“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
“Dangerous ‘Intended’ Consequences”: The Laughable Logic Behind Marco Rubio’s Plan To Limit Government Regulation
Republicans like to talk about government in the broadest, most abstract terms—arguing that it’s too big, too intrusive, and too expensive. The argument plays well politically, since the public tends to agree. But it also allows Republicans to avoid talking about real trade-offs—like the fact that government unemployment checks help people pay their bills while they are out of work, or that government guidelines for product safety keep kids safe when they play with toys. So perhaps it’s no surprise that the latest big idea from Republicans is a “national regulatory budget”—a proposal by Senator Marco Rubio that, however sensible sounding, could force government to scale back protections that people very much need.
Under Rubio’s plan, an independent agency would calculate the economic costs of all existing regulations. Congress would then set an upper limit on how much regulations can cost the economy—and use that figure to establish caps for each individual federal agency. What would that mean in practice? Imagine that the Environmental Protection Agency wanted to impose a new regulation on pollution. If the EPA was already at its limit, it would have to rescind an old regulation (or regulations) in order to make room.
“The essence of this proposal is a budget accounting mechanism—a one in requires one out. So one regulation in requires a similar regulation to be repealed,” said Amit Narang, a policy advocate at Public Citizen and an expert on the federal regulatory process. “The premise of the legislation is that we are currently at the perfect level of regulation. We don’t need anymore.”
One of Rubio’s goals is to force regulatory agencies to go back through old regulations and eliminate outdated and costly ones. There’s a strong case for that: Government agencies don’t do this very often and plenty of duplicative, cumbersome regulations exist. But Rubio’s method for forcing agencies to review past regulations is clumsy—and, according to many experts, dangerous. Among other things, the plan requires agencies to eliminate a regulation (or regulations) with the same economic cost as the new one. If the EPA wants to impose a major regulation (such as one on coal-fired power plants), it would have to rollback a significant one in return. “It’s not out of the realm of possibility to imagine this kind of budgetary system resulting in, say, the EPA, in order to put forward new chemical regulations—maybe they would have to repeal old lead regulations,” Narang said.
Rubio seems to think that Congress can set an arbitrary cap on the burden of regulations, at the precise level where agencies can ensure public safety without unduly hurting the economy. “This would force federal agencies to enact only those regulations that truly serve an essential role,” Rubio said in a speech at Google’s Washington D.C. headquarters on Monday. “It would put in place and enshrine the cost-benefit analysis and the regulatory framework that we are lacking right now.” Rubio is right that under his plan, federal agencies would have to evaluate their regulations and repeal the ones that had the worst cost-benefit ratio. But Congress could easily set the cap at a level which would force agencies to eliminate regulations whose benefits exceed their costs. That’s a dangerous unintended (or maybe intended) consequence of his proposal.
The ultimate problem with Rubio’s plan is that it actually has nothing to do with cost-benefit analysis. On the contrary, it sets a cap based solely on the economic costs of regulations, regardless of their benefits. Rubio wants agencies to evaluate the current costs and benefits of old regulations (they already do so with new ones), but he wants to ensure that even if the benefits exceed the costs, federal agencies will be forced to do away with many regulations anyway. Rubio says he wants to ensure a rigorous analysis of our regulatory system. What he really wants to do is rig the game.
By: Danny Vinik, The New Republic, March 11, 2014
“The Misguided War On Envy”: Conservatives Love To Hate The Envy Their Policies Caused
Conservatives have launched a War on Envy. This week, Arthur Brooks, president of the American Enterprise Institute lamented “a national shift toward envy” which, he said, would be “toxic for American culture.” Venture capitalist Tom Perkins recently made the same point in much more inflammatory terms: He equated those who criticize rising inequality with Nazis persecuting Jews, a salvo attack that quickly drew censure from those now running KPCB, the VC powerhouse that he once led.
Both conservatives and progressives agree on basic facts: The percentage of Americans who see this country as a land of opportunity, in which hard work leads reliably to material reward, is falling rapidly. This shift brings envy, resentment, cynicism and despair. And these negative emotions undermine our social structure and bring unhappiness.
But that’s where the agreement ends. Conservatives insist the problem is one of perception. They think that if the media would just stop talking about inequality things would get better. They say that if our leaders (read: President Obama) would simply offer up “an optimistic vision in which anyone can earn his or her success,” the envy would dissipate and everything would be just fine.
