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Old 03-28-2011, 11:15 AM   #1
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Losing Our Way

NY Times

March 25, 2011
Losing Our Way
By BOB HERBERT

So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home.

Welcome to America in the second decade of the 21st century. An army of long-term unemployed workers is spread across the land, the human fallout from the Great Recession and long years of misguided economic policies. Optimism is in short supply. The few jobs now being created too often pay a pittance, not nearly enough to pry open the doors to a middle-class standard of living.

Arthur Miller, echoing the poet Archibald MacLeish, liked to say that the essence of America was its promises. That was a long time ago. Limitless greed, unrestrained corporate power and a ferocious addiction to foreign oil have led us to an era of perpetual war and economic decline. Young people today are staring at a future in which they will be less well off than their elders, a reversal of fortune that should send a shudder through everyone.

The U.S. has not just misplaced its priorities. When the most powerful country ever to inhabit the earth finds it so easy to plunge into the horror of warfare but almost impossible to find adequate work for its people or to properly educate its young, it has lost its way entirely.

Nearly 14 million Americans are jobless and the outlook for many of them is grim. Since there is just one job available for every five individuals looking for work, four of the five are out of luck. Instead of a land of opportunity, the U.S. is increasingly becoming a place of limited expectations. A college professor in Washington told me this week that graduates from his program were finding jobs, but they were not making very much money, certainly not enough to think about raising a family.

There is plenty of economic activity in the U.S., and plenty of wealth. But like greedy children, the folks at the top are seizing virtually all the marbles. Income and wealth inequality in the U.S. have reached stages that would make the third world blush. As the Economic Policy Institute has reported, the richest 10 percent of Americans received an unconscionable 100 percent of the average income growth in the years 2000 to 2007, the most recent extended period of economic expansion.

Americans behave as if this is somehow normal or acceptable. It shouldn’t be, and didn’t used to be. Through much of the post-World War II era, income distribution was far more equitable, with the top 10 percent of families accounting for just a third of average income growth, and the bottom 90 percent receiving two-thirds. That seems like ancient history now.

The current maldistribution of wealth is also scandalous. In 2009, the richest 5 percent claimed 63.5 percent of the nation’s wealth. The overwhelming majority, the bottom 80 percent, collectively held just 12.8 percent.

This inequality, in which an enormous segment of the population struggles while the fortunate few ride the gravy train, is a world-class recipe for social unrest. Downward mobility is an ever-shortening fuse leading to profound consequences.

A stark example of the fundamental unfairness that is now so widespread was in The New York Times on Friday under the headline: “G.E.’s Strategies Let It Avoid Taxes Altogether.” Despite profits of $14.2 billion — $5.1 billion from its operations in the United States — General Electric did not have to pay any U.S. taxes last year.

As The Times’s David Kocieniewski reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”

G.E. is the nation’s largest corporation. Its chief executive, Jeffrey Immelt, is the leader of President Obama’s Council on Jobs and Competitiveness. You can understand how ordinary workers might look at this cozy corporate-government arrangement and conclude that it is not fully committed to the best interests of working people.

Overwhelming imbalances in wealth and income inevitably result in enormous imbalances of political power. So the corporations and the very wealthy continue to do well. The employment crisis never gets addressed. The wars never end. And nation-building never gets a foothold here at home.

New ideas and new leadership have seldom been more urgently needed.
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Old 03-28-2011, 12:22 PM   #2
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I think this ties in:

Fed: More than two-thirds saw net worth drop in recession - USATODAY.com

Quote:
To gauge how the 2008 financial crisis affected U.S. households, the Federal Reserve revisited more than 3,800 families that were interviewed for its 2007 Survey of Consumer Finances, a triennial survey that looks at the balance sheets of American families.

Median wealth, which the Fed defines as a household’s total assets minus their debts, fell to $96,000 from $125,000 during the period. Stocks were among the hardest-hit assets: The median value of directly held stock, among families that owned it, fell to $12,000 from $18,500, the Fed said. The median value of primary residences dropped to $176,000 from $207,000.
Yes, everyone's net worth dropped, but the wealth still is flowing upward. This inequality can't continue.
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Old 03-28-2011, 06:54 PM   #3
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Originally Posted by MrsSpringsteen View Post
NY Times

March 25, 2011
Losing Our Way
By BOB HERBERT

There is plenty of economic activity in the U.S., and plenty of wealth. But like greedy children, the folks at the top are seizing virtually all the marbles. Income and wealth inequality in the U.S. have reached stages that would make the third world blush. As the Economic Policy Institute has reported, the richest 10 percent of Americans received an unconscionable 100 percent of the average income growth in the years 2000 to 2007, the most recent extended period of economic expansion.

Americans behave as if this is somehow normal or acceptable. It shouldn’t be, and didn’t used to be. Through much of the post-World War II era, income distribution was far more equitable, with the top 10 percent of families accounting for just a third of average income growth, and the bottom 90 percent receiving two-thirds. That seems like ancient history now.

The current maldistribution of wealth is also scandalous. In 2009, the richest 5 percent claimed 63.5 percent of the nation’s wealth. The overwhelming majority, the bottom 80 percent, collectively held just 12.8 percent.

