Monthly Archives: October 2015

Thanksgiving Holiday History | Footnote to History

by Jon Vara, published November 1995 in Yankee Magazine

happy-thanksgiving-370x309The country was still emerging from the depression when Franklin D. Roosevelt announced, in the summer of 1939, that he was moving the Thanksgiving holiday from the last Thursday in November to the Thursday preceding it. In purely economic terms, it seemed to make sense. Moving the holiday forward a week, the president explained, would enable retailers to sell more goods before Christmas and provide a longer period of temporary work for the unemployed.

In practice, however, the plan was unpopular from the beginning. College and high school football coaches were incensed to learn their Thanksgiving Day games, long ago scheduled for November 30th would now fall on an ordinary working day. The Plymouth, Massachusetts, board of selectmen sent an angry letter of protest to Roosevelt, and board chairman James Frazier announced that Plymouth would not recognize the revised date. “It is a religious holiday,” he said, “and the president has no right to change it for commercial order lasix online cheap interests.” One republican senator acidly suggested that the president abolish winter.

Continue reading Thanksgiving Holiday History | Footnote to History

New Budget Deal DOES cut Social Security (File and Suspend Rule)

by Bud Meyers, published October 31, 2015

The “File and Suspend” rule for Social Security ends in the new budget deal … and that might be bad news for divorced women heading toward retirement.

Slate: People weren’t just using the “file and suspend” strategy out of greed. They were using it to boost what are often less than adequate income replacement levels in retirement. It came about as part of legislation designed to encourage people in their 60s to remain part of the paid workforce by eliminating caps on what seniors could earn and still claim Social Security. The “file and suspend” strategy allows one member of a married couple to file for his or her Social Security benefits on reaching the full retirement age but then suspend them. This allowed the lower-earning partner—usually the wife—to take her spousal benefits when she turned 66, while the other member of the marital team—usually the husband—continued to work. When the file-and-suspend spouse turned 70, he would once again claim his benefits, this time for good. At that point, the other partner forgoes Social Security’s spousal benefit in favor of her now-larger personal monthly stipend.

http://www.slate.com/articles/double_x/doublex/2015/10/budget_deal_closed_social_security_loophole_known_as_file_and_suspend.html 

Continue reading New Budget Deal DOES cut Social Security (File and Suspend Rule)

Offshoring the Economy: Why the US is on the Road to the Third World

by Paul Craig Roberts, published October 30, 2015 in Counterpunch

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On January 6, 2004, Senator Charles Schumer and I challenged the erroneous idea that jobs offshoring was free trade in a New York Times op-ed.  Our article so astounded economists that within a few days Schumer and I were summoned to a Brookings Institution conference in Washington, DC, to explain our heresy. In the nationally televised conference, I declared that the consequence of jobs offshoring would be that the US would be a Third World country in 20 years.

That was 11 years ago, and the US is on course to descend to Third World status before the remaining nine years of my prediction have expired.

The evidence is everywhere.  In September the US Bureau of the Census released its report on US household income by quintile. Every quintile, as well as the top 5%, has experienced a decline in real household income since their peaks.  The bottom quintile (lower 20 percent) has had a 17.1% decline in real income from the 1999 peak (from $14,092 to $11,676).  The 4th quintile has had a 10.8% fall in real income since 2000 (from $34,863 to $31,087). The middle quintile has had a 6.9% decline in real income since 2000 (from $58,058 to $54,041). The 2nd quintile has had a 2.8% fall in real income since 2007 (from $90,331 to $87,834). The top quintile has had a decline in real income since 2006 of 1.7% (from $197,466 to $194,053).  The top 5% has experienced a 4.8% reduction in real income since 2006 (from $349,215 to $332,347).  Only the top One Percent or less (mainly the 0.1%) has experienced growth in income and wealth.

The Census Bureau uses official measures of inflation to arrive at real income. These measures are understated. If more accurate measures of inflation are used (such as those available from shadowstats.com), the declines in real household income are larger and have been declining for a longer period. Some measures show real median annual household income below levels of the late 1960s and early 1970s.

Continue reading Offshoring the Economy: Why the US is on the Road to the Third World

Inside the Secretive World of Tax-Avoidance Experts

by Brooke Harrington, published October 26, 2015 at The Atlantic

A sociologist realized that if she were ever going to understand global inequality she would have to become one of the people who helps create it. So she trained to become a wealth manager to the ultra-rich.

