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Harold Meyerson: Trump’s Man at the Fed Admits that American Workers Are Losing Ground

By dianeravitch
July 19, 2018 //
15

Harold Meyerson, editor of The American Prospect, writes today:

JULY 19, 2018

Meyerson on TAP

Even Trump’s Man at the Fed Says Workers Are Being Screwed. Anyone who still remains bewildered by the rebirth of American socialism should consider this: Jerome Powell, the Trump-appointed chairman of the Federal Reserve, says he’s concerned that the share of the national income going to labor has fallen “precipitously.”

In testimony Tuesday before the Senate Banking Committee, Powell bemoaned the fact that “labor’s share of profits has been sideways.” This, he said, was “very troubling.”

That’s Jerome Powell who said this. Donald Trump’s appointee as the nation’s top banker.

The unhappy development Powell was referencing was the fact that the share of the national economy going to workers’ wages and benefits has fallen since the turn of the millennium from 66 percent to 62 percent, while the share going to corporate profits has risen correspondingly, from 8.3 percent to 13.2 percent. (And, adding insult to injury, more than 90 percent of those profits have been doled out in the form of increased dividends and share buybacks to shareholders and top corporate executives.) Had the workers’ share stayed at 66 percent of the economy, according to estimates by Jared Bernstein, Vice-President Biden’s former chief economist and a contributing columnist to the Prospect, their average annual income would have risen by $3,400.

Cautiously, Powell intimated this wasn’t good. “We want an economy that works for everyone,” he concluded.

That, however, is as far as the Fed chairman was willing to go. He didn’t adduce causes for the decline of the labor share, other than “global factors.” He didn’t cite the role that the business community’s and the Republican Party’s war on unions had played, or the Republicans’ opposition to raising the federal minimum wage, or the shareholders-uber-alles ethos that has governed corporations since Milton Friedman first propounded it and Ronald Reagan’s SEC supercharged it by legalizing share buybacks. He did admit he wasn’t sure how to reverse the decline—in fairness, a cluelessness that follows logically from his refusal to recognize the causes of that decline.

Still, even Trump’s man at the Fed is distressed that the labor share has dwindled. Is it any wonder that, among more sentient Americans, socialism is on the rise? ~ HAROLD MEYERSON

Categories Economy

Trump Tariffs Will Hurt Trump Voters Most

By dianeravitch
July 11, 2018 //
44

The New York Times showed that Trump tariffs on cars will boomerang and hurt Trump voters in South Carolina, Tennessee, and Alabama.

“BRUSSELS — President Trump has complained about seeing too many German cars on Fifth Avenue, and threatened heavy tariffs on the companies that produce them. There is a good chance, though, that those Mercedes-Benzes and BMWs were not only made in the United States, but made by workers who voted for Mr. Trump.

“European companies have turned Alabama, South Carolina and Tennessee into auto manufacturing powerhouses in recent years, churning out cars not just for American buyers but also for export to China and Europe. Germany’s three biggest carmakers all have facilities there, and Volvo Cars, which is owned by a Chinese company but based in Sweden, began producing at a new plant in South Carolina just last month.

“Yet being major employers in regions that voted heavily for Mr. Trump has not protected them.

“With barely a peep of resistance from his own party, the president has threatened tariffs — expected to be 20 percent — on imported cars and car parts. In a prelude to such a move, he has ordered an investigation into whether the imports pose a threat to national security. Trade restrictions could be put in place within months. And if he follows through, the European Union has pledged to retaliate.

“The damage would be far-reaching, draining an estimated $14 billion from the United States economy. If other countries retaliated, the cost would skyrocket to nearly $300 billion, the European Union’s Washington delegation said last week.

“Carmakers, both foreign and domestic, say such penalties would severely damage their lines of supply, interfere with exports and eventually force them to curtail operations in, of all places, Republican strongholds.

“Mr. Trump won 63 percent of the vote in Spartanburg, S.C., home of BMW’s biggest factory anywhere in the world. But Allen Smith, president of the Spartanburg Area Chamber of Commerce, said the president’s tariffs would threaten the region’s livelihood.

