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Friday, June 9, 2017

A Ten Year Vision towards Full Employment

This post highlights two reports which describe plans to create millions of jobs by 2027. The first by Frank Stricker, and then the report "What Would Sanders Do?" by professor Gerald Friedman: 

          Full Employment and How to Get It       

                             (see here to read the article)

Full employment to men means an abundance of good jobs, higher wages, growing income. White Americans with "no college" voted for Trump by a margin of two to one, 67% to 28%, nearly a 40% margin in favor of Trump. And "white males" also went for Trump by a two to one measure, a 32% margin. They were impressed by Trump's claim to be able to create good jobs. Here is Stricker's report card on job and wage growth: 


Report Card on Growth in Real Wages and Total Jobs, Five-Year Periods, 1950-2015                                                                                    
                                  Wages          Jobs                 
1950-1955 A+ A
1955-1960 A B
1960-1965 B+ A
1965-1970 C A+
1970-1975 F B+
1975-1980 FF A+
1980-1985 FF D
1985-1990 FF A
1990-1995 FF D
1995-2000 C- A
2000-2005 F F
2005-2010 F F
2010-2015 D


Total five-year growth in wages and jobs graded thusly: 10% or more = A, 8%-9% = B, 7% = C, 6% = D, under 6% = F, decline =FF.


I recommend readers go straight to "Full Employment and How to Get It", by professor Frank Stricker, who also wrote the book Why America Lost the War on Poverty, and How We Can Win It. (He also wrote an article on Infrastructure here.) Stricker's program, like the Sanders' Program I deal with below, would lift the income of the middle income,  non-supervisory employee, whose income would increase by $20,000 a year, a 50% increase by 2026.              

Michael Braxton.

Michael Braxton states: “I am for Hillary. Praise the lord. Trump will probably start us another war. Praise the lord. And he is a racist. Praise the lord.”
This photo originates from an article in the British paper The  Guardian, by Chris Arnade, "What I learned after 100,000 miles on the road talking to Trump supporters". Pictured above,   Michael Braxton, a resident of Natchitoches, Louisiana, offers his straight-from-the-shoulder assessment of Trump before the election. Arnade, the author states,  
"It became simple: if I wanted to talk to a community overwhelmingly supporting Trump, I would go to a white town or neighborhood nearest the rusting factory surrounded by razor fence. . . .  The early Trump voters I met were the losers from these changes. Their once superior status – based only on being white – was being dismantled, while their lack of education was also being punished. They lived in towns and communities devastated by economic upheaval. They were born in them and stayed in them, despite their fall. For many, who had focused on their community over career, it felt like their entire world was collapsing."
Read the article  here.

These articles vividly portray the men and women who swung their votes to Trump. "Pride and Poverty in America" is the apt title of his articles. Arnade drove his car 140,000 miles across the U.S. searching for his interviews. Then you can listen to a friendly interview with Arnade at the radio broadcast Behind the News with Doug Henwood, here.

I need say no more. But here's some additional background reading. 

The Political and Economic Impact of                        Infrastructure Programs                                         

Bernie Sanders called for a $1 trillion investment in infrastructure over 10 years. Unfortunately he downplayed the direct job creation part of the program. Had he called it a jobs program first, that also upgraded infrastructure, the clear intent would have been appreciated by voters -- white male voters -- who rejected Hillary Clinton. But perhaps he shied away from sounding too socialistic. Read this important report   What Would Sanders Do?  , describing the wide-ranging effect of his public investment program. See Table 1 for a quick glance. Most of his spending increase, 74%, deals with universal health care or Medicare for All. Yet he calls $1 trillion over 10 years in Infrastructure, and another $1.2 trillion in spending for "Climate change, energy resiliency." 

Also see his web page platform describing his program" Rebuilding America. His program would have served two important national purposes: 1) upgraded public roads, seaports, airports, rail lines, electrical grid, drinking water and sewage systems, private home and public building insulation leading to energy conservation, public school building and municipal building upgrades, and broadband internet improvements, as well as human services improvements in senior health care and pre-school education, and 2) jobs. See the Stricker article above for the impact millions of public jobs will have. Readers can review also the Progressive Caucus Budget, The People's Budget, 2017, which claims would create 3.6 million new good jobs; and view the spending program for this budget here at the Economic Policy Site, see Table 2, page 22. Page 8 states, "


This stimulus program includes a $208 billion investment in 

infrastructure, spending that reaches $1.2 trillion over FY2016–

2026, which approaches the level the American Society of Civil 

Engineers calls for to close the nation’s investment shortfall while 

offering a sustained, continuing dedicated source of funding 

specifically for infrastructure investments (ASCE 2013)."

