Working Life Jonathan Tasini's Ruminations on Work, The Economy, and Politics Tue, 23 Sep 2014 01:29:31 +0000 en-US hourly 1 Hedge Fund Rejection–Part II Tue, 23 Sep 2014 01:29:31 +0000 A week ago, I wrote about CALPERS’ decision to basically get out of hedge funds. Yesterday, Gretchen Morgenson asked whether the love affair with hedge funds is over?


Are public pension funds over their crush on hedge funds?

Looking for better returns, public pension funds in recent years have been socking away money in those lightly regulated vehicles. Some pension overseers have criticized this trend, but they have been few in number and have often been drowned out by hedge fund proponents. Those overseers’ arguments, however, are sound: Hedge funds, with their high fees, secrecy and recent underperformance, are inappropriate investments for most funds charged with providing retirement and other benefits to former workers.


Among the problems posed by hedge funds, pension experts say, are exorbitant fees and illiquidity. (Many hedge funds have one-year lockups, limiting investors’ ability to get out.) Moreover, they are about as transparent as mud.

“As a trustee, I was not allowed to see the hedge fund contracts,” said Chris Tobe, a former trustee for the Kentucky Retirement Systems, and one of those quiet hedge fund critics in the pension world. “The auditor wasn’t allowed to see the contracts, and the contract review committee for the Legislature was not allowed to look at them, either. Given the contracts are secret, how do you know they are not overcharging you on fees?”

The key will be to see what happens in the months ahead–will other funds do the same thing? I’ll keep an eye out for that.

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Cycling And Questions To Ask Fri, 19 Sep 2014 19:50:54 +0000 As a long-time, avid cyclist, I’ve been waiting for a reason to write about this. Unfortunately, the collision in Central Park between a cyclist and pedestrian gives me a chance to do so.

The incident:

A 58-year-old woman was in critical condition after being struck by a bicyclist in Central Park on Thursday afternoon, the authorities said.

The bicyclist, a 31-year-old man, was riding south on West Drive near West 63rd Street in the park around 4:25 p.m. when he swerved to avoid a group of pedestrians and struck the woman, the police said. She hit her head, and was taken to New York-Presbyterian Hospital/Weill Cornell Medical Center, where she was in critical condition.

So, my Top Six gripes list:

1. Some cyclists are a menace. You know the type: all decked out in their racing gear, intense and focused, with visions of “Look at me, I’m Lance Armstrong” perhaps without the performance-enhancing treatments…”perhaps”…I usually think that these men–and I’ve never seen a woman act like this–are also the same guys who work on Wall Street. They just don’t care. If someone proposes to give them tickets, I’m all for it–and impound their bikes as well.

2. Some pedestrians are just out-to-lunch, particularly in Central Park. Pay-the-fuck attention. Especially tourists. The Park does not belong to you. Solution: pen tourists into the 10 block radius around Times Square on weekends and only allow them into Park areas between 11 p.m. and 2 a.m…OK, I’m only kidding…I think. But, at least, it might make sense to post signs in the entry to the Park, and other similar spots, with a sign that says something like, “Who’s In The Park?”, or even hand out leaflets with instructions on rules-of-the-road.

3. Idiot wanna-be cyclists. Look, if you haven’t been on a bike, or you ride once a year, consider moving to the slow lane. It won’t kill you. And if you are out riding with say 6 friends, that isn’t the time to have a chat while spreading yourselves out in one row and blocking the entire road for everyone else.

4. Idiot parents. Those are the parents who think it’s really cool to take their kid who has no idea how to ride a bike into Central Park, and give no instruction to the kid about riding on the slow-speed side of the street. Instead, on any given day, particularly weekends, you’ve got kids wildly swerving into bike lanes where experienced cyclists are riding at normal speed. Solution: have a Child Services rep stationed in Central Park, and take the kid away from the parents…OK, I’m sort of kidding. But, why shouldn’t a parent be ticketed for allowing a kid to ride in an unsafe way?

5. The police are partly responsible. They don’t bother to enforce traffic rules that have anything to do with cyclist rights–I’ve counted at least 3 instances in roughly the past year where a truck/taxi was parked in the cycling lanes in my neighborhood…and a cop car was up a block away…doing zippo. They just don’t care. Start giving out tickets for any cycle lane blocking. Drivers complain about cyclists in the road but what’s a cyclist to do when, in some of these instances, s/he has to swerve out to the traffic because some jerk is blocking the lane.

