Working Life http://www.workinglife.org Jonathan Tasini's Ruminations on Work, The Economy, and Politics Fri, 24 Oct 2014 16:50:38 +0000 en-US hourly 1 http://wordpress.org/?v=4.0 Bad And Worse http://www.workinglife.org/2014/10/23/bad-and-worse/?utm_source=rss&utm_medium=rss&utm_campaign=bad-and-worse http://www.workinglife.org/2014/10/23/bad-and-worse/#comments Thu, 23 Oct 2014 16:45:26 +0000 http://www.workinglife.org/?p=9546 While everyone is focused on the polls and the dwindling chances of the Democrats to hold the Senate, on the tax policy front, it’s just horrendous, with the choices in the upcoming lame duck session of Congress verging from “bad” to “very bad”.

As usual, I turn to Citizens for Tax Justice on this. Its conclusion:

There are two types of tax legislation Congress may enact after it returns to Washington for its lame duck session in November: bad policy and extremely bad policy.

Oh, great. As in:

Let’s start with the least terrible scenario, which would involve Congress enacting the Expire Act, the “tax extender” legislation approved by the Senate in May. This bill would extend for two years a list of tax breaks so long that almost no one understands them all. (Except us, of course, see our report explaining them.)

The bill is an $85 billion deficit-financed handout to businesses at a time when lawmakers refuse to provide any help to working people hit hard by the recession unless the costs are somehow offset.

Oh, and that was the good news. The bad news:

Not satisfied with the Senate’s approach, the House voted to make several of these provisions permanent, which of course has a much bigger price tag and eliminates the possibility of ever getting rid of them, or at least reforming them. The question on everyone’s mind is whether or not House Republicans will demand that tax legislation enacted during the lame duck session must include at least some of these permanent provisions.

“Permanent’ meaning things that will continue to rob us blind for a long time.

Bring on Ebola…something we can cope with.

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The IRS Is Like Nazis…Or So A Right-Wing Lunatic Film Says http://www.workinglife.org/2014/10/22/the-irs-is-like-nazis-or-so-a-right-wing-lunatic-film-says/?utm_source=rss&utm_medium=rss&utm_campaign=the-irs-is-like-nazis-or-so-a-right-wing-lunatic-film-says http://www.workinglife.org/2014/10/22/the-irs-is-like-nazis-or-so-a-right-wing-lunatic-film-says/#comments Wed, 22 Oct 2014 16:36:30 +0000 http://www.workinglife.org/?p=9544 This could be funny since it’s the rantings of some seriously crazy people. But, the end result of a very stupid film is just more unhinged hate of government.

It’s a movie called “Unfair: Exposing the IRS”. Yeah, uh huh…

And what is the upshot? From Citizens for Tax Justice:

Pulling no punches, Lori Marcus, a commentator in the recently released documentary “Unfair: Exposing the IRS,” says that if the IRS is not stopped then the next boxcar will be coming for you, an allusion to the boxcars used to carry Jews to Nazi concentration camps. Nazi allusions are part and parcel of Sullivan, whose right-wing propagandist films such as”2016: Obama’s America” and “Expelled: No Intelligence Allowed,” are chock full of factual errors and hyperbole in service of perpetuating a sense of mortal fear of all things Obama or progressive.

With Unfair, Sullivan uses the IRS’s recent scandals as a jumping off point to argue that the IRS is an inherently criminal organization at the forefront of turning America into a “fascist state.” In reality, the real scandal is how years of woefully underfunding the IRS has seriously hamstrung the agency’s ability to perform its even its most basic tax collection duties. The lack of adequate funds for computer infrastructure, staff and training is more the cause of the scandals than any fake conspiracy dreamed up by Sullivan.

Nuts abound.

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Rethinking Hedge Funds http://www.workinglife.org/2014/10/20/rethinking-hedge-funds/?utm_source=rss&utm_medium=rss&utm_campaign=rethinking-hedge-funds http://www.workinglife.org/2014/10/20/rethinking-hedge-funds/#comments Mon, 20 Oct 2014 13:04:23 +0000 http://www.workinglife.org/?p=9537 Hedge funds were often the rage. Not so much now.

You may recall I wrote about CALPERS, the biggest employee pension fund, was rethinking its investments in hedge funds.

It’s spreading, per The Wall Street Journal (pay wall):

Pension-fund managers across the U.S. are rethinking their investments in hedge funds in the wake of a retreat by the California Public Employees’ Retirement System.

In San Francisco, the chairman of that city’s pension fund has put on hold a vote to invest 15% of its assets in hedge funds. In Austin, Texas, officers responsible for the retirement savings of city police officers are discussing whether to withdraw all of their hedge-fund investments. In Harrisburg, Pa., a prominent state official asked the systems that manage money for teachers and other public workers to reconsider the $7.6 billion parked in such investments.

“We need to be talking about this,” Pennsylvania Auditor General Eugene DePasquale said in an interview.

