Redistributing the Wealth — Higher and to Fewer

Robert Reich reminds us that all the talk about taxing the wealthy to redistribute downward masks a vital point — the wealthy got that way, in part, by the rigged distribution upward.

Much of the national debate about widening inequality focuses on whether and how much to tax the rich and redistribute their income downward.

But this debate ignores the upward redistributions going on every day, from the rest of us to the rich. These redistributions are hidden inside the market.

… the extra money we’re paying for pharmaceuticals, Internet communications, home mortgages, student loans, airline tickets, food, and health insurance – and you get a hefty portion of the average family’s budget.

Or, in other words, the markets are far from being ‘free,’ as is widely and loudly claimed.  The ideal state for big business is to have captive markets, or shall we call them slave markets, controlled by themselves. Until the conglomerates are broken up, and the purchasing public understands that saving 2% at the big box stores costs 4% in time, transportation and hassle, redistribution up will continue to be the norm.

Scandal follows Scandal but Who Needs Regulation?

Oh my goodness! Volkswagen, which distanced itself from its Adolf Hitler aided beginnings and the taint of using slave labor to become the largest automobile manufacturer in the world has exploded in the biggest manufacturing scandal of the year – maybe in several years but who can keep track?

From Upton Sinclair’s exposure of corporate meat packing fraud and filth to today, the rolls are filled with dishonorable corporate activity. I know, I know, not all of theM, but how many bad apples in a barrel before you don’t want anything to do with the whole lot?  Here are a couple of lists just to jar loose the memories. The Biggest 25 Ever (probably not, but all recent.)  And here’s a Wiki list.  It’s pretty short on Gilded Age scandals but still, many.

So, the problem is not, nor has ever been, one bad apple.  The problem is the set up of corporations to spin the “virtuous circle” of profits and greed while resisting any kind of regulation or oversight for the common good.  Today’s James B Stewart article in the NY Times makes the point about VW with plenty of detail:  it was not just the CEO Winterkorn, nor a rogue engineer somewhere.  It starts at the top, with the Board.

Volkswagen’s recent history — a decades-long feud within the controlling Porsche family, a convoluted takeover battle and a boardroom coup — has dominated the German financial pages and tabloids alike. This week, the German newspaper Süddeutsche Zeitung compared Volkswagen’s governance to that of North Korea, adding that its “autocratic leadership style has long been out of date.” It said “a functioning corporate governance is missing.”

Image result for volkswagen pollution

… I spoke this week to a longtime former senior Volkswagen executive, who agreed that a scandal, especially one involving emissions, was all but inevitable at Volkswagen. He cited the company’s isolation, its clannish board and a deep-rooted hostility to environmental regulations among its engineers. …  engineers felt that the politicians were guilty of rank hypocrisy, especially in the United States, also grumbling that electric cars make no sense as long as power plants are burning fossil fuels.

“There’s an attitude of moral superiority there,” he said. “The engineers think they know best.”

And, of course, it’s not new. Cheating, cheating, everywhere.  Because, who does the testing? Why those who have products to be tested! Wahoo!  Let the students test themselves…

Paul Krugman weighs in with a quick summary of very recent corporate scandals and hammers the drum for a return to reasonable regulation.

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior, not least so that ethical business people aren’t at a disadvantage when competing with less scrupulous types. But we knew that, right?

Well, we used to know it, thanks to the muckrakers and reformers of the Progressive Era. But Ronald Reagan insisted that government is always the problem, never the solution, and this has become dogma on the right.

As a result, an important part of America’s political class has declared war on even the most obviously necessary regulations.

And ALL PRAISE! to the folks who found out:

Peter Mock, European managing director of a International Council on Clean Transportation and his American counterpart, John German, were sure that tests would show VW diesel to be clean!  They hired West Virginia University’s  Center for Alternative Fuels, Engines and Emissions where Dan Carder was director and research assistant professor Arvind Thiruvengadam and his colleagues hoped to be able to publish a few scholarly articles from the test results.  No one had an idea that anything was wrong.  When the results started coming in they re-did and re-did the tests, doubting themselves.

The initial test results were ready a year ago to little noise except for the EPA which began testing of its own followed by European authorities.  Bam! The VW castle is barely standing. In fact, the whole diesel line of fossil fuels may die.  The silver lining? Perhaps, to reclaim the trust of the public, VW will lead the way in to renewable fuels. Perhaps.

And, by the way, were the code that was jiggered to falsely give superb emission reading “open code” instead of proprietary, some young nerds might have discovered the problem several years ago.

