“Don’t Buy It”: The “Paid-What-You’re-Worth” Myth
It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs.
According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form.
“Paid-what-you’re-worth” is a dangerous myth.
Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.
Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.
The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.
Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.
By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top.
If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.
All told, the Street paid out a whopping $26.7 billion in bonuses last year.
Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail.
People who park their savings in these banks accept a lower interest rate on deposits or loans than they require from America’s smaller banks. That’s because smaller banks are riskier places to park money. Unlike the big banks, the smaller ones won’t be bailed out if they get into trouble.
This hidden subsidy gives Wall Street banks a competitive advantage over the smaller banks, which means Wall Street makes more money. And as their profits grow, the big banks keep getting bigger.
How large is this hidden subsidy? Two researchers, Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz, have calculated it’s about eight tenths of a percentage point.
This may not sound like much but multiply it by the total amount of money parked in the ten biggest Wall Street banks and you get a huge amount — roughly $83 billion a year.
Recall that the Street paid out $26.7 billion in bonuses last year. You don’t have to be a rocket scientist or even a Wall Street banker to see that the hidden subsidy the Wall Street banks enjoy because they’re too big to fail is about three times what Wall Street paid out in bonuses.
Without the subsidy, no bonus pool.
By the way, the lion’s share of that subsidy ($64 billion a year) goes to the top five banks — JPMorgan, Bank of America, Citigroup, Wells Fargo. and Goldman Sachs. This amount just about equals these banks’ typical annual profits. In other words, take away the subsidy and not only does the bonus pool disappear, but so do all the profits.
The reason Wall Street bankers got fat paychecks plus a total of $26.7 billion in bonuses last year wasn’t because they worked so much harder or were so much more clever or insightful than most other Americans. They cleaned up because they happen to work in institutions — big Wall Street banks — that hold a privileged place in the American political economy.
And why, exactly, do these institutions continue to have such privileges? Why hasn’t Congress used the antitrust laws to cut them down to size so they’re not too big to fail, or at least taxed away their hidden subsidy (which, after all, results from their taxpayer-financed bailout)?
Perhaps it’s because Wall Street also accounts for a large proportion of campaign donations to major candidates for Congress and the presidency of both parties.
America’s low-wage workers don’t have privileged positions. They work very hard — many holding down two or more jobs. But they can’t afford to make major campaign contributions and they have no political clout.
According to the Institute for Policy Studies, the $26.7 billion of bonuses Wall Street banks paid out last year would be enough to more than double the pay of every one of America’s 1,085,000 full-time minimum wage workers.
The remainder of the $83 billion of hidden subsidy going to those same banks would almost be enough to double what the government now provides low-wage workers in the form of wage subsidies under the Earned Income Tax Credit.
But I don’t expect Congress to make these sorts of adjustments any time soon.
The “paid-what-your-worth” argument is fundamentally misleading because it ignores power, overlooks institutions, and disregards politics. As such, it lures the unsuspecting into thinking nothing whatever should be done to change what people are paid, because nothing can be done.
Don’t buy it.
By: Robert Reich, The Robert Reich Blog, March 13, 2014
“And Idiots They Are”: Once Again, Conservative Media Treat Their Audience Like Idiots
Dinesh D’Souza is one of a number of people who has made a good living over the years trafficking in anti-liberal screeds, culminating in his book The Roots of Obama’s Rage and follow-on film 2016, in which he charges that President Stokely Charmi—excuse me, President Barack Obama is consumed with anti-white racism, hatred of America, and generalized fury because he’s living out the “Kenyan anti-colonialism” of the father he barely knew. It’s a story pitched to the deranged, but there’s a healthy market for that in the right, as we know.
So when D’Souza was charged by a U.S. Attorney with violating campaign finance laws with a straw donor scheme, it wasn’t surprising that some conservatives ran to his defense. You might think they’d take the opportunity to attack the law as unjust, particularly since D’Souza’s lawyer all but admitted his guilt, essentially saying that sure, he violated the law, but he only did so out of friendship for the candidate in question and not for corrupt purposes (“Simply put, there was no ‘quid pro quo’ in this case, nor was there even any knowledge by the candidate that Campaign Finance Rules may have been violated. Mr. D’Souza did not act with any corrupt or criminal intent whatsoever. He and the candidate have been friends since their college days, and at worst, this was an act of misguided friendship by D’Souza”). But no.
Instead, you get the conspiracy theories, which Ben Dimiero helpfully gathered here. Matt Drudge tweets, “They are going after the Obama critics with indictments. VA Gov. Now Dinesh D’souza. Holder unleashing the dogs…” Nationally syndicated radio host and frequent Fox news guest host Laura Ingraham says the indictment “is more about stifling political dissent and intimidating other people from speaking out than it is about any real serious allegation of wrongdoing.” Rush Limbaugh, the most successful radio host in America, tells his listeners that the Obama administration is “trying to criminalize as many Republicans and conservatives as they can.”