The new conversations were spurred by Calpers, the largest U.S. public pension fund, which last month decided to shed its entire $4 billion in hedge-fund investments over the next year. Calpers said the investments were too small a slice of its $298 billion portfolio to justify the time and expense they required.

 

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How The Wall Street Guys Nickle-And-Dime Pension Funds To Death http://www.workinglife.org/2014/10/17/how-the-wall-street-guys-nickle-and-dime-pension-funds-to-death/?utm_source=rss&utm_medium=rss&utm_campaign=how-the-wall-street-guys-nickle-and-dime-pension-funds-to-death http://www.workinglife.org/2014/10/17/how-the-wall-street-guys-nickle-and-dime-pension-funds-to-death/#comments Fri, 17 Oct 2014 17:36:55 +0000 http://www.workinglife.org/?p=9535 It’s hard enough to amass enough money to retire. It’s even harder when the people charged with investing the money in an IRA charge really ridiculous fees, and you can’t trust the trustees to do the right thing.

Check this out. As reported by Floyd Norris of the NYTimes:

If you had a choice between two share classes of the same mutual fund — the only difference being that one class charged higher fees and was therefore guaranteed to have poorer returns — the choice would not seem to be difficult.

But trustees of one corporate 401(k) plan — the type of defined-contribution plan that is increasingly the only kind of retirementplan available to American workers — decided to take the one that charged higher fees.

Now the Supreme Court has agreed to hear a case that hinges on that decision, which was made for employees of Edison International, the parent of Southern California Edison, a utility company. It will hear an appeal of a decision by the United States Court of Appeals for the Ninth Circuit that essentially held that companies were protected from litigation related to investment decisions made more than six years before a suit was filed.

And more:

A third of 1 percent does not sound like a lot, but compounded over 20 or 30 years it can add up. If you invested $1,000 and earned 8 percent a year for 25 years, you would end up with nearly 10 percent more money than if you had invested it at 7.67 percent.

As with most 401(k) plans, employees could choose from a list of funds. Some had lower fees than the funds in question. But they also had different investment objectives.

It costs money to manage a 401(k) fund. Records must be kept for each plan participant, and each participant has the right to move money around, generating record-keeping and transaction expenses.

Edison, like many companies, told workers it would pay those administrative costs. It could have chosen otherwise, but changing such a provision would no doubt anger a lot of workers.

Instead, Edison had a deal to force the workers to pay through the back door. The 12(b)1 fees that were deducted from their investments in the “retail” funds were rebated in a way that allowed Edison to use them to pay the 401(k) costs. The net result was that Edison’s profits were a little higher, and employee investment returns a little lower, than would have been the case if the trustees had chosen the institutional classes of shares.

As Dean Baker points out:

There is a procedural issue which the court must decide about how far back in time plaintiffs can go for bringing a suit. However there is also an important substantive issue. The workers are claiming that the company deliberately chose a higher cost plan, with the fees coming out of workers’ accounts, because the fund manager gave Edison a kickback.

There is a considerable amount of money at stake with this issue. Norris puts the gap in costs at roughly one-third of a percentage point. If this were applied to the more $8 trillion currently held in 401(k) type accounts, it would come to more than $25 billion a year. This is effectively money taken away from workers and given to the financial industry. This is a bit more than 30 percent of what the government is projected to spend on food stamps this year.

 

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Congress Needs To Act On Inversions http://www.workinglife.org/2014/10/16/congress-needs-to-act-on-inversions/?utm_source=rss&utm_medium=rss&utm_campaign=congress-needs-to-act-on-inversions http://www.workinglife.org/2014/10/16/congress-needs-to-act-on-inversions/#comments Thu, 16 Oct 2014 19:09:11 +0000 http://www.workinglife.org/?p=9533 Well, sure, it’s fine of the Treasury does *something* to stop tax inversions. But, that just isn’t enough. I know, I’m so naive–but it’s Congress that has to act.

As the folks at Citizens for Tax Justice just observed, new regulations slow and/or curb some of the inversions but:

The new rule will apply only if a U.S.-foreign merger results in a company that is 60 percent or more owned by the shareholders of the American partner to the merger. This seems to mean that a merger could result in a company that is 55 percent owned by the shareholders of the American partner to the merger (basically meaning the Americans have not given up control) and can claim to be foreign for tax purposes, and the new regulation would have no effect. This may be another reason why some inversions continue.

Ah, yeah, chances of Congress doing something are slim in the short-term. But, then, just accept that the tax base will continue to erode.

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So Much For That Slow Slide http://www.workinglife.org/2014/10/15/so-much-for-that-slow-slide/?utm_source=rss&utm_medium=rss&utm_campaign=so-much-for-that-slow-slide http://www.workinglife.org/2014/10/15/so-much-for-that-slow-slide/#comments Wed, 15 Oct 2014 19:20:19 +0000 http://www.workinglife.org/?p=9531 The other day, I wrote about the warning of a slow slide in the global economy. Oppsssss…

Down it comes:

Wall Street had for the most part shrugged off a recent slide in global stock markets, viewing the declines as an adjustment that was bound to take place after so many years of uninterrupted gains.

