Killer Politics (18 page)

The good news is that labor now has a friend in the White House.

“The strength of our economy can be measured directly by the strength of the middle class,” Obama said when he announced the aforementioned Middle Class Task Force. “I do not view the Labor Movement as part of the problem. To me, it is part of the solution…. We need to level the playing field for workers and the unions that represent their interest…. When workers are prospering, they buy products that make businesses prosper.”

The American form of government is predicated on checks and balances. That's what unions are—a check to the power of corporations. That's why a resurgence of the labor movement at this moment in history
is critical. While tax loopholes that reward outsourcing are closed and illegal labor restricted, it is equally important that a worker's right to join a union be free of intimidation by ownership.

I support the Employee Free Choice Act, a bill that would do just that.

Under the current system, corporations have learned to stall and intimidate those who would start a union. The Employee Free Choice Act moves the process along more quickly and fairly. If the process stalls, arbitrators are called in. Those on the wrong side of the issue have created a hullabaloo because the act shifts some leverage from ownership to the worker.

Corporate opposition to this has been strong, and why wouldn't it be? Even as productivity has risen, corporations have managed to suppress wages. Lower overhead means higher profits and a windfall for owners and stockholders—what's not to love if you're at the top of the food chain? According to economist Jagdish Bhagwati, from 2000 to 2007, “virtually
all
of the nation's economic growth went to a small number of wealthy Americans.” The problem? “The erosion of workers' ability to form unions and bargain collectively.”

According to the AFL-CIO, “Union members are 52 percent more likely to have job-provided health care, nearly three times more likely to have guaranteed pensions and earn 28 percent more than nonunion workers.”

The Employee Free Choice Act
does
play hardball. But you know what? These are hard times. Don't weep for Big Business. Ownership will always have the advantage.
Always.
If workers cannot organize freely, they don't stand a chance. Freedom…Fairness…That's what this is all about. We want a little more of the profit to go from the CEOs to the guys busting their asses on the factory floor. These folks aren't asking for anything more than a fair shake.

According to the Institute for Policy Studies and United for a Fair Economy, the ratio of compensation between CEOs and workers in
2005 was to be 411 to 1. This is the direct result of the Republican trickledown mind-set ushered in by Ronald Reagan in 1980. Back then, according to the
Economist,
the CEO-worker ratio was only 40 to 1. If you're a workingman or workingwoman who votes Republican, don't you have to look at a statistic like that and wonder why you are voting against your best interests?

STOCK MARKET PERVERSIONS PUT AMERICAN WORKERS ON THE STREET

Let's talk for a moment about stockholder expectations and publicly traded corporations. In the last thirty years it seems to me we have been accelerating toward greed and away from economic fundamentals, and it is another nail in the coffin of the middle-class worker.

The system used to make sense. A company sold stock to raise capital for expansion and innovation. The money funded research and new products, which in turn legitimately increased the value of the stock. Ideally, the company expanded and more workers were added to the payroll. That's the way it's
supposed
to work. And there was a time in the not so distant past when a veteran of the stock market could advise you to simply buy good stock and hold it. But that just doesn't seem to be true anymore.

Stock prices are hard to predict, it seems to me, because we have veered so far away from the basics. You could probably do just as well by going to the track and betting on the prettiest pony.

Before technology stocks tanked in 2000, investors were like the Dutch speculating on tulip bulbs—with no rhyme or reason. In 1637, tulip contracts sold for ten times as much as the wage of the average craftsman. In 1998, we were happily investing in companies that were hemorrhaging money. Many people holding tech stocks in the 1990s became wealthy on paper, but ended up bloodied. Just before the crash someone asked Warren Buffett if he should sell a stock that had shot up in value,
or if he should hold out for even higher gains. Buffett replied, “No one ever lost money by taking a profit.”

If you invest in the market, remember that advice.

The goal has become to increase the value of the stock price, but as often as not, that effort has little relation to the productivity or direction of the company. Sure, there is a time and a place to bet on a new, innovative player, but most stocks are not worth what they are selling for. If you actually looked at the profit and earnings of each company, the real value of the stock market would be shrunken considerably—probably to about half of what it is today.