Readers may also read the Center for American Progress report "Toward a Marshall Plan for America".

Trump's plan will be financed by borrowing from the private financial market, doubling the cost of investment. And it will saddle users with life-time user fees -- an obvious avoidable error. But it will enrich the private corporations who feed on the government. The shortcomings of the Trump Infrastructure plan are displayed by the Economic Policy Institute, here. And see a report from the Center for American Progress, How Donald Trump's Infrastructure Plan Fails America.  And more from CAP,  "Fact Sheet: A Plan for Investing in America's Infrastructure". 
The Economic Policy Institute presents two articles on Infrastructure and Trump, here and here

Hillary Clinton lost the "white no college" vote by 39% points -- 67% for Trump and 28% for Clinton. I remember this as 70 to 30. That represented 34% of all votes cast. And she lost the "men - white" vote by 32 points -- 63% to 31%; also representing 34% of votes cast. See the results at Wikipedia. White men with little education beyond high school turned to Trump, there's no doubt. 

If Democrats in 2018 wish to make gains among these voters they must offer better employment and wage growth programs that will rescue these disenchanted workers who have had decades of poor job and wage growth (see the Stricker article).  This malaise portends a future of bleak social disruption.   

Later I'll expand more of the infrastructure and direct job creation.  This is an essential issue that can break the iceberg of disaffection and recast our  political theater as we know it.  

As I always state in my latest essays, my best utopian essay is December 2016, and the most thorough run down of Inequality is the one before that, July, 2016.  

Another photo from the Arnade articles, this of Robert McAdams of Peru, Nebraska, from the article linked to already, here.  "We need to get this country straight again," he says. 



Robert McAdams, 78, of Peru, Nebraska: ‘We need to get this country straight again.’




Friday, March 17, 2017

Healthcare, One Aspect of a Failing System

                                  Healthcare
                  A Failing Part of a Failing System 




My two previous essays are more important than this one. I should get a web page instead of a blog. 

The Yosemite Democratic Club did publish this essay, also. 

After the AHCA passed the House on May 4, 2017, the head of the Center for Budget and Policy Priorities, Robert Greenstein, issued a short report, stating, "I have been in Washington, D.C. for 45 years.  But I have never seen members of Congress vote to so deeply hurt so many of their own constituents.  If enacted, this bill will stand as the biggest assault on ordinary Americans — and the largest Robin-Hood-in-reverse transfer of income up the income scale, from low- and middle-income families to those at the top — in our country’s modern history."
This short CBPP report succinctly clarifies both the Trump/Ryan AHCA and the previous ACA which may be repealed with Senate approval. The AHCA passed the House 217 to 213 with all Dems voting against and 20 Reps joining them. As Nancy Pelosi said, this vote will make those Reps glow in the dark. 

Now for my take, written in March, 2017: 


Healthcare — It’s a Complicated Issue

I received a new titanium hip last September, I had hip replacement surgery. I’m 70 years old, and the doctor tells me it will last for 20 years or more. I have Medicare, and when the hospital sent me a bill for $67,000, more or less, I was happy because I knew I was responsible for only $3,000. Medicare saved me. If I had been under 65 years old, I would now be in debt or using a walker or a wheel chair. Or I could have flown to London or Paris where this surgery costs $11,000 or $12,000. In London they do six surgeries for the cost of one in California. Or to India, Korea, Mexico. In Canada the cost of an angiogram (an x-ray of arteries and veins) costs $35, the average cost in the U.S. is $914. An MRI in France costs $363, in the U.S. $1,121; a one day stay in a hospital bed in the Netherlands at $731, compared to $4,287 in the U.S. An appendectomy in England, $3,408, in the U.S. $12,851. And so on from the IFHP 2012 Comparative Price Report. The IFHP 2015 report here. Bypass surgery in England, $24,059, in the U.S., $78,318. Angioplasty in U.K., 7.264, in U.S. $31,620.  