That complacent view was upended on Wednesday.

Waves of nervous selling rocked the stock market in the United States, following an earlier sell-off in Europe. With an hour of trading left on Wednesday, the benchmark Standard & Poor’s 500-stock index was down 1.75 percent, leaving it virtually unchanged for the year. The Dow Jones industrial average was down 1.6 percent, leaving it down about 3 percent for the year.

All 10 sectors of the S.&P. 500 were lower on Wednesday, led by financials. Shares of JPMorgan Chase, Citigroup and Bank of America — which all reported solid, if unspectacular, earnings this week — were down more than 4 percent. Shares of Wells Fargo, which also reported third-quarter results, were down nearly 3 percent.

This goes back to a point I’ve made for a long time: until people get real wage increases and have real jobs, there will be no stability in the economy.

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Ohio Inversion http://www.workinglife.org/2014/10/14/ohio-inversion/?utm_source=rss&utm_medium=rss&utm_campaign=ohio-inversion http://www.workinglife.org/2014/10/14/ohio-inversion/#comments Wed, 15 Oct 2014 00:38:39 +0000 http://www.workinglife.org/?p=9529 Another day brings yet another company scamming the taxpayer with a tax inversion gimmick.

I’ve been writing a lot about this and from the great state of Ohio we now have the Steris Corporation, which is buying up a British health care firm and reincorporating in the United Kingdom. Courtesy of Citizens for Tax Justice:

This is a little hard to swallow given the company’s recent history. Steris has subsidiaries in a wide range of tax havens, from the British Virgin Islands and Barbados to Mauritius and Luxembourg. Despite consistently earning more than two-thirds of its revenue in the United States and holding about 90 percent of its assets domestically, the company discloses that, somehow, 94 percent of its cash is currently being held (at least on paper) outside the United States.  Steris now holds a total $222 million in “permanently reinvested earnings” abroad—profits that have never been taxed by the U.S., and after a successful inversion may never be subject to our federal income tax.

More thieves.

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Confounded Only If You Aren’t Paying Attention http://www.workinglife.org/2014/10/13/confounded-only-if-you-arent-paying-attention/?utm_source=rss&utm_medium=rss&utm_campaign=confounded-only-if-you-arent-paying-attention http://www.workinglife.org/2014/10/13/confounded-only-if-you-arent-paying-attention/#comments Mon, 13 Oct 2014 12:54:27 +0000 http://www.workinglife.org/?p=9527 Once again, the elites are confounded. They don’t understand why the economy isn’t performing very well. And it leads them to pay attention to the wrong things.

I’ve written multiple times that the underlying problem is that people don’t have work and they don’t have work that pays decent wages. That seems so simple: you can’t buy stuff if you don’t have a job or have a job that doesn’t pay the bills.

And when they don’t get that, the elites pay attention to the wrong thing:

As global leaders sounded the alarm about a slowing world economy, a more immediate concern drew the attention of policy makers at the International Monetary Fund’s semiannual meetings last week: inflated asset prices and increasing levels of debt overseas.

Bond markets in the eurozone are booming, debt in China is at historic highs and the United States stock market, even with its sharp fall last week, has been on a tear.

As economists and politicians heap pressure on global central banks to continue, and even escalate, their unusually loose monetary policies in order to spur global demand, the fear that these measures could provoke another market convulsion is spreading.

 And you can see it coming: a noisier call from some to lower debt and cut spending. Which will have the opposite effect of helping millions of people.

Or maybe that’s the point.

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Watch The Slow Slide http://www.workinglife.org/2014/10/10/watch-the-slow-slide/?utm_source=rss&utm_medium=rss&utm_campaign=watch-the-slow-slide http://www.workinglife.org/2014/10/10/watch-the-slow-slide/#comments Fri, 10 Oct 2014 17:02:45 +0000 http://www.workinglife.org/?p=9525 Typically, it doesn’t happen with a crash. Nope, more like a slow slide–until it’s too late to avoid a really bad economic picture that hurts millions of people. And at least someone is warning of the slide.

The warning comes from the ILO just as the World Bank and IMF are set to meet tomorrow:

Serious risk of global economy getting stuck in a low growth trap

1. Growth in the global economy is slowing in 2014 and even the forecasts of slight improvement in 2015 are beset with uncertainty. Accommodative monetary policy in several countries has pumped liquidity into the global economy but has not stimulated private investment in the real economy despite very low interest rates. Instead market speculation has again been on the upswing and many corporations have opted to accumulate cash. Fiscal policy is still tight in most countries but public debt levels are not declining as tax revenue is weakened by depressed consumption and incomes for the bulk of the workforce.

2. Demand for labour is weak and hiring is not keeping pace with the growth of the world’s workforce. The increase in unemployment and the fall in employment participation rates that followed on the global financial crisis persist in many countries. Self-employment is an increasing share of what growth in employment there is. In many developing countries this is largely informal and of a subsistence character.

3. Real wage growth is weak in most countries for all but the very highest paid. As a result the biggest component of the global economy and potential driver of global growth – household consumption –is flat.