That is not going to work.
It won’t work because the sense that the dream is slipping away, the sense of diminished mobility, of a system that’s increasingly rigged, is not a fantasy that can be dispelled with clever rhetoric. It is the everyday, lived experience of millions of Americans. The only consequence of elites refusing to discuss it will be to confirm that those elites are indeed out of touch with ordinary Americans and their problems. That aloofness is reflected in the appallingly low approval ratings of the current Congress.
Brooks and other influential conservatives fail to acknowledge that the envy they lament, and the loss of opportunity that fuels it, results directly from the policies they have championed over the years. Consider higher education, which is acknowledged by both liberals and conservatives as the single most powerful force for economic mobility. Conservatives have succeeded in slashing taxes at all levels of government, and these cuts have gutted state funding of higher education.
Tuitions have spiked as a result. The soaring cost has put college out of reach for many middle-class families and nearly all of the poor and near poor. In 1971 an American family at the median income level had to pay 13 percent of its annual income to send each child to a public four-year university. That’s tough but it’s doable, with considerable sacrifice, savings, loans, a part time job and so on. Now the cost has more than doubled to 29 percent of income. This puts college out of reach for many, and leads to students graduating with staggering debt burdens. To put it mildly, this much debt does not encourage entrepreneurship.
That’s not the only way that conservative policies have limited upward mobility and destroyed confidence in the American Dream. Conservatives have long championed corporate tax policies that accelerate the harsher aspects of globalization, outsourcing and offshoring. As a result, American workers in many industries have seen their wages stagnate even as productivity has gone up, profits have soared and those who hold stock and options have done exceedingly well. Hard work now means breaking even for most Americans, rather than pulling ahead.
Here’s another example: Conservatives have championed individual tax structures that reduce the share of taxes born by the richest and increase the share born by the rest. Tax law changes such as the reduction in top tax brackets, lowering of capital gains rates and elimination of estate taxes confirm many Americans’ suspicion that the deck is indeed stacked against them.
I built and enjoyed a successful career in business before becoming an advocate for a sustainable economy. One of the things I learned in my career was to look for the true root cause of problems and not waste time attacking symptoms. Another thing I learned was that if what you’re doing isn’t working, stop doing it and try something else.
We are not going to bring optimism back to ordinary Americans by belittling those who discuss the real state of our economy. Waging war on envy won’t make people more confident in their job prospects and more entrepreneurial in their careers. Not if the reality of our tax, trade, labor and other policies is to strip away the rewards of working Americans and concentrate more and more wealth at the top.
It’s good that both left and right want to make the American dream credible again for more people. It’s good that both sides see loss of optimism as a problem. But diminished opportunity won’t be solved by refusing to talk honestly about its causes, and envy won’t be eliminated by more of the policies that kindled it in the first place. The success of the American economy and the American political system depends on people having the genuine conviction, based on the reality of their day-to-day experience, that hard work brings upward mobility.
By: David Brodwin, U. S. News and World Report, March 6, 2014
“Clearly Freakazoid Behavior”: Where Does The Tea Party Find These People?
I was on Hardball last night talking about the escapades of this Milton Wolf character, the tea party guy who’s challenging GOP incumbent Senator Pat Roberts this year. Wolf became freshly newsworthy this past weekend when the Topeka Capital-Journal revealed that in 2010, Wolf, a radiologist, posted photos of disfigured corpses on Facebook (of people who’d been shot, etc.) and joined other commenters in poking fun at the them.
One image he posted showed a human skull all but blasted apart, about which Wolf wrote: “One of my all-time favorites,” Wolf posted to the Facebook picture. “From my residency days there was a pretty active ‘knife and gun club’ at Truman Medical Center. What kind of gun blows somebody’s head completely off? I’ve got to get one of those.”
The Kansas City Star headlines an AP story by asserting that Wolf has “apologized,” but I read the piece and I’ll be jiggered if I see any apology in there. What Wolf does is try to explain his actions, although not really, and then accuse Roberts of leaking the material (which, if he did, so what; any opposing campaign would). A release by Wolf’s campaign even called the alleged leak (and it’s only alleged) “the most desperate move of any campaign in recent history,” another clueless and self-pitying statement.