To be sure, plenty of conservatives think that’s ridiculous. But think about the argument here: Do these folks actually believe that the Attorney General of the United States is sitting around with his aides and says, “I’ve had enough. That D’Souza? I want him taken down! He’s been a thorn in our side for too long.” Then he places a call to the White House. “Mr. President? Good news. I think we found a way to get Dinesh D’Souza.” “Thank God!” replies Obama. “He could destroy this entire presidency if we don’t deal with him.”
The answer is, of course they don’t think that. But they think their audiences do. They think the people who read their web sites and listen to their radio shows are so stupid that they’d believe there’s a conspiracy at the highest levels of the federal government aimed at…Dinesh D’Souza.
The left’s media stars may be far from perfect in a variety of ways. But one thing you can say about them as a group is that they don’t assume their audience is made up of idiots.
By: Paul Waldman, Contributing Editor, The American Prospect, January 24, 2014
“The Circle of Scam”: Welcome To Conservative Politics, Where Everybody’s Fleecing Somebody
I’ve long held that what William Goldman said about Hollywood—”Nobody knows anything”—is equally true of Washington. At the same time though, people in politics are particularly adept at finding those who know even less than they do, and scamming them into giving over their political support or their money, or both.
I thought of this when reading the long investigation The Washington Post published the other day on the byzantine network of organizations the Koch brothers have established or funded to funnel their ample resources into politics. There are dozens of groups involved, and money moves back and forth between them in intricate ways. The Post was able to trace $400 million they spent in the last election, but since there were a number of organizations whose money they weren’t able to track, the real number is almost certainly higher. As a tax law expert quoted in the article says, “It is a very sophisticated and complicated structure … It’s designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap.” The Koch brothers no doubt can avail themselves of the most skilled and creative accountants money can buy.
But they sure didn’t get much for their money. Barack Obama, you might have noticed, is still the president, and Democrats did quite well overall in 2012. Perhaps there was no way for the Kochs to change that even with a mid-nine-figure investment. But what it appears happened is that these brothers, who are no doubt savvy businessmen, got taken to the cleaners by their consultants (Matt Yglesias had the same thought I did about this).
You see, political consultants don’t always have standard rates that they use for all their clients. On one end, this may mean that the firm accepts a smaller profit to do some work for a do-gooder nonprofit. On the other end, it means that for a client the consultant knows has deep pockets, the same services will be marked up, maybe by a little, maybe by a lot. If you were a Republican polling firm and the Kochs came to you asking you to do a poll that you ordinarily charge $50,000 for, maybe you could just bump that up to $75,000. They probably won’t notice the difference, after all. And maybe you convince them that they need to conduct six or eight such polls over the course of the year. The direct mail consultants are doing the same thing, and you can bet the media consultants are doing it too, because those guys pull money from clients like nobody’s business. And it isn’t like the Kochs are going to be going over the contracts line by line, right?
Each individual consultant may only be padding his own bottom line by $50,000 here or $100,000 there, but there are so many people involved and so many millions passing hither and yon that by the time its over, the results at the ballot box may be discouraging but a lot of already successful Republican consultants are thinking it’s finally time to get that beach house.
There’s another scam going on at the same time, which is that many of these efforts are aimed at recruiting regular people to be the Koch’s ground troops, to put a “grassroots” face on what is most assuredly an elite project. The Kochs have sincerely held political beliefs, which by pure coincidence happen to line up perfectly with their economic interests. They’d like it if there were fewer regulations on corporate behavior and lower taxes on the rich, among other things (that isn’t to say they don’t also have beliefs on non-economic topics like abortion as well, because I’m sure they do). If you can convince a bunch of middle-class folk to go stand outside in their tricorner hats braying about the Founders and the Constitution as they press Congress to lighten the burdens on our nation’s beleaguered plutocrats, then it’s all worth it.
So the Kochs are getting scammed by their consultants, and they’re scamming the people whom those consultants are persuading, and meanwhile there are plenty of other scams around too. Today Rush Limbaugh went on the air and told his millions of listeners that the “polar vortex” is not an actual thing that meteorologists have documented, but something the media made up in order to make the current cold wave not contradict their existing global warming hoax. Does Rush Limbaugh believe this? I doubt it. But treating his audience like a bunch of gullible fools is part of his business model.