4. Economic growth and the quantity and quality of employment are intertwined. Weakness in labour markets is inhibiting growth which in turn feeds back into a further slowing of employment growth and wages. This dangerous downward spiral risks pushing the world economy in a low growth trap – “secular stagnation” as some economists have dubbed it.

5. Despite progress in reducing extreme poverty since 2000 enormous challenges remain in transforming the pattern of global development to meet the goals of economic, social and environmental sustainability. Establishing a new framework for inclusive growth through full and productive employment and decent work is central to a renewed global drive to eradicate extreme poverty and reduce inequality. Re-establishing a positive relationship between growth and jobs is critical to avoid a low growth trap and to achieve strong, sustainable and balanced growth in the medium term.

What to do?

12. A major policy effort is required to reverse the slide into persistent low growth. In addition to the economic damage that scenario holds it also has potentially adverse political consequences, as frustrated aspirations for decent work and rising living standards contribute to political extremism and narrow nationalism. The multilateral system in which the IMF plays a key role was built to overcome such tendencies through “the promotion and maintenance of high levels of employment and real income and the development of the productive resources of all members as primary objectives of economic policy…” (See Article 1 (ii) of the IMF’s Articles of Agreement)

13. The priority must be to lift aggregate global demand. This should be led by the systemically important economies of the G20. While different countries face different challenges, all should review current policies with a view to stimulating consumption by households, which would contribute to business confidence to invest. The ILO fully supports the conclusion of Chapter 3 of the IMF’s latest World Economic Outlook that “that increased public infrastructure investment raises output in both the short and long term, particularly during periods of economic slack and when investment efficiency is high.” Boosting infrastructure investment should also focus on the reduction of carbon emissions.

Do it.

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One Dumb Argument http://www.workinglife.org/2014/10/09/one-dumb-argument/?utm_source=rss&utm_medium=rss&utm_campaign=one-dumb-argument http://www.workinglife.org/2014/10/09/one-dumb-argument/#comments Thu, 09 Oct 2014 16:45:33 +0000 http://www.workinglife.org/?p=9522 You may have read about the lawsuit against Amazon, demanding workers be paid for the time they have to stand in line for post-work security screenings. Sometimes lawyers are really dumb. Like here.

Yeah, this is really going to happen:

“The allegations here are not that this process takes 25 minutes,” he said. “It can take up to 25 minutes if you’re in the very back of the line. And I think one of the many reasons not to adopt their rule is you don’t want to create an incentive for every employee to try to get to the back of the line, which is hardly going to speed things up.”

Because, at the end of a long day in a warehouse, some guy is going to want to hang around rather than get the hell out of work and go home. I mean that’s really dumb.

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The U.S. Leading The Way? Sure…To Poverty For Millions http://www.workinglife.org/2014/10/08/the-u-s-leading-the-way-sure-to-poverty-for-millions/?utm_source=rss&utm_medium=rss&utm_campaign=the-u-s-leading-the-way-sure-to-poverty-for-millions http://www.workinglife.org/2014/10/08/the-u-s-leading-the-way-sure-to-poverty-for-millions/#comments Wed, 08 Oct 2014 14:47:58 +0000 http://www.workinglife.org/?p=9517 For all the bemoaning about the the lack of bi-partisanship and abundant political rancor, there is one thing both political parties just revel in: the rah-rah cheering over the notion that the United States is Number One in the world and leading the pack. Well, facts are a bitch, especially when it comes to the reality: globally, the U.S. is leading the way in charting a path of harshness, austerity, and poverty for millions.

The facts come in a huge report just issued yesterday by the International Labor Organization (ILO) called “World Social Protection Report 2014-15: Building economic recovery, inclusive development and social justice”. Weighing in at a hefty 364 pages (with detailed charts and stats), it’s easy to drown in its analytical language and miss the big picture so I’ve pulled out just a few pearls to tell a story.

The report is one thing, even if the ILO, because its partners include employers and government, has to be diplomatic (so it has people like me to be not so diplomatic): it’s a chronicle of economic warfare against workers, a lot of stupidity and the triumph of ideology and greed over basic decency and economic sense. It’s an indictment of the failure of governments and the failure of the so-called “free market”

What else can you say when we live in a time of the greatest combined generation of wealth in human history but:

Only 12 percent of workers globally receive unemployment pay.

24 percent of people in Europe–123 million people–live in poverty.

51 percent of people receive a pension but most can’t live on that pension.

How did this happen? Not like a natural phenomena, like the sun rising in the east:

In 2014, 122 countries are limiting their public expenditures in terms of GDP, at a time when populations are most in need. Fiscal consolidation measures have contributed to increases in poverty and social exclusion in several high-income countries, adding to the effects of persistent unemployment, lower wages and higher taxes. The resulting depressed household income levels are jeopardizing domestic consumption and demand, and slowing down recovery.

