Opinion

The Great Debate

The middle class’s missing $1.6 trillion

The United States was the world’s first middle-class nation, which was a big factor in its rapid growth.  Mid-19th-century British travelers marveled at American workers’ “ductility of mind and the readiness…for a new thing” and admired how hard and willingly they labored. Abraham Lincoln attributed it the knowledge that “humblest man [had] an equal chance to get rich with everyone else.”

Most Americans still think of themselves as middle class.  But the marketing experts at the big consumer goods companies are giving their bosses the unsentimental advice that the middle class is an endangered species. Restaurants, appliance makers, grocery chains, hotels are learning that they either have to go completely up-scale, or focus on bargains for the struggling and budget-conscious.

Current income surveys, for statistical reasons, usually segment families by broad categories, which obscure the recent radical shift of income to a thin stratum of the super-rich. Well-to-do people may buy $100 coffee pots, but the lion’s share of the income growth has been going to folks with five houses and staff to make the coffee.

For the last 15 years, an international consortium of economists has been building data bases on the income shares of the richest people in the developed countries, based on pre-tax market income including capital gains and tax-exempt income, and excluding government transfers. The American data reveals the greatest inequality by far, followed by Great Britain.

The stunning income distribution has a remarkable symmetry.  In 2012, the top 10 percent captured half of all reported income. But the top 1 percent got almost half of that — 22.5 percent — while the top 10th of 1 percent (0.1 percent) captured half of that. All three are within a few decimal places of the previous highs — which occurred in 1928, just before the market crash that ushered in the Great Depression.

In the Netherlands, bankers turn to God — by law

 

Lloyd Blankfein, the chief executive officer of Goldman Sachs, once famously said he believed banks were doing “God’s work.” Now, the Netherlands is going one step further: starting later this year, all 90,000 Dutch bankers will have to swear an oath that they’ll do their “utmost to maintain and promote confidence in the financial-services industry. So help me God.”

It’s part of a major attempt by regulators and banks to clean up after the financial crash of 2008, and put behind them scandals that continue to blacken the financial service industry’s reputation. Just last October, the big Dutch cooperative bank Rabobank paid a $1 billion fine to settle charges in the Libor rate-fixing scandal.

Board members of the banks have already been required to swear the oath since last year, but now it’s being expanded to cover everyone who works in the sector. It consists of eight statements, including promises not to abuse knowledge and “to know my responsibility towards society.” There’s also a new banking code, a special declaration of moral and ethical conduct that all board members are required to sign, a “treat your customer fairly” initiative, and a “suitability” test for executive and non-executive directors of supervisory boards.

America’s long search for Mr. Right

What’s wrong with central casting? It’s a virtual truism: The United States always seems to pick the wrong guy to star as George Washington in some faraway civil war. We sell him weapons for self-defense against his despicable foes — and then, sometimes before the end of the first battle, we find we are committed to a bad actor who bears an uncanny resemblance to Genghis Khan.

President Barack Obama just approved the sale of 24 Apache helicopters to the Iraqi government of Prime Minister Nouri al-Maliki — despite well-founded concerns that Maliki may use them against people we do like as well as those we don’t.

Helicopters aren’t the only munitions on Maliki’s shopping list. Washington has negotiated the sale of 480 Hellfire air-to-ground missiles, along with reconnaissance drones and F-16 fighter jets.

Why the far-right fears change in Chattanooga

On Wednesday through Friday, 1500 autoworkers at Volkswagen’s plant in Chattanooga, Tennessee will vote on whether to join the United Auto Workers union in a landmark National Labor Relations Board election. Like other U.S. outposts of foreign auto companies, the facility, which opened in 2011, has never had a union.

A vote for unionization at Volkswagen would be a historic victory — not only for the UAW, but for the entire labor movement. It would provide unions with a key victory in the South, even in the face of a lavishly-funded external anti-union campaign, and may lead to transformative changes in labor-management relations, especially among European-owned firms.

