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Fighting Income Inequality Requires a Return of Manufacturing Jobs

By Arshad M. Khan | Dissident Voice | February 1, 2014

A recurrent theme in this administration is often spellbinding rhetoric followed by … well, very little in the way of follow-through programs. Lately, there has been the inequality issue. Taken up once more in the State of the Union (SOTU) address, the remedy proposed was an increase in the minimum wage. Yes, it needs to be raised but to focus on it alone simply evades the complexities to be navigated to confront the challenges of inequality.

One major cause is the export of well-paid manufacturing jobs and with them proprietary technology and skills. Higher and higher level jobs (and concomitant expertise) are being exported. Ross Perot’s ‘whoosh of jobs’ in the wake of NAFTA will become a hurricane (or more accurately a typhoon) as the Trans Pacific Partnership (TPP) is realized. Yet, the administration sees no contradiction in promoting TPP vigorously and attacking income inequality rhetorically. NAFTA failed to render a level playing field for the American worker by excluding environmental safeguards, working conditions, worker safety and benefits (even on a purchasing-power-parity equivalence). The secretive negotiations for TPP are expected to do the same.

As a result, almost everything we use in our daily lives is made abroad: refrigerators, ovens, microwaves, dishwashers, TVs, computers, phones, fixtures, fittings, clothes, shoes, automobiles among which even iconic names often have innards imported, pet foods, toys, etc., etc. Gone with them are the jobs of the men and women who built them. Even high-end airplane manufacture is not exempt. Consider the new 777: While Boeing is responsible for a major portion of the structure, Mitsubishi, Kawasaki and Fuji are significant contributors furnishing fuselage panels and the wing center section. Other bits and pieces have been contracted elsewhere in the world including Australia, Brazil, Korea and Italy. The concept differs from Airbus which retains almost all its jobs and technology in Europe. Also in contrast, Boeing recently threatened to pack up and shift the manufacture of the 777x forcing machinists into benefits concessions.

Germany which exports few jobs follows a model encouraging job retention. Very simply a company’s supervisory board has equal management and labor representation (10 members from each side). It must approve major decisions, and it appoints the management board. No surprise that jobs stay home.

A line in the SOTU address mentions job training. Here too the long-standing German apprenticeship model, which develops highly skilled workers and offers alternative skills to a university education, deserves a closer look. But the least anyone undertaking such programs can expect is a job. Yet, just about every jobs report in the last half-dozen years shows most jobs generated are in the low-paid, low-skill service sectors like the hospitality industry and ambulatory care.

What we need desperately are policies and programs to bring back manufacturing jobs, and to restore our crumbling infrastructure. The latter not only alleviates unemployment but together with education and job training enhances the attractiveness of relocating manufacturing jobs to this country.

Now that would be a step towards reducing income inequality.

Arshad M. Khan is a retired professor. He can be reached at: backfire@ofthisandthat.org.

February 1, 2014 Posted by | "Hope and Change", Deception, Economics, Timeless or most popular | , , , , , | Leave a comment

American State of the Union: A Festival of Lies

obama-arrival-sotu

By Glen Ford | Black Agenda Report | January 29, 2014

“Believe it,” said the current Prevaricator-in-Chief, in the conclusion to his annual litany lies. President Obama’s specialty, honed to theatrical near-perfection over five disastrous years, is in crafting the sympathetic lie, designed to suspend disbelief among those targeted for oblivion, through displays of empathy for the victims. In contrast to the aggressive insults and bluster employed by Republican political actors, whose goal is to incite racist passions against the Other, the sympathetic Democratic liar disarms those who are about to be sacrificed by pretending to feel their pain.

Barack Obama, who has presided over the sharpest increases in economic inequality in U.S. history, adopts the persona of public advocate, reciting wrongs inflicted by unseen and unknown forces that have “deepened” the gap between the rich and the rest of us and “stalled” upward mobility. Having spent half a decade stuffing tens of trillions of dollars into the accounts of an ever shrinking gaggle of financial capitalists, Obama declares this to be “a year of action” in the opposite direction. “Believe it.” And if you do believe it, then crown him the Most Effective Liar of the young century.

Lies of omission are even more despicable than the overt variety, because they hide. The potentially most devastating Obama contribution to economic inequality is being crafted in secret by hundreds of corporate lobbyists and lawyers and their revolving-door counterparts in government. The Trans Pacific Partnership (TPP) trade deal, described as “NAFTA on steroids,” would accelerate the global Race to the Bottom that has made a wasteland of American manufacturing, plunging the working class into levels of poverty and insecurity without parallel in most people’s lifetimes, and totally eviscerating the meager gains of three generations of African Americans. Yet, the closest Obama came to even an oblique allusion to his great crime-in-the-making, was to announce that “new trade partnerships with Europe and the Asia-Pacific will help [small businesses] create even more jobs. We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment and open new markets to new goods stamped ‘Made in the USA.’” Like NAFTA twenty years ago – only far bigger and more diabolically destructive – TPP will have the opposite effect, destroying millions more jobs and further deepening worker insecurity. The Trans Pacific Partnership expands the legal basis for global economic inequalities – which is why the negotiations are secret, and why the treaty’s name could not be spoken in the State of the Union address. It is a lie of omission of global proportions. Give Obama his crown.