“For BMW and its many, many suppliers scattered across the state and region, you’re talking tens of thousands of jobs,” Mr. Smith said. “We would all agree with the president’s overall aim to improve trade with America’s interests top of mind. But getting to that end by inflicting so much pain on American business is the wrong approach.”

“Mr. Trump’s threat to impose auto tariffs would be the latest manifestation of his willingness to alienate longtime allies and American companies, ostensibly to protect domestic jobs. He has already imposed levies on steel and aluminum from the European Union, Canada, Mexico and other nations, and on Friday will place tariffs on $34 billion worth of Chinese products.

“But this new front in the trade war carries substantial risk not just for the auto industry but for Mr. Trump and Republican officeholders nationwide, given the impact that a full-blown trade war could have on American jobs tied to the auto industry.

“Virtually all cars made in the United States contain imported parts. Unlike steel and aluminum tariffs, whose costs may not be obvious to most consumers, automotive levies would show up in showrooms within weeks. Sticker prices would rise by hundreds if not thousands of dollars. That is why Ford and General Motors, alongside foreign automakers, have also roundly condemned the protectionist measures.

“The times are gone that a producer was only headquartered in one country with production in that country and exporting from that country to the rest of the world,” said Erik Jonnaert, the secretary general of the European Automobile Manufacturers’ Association, in an interview in Brussels.

“The economic impact would be greatest in a triangle demarcated by BMW’s factory in Spartanburg; Daimler’s Mercedes complex in Tuscaloosa, Ala.; and Volkswagen’s plant in Chattanooga, Tenn…

“Over time, the European carmakers have expanded their operations in those regions not only to build vehicles for American buyers, but also to serve customers in places like China. Last year, Daimler added 900 jobs to its American operations, which also include truck factories, and it is investing $1 billion to expand the Tuscaloosa operation to produce electric vehicles and batteries.

“Mr. Trump’s contention that these companies may present a threat to American national security, though, has thrown that growth into doubt.

“BMW exports 70 percent of the vehicles that it makes in Spartanburg, about 270,000, helping to reduce the trade deficit that Mr. Trump often complains about. BMW plans to add 1,000 jobs in Spartanburg as part of a $600 million expansion. If trade tensions continue to escalate, BMW warned in a letter on June 28 to Wilbur Ross, the commerce secretary, the result could be “strongly reduced export volumes and negative effects on investment and employment in the United States.”

Categories Economy, Education Reform, Jobs

Trump’s Tariffs Hurting American Businesses

By dianeravitch
June 25, 2018 //
12

Harley-Davidson plans to open a plant in Europe because Trump’s tariffs will raise the price of a Harley by more that $2,000 for EU consumers.

Other industries will be hard hit and are planning to lay off workers.

The lobster industry, farmers, the nation’s largest nail company.

Think before you act.

Dealmaker-in-Chief Cuts Deal to Annihilate American Business – Vanity Fair

https://www.vanityfair.com/news/2018/06/dealmaker-in-chief-cuts-deal-to-annihilate-american-business

Categories Economy, Education Reform

Needed: A Trustbuster to Break Up Four Mega-Corporations

By dianeravitch
April 22, 2018 //
43

 

Four corporate behemoths dominate our economy, writes Ross Barkan. It is time to break them up and foster healthy competition. Progressives met that challenge over a century ago. Have the Big Four become too big to fail and too powerful to regulate?

https://www.theguardian.com/commentisfree/2018/apr/19/democrats-break-up-techs-big-four-apple-google-facebook-apple

”Four corporations dominate American life. They have the wealth of nations. They have generated unfathomable revenue, created a number of jobs, and decimated many more. Their control of the economy is total.

“They are Google, Amazon, Apple and Facebook. Unless we do something, their power will remain limitless.

“Any Democrat running for president who claims to be a progressive should put trust-busting at the top of their agenda. Socialist or capitalist, big government or small, the priority should be the same: to ensure the people who consume goods and create goods are not exploited.

“All four corporate behemoths are too large. These monopolies fuel staggering inequality and stifle the kind of economic growth that used to be more evenly distributed. Profits are immense and gains for actual workers are small – these corporations do not generate employment, let alone unionized employment, on the scale of earlier revolutionary giants.”

