SteveG’s Posts

Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs

Robert Reich posted on his Facebook timeline a re-emphasis of the 2014 article Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs.

Until the 1980s, corporate CEOs were paid, on average, 30 times what their typical worker was paid. Since then, CEO pay has skyrocketed to 280 times the pay of a typical worker; in big companies, to 354 times.
The proposed legislation, SB 1372, sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break.Those with high ratios get a tax increase.
For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent.

I don’t see why a company should get a tax break at over a 30:1 ratio. Certainly not at 100:1. Companies should not get rewarded for doing what they ought to do in an ordinary way. They need to be penalized for not doing what they ought to do. They should certainly not even be considered for some sort of reward unless they do something extraordinarily good.

Our politicians, including Hillary Clinton, immediately jump to the idea of some corporate tax break as the solution for every problem. The share of taxes paid by corporations is already far lower than it used to be. We need to think more about my principle of using tax penalties for bad behavior, ordinary taxes for good behavior, and then, if really need be, tax incentives for extraordinarily good behavior that needs to be encouraged.

Meet the Hedge Funders and Billionaires Who Pillage Under the Shield of Philanthropy   Recently updated !

Naked Capitalism has the post Meet the Hedge Funders and Billionaires Who Pillage Under the Shield of Philanthropy by Lynn Parramore.

America’s parasitical oligarchs are masters of public relations. One of their favorite tactics is to masquerade as defenders of the common folk while neatly arranging things behind the scenes so that they can continue to plunder unimpeded. Perhaps nowhere is this sleight of hand displayed so artfully as it is at a particular high-profile charity with the nerve to bill itself as itself as “New York’s largest poverty-fighting organization.”

Yves Smith who posted this on Naked Capitalism warns that the article is a little shrill. Most of the commenters and I think it is not shrill enough.

I have always felt, without any explicit evidence to back it up, that society would be better off if the billionaires didn’t take the money in the first place before they gave it back in philanthropy. I had no measure of the extent to which I was correct. Recently, I have seen estimates that if the non-rich had advanced in the past 40 years at historical rates, they would be almost $11 Trillion dollars ahead of where they are today. I guess that figure fits nicely with the contention of this article.

Elizabeth Warren to Republicans: Did You Fall Down, Hit Your Head, and Wake Up In 1950’s   Recently updated !

Elizabeth Warren posted this video on her Facebook timeline.

The Republican plan to defund Planned Parenthood is a right-wing attack on women’s rights. Watch why I voted to stand with Planned Parenthood.

Imagine if we had a fighter like this as President. Elizabeth Warren is doing a great job in the Senate. Bernie Sanders would do an equally great job as President. Imagine if both of them had a platform from which to speak and rouse the public to action.

Imagine a President who would not be cowed into preventing this woman from heading a federal agency. That’s what drove her to become a Senator, and we in Massachusetts are actually glad this happened.

You don’t mess with Elizabeth Warren. We can elect Bernie Sanders as President to show that you don’t mess with Bernie Sanders either.

How Would You Kill the Tax Code?   Recently updated !

In case you didn’t see what Ted Cruz was responding to as shown in my previous post Making Machine-Gun Bacon with Ted Cruz, here is Rand Paul in all his glory.

Instead of a motto of “Unleash the American Dream”, maybe he should change it to “Unleash an oligarch’s wet dream”. 14% flat tax indeed. Would a one-page tax code allow for deductions?

If $15/hour is a barely livable wage – equivalent of $30,000 per year, let’s see what that flat tax rate is on various salaries above the barely livable wage.

Gross Wage Wage in excess of
the poverty line
14% tax on
gross income
Tax rate for income in
excess of poverty
$50,000 $20,000 $7,000 35%
$100,000 $70,000 $14,000 20%
$1,000,000 $970,000 $140,000 14%
$1,000,000,000 $999,970,000 $140,000,000 14%

Does it still sound fair to you?

