Wednesday, November 27, 2013

Economic Disparity

Since the 1980's and even before, if you were to ask a presidential candidate what the campaign's primary issue was, they'd tell you that far above any social issue, any security issue, (even post 9/11) the economy has been the biggest concern for Americans.  Economy means inflation, income, housing, international trade, Wall Street and more, so it's a very complex issue.

So let's examine the economy.  Today, more than at any time in American history, the stock market is vibrant.  Breaking new records almost daily, the DJIA closed last week above 16,000 for the first time in history.  As I'm writing this, it's standing at almost 16,100.

Yet today, unemployment is above 7 percent overall, and far higher in key demographics.  Average income in the US is down precipitously since before 2007's Great Recession.  Historically high numbers of Americans are on some sort of government assistance.  Student loan defaults are at historic highs.  And as a country, our debt continues to increase, as we pour trillions into programs that have no chance or intention of changing the economic trajectory of the average American.

Today's presidential candidate might say their primary campaign issue would be economic inequality.  Today, the share of income flowing to the top 1 percent is over 20 percent - the highest level since right before the Great Depression.  Since 1993, the top 1 percent has benefitted from over two thirds of US economic growth, per family, real income.  Since the 'recovery' of the 2007 Great Recession, 95 percent of the total increase in income went to the top 1 percent.  Staggering.

In terms of wealth, the top 5 percent of Americans now control 72 percent of the wealth.  The other 95 percent control only 28.

So how can Wall Street be so vibrant, while Main Street is barely getting by?  The truth behind the numbers is telling.  The current market cap of the stock market is bigger than the Gross National Product of the US.  That doesn't happen often - only three times in history, two of which were right before the crash of the economy in 2007.  All the while, the Fed is providing economic stimulus to the tune of billions per month to help prop it all up.

Let me provide some insight behind the sharp contrast between Wall Street and Main Street.

The first reason market indices no longer reflect conditions on the ground is, they are based on productivity gains, not employment.  Corporations are investing in technology instead of workers.  The tax code is fertile with tax deductions for equipment and technology, not so much for investment in employees.  Higher productivity + lower payroll = higher profits.

Another reason - workers have no bargaining power when unemployment is high.  Wages stay low because those who are employed feel fortunate to have a job.  While governmental support systems, such as tax breaks for hiring the unemployed, may have helped in a different place and time, government is operating under very austere conditions as we chip away at deficit spending and try to at least reduce the rate of growth of the National Debt.  The result of a powerless work force is lower wages for workers and higher short-term profits for corporations.

American corporations are beholden first to stockholders, so they go searching globally for cheap workers.  That usually means moving much of their manufacturing and production off-shore.  That results in lower taxes, and again, less investment in employees.  Wall Street looks positively on all of this.

I mentioned the Fed.  The easy money they provide plays a huge role, pushing investors toward Wall Street, because bond yields are at historic lows.  Stocks, while riskier, produce far higher returns.

One final reason that doesn't get much play, but is a concern of mine: The methodology of the stock market.  At one time, investors looked for companies they felt were 'doing it right'.  They invested in ideologies and strategies.  Today, much or most of the trading on Wall Street is done by computer algorithms, and a share of stock might be bought and sold within 1/10th of one second, for a profit of less than a penny.  That's not much, but do it a billion times a day, and the results are staggering.  More important than corporate ideologies and philosophies in today's stock market, is the speed of your Internet connection.

The result: Wall Street is healthy, Main Street is not.

Adding insult to working-class injury, sequestration has eliminated or reduced the DOE's Title 1 Program, Head Start, and WIC, which provides nutritional education and assistance.  Rent subsidies are disappearing.  Cuts to the Department of Agriculture have eliminated or reduced food stamp benefits for many who need them.  Those who are suffering as a result of the productivity gains of corporations, the unemployed, are finding their long-term benefits are disappearing because of government sequestration.

Never before have governmental policy, and the need to feed the beast that is Wall Street, so inopportunely coincided to so radically help America's most fortunate, and hurt the least among us.

The icing on the cake is, nothing will likely be done about it.  Lax campaign finance laws mean those with the most money will get the most attention.  One individual can, through various means, contribute an unlimited amount of money to a Congressperson.  The Supreme Court says corporations are people, and money is free speech, a constitutional guarantee.  As bargaining power of employees is slowly whittled away, and the power of unions is reduced or removed, the rich hold not only the trump card, but virtually all of the cards.

Gerrymandering, and an apathetic (or worse, blindly partisan) electorate, ensure that those in power will remain, and little will change in the near future.

I'm not saying nothing will ever change.  History is a great tool, and easily reveals what happens to top-heavy economies.  Pyramids crumble when turned on their heads.  But our continued blindness to signs is discouraging.  Capitalism, in its orderly and regulated form, is an absolutely amazing system.  Capitalism unbridled and unregulated, is no better than Marxism or Communism, and is as dangerous a scourge as exists anywhere.


Spare me the tired slogans or accusations of class envy, I've lived through extremes, both high and low.  I'm a vibrant supporter of Capitalism.  I'm stating facts, feel free to check them.  We live in interesting times.

Thursday, November 07, 2013

Vive la Francis

I've come to be agnostic the hard way - via the life of a born-again Christian.

In 1977 we lived in the basement of the subject of an early crush, Cindy Lewis.  One day, she introduced me to a bus pastor named Louis O'Neal, who attended Waldo Avenue Baptist Church in Independence, MO.

Long story short, I became a rabid Christian, attending church on Wednesday nights, Saturdays (for pastor
training and 'recruitment'), and of course Sunday mornings and evenings.  Mr. O'Neal took me, a poor 13-year-old urchin kid, under his wing.  He and his wife were amazing, and were like family to me.  People like Lou don't exist anymore.

At any rate, after witnessing the financial vehicle that is an organized church, and watching them spend a fortune on a building, the pastor, and the property, I realized that priorities were all wrong.  And being the science-based individual I am, I knew religion wasn't for me.

So as I watch a man like Pope Francis lead by example, in a way no person in any church has in a very long time, I am at least heartened.  It won't change my mind about the existence of a 'God', or that I perceive as wholly antithetical the practices of most church entities as they relate to Christian teachings.  But, as a Humanist, I'm glad to see a man who displays the best traits of the human race from perhaps the loftiest perch on the planet.