Will any candidate step up to the challenge? Will candidates from both parties court the 1% for campaign contributions in exchange for protecting them from taxation and regulation?

Categories Accountability, Billionaires, Democracy, Democrats, Economy, Education Reform

Which Sector Employs the Most People? Higher Education or Steel/Aluminum?

By dianeravitch
March 23, 2018 //
9

 

Catherine Rampell asks that interesting question. Trump is hostile to higher education but courts the steel and aluminum sectors? Maybe he disdains higher education because, as he said during the 2016 campaign, he “loves the uneducated.”

Rampell says that Trump

“has been threatening [higher education] with anti-immigrant policy and rhetoric; several recent data releases suggest that the long-term growth in international students has now reversed itself. In response, a reader asked me how U.S. employment in higher education compares to employment in some of the industries Trump has sought to protect through tariffs.

“As you might expect, the comparison is not exactly flattering to Trump’s trade policies: Higher ed vastly dwarfs those other sectors.

“According to the most recent data from the Bureau of Labor Statistics’s Quarterly Census of Employment and Wages, from the third quarter of 2017, about 3 million people were employed by colleges and universities, both public and private. That tally excludes those employed by junior colleges (an additional 697,000), technical and trade schools (131,000), and other related employers, which likely enroll fewer international students.

“By contrast, in iron and steel mills and ferroalloy production, employment tallied 82,000. Alumina and aluminum production had 57,000 jobs. Meanwhile, millions of Americans are employed in industries that use these metals as an input (aerospace, construction, energy, beer can manufacturers, etc.), and will therefore face higher prices and the threat of layoffs. Many millions more may also find their jobs threatened if, say, China follows through with its threats of retaliatory tariffs.

“I would offer you my chart of higher ed employment vs. steel and aluminum employment, but given that higher ed employment is more than 20 times as large as steel and aluminum employment combined, the chart’s a bit hard to read.”

 

Categories Economy, Higher Education

“This Land Belongs to You and Me,” not Trump, DeVos, and the Koch Brothers

By dianeravitch
February 4, 2018 //
77

 

One of my favorite non-education bloggers is Andrew Tobias (except on the rare occasions when he ventures into education), who cuts through the economic morass with a fine scalpel and recognizes Trump for the phony that he is. I subscribe (free) at AndrewTobias.com. He gave me his permission to post his latest. Open here to read his links. 

Tobias writes:

YOU Get $930! And YOU Get $930!”

John Grund, one of your fellow readers, offers this wonderfully clear analysis (thank you, John):

Here’s another way to think about the Republican tax bill: Think like an owner.

Sit down quietly and let your mind inventory all that you own as an American. I like to start with the Statue of Liberty. It was a gift from France to the American people; I’m an American person, so that includes me. And the Park Service charges admission, so there’s that.

From there, I like to fly over the country in my mind, surveying all that you and I own. All the beaches and waterways. All the roads and bridges. All the public lands and forests. All the great national landmarks and parks. All the wonderful buildings our fathers and mothers built for us: the libraries and colleges and theaters. 

Take your time. It takes time to even touch on how much there is. The public hospitals and clinics. The harbors and canals. The lighthouses and navigation markers. The reservoirs, rivers, lakes and water systems. The radio and television airwaves. The courts and city halls and schools. The warships, guns and warplanes.

And now reflect that corporations are granted a charter by the state (which you and I own, of course) that allows them to do business. And think of corporate taxes as the rent those corporations pay for using all that we own – the roads to deliver their products, the monetary system the underpins commerce, the police to keep their trucks safe, the schools to train their workers, the military to protect it all.

The Republican tax bill cuts the rent you earn on all that property. The corporate tax rate drops from 35 percent to 21 percent of profits.

Now perhaps you are a gracious and benevolent landlord, and you say you don’t really mind giving your renters a break. You’re feeling generous.