6. Citibikes. I’m all for the program. But, the Citibike “cyclists” give the rest of us a bad name. They ride wherever they choose, swerving here and there with often no clue about the concept of “no, you can’t just go against the traffic.” And, no helmets? How did that ever get allowed?

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Cambodian Slaves Oil This Billionaire’s Fortune Thu, 18 Sep 2014 13:26:25 +0000 Recently, I mentioned Seymour Hersh’s observation that, while most people count sheep to fall asleep, Henry Kissinger, who orchestrated the massive secret, illegal bombings of Cambodia, must count burned and maimed Cambodian babies. Which makes me wonder: has Amancio Ortega picked up a version of the Kissinger habit, counting overworked Cambodian slaves who have made him the fourth richest person in the world?

Ortega, according to Forbes, is worth $64 billion, ranking him just behind Warren Buffet. The source of his fortune:

World’s richest retailer Ortega added $7 billion to his fortune this past year, expanding the gap between him and number four, Warren Buffett. He is up a total of $26.5 billion in the past two years. Though he stepped down as chairman of Inditex (best known for its Zara brand) in 2011, he still owns nearly 60% of its shares. He also has a growing real estate portfolio, estimated to be worth nearly $5 billion, much of it acquired at bargain prices during the financial downturn. He is reportedly planning to list his property holdings in a real estate investment trust. Among his properties: the iconic Torre Picasso, a 43-story skyscraper in Madrid (Google is a tenant). In the past year, he’s bought four new buildings in Madrid, New York and London for around $830 million, taking the number of buildings he owns to 26.

Behind that number though lurks a grim and despicable reality: Ortega rings up those huge profits because of the sweat of thousands of Cambodian garment workers who are paid a minimum wage of $100 a month–let me repeat, ONE HUNDRED DOLLARS PER MONTH–and work in long hours in horrendous conditions, suffering a whole raft of health emergencies from  malnutrition to inhaling chemical fumes.Workers United, which has its earlier roots in the Amalgamated Textile Workers Union and the International Ladies’ Garment Workers Union, (before going through a merger and a split, and now existing as an affiliate of SEIU) is engaged in a global campaign in support of the Cambodian workers. A report:

In December 2013, tens of thousands of Cambodian workers struck for higher wages, shutting down the industry that is the mainstay of the Cambodian economy. In early January, after ten days of mass demonstrations, the military suppressed the strike, firing live ammunition into crowds of demonstrating workers, killing five and injuring many more. Twenty-three activists were arrested and spent five months in prison before being released with suspended sentences of up to two and a half years. In the past weeks, six union leaders have been ordered to court to face charges of incitement to violence in the strike.

Yesterday, Cambodian workers took to the streets and across the globe, union supporters took to the streets with a very simple demand:Raise the minimum wage to $177 a month.

Just saying those words “$177 a month” is jaw-dropping when you think of how little that really is–compared to Amancio Ortega’s immense wealth.

Take your calculator out. If just 10,000 workers got that raise, over a year, that would cost Ortega $9,240,000…which is a rounding error in his bank account, the money he probably spends for flower arrangements in a given year.

And people marched:

In Cambodia:




San Francisco:

New York (where yours truly marched along with the protesters):

It’s pretty simple: Ortega’s wealth is built on a sea of misery. He has picked up where Kissinger left off, bludgeoning Cambodians. Though he wages war in a different way then Kissinger did, you don’t have to drop bombs on people to make life intolerable. It can be done with the stroke of a pen.People are fighting back, though.

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Not Easy To Live In Manhattan If You Aren’t Rich Thu, 18 Sep 2014 01:11:53 +0000 If you ever read the real estate section of The New York Times, there’s a section on page 2 called “Big Ticket”…it’s the place where you can read about the most expensive sale of the week, and that usually means something around $30-$40 million. Well, then, no wonder the gap between rich and poor in Manhattan is tops in the country.


The mean income of the top 5 percent of households in Manhattan soared 9 percent in 2013 over 2012, giving Manhattan the biggest dollar income gap of any county in the country, according to data from the Census Bureau.

The top 5 percent of households made $864,394, or 88 times as much as the poorest 20 percent, according to the Census Bureau’s American Community Survey, which is being released Thursday and covers the final year of the Bloomberg administration.