We all have stories about the delivery of healthcare services. A friend, age 52, went in for an appendectomy, and his wife’s insurance paid the $40,000 charge, otherwise he might have died. A friend with a possible colon obstruction spent the night in the emergency room, received some laxatives, total cost $21,000. Another had a pig valve inserted into his heart 20 years ago. He was on MediCal. He has been a productive adult supporting his wife and daughter since then. Another, a PhD. in psychology, diagnosed with breast cancer, died because she could only get treatment by participating in an experimental treatment. We all have stories. 

Healthcare U.S.A. seems to be an irrational mess. We pay double per person what other advanced nations spend, and our outcome is worse. (We spend $9,500 per human, our yearly expense, about 18% of total annual GDP, a huge amount, while others average around $4,500 yearly, about 10% of GDP, with better outcomes). Author James Kwak states, “Of the [34] OECD countries, the United States ranks between twentieth and twenty-ninth on primary health status metrics, ranks in the bottom third for access to coverage, and has among the fewest doctors and hospital beds per capita.” Kwak concludes: “It seems quite possible that our high costs relative to the rest of the world are the result not of overconsumption but of a decentralized system organized around private profits rather than strong government spending controls.” Says Kwak at his web page:

"The Trump administration is rhetorically committed to deregulating health insurance; the question is whether they are willing to accept the political consequences of pricing millions of people out of not dying."

Healthcare is just a part of a dysfunctional economy. 
The Federal Reserve’s “Report on the Economic Well-Being of U.S. Households, 2015” shows that 44% of households cannot pay an emergency $400 expense within a 30 day period. Even though the average household net worth is $721,000, and the average yearly household income is over $100,000, almost half of Americans live in “liquid asset” poverty. Thirty percent of Americans “may be characterized as not able to meet their basic needs and achieve a safe and decent standard of living, or as families with ‘low income’,” states Kathleen Short, the author  of the U.S. Census Supplemental Poverty Measure (SPM). (see here, page 23) America has extreme inequality. 

The FRB report further shows that 22% of respondents in the past year had an emergency medical expense, and 45% of Americans carry an “unpaid balance” resulting from medical expenses. The initial median cost was $1,200 while the average cost was $2,383. And “Among those whose family income is under $40,000, 39 percent have gone without some form of medical treatment in the preceding 12 months.”  And the SPM of 2016 for 2015 states, Table 5.A, that the poverty rate would decrease from 14.3% to 10.8%, without “medical out-of-pocket” expenses.

A report from The Center for American Progress (see page 9)  shows that medical expenses doubled between 2000 and 2012, increasing from 5.5% of the family budget for the median four-person household to 10.1%. During the Bush years medical expenses were eating us out of house and home. The Congressional Research Service reported, page 8: "Private health insurance premiums have generally grown faster than the economy as a whole. The Office of the Actuary at CMS estimates that the average premium per enrollee in all private markets grew from about $2,320 in 2000 to about $5,080 in 2013, indicating an average annual growth rate of 6.2 percent.10"However, private insurance premiums grew more slowly from 2005 to 2013 (4.5 percent per year, on average) than they did from 2000 to 2005 (9 percent per year). 
 So medical expenses drive low-income families below the federal  poverty line, some into bankruptcy, some have to avoid medical appointments due to high costs, and in general weigh heavily on the family budgets of all the nation's households. 













(From a Washington Post article)
I’m afraid I’ve used too many numbers, and it is numbing. But the general message is pretty clear. We need some reform, healthcare-wise and economy-wise. 

A recent report shows that the lower-earning 50% of French citizens enjoy an income 16% higher than the same group in the U.S., even though the French economy is less productive per person by 36%, $36,000 versus $56,000 per capita. 
While the bottom 50 percent of  incomes were 11 percent lower in France than in the United States in 1980, they are now 16 percent higher. (See Figure 3.)
Figure 3
















In fact, this understates the facts because, "Since the welfare state is more generous in France, the gap between the bottom 50 percent of income earners in France and the United States would be even greater after taxes and transfers."

In the past 34 years France's lower earning 50% saw their incomes increase at the same rate as productivity, both rose by 32%. In the U.S., over 34 years, 1980 to 2014, the lower-earning 50% had a 1% increase in earnings, despite the overall average growth of 61%. 

In the U.S. the higher earning groups all increased their incomes greater than the average: "In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent." 