I know it is almost un-American to ask this question, but I will:
How much profit is enough?
Unreasonable stockholder expectations and corporate greed have combined to pervert entire industries. Even
very profitable
businesses have chosen to take advantage of cheap labor in China and India so they can make
even more
profit. The stockholder loves it, and the CEO gets giant bonuses, but what about the American worker? He or she is on the street.

If this isn't selling your soul, I don't know what is.

Remember, all profit comes at a price.

The sad fact is that there are lines of greedy people willing to sell out their fellow Americans for a few dollars more. If there is such a thing as economic treason, this is it.

In the push to inflate stock prices, workers become little more than part of an equation—being hired or fired to make the books look good in the short term, without any regard to the reality that these are human beings with families to raise and mortgages to pay. Ironically, with the advent of the 401(k), the workingman himself has become an investor, but paradoxically, what is good for him as an investor may not be good for him as a worker.

As investors, I think it's important that we become more accountable, too. There are moral decisions to be made. As investors, we can be part of the problem or part of the solution. If my 401(k) is holding
Halliburton stock, I don't want any part of it or any company that might put a dime in that son of a bitch Dick Cheney's pocket. I don't want to own any part of a company that uses child labor, and I damn sure don't want to invest a dime in any outsourcing bastards. I don't want to support bad corporate behavior, period!

There are millions of people who think like you and I do. There are “socially responsible” investment funds, some with very good track records. We know fair trade coffee sells when customers are given a choice. I know products made in the USA sell—even if they might cost a bit more. People will always support something they believe in. Surely, if enough people start investing only in companies they find ethical, it could begin to change the way other companies do business. Believe me, if there is more money in wearing a white hat instead of a black one, they'll do it.

Time for Mandatory Trickling

IT'S TIME TO PAY THE PIPER, BUT THERE WILL NOT BE ANY DANCING
to the music. As the federal debt creeps toward $12 trillion, with the 2009 deficit projected to be $1.75 trillion, with
one third
of our expenditures going to satisfy the
interest
on the debt, America is in danger of becoming a giant banana republic.

There seems to be this phenomenal case of amnesia sweeping the nation as to how we got here, and if you bring it up, well, they say you're just playing the blame game. But telling the truth isn't the same as placing blame.

It was a supposed tax-and-spend Democrat, Bill Clinton, who turned over the U.S. economy to George W. Bush with four consecutive budget surpluses that had the country on track to pay off the debt by now. Bush inherited a $5 trillion debt, but it was on the decline. However, with reckless spending that included the Medicare Drug Bill, a $1.2 trillion expense over a decade, according to the
Washington Post,
that Bush claimed would cost less than $400 billion, Bush ruined Clinton's good work. Talk about a royal scam! They knew the bill was a budget buster, but they wanted to secure the vote of the most consistent voters—
senior citizens. Then came two tax cuts for the richest Americans—$2.5 trillion from 2001 to 2010, according to Citizens for Tax Justice. Add to the mix the cost of the Iraq War, estimated to be as high as $3 trillion, according to economist James Stiglitz.

We had been moving forward.

Bush and his Republican enablers in Congress (a majority for six years) took us backward into financial disaster, spreading around another $700 billion to his Wall Street cronies on the way out.

Had Bush continued down Clinton's path, the debt would now be paid and the deficit eliminated. The last time that happened was in 1835 under Andrew Jackson.

So Barack Obama has been forced to do what most economists say has to be done—stimulate the economy when no one else is spending. That means even more debt.

Now that they don't have their hands on the checkbook, it is so disingenuous as to be laughable the way the Republicans have suddenly discovered fiscal responsibility. These born again Republicans have delayed the progress of government with procedural votes to slow key legislation, like extended unemployment benefits. In September 2009, what could have been passed in a day or two turned into an ordeal before the majority of Republicans voted for the unemployment extension—but only after receiving tax breaks for business in the package. While they stalled, 200,000 Americans that they had put out of work in the first place with their policies ran out of unemployment benefits. What is at stake? Power. By slowing the process, the Republicans want to claim, “See, we told you. Those guys can't get anything done!”

Apparently, you can't pass anything in Washington without giving Republican cronies a tax break. The formula is the same: Cut taxes. Well, I'm all for it. But let's cut taxes for the middle class. However, as Michael Moore pointed out in his movie
Capitalism: A Love Story,
since the top 1 percent owns 95 percent of the financial wealth (a figure confirmed by PolitiFact.org), they can afford to pay more. For the record,
the top 1 percent pays about 40 percent of the federal taxes collected each year—but when you consider that they own 95 percent of the total wealth, that's hardly extreme.