Appalling. But, not surprising if you pay attention.

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S&P: Inequality Hurts State Taxes. Yet Another “Duh” Tue, 16 Sep 2014 20:23:39 +0000 When do we get to the point when the obvious–DUH–doesn’t come as some surprise or revelation to the elites? Probably never when it comes to inequality because they can’t see because they don’t live it. Last week, I wrote about a “Duh”–the G20 being told that higher wages will lift the global economy. Today, it’s the dopes over at Standard & Poor’s who wake up from a slumber–or self-imposed denial.

Meteor Blades already picked up on S&P’s discovering that inequality hurts economic growth. Yesterday, S&P followed up on that magical discovery with a new one:

Extending our analysis to public finance, we find that increasing income inequality is undermining the rate of state tax revenue growth. In addition, it is contributing to volatility in tax revenue collections.


Our analysis found a negative relationship between income inequality and state tax revenue tends. When we tested the relationship by tax structure, we found the negative effect was stronger and only statistically significant in the sales tax-reliant states. The findings support our view that rising income inequality contributes to weaker tax revenue growth by undermining the rate of overall economic expansion. [emphasis]

Well, no shit. You mean, people aren’t make enough money so they don’t pay taxes? And you get paid to come up with that? What a gig.Ok, I have to cut these guys some slack–they aren’t the brightest bulbs in the universe (as Michael Lewis pointed out previously, only the guys who can’t get a job on Wall Street go to work for the ratings agencies)

So, this is worth pointing out. Progressive tax systems are better than flat-tax systems…duh again. Or, as the dim bulbs say it:

The results of this analysis found that income inequality for both groups — the income tax and the sales tax-dependent states — relates negatively with tax revenue growth. However, the negative effect was stronger in the sales tax-reliant states than it was for the income tax-dependent states. In addition, the relationship was only statistically significant at the one percent level for the sales tax-reliant states. This suggests that through a progressive tax structure, it’s possible to counteract much of the depressing effect inequality has on tax revenue growth rates. In contrast, the strong negative relationship we found in the sales tax-dependent states reflects how rising income inequality contributes to slower economic growth. And absent the progressivity found in most of the income-tax states’ tax structures, the slower economic growth related to inequality gets transmitted to the sales tax-reliant states’ budgets as slower tax-revenue growth.[emphasis added]


In a setting of rising income inequality, the move toward more progressive tax rates may help states generate faster tax revenue growth than would flatter tax regimes. In California, the Legislative Analyst’s Office (LAO) has indicated as much. Since 1993, the top percentile’s inflation-adjusted incomes have increased by 75%. Incomes of the bottom four quintiles, on the other hand, all declined, between 2.9% to 9.3% during this span. California’s revenue dependence has mirrored these income trends, with an increasing share of its income tax collections coming from the high-income taxpayers. In 2012, for example, taxpayers with incomes in the top percentile paid almost 51% of the state’s personal income tax revenue, up from 33% in 1993.(9) Thanks to the combination of a progressive income tax schedule and divergent income trends, the state’s finances have come to rely more heavily on high-income taxpayers.

Obviously, no one wants to avoid ending the inequality we see by demanding higher minimum wages and higher basic wages. But, progressive taxation is a better way to combat inequality than the more regressive sales tax…again, duh…but it helps when these guys say the obvious.OK, now back to our regularly scheduled life in the real world.

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Nation’s LARGEST Pension Fund Sends A Shiver Through Hedge Funds Tue, 16 Sep 2014 01:12:56 +0000 I’m all for change happening through action in the streets. But, it doesn’t hurt to send a little tremor into the world of the elites in other ways. And that’s exactly what the California Public Employees’ Retirement System (CALPERS) has just done.

CALPERS “Covers more than 1.3 million active and retired state, local government, and school employees and their family members”, an overwhelming number of whom are unionized public sector workers. It has $300 billion in assets. Six of the 13 board members are elected by the workers’ representative organizations, and another 2 are chosen by the governor.

When CALPERS acts, the rest of the pension fund world listens.

Attention, please:

The California Public Employees’ Retirement System, the nation’s largest pension fund, will eliminate all of its hedge fund investments over the next year on concerns that investments are too complicated and expensive.The pension fund, which oversees $300 billion, said on Monday that it would liquidate its positions in 24 hedge funds and six hedge fund-of-funds — investments that total $4 billion and more than 1 percent of its total investments under management.