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Sergey Nivens / Shutterstock / Fotolia / Paul Spella / The Atlantic

Shakespeare said that all the world’s a stage, but the sociologist Erving Goffman added that most of the interesting stuff lies behind the scenes, in what he called the “backstage” areas of everyday life.

Having spent the past eight years doing research on the international wealth-management profession, I have to agree with Goffman: The most revealing information comes from the moments when people stop performing and go off-script. Like the time one of the wealth managers I interviewed in the British Virgin Islands lost his composure and threatened to have me thrown out of the country. His ire arose from an unexpected quarter:  He took offense to my use of the term “socio-economic inequality” in the two scholarly articles I had published on the profession. I thought the articles were typically academic, which is to say, the opposite of sensationalizing and of little interest to anyone outside my field.  But my suggestion that wealth managers might be connected to inequality in any way seemed alarmingly radical to this gentleman.

I was lucky that he merely threatened me. A journalist from Newsweek actually was deported from a different tax-haven island (Jersey) for her reporting there, and was banned from re-entering the island, or any part of the U.K., for nearly two years. Even though her story was unrelated to the financial-services industry, it was expected to bring negative publicity to the island, threatening its reputation as a place to do business. The message was therefore quashed by banishment of the messenger. The wealth-management industry does not mess around.

Wealth management is a profession on the defensive. Although many people have never heard of it, it is well known to both state revenue authorities and international agencies seeking to impose the rule of law on high-net-worth individuals. Those individuals—including the 103,000 people classified as “ultra-high-net-worth” based on having $30 million or more in investable assets—pay wealth-management professionals hefty fees to help them avoid taxes, debts, legal judgments, and other obligations the rest of the world considers part of everyday life. The general public doesn’t hear much about these professionals, since there are only a few of them worldwide (just under 20,000 belong to the main professional society) and they strive to keep a low profile, both for themselves and their clients.

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But they are very much on the radar of regulatory agencies, due to the central role wealth management plays in tax avoidance. Media coverage of the 2012 presidential campaign of Mitt Romney noted that his $250 million personal fortune was spread out through a network of offshore trusts and bank accounts, lowering his effective income-tax rate to just under 15 percent. Few outlets, however, noted the professional interventions that made that happen: Mitt Romney employs at least one wealth manager to create and maintain those offshore shelters.

Continue reading Inside the Secretive World of Tax-Avoidance Experts

‘A Tale of Two Retirements’: New Report Blasts Rigged Rules That Favor Corporate Execs

by Andrea Germanos, published October 28, 2015 at Common Dreams

‘Together, we can … allow for all Americans to be able to retire with dignity.’
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100 CEOs have as much in retirement assets as 41% of American families, a new report shows. (Photo: 401kcalculator.org)

Imagine a retirement account worth over $49.3 million.

For 100 Fortune 500 CEOs, it’s no dream—it’s their average retirement nest egg, according to a report, A Tale of Two Retirements, released Wednesday by the Center for Effective Government and the Institute for Policy Studies (IPS).

Underscoring the nation’s inequality, the CEOs’ retirement assets together total $4.9 billion, the same amount as that held by 50 million families—41 percent of American families—combined.

“The CEO-worker retirement divide has turned our country’s already extreme income divide into an even wider economic chasm,” said Sarah Anderson, IPS Global Economy Project director.

taleoftworetirements-aTake Honeywell CEO David Cote, who, the report notes, has promoted cuts to Social Security and is a founding member of the pro-austerity group Fix the Debt.  He stands to get a monthly retirement check of over $948,000, while General Electric chief executive Jeffrey Immelt stands to take in $463,000 a month.

David Novak, who was CEO of YUM Brands in 2014 and is now Executive Chairman, tops the list with largest retirement assets of $234 million.  That puts him on a path to receive a monthly retirement check of $1.3 million.

Those amounts make President Obama’s monthly retirement check of $16,975 look like a mere pittance. More importantly, they put into sharp relief the economic chasm between the CEOs and ordinary Americans. As a separate report released earlier this year showed, 55 percent (pdf) of those aged 50-64 will get about $1,200 a month, as they will have to rely nearly entirely on Social Security.

Continue reading ‘A Tale of Two Retirements’: New Report Blasts Rigged Rules That Favor Corporate Execs

What the Steve Jobs Movie Won’t Tell You About Apple’s Success

by Yves Smith, published October 27, 2015

Yves here. Mariana Mazzucato’s recent book, The Entrepreneurial State, makes a bold and well documented case that government has played the key actor in promoting innovation, largely because private interests lack the risk tolerance and long time horizon needed to create foundational technologies. She goes through numerous industries in the US and abroad to make her case. I can give one from Australia: Oz is the leader in viniculture technology, and that’s because it was one of the areas given priority in government funding through CSIRO, the Commonwealth Science and Industrial Research Organization.