But remember you have a mortgage against all that property, too. It’s the national debt, and you use the rents – the taxes – you receive as owner to pay off that mortgage. And remember that the rents have to pay for upkeep on all that property. Are the roads and bridges in great shape, with plenty of money squirreled away to keep them that way? Or are they in dire need of long-delayed maintenance and restoration?

This is one case where it is right to think like an owner, because that is what you are. Be a calculating landlord when you consider the Republican tax bill.

Isn’t that kinda great?

One could certainly tinker with the implementation. For example, how about revenue-neutral corporate tax reform? Adopt the more-globally-competitive 21% were adopted — but pay for it by closing loopholes that most big corporations have been using to pay far less than the nominal 35% rate.

But the gist of John’s essay, I think, is exactly right.

Again, I urge you to watch Reagan budget director David Stockman’s critique of the massively ill-advised tax cut.

And again, note how beyond nuts — how bizarro-world — it is that this tax bill, designed to help the middle class (yeah, right), and that’s gonna cost Trump a fortune, “believe me” (yeah right), includes a special provision for real estate developers like Trump.

I’m all for the much-heralded $1,000 bonuses a few million employees (maybe 5% of American workers?) have gotten from corporate employers . . . perhaps in part to curry favor with the strong man in the White House, perhaps in part to help Republicans hold Congress in the next election, and surely in part because they’d like to do something nice for their valued employees. That’s great.

And I’m all for the modest but real tax breaks many middle-class Americans will see (if we can afford them; though: can we afford them?). Bloomberg estimates $930 a year for people in the middle fifth of taxpayers ($60 for people in the bottom fifth). But don’t you get it? The motivation here is to help those at the top. You get $930! And you get $930! And you get $930! And — if I’m in the top 1% — I get $51,140. Unless I’m in the top tenth of that group — $193,380. Unless I’m in the top tenth of that group — where Trump and his friend Carl Icahn and his pal Wilbur Ross and his pals Sheldon Adelson and the Mercers and Betsy Devos presumably are. That number Bloomberg doesn’t even try to estimate, but it would be a lot higher.

When the ultra-rich were taxed at a 90% top federal tax rate (Roosevelt, Truman, Eisenhower), it was too high (though designed to lower our National Debt, relative to the economy as a whole, which it did help do). And when they were taxed at 70% (Kennedy, Johnson, Nixon, Ford, Carter) it was still too high (though it, too, helped shrink the Debt relative to the economy as a whole). Even when they were taxed at 50% (Reagan’s first cut), I would argue it may have been too high.

But, with his second cut, Reagan, and then Bush 43, and now Trump have exploded the National Debt — borrowing not to build infrastructure that’s been crumbling for 35 years, but to enrich the already-rich by cutting their taxes to record-low levels.

Criminal.

Well, not literally. But immoral.

And dishonest (Bush told us “by far the vast majority” of his tax cut would go to people “at the bottom”).

And . . . well, tragic.

Only Clinton and Obama managed to turn the deficits around, leaving their successors with economies growing faster than the debt . . . thus shrinking the debt relative to the economy as a whole.

This massively irresponsible Republican tax cut reverses that, once more. It puts us back over $1 trillion in deficit spending . . . gets the debt growing faster than the economy again, as under Reagan, Bush, and Bush . . . and is sold to the voters as, “Look! You get $930! And you get $930!” (And me? Don’t bother your pretty little head with that. If you can’t trust Donald Trump and Mitch McConnell and Paul Ryan and Devin Nunez and Vladimir Putin — Trump trusts him, why shouldn’t we? — whom can you trust?)

Right?

Copyright © 2018 Andrew Tobias
All rights reserved.
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Categories Billionaires, Economy, Equity

Andrew Tobias Rephrases Trump’s State of the Union Speech

By dianeravitch
January 31, 2018 //
11

 

Andrew Tobias writes about money, investing, and politics. We have engaged in a civil offline discussion about his favorite NYC charter chain, but I find his political insights valuable. I subscribe to his blog at AndrewTobias.com. Here is his rephrasing of the SOTU last night, if it represented the real world:

 

“The state of the Union is precarious.

“In my first year I have:

“1. Told more than 2000 public lies or falsehoods.

“2. Ended the American Century and abdicated our leadership of the world.