When Jon Stewart Took on Wall Street

Joe Nocera in the NY Times has a nice memory of how Stewart took apart the Wall Street media.

“Stewart had no special Wall Street knowledge, as he was the first to admit. What he had was a nose for a scam, and an uncanny ability to articulate what the rest of us were feeling.

“He mocked the way Wall Street firms paid ungodly sums to settle government charges without ever admitting guilt (a subject later championed, less humorously, by Federal Judge Jed Rakoff). He lampooned the way dubious deals — particularly the notorious Goldman Sachs Abacus deal — were legal, even as they oozed with sleaze. After J.P. Morgan’s big London Whale losses, he showed a Senate hearing where senators cravenly solicited regulatory advicefrom the company’s chief executive, Jamie Dimon — and then noted that J.P. Morgan was often their biggest campaign contributor. And so on.

Punishment for Felonious Banks

Robert Reich, economist, author, blogger, public servant, is always worth turning to in order to understand the world, and some striking alternatives to the status quo.  Here is a June article from his web site, robertreich.org recommending some innovative punishments for felonious banks.

When real people plead guilty to felonies, they go to jail. But big banks aren’t people despite what the five Republican appointees to the Supreme Court say.

The executives who run these banks aren’t going to jail, either. Apologists say it’s not fair to jail bank executives because they don’t know what their rogue traders are up to.

Yet ex-convicts often suffer consequences beyond jail terms.

In many states they lose their right to vote. They can’t run for office or otherwise participate in the political process.

So why not take away the right of these convicted banks to participate in the political process, at least for some years? That would stop JPMorgan’s Dimon from lobbying Congress to roll back the Dodd-Frank act, as he’s been doing almost non-stop.

Why not also take away their right to pour money into politics? Wall Street banks have been among the biggest contributors to political campaigns. If they’re convicted of a felony, they should be barred from making any political contributions for at least ten years.

Read All

Going After the Bigs

From Australia:

Australian Treasurer Joe Hockey has said the government will introduce a new tax crackdown against 30 multinational corporations.

Without identifying the targets, Mr Hockey said the big corporations were “diverting profits earned in Australia away from Australia to no-tax or low-tax jurisdictions”.

He described the crackdown as “the first of its kind in the world”.

The legislation will be introduced to Parliament on Tuesday.

Mr Hockey said it was “pretty evident” which companies would be targeted.

Big multinational firms such as Google, Apple and Microsoft have been accused of moving their profits to countries with lower rates of tax.

BBC

From Bloomberg News: Elizabeth Warren is the Real Deal

Warren is a problem the financial industry didn’t expect to have right now. With the Republicans in control of Congress, this should be the time for Wall Street to soften regulators and their rules. The financial crisis is over, the housing market is recovering, and the economy is stable. A year ago, the sense of urgency about keeping a close watch over the financial industry seemed to be subsiding. Not anymore. Warren has re-sounded the alarm.

“There is a lot of talk coming from Citigroup about how Dodd-Frank isn’t perfect,” Warren continued. “So let me say this to anyone who is listening at Citi. I agree with you, Dodd-Frank isn’t perfect.” She paused, then spoke very slowly and emphatically: “It should have broken you into pieces.”

“More than any of the senators, she is making Wall Street nervous,” says Dick Durbin, a Democratic senator from Illinois and a fellow financial reformer. This spring, news broke that bank executives had told Democrats they were unhappy about the anti–Wall Street rhetoric coming from Warren and others. In some conversations, executives reportedly suggested they might withhold donations. Warren used the news as an opportunity to remind the public once again how banks wield power in Washington. “The big banks have issued a threat, and it’s up to us to fight back,” she promptly e-mailed supporters, asking for donations.

Bloomberg News — including a nice graphic of friends and enemies.

And Krugman at the Times weighs in, calling out the Wall Street Vampires:

…. let’s just note that these days Wall Street, which used to split its support between the parties, overwhelmingly favors the G.O.P. And the Republicans who came to power this year are returning the favor by trying to kill Dodd-Frank, the financial reform enacted in 2010.

And why must Dodd-Frank die? Because it’s working.

…. Republicans would love to undo Dodd-Frank, but they are, rightly, afraid of the glare of publicity that defenders of reform like Senator Warren — who inspires a remarkable amount of fear in the unrighteous — would shine on their efforts.