You can find regular people who think that if “global warming” were real, that would mean it will never get cold again. But that’s not because they’re dumb (though they may be). It’s because that’s what people they trust have been telling them for years. Every winter, whenever there’s a cold snap or a big snowfall, a parade of doltish Fox anchors goes on the air hour after hour to say, “So much for global warming! Suck it, Al Gore!” Or as Ted Cruz said today, “It’s cold! Al Gore told me this wouldn’t happen!” Har, har! And those Republican voters, made ever stupider by the media figures they adore, make sure the people who represent them won’t allow anything to be done to address climate change. And you know who benefits from that? Why Charles and David Koch, who are in the oil business. They make money, the consultants make money, Rush Limbaugh makes money, and the only people in the equation who don’t make money are the suckers at the bottom.
By: Paul Waldman, Contributing Editor, The American Prospect, January 7, 2014
“Endless Crusades”: Tea Party Delays Spending, Beats Dead Horse
It will only cover three days, but once again next week Congress will have to pass a continuing resolution to keep the government open. The current resolution expires on Wednesday, and even though a budget agreement was reached last month, appropriators in both chambers still haven’t nailed down a plan to tell various agencies what they can spend.
There are many reasons for that delay — the appropriations committees only had a few weeks after the budget deal to cobble together a massive $1 trillion bill, known as an omnibus. But one of the biggest is that House Republicans from the Tea Party wing have demanded that the bill reflect their ideological goals.
They have insisted, for example, that no money be spent to implement the health care reform law, or that various aspects of the law be cut back so sharply that it would not be workable. They don’t want money spent to implement the Dodd-Frank financial reform law. They want sharp reductions in the National Labor Relations Board.
More than 130 of these so-called riders have been filed by lawmakers, many of whom wouldn’t vote for the omnibus even if their provisions were adopted. Some are particularly ridiculous, including:
* Forbidding the Environmental Protection Agency from enforcing its rule on the safe removal of lead paint.
* Prohibiting the Fish and Wildlife Service from including the sage grouse on the endangered species list.
* Prohibiting subsidies for any health care plan that includes abortion. (Many states already forbid this, but this rider would make the ban nationwide.)
* Banning the government from requiring federal contractors to disclose their political contributions — one of the Obama administration’s better transparency proposals, which it eventually dropped in the face of business opposition.
Many of these riders have been dropped by the negotiators, but some, including those involving the health care law, have yet to be resolved. (Appropriators think the omnibus bill will be ready by next week.) Republican leaders can’t afford another government shutdown, but apparently they haven’t yet convinced their most radical members to stop their endless crusades.
By: David Firestone, Editor’s Blog, The New York Times, January 10, 2014
“No Fools On Our Ticket”: A Battle Between The GOP Outsiders And Insiders
Just over the last few months, we’ve seen reports from the New York Times, Bloomberg News, and the Washington Post on the simmering tensions between Corporate America and Tea Party Republicans, driving a wedge into the GOP coalition. With party primaries looming, talk of a “Republican civil war” abounds.
Some of the party’s major players are even putting their money where their mouths are. This Wall Street Journal piece yesterday was circulated far and wide in Republican circles.
Republican leaders and their corporate allies have launched an array of efforts aimed at diminishing the clout of the party’s most conservative activists and promoting legislation instead of confrontation next year. […]
The U.S. Chamber of Commerce early next year plans to roll out an aggressive effort – expected to cost at least $50 million – to support establishment, business-friendly candidates in primaries and the general election, with an aim of trying to win a Republican Senate majority.
“Our No. 1 focus is to make sure, when it comes to the Senate, that we have no loser candidates,” said the business group’s top political strategist, Scott Reed. “That will be our mantra: No fools on our ticket.”
Though Reed did not specify who would qualify as a “fool,” it’s not hard to look back at major Senate races from the last couple of cycles and know exactly the kind of candidates he’s referencing (O’Donnell, Akin, Mourdock, Angle, et al). In other words, when Reed and the Republican Party’s Chamber of Commerce wing talk about “loser candidates” and “fools,” they’re obviously talking about right-wing Tea Party favorites.
Also note, there’s been ample analysis this year noting that Corporate America may want to overcome extremist candidates in GOP primaries, but if this wing of the party doesn’t commit real resources, Tea Partiers will prevail. It’s worth acknowledging, then, that $50 million in support of establishment candidates is a considerable sum.
But as word of the Chamber’s intentions spread, the backlash soon followed. “Special interests in Washington will do whatever it takes to protect big government Republicans,” Senate Conservatives Fund Executive Director Matt Hoskins told TPM yesterday. “Their ability to get future bailouts, kickbacks, and other favors depends on it.”
Club for Growth senior fellow Tom Borrelli added, “This is a battle between the outsiders and insiders and insiders include big bucks and establishment Republicans.”
Remember, primary season hasn’t really begun in earnest, which means these disputes are likely to intensify very soon. For many Democrats, hoping to see Republicans at each other’s throats during an election year, the popcorn is already being popped.
By: Steve Benen, The Maddow Blog, December 27, 2013
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