In my last post I show a graph of this uneven growth. The income gap tripled in size between the lower 50% and the top 1%, increasing from 27 times to 81 times, from $16,000 (per adult) to $432,000 in 1980, to $16,000 to $1,300,000 in 2014. This is the story of the past 30 years -- widening uneven income gaps, growing inequality. 

With commensurate growth that matched productivity gains, today's U.S. minimum wage would be $15.77, not $7.25, --- multiply $9.80 an hour, the 1978 minimum wage, with 1.61 to arrive at $15.77 -- and yearly earnings would be $32,818, not today's $15,080. We're not France. The Economic Policy Institute states the minimum would be $19 an hour (see here, the first graph). And that by 2024 the minimum would be $21.34, and a yearly income would be the unrealistic amount of $42,680, which is above the average wage income for all wage earners -- an obviously unrealistic prediction. 

Social expenditure and relative poverty rates in selected OECD countries, late 2000s



Extent to which taxes and transfer programs reduce the relative poverty rate, selected OECD countries, late 2000s




But I find that $32,818 much too high. So I refer you to the Economic Policy Institute web page "What Should You Be Earning?", where we find an annual income of $15,080, "would-be" $26,911 or $12.94 and hour, or still 78% higher than the current income. The BEA.gov (Personal Income Table 2.1)  site says that disposable income per capita in constant dollars rose, between 1980 and 2014, by 86%, not 78%, not 61%. But I think the Piketty, Saez, Zucman report, showing 61% increase) is the most exhaustive. Today the "Average Weekly Earnings of Production and Nonsupervisory Employees" private sector", are $734.50 a week, and for a full-time year-round worker that equals $38,194 annually. The EPI says his/her pay would increase to $57,328, a 50% raise. I believe about 80% of U.S. workers are "non-supervisory". 
My two most recent essays cover the shift of wage income to the lower-earning 90% of earners; see them for details.  

In 2015 30% (48 million out of 160.7 million) of U.S. workers   (Social Security Administration report on wage income) earned less than $15,000 a year. The mean average income for all 48 million (30%) was $6,246 in 2015. From the same Social Security Administration report, 50% (or 80 million) of U.S. workers earned less than $30,000, and their average income was $12,770. And the median for all workers, or the upper limit for the lower half, was $29,930.  


     An Inequality of Income Review      

The Bureau of Economic Analysis, Department of Commerce, (Table 2.1, Personal Income) states the average “disposable” income per capita in 2017 is $44,313, and this implies an average income of $177,252 for all four-person families in the U.S.  The U.S. median income of $84,000 for a four-person household is less than 50% of the average. At the BEA the total personal income is $16.4 trillion, and "disposable income" -- which is post-tax income -- is, by deduction, $14.4 trillion. This is different, considerably, from the total posted at The Congressional Joint Committee on Taxation, Overview, page 31, which shows a total income of $14.375 trillion. The highest-earning 6.1% of taxpayers, with incomes over $200,000, earn 35.3% of all income. The lowest-earning 66.7 (2/3rds) with incomes under $100,000, earn 36.2% of all income. 

  Therefore the collective income of 6% is nearly equal to the collective income of 67%.      And 67% collectively earn a little more than the 6%.   

Yet the best article on distribution is the Saez, Piketty and Zucman, showing an average income of $16,000 per year for all in the lower-half of U.S. adults (which I have already posted a link to, and do so again here and here). 

Looking at Table 1 of the report shows the average income for adults in the lower half in 2015 at $16,000, with a gap of 81 to the income of the earners in the top 1%, whose average income is almost $1.3 million per adult. But comparing the two halves of U.S. adults we get a ratio of  1 to 7 in income. The lower-half average is $16,000, while the higher half average is $113,000. The lower earns 12.5% of all income, therefore the upper therefore 87.5%, the ratio is 1 to 7. 

I try to repeatedly display the inequality so readers will be left with no doubt. IF only I could find more readers! 

