Putting The Right Spin On The Income Inequality Argument

Growing income inequality between the top one percent and the rest of the population seems a wonderful political issue for progressives. This will only be true, however, if the issue is framed properly, which has not always been the case.

For starters, it’s important to appreciate that economically speaking, income inequality is both natural and appropriate. You work harder than me, you’re better educated, you’re more skilled, you simply care more about spending your time and energy making a lot of money than I do because I have other priorities, these are just a few of the good reasons why income inequality exists and should exist.

There’s also nothing inherently bad about very large and growing income inequality. You made 100 units of income last year and 200 units this year (a hundred percent income increase), while my own income just went from 10 units to 12 units (a twenty percent increase), so what? For most of us life isn’t a competition over who gets richer, faster before dying. As long as some of the economy’s extra income trickles down, as long as I get my taste, as long as I get a little richer, if you get a lot richer, God bless.

What makes income inequality such a bad thing these days in these United States is thus not that it exists, not even its extent and growth. And contrary to what apologists for this growing disparity claim, not that it is the inevitable and unavoidable consequence of macro economic forces such as technology trends and globalization. The present 99-to-1 divide is simply and obviously the result of an economy that has been engineered to favor of capital over labor, unearned income over earned income, investors and managers over workers.

Phrased another way, the top one percent have enjoyed great additional prosperity at the expense of the 99 percent. Their more is our less.

All kinds of stats and facts could used to illustrate this reality. Here’s a simple and obvious situation that gets the point across.

Imagine a company. The wages of its workers have been kept stagnant while the benefits enjoyed by these workers, once paid by the company, are now paid for in large measure by the workers themselves. The net compensation of these workers declines in consequence. This is the 99 percent story in this situation.

At this same company. Because profits go up when total worker compensation declines, top managers use this to pad their own compensation packages. Shareholders of the company [mostly one percenters because the top 1 percent own two-thirds of all financial securities such as stocks] also get a bump in the form of bigger dividends and capital gains. Such unearned income is taxed at favorable rates, rates much lower than the earned income rates paid by workers. This unearned income is also not subject to the Payroll (Society Security) Tax paid by workers on their earned income [and approximately two-thirds of workers pay more in payroll taxes than income taxes]. This is the 1 percent story in this situation.

The other side’s income inequality argument is well known and well honed. It portrays this growing disparity as a reflection of the success of the deserving, a reflection of the American Dream to achieve great personal wealth, a tribute to the joys of our opportunity society, and those angry over this growing spread as jealous and envious economic losers.

This, then, is the appropriate reply to this argument that doesn’t go against rewarding the successful or the American Dream myth: There’s nothing wrong with income inequality because some people deserve to earn more than others. There’s even nothing intrinsically wrong with great and growing income inequality, as long as everyone wins at least a little while a few are winning very big. But when this great and growing spread results from market and government policies deliberately warped in ways that favor the very few at the expense of the many it’s a very bad thing — bad for the health of our democracy as well as the health of our economy.

(Recent books from Michael Silverstein: The Devil’s Dictionary Of Wall Street; Fifteen Feet Beneath Manhattan; The Bellman’s Revenge; and Murder At Bernstein’s — To contact him: Mike@wallstreetpoet.com)

Real Tax Reform That You Won’t Hear About Elsewhere

We increase the top income tax rate from the present 39.6 to 45 percent and use ALL the new revenue generated, ALL OF IT, to reduce lower income tax rates.

This is NOT a tax increase. No new money flows to the government. It’s merely a tax shifting from the presently under-taxed top to the over-taxed working lower and middle.

This immediately reduces income inequality. It immediately improves the earnings and economic lives of the working middle class and lower paid workers.

It animates the economy immediately by spawning more spending by most Americans who have more net income to spend.

It reduces the growth of poverty, whose biggest cause today is the working lower and middle sliding down.

And this is critical. It does NOT reduce needed investment that grows an economy. Rather, it generates new investment to tap into greater consumer spending — it loosens the strings on the vast billions not being invested by bloated corporations today because there is no consumer spending to justify such investment with all the new jobs this investment would also generate.

Republicans won’t back this approach because they will call it a tax increase (it isn’t, just a tax shifting), and label it class warfare, which is silly since many if not most tax changes benefit some group at the expense of another.