So, this is clearly freakazoid behavior, and is obviously a grotesquely inappropriate thing for a medical professional to do. And it raises the broader question: Where does the tea party find these people?
I think this is an interesting question, because the answer describes one of the movement’s major impacts on our politics, which is the elevation of ideology above every other human consideration—of things like experience and temperament and character—in selecting people for high office; indeed, the creation of a posture in which those other considerations are scorned.
Here’s what I mean. Pre-tea party, if you wanted to be involved in Republican politics, you started the way nearly everybody starts in politics, in both parties. You run for city council, or county commissioner; then state legislature; then maybe, if you’ve demonstrated some skill or charisma or something, you’ll get to Congress or maybe become governor.
Each of these campaigns vets you, so that the crazy things you did and said when you were young are placed before the voters, who decide whether those things matter or not. And each of these experiences, as a county commissioner or state legislature, leavens you a bit, teaches you what the process of government is like, gives you a little sobriety. You might still be very conservative (or very liberal on the other side), but experience has, at least in theory and I think in most cases, made you a little more mature and better equipped to hold higher office.
But then comes the tea party in 2010, and boom, none of this matters anymore. So people who would normally have had to run for lower office first are suddenly running for United States Senate! Christine O’Donnell, no apparent relevant experience in anything except being on TV. Sharron Angle, who did admittedly serve in the Nevada state assembly for eight years but who was there to throw bombs; she voted no in the 42-member body so often that statehouse reporters joked about votes being “41 to Angle.” And lots of people with histories of out-there statements.
None of that earns any demerits in tea party “vetting.” For the tea party, all you need to do is pass ideological muster: hate Obama; hate government; embrace their idea of “freedom.” You sure don’t need to have shown a sober temperament. In fact, quite the opposite. Being known as 41 to Angle is a great calling card for tea party voters, because it shows them that you’re not a sell-out and the system hasn’t ruined you.
So it’ll be especially interesting to see if this harms Wolf. The reaction will tell us whether tea party people and Republicans generally in Kansas regard what he did as just another sort of manly joke that offends prissy liberal sensibilities (and thus requires that they rise to his defense)—that is, whether they have a knee-jerk ideological reaction—or as something that’s really just kind of beyond the pale for a human being, let alone a doctor, to do—that is, whether they have a more human reaction. Because I think 99 percent of normal human beings would react to what Wolf did with varying degrees of disgust. But once it becomes a political act, and he gets taken apart on MSNBC, a certain percentage will defend him. How high that percentage ends up being will be a fascinating thing to see.
As I was leaving the set, a producer said into Chris Matthews’s earpiece, and he announced, that a recent poll had it Roberts 49, Wolf 23. So Wolf is behind, but he’s not out of it. The primary isn’t until August. He has plenty of time to make a run. There’s also plenty of time to learn more weird stuff about him. That comes with the tea-party territory, and it’s creating a class of pols who should be back-bench state legislators but have the chance of becoming U.S. senators. It’s just a good thing most of them don’t win.
By: Michael Tomasky, The Daily Beast, February 25, 2014
“The Vampire Slayer Election”: Democrats’ Best Weapon For Midterms, Fear Of A Red Senate
We’ve known for a long time now that the Democrats have a lot of Senate seats to defend in red states where Barack Obama’s approval numbers aren’t much higher than George Zimmerman’s—indeed, in these states, surely lower.
But I feel like the fear has just set in here in the last couple of weeks; that is, Democrats coming to terms with the possibility-to-likelihood that they might lose the Senate this November, and after that, the utter bleakness of a final Obama two years with both House and Senate in GOP hands, saying no to anything and everything except, of course, any remote whiff of an opportunity to bring impeachment charges over something.
Republicans need a net pickup of six seats. Democrats are trying to defend incumbent status in six red states (North Carolina, Louisiana, Arkansas, Montana, West Virginia, and Alaska); also in two blue ones (Michigan and Iowa). They’re hoping for upsets in two red states (Georgia and Kentucky).
You’ll read a lot about Obamacare and the minimum wage and the War on Women and everything else, and all those things will matter. But only one thing really, really, really matters: turnout. You know the lament: The most loyal Democratic groups—young people, black people, single women, etc.—don’t come out to vote in midterms in big numbers. You may dismiss this as lazy stereotyping, but sometimes lazy stereotyping is true, and this is one of those times.
