“The Middle Class Doesn’t Write Big Checks”: The Bottom 90 Percent Have Disappeared And Have No Voice In Washington
So how to explain this paradox?
As of November 1 more than 47 million Americans have lost some or all of their food stamp benefits. House Republicans are pushing for further cuts. If the sequester isn’t stopped everything else poor and working-class Americans depend on will be further squeezed.
We’re not talking about a small sliver of America here. Half of all children get food stamps at some point during their childhood. Half of all adults get them sometime between ages 18 and 65. Many employers – including the nation’s largest, Walmart – now pay so little that food stamps are necessary in order to keep food on the family table, and other forms of assistance are required to keep a roof overhead.
The larger reality is that most Americans are still living in the Great Recession. Median household income continues to drop. In last week’s Washington Post-ABC poll, 75 percent rated the state of the economy as “negative” or “poor.”
So why is Washington whacking safety nets and services that a large portion of Americans need, when we still very much need them?
It’s easy to blame Republicans and the rightwing billionaires that bankroll them, and their unceasing demonization of “big government” as well as deficits. But Democrats in Washington bear some of the responsibility. In last year’s fiscal cliff debate neither party pushed to extend the payroll tax holiday or find other ways to help the working middle class and poor.
Here’s a clue: A new survey of families in the top 10 percent of net worth (done by the American Affluence Research Center) shows they’re feeling better than they’ve felt since 2007, before the Great Recession.
It’s not just that the top 10 percent have jobs and their wages are rising. The top 10 percent also owns 80 percent of the stock market. And the stock market is up a whopping 24 percent this year.
The stock market is up even though most Americans are down for two big reasons.
First, businesses are busily handing their cash back to their shareholders – buying back their stock and thereby boosting share prices – rather than using the cash to expand and hire. It makes no sense to expand and hire when most Americans don’t have the money to buy.
The S&P 500 “Buyback Index,” which measures the 100 stocks with the highest buyback ratios, has surged 40 percent this year, compared with a 24% rally for the S&P 500.
IBM has just approved another $15 billion for share buybacks on top of about $5.6 billion it set aside previously, thereby boosting its share prices even though business is sluggish. In April, Apple announced a $50 billion increase in buybacks plus a 15% rise in dividends, but even this wasn’t enough for multi-billionaire Carl Icahn, who’s now demanding that Apple use more of its $170 billion cash stash to buy back its stock and make Ichan even richer.
Big corporations can also borrow at rock-bottom rates these days in order to buy back even more of their stock — courtesy of the Fed’s $85 billion a month bond-buying program. (Ichan also wants Apple to borrow $150 billion at 3 percent interest, in order to buy back more stock and further enrich himself.)
The second big reason why shares are up while most Americans are down is corporations continue to find new ways to boost profits and share prices by cutting their labor costs – substituting software for people, cutting wages and benefits, andpiling more responsibilities on each of the employees that remain.
Neither of these two strategies – buying back stock and paring payrolls – can be sustained over the long run (so you have every right to worry about another Wall Street bubble). They don’t improve a company’s products or customer service.
But in an era of sluggish sales – when the vast American middle class lacks the purchasing power to keep the economy going – these two strategies at least keep shareholders happy. And that means they keep the top 10 percent happy.
Congress, meanwhile, doesn’t know much about the bottom 90 percent. The top 10 percent provide almost all campaign contributions and funding of “independent” ads.
Moreover, just about all members of Congress are drawn from the same top 10 percent – as are almost all their friends and associates, and even the media who report on them.
Get it? The bottom 90 percent of Americans — most of whom are still suffering from the Great Recession, most of whom have been on a downward escalator for decades — have disappeared from official Washington.
By: Robert Reich, RobertReich.org, Published in Salon, November 1, 2013
“Show Your Invisible Hand”: The SEC Should Make Corporations Disclose Political Contributions
A core assumption of the Supreme Court’s opinion in 2010’s troubling Citizens United case, which broadened corporations’ abilities to use their money for political purposes, was that shareholders could decide for themselves whether they agreed with the ways that money was being spent.