Does this mean that all is well on the financial front? Of course not. Dodd-Frank is much better than nothing, but far from being all we need

Tax Subsidies to Corporate Giants

From the Washington Post:

The low wages paid by businesses, including some of the largest and most profitable companies in the U.S. – like McDonald’s and Wal-Mart – are costing taxpayers nearly $153 billion a year.

After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs goes to working families who need food stamps, Medicaid, or other support to meet basic needs. Let that sink in — American taxpayers are subsidizing people who work — most of them full-time  (in some case more than full-time) because businesses do not pay a living wage.

[Actually, it’s worse than that.  Living wage means enough to live on now, while working. Nothing about putting aside enough, or paying back, for the years you don’t work, can’t work, aren’t allowed to work.]

The Book Wars: What to Do?

It has been clear for some time that the more book buyers (you and me) depend on Amazon the greater the destruction of bookstores.  It is becoming more apparent that publishers are also threatened. Amazon, the biggest distributor, wants a bigger share of e-book prices which it sells.  Hachette, no small business itself, is refusing.  Amazon is delaying  or making hard to order, Hachette books.  What to do?

In the US

The confrontation between Amazon and Hachette is growing louder and meaner, as the combatants drop all pretense that this is a reasonable dispute among reasonable people.

Amazon has proposed giving Hachette’s authors all the revenue from their e-book sales on Amazon as the parties continue to negotiate a new contract. Hachette’s response on Tuesday was to suggest that the retailer was trying to make it commit suicide

…  For more than six months, Amazon has been trying to wring better e-book terms out of Hachette. The publisher, which is the fourth largest in the United States and whose imprints include Little Brown and Grand Central Publishing, is energetically resisting.

Amazon has responded by delaying shipments of Hachette books and making it harder for customers to order them. Hachette authors have responded by publicly excoriating Amazon.

…  One author,, Ms. Robinson, whose books are not published by Hachette, said that “what writers want is a long-term healthy publishing ecosystem, not a temporary windfall.”

That applies to both parties, she added. “From our publishers we want a fairer share of e-book revenues; from Amazon we want an end to predatory practices that unfairly threaten their competitors, as well as the continued existence of the printed book.”

NY Times: Streitfield

In France

France, meanwhile, has just unanimously passed a so-called anti-Amazon law, which says online sellers can’t offer free shipping on discounted books. (“It will be either cheese or dessert, not both at once,” a French commentator explained.) The new measure is part of France’s effort to promote “biblio-diversity” and help independent bookstores compete. Here, there’s no big bookseller with the power to suddenly turn off the spigot.

The French secret is deeply un-American: fixed book prices. Its 1981 “Lang law,” named after former Culture Minister Jack Lang, says that no seller can offer more than 5 percent off the cover price of new books. That means a book costs more or less the same wherever you buy it in France, even online. The Lang law was designed to make sure France continues to have lots of different books, publishers and booksellers.

Fixing book prices may sound shocking to Americans, but it’s common around the world, for the same reason. In Germany, retailers aren’t allowed to discount most books at all. Six of the world’s 10 biggest book-selling countries — Germany, Japan, France, Italy, Spain and South Korea — have versions of fixed book prices.

NY Times: Druckerman

“Climate Change is Real” One Republican Says

Michael Bloomberg is one of the few known-to-be-a-Republican big names who has squarely talked about climate change and the dangers we are facing.  On Sunday, another Republican, well known, added his voice.  Henry Paulson, Secretary of Treasury when the economy went to hell, and now chair of the Paulson Institute at the University of Chicago, is unambiguous:

THERE is a time for weighing evidence and a time for acting. And if there’s one thing I’ve learned throughout my work in finance, government and conservation, it is to act before problems become too big to manage.

For too many years, we failed to rein in the excesses building up in the nation’s financial markets. When the credit bubble burst in 2008, the damage was devastating. Millions suffered. Many still do.

We’re making the same mistake today withclimate change. We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs are clear and growing more urgent as the risks go unchecked.

This is a crisis we can’t afford to ignore. I feel as if I’m watching as we fly in slow motion on a collision course toward a giant mountain. We can see the crash coming, and yet we’re sitting on our hands rather than altering course.   Paulson : The Coming Climate Crash

I’m not sure who he means by WE but I’d offer that ‘my friends are sitting on their hands” would be closer to accurate.  There are plenty of US who have been consumed with the problem of too much CO2 and too little action for years, some for decades.  Paulson describes having the dry-heaves from tension during the worst weeks of the financial crisis.  It’s a familiar feeling, Hank — everytime another weather anomaly breaks out, everytime we hear an elected Republican say that climate change is a bogus, lied-up plot by tens of thousands of scientists anxious to curry favor with their funders.  [Who else could dream up such an accusation but those who are fully aware of how such liaisons work?]