The decision, after months of deliberation by the pension fund’s investment committee, comes as public pensions across the United States are beginning to assess their exposure to hedge funds. It is likely to reverberate across the investment community in the United States, where large investment funds look to Calpers as a model because of its size and the sophistication of its investments.


A growing number of pension funds and institutional investors have expressed concern that the fees that hedge funds charge are too high. While there is a range, hedge funds typically follow a “2 and 20” model where investors pay management fees of 2 percent of the total assets under management and 20 percent of the profit.These concerns have become more pronounced as performance across the hedge fund industry has disappointed investors. Hedge funds have underperformed the Standard & Poor’s 500-stock index for the last five years, a metric that pension funds frequently cite as a comparison. In 2013, for example, the average hedge fund returned just 9.1 percent, according to the data firm HFR. That compares with a 32.4 percent increase in the S.&P. 500.

Calpers said it paid $135 million in hedge fund fees over the financial year that ended on June 30. The hedge fund investments returned just 7.1 percent, adding 0.4 percent to the firm’s total returns. For its hedge fund investments to have a material impact, Calpers would have to increase its hedge fund investments to at least 10 percent of its total portfolio, which was not a feasible option, according to Joe DeAnda, a spokesman for Calpers.[emphasis added]

There has been a movement over the past several decades to try to use pension fund money–that’s deferred wages of workers, not a gift–as a lever to shape a better economy. To date the victories have been quite modest. However, the financial crisis made a lot of pension funds perk up–these funds lost hundreds of billions of dollars because of the Wall Street greed, money that can’t be recouped (because of the lost investment opportunity) and means retirees will always be playing catch up.

Let’s see if this causes more funds to dump hedge funds–or at least force a change in the absolute “2 and 20” ripoff fee scheme.

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Hey, Corporations: Since You Are A “Person”, Before You Flee The US, Pay Your Taxes–Like People Fri, 12 Sep 2014 13:43:04 +0000 Ok, so, most sane people don’t buy into the idiotic idea that corporations should have the same standing as people. But, right now, thanks to a majority of morons on the Supreme Court, that’s the law. So, fine, then, while we try to close the loopholes on tax inversions, let’s apply a similar standard: the law that says before renouncing U.S. citizenship, a person has to pay taxes on unrealized capital gains.

For those just checking in on the tax inversion scam, I’ve written a number of pieces about this (including here, here and here). In sum, quoting Citizens for Tax Justice:

The inversion crisis actually consists of three related problems which each call for specific solutions. First, loopholes in our tax law allow American corporations to pretend they are based abroad. Second, those corporations claiming to be based abroad (and corporations that really are based abroad) are able to use “earnings stripping” techniques to make profits earned in the U.S. appear to be earned in countries where they will be taxed more lightly or not at all. Third, the profits that American corporations earn offshore are supposed to be taxed by the U.S. when they are brought to the U.S., but after inverting corporations are able to use accounting tricks to escape that rule. The first problem is simply the absurdity that American corporations can pretend to be foreign corporations, while the second and third problems are the benefits they obtain by doing so.

Ok, so, that’s the scam, and there are plenty of solutions for the problem.

But, in the meantime, as CTJ cleverly points out yesterday:

Individuals and corporations are both allowed to defer paying U.S. taxes on key parts of their income. Under current law, wealthy individuals are required to give up this benefit when they renounce their American citizenship, while profitable corporations are not.The tax code allows American individuals to defer paying income taxes on capital gains (appreciation of their assets) until they sell their assets. But wealthy individuals who renounce their U.S. citizenship lose this benefit and are required to pay tax on unrealized capital gains.

American corporations are allowed to defer paying income taxes on profits earned by their offshore subsidiaries until those profits are brought to the U.S., but under current law are not required to give up that benefit even after being acquired by a foreign owner. This more generous treatment of corporations has no apparent rationale and seems to be an accident of history rather than the intent of Congress.

Legislative history (explained below) suggests that Congress preserved deferral to help American multinational corporations compete with foreign-based multinational corporations. There is no reason to continue this tax break for corporations once they declare that they are no longer American.