The Democrats won’t back this proposal because they want to tax the rich to fund government programs — not a bad idea in many cases, but a totally separate issue that should be dealt with separately.

This is a proposal that many on the small-government right can support along with people on the generally big-government left.

Why haven’t you heard this simple and obvious way to immediately reduce income inequality, aid the middle class and do the other worthwhile things noted above? Because no one is being paid to peddle the idea.

Michael Silverstein newest books, The Devil’s Dictionary Of Wall Street, and Fifteen Feet Beneath Manhattan, are both available from Amazon.

Mr. Putin Is Chuckling At The Dinner Table

Before becoming Germany’s foreign minister, Joachim von Ribbentrop was Nazi Germany’s ambassador to Britain in the mid-1930s. There’s a famous story of him dining with Winston Churchill and discussing the war both expected to come soon. Ribbentrop noted that this time around Germany would have Italy as an ally. To which Churchill famously responded: “Only fair. Only fair. We had them last time.”

This remark brought to mind the present deepening involvement of the U.S. and its NATO partners with Ukraine in that country’s struggles with Russia. The new government in Kiev, it should be noted here, was not elected. It came to power when protestors in the country’s capital overthrew the elected government, a corrupt lot to be sure, but no more noticeably corrupt that those now running the Ukrainian government.

So here’s the current scoreboard of who seems to be getting what from out of this crisis. We, the United States and our NATO partners, get to support a badly divided, terribly corrupt, nearly bankrupt state whose finances will require $30 billion or more in loans and grants in the short-term, and heaven only know how much in a longer term to bring the country up to some approximation of western economic standards.

Oh. And we also get the growing hostility of Russia, a country we are very dependent upon for progress with Iran and Syria and budding conflicts in Asia and nuclear disarmament and…well, the list goes on from there.

And what does Russia get from this Ukrainian crisis? Crimea, which is has already taken. And the loss of having to loan billions and billions to a nearly bankrupt state that the West now has to fund (with little chance of ever getting back any of its loans) along with the need not to give Ukraine bargain prices on its gas imports, and good deals on its exports to Russia.

Italy turned out to be a very bad, resource draining partner for Nazi Germany during WWII. Churchill’s quirky prediction summed this up nicely. The West today seems to be making a very similar deal with Ukraine.

We have gained a drain and a pain in Ukraine. Mr. Putin has escaped a set of obligations to Ukraine he didn’t really want and couldn’t really afford. He must be laughing his buns off watching us sink into a hole he has escaped.

(Recent books by Michael Silverstein include The Devil’s Dictionary Of Wall Street and Fifteen Feet Beneath Manhattan)

My 2016 Dream Ticket — Sanders And Paul

My dream presidential ticket in 2016 is a lefty libertarian ticket. Bernie Sanders and Rand Paul.

If this sounds strange, it shouldn’t. The Democrats were always a party that sought to keep Wall Street in check. Then in the 1990s Bill Clinton wedded this party to The Street. Republicans were long a party of openness on social and personal issues. Then fundamentalism took over a large part of its agenda in these realms and the result was that very, very curious McCann-Palin union. A Sanders/Paul ticket is no more inherently strange a mix that the ones now in place in our two major parties.

Beyond this, it would have enormous popular appeal. Especially for turned off youthful voters, conned on Hope and Change, unhappy about fundamentalist threats to their chosen ways of life. What these and so many other voters want are the things Sanders and Paul offer — Decency and Freedom.

Could this pairing win the election as a third party offering? Probably not, given the way our electoral system has been rigged. However…

Imagine this pair on the same platform with the same-old, same-old big buck beards put up by the national Democratic and Republican organizations. They would bring front and center the two greatest threats to our national polity — a perverted form of crony capitalism, and an overreaching presence of government snoops and private data miners in individual American lives.

Sanders and Paul in 2016. Decency and Freedom.

(Michael Silverstein’s newest book is The Devil’s Dictionary Of Wall Street, now available from Amazon.

How To Reanimate The U.S. Economy

These days you often hear that our politics have become “monetized.” That with all the money pouring into elections, especially since the Supreme Court’s Citizens United decision, government is being distorted in ways that work only for deep pocket special interests and not the interests of the American people generally.