And Pauslon has a solution, at least a point of view.

The solution can be a fundamentally conservative one that will empower the marketplace to find the most efficient response. We can do this by putting a price on emissions of carbon dioxide — a carbon tax.

Bravo!

And how is that going to come about?  Is Hank Paulson with Michael Bloomberg going to grow think-tanks and funding sources to counter the baleful influence of their fellow Republican deniers, the Koch billionaires foremost among them?  Has he heard any recent Heritage Foundation nonsense?

Their action to quantify the cost of inaction — the Risky Business project — is good, but great?  Enough?  Not by a long shot.

Paul Krugman’s response to Paulson’s Opinion piece was cogent, as usual.

[his] … was a brave stand to take.

But not nearly brave enough. Emissions taxes are the Economics 101 solution to pollution problems; every economist I know would start cheering wildly if Congress voted in a clean, across-the-board carbon tax. But that isn’t going to happen in the foreseeable future. A carbon tax may be the best thing we could do, but we won’t actually do it.

Yet there are a number of second-best things (in the technical sense, as I’ll explain shortly) that we’re either doing already or might do soon. And the question for Mr. Paulson and other conservatives who consider themselves environmentalists is whether they’re willing to accept second-best answers, and in particular whether they’re willing to accept second-best answers implemented by the other party. If they aren’t, their supposed environmentalism is an empty gesture.

So, thank you Mr Paulson but some of us have the dry-heaves about this.  Could we get this show on the road and put the pedal to the metal?  Otherwise the coastal populations around the world are going to be following in the footsteps  our end-of-ice-age ancestors, beating a retreat (in our millions) for higher ground as the rains keep falling and the  oceans keep rising. And there’ll be deaths aplenty as our grandchildren battle for food, shelter and dry ground.

And, by the way:

Air quality has improved significantly in the past 20 years because of federal and state laws and regulations, and researchers in North Carolina have found an associated decline in rates of death from respiratory disease.

Let’s call what we now have  carbon pollution and get on with cleaning it up…

Protesting the Corporate Tax Breaks/Evasions

Some working folks took to the street yesterday to point out the hidden obvious — the big get away with big breaks, while the little guy east dust.

City nurses, janitors and other workers marched to Twitter’s headquarters on tax day Tuesday to deliver a symbolic tax bill for tens of millions of dollars for the “corporate tax giveaway” that helped persuade the company to move to San Francisco’s Mid-Market area

SF Gate

SEIU Twitter

Protesters target Apple for offshore tax shelters

Protesters dressed up as Apple Store employees in telltale blue t-shirts marched in front of the Union Square store Tuesday morning, calling on Apple to pay taxes on the $102 billion they said the company holds overseas.

The protest called on tech’s ethos of making the world a better place. Flyers handed out at the protest to shoppers passing by the store pointed them to www.techcandobetter.org, which pushes for better wages for security guards at tech companies.

SEIU USWW, the union that organized the march, represents security guards and janitors at many companies, not just tech, in San Francisco and the East Bay.

SF Gate

Corporations And Their Responsibility

Today’s S F Chronicle featured a front page magazine piece about SalesForce.com founder, Marc Benioff and his push to enlist other Bay Area corporations to follow his in being good citizens:

Salesforce.com founder Marc Benioff is challenging fellow tech leaders to raise millions to fund a new antipoverty program – and recast the industry as a local hero.

“We don’t want to be the industry that looks like ‘The Wolf of Wall Street,’ ” he told The Chronicle. “We want to be more benevolent.”

On Friday – the software company’s 15th birthday – Salesforce and the nonprofit Tipping Point will announce the formation of SF Gives, an initiative to raise $10 million over the next 60 days for Bay Area antipoverty programs.

Persuading 20 companies to contribute $500,000 apiece is just the start. Benioff, one of the city’s leading philanthropists, said he hopes to eventually expand the program to $100 million.  SF Gate

There is, by the way, a music event at Justin Herman Plaza, near the Ferry Building, all afternoon to celebrate the 15th anniversary of Sales Force and to raise money and food for that goal.

Now such corporate largesse would seem to be a welcome thing.  Who could complain about $10 million to help the impoverished?  The problem is two fold as I see it.  One, each corporation is necessarily guided by its Board of Directors along the value lines they set up.  Therefore, the decisions as to Who is supported, under What criteria for How long and When the help begins and ends are all privatized.  As we have seen recently, several corporations are suing the government for mandating medical care payments for services they don’t like.  It follows that a corporation or consortium of corporations will, predictably, have opinions about who the Deserving Poor are and distribute their support accordingly.