Now think of the huge increases in wealth from unrealized capital gains that are not even counted as income and which people at the $50,000 level have hardly any of. This increase in wealth, not recognized as income, is many multiples of the amount of money counted as income for the billionaires. This is the way the wealthy arrange for their compensation, not income, to be paid. Is this still sounding fair?

Making Machine-Gun Bacon with Ted Cruz   Recently updated !

Apparently there is a YouTube video of a Ted Cruz political commercial.

It’s almost as if he were saying, “Don’t take Steve Greenberg’s word that I am crazy. Let me give you a demonstration of what he means.”

Ironically, Ted Cruz is such a firearms expert apparently he wouldn’t know a machine gun when he didn’t fall over it. That’s no machine gun compared to what I got an expert’s badge firing while in US Army training. (Well, what Ted has is actually called an automatic rifle. And he purports to live in Texas? In case you missed my point, an automatic rifle is very distinctly different from a machine gun.)

In my recollections, I can still hear the firing range officer “Fire a burst of six.”

I wonder if the lame stream media will play this like they did Michael Dukakis riding in a tank, or Barack Obama bowling, or Howard Dean shouting over a noisy crowd with the crowd noise filtered out by the news media inventing faux news.

The Difference Between Private and Public Morality

Robert Reich has posted his 2012 essay The Difference Between Private and Public Morality on his Facebook timeline. The introduction to the recent post is

The Republican attacks on a woman’s right to choose once again confuse private morality with public morality. The Republican concept of morality centers on bedrooms rather than boardrooms. They fixate on the most intimate decisions people make about their own personal lives, and ignore the abuses of power emanating from large corporations and Wall Street. Yet public morality is the crisis of our time, not private morality. Public morality is all of our business. Private morality is not.

The closing remark in the original essay is

It’s time once again to save capitalism from its own excesses – and to base a new era of reform on public morality and common sense.

One of these times when it may seem we need to come to the rescue of capitalism again, more people might start to wonder why we bother.

Star Trek Economics: Life After the Dismal Science

Bloomberg has the article Star Trek Economics: Life After the Dismal Science.

In other words, the rise of new technology means that all the economic questions will change. Instead of a world defined by scarcity, we will live in a world defined by self-expression. We will be able to decide the kind of people that we want to be, and the kind of lives we want to live, instead of having the world decide for us. The Star Trek utopia will free us from the fetters of the dismal science.

I have a thought experiment that I like to pose to people, and that is to imagine the day when everything we need can be produced without any human workers. How will wealth be distributed then?

Little did I realize that Star Trek provided the answers. Maybe if I had watched Star Trek after the original series had finished, I would have seen what this author describes.

The F story about the Great Inflation   Recently updated !

On his Mainly Macro blog, Simon Wren-Lewis had posted The F story about the Great Inflation. He starts the post by describing the false story.

Here F could stand for folk. The story that is often told by economists to their students goes as follows. After Phillips discovered his curve, which relates inflation to unemployment, Samuelson and Solow in 1960 suggested this implied a trade-off that policymakers could use. They could permanently have a bit less unemployment at the cost of a bit more inflation. Policymakers took up that option, but then could not understand why inflation didn’t just go up a bit, but kept on going up and up. Along came Milton Friedman to the rescue, who in a 1968 presidential address argued that inflation also depended on inflation expectations, which meant the long run Phillips curve was vertical and there was no permanent inflation unemployment trade-off. Policymakers then saw the light, and the steady rise in inflation seen in the 1960s and 1970s came to an end.

As great as the article is, the back and forth commentary may be even better. The comment that I found most compelling was the one by Blissex. I found the initial connection of the inflation to the huge government “global security” oriented spending in the USA a little overwrought. However, on second reading, and thinking about the Vietnam War and what Lyndon Johnson did about guns and butter, I see the connection better.

«If it wasn’t a belief in a long run inflation unemployment trade-off, what was it that allowed inflation to gradually rise during those two decades? Forder has a lot to say on this, but the following is my own take. I think two things were critical: the idea that demand management was primarily designed to achieve full employment, and that full employment had primacy over the objective of price stability.»