By Lynn Parramore, a Senior Research Analyst at the Institute for New Economic Thinking and a Contributing Editor at AlterNet. Originally published at the Institute for New Economic Thinking website

Mariana Mazzucato is Professor in the Economics of Innovation at the Science Policy Research Unit of the University of Sussex. Her widely-acclaimed book, The Entrepreneurial State: debunking public vs. private sector myths, reveals the critical role that we, the taxpayers, play in the creation of the most exciting innovations of our time through publicly-funded investment. (The new U.S. edition hits the shelves October 27th). Mazzucato debunks common myths about how innovation works and shapes a new narrative on how to grow a robust and inclusive economy. Think that iPhone in your pocket is simply a product of Silicon Valley magic? Think again! (Join Mazzucato in New York for a talk and conversation with Time Magazine’s Rana Foroohar and The New School’s Mark Setterfield on October 28: details here). *This interview was originally posted on the blog for the Institute of New Economic Thinking.

Lynn Parramore: We constantly hear that anything to do with government is incompetent and inefficient. Yet as you show, many of the industries and products that make our lives better wouldn’t exist without government-funded research. The whole process of economic growth is hugely interdependent with governmental action. What about something like the iPhone? Is it a product Silicon Valley magic and the genius of Steve Jobs? Or is there more to the story?

Mariana Mazzucato: Economists have recognized that government has a role to play in markets, but only to fix failures, like monopolies, for example. Yet if we look at what governments have done around the world, they have not just stepped in to address failures. They have actually actively shaped and created markets. This is the case in IT, biotech, nanotech and in today’s emerging green economy. Public sector funds have not only supported basic research, but also applied research and even early-stage, high-risk company finance. This is important because most venture capital funds are too short-termist and exit-driven to deal with the highly uncertain and lengthy innovation process.

I often use the iPhone as an example of how governments shape markets, because what makes the iPhone ‘smart’ and not stupid is what you can do with it. And yes, everything you can do with an iPhone was government-funded. From the Internet that allows you to surf the Web, to GPS that lets you use Google Maps, to touch screen display and even the SIRI voice activated system —all of these things were funded by Uncle Sam through the Defense Advanced Research Projects Agency (DARPA), NASA, the Navy, and even the CIA!

These agencies are all ’mission driven, which matters to their success, including who they are able to hire. The Department of Energy (DoE) was recently run by Steve Chu, a Nobel Prize-winning physicist, who wanted the Advanced Research Projects Agency-Energy (ARPA-E) to do for energy what DARPA did for the Internet. Would he have bothered leaving academia to join the civil service just to ‘fix’ markets? Surely not. That’s boring.

LP: So what Steve Jobs and his team did was not central to the greatness of Apple?

MM: It’s not that Steve Jobs was not a genius—of course he was! But the problem is that the narrative we tell around entrepreneurs like him, Bill Gates or Elon Musk is so unbalanced. We pretend that government at best was important for some infrastructure and basic science behind their empires. We see the new Steve Jobs film, which is based on a 600-page book where not one word mentions any of the public funding behind Apple’s empire. But the real iPhone story — or the story behind biotechnology — reveals a very different narrative in which government-funded research made the most exciting innovations possible. The same could be said of Elon Musk today —Tesla and Space X not only benefit from government-funded basic research through agencies like the DoE and NASA, but they have also, as companies, received high-risk investments by the public sector. Just one example is the $465 million guaranteed loan received by Tesla by the DoE. As recently shown by an LA Times article, the entire Musk empire has received close to $5 billion in direct and indirect support.

Do we hear about that? No. Is that ‘story’ helpful for future innovation? No.

LP: You make the case that if taxpayers fund research responsible for the success of many private sector enterprises, then we deserve something back. What might a fairer system of the distribution of rewards look like? Have any countries done better at this than others?

MM: Government support is not only investing in upstream areas like basic research, but also in downstream areas like applied research and early-stage financing for the companies themselves. This means there are great risks.

Continue reading What the Steve Jobs Movie Won’t Tell You About Apple’s Success

Steve Jobs Didn’t Build That.

by Bud Meyers, published October 27, 2015

Via Naked Capitalism: What the Steve Jobs Movie Won’t Tell You About Apple’s Success (excerpts)

Everything you can do with an iPhone was government-funded. From the Internet that allows you to surf the Web, to GPS that lets you use Google Maps, to touch screen display and even the SIRI voice activated system —all of these things were funded by Uncle Sam through the Defense Advanced Research Projects Agency (DARPA), NASA, the Navy, and even the CIA!