“3. Plunged the nation into economic peril through what is — according to Reagan budget director David Stockman — a massively irresponsible tax cut at exactly the wrong time in the business cycle. (We will be running a $1.2 trillion deficit in the tenth year of a recovery!)

“4. Prioritized those lower taxes on the rich — including real estate developers like me — over borrowing that same money to employ millions of Americans at good jobs revitalizing our infrastructure.

“5. Denied and ignored the massive and ongoing attack on our democracy ordered by a former KGB operative with whom I enjoy a warm relationship and against whose country I have refused to impose the sanctions mandated by Congress.

“6. Ceded economic leadership in the Pacific to China.

“7. Taken credit for the low unemployment and steadily improving economy I inherited (slightly more jobs were added in Obama’s last year than my first).

“8. Decimated the State Department, hobbled the Environmental Protection Agency, neutered the Consumer Financial Protection Bureau, and put agencies like HUD and the Departments of Education and of Energy in the hands of people with no expertise.

“9. Destabilized the health insurance market in ways that will lead to higher premiums and more uninsured (despite my promise of “great health care for everybody at a tiny fraction of the cost”).

“10. Demonized the free press, the FBI, and our intelligence community.

“11. Widened inequality, praised as “very fine people” torch-bearing white supremacists, set an example of incivility for your children.

“12. Solicited contributions to my campaign with the promise of running your name over the leave stream of this State of the Union address. No president in history has thought to cheapen and politicize the presidency that way, but then neither has a president embarrassed America on the world stage as I have. And if the —-holes of the world don’t like it, —- ’em.

“There’s more, but that’s enough for now.

“God bless you, and God bless the United States of America.”

Categories Economy, Freedom of the Press

“Creative Disruption” and Its Critics

By dianeravitch
January 8, 2018 //
23

One of our regular readers and occasional commentators, Doug Garnett, happens to have expertise about media.

After he read Jill Lepore’s article, he reacted to it and added several other commentaries. He also links to Clayton Christensen’s rebuttal to Lepore.

This link is an amazing article which I urge you to read. It links together “creative disruption” with the complacency of our nation’s elites about the deindustrialization of the nation and the human toll it created.

Here is a small excerpt from a fascinating article:

A little backstory may help here. Prof. Christensen is now the most prominent heir of Joseph A. Schumpeter’s twin definition of capitalism as the source of all meaningful innovation in life, and of innovation as “creative destruction.” For both of these thinkers, the entrepreneur is the fountainhead of new value, and capital must be pulled out of less productive uses and allocated to the entrepreneur, who is the privileged source of all future of wealth-creation. In Schumpeter’s view, governments, publics, regulations, communities, traditions, habits, faculty senates, teacher’s unions, zoning boards, homeowner’s groups, professional organizations, and, last but not least, business corporations, do not create value but interfere with its creation. All that is solid must be melted into air for the entrepreneur to be free to innovate and thus transform. The resulting wreckage and waste is part of progress, and must not be reduced through regulation. This is true for shuttered factories, and also for high levels of inequality: both are part of liberating the entrepreneur to create the greater wealth of the future.

Although years of reading Prof. Christensen makes me think he’s personally humane, his theory is the business world’s single most powerful rationalization for disrupting every type of humane condition, such as job security, tax-funded public infrastructure, or carefully nurtured, high-quality product lines. Prof. Lepore was right to state, “Disruptive innovation is competitive strategy for an age seized by terror.” Disruption feeds on major and also minor terrors, like being left behind by a change deemed unavoidable, or being excluded from debate about the costs and benefits of undermining entire regional economies by offering tax breaks to companies that offshore production.

One outcome of the theory of disruptive innovation has been the shocking complacency of the U.S. political class about the national devastation wrought by deindustrialization. We have a “rust belt,” and ruined cities like Newark and Detroit, and wide areas of social and economic decline amidst enormous wealth, because business and political leaders were taught by consultants like Prof. Christensen that capitalism must destroy in order to advance. Journalists might come along and chronicle the horrible human costs of the decline of the steel industry in, say, Youngstown, Ohio (see the Tammy Thomas sections in George Packer’s The Unwinding (2013). But by the time someone like Mr. Packer arrived, decline has been baked into the regional cake.