And here we have another version of the usual neoliberal story of the completely imaginary “wage-price” spiral of the 70s and 80s, according to which nasty greedy workers pushed up their wages and this caused endogenous price inflation.

The story that is instead apparent from the numbers of the 1960s, 1970s, 1980s is that the great inflation was the product of huge government “global security” oriented spending in the USA, and other factors that caused the USA to switch from a net exporter to a net importer, and the international dollar shortage of the 1940s and 1950s to become slowly a dollar glut, which resulted not many years later in the decision to devalue the dollar by a huge amount, the *symptom* of which was the end of the gold standard.

The huge devaluation of the dollar was in effect a “cram-down”. The oil producers refused to be crammed down and increased massively the price of their product after the dollar devaluation, and the Fed Board decided to “accomodate” the huge exogenous price shock, to avoid undermining the USA government’s global security policy, and this created a massive eurodollar recycling problem.

All this transmitted the cram-down shock wave through the value chain, and unionized workers reacted to sharply rising prices driven by oil and commodity inflation by demanding higher wages, which was temporarily successful. At that point because of the exogenous price shock caused by the falling dollar and oil and commodity producers and unionized workers resisting the cram-down it was creditors and businesses who were forced to take the cram-down as massive losses on existing bond valuation because of increasing nominal interest rates and much reduced profits.

Eventually creditors and businesses fought back and thanks to Volcker and Reagan managed to push the costs of the cram-down onto unionized and non-unionized workers, and debtors, and the cram-down continues today: in the USA median hourly wages have been flat or declining since 1973, and the interest rates have been falling for decades, generating enormous capital gains for creditors.

Most other anglo-american economies just followed the leader, in various particular ways, and most of the world economy was deeply affected.

It was a gigantic price-push shock caused by USA government dollar policy, not
by greedy unions causing wage-push price increases.

The greatness of this article and the ensuing discussion was the raising of the many different events that occurred in the history of the times that had an impact on economies, inflation, wages, and employment. It starts to become so much clearer that trying to focus on one specific cause as opposed to all the others is a fool’s errand. You really have to take everything into consideration at once. Each factor had more or less impact varying with time over the period. If you try to ignore one factor during one period of time, you find that factor to not be ignorable at a different point in time. To think you have a model that works for all time, but does not account for all factors, then you are kidding yourself and others.

This fits quite nicely with my December 14, 2011 post Stop Arguing About Economic Theory And Politics. It also fits with my April 23, 2015 post Constructing Models of the Economy. The discussion of today’s post adds some concrete examples to the abstract discussions in the previous posts.

How Does Bernie Sanders Plan to Pay for all this “Free” Stuff?   Recently updated !

The Berniementum blog has the article How Does Bernie Sanders Plan to Pay for all this “Free” Stuff?

Bernie supporters know that all this “free” stuff isn’t really free. Someone has to pay somehow. But is it true that all this “free” stuff means higher taxes? If you came here with questions, here are your answers.

This shows you what happens when Bernie Sanders cannot find a way to tell his own supporters all that he knows.

I know that all politicians must pay homage to deficit reduction and how to “pay” for programs. It is too early to let the public in on the great secret that they are not supposed to know. Our country is sovereign in its own currency. Our currency is not tied to the price of any commodity. The Federal reserve is tasked with the creation of our money. They create money by crediting money to the Federal Reserve accounts of organizations that have such accounts. It is the Fed’s job to insure that there is enough money (liquidity) to keep the economy running smoothly. Sometimes there is too little money, so the FED must create more, as they did with the bank bailouts and multiple rounds of quantitative easing. Occasionally, but not now, there is too much money and inflation ensues. The FED then cuts back on money creation, and if need be, other government agencies need to increase taxes to take money out of circulation.

I don’t know how any politician will be able to explain this to the public and still hold office, but someday, someone is going to have to counteract all the propaganda about money that the oligarchs have been spewing for decades.

If the FED can create trillions at the drop of a computer keyboard stroke, who has to pay back the money they create? What possible meaning can you attach to the word debt in the context of sovereign money creation?