As I said, healthcare is wildly unaffordable and compared with other nations Americans pay double and receive less. And now after the Trump/Ryan Care passage in the House on May 4, 2017, it is more unaffordable. 
Today I read that the owner of the Amazon retail web pages, Jeff Bezos, increases each hour his net worth by more than one lawyer will make in his entire lifetime. This was reported at Inequality.org on May 8, 2017


Here are a few facts from the CBO report on the Affordable Care Act: 
The annual federal cost in 2016 was $110 billion. The average subsidy per enrollee receiving a subsidy through a marketplace or Basic Health Program was $4,240. Through the ACA in 2016, 22 million Americans are insured,11 million were made eligible for Medicaid, and 10 million purchased subsidized insurance through marketplaces (often called exchanges), and 2 million purchased individual policies unsubsidized through marketplaces. In 2016 the ACA increased the share of the U.S. population with healthcare insurance from 83% to 90% by insuring 22 million people. 

All this data is overwhelming, maybe incomprehensible. The gist is that the ACA improved the healthcare system but not enough, it is a miserably failing sector in an already dysfunctional economy. 

*****************************************************************
Listen to Dr. Steffie Woolhandler explain the need for real healthcare reform on Doug Henwood's Behind the News. And watch her videos on the Real News, March 17. 
I recommend Ellen Brown's article on Single Payer reform. 
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                                  Even More           
On May 23, 2017, a continuation . . . 

I have read Ed Dolan's essays on healthcare and I find this graph very useful for understanding the costs of healthcare. It shows that 1% of recipients cost the system each year 23% of all costs, 5% of them rack-up 50% of costs, and 10% of the sick cost the nation 67% of all expenditures. His source is this Kaiser Family Foundation report

healthpicture4

The Kaiser report states: "In any given year, among the 50% least expensive people in a year, 73% will remain in that group for a second year; similarly, of people who are among the most expensive 10% of the population in one year, only 45% would still be in that group the following year.1"
Five percent (or almost half of the most expensive 10%) of total U.S. population, will slip out of the high expense and uninsurable category -- perhaps many of them die. While 36% of total population (73% times 50%) remain in the insurable category, the lower half who consume just 3% of all medical expenses, going year to year. 


            The Republican Plan, Perhaps Workable
Dolan's article contends that caps on health expenditures will automatically shift patients from the private insurance market, the General Tier that covers 70% of all citizens, to the High Risk Tier that covers 10% who generate 66% of all costs. The remaining 20% are those in the Low-Income Tier. As I see it, this Republican plan is an extension of Medicare. It appears that if 66% of the costs are covered in the High Risk Tier, and perhaps 10% are covered in the Low-Income Tier, that places 76% of costs under government coverage, and allows the private market access to 70% of the population who generate only 24% of the costs. I may be wrong, as this is a hasty conclusion. The problem of pre-assigning people to certain risk categories therefore is corrected by automatic spending caps, year to year; the "Uninsurable" or the "Marginally Insurable" or the "Insurable" groups are fluid. And this makes the Republican plan, outlined in Dolan's article, workable. But the major issue of  egregiously high-costs-for-everything remains to be dealt with. 

The book The American Health Care Paradox, Why Spending More Is Getting Us Less, by E. Bradley and L. Taylor, makes the case that low social spending in the U.S. exacerbates health outcomes.  It says, p. 16, "The study found that if we counted countries' combined investment in health care and in social services, the United States was no longer spending the larest percentage of GDP -- far from it. In 2007, for example, the United States devoted only 25 percent of gross domestic product to health and social services combined, while such countries as Sweden, France, Austria, Switzerland, and Denmark dedicated about 30 to 33 percent of their respective GDP to the combination. In 2007, while the United States ranked highest in health spending, it ranked only thirteenth in spending on health services and social services combined (see Figure 1.4)." 
The New Yorker magazine carried an article from these authors

And lastly, Paul Starr at the American Prospect lays out a plan for expanding Medicare to middle age citizens, beginning at age 50. This would incorporate more of the "Uninsurable" and "Marginally Insurable" into the government risk pool. He makes a strong case, and he has written exhaustively about the medical health care problem. He concludes, "We need to move in a more promising direction that takes into account the difficulties that progressive reform has long faced in health care. Midlife Medicare could be a big next step toward a system that works better for everyone." 

     California Moves Closer to Universal Health Care Measure      
In the first week of June, 2017, the California Senate passed a bill to provide universal health care. Here is an excellent article concerning the measure.


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The book Sixteen for '16 -- This is my choice for readers. It has the virtue of a snapshot. It clearly and persuasively details sixteen elements of a progressive economy. Salvatore Babones writes for the Institute for Policy Studies, the same group that sponsors Inequality (dot) org where you can read his articles. You can read a short selection from the book at Google books, see here. Babones also publishes at Truthout. Here is the publisher's promotion page. And The Real News Network interviewed him in June 2015 after the book was published. Amazon sells used copies for a buck plus shipping -- it's well worth it. 