This inequality, in which an enormous segment of the population struggles while the fortunate few ride the gravy train, is a world-class recipe for social unrest. Downward mobility is an ever-shortening fuse leading to profound consequences.

A stark example of the fundamental unfairness that is now so widespread was in The New York Times on Friday under the headline: “G.E.’s Strategies Let It Avoid Taxes Altogether.” Despite profits of $14.2 billion — $5.1 billion from its operations in the United States — General Electric did not have to pay any U.S. taxes last year.

As The Times’s David Kocieniewski reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”
These.

I didn't know that the CEO of GE is the head Obama's task force on Jobs & Opportunity

I know Obama is too much of a corporatist at times - but I still support him on other very important things. I also knew he was not the dream candidate a lot of my fellow liberals/progressives thought he was.

Under Pres. Eisenhower and most of John F Kennedy's the tax rate for the top bracket was about 91% - 92% yet look how well many people were doing back then (not counting those many suffering from rampant racism, sexism, and changes in industries in local areas at times). JFK reduced the rate to 77% (1964) and it bounced up & down in the 70's% until Reagan . A lot of people were moving up the economic ladder during these decades!

Then It was lowered to 50%and dropped to 38.5% in 1987.

By the time Pres. Clinton got into office it was 31%. And when Clinton raised the rate back up to 39.6% he began to shrink Reagan's deficit (partly ballooned by unfunded war (El Salvador), when he left office we did not have a deficit.

The rate as of 2008 was 35% (note another decrease).

These numbers provided by NTU (National taxpayers Union) :
National Taxpayers Union - History of Federal Individual Income Bottom and Top Bracket Rates

I still hope to be rich (have to continue to undo some Catholic/Christian teaching on that area, getting better at it).... but unlike seemingly a major portion of the rich today I know that "taxes is what we pay for a civilized society". At the core of all the major religions, and (atheistic) Ethical Humanism is compassion, mercy and help for those less fortunate than us.

To be rich and not have to usually worry about having a really decent roof over my head, a mostly safe neighborhood (not a gated community); good, healthy food, (and water) with more choices, ; and good medical care, and some extra fun & fascinating things; super-decorating an apt with a extra room or 2, affording me a separate Art Studio and some experiences I could only have because I have a lot of $$$$$>>> well for goodness sakes I could forfeit some of all that experiences and stuff at times-- so that others on this Earth in my city, country and world could have good and safe basics: food, clothing, shelter and health care.

I'd be happy to share my good fortunes!

and Bob Herbert
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Old 03-28-2011, 06:55 PM   #4
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"So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home."


I guess this is the "hope and change" Americans voted for in the last presidential election.
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Old 03-28-2011, 07:01 PM   #5
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Originally Posted by the iron horse View Post
"So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home."


I guess this is the "hope and change" Americans voted for in the last presidential election.
If Obama lands on an aircraft carrier, declares victory in Libya, and then proceeds to dump trillions of dollars in the country for the next 6 years, then I'll compare his actions to Bush's.
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Old 03-28-2011, 07:37 PM   #6
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So its okay to make unprovoked attacks on a nation that did not directly attack us, that has oodles of oil, if it's quick and speedy.

Check. Got it.
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Old 03-28-2011, 08:28 PM   #7
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Originally Posted by Headache in a Suitcase View Post
So its okay to make unprovoked attacks on a nation that did not directly attack us, that has oodles of oil, if it's quick and speedy.

Check. Got it.
I, for one, think this Libya thing is yet another misadventure in the Middle East.
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Old 03-28-2011, 08:29 PM   #8
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I, for one, think this Libya thing is yet another misadventure in the Middle East.
By far the worst decision of Obama's presidency and the first one I strongly disagree with.
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Old 03-28-2011, 08:33 PM   #9
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It's my fault for responding to Iron Horse. This discussion really should move over to the Libya thread.
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Old 03-29-2011, 10:25 PM   #10
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Salon, Mar. 29
Quote:
The verdict is in: The Thatcher-Reagan-Blair-Clinton model of capitalism is a failure.

By cutting taxes, slashing wages and destroying unions, the US was supposed to lead the world in high-tech industry. But a recent study by the Asian Development Bank found that the majority of the added value of iPhones assembled in China come from high-tech companies in Japan, Germany and South Korea, whose inputs dwarf those from American companies. For a generation we've been told that the European and Asian capitalist countries were doomed by statism and high wages. Instead, they dominate global high-tech industrial production, while the US continues to be deindustrialized.

Oh, well, who needs manufacturing, anyway? Let the rest of the world make things; we'll invent them and live off the royalties. Right? Wrong. The tech sector employers only a tiny number of Americans--and offshoring the production of goods invented here will only shrink that number further. Most Americans work in the nontraded service sector. In the last decade, as the economist Michael Mandel has pointed out, almost all of the new jobs have been created in health, education and government, which share one characteristic in common: low productivity and rapidly escalating costs. The other big growth area, before the 2008 crash, was in the largely unproductive FIRE (finance, insurance, real estate) sector, where high salaries enticed smart young Americans who might have manufactured useful goods and services into manufacturing the toxic financial products that brought down the world economy. The homeland of Margaret Thatcher became even more dependent on a bloated financial sector than the over-financialized US.