We see the new Steve Jobs film, which is based on a 600-page book, where not one word mentions any of the public funding behind Apple’s empire. But the real iPhone story — or the story behind biotechnology — reveals a very different narrative in which government-funded research made the most exciting innovations possible.

Economists argue that the government gets that upside through taxes paid by the companies benefiting from the investments; and by economic growth, which should generate higher tax receipts more broadly; and also through the spillovers from the investment into other areas, which helps the economy. But those mechanisms are limited, because of decreased corporate tax rates (and abundant loopholes), as well as the fall in what the top 1 percent pays [its workers, compared to what they pay themselves — not to mention, the offshoring of manufacturing jobs to China]. Continue reading Steve Jobs Didn’t Build That.

New Budget Deal Cuts Social Security, But How?

by Bud Meyers, published October 27 at The Economic Populist

news-black-outMSNBC, CNN, HLN and Fox News have all been reporting non-stop about the Spring Valley school officer caught on video slamming a South Carolina student to the ground during an arrest — but very few details are being reported by the media about the new budget deal, which will soon go to a vote. (BTW, the student wasn’t even hurt, but that has been “breaking news” for hours now.)

So far, limited information provided to the public seems to indicate that, rather than expand Social Security (as Senators Bernie Sanders, Elizabeth Warren and many others have advocated), the new budget deal is a “bipartisan compromise” to cut benefits for the disabled and lower the “cap” for high income earners (that, according to other media sources).

And just like the TPP trade agreement, the new budget is also being negotiated behind closed doors (while we’re being distracted by other sensational news).

Continue reading New Budget Deal Cuts Social Security, But How?

When Titans collide: UPS petitions the PRC to change USPS costing methodologies

by Mark Jamison, published October 26, 2015 at Save The Post Office

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The United Parcel Service is very concerned that you might be paying too much for a postage stamp.

If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set.  According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs.

UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough.

As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products.  UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs.

Then the Postal Service will to have to raise the prices of the products that UPS competes with, which will put UPS in a better competitive position and increase its profits.  UPS doesn’t really care that some USPS customers are paying too much for postage.  UPS cares about UPS.

The UPS petition

UPS has been complaining about the costing methodology for many years, but in recent weeks it has intensified its efforts to get the Postal Regulatory Commission to do something about the problem.  In a petition recently filed with the PRC, UPS argues that the costing methodology used by the Postal Service and PRC is seriously flawed, and it recommends several changes that are intended to make the system fairer and bring it into compliance with the law.  (The UPS filing is in PRC Docket Number RM2016-2.)

Continue reading When Titans collide: UPS petitions the PRC to change USPS costing methodologies

CAFR expert’s brilliant 400 words on US debt: government hides abundance as future liabilities, ‘retirement’ accounts, buying ‘debt’ from each other

by Carl Herman, published October 24, 2015 at Washington’s Blog

Walter Burien is the leading expert on Comprehensive Annual Financial Reports (CAFRs). Beginning in 1990, Walter began documenting how governments manipulate their books to hide public money, but reveal part of what they do in CAFRs. I discovered Walter’s work in 2012, read CAFRs for the state of California, the City of Los Angeles, and Los Angeles County, and verified his information as correct. I document those CAFRs’ information here, along with the adventure of my California Assemblyperson and State Senator’s obfuscations and eventual official statements of, “No comment” when asked to verify what I found in the state CAFR. My 23-minute interview to explain my findings is the last video of this article. I found similar fraud in San Jose’s CAFR in 2015.

The bottom-line is that we live in the Orwellian economy of a debt-based “money” system, while government lords over trillions of our captured dollars with .01% oligarchs hiding ~$30 trillion in tax havens (that’s about 20-30 times the total to end all poverty on Earth forever). A leading CAFR example is California’s ~14,000 various government entities’ CAFRs have a sampled-data total estimate of $8 trillion in surplus taxpayer assets ($650,000 non-disclosed assets per household). CAFR so-called “retirement funds” currently deliver net returns of about one percent on good years, and negative returns on bad years (here, here).

Better read the above paragraph twice to feel our real economic condition exposed through official CAFRs.

Continue reading CAFR expert’s brilliant 400 words on US debt: government hides abundance as future liabilities, ‘retirement’ accounts, buying ‘debt’ from each other