Ending deferral in this situation would also remove a significant incentive for corporations to undergo inversions and could complement other legislative proposals to prevent inversions.
[emphasis added]

Ok, so, you want to leave. Fine, here’s the boot stuck up your ass. But, before we apply the boot, pay up–just like people do.

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Apple Ready To Ring Up More Tax Dodging Profits Thu, 11 Sep 2014 17:46:10 +0000 Just keep in mind this point: every time your favorite consumer company, the one with that very friendly logo, rolls out a new product, its internal corporate machine is getting ready to dodge taxes.

This is a story that goes back to 2013 but, as far as I know, the reality is the same. Here’s the upshot from a longer study by Citizens for Tax Justice:

Thanks to PSI’s efforts, we now know that Apple shifts U.S. profits to one of its non-taxable Irish subsidiaries through a “cost-sharing agreement” that gives the subsidiary the right to 60 percent of profits from its intellectual property, and that Apple also shifts profits from other foreign countries where it sells its product to its non-taxable Irish subsidiaries.

The Irish subsidiaries have few if any employees and don’t do much of anything, but Apple Inc has a huge incentive to claim that a lot of its profits are generated by these subsidiaries because Ireland is not taxing them. So, Apple uses the “cost-sharing agreement” to convert U.S. profits to non-taxable Irish profits for tax purposes, and likewise manipulates transfer-pricing rules and other tax provisions to turn profits from other countries into untaxed Irish profits.


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On Wages, The Economist Agrees Wed, 10 Sep 2014 13:31:17 +0000 The other day I wrote about a campaign by the International Trade Union Confederation to push the G20 to make hiking wages the cornerstone of any policy to create a sustained and healthy global economy . The Economist agrees.

The magazine had a relatively long piece in its September 6th edition (subscription paywall) entitled,  “The big freeze: Throughout the rich world, wages are stuck”. After looking at a variety of countries, and pronouncing the situation grim, the last paragraph really is what mattered:

Wages, of course, are not just important to central bankers. Weak pay saps revenue from income tax and social-security contributions, making it harder for governments to mend public finances. The lack of growth in real wages hurts household finances, too, keeping consumers tight-fisted. A healthy and sustained recovery in the rich world will remain elusive until the pay squeeze ends. [emphasis added]

As I said in my original piece, duh.


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Burger King’s Whopper Strategy: Your Waistline Expands, The Company’s Tax Bill Shrinks Tue, 09 Sep 2014 17:49:28 +0000 A couple of weeks ago, I wrote about Burger King’s tax inversion strategy–you know, the clever tax dodge strategy that’s all the rage among the corporate elite because it funnels hundreds of billions of dollars overseas and outside the reach of the IRS. Well, that apparently isn’t the half of it. Burger King has a two-pronged approach to screwing the country–at the waistline and at the bottom line.

No one really has to be told what horrendous slop gets shoveled across the counter at Burger King. Basically, that slop kills people but it’s a golden slot machine that never stops generating huge revenues for the company.

And where do those revenues go? Abroad. Hidden. And not in some penny ante way. Citizens for Tax Justice tells us:

Burger King’s recent decision to pursue a corporate inversion to Canada is the culmination of years of maneuvering to dodge paying its fair share in corporate taxes. In fact, Burger King was able to cut its average worldwide effective tax rate by more than 60 percent over the past few years likely through complex accounting maneuvers.[emphasis added]


The first key point to know is that Burger King only owns a small percentage of its thousands of restaurants worldwide, with the overwhelming majority of its restaurants owned by individual franchisees who pay Burger King for use of its intellectual property. From the beginning of 2010 (when private equity firm 3G Capital purchased the company) through the end of 2013, Burger King went from owning about 12 percent of its worldwide restaurants (1,422), to owning less than half a single percent of its worldwide restaurants (52).Unlike physical properties such as restaurants, stores or even factories, it’s relatively easy to shift the location of income-generating intellectual property from one jurisdiction to a different low- or no-tax jurisdiction. This may explain why, after its purchase by 3G Capital in 2010, Burger King reorganized its business structure by shedding ownership of nearly all the individual restaurants that it owned.