This is the stupidity–no, madness–some of us have written about for a number of years: after the greed and irresponsibility of the financial elites crashed the entire global economy, destroying the livelihoods of tens of millions of people and obliterating trillions of dollars in wealth (a crime for which bankers did not serve with jail time and not only were never shown the door but kept their jobs with higher pay and perks), governments should have been spending more for jobs.The opposite happened.

Austerity (“fiscal consolidation”) was the order of the day.

So, it should not be surprising that, every few months, there is yet another rumbling in the economic data showing that the economy is not healthy or growing.

So, back to where I started: the U.S.

These two charts tell an important story (I’ve added the arrows and apologies for the small size). The first chart is one for “non-health public  social protection expenditure for people of working age” which basically means unemployment benefits, employment injury benefits, disability benefits and maternity protection. The second chart is “public social protection expenditure on child and family benefits (excluding health)”:

And:

Both charts show the percentage of gross domestic product a country spends–which is a reflection of the value a country places on these protections.The U.S. certainly leads the way…to the bottom. It ranks in the bottom third in both categories among high-income countries. In employment protection, below such powerhouses as Estonia, Slovakia, the Czech Republic, Cyprus, Poland, Croatia and, uh, the Russian Federation. On kids and families, it stares up at Luxembourg, Lithuania, Malta and, of course, the great challenger to U.S. global dominance…Aruba–though, in fairness, the U.S. does outpace the global killer “B”s…Barbados, Bahamas and Bahrain.

So, every time you hear some politician invoke his or her love for children or the sanctity of the family and parenting, stick the above charts in his or her face.

This is the tragedy: there cannot be a decent global society, with decent work for all, if the largest economy in the world is a laggard and is pulling the rest of the world down to a lower level of fairness.

At the UN briefing on the report, I heard one sentence sum this up. It came from Selim Jahan, director of the Human Development Report Office. He said: “Social protection is a development issue, not a welfare issue”.

Meaning, decent work, and all the things that come with it, are not handouts or some safety net for marginalized people.

It’s all stuff you need to have a thriving economy.

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The Beast Just Can’t Help It http://www.workinglife.org/2014/10/07/the-beast-just-cant-help-it/?utm_source=rss&utm_medium=rss&utm_campaign=the-beast-just-cant-help-it http://www.workinglife.org/2014/10/07/the-beast-just-cant-help-it/#comments Wed, 08 Oct 2014 01:05:34 +0000 http://www.workinglife.org/?p=9515 This is just a renegade company that can’t help itself. Greed is endemic.

Via Reuters:

Wal-Mart Stores Inc, the biggest U.S. private sector employer, said on Tuesday that its 1.3 million workers would have to pay more for healthcare and it would end benefits for some part-time staff in a move that could prompt other companies to follow suit.

The world’s largest retailer said it would raise health insurance premiums for its entire U.S. workforce beginning in January. In addition, Wal-Mart will end coverage for employees who work fewer than 30 hours a week, a change that will impact 2 percent of U.S. workers, or about 30,000 people.

And just so we don’t forget: the four Walton heirs–Christy, Alice, Rob and Jim–are four of the top ten richest Americans, according to Forbes, with a collective net worth of $144 billion.

Disgusting doesn’t begin to describe this.

 

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Social Security Media Stupidity #5,423: This Time Courtesy of Washington Post http://www.workinglife.org/2014/10/06/social-security-media-stupidity-5423-this-time-courtesy-of-washington-post/?utm_source=rss&utm_medium=rss&utm_campaign=social-security-media-stupidity-5423-this-time-courtesy-of-washington-post http://www.workinglife.org/2014/10/06/social-security-media-stupidity-5423-this-time-courtesy-of-washington-post/#comments Mon, 06 Oct 2014 20:14:20 +0000 http://www.workinglife.org/?p=9513 I am sort of used to the foolishness spewed by the transcribers of press releases (formerly known as “journalists) when it comes to Social Security. “The sky is falling, the sky is falling” is roughly the hysteria pouring out of their mouths. But, well, it’s important to keep after them because, well, ten people still listen to Fred Hiatt at the Washington Post.

Hiatt’s uninformed latest tirade came yesterday as he wrings his hands about some mythical “debt crisis” which, concern troll that he is, will threaten Social Security:

Federal debt has reached 74 percent of the economy’s annual output (GDP), “a higher percentage than at any point in U.S. history except a brief period around World War II,” the CBO says, “and almost twice the percentage at the end of 2008.” With no change in policy, that percentage will hold steady or decline a bit for a couple of years and then start rising again, to a dangerous 78 percent by 2024 and an insupportable 106 percent by 2039.

And:

Meanwhile, with the population aging and costs still rising, payments for Social Security and health programs including Medicare and Obamacare also will soar, the CBO estimates. By 2039 those programs will consume 14 percent of GDP, again double the average of the past 40 years. That’s taking into account the good news that Podesta heralded in his tweet.Put those together and the government will be spending on entitlement programs and interest alone just about what it spends today on the entire budget. Everything else — schools, pre-K, Pell grants, national parks, mass transit, housing subsidies — will get squeezed, or taxes will soar, or both.