We are in a system consisting of financial royalty and worker bees. There's a lot to be admired about worker bees, but who can truly say they are getting their fair share of the honey? Despite all the complaints from the American oligarchy about the transfer of wealth, the wealth has gone their way!

One way to keep government programs from growing is to blow up the national debt. Mission accomplished. The Republicans did just that and, in the process, stole the birthright of health care and education from the American people. They piled so much debt on the heads of our children that, for the first time ever, a generation of Americans will probably have a lower standard of living than the generation that preceded them. Every man, woman, and child's share of the national debt is in the neighborhood of $40,000.

It's a crime.

From the end of World War II until we hit the Reagan years, middle-class growth had exceeded that of every class. But by dismantling the rules that had protected the middle class, capitalism became legalized robbery. Credit card rates spiked; 401(k)s plunged. This oligarchy sucked money out of the system like vacuum cleaners. They got into every corner that was unregulated and got every dime they could.

Here's the thing most people miss. Specifically, I mean this is the thing
Republican voters
miss. They get distracted talking about taxes, without ever stopping to think about all the other ways that dollars are being drained from them. Oil companies get you at the pump. Ken Lay jacks up your utility bill. Insurance companies ratchet up the premiums and deny the coverage. Your investments founder on Wall Street. Credit card companies change the rules in midstream. This behavior is enabled by politicians who are bought off by these very same corporations.

When 1 percent enjoys 95 percent of the financial wealth, you don't have to worry about getting screwed by the taxman on April 15. You've been getting screwed all year long. Tell me, in what reasonable system does so much go to so few?

There are a couple of ways to get it back. Reinstate regulations and a level playing field to make capitalism competitive, or tax those greedy fat bastards back into the Stone Age! (Excuse me while I channel Curtis LeMay.) Actually, we need to do both—increase taxes on the wealthy, as well as regulate and break up monopolies.

Why not go to the heart of the problem? Congressman Peter Defazio has an idea I can get behind, and that is to tax stock market trades .25 percent. That would raise $150 billion for a Job Creation Reserve. Naturally, they screamed about this idea on Wall Street like stuck pigs. Billionaire Mark Cuban suggested on his blog in 2008: “Tax every single share of stock that is bought and sold 10 cents per transaction. One dime. If you buy a share of stock, your brokerage pays a 10 cent tax. If you sell a share, your brokerage pays a 10 cent tax. 1 share, 100 million shares. It's 10 cents per share. Of course, the tax will be paid for by those of us who are buying and selling stocks. So what. Here is the reality. If you are a true investor. Someone who wants to own a share of stock in a company you believe in, then it's an amount that is not going to impact your investment decision making process.”

THE TAX CUT SHELL GAME

People also get distracted by federal income tax, never stopping to realize that when the feds cut taxes, the burden gets passed on to the state and school district. Property tax and local sales tax go up, and you pay anyway.

Paul Krugman, the
New York Times
economist, wrote, “There's no mystery about what's going on: education is mainly the responsibility of state and local governments, which are in dire fiscal straits. Adequate
federal aid could have made a big difference. But while some aid has been provided, it has made up only a fraction of the shortfall. In part, that's because back in February centrist senators insisted on stripping much of that aid from the American Recovery and Reinvestment Act, a.k.a. the stimulus bill.”

When Bush finally gave a measly $600 tax break to middle-class Americans, they gave it back at the gas pumps anyway, and it all went into the pockets of his oil company buddies. With one hand they put it in your pocket, with another they take it back out, crowing all the while that you got a tax cut! Charlatans!

Keep your eye on the ball, people! Look at the big picture. What matters is what you have left in your pocket at the end of the day when all your bills are paid. In most countries, people are not worrying about health care bills or the cost of college. It's covered. My point is not that tax reform isn't important. My point is that what you pay in taxes is only part of a system that is rigged against you and in favor of the super rich.

This fight has been going on for some time. “The absence of effective state, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” said Teddy Roosevelt one hundred years ago. He helped rein in that imbalance by busting monopolies and championing a progressive tax.