Yes, that’s a negative. But perhaps we should also focus more on the upside. Focus on the way all this election spending helps give our moribund economy a positive jolt. From this perspective, the problem is not that too much money is fouling the system, but that too little is going toward buying public office.

Soaring spending on elections is in fact one of the economy’s major growth sectors. And while a lot of this spending gets no further than the sticky palms of a few contribution bundlers, a lot more tickles down to a fast expanding network of middle class and even poor staffers who do campaign field work, and have other fundraising, soliciting, technical, legal and communication employment.

Based on these profound insights, the question then becomes how to further grow election-based spending. A few obvious answers quickly come to mind.

First, of course, we could start at the top. Almost half of the $6.3 billion spent on electing people to office in 2012 went into the Obama-Romney campaigns. Presidential elections now take place every four years. With a simple constitutional amendment, however, we can have them every two years and double presidential election spending with all its attendant economic benefits.

And why not do this, after all? There would be no loss in the quality of governance from the White House from such a change. The last two years of a sitting president’s first term are totally geared to getting reelected. In the last two years of a second term a sitting president is a lame duck. We drop the last two years of each term and lose nothing of political consequence while gaining billions in economy-animating spending.

Competitive congressional races are now another spending cash cow. Candidates may now need to raise $19 million or more for a competitive Senate race and more than $9 million in a competitive race for a House seat. Again, just a small constitutional tweak that makes election for a House seat every year and a Senate seat every two years would double House election spending and triple (yes, triple!) spending on Senate races.

The economic boost here could be expanded even further by lowering the bar to get on the ballot in every state, thereby allowing anyone with a few extra bucks and some time on their hands to run for national office. This would confuse voters even more than they are presently confused and thus make even more races for Congress competitive.

Elections for national office are just the tip of this economy-enhancing iceberg. The Census bureau reported that in 2012 there are more than 89,000 local governments in this country — state, county, municipal, town and township, special and school districts. Within these local governments there are often a fair number of positions that are elective. No national constitution and relatively few state constitutional amendments would be needed to change the length of time between elections for most of these hundreds of thousands of elected offices. Reduce times between all these local races, the potential growth of overall campaign spending is mind boggling.

The flood of money that now goes into getting elected to so many public offices has soured many Americans on our politics. Do I have a solution for this sad political reality? No. All I’m saying is that since we’re stuck with political lemons, let’s make more economic lemonade. And since we don’t even have the best government money can buy, let’s spend some more and maybe its quality will improve.

Michael Silverstein’s newest book, available from Amazon. Is The Devil’s Dictionary Of Wall Street.

Ukraine Crisis — Middle East Implications

The regions of the world can’t be neatly separated when it comes to setting a foreign policy. The present crisis in the Ukraine, in which Russia is a key participant, is not just a crisis in that part of Europe. It has profound implications for what’s happening in the Middle East — and what might happen there soon.

Israel wants the United States to take out Iran’s nuclear infrastructure. They think they have a U.S. agreement to do so if the present negotiations with Iran over this infrastructure don’t eliminate its ability to build nuclear weapons. Russia is critical to achieving this elimination. If it backs off doing so because of conflict with the U.S. over Ukraine, present negotiations with Iran may well falter, and the Obama Administration may be forced to get into a military conflict with Iran — with the potential to spread dangerously.

Russia is also a very key player in the Syrian civil war that already is spreading to neighboring countries. It has been reasonably cooperative in getting Syria to make at least a few concessions. If conflict between the U.S. and Russia over Ukraine gets too serious, cooperation over Syria will falter — and this war might spread dangerously.

U.S. policy toward Russia over the Ukraine has very serious Middle East implications. While the media drums today are beating out a “we must stand up to Ivan” chant, a wider policy view might be a wiser policy view.

Michael Silverstein’s newest book, The Devil’s Dictionary Of Wall Street, is available from Amazon.

Let’s Make Our Minds Up About Regime Change

Street protests got rid of a military government in Egypt. The U.S. applauded this.

Then other street protests got rid of a new democratically elected President in Egypt. The U.S. denounced this, but soon went along with military control of the country.

Now street protests in Ukraine got rid of a democratically elected government there. And the U.S. approved.