According to Justice Anthony Kennedy, who delivered the opinion for the Court, “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.”
The problem with this particular assumption, which economists call perfect information, is that corporations are — surprise surprise — not legally obligated to share information on political spending with their shareholders or the public. In August 2011, a group of high-profile law professors filed a petition with the Securities and Exchange Commission, calling on the agency to require public companies to disclose what corporate resources they spend on political activities because “most political spending remains opaque to investors in most publicly traded companies.”
Why do companies spend money on politics? The answer seems obvious: they want to generate profits. They are seeking advantages like reduced trade barriers, government contracts, easier regulatory inspections, and lower tax rates. For more on this point, see my colleague Tom Ferguson’s recent paper with Paul Jorgensen and Jie Chen, which reveals how “Too Big to Fail” Wall Street firms and telecom companies have captured the GOP and the Democrats, respectively. (As an aside, isn’t it odd that the same companies orchestrating the expansion of the surveillance state are so concerned about their own privacy?)
But there is sufficient research to suggest there is another, more covert reason that has serious consequences for shareholders. In my recently published Roosevelt Institute paper on the costs and benefits of this disclosure rule, I cite several studies that show corporate executives frequently spend on politics for their own personal advantage rather than the company’s bottom line. These personal benefits include things like prestige, a future political career, star power, or assistance for political allies.
With these kinds of distorted incentives, the lack of information available to the public about corporate political spending puts shareholders and potential investors at enormous risk. Why would they want to invest in a company that is undertaking activities that are more likely to benefit its executives than its investors? Requiring corporations to disclose their political spending, on the other hand, would do the following:
—Enable investors to make informed investment decisions. Good information is always key to helping potential shareholders calculate the risk they are taking by investing in a company or helping current shareholders decide if they want to hold on to a company’s stock.
—Create the motivation for corporate executives to focus less on their own personal benefit and more on the political spending that would increase shareholder wealth. By disclosing their political activities, corporate executives would have less of an opportunity to waste company resources for their own advantage.
—Benefit corporations that already share their political spending information. Research suggests companies that already disclose SEC-required information enjoy a bump in stock returns when the particular rule is put in place.
Two years after the lawyers submitted their petition, File No. 4-637 is finally on the SEC’s official agenda and support for the disclosure rule is overwhelming. Recent polling finds that 79 percent of surveyed Republicans and nearly 100 percent of Democrats support the rule, and more than 600,000 public comments supporting the rule have been submitted to the SEC. Major institutional investors are also in agreement. Former Vanguard mutual fund CEO John C. Bogle, six state treasurers, CalPERS and other pension funds, and many more are also in support. The rule also has the endorsement of small-business owners across the country, as large companies have a competitive advantage over smaller businesses because of their ability to influence lawmakers and agencies through campaign contributions and lobbying.
The pushback against disclosure is typically about the costs of disclosure. But companies already have to document their political spending for the IRS, so the additional cost would be, at most, the few hours it would require an employee to copy and paste data from an internal file into a public one. Furthermore, companies already submit annual forms to the SEC. The political spending information would simply be a few additional lines of text added to these forms.
A more valid concern about this rule is that, if companies are required to disclose this information to the SEC, the information could be exploited by their competitors and harm the companies’ bottom line. But corporate political activities are already well known among industry competitors. In fact, sometimes political spending is even coordinated among industry groups. The people who are actually excluded from this information are the ones who need it most: investors.
At a briefing held this past Wednesday organized by the Corporate Reform Coalition, Senators Elizabeth Warren (D-MA) and Robert Menendez (D-NJ) called for the SEC to finally adopt this important rule. “There is no excuse,” said Warren, “There is no reason […] for saying a corporation wants to be able to spend shareholders’ money and not tell shareholders how that money is being spent.”