Saturday, December 10, 2016

Solutions, Accentuate the Positive

     Solutions — The Way Forward                                                         
                       To Shared Prosperity    

The problem: 
Average income growth in US recoveries: top 10% versus the bottom 90%. (Graph:  Pavlina Tcherneva)
Average income growth in US recoveries: top 10% versus the bottom 90%. (Graph: Pavlina Tcherneva)

Not clear? Then compare two 34 year periods in this graph: 
US pre-tax income growth


This graph came from Inequality.org, January 9, 2017

And from the actual report that generated the above data, this graph:



This shows that each household in the lower 50% of households lost about $20,000 of yearly income, and all their loss was captured by the top 1%. 
From the report
From 1980 to 2014, for example, none of the growth in per-adult national income went to the bottom 50 percent, while 32 percent went to the middle class (defined as adults between the median and the 90th percentile), 68 percent to the top 10 percent, and 36 percent to the top 1 percent. An economy that fails to deliver growth for half of its people for an entire generation is bound to generate discontent with the status quo and a rejection of establishment politics.


I find myself mentally pursuing solutions. The world has to react to the presidential and Congressional realities, but perhaps we are forgetting the evolution of positive outcomes. Here is my list of 14 solutions to transform the economy worldwide, no small ambition. 

               The 14 Solutions 
1.  Get money out of politics. 
Thomas Ferguson, and Open Secret, and others have information about this, and Represent.Us has 10 reforms. Here is a crisp video on election corruption from Represent.Us, and here is the anti-corruption act site. You can download the act itself. Incumbents win re-election 90% of the time, they collect over 80% of all donations, and almost half of the time they outspend their opponent by 10 to 1 --- all this in charts at the Open Secrets site, here. Money calls the shots, and here's Lawrence Lessig at Ted Talks video, presenting a clear picture about the 0.02% who determine our democratic (?) system. 

2.   End "Financialism", a mutant off-spring of capitalism, the parasite that is destroying the host. Finance is destroying capitalism, period. 
Since 1986 financial assets have increased their value by 194%, that is almost tripling in value. They increased from $24 trillion to $72 trillion, adjusting for inflation (in comparison the national debt stands at $20 trillion in 2016). In the same period, GDP per capita rose by 56%. 56% vs. 194% -- This creates a disincentive for productive investment because investing in financial assets pays  far more than normal economic growth. 

Since the recession ended in June of 2009, the "real" household net worth - call it wealth - has increased by 64%, up from $48.9 trillion to $90.2 trillion. (See the FRB report, page 2, and Table B101) How, we should ask, is this possible? To create a stunning increase in total net worth during a period of recession? While the wealthiest six million households are now wealthier by over $5 million on average, even more millions of Americans lost their jobs and/or  income and often their homes. Half of Americans live a precarious life indecent for such a wealthy nation. While most of the attention has gone to the federal budget -- national debt rose by $9 trillion to $19 trillion in the same period -- the real problem is the enrichment of a minority at the expense of the majority. 
Most American families lost over 40% of their life savings. 


Median household wealth, by race and ethnicity, 1983–2010 (2010 dollars)



Graph from State of Working America.
The average household net worth is $721,000 (see FRB Flow of Funds, linked above) 
Running in the opposite direction, financial wealth was booming. Something is wrong here?  

The book Makers and Takers by Rana Foroohar targets unequivocally the financial system as the crippler of our economy. She cites a book by Adair Turner that claims 85% of corporate profits end up bolstering financial assets and 15% are applied to actual investment. And she cites (page 332) a study that "finds that the function of financial system . . . is no longer to funnel money to new investments, but to funnel it through existing assets, such as housing, often via complex securitization." (from an FRB paper by Schularick and Taylor, Credit Booms Gone Bust, 2009) From their conclusion: ". . . episodes of financial instability have more often than not been the result of credit booms gone wrong, most likely due to failures in the operation and/or regulation of the financial system. . . . For policymakers, a complacent attitude towards the growth in the scale and riskiness of the credit system now looks like a misguided choice that ignored history."
 Foroohar's book is also easy to read as she was a journalist at Time magazine for 20 years or more. I've not finished it, but it's good so far. See her interview at INET. 