If the Chattanooga workers vote to unionize, they will provide another example that when companies remain neutral in union elections, employees usually choose unions. Instead of pressuring the employees to vote against the UAW, Volkswagen management has let workers make the choice on their own. This is exactly what should happen in union elections, but rarely does. Volkswagen would probably have recognized the union on the basis of documented interest among workers, but Republican politicians and anti-union groups such as the National Right to Work Committee (NRTWC) demanded that the company hold an NLRB election. Ironically, the NRTWC has insisted that Volkswagen provide employees who oppose the UAW with an opportunity to make their case to the workforce, something that pro-union workers never enjoy during standard U.S. anti-union campaigns.

from Stories I’d like to see:

CVS and the doctoring business, Sochi consequences, and getting Cohen’s side of the story

1. How far can CVS and other pharmacy chains get into the doctoring business?

In announcing Wednesday that CVS Caremark would stop selling tobacco, chief executive officer Larry Merlo said selling cigarettes would be, according to a company press release, “inconsistent with our purpose.” He explained, “As the delivery of health care evolves with an emphasis on better health outcomes, reducing chronic disease and controlling costs, CVS Caremark is playing an expanded role in providing care through our pharmacists and nurse practitioners.”

I’d like to know more about what Merlo has in mind vis a vis that “expanded role in providing health care.”

Drugstore chains like CVS, Rite Aid and Walgreens already offer flu shots. How is that regulated? Is it allowed in all states? Do licensed nurses have to provide them? Did doctors’ groups or health clinics lobby against it?

The minimum wage fight: From San Francisco to de Blasio’s New York

In his State of the Union address last month, President Barack Obama urged cities and states to bypass Congress and enact their own minimum wage increases. “You don’t have to wait for Congress,” he stated.

On Monday, New York City Mayor Bill de Blasio followed the president’s advice. De Blasio announced, in his State of the City address, that he plans to ask Albany next week to give the city the power to raise the minimum wage.

The New York mayor is not the only elected official putting Obama’s words into action. Cities across the country, from New York to Seattle, are moving aggressively to confront rising income inequality and falling real wages for low-paid workers. These cities can learn important lessons from San Francisco’s bold experiments over the last 15 years.

Corporate tax reform: California points the way

The arcane, outdated and inefficient U.S. corporate tax code is costing our country jobs, factories, industries and tens of billions of dollars of badly-needed tax revenue each year.

Our tax system is supposedly based on the idea that U.S. companies should pay taxes on all profits, no matter where they are earned. Yet this is undermined when companies are allowed to “defer” taxes on profits made in other countries until those funds are repatriated to the United States.

This loophole encourages multinational corporations to move production and intellectual property, such as patents and trademarks, out of the country. Or they juggle their books to make it appear that a major portion of their income is made outside the United States. Then they keep it abroad, expecting to persuade legislators to give them “tax holidays” that allow them to repatriate the funds with minimal tax consequences. (The last holiday in 2004 offered a 5.25 percent tax rate). This set of incentives has resulted in up to $2 trillion of profits staying out of the country to defer taxation. This amount grows every year.

What unites Democrats? Republicans!

Back in 1901, Finley Peter Dunne’s character Mr. Dooley said, “The Dimmycratic Party ain’t on speakin’ terms with itsilf.” Is that happening again now? You might think so, given the talk about a populist revolt on the left.

But Democrats are in fact remarkably united on most issues. They agree on everything from increasing the minimum wage, to extending unemployment benefits to raising the debt ceiling.

Yes, there are divisions emerging over trade and energy. But it’s not anything like the bitter confrontations we used to see among Democrats over civil rights and the Vietnam War. It’s also not anything like the bitter civil war that’s broken out in the Republican Party. No one is threatening to walk out.

Reagan’s true legacy: The Tea Party

 

Challenging the status quo is the correct condition of American conservatism.

At the end of the American Revolution, Benjamin Rush, who had signed the Declaration of Independence, vowed that though the war with Great Britain was over, the Revolution would go on.

The stirrings of original American conservatism were found in such sentiments. For the proper state of American conservatism — from Thomas Paine to Thomas Jefferson to Abraham Lincoln — is to be in a perpetual struggle for intellectual revolution.

Ronald Reagan, whose 103rd birthday would have been Thursday, exemplified this. No surprise the Gipper regularly quoted all three men.

The missing ingredient for middle-class jobs

Christopher “Topher” Polack began his Apple career as a “creative genius.” He thrived in his job fixing customers’ technology problems and quickly rose through the ranks, getting more on-the-job training along the way. But like most other members of his genius class, he eventually quit. He now works as a freelance consultant specializing in helping older people use technology.

“I wasn’t meant to be a cog,” says Polack, who increased his salary post-Apple.

Polack’s experience provides a blueprint for how to thrive in the modern labor market and points to the future of middle-class jobs. Unlike the industrial revolution, the latest technology revolution diminishes the value of long-term employment relationships and places a premium on individual skills. Workers like Polack are more mobile and take the skills they acquire from one job to the next. Yet America’s institutions haven’t fully adapted, and may be holding the economy back.

  •