And shifting its profits to Switzerland, Singapore, Luxembourg, Hong Kong and the Netherlands does what?:

Burger King’s strategy of profit-shifting and relying more heavily on intellectual property came to fruition in 2013, when it was able to lower its worldwide effective tax rate to a mere 11 percent. For purpose of comparison, the company’s average worldwide effective tax in the three years before it embarked on its aggressive tax dodging maneuvers was nearly 28 percent, meaning that company was able to lower its tax rate by 60 percent over just a few years.

So, look, if the fact that that food is killing a lot of people isn’t enough reason to avoid the Whopper, perhaps the fact that the company does everything it can to dodge taxes–with tax inversions and lots of other maneuvers–will make some people willing to spend their food money elsewhere.

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A Shocker: G20 Being Told HIGHER WAGES Will Lift Global Economy. Duh. Mon, 08 Sep 2014 16:29:02 +0000 It never ceases to amaze me how, either because they are intentionally trying to mislead people or because they are just dumb/incompetent, “analysts” or public commentators and/or politicians profess to be flummoxed by the weak economy, the stop-and-go nature of growth and economic activity. Well, this isn’t rocket science: when you have an economy powered mostly by consumer spending and people don’t have money to spend, shit won’t get bought…is this not obvious? And that’s the message–the correct one–being delivered this week to the G20.

The G20 labor ministers are meeting this week in Melbourne, Australia (the G20 leader summit is in Brisbane in November). Coming into the meeting, the International Trade Union Confederation has put out this report with the very sexy and inviting title, “The Case for a Coordinated Policy Mix of Wage-led Recovery and Public Investment in the G20″…I’m fanning myself to cool myself down.

The top-level point:

“A coordinated mix of polices in the G20 targeted to increase the share of wages in GDP by 1%-5% in the next 5 years and to raise public investment in social and
physical infrastructure by 1% of GDP in each country can create up to 5.84% more
growth in G20 countries – compared to business as usual.


”A 1%-point increase in the wage share at global level could lead to a 0.36 % increase in the rate of growth in global GDP above the current trajectory. This shows that growth in the world economy on aggregate is “wage-led”.

Understand, what has happened is the opposite:

The share of wages in national income (GDP) has declined by around 10 percentage points in the G20 countries over the past three decades.

So, this is where the dumbness or lying part comes in: what part of “I don’t have any fucking money to spend on the shit we’re producing so…”

Or, put another way: when the share of prosperity being created by shit being made (also known, in more refined terms, as the Gross Domestic Product) goes to the top one percent, why would anyone think there is enough left for other people to go to the store and spend?

And, to slap these idiots in the head a bit more, the Federal Reserve Board’s just-posted 2013 Survey of Consumer Finances(yes, the Fed operates on smoke-signal paced timing) tells a similar story with three central points:

Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys.


For the median family with debt, debt burdens also fell between 2010 and 2013: Leverage ratios, debt-to-income ratios, and payment-to-income ratios all fell. The fraction of families with payment-to-income ratios greater than 40 percent declined below the level seen in 2001.


Retirement plan participation in 2013 continued on the downward trajectory observed between the 2007 and 2010 surveys for families in the bottom half of the income distribution.

Meaning: people don’t have money, and whatever dollars they could earn went to pay down debt because they are freaked out that another financial crisis could come again (some of the lower debt also comes from people who just lost their homes) and people are shit out of luck when it comes to retirement.The bottom line from the ITUC:

In summary, a policy mix of raising the wage share (e.g. through well set minimum wages and widening the coverage of collective bargaining) together with increased public investment in social and physical infrastructure would give a significant stimulus to growth and, hence, employment over a five year period in G20 countries.

Translation: let unions organize, raise poverty-level minimum wages, dump the stupid Andrew Cuomo-type austerity (a pre-election point about the New York governor’s repeated austerity budgets), put money into roads and bridges (much more stimulus, not less stimulus) and, presto, you’d have a growing economy.It is so obvious you’d think they were intentionally lying so they could steal from us…

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Slipping Away…No Surprise Fri, 05 Sep 2014 17:21:58 +0000 Certain things I get no pleasure being right about. Like the lack of jobs. But, hey, I said back in July no one should be celebrating short-term hype on the economy. Sure enough…

Uh oh:

American employers hired at a surprisingly weak pace in August, even as the unemployment rate fell slightly, the Labor Department said Friday.

With an increase in payrolls last month of 142,000, August is the first month since January that hiring slipped below the 200,000 level, an important threshold to beat if the economy is going to be able to absorb new entrants while also reducing the ranks of the long-term unemployed.