"Capitalism is killing itself," states the expert in this interview. Another expert agrees. Watch this February, 2017, video interview at The Real News Network, where Paul Jay interviews Heiner Flassbeck, "Mountains of Uninvested Corporate Cash, Not Mexico, Most Responsible for Job Loss." 
Flassbeck worked as an economist for the German government, then for the United Nations at UNCTAD, United Nations Council on Trade and Development. 

Lawrence Mitchell, author of The Speculation Economy, has penned an accurate picture of this "financialism" parasite at his blog. His last installment, May 5, 2014, carries a paragraph "How can we fix it?" The details are not appropriate in this broader essay, but should be glanced at. 
The U.S. and global economies suffer from a scandalous and  enormous over-supply of unused capital. Daniel Alpert covers this in his book The Age of Oversupply, Overcoming the Greatest Challenge to the Global Economy, and in this shorter essay, Glut.  Other authors have been writing about it here (David Korten), and here, (Robert Kuttner), and here (Michael Roberts). And read my comment at the end of this essay. 
Household Net Worth as Percent of GDP

At the risk of cluttering my list, here's a bar graph showing the ratio of household net worth to GDP, at a historical high (see this web page). 

Globally, private net worth exceeds $256 trillion according to Credit Suisse Bank. How much of this value is simply wasted, not  put to productive use, squandered in speculation not investment? 

A Global View 
What is a proper social response to this enormous pile of unused wealth? The Pew Research reports that in 2011 51% of humans (3.5 billion people) consumed or lived on less than $5 a day, and "at the end of the first decade of the 21st century, the vast majority of the world’s population (71%) [5 billion humans] remained either poor or low income", living on less than $10 a day. The Credit Suisse's wealth pyramid shows that 74% of the world's adults own 2.4% of total wealth, about $1,700 per adult. And they all survive at less than $10 a day. As for the poorer half of humankind, they consume annually $5 trillion of resources, 2% of the world's private net worth. This is a tragedy. A modest tax on these resources could improve the lot of half of all humans. The dynamics of "financialism" should be examined, and the incentives changed drastically. That's the purpose of this essay. 
James Kwak, co-author of several books with Simon Johnson, here proposes a retrospective tax on capital
And here is another proposal about a modest  tax on billionaire's wealth

I highly recommend this short report by L. Randall Wray which  capsulizes the essential economic problem we face, "Minsky's Money Market Capitalism and the Global Financial Crisis".  

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       The Way Finance Outpaces the Economy 
I don't like to complicate matters, but ---- as usual I have to anyway. Here's how financial growth exceeds normal economic growth. In 31 years, 1986 to 2016, the nation saved about $20.5 trillion, but financial assets increased in value by $61 trillion. How is that possible? Instead of using this surplus to improve the quality of life, the wealthy minority place their gains into a finite number of paper products. When the economy's surplus is converted into hoarded savings and poured into this finite pool, the value of these limited assets (stocks and bonds) automatically increases. During the 1960s and '70s this did not happen. If you want proof of skimming off the top, read the Harvard Business Review article by Professor William Lazonick showing that 91% of the profits from the S&P 500 went to shareholder dividends and stock buybacks. Stock values in this condition become a parallel currency that increases faster than the actual currency and faster than the economy! 

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3.  Tax Financial Transactions, 
or, better, tax financial assets directly as a property tax. 
The public part of the national debt of the federal government is $14 trillion, while 6 times greater at $90 trillion is the total household net worth, or savings net of debt. A current study shows the wealthiest 0.1%, or 160,000 families, own about $20 trillion in assets, or $122 million average wealth, mostly untaxed financial assets. The CPEG writers have offered a FTT plan that would raise $900 billion in new taxes; and they are trying to create an Illinois tax on the Chicago Board of Trading. Also James Kwak has authored a plan to tax financial assets directly. Kwak co-authored several books with Simon Johnson, economics professor at MIT. I imagine this is the best way to treat the economy's imbalance, and  to also balance the federal budget: direct taxation of financial wealth. Of course a reworking of the long-term capital gains tax is much needed. And international trade should be conditioned on raising the incomes of all workers, not just on the efficiency of lower priced goods. It all fits together -- financialization is a global parasite. The Peter Barnes’ book, With Liberty and Dividends for All, also discusses a FTT. 