But when street protests now threaten to take control of the province of Crimea, the U.S. denounces the action.

Is it any wonder the Russians are confused about our policies when it comes to how governments should stay in power or be dumped from power by street potests? We don’t seem to have one policy in this regard.

Michael Silverstein’s newest book, The Devil’s Dictionary Of Wall Street, is now available from Amazon.

The Best Idea To Reanimate The Economy You Won’t Hear About Elsewhere

We increase the top income tax rate from the present 39.6 to 45 percent and use ALL the new revenue generated, ALL OF IT, to reduce lower income tax rates.

This is NOT a tax increase. No new money flows to the government. It’s merely a tax shifting from the presently under-taxed top to the over-taxed working lower and middle.

This immediately reduces income inequality. It immediately improves the earnings and economic lives of the working middle class and lower paid workers.

It animates the economy immediately by spawning more spending by most Americans who have more net income to spend.

It reduces the growth of poverty, whose biggest cause today is the working lower and middle sliding down.

And this is critical. It does NOT reduce needed investment that grows an economy. Rather, it generates new investment to tap into greater consumer spending — it loosens the strings on the vast billions not being invested by bloated corporations today because there is no consumer spending to justify such investment with all the new jobs this investment would also generate.

Republicans won’t back this approach because they will call it a tax increase (it isn’t, just a tax shifting), and label it class warfare, which is silly since many if not most tax changes benefit some group at the expense of another.

The Democrats won’t back this proposal because they want to tax the rich to fund government programs — not a bad idea in many cases, but a totally separate issue that should be dealt with separately.

This is a proposal that many on the small-government right can support along with people on the generally big-government left.

Why haven’t you heard about this simple and obvious way to immediately reduce income inequality, aid the middle class, and do the other worthwhile things noted above? Because no one is being paid to peddle the idea.

Michael Silverstein’s newest book, The Devil’s Dictionary Of Wall Street, is available from Amazon.

Where The Hell Is A Real Third Party?

Haven’t you figured it out yet? All this nonsense about “will Hillary run.” And “is Chris Christie as nasty as it he seems.” And “will the Democrats hold the Senate.” It don’t mean hardly anything! It’s entertainment at best, but in a more sinister sense, the more realistic sense, it’s just a distraction from a truth now so obvious that only a political dummy has failed to understand its implication.

The implications are this: Both our major political parties just represent the interests of the top one percent. One party, the Democrats, incline to allow the enrichment of the top to proceed more slowly with a few extra crumbs dribbled down to the rest of us. The other major party, the Republicans, want it all to go to the top because they deserve it all.

All the representatives of both parties. ALL OF THEM, live in a Beltway cocoon that is so divorced from the realities of the country’s majority that pain out here is a just a dull echo, and the only things that really resonates  are endless reports of economic improvement and recovery that the puppet masters at the top let our elected officials to hear daily.

A third party would NOT just skim off votes from the left. It would combine the populist left with the populist right in a true synthesis of the country’s currently true center.

Where are you, third party makers? Things are sliding toward a terrible fruition unless you appear soon. Hurry….Hurry….Hurry…

Michael Silvestein’s novel The Bellman’s Revenge, is available from Amazon.

Recession Over? Yeah, right.

If you read the business press these days you’ll run into the following word pair a lot—“post-recession.” The experts all seem to agree, and Washington clearly believes, that the recession that officially ended in purely economist terms in 2009, has also ended in the way the rest of the world should see the economy today.

Except that idea is a crock. What’s happened is that markets that can be manipulated to increase the wealth of the wealthy have been so manipulated with the aid of the Federal Reserve that has pumped out trillions in new money scooped up by these markets and their manipulator-beneficiaries. Pretty much everyone else has been screwed royally.

The game of pretending we’re out of the recession and in a recovery mode is played with numbers — numbers that are either fudged, or more often, just interpreted in a way that proves the point the game players want to prove.

But here’s the number that really matters. Three-quarters of Americans believe we are still in recession. They know this because they are living in a recession. The relatively few who aren’t living in the recession, of course, parrot about a post-recession economy and a recovery endlessly.

Michael Silverstein’s novel, The Bellman’s Revenge, is available from Amazon.