The theory of disruptive innovation was arguably head baker, for it taught politicians in Youngstown and elsewhere that industries like steel and their unionized employees had been judged by an impartial market to be uncompetitive. Consultants would routinely opine that the only logical response to falling profits was the mass layoff and/or factory closure. In The Disposable American (2007), Louis Uchitelle pointed out that layoffs were not wars of necessity but wars of choice, and yet to say that deindustrialization expressed a cultural entitlement rather than an economic law was to stick one’s finger in the dike. Slowly but surely, Youngstown and everyplace like it no longer had economies that supported a broad, stable middle class. In addition, like Beckett’s Godot, the renewal to which this disruption was to lead never actually showed up.

Thus Prof. Lepore’s critique of disruptive innovation tapped into a pervasive, long-term anger about ruin in America and an anger at the corporate and political classes that deemed ruin necessary.

Categories Economy, Education Reform, Hoax

A Blog You Might Enjoy

By dianeravitch
December 29, 2017 //
18

 

 

A friend suggested I subscribe to Andrew Tobias’ Blog, and I did. He mostly writes about economics, and I enjoy his clear explanations. You can subscribe for free at Andrewtobias.com.

I have strongly disagreed with him only once, when he raved about the test scores at Eva Moskowitz’s test prep Academies and suggested that she had created a new model. We have been engaged in a discussion on this issue since then.

This is his latest. If you want to read the links, go to his website.

A Republican touting the much-criticized tax bill recently told viewers to go to fairandsimple.gop to see the truth about it.

So I did.

The bill has three goals:

More Jobs. The bill will “make America the jobs magnet of the world.”

Maybe. But the Wall Street Journal (here) and the Financial Times (here) worry it could cost jobs.
Bigger Paychecks. “Americans’ taxes are too high, so we are lowering individual tax rates for low- and middle-income Americans.”

No mention is made of “high-income” or “obscenely-high-income” Americans — yet they will get by far the biggest reductions. You might get a thousand bucks, they might get a hundred thousand or a million. Is that adequately disclosed on the website?

And, by the way? Why are “Americans’ taxes too high?” Is it because we’re running a surplus, collecting more than we need? (No, we’ve already run up $20 trillion in accumulated deficits and will now, thanks to this tax cut, be growing that debt faster than the economy as a whole, just as Reagan, Bush, and Bush did.)

Is it because our infrastructure is in such awesome shape we can now cut back on maintaining it? (No, it’s in truly rotten shape — we desperately need to spend more.) Is it because we pay more than workers in other countries? (No, according to this, our workers pay a lower rate than those in Belgium, Austria, Germany, Hungary, Italy, France, Finland, Czech Republic, Sweden, Slovenia, Portugal, Slovak Republic, Spain, Greece, Estonia, Turkey, Luxembourg, Norway, Denmark, Holland, Poland, Iceland, or Japan.)

Fairer Taxes. The bill will “make filing taxes so easy that you can use a form as simple as a postcard.”

First off, what does that have to do with fairness? Is it fair to give the lion’s share of the tax cut to people and corporations who don’t need it . . . and to do so at the expense of millions of lower-income Americans who will either lose their health insurance or see premiums increase? And at the expense of a higher National Debt whose consequences will hurt average Americans disproportionately?

But since the postcard aspect of this is what Republicans seem to mean by “fairer” — no, people will not be filing on postcards. Start with the “simplification” of the child tax credit, as per this 1,100-word explanation in Forbes. In part:

. . . Under tax reform, part of the Child Tax Credit remains nonrefundable but the “old” Additional Child Tax Credit, which was refundable, has essentially been merged into the new credit. I know that sounds confusing but what it means is that the Child Tax Credit is just one credit worth up to $2,000 per child and includes a refundable piece of up to $1,400 per child. To be clear, the $1,400 refundable piece is included as part of the $2,000 Child Tax Credit and is not an additional credit (unlike before).