Still not convinced that the Anglo-American model of the last generation is a failure? Orthodox economists recite the dogma that if productivity goes up worker compensation will follow. But according to the economist Alan Blinder in a Wall Street Journal Op-Ed titled "Our Dickensian Economy" last year, since 1978 productivity in the nonfarm business sector has grown by 86%, while real compensation--wages plus benefits--has grown only 37%. Take out the increased benefits, which tend to be eaten up by cancerous health insurance costs, and the real average hourly wage has not increased in 35 years.

Where have those missing gains from productivity growth gone? To a small number of rich American shareholders, CEOS and highly paid professionals, thanks to "shareholder capitalism." Shareholder capitalism is the doctrine that companies exist solely to make money for their shareholders. It is frequently contrasted with stakeholder capitalism, which holds that companies exist for the benefit of their customers, workers and communities, not just for ever-fluctuating number of mostly remote and unengaged passive investors who just happen to own stock in them, often without even being aware that they do. The rise of shareholder capitalism in the US is often dated to an influential article in the Journal of Financial Economics in 1976, titled "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" by Michael C. Jensen and William H. Meckling. They argued that shareholders should demand higher returns from complacent corporate managers. The idea of shareholder value was publicized by a 1981 speech in New York by Jack Welch, who had just taken over General Electric, and by Aflred Rappaport's 1986 book "Creating Shareholder Value." The shareholder value movement sought to persuade corporate managers to ignore the interests of all stakeholders like workers, customers and the home country, other than shareholders. Granting CEOs stock options, in addition to salaries, was supposed to align their interests with those of the shareholders.

The theory had an obvious problem: Who are the shareholders and what are their interests? Most publicly traded companies have shares that are bought and sold constantly on behalf of millions of passive investors by mutual funds and other intermediates. Some shareholders invest in a company for the long term; many others allow their shares to be bought and sold quickly by computer software programs. Unable to identify what particular shareholders want, CEOs with the encouragement of Wall Street have treated short-term earnings as a reliable proxy for shareholder value. According to shareholder value theory, breaking up a firm and selling its pieces might maximize shareholder value in the short run more than long-term investments that would not pay off for many years. So could shutting down factories in the US and turning the American branch of a global manufacturing company into an importer and vendor finance company.

While the shareholder value theory had some influence in Europe and East Asia, it never displaced the stakeholder models of capitalism that exist outside the English-speaking world. As the Financial Times columnist Martin Wolf observes:
...[T]he idea that a company is an entity that can be freely bought and sold is culturally specific. It is the view, above all, of Anglo-Americans. It is not shared in most of the rest of the world. The reason for this divergence is that, for many cultures, a company is viewed as being an enduring social entity. I once read that, for many Japanese, one can no more sell a company over the heads of its workers than one can sell one's grandmother. In this view, goods and services can be bought and sold. Companies, like countries (or, as we all now agree, people), must not be.
Only in the English-speaking world, with its tradition of radical libertarian ideology, could a head of state like Margaret Thatcher declare: "There is no such thing as society." According to a 2007 article in the Journal of Business Ethics, 31 of 34 corporate directors, each of whom served on an average of six boards of Fortune 200 corporations, agreed that their duty to shareholders would require them to cut down a mature forest or allow a dangerous, unregulated toxin into the environment, if that increased shareholder value.

Because they never wholly accepted the shareholder value ideology, other capitalist nations have not seen fit to follow the Americans and British in steering most of the gains from economic growth away from workers to CEOs and shareholders. In Europe, average CEO pay is half the American level. The average European CEO makes 25 times as much as the average employee in the same company. The ratio in the US is 100 to 1.

America's most dysfunctional industries have the best-paid CEOs. The US spends twice as much on healthcare as other developed nations, with no better results, and the runaway cost of medicine in the US is the biggest threat to the economy in the long run. And yet a Wall Street Journal CEO compensation study in 2010 found that healthcare CEOs did much better than their equivalents in more productive industries like energy, telecom and consumer goods. The disproportion between the compensation of American financiers and their foreign equivalents is even more grotesque. In 2008 Jamie Dimon, the CEO of JP Morgan Chase, the world's fourth largest bank, was paid $19.6 million. Jiang Jianqin, the head of the world's largest bank, the Industrial and Commercial Bank of China, earned $234,000--2% of Jamie Dimon's compensation.

Shareholder value capitalism in the US since the 1980s has even failed in its primary purpose--maximizing the growth in shareholder value. As Roger Martin, dean of the Rotman Business School at the University of Toronto points out in a recent Harvard Business Review article, between 1933 and 1976 shareholders of American companies earned higher returns--7.6%--than they have done in the age of shareholder value from 1977 to 2008--5.9% a year. For his part, Jack Welch has renounced the idea with which he was long associated. In a March 2009 interview with the Financial Times, the former head of GE said: "Strictly speaking, shareholder value is the dumbest idea in the world."
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