Of course, no elite hysteria over the non-existent debt crisis is complete without bowing to the useless Simpson-Bowles Commission:

He created the Bowles-Simpson task force, which came up with recommendations to put the nation’s finances in order. But Obama and congressional Republicans couldn’t agree on the right mix of benefit cuts and revenue increases, and Bowles-Simpson was tucked on the shelf with a lot of other commission reports.

And, then, his final point:

The real choice for the Democratic Party is whether it settles in as a reactionary defender of ever-rising payments to the older generation, no matter how well off it is, or whether it will fight for a balance between protecting the elderly and boosting the next generation with the science, schools and infrastructure the country needs to be competitive.

So, I’ll first let Dean Baker eviscerate this stupidity:

It might help editorial page editor Fred Hiatt understand how the budget works. He is appalled because “reactionary defenders” of Social Security think that seniors should be able to get the benefits they paid for. (I wonder if it’s reactionary to think that Peter Peterson type billionaires should be able to get the interest on the government bonds that they paid for.)

Of the debt “crisis”, Dean says:

Yep, the debt is much higher today than in 2008, so what? Millions of people lost their jobs due to the collapse of the economy. The deficits of the last six years created demand that would not otherwise have been there. It led to more growth and put people back to work. To those in the real world, people losing their jobs and losing their homes, would be the big story. This means kids growing up with unemployed parents and maybe hustling from house to house or even living on the street. But hey, Fred Hiatt wants us to worry about the deficit in 2039.Just to be clear, the gloom and doom story is all Hiatt’s not CBO’s, although some readers may be confused by the presentation. There is no obvious negative consequence to a debt to GDP ratio of 74 percent, although readers can get that Fred Hiatt doesn’t like it. Nor is there any obvious negative consequence to a debt to GDP of 78 percent by 2024, even if Fred Hiatt calls it “dangerous.”

And the assertion that a debt to GDP ratio of 106 percent is insupportable is just Fred Hiatt’s invention. There are many countries that have much higher debt to GDP ratios today (Japan’s is more than twice as high) and continue to pay very low interest rates on long-term debt. In other words, Fred Hiatt is just like the little kid who who is worried about the monster under his bed when the lights are turned off. Undoubtedly it is very real to him, but when you turn on the lights you can see there is nothing there.

And on Social Security’s future, Dean nails it:

It’s worth making a couple of other points about Hiatt’s little tirade. First the scenarios assuming “no change in policy” for a quarter century are more than a little bizarre. We have never gone a quarter century or even five years with “no change in policy.”  We probably will want to raise taxes somewhere in the next quarter century. We don’t have to do that now or even plan for it now. The country has very real problems and need not be bothered by this silliness.As far as Social Security, if Hiatt could get a copy of the Trustees report he would see that under the law the program can only pay out benefits based on what has been paid in as taxes (this year and prior years, including interest). While this can vary in any given year (right now we are collecting more in revenue than we pay out in taxes), over the program’s life it is only authorized to pay benefits if it has collected the revenue in Social Security taxes.

This means that Social Security does not affect the rest of the budget unless Hiatt thinks that we should tell people that we are taxing them for Social Security and then use the money for wars in Iraq or elsewhere. That may sound like good fiscal policy at the Washington Post, but probably won’t sell well elsewhere.

The entire debt and deficit “crisis” has been entirely manufactured, as I wrote in “It’s Not Raining, We’re Getting Peed On: The Scam Of The Deficit Crisis”. But, the Hiatts of the world keep repeating a phony crisis…There is no debt crisis. Never has been. And nothing remotely on the horizon suggests there will be.

Come to think of it, maybe it would be better to assign Hiatt to the Ebola hysteria beat–and hire Alan Simpson and Erskine Bowles to chair a useless Commission on the topic.

Hiatt’s column does give me a chance to invoke the memory of Molly Ivins, who once said, of former Republican House Majority leader Dick Armey, “If ignorance ever goes to $40 a barrel, I want drillin’ rights on that man’s head.”

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The Phony Jobs Report Hype, A Very Sick Economy & Millions of Workers Who Don’t Count http://www.workinglife.org/2014/10/03/the-phony-jobs-report-hype-a-very-sick-economy-millions-of-workers-who-dont-count/?utm_source=rss&utm_medium=rss&utm_campaign=the-phony-jobs-report-hype-a-very-sick-economy-millions-of-workers-who-dont-count http://www.workinglife.org/2014/10/03/the-phony-jobs-report-hype-a-very-sick-economy-millions-of-workers-who-dont-count/#comments Fri, 03 Oct 2014 13:54:36 +0000 http://www.workinglife.org/?p=9511 This was almost predictable: the traditional media, and too many bloggers who regurgitate what they read in the traditional media, are buying into the “rebound” in the economy because of today’s Labor Department report; the stock market goes up; and, I’m certain, pretty soon, the White House will be taking credit for all this and, subtly or not so subtly, arguing that, see, aren’t we great, vote for us. It’s nonsense.