So how to get these groups energized? Because if core Democratic voting groups turn out to vote in decent numbers, the Democrats will hold the Senate. Two or three of the six will hold on, the Democrats will prevail in the end in Michigan and Iowa, and either Alison Lundergan Grimes in Kentucky or Michelle Nunn in Georgia will eke out a win. Or maybe both—if Democratic voters vote. And if not? Republicans could net seven, eight.
The other side will be motivated: They’re older, white, angry that Obama continues to have the temerity to stand up there and be president, as if somebody elected him. This will be their last chance to push the rage button (well, the Obama-rage button; soon they’ll just start pushing the Hillary-rage button). But what will motivate the liberal side?
I call this the vampire-slayer election. I’ll explain that farther down. But first, let’s hear from Matt Canter, deputy executive director of the Democratic Senatorial Campaign Committee, making his team’s most plausible case for why 2014 isn’t destined to be a repeat of 2010.
Canter acknowledges that the Democrats talk about “field” in every off-year election. But now, he vows, “This is the year we’re going to say it and mean it.” In the 10 states I mention above, Canter says, the goal is to spend $60 million on field operations alone, with an aggregate 4,000 paid staff in those states. It’s called the Bannock Street Project, after the street that housed the campaign HQ of Michael Bennet, the successful Democratic Senate candidate in that state in 2010. Bennet, you might recall, was one of the few Democrats not running against witches who held on to beat a Tea Party GOPer. The effort will be to quasi-nationalize what happened in Colorado then.
Look also, Canter says, at what happened in Montana and North Dakota in 2012. In both of those states, Obama was getting walloped by Mitt Romney—by 14 and 20 points, respectively. And yet, Democratic Senate candidates won in both states. Turnout was much higher in these two states: It was 53.4 percent nationally, but 59.4 in North Dakota and 61.5 in Montana. In both cases, Jon Tester and Heidi Heitkamp ran well ahead of Obama and are senators today.
Canter says the operations in those 10 states will look like this. Every voter in those states—yes, every single voter in those 10 states, he says—will be given two scores on a scale of 1 to 100: a support score and a turnout score. So if Molly Jones in Paducah is a 58 likely to support the Democrat and 38 likely to turnout, she can expect a lot of contacts from field operatives this fall.
But… contact her saying what? This is where I was a little less impressed by the things Canter had to say. I think he makes a plausible logistical argument. The Colorado, Montana, and North Dakota examples are real things. So are 60 million simoleons and 4,000 operatives. But they still need a compelling, unifying message. This is where we get to Buffy.
One of the all-time great Buffy the Vampire Slayer episodes was Season 3’s “The Wish,” when a female demon grants Cordelia, the classic senior-class Queen Bee-beeyatch, one wish. Cordelia wishes instantly that Buffy Summers—who makes her life far more complicated than she wishes it to be—had never come to Sunnydale. The wish is granted. The next thing you see is, indeed, what would have happened to Sunnydale if Buffy, the vampire slayer, had never hit town. The high-school population is reduced by more than half. There’s a 6 p.m. curfew. Those who remain live in fear. The vamps have taken over. It’s a death town.
See where I’m going here? That’s Washington if the Republicans get the Senate. Vamp town. Imagine if Ruth Bader Ginsberg retires. If the Republicans control the Senate, will they even give a mildly left-of-center Supreme Court nominee a hearing? What about less high-profile federal judgeships across the country? How many of those are going to go vacant? If a Cabinet official or high-ranking sub-Cabinet member resigns, will they even permit the position being re-filled? Remember—41 of the 45 current GOP senators voted against confirming Chuck Hagel as defense secretary. And he was a former senator. And a Republican one at that!
Picture the mad Darrell Issa having a counterpart in the Senate to launch baseless investigations. It’s one thing for the House to be banging on about phony IRS and Benghazi scandals, but the Senate doing it is another matter entirely—far more serious. You really think a Republican Senate won’t? And I haven’t even gotten to regular policy. You think a GOP House and Senate combined won’t try every trick in the book to pressure Obama to fold on Social Security and Medicare?
The unique 2008 election aside, fear is a much better motivator in politics than hope. Democrats need to make their base voters see vividly the potential consequences of a GOP Senate majority and live in mortal fear of it. That and $60 million just may stem the tide.
By: Michael Tomasky, The Daily Beast, February
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