in the Congress and the corporate board rooms. The kind of trash that should not be recycled, but go straight to the landfill.