So, here is the visual to remember:

That chart does not reflect the 5.9 percent number being touted today–but the point is still the same: we have a very sick economy where people cannot find meaningful, solid, decent-paying work and are dropping out of the workforce.As Dean Baker of the Center for Economic and Policy Research points out, in an email just landing in my inbox:

…there was no change in the employment-to-population ratio which remained fixed at 59.0 percent. In fact, labor force participation fell by 0.3 percentage points for white men in September and 0.2 percentage points for white women.

Even the centrist, Clinton-Administration-in-waiting-awash-in-corporate-donations, free-market-cheerleaders, the Center for American Progress said yesterday:

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

And:

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its postrecession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 3 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty-three percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about seven-and-a-half months, almost double what it was before the recession.[emphasis added]

Back to Dean Baker:

The number of people involuntarily employed part-time by fell 174,000 to 7,103,000. This is extraordinarily high given the unemployment rate. The number of people choosing to work part time rose slightly and now stands 642,000 above its year-ago level. This presumably is the result of people taking advantage of Obamacare and getting insurance through the exchanges or expanded Medicaid rather than their employers.[emphasis added]

So, this means:A persistent, large core of workers–real people–are in part-time jobs because they can’t find full-time work. This is a trend that goes back way before the financial crisis. It is, in fact, the result of a conscious corporate decision to REDUCE the number of full-time, good-paying jobs, and to work off of part-time workers.

It means more people have dropped out of the job market, over time, because it’s just too damn depressing to look for real, meaningful, stable work.

What really has happened here is that the frame has shifted. For example, when elites, including Democrats, talk about “full employment”, they mean 5.5 percent or so–which, back in the day, would be seen as unconscionably high; full employment, at worse, was pegged at 4 percent (and could probably go a bit lower).

But, there is an acceptance of a certain level of desperation now and exploitation that would have been seen as immoral say 30-40 years ago.

In my opinion, it is much more helpful, for the sake of long-term political chance, to challenge the chatter of these jobs reports, pointing out the realities facing millions of people.

The economy is very sick because people can’t make a decent living. This is not recovery.

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“Corporate U.S. Healthiest in Decades Under Obama”, Though The People Are F***ED http://www.workinglife.org/2014/10/02/corporate-u-s-healthiest-in-decades-under-obama-though-the-people-are-fed/?utm_source=rss&utm_medium=rss&utm_campaign=corporate-u-s-healthiest-in-decades-under-obama-though-the-people-are-fed http://www.workinglife.org/2014/10/02/corporate-u-s-healthiest-in-decades-under-obama-though-the-people-are-fed/#comments Thu, 02 Oct 2014 18:25:37 +0000 http://www.workinglife.org/?p=9509 For Corporate America, it’s “Morning in America”, babe. Time to party, break out the champagne, lock in a little trip on the Gulfstream to the South of France. For the rest of the people, oh, well, nose to the grindstone–it’s as dark as can be.

The headline in the business press–Bloomberg–is all cheery: “Corporate U.S. Healthiest in Decades Under Obama With Lower Debt”. The top-line message:

Corporate and economic statistics almost six years into his administration paint a different picture. Companies in the Standard & Poor’s 500 (SPX) Index are the healthiest in decades, with the lowest net debt to earnings ratio in at least 24 years, $3.59 trillion in cash and marketable securities, and record earnings per share. They are headed this year toward the fastest average monthly job creation since 1999, manufacturing is recovering and the U.S. has returned as an engine for global growth. The recovery, which stands in contrast to weak growth in Europe and Asia, has underpinned an almost threefold gain in the Standard & Poor’s 500 Index since March 2009.

And:

In total, S&P 500 profit as measured by Ebitda — earnings before interest, taxes, depreciation and amortization — increased to $1.84 trillion for the 12 months through the end of last quarter from $1.2 trillion in 2009.The jump in earnings has meant that companies can service their debt more easily. In the six years since Obama became president, corporate debt as measured against earnings has fallen to the lowest point since at least 1990. For companies in the S&P 500, the ratio of net debt to Ebitda is currently 1.6, down from a high of 4.9 in 2003, according to data compiled by Bloomberg.

That ratio, a marker of corporate health, has also been helped by the cash that companies are piling up. Those holdings for S&P 500 companies have jumped to $3.59 trillion from $2.28 trillion four years ago, a build-up that lowers their net debt.

“When I came into office, our economy was in crisis.” Obama said in an interview aired Sept. 28 on CBS television’s “60 Minutes.” Now, in addition to a lower unemployment rate and a cut in federal deficits, “corporate balance sheets are probably the best they’ve been in the last several decades.”

One problem. Corporate balance sheets don’t tell you how well the people are doing, Mr. President. And, if you don’t understand that, then, you continue to be confused by the lack of enthusiasm for Democrats and the reason you don’t get “credit” for a “good economy.”Yes, the economy was in crisis when you came into office–thanks to the very bankers who you and Eric Holder refused to either jail or force out of their jobs in return for **taxpayer bailout money**. And you handed trillions of dollars to banks–but very little of that trickled down to people. And the system has not really changed.