Secondly, the corporate anti-poverty push is so far, and likely to remain so, a local affair.  The Bay Area is home to Sales Force and many other mega billion dollar companies; Gallup, New Mexico is not.  The result of such local action will follow in the tracks of the public school system in which wealthy districts hold million dollar fund raisers every year; their districts far outstrip their poor brethren in the breadth of school offerings, size of classes, excellence of facilities, availability and quality of extra-curricular activities.  The notion of equal education and opportunity is lost but denied, since all are still in ‘public schools.’

Thirdly, how much is $10 million anyway?  According to a Forbes article, the US spends $550 billion yearly to alleviate poverty.  My calculator won’t show in decimal format how small a percentage that $10 million is.

Fourthly, why is such giving necessary in the first place?  Why are there so many poor?  Why, for example, is San Francisco the city in the nation where the disparity between its rich and its poor has grown the fastest?

What are the structural economic reasons for this?  Have salaries for Sales Force janitors, electricians and grounds keepers kept pace with those of the Benioffs and top managers?  Have the associated companies taken advantage of city and county tax breaks, thereby diminishing taxes available for infrastructure jobs?  Perhaps the smart guys in these corporations could help us all figure this out.  What are the algorithms of production, distribution and consumption most likely to get us to a stable, growth economy, where all who wish to work can, and those who are unable to work are provided for?  Where are the super-computer models that could help us move forward?

Finally, such corporate largesse if it does not now, will surely, be weighed against their corporate tax obligations.  Perhaps such gifts are already tax deductible, depriving the governments (state and national) from making decisions and allocations of tax moneys — based on input from affected communities and debates which, in theory at least,   are public.  Corporate Board decisions are not public.  Who are their constituents?  If the donations are not now deductible you can be sure that the argument will be advanced, strongly, that they should be, or should be more deductible if such corporate giving shows a decent track record in the next years.

And how have corporations done with their responsibilities to the national community through fair and equal taxation?  The corporate record can barely even be called spotty. According to a new report from Citizens for Tax Justice:

“A comprehensive, five-year study of 288 profitable Fortune 500 companies finds that twenty-six paid no federal corporate income tax over the five-year period; 111 paid no federal corporate income tax in at least one of the last five years, and one-third paid a U.S. tax rate less than 10 percent over the same period,” says a recent study by Citizens for Tax Justice, a Washington, D.C.-based group.

Among the companies that paid not a single penny over five years, despite making huge profits, are household names such as Boeing, General Electric, Priceline.com, and Verizon.

[Just scanning the report will set your hair on fire…]

Corporate Tax Dodgers

Further, the hue and cry from the GOP to roll back corporate taxes and compensate for lost revenue by stitching up loop-holes in the law is about to go silent completely, after a report by one of its own shows how many toes would have to be stepped on to come close to maintaining revenues while rolling back top tax rates.

… the Tax Reform Act of 2014 proposed last week by the chairman of the House Ways and Means Committee, Representative Dave Camp, a Michigan Republican …  seems unlikely to go anywhere, in no small part because the House Republican leadership has gone out of its way to distance itself from the proposal, praising Mr. Camp for his diligence and calling it worthy of consideration but not getting close to an endorsement.

In the talk about tax reform, there has been a general agreement that top rates should be reduced and loopholes closed, something Mr. Ryan has loudly endorsed. But there has been a great reluctance to get specific. This proposal does get specific, and in doing so it makes clear that much more needs to be done to reduce tax preferences and loopholes if we want both to finance the government and to lower tax rates.

To make the limited progress he does, Mr. Camp has to attack many tax preferences. Some are easy (did you know that for some reason the National Football League is tax-exempt?), but many are not. Americans who work overseas lose a tax break. The tax credit for buying electric cars goes away. So does the credit for adopting a child. A lot of tax provisions to provide aid for higher education costs are consolidated.

And so it goes.

It seems to me Benioff and friends would do all of us a big favor to put significant dollars into a tax reform campaign, into national discussion, payment for expert opinion, studies of other comparable countries, into its drafting and into lobbying to pass it — taxes which are recognized as corporate responsibilities.  After the payment of that obligated to the common good, and payment to workers of sufficient wages, if there is a strong benevolent ethos or particularly profitable years, additional gifting, corporately determined, would be a very nice thing, indeed.