Wednesday, October 22, 2014

Income Inequality: Yeah, it's a problem, but the solutions are there

When billionaire Nick Hanauer made his case for the $15 an hour minimum wage in Bloomberg's Businessweek back in 2013 and then in his subsequent TED Talks video it had escaped my interest. Here was another 0.1% guilt trip, knowing that such a change wouldn't affect his fortune one iota. It's like Facebook's Zuckerberg or Bill Gates pushing for relaxed immigration in a nation that already has 25 million native-born workers sitting idle. Unfettered immigration is not going to put those two out of a job. The fact is listening to ultra billionaires prattle on about income inequality is almost offensive.

Sure, they may want to "help the situation" out of some sort of sense of altruism, but their kind of help is so blatantly self serving they'd do best to say nothing. Nick Hanauer so much as say's it straight out - it's fear that motivates his views, he sees pitchforks and mobs in his future when the middle-class is reduced to bare sustenance survival. He says:

 "I see pitchforks, as in angry mobs with pitchforks, because while people like us plutocrats are living beyond the dreams of avarice, the other 99 percent of our fellow citizens are falling farther and farther behind."

Certainly Hanauer say's things I can agree with. He says it's time for American plutocrats and zillionaires to start thinking about the American middle class, and the well being of this country, which is one and the same. I also believe it's true when he says:

 "You see, the problem isn't that we have some inequality. Some inequality is necessary for a high-functioning capitalist democracy. The problem is that inequality is at historic highs today and it's getting worse every day. And if wealth, power, and income continue to concentrate at the very tippy top, our society will change from a capitalist democracy to a neo-feudalist rentier society like 18th-century France. That was France before the revolution and the mobs with the pitchforks.

So I have a message for my fellow plutocrats and zillionaires and for anyone who lives in a gated bubble world: Wake up. Wake up. It cannot last. Because if we do not do something to fix the glaring economic inequities in our society, the pitchforks will come for us, for no free and open society can long sustain this kind of rising economic inequality. It has never happened. There are no examples. You show me a highly unequal society, and I will show you a police state or an uprising. The pitchforks will come for us if we do not address this. It's not a matter of if, it's when. And it will be terrible when they come for everyone, but particularly for people like us plutocrats."

I just don't see something like a minimum wage hike as any kind of answer to income inequality - certainly not all by itself, I see it as the last thing in a long list of positive changes.

Without a doubt income inequality has worsened in the past six years. Mostly due to phenomenally high rates of growth in the U.S. money supply. The Federal Reserve has been pumping $85 billion worth of government bonds and mortgage-backed securities into the economy every month for years. The equities as well as other financial markets have soared. This has yielded phenomenal increases in wealth to upper income earners.

Subsequently, the president’s poverty programs have discouraged the bottom 15 percent from even wanting to earn an income. Why would they? He gives them a free ride by providing years of unemployment benefits, free health care, welfare and food stamp benefits - as if that's all policy makers can possibly hope to do. It's false compassion if it's done in an atmosphere of economic warfare against the best interests of the national economy.

Prior to that historically low interest rates had pushed home prices up to such a place as to leave only one possible outcome when the economy finally cooled - a disastrous crash in the housing market. This literally destroyed the one piece of the pie most middle-class families had, their house. One lay off and the house is gone. Six years later interest rates are still near 0%.

There are things, many things, which can be done to encourage economic growth and job growth and most importantly income growth for the middle-class. It will never happen unless politicians - our (so-called) leaders - stand up and reject cronyism and special-interests that are skewing everything toward the ultra rich. Not all the answers are government solutions,  but government needs to act - first. 

Here's my bullet-point list to steer income inequality the other way culled from many different sources including my brain. Mostly common sense stuff that takes courage more than anything else to see it through.

# Restrict Cronyism - break the cycle of business and special interests from funding politics in a vacuum, by law if necessary. End corporate welfare. Make it illegal for in-office politicians to get rich off of legislative "favors". Require total transparency for politicians and lobbyists of all kinds, published for all to see. If it means paying politicians more - then do it

# Quality primary education - push toward local control of schools and school choice, away from Federal mandates and funding. End the monopoly of public schools and education unions 

# Encourage marriage/families - how many studies do we need that tell us that intact two parent households are the best predictor of economic success for the next generation before we as a society stop tearing down families? It's in everyone's interest to encourage marriage and discourage welfare life-styles

# Reasonable/Responsible regulation - reduce unregulated power of government agencies that dictate defacto law without elected law maker involvement. Force time restrictions on environmental and economic impact statements so companies and local governments can plan effectively

# College tuition/debt revamp - force the reform of public university tenure/cronyism/sports/endowment systems to bring down tuition. Restructure debt repayment that factors in the Federal tax liabilities of the graduated student in their repayment schedules, to encourage full time employment and repayment. Allow corporations and businesses to concentrate on mutually beneficial apprenticeships and internships for potential workers through public universities and/or private purpose built schools.

# Profit Sharing - corporations should consider equitable profit sharing as a form of compensation. Government agencies could incentivize budget savings with bonuses of half the "saved" money and the other half toward the next year's departmental budget (which is reduced by the same amount)

# Tax reform - reduce Federal income taxes significantly, do away with payroll taxes altogether

# Tax loophole reform - lower corporate taxes to international averages and remove most loopholes permanently

# Infrastructure - increase spending on infrastructure (not vanity trains), airports, roads, bridges, sewer/sanitation etc etc

# Discourage off-shoring/out sourcing - end all tax benefits and government encouragement for American companies to move work overseas 

# Raise interest rates - return interest rates incrementally to historic norms 

# Minimum Wage - finally, increase minimum wage (if even necessary)

To be honest I know that most of these have a zero percent chance of ever happening. There are tidal forces pushing against change that is impossible to resist short of a nation ending catastrophic disaster. 

The fact is without the first one - ending cronyism - the rest will only be marginally effective. That's not to say it can't be done. Frankly no one in power today has the will to fight the entrenched system of crony capitalism, they realize they will be destroyed politically and/or personally. The vested interests of mega-corporations and defense industries are able to sprinkle gold dust on politicians that stops reform in its tracks.

Any real change is a mighty tough sell, those at the top like it that way, and their political benefactors like the sweet life too much to rock the boat. There are also forces within the American body politic and the inside the government that want the American capitalistic system to fail, to utterly fail so that it can be replaced by a centrally controlled solution (they used to called this communism). The fact that the ultra rich control so much of the wealth is the proof to claim that a new economic system is needed. News flash: totalitarianism has been tried and found to be pitiful. 

To those who say market based capitalism itself is an anathema to good economics is like saying air is an anathema to breathing. There will always be inequality because human beings are unequal. Get off the high horse of so-called social and economic justice by insisting that everyone has an equal right to everything. It's ridiculous.

Indeed, both parties flail against the system they themselves create while they reap massive personal benefits - and the middle class falls further behind. Among them may be righteous patriots that truly believe in market capitalism, or on the other side, government controlled socialism, but they won't be allowed to rise in power among the cronies that believe in nothing but their own fortunes.

And so, Nick Hanauer rightly chides his fellow upper crust elite billionaires to wake up and pay attention to the vast middle, it's high time for the political elites to do the same.