A refundable credit means that you can take advantage of the credit even if you do not owe any tax. Unlike with a nonrefundable credit, if you don’t have any tax liability, the “extra” credit is not lost but is instead refunded to you. To claim the refundable portion, you must have earned income (generally, wages, salary, tips, and net earnings from self-employment). For purposes of the new Child Tax Credit, the refundable portion is equal to 15% of your earned income which exceeds $4,500 up to the maximum credit.

. . . If you have three or more qualifying children, you can use an alternative formula to determine the refundable portion. Under the alternative formula, the refundable portion is equal to the amount by which your Social Security taxes (those taken out of your wages or paid out as self-employment taxes) exceed your earned income credit (sometimes called EIC or EITC).

I know that this tax reform was supposed to be about simplification, but not when it comes to the Child Tax Credit. In order to claim the credit, you must file a federal form 1040, federal form 1040A, or a federal form 1040NR. You cannot claim the child tax credit using form 1040-EZ.

The main thing, of course: HAVE A WONDERFUL NEW YEAR.

Drive safely!

Categories Economics, Economy

The Greatest Scandal Afflicting Our Nation Today: Inequality

By dianeravitch
December 24, 2017 //
49

A few years ago, I read a wonderful book titled “The Spirit Level: Why Greater Equality Makes Societies Stronger” by Richard Wilkinson and Kate Pickett. I strongly recommend it to you.

Their thesis is that the societies with the greatest equality are happier and healthier. As inequality grows, so do social problems that cost huge amounts of money to address. But nothing succeeds like equality. That is not to say that societies need to have everyone with exactly the same amount of everything. But that societies should aim to reduce inequality of income and wealth to the greatest extent possible. In 1960, the average CEO made 50 times the wages of the average worker. Today, the average CEO makes 271 times the wages of the average worker.

The concentration of wealth in the hands of a tiny number of people erodes the foundations of our society. It creates grievance, rage, depression, poor health, poor schooling, stagnant opportunity, overuse of drugs, addiction, suicide, and a sense of hopelessness. As inequality grows, our optimism about our society and its future declines.

Consider this:

The wealthiest 1 percent of American households own 40 percent of the country’s wealth, according to a new paper by economist Edward N. Wolff. That share is higher than it has been at any point since at least 1962, according to Wolff’s data, which comes from the federal Survey of Consumer Finances.

From 2013, the share of wealth owned by the 1 percent shot up by nearly three percentage points. Wealth owned by the bottom 90 percent, meanwhile, fell over the same period. Today, the top 1 percent of households own more wealth than the bottom 90 percent combined. That gap, between the ultrawealthy and everyone else, has only become wider in the past several decades.

The tax bill just passed by the Republicans in Congress without a single Democratic votes will deepen that inequality.

It will provide windfall gains for corporations and real estate investors (like Donald Trump).

The Republicans say the tax cuts for the top 1% and for corporations will create jobs and raise wages. But when the Washington Post polled the nation’s 20 largest corporations, most of them said they planned to pay dividends to investors.

A commentary in Fortune magazine said that corporate tax cuts were likelier to benefit shareholders than workers.

Some argue that corporate tax cuts lead to wage and job growth because they encourage corporations to invest in additional capital. But if companies are unwilling to invest in today’s environment—with extraordinarily high after-tax corporate profits and low interest rates—it is unlikely they will do so after a corporate tax cut.

Evidence from 2004, when a repatriation holiday allowed corporations to bring back overseas profits at a lower rate, provides a good case study. The 15 companies that brought the most profits back to the U.S. used them to buy back shares instead of boosting investment, and actually ended up cutting jobs and slightly lowering their research and development spending.

The tax cut does nothing to enhance income equality or wealth equality. It is simply getting worse.

The persistence of poverty in the United States directly affects schools. About half the children in the U.S. public schools qualify for free or reduced price lunch. Poverty is the most significant cause of poor academic performance. Children who are poor are less likely to have good medical care, good nutrition, and live in a safe neighborhood in a good home.

If we want to make America great again, we should revive the goals of the New Deal. A society where people are free from want and fear.

This is not a good Christmas present.

Categories Economy, Equity
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