For example, the proportion of working-age Americans in the labor force dipped to 62.8 percent last month, compared with 62.9 percent in July, close to historic lows. While the downward trend in recent years can be attributed in part to retiring baby boomers, many economists believe at least half the drop is because Americans have simply given up the job hunt and dropped out of the labor force entirely.[emphasis added]

This really isn’t much of a surprise. The economy stinks. Part of that goes back to the flat-lining of wages and it’s simple to understand: consumer spending is 2/3 to 70 percent of economic activity but if you don’t pay people a decent wage, no one can afford to buy shit.

This isn’t rocket science.

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Fastfood Workers March/Strike/Arrests: New York City Pics Thu, 04 Sep 2014 19:50:58 +0000 Today, as many people know, fast food workers went on strike, marched and some participated in acts of civil disobedience in support of a $15-an-hour minimum wage. Here are some pics from New York. PLEASE ADD YOUR OWN–EITHER FROM NYC OR OTHER PLACES!


Going to jail for justice

Signs of the times: McDonald’s needs a beefy security guard complete with ear piece.
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OECD Confirms: “Bankers & Politicians Screwed Millions Of Workers Globally” Wed, 03 Sep 2014 15:10:12 +0000 Well, of course, the Organization for Economic Cooperation and Development wouldn’t quite say it that way. But, that is the upshot of what a relatively mainstream operation tells us: the financial crisis is still being felt worldwide, with millions of people out of work who would have been working but for the greed of the bankers and stupidity of politicians, including those in the U.S.

The OECD has 34 members (see description here). Here is what the OECD says about the so-called “recovery”:

Unemployment will remain well above its pre-crisis levels next year in most OECD countries, despite modest declines over the rest of 2014 and in 2015, according to a new OECD report.The Employment Outlook 2014 says that average jobless rates will decrease slightly over the next 18 months in the OECD area, from 7.4% in mid-2014 to 7.1% at the end of 2015. Almost 45 million people are out of work in OECD countries, 12.1 million more than just before the crisis. Globally, an estimated 202 million people are unemployed, with many more in low-paid and precarious jobs.

The Outlook also analyses the impact of the crisis on wages. It finds that real wage growth has come to a virtual standstill since 2009 and wages actually fell in a number of countries by between 2% and 5% a year on average, including in Greece, Portugal, Ireland and Spain.[emphasis added]

A few points are worth making.So, while bankers are getting off with no punishment–basically, benefiting from the Bank of America “leave no banker behind, hike their pay, make the shareholders pay” deals with the government–millions of other people who aren’t well-connected elites are suffering from the greed and incompetence of the elites and their bankers.

But, Wall Street is Wall Street–the elite people on Wall Street live to make huge bonuses, no matter the consequences. It’s the culture–a culture that is unchanged today precisely because bankers have not paid the price.

The OECD, though, indirectly indicts the idiot politicians, including our own White House and Congress, who made the entire crisis far worse by opting for either austerity (budget cutting) or weak stimulus.

They did not get that:

Austerity would not work.

The only way to prevent years and years of stagnation and psychological devastation to generations of people was to SPEND MORE, not cut.

Elected leaders punished the wrong people.

Elected leaders were listening to the very people who created the crisis.

As I wrote back in 2011,  the entire political system had gone off the rails and was engaged in a conversation that was entirely economically stupid. The United Nation, at that time, said:

Fiscal imbalances and higher public debt ratios are a consequence of the global financial and economic crisis, not the cause


   Fiscal austerity seeking to cut fiscal deficits, curb public debt and thus “regain the confidence of the financial markets” is likely to be self defeating, as it affects GDP growth and reduces fiscal revenues.[emphasis added]

We needed to spend more money–I used the $1 trillion figure in 2010 and a lot smarter people like Paul Krugman were castigating the White House for being too cautious.

You did not have to be a fucking Nobel Prize winner to know this.

And this bring us to today. Finally, the president gets that he should be out there making the case for a higher minimum wage–even though the $10.10-an-hour is way too low a demand.

That comes a bit late in the game. And, frankly, looks so crassly 2014 election-motivated that it lessens the punch, in my humble opinion, with the voters he’s probably trying to motivate.