So, though corporations may be cheering, people don’t feel very good:

Consumer confidence fell in September for the first time in five months, and home prices in July rose less than expected from a year earlier, underscoring the unsteady nature of United States growth.Another report on Tuesday showed that business activity growth in the Midwest slowed slightly in September.

“We’re continuing to effectively struggle,” said Mike Englund, chief economist at Action Economics. “Some of the optimism that we got in the updraft in consumer confidence in the third quarter was probably a bit overstated.”

It is a sign of how pathetic the debate has become that Democrats run around trumpeting a drop in the unemployment rate to 6.1 percent–a rate that once upon a time was considered very high, in the good old says when Democrats might have campaigned for FULL EMPLOYMENT (as an aside, “full employment” is still the legal mandate for the Federal Reserve Board, along with price stability, not that anyone ever tries to hold the Fed to a FULL EMPLOYMENT goal…but I digress).It isn’t that the people are stupid and need reminding that somehow the facts, when repeated in presidential speeches, are that, snap out of it, all is rosy.

This is the graph that should be tattooed on the president’s head:

attribution: None Specified

The bottom line is this: the hurt to people is 50 percent worse than what the official unemployment number that corporate America and the White House and other keep using.Because the people in the corporate suites, the talking heads, the analysts, the president, the White House operatives–this isn’t their life.

None of those people are among the millions of people who just have given up–the same people who, wow, don’t have much confidence in the economy.

Why is this a fucking hard idea to get?

As I wrote the other day, just in the G20 countries alone, there is a gap of tens of millions of jobs–it will be 63 million by 2018.

The message is pretty clear, as the International Trade Union Confederation argued recently, and I wrote here: All your fancy stats about corporate balance sheets don’t mean shit if people don’t have higher wages, and 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.

People don’t have money, and whatever dollars they earn goes to pay down debt because they are freaked out that another financial crisis could come again.

Wake the fuck up.

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Your Taxes Went Up…Yawn…Shrug…Good News For Social Security!!! http://www.workinglife.org/2014/10/01/your-taxes-went-up-yawn-shrug-good-news-for-social-security/?utm_source=rss&utm_medium=rss&utm_campaign=your-taxes-went-up-yawn-shrug-good-news-for-social-security http://www.workinglife.org/2014/10/01/your-taxes-went-up-yawn-shrug-good-news-for-social-security/#comments Wed, 01 Oct 2014 18:24:21 +0000 http://www.workinglife.org/?p=9507 In case you didn’t notice, your taxes went up at the beginning of 2013–and you probably didn’t notice. Nor did most of the country. And that’s a good thing for Social Security.

My friend Dean Baker over at the Center for Economic and Policy Research slipped this quiet analysis out:

In January of 2013 nearly every worker in the country saw their payroll tax increase by 2.0
percentage points. The payroll tax holiday that had been put in place at the start of 2011 ended in December of 2012, leading to a jump in the Social Security tax from 10.4 percent to 12.4 percent of earnings up to the taxable limit.This was an extraordinarily large increase in the payroll tax. Past increases had generally been phased in gradually. For example, from 1980 to 1990 the tax rate was increased by a total of 2.24 percentage points; however in no year did the rate rise by more than 0.72 percentage points, just over one-third of the 2013 increase. If the public was strongly opposed to any tax increases, it would be expected that one as large as the 2013 rise in the Social Security tax would lead to considerable anger, especially given the weakness of the labor market which was s till very much feeling the impact of the 2008-2009 recession at that point.

This is why it was striking to find that most people responding to a 2013 Google Consumer Survey apparently did not even know that their payroll taxes had been increased at the
start of the year. The poll asked respondents whether at the beginning of the year their Social Security taxes were raised, lowered, left the same, or don’t know. (See the appendix for a full description of the methodology.) A majority of respondents answered that they didn’t know what had happened to their payroll taxes at the start of the year. Only 28.9 percent correctly answered that their taxes had gone up.[emphasis added]

And this is important in this sense: while Social Security is solvent and can pay benefits many years down the road, at some point, there needs to be tax hikes to make up shortfalls to avoid benefit cuts, particularly if we increase Social Security benefits–which many of us believe should be done. I’m all for increasing the payroll taxes for the very wealthy but, based on the recent experience, people won’t scream or even feel a slight increase in the payroll tax, particularly if it means HIGHER benefits.

As Dean says:

These poll results suggest that the public may not be especially adverse to modest increases in the payroll tax, since they may not even notice them. This supports the findings of other polls that indicate most Americans favor strengthening Social Security
through revenue increases such as raising the program’s tax rate. This would be especially likely if the tax increases occurred in the context of rising real wages. (The Social Security Trustees project that real average hourly compensation will rise by more than 60 percent over the next three decades.) If most workers see their wages rise in step with average compensation over the next three decades, then even an increase of 2-3 percentage points in the payroll tax would not prevent them from enjoying far higher standards of living at the end of this period than they do today.

Worth remembering: people don’t mind taxes if they are for the right thing.

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