By: Susan Holmberg, The National Memo, November 1, 2013
“In The Name Of Creating Jobs”: Corporations Are Hijacking Government With GOP Help And At Taxpayer Expense
After being swept into statehouses in the red wave of 2010, Republican Govs. Scott Walker, John Kasich and Terry Branstad each presided over the replacement of a state agency responsible for economic development with a less public, more private alternative. Arizona’s Jan Brewer did the same in 2010 after replacing Janet Napolitano, who’d been tapped for Obama’s Cabinet. Walker’s Wisconsin, Kasich’s Ohio, Branstad’s Iowa and Brewer’s Arizona were only the latest to institute a “public-private partnership” approach to development: States including Indiana, Florida, Rhode Island, Michigan and Texas had done the same years earlier. Now North Carolina’s Pat McCrory, who entered the governor’s mansion in January, aims to do the same. A new report from a progressive group warns that means good news for the wealthy and politically connected, but bad news for just about everyone else.
“Privatization augurs against transparency …” Good Jobs First executive director Greg LeRoy told Salon. LeRoy is a co-author of the new report “Creating Scandals Instead of Jobs: The Failures of Privatized State Economic Development,” which his group released Wednesday afternoon. Based on recent years’ scandals and controversies in several states, the authors conclude that “the privatization of economic development agency functions is an inherently corrupting action that states should avoid or repeal.” They argue the record shows that “privatization was not a panacea,” but instead fostered misuse of taxes; excessive bonuses; questionable subsidies; conflicts of interest; specious impact claims; and “resistance to accountability.” Goods Jobs First funders include unions and foundations.
A spokesperson for Gov. Kasich emailed Salon a one-sentence take on the report: “We don’t pay much attention to politically motivated opponents whose mission is to combat job creation.”
Kasich promised as a candidate to substitute a new entity, led by “a successful, experienced business leader,” for the existing Ohio Department of Development. The result, JobsOhio, features prominently in the GJF report. The authors note that its board included some of Kasich’s “major campaign contributors and executives from companies that were recipients of large state development subsidies.” They write that JobsOhio “received a large transfer of state monies about which the legislature was not informed, intermingled public and private monies, refused to name its private donors, and then won legal exemption (advocated by Gov. Kasich) from review of its finances by the state auditor.”
The authors also fault the Arizona Commerce Authority, whose first head reaped a privately paid $60,000 bonus and resigned after one year; and the Wisconsin Economic Development Corp., which they charge has been “racked by scandals and high-level staff instability.” They cite accusations against WEDC including spending millions in federal funds “without legal authority”; failing to “track past-due loans”; and having “hired an executive who owed the state a large amount of back taxes.” LeRoy told reporters on a Wednesday conference call that, of the four newest public-private partnerships, Iowa’s was the only one to so far avoid significant scandal.
The report also slammed some of those four entities’ predecessors, including the Indiana Economic Development Corp. – GJF noted “a state audit found that more than 40 percent of the jobs promised by companies described by IEDC as ‘economic successes’ had never materialized” – and Enterprise Florida Inc.: while “more than $20 million in subsidies has gone to EFI board member companies,” in 2011 the Orlando Sentinel “reported that since 1995 only one-third of 224,000 promised jobs materialized.”
Gov. Scott’s office referred an inquiry to Enterprise Florida Inc., whose strategic communications director emailed that the group’s “efforts have resulted in an increase of competitive jobs projects established, private-sector jobs created and capital investment.” He noted that EFI “has received a clean opinion on its financial statements as conducted by its independent auditors and presented to EFI’s Board of Directors.” The offices of Govs. Walker, Brewer and Pence did not immediately respond to Wednesday evening inquiries.
“If we don’t know how the money’s spent, if we don’t get accurate assessments of the outcomes that we accept from our economic development subsidies or support, then there’s no way for us to evaluate the job they’re doing,” Donald Cohen, who leads the foundation- and labor-backed privatization watchdog In the Public Interest, told reporters on Wednesday’s call. “It’s fundamental to being able to manage our resources.” Cohen added, “When we’re talking about giving away the power and authority to give away public dollars, to make public decisions, then it is all the more important that public control be established in the strongest possible way.”
By “mingling private money or having board seats for sale,” LeRoy told reporters, public-private partnerships are “giving undue influence to a tiny share of mostly large companies that can afford to pay and play, potentially to the detriment of the focus of the entity.”