The president who promised in his 2008 campaign to support a hike in the minimum wage to $9.50 by 2011, and then did nothing at all to make it happen, says this is the “year of action” when he’ll move heaven and earth to get a $10.10 minimum. He will start, Obama told the Congress and the nation, by issuing “an executive order requiring federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour because if you cook our troops’ meals or wash their dishes, you should not have to live in poverty.” Obama neglected to mention that only new hires – a small fraction, beginning with zero, of the two million federal contract workers – will get the wage boost; a huge and conscious lie of omission. The fact that the president does not even propose a gradual, mandated increase for the rest of the two million shows he has no intention of using his full powers to ameliorate taxpayer-financed poverty. We can also expect Obama to issue waivers to every firm that claims a hardship, as is always his practice.

What is Obama’s jobs program? It is the same as laid out at last year’s State of the Union, and elaborated on last summer: lower business taxes and higher business subsidies. When you say “jobs,” he says tax cuts – just like the Republicans, only Obama first cites the pain of the unemployed, so that you know he cares. “Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home.” Actually, Obama wants to lower tax rates for all corporations to 28 percent, from 35 percent, as part of his ongoing quest for a Grand Bargain with Republicans. For Obama, the way to bring jobs back to the U.S. is to make American taxes and wages more “competitive” in the “global marketplace” – the Race to the Bottom.

In the final analysis, the sympathetic corporate Democrat and the arrogant corporate Republican offer only small variations on the same menu: ever increasing austerity. Obama bragged about reducing the deficit, never acknowledging that this has been accomplished on the backs of the poor, contributing mightily to economic inequality and social insecurity.

Obama offers nothing of substance, because he is not authorized by his corporate masters to do so. He takes his general orders from the same people as do the Republicans. That’s why Obama only speaks of minimum wage hikes while Republicans are in power, rather than when his own party controlled both houses of Congress. Grand Bargains are preferred, because they are the result of consensus between the two corporate parties. In effect, the Grand Bargain is the distilled political will of Wall Street, which feeds the donkey and the elephant. Wall Street – the 1 percent – believes the world is theirs for the taking, and they want all of it. Given this overarching truth, Obama has no choice but to stage a festival of lies.

~

Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com

January 29, 2014 Posted by | "Hope and Change", Deception | , , , , | Leave a comment

The fallacy of corporate taxes in a neo-liberal context

By Michael Laxer | Rabble | November 23, 2013

“Make the corporations pay!”

It is a slogan that sounds good, and with which I would fully agree, under conditions where “corporations,” or, more accurately, those who control them, were actually paying. But this is not the case in the debate in Canada today where many on the left are falsely proclaiming corporate taxes as an alternative to increasing personal taxes, even on the wealthy, and seem to display little understanding that corporate tax rates have nothing at all to do with inequality socially and are not at all a tax on wealth or the wealthy.

When Thomas Mulcair juxtaposes his “plan” to increase corporate taxes as a “progressive” alternative to Toronto-Centre candidate Linda McQuaig’s previously stated notion that taxes should be increased as well on Canada’s wealthiest individuals, he is fundamentally juxtaposing McQuaig’s plan that might accomplish something to a plan that will accomplish absolutely nothing.

The essential fallacy of mythologizing corporate taxes in the present context lies in the fact that, unless you agree with the U.S. Supreme Court, corporations are not people. By definition, if government taxes a corporation, ultimately some individuals, somewhere, pay the bill. Corporations cannot pay anything, any more than a house you own pays its own property tax. Given that corporations can, will and must extract the money to pay their tax bills any number of ways, from increasing prices, to attempting to force down worker wages and benefits, to finding creative ways to reduce nominal profit (which includes actually increasing CEO salaries or privileges, which are a “cost”), in the absence of a campaign to dramatically increase personal taxes on the managerial and CEO class of corporations or to re-adjust social power relations through the threat of socialization of assets and/or price controls, the net effect of corporate taxes, in terms of income levelling, will often  be either zero or regressive.

It sounds radical, and is therefore appealing to centrists who wish to nominally appear radical, but its impact on inequality is essentially non-existent for the very simple reason that inequality is driven by disparities in the incomes that exist between individuals. Inequality is facilitated by corporations and corporate actions, but it is manifested in the difference between people and people alone.

This exact inequality exists within corporations themselves. Corporations are comprised, as a general rule, of workers, managers and upper management. Given the nature of the capitalist economy, the way corporations will seek to lessen the impact of higher taxation will not be at the expense of their CEOs.

It is not corporations who own multiple mansions, live lavish lifestyles or indulge in tremendous decadence, it is wealthy people who do so. The disparity between rich and poor is not between rich and poor companies, but rather between rich people and those living working-class lifestyles or those actually living in poverty.

Taxes on corporations, in isolation, separated from higher tax rates on the wealthy individuals who own, profit from and run the corporations, act as little more than waypoints to collecting taxes on corporate workers or customers.