And in that other hall of economic genius, the Federal Reserve Board, you’ve got a bunch of the Fed’s governors–still a minority apparently–who are arguing that the Fed should start raising interest rates because the worst is over and some people (read: bond holders) are wringing their hands over the prospect of inflation, which is non-existent.

So, bottom line: the reality in the streets is frightening, all over the globe–and, yet, we have the elites on Wall Street busily figuring out the new scam and a coterie of politicians who won’t do what’s needed, either because they have no spine, no vision or just don’t care.

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Bigger Demos For Minimum Wage Hike…Though Still Too Low A Demand Tue, 02 Sep 2014 15:43:20 +0000 A louder rumble is brewing in the fight to end poverty–also known as the fight to hike the minimum wage. Filling some jails is on the agenda…

From The Guardian:

America’s fast food workers are planning their biggest strike to date this Thursday, with a nationwide walkout in protest at low wages and poor healthcare.

…Workers from McDonald’s, Burger King, Pizza Hut and other large chains will strike on Thursday and are planning protests outside stores nationwide, in states including California, Missouri, Wisconsin and New York.

The day of disruption is being coordinated by local coalitions and Fast Food Forward and Fight for 15, union-backed pressure groups which have called for the raising of the minimum wage to $15 an hour for the nation’s four million fast-food workers. [Emphasis added]

At least the $15-an-hour demand is significantly higher than the lukewarm $10.10-an-hour demand being pushed by Democrats and The White House. I’m still of the view, as I argued many weeks ago, that the demand should be $20 an hour. But, the main thing that I like here is the activism in the streets.

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Eliminating The Corporate Tax Has Got To Rank As One Of the Dumbest Ideas Thu, 28 Aug 2014 20:59:22 +0000 Politics is full of really asinine ideas–let’s see, the Iraq War counts as a good example. But, for perhaps the dumbest one going I’d offer up the mumbling, coming from even some Democrats, to eliminate the corporate tax. It is stupefyingly idiotic–in the midst of the greatest divide between rich and poor in 50 years, and corporate profits rising to record levels even as wage growth remain at its lowest level in half a century.

The folks at Citizens for Tax Justice have it nailed quite succinctly:

First, a corporation can hold onto its profits for years before paying them to shareholders. This means that if the personal income tax is the only tax on these profits, tax could be deferred indefinitely. It also means that people with large salaries could probably create shell corporations that would sell their services. Their income would then be transformed into corporate income and any tax would be deferred until they decide to spend the money, which could be decades later, if ever.Second, even when corporate profits are paid out as stock dividends to shareholders, under our current system about two-thirds of those stock dividends are paid to tax-exempt entitles, such as pensions and university endowments which are not subject to the personal income tax. In other words, a lot of corporate profits would never be taxed if there was no corporate income tax.

Third, our tax system overall is just barely progressive and it would be a lot less progressive if the corporate income tax were repealed. The corporate income tax is a progressive tax because it is mostly paid by the owners of capital — people who own corporate stocks (which pay smaller dividends because of the tax) and other business assets.

Some have tried to argue that the corporate tax is mostly borne by labor because it chases investment out of the United States, leaving working people with fewer jobs and/or lower wages. But corporate investment is not perfectly mobile and, as a result, the Treasury Department has concluded that 82 percent of the corporate income tax is paid by owners of capital, and consequently, 58 percent of the tax is paid by the richest 5 percent of Americans and 43 percent is paid by the richest one percent of Americans. Congress’s Joint Committee on Taxation has reached similar conclusions.

Robert Reich, the same genius who was a passionate advocate FOR NAFTA, which arguably was a key component in the hammering down of wages over the past 20 years, is among those who have a dumb idea: eliminate the corporate tax and, then, tax dividends and capital gains as ordinary income and, then, as CTJ, says, “tax the gains on corporate stocks each year rather than only when they are realized when the stocks are sold.”But, that’s stupid too and actually wouldn’t get the revenue we need, per CTJ:

The net effect of the proposal, as its proponents acknowledge, would be to lose about half the revenue raised by the corporate income tax.

Honestly, those who advocate this dumb idea have basically capitulated to the same line of thinking that somehow we tax companies too much (not true) and that somehow the “job creators” deserve a break.Bullshit.

It’s wrong on the politics and wrong on something called “Math”.

Though it does fit well with the platform of the Republican Party.

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