“You want people who are covered by ethics and disclosure and sunshine laws and oversight,” said LeRoy. “We know that government agencies aren’t perfect, but they by far are more accountable.” He also argued that public sector collective bargaining – which came under high-profile attack by Walker and Kasich – was also a check against abuse, because it “helps shield whistle-blowers and protect taxpayers.”
While GJF has proposed various safeguards for public-private economic development groups, it emphasized that its first choice would be for states to simply return their functions to fully public departments. “The economy is soft right now – we need to focus on the basics,” said LeRoy, rather than “tweaking the rules of a captive entity that co-mingles public and private money to get into all of these sort of gray areas.”
By: Josh Eidelson, Salon, October 24, 2013
“The Monster They Created”: Can Corporate America Break The Republican Radical Right?
Back in the early 1970s, corporate America got together and developed a plan of action to combat the takeover of America by what they saw as an unremittingly radical left. If we don’t act and get politically engaged, these corporate titans said, this country is going down the chute.
Forty years later, corporate America beholds the monster it created. And now, these same institutions need to step up and rein in an unremittingly radical right. Only they can stop this nonsense, and it will take an effort as concerted and well-organized as the one they undertook in the 70s.
Here’s what happened then. In the 1960s and early 70s, a good chunk of America’s corporate elite really did feel that the free-enterprise system was under threat. In 1971, the U.S. Chamber of Commerce asked Lewis Powell, then a corporate lawyer in Richmond who would soon be nominated to the Supreme Court by Richard Nixon, to tell them how to save America. The result was the famous Powell memo, which urged the Chamber to start fighting back to protect the system before it was too late in the following arenas: on college campuses; in the media; in the courts; at stockholder and shareholder meetings; and in the political realm.
There’s been a lot of interesting debate over the years about how important the Powell memo really was. But whatever centrality one accords it, the fact is that it was right around then that conservatism really started to organize itself politically. The major think tanks got off the ground (Heritage in 1973), or, in other cases like the American Enterprise Institute, were transformed into something much more overtly political. Several media-monitoring outfits were started (Google the name Reed Irvine, if you weren’t around in those days). Groups were created to train young conservatives and fund right-wing campus newspapers. By 1980, they helped elect a president, feed him appointees and judicial nominees (the Federalist Society started in 1982), and create much of his policy agenda. Today, this organized right-wing infrastructure spends more than $300 million a year on politics.
But now, as we’re seeing, the corporatists’ biggest problem isn’t the left. It’s the right—the nativist and ideological right that no longer wants to listen to them. It was encouraging last week to see officials from the Chamber, the National Retail Federation, and other organizations vent their frustrations to the New York Times and vow that they are going to get involved in Republican primaries to try to defeat some crazies.
And it’s great to hear Tom Donohue, the head of the chamber, say things like these remarks, which he recently made on C-SPAN: “You’ve got to go into the primaries not just to affect this race or that but to send a message on who we are and what we believe. We want to get a better result for the American people and get people there who give the arguments a fair shake.” His ultimate goal, said Donohue, is a “more governable Republican Party.”
Hallelujah to that. But the Chamber and the others are going to have to put lots of money behind this. And they’re going to have to dig in for lengthy trench warfare. Can they reach, and energize, the half of the GOP electorate that isn’t driven by resentment? The half that’s conservative, which is fine, but not boiling over with rage? The half that would accept and embrace an immigration-reform bill and investments in infrastructure, as the Chamber does, even though Barack Obama wants them, too?
This is the biggest political issue of our time. Others are close—the corrupt hold of money on our system is admittedly a pretty close second. But this is the biggest one, because a reasonable GOP would make the country governable again. A critical mass of conservative compromisers, with maybe a few genuinely moderate Republicans thrown in, would end this dysfunction more quickly than anything else.
And the only way for that to happen is for Republican officeholders to fear that segment of the GOP electorate more than they fear the radical segment. That’s going to take a long time and lot of money and organization. But we do know from polls that those Republican voters exist. They’re just intimidated right now.