“Progressive” politicians, New Democrats, Liberals and Democrats alike, like the corporate tax narrative when it suits them precisely because it does not threaten any actual people at all, whether it is Galen Weston or one of his Loblaws cashiers. They can claim to be holding the banner of redistributive justice high. To be defending the mythical “99 percent.”

Yet these taxes can only have an impact on inequality if you assume, barring personal tax increases, that corporations will pass the “costs” of higher taxes along, out of a sense of social justice, to their corporate boardrooms. This is, frankly, a counterintuitive and bizarre assumption for leftists to make.

They will not. They will, as they always do, make their workers pay.

We need to move beyond the false narrative of so-called “corporate taxes” as a solution under capitalism and, instead, to advocate for both a dramatic increase in personal taxes on the wealthy and the upper middle class with a corresponding fight to socialize corporate assets. We need to tie this to an entrenchment of union and workers’ rights and democratization of the economy.

It is time to actually make those who benefit from the corporations pay. By higher taxes on capital gains, by higher income taxes on the wealthy and managerial class, by inheritance taxes, by expanding the legal rights and powers of workers.

By advancing expropriation and radically new ownership models.

Until then, when it comes to understanding how to tackle income inequality and its consequences, it is the pre-by-election Linda McQuaig who was right and it is the desperate-for-power NDP leader Thomas Mulcair who is wrong.

November 24, 2013 Posted by | Deception, Economics | , , , , , | Leave a comment

Maxing Out

Toward a Maximum Wage

By JOHNNY E. WILLIAMS | CounterPunch | April 10, 2012

Tackling income inequality through the minimum wage alone is an inadequate way to counter the economy’s anti-egalitarian tendencies. The minimum wage exists because the federal government recognizes the economy undervalues the average worker’s contribution and fails to provide a fair livable wage. Conversely, the economy’s overvaluing a few people’s contribution is also in need of governmental oversight. Since the government believes the economy is not a reliable gauge for determining how little is too little, it cannot assume the “market” is capable of determining how much is too much. Given this it is incumbent on the federal government to implement an income ceiling to eliminate the extreme income disparity between top and average wage earners.

Before dismissing the maximum wage idea outright, consider President Franklin Delano Roosevelt’s call for 1942 maximum wage of $25,000 a year (in 2012 dollars $364,000) as a means to fuel economic growth and reduce income inequality. In a recent Le Monde Diplomatique article Sam Pizzigati of the Institute for Policy Studies revealed that two short years after President Roosevelt’s proposal, Congress increased the top tax rate to 94% for individual incomes over $200,000 (in 2012 dollars $2.6 million) The 94¢ tax on every dollar over the $200,000 limit helped initiate the longest period of economic growth for the middle class in U.S. history. This tax rate remained in place until President Lyndon Johnson dropped it to under 70% in the late 1960s. About two decades later President Reagan reduced the rate to 50% and then to 28% in 1988 before it settled at today’s 35% rate. But this tax rate overstates the rich’s tax burden given that most of their income [tax payment] comes from the 15% capital gains tax on profits acquired from buying and selling stocks, bonds and assets. This tax rate is about the same as that for working Americans earning between $50,000 and $75,000 before itemized deductions and exemptions.

Opponents of the maximum wage assert that cutting the top tax rates rather than increasing them will spark revenue and job growth. Their “trickle down” rationale assumes that making the rich richer will create good paying jobs, making working people more prosperous. But the trickle down approach and other piecemeal provisions like the minimum wage, earned income tax credit, and other minimalist economic programs and policies have proven ineffective in reversing the growth in income inequality over the last four decades. The ineffectiveness of such programs and policies is apparent in Emmanuel Saez’s recently released study showing that during the current recession one-percenters captured 93 percent of the income growth in both 2009 and 2010. In real dollar terms this means that the bottom 90% income on average declined $127 while the top 1% income increased $106,000.

One the best and most proficient ways to restart job growth and alleviate poverty and inequality, the imposition of a maximum allowable wage tied to minimum wage and enforced through a progressive income tax. The maximum is set at a specific multiple (maybe twenty five times) of the minimum wage, so that all income over the multiple limit is subject to a 95% to 100% tax. Limiting and linking average and top wage earners in this way will help Americans clearly see that poverty and suffering is necessary for an individual to accumulate wealth.

The fact is that income and wealth inequality impedes economic recovery, and efficiency and stability because it weakens demand for goods and services. By implementing a maximum wage the government could generate billions in revenue that can be invested in health, education, technology and infrastructure maintenance in ways that ensure the economy is sustainable, productive and efficient.

Europeans, especially those dealing with economic austerity measures, are already debating how to enact a maximum wage policy to ameliorate economic calamity. The idea of the maximum wage is also starting to resonate in the United States with a public that is increasingly aware of the destructive and anti-democratic consequences of lopsided disparities in income and wealth. This emerging awareness encourages people to question and challenge the legitimacy of economic values and a political system that, as Martin Luther King, Jr. put it: “permit necessities to be taken from the many to give luxuries to the few.”

Johnny E. Williams is an Associate Professor in the Department of Sociology at Trinity College.    

April 10, 2012 Posted by | Economics, Timeless or most popular | , , , , , , | Leave a comment

   

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