However, the tax code has been burdened by so many deductions and legalized favors, it doesn't operate as fairly as it should. I wonder if anyone really understands it all. Few people would argue that the federal tax code is in need of an overhaul. When Warren Buffett, one of the richest men in the world, is paying 17.7 percent and his secretary is paying 30 percent, you know something is terribly wrong.

Here's something that really galls me. After witnessing the extraordinary muscle corporations are able to flex in Washington, in essence trumping the wishes of the voters, it astounds me to discover (
Forbes
2004) that corporations account for less than 10 percent of federal taxes paid.
According to a CNNMoney report, “Nearly two-thirds of U.S. companies and 68% of foreign corporations
do not pay federal income taxes
[emphasis mine]…. The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes—despite having a combined $2.5 trillion in revenue.” The Republicans, meanwhile, want to reduce the corporate tax rate from 35 to 25 percent. If corporations actually paid that much, I might support it!

The Tax Reform Act of 1986 slashed the statutory corporate tax rate from 46 percent to 34 percent, and in the process closed enough loopholes that, according to the Multinational Monitor, the effective rate for large corporations was 26.5 percent. But, by 2003, enough new loopholes had been uncovered to bring the effective tax rate paid by major corporations down to 17.2 percent.

A middle-class family bringing home $118,000 will pay 25 percent in income tax plus another 8 percent in payroll taxes. Yet the rich can sell millions of dollars in stocks and pay a capital gains tax of only 15 percent! Baby, the rich really do get richer.

With a tax code thousands of pages long and full of loopholes, there are many people who favor a national sales tax. But the poor consume more as a percentage of their income than anyone. Is that fair? A family with an income of $50,000 would pay as much as one with an income of $500,000. It would bury the poor and middle class and be a windfall for the wealthy families.

Then there are flat taxes based on income. But a flat income tax does not address
existing
wealth. It would take at least 20 percent for a flat tax to work—probably higher. For the bottom fourth of American wage earners paying 15 percent, that would be a real kick in the teeth.

That leaves us with the progressive system, which Robert Shapiro, director of economic studies at the Progressive Foundation and vice
president of the Progressive Policy Institute, explains: “A progressive tax system, however, can protect poor and middle class families from bearing the higher tax burdens entailed in a purely flat or proportional system, and in this sense, ameliorate some of the distributional inequalities achieved through our markets but based on factors other than how hard different people work. And the additional burden of progressive taxation is a reasonable price to pay by those who in some respect start with more, for the privilege of prospering relatively more under America's laws and in her markets. Bill Gates and his investors have a responsibility to not merely bear an equal share of the burden, but a greater share because they enjoy a larger share of the benefits provided by these laws and markets.”

But if the wealthy are still paying less under the enlightened progressive tax, uh, Houston, we have a problem. The problem is loopholes. Man, we all love our deductions, but we sure resent the ones the other guy gets. As much as I like a simple solution, a progressive tax with minimal deductions is the best hope of the middle class.

There is much to admire about a plan from the Progressive Policy Institute that mirrors one devised by White House chief of staff Rahm Emanuel when he was a congressman and Senator Ron Wyden (D-OR). The PPI website says, “It is designed to shore up the very pillars of middle-class aspiration: paying for college, buying a first home, raising children, and saving for retirement.” It eliminates sixty-eight special-interest loopholes and adds some family-friendly deductions like a $3,000-a-year incentive to students for four years of college and two years of graduate school. A second part of the plan is “a home mortgage deduction that would be available to all homeowners, not just those who itemize.” Also included: “A new family tax credit would replace three existing tax incentives—the Earned Income Tax Credit, the Child Credit, and the Dependent Care Credit—and provide more benefits to more families than all of them combined. A universal pension (UP) would replace 16 existing IRA-type accounts with a single portable retirement account for all
workers. It would provide a $500 stake and tax-deferred saving to workers, who could roll their 401(k) plans into their UPs when they change jobs.”

And get this—the plan is budget neutral.

It's a start. But to begin to break down the imbalance of wealth, which is the only way democracy can really function, you have to beat back those who want to eliminate the death tax, something that affects just .06 percent of people. The point of taxing inherited wealth is to preserve a system that rewards hard work and innovation instead of inherited privilege. If you don't, you end up with financial royalty, and Americans decided long ago that they were done with that sort of thing. Warren Buffett said, “Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy.”