But to lead this fight, the Chamber needs to see it in just the historical terms I’ve laid out. It’s 1971 all over again. Who is the Lewis Powell who will save corporate America from the rage machine it helped create?
By: Michael Tomasky, The Daily Beast, October 14, 2013
“A Stash Of Riches”: Walmart Getting Ahead On The Backs Of Others
Having been raised in a small-business family and now running my own small outfit, I always find it heartwarming to see hardworking, enterprising folks get ahead.
So I was really touched when I read that, even in these hard times, one extended family with three generations active in their enterprise is hanging in there and doing well. Christy, Jim, Alice, Robbie, Ann and Nancy are their names — and with good luck and old-fashioned pluck, they have managed to build a fairly sizeable family nest egg. In fact, it totals right at $103 billion for the six of them. Yes, six people, 100-plus billion bucks. That means that these six hold more wealth than the entire bottom 40 percent of American families — a stash of riches greater than the combined wealth of some 127 million Americans.
How touching is that?
The “good luck” that each of them had is that they were either born into or married into the Walton family, which makes them heirs to the Walmart fortune. That’s where the “pluck” comes in, for the world’s biggest retailer plucks its profits from the threadbare pockets of low-wage American workers and impoverished sweatshop workers around the world.
Four of the Walton heirs rank as the 6th, 9th, 10th and 11th richest people in our country, possessing a combined net worth of $95 billion. But bear in mind that “net worth” has no relationship to worthiness — these people did nothing to earn their wealth; they just inherited it. And, as Walmart plucks more from workers, the heirs grow ever luckier. In recent years, while the wealth of the typical family plummeted by 39 percent, the Waltons saw their wealth grow by 22 percent — without having to lift a finger.
How odd then that the one-percenters (on in this case, the 1/100-of-one-percenters) are hailing themselves as our country’s “makers,” while snidely referring to workaday people as “takers.” With the Waltons, it’s the exact opposite.
Indeed, you’d think that the Bentonville billionaires would realize that their fortunes are tied directly to these disparages. Apparently, they’re unaware that America’s economic recovery cannot truly be measured in the performance of the stock market but instead should be gauged by the sock market.
Most economists, pundits and politicos see today’s boom in stocks and say: “See, the recovery is going splendidly!” But they should go to such stores as Kohl’s, Target and even the Waltons’ very own Walmart and find out what’s selling. The answer would be socks. Even in the present back-to-school season (usually the second-biggest buying spree of the year), sales are sluggish at best, with customers foregoing any spending on their kids except for socks, underwear and other essentials.
This is not only an economic indicator but also a measure of the widening inequality in America. The highly ballyhooed “recovery” has been restricted to the few at the top who own nearly all of the stocks, get paychecks of more than $100,000 a year and shop at upscale stores. But meanwhile, the many don’t have any cash to spare beyond necessities. Walmart’s chief financial officer seems puzzled by this reality. There is, as he put it last week, “a general reluctance of customers to spend on discretionary items.”
Golly, sir, why are those ingrates reluctant? Could it be because job growth in our supremely wealthy country has been both lackluster and miserly? Yes — jobs today are typically very low paying, part-time and temporary with no benefits. Mr. Walmart-man should know this, since his retail behemoth is the leading culprit in downsizing American jobs to a poverty level in order to further enrich those at the very top, including Christy, Jim, Alice, Robbie, Ann and Nancy. In recent months, corporate honchos at the Arkansas headquarters have directed Walmart managers not to hire at all or to concentrate on hiring temporary and part-time workers, while cutting the hours of many full-time employees
Since the Great Recession “ended” in 2009, Walmart has slashed 100,000 people from its U.S. workforce, even as it added some 350 stores. In addition, while the giant banked more than $4 billion in profit just in the last three months, the chieftains changed the corporate rules to make it harder and costlier for employees to get Walmart’s meager health care plan.
Yet, executives wonder why customers aren’t buying “discretionary” items. Hello — even your own workers can’t afford to buy anything in the store besides socks.
By: Jim Hightower, The National Memo, August 28, 2013
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