3.   Raise the Minimum Wage and Increase the Earned Income Tax Credit, EITC.
Jeanette Wicks-Lim has written in 2011 such a report. Forty-five percent of American workers (71 million workers) earn less than 6% of total national income. They need a raise. See here and here, my blogspot web page.

4.   Rewrite the National Labor Relations Act and make strikes effective again. 
Ellen Dannin has a book on litigating the NLRA and reviving its original intent. 
Others authors include Michael Yates, Thomas Geoghegan, Stanley Aronowitz. 
Kate Andrias presents a new approach. And this article at Salon

5.   Create Public Jobs, about 4 to 5 million, $300 billion per year.
See Phillip Harvey speak about a public jobs program and read his proposal, and see 
this program at CAP. For info about a Universal or Guaranteed Income Plans - see Peter Barnes’ book With  Liberty and Dividends for All  (see the books web page), and an article with James Boyce “$200 a Month for Everyone”.

6.   Create Corporate Profit Sharing programs, and give tax preference status. 
See the book The Citizens’ Share by Blasi, Freeman and Kruse.
And read these articles at the Center for American Progress, one
and at Hillary Clinton’s web page, two

7.   Create cooperative, worker-owned businesses, and give tax preference status.
See author Alperovitz speak about his book What Then Must We Do?and Marjorie Kelley on Broad-based Ownership Models.

8.    Create National Corporate Charters, a national standard mandating worker and community member positions on the board  — a Ralph Nader proposal found in his book 
Seventeen Solutions. Read some proposals here and here.

9.    Mandate paid vacations for employees with at least one year of employment in the firm.
Almost all European nations mandate 20 or more paid vacation days, and some 30.  The U.S. mandates zero. 

10.    Enable Debt Restructuring for student loans and mortgages

11.   Heal these Six major economic inefficiencies: 
Health Care — We need single payer, see the OECD international comparison. The U.S. pays more than twice the OECD average per capita expense. 
Finance — Just break up big banks? See this major proposal by Paul Volkert.  And I refer you to # 2 above. 
Low-Income Housing, we need affordable housing. Read here and here.  
Military Budget, we need a reduction
Childcare expenses are prohibitively high. Here is Hillary Clinton’s plan. 
    Monopolies -- break them up with new standards. 
  Barry Lynn has done pioneering work on this, Cornered is the bookAnd read articles here and here

13.   Repair the trade deficit and create trade agreements that put labor, environmental and democratic standards in place. 
Lori Wallack and Jared Bernstein wrote a recent essay on topic.
14.  Create a well-funded Individual Development Account (IDA) program to increase the savings of the lower 50% of Americans. Savings of poor individuals are matched by government subsidy for savings accounts to be used strictly for education, home mortgages or business development.
See the Center for Social Development at Washington University in St. Louis. 

We must promote all of these standards and reforms globally.

If Bernie Sanders had been elected on November 8, 2016, what would we be talking about? 
We would be imaging a new way forward to a fairer economy with shared prosperity. Sanders' web page still covers 32 issues and solutions, lots of constructive thinking.
The national conversation has to continue, as ignorance is epic and dangerous. The Michael Moore movie Where Do We Invade Next? highlights the constructive social arrangements of Europe that are steps towards a shared prosperity. 

Harold Myerson at the American Prospect (Feb. 23, 2017) lays out a strategy for the Democrats similar to what I've proposed here. I think main idea that politicians need to pass along to voters is that inequality has shifted dramatically, and more and more families are strapped and suffering as a result. It can be changed, but the Republican plan will make it worse, quite obviously. 

An article at Inequality.org, by Bob Lord, 2/20/17, states "The experience of the bottom 50 percent in France over the same period -- 1978 to 2015 --was entirely different. They saw their real income increase by 39 percent, even though overall growth in France was only 39 percent. That’s not a clerical error. In France, the participation of the bottom 50% in the country’s growth was exactly proportional. During the same period that the income share of America’s bottom 50 percent was plummeting, the income share of the bottom 50 percent in France stayed remarkably constant, never straying more than a percentage point or so from 22 percent, with zero overall movement between 1978 and 2015."

An article by Piketty, Saez, and Guzman states, "While the bottom 50 percent of  incomes were 11 percent lower in France than in the United States in 1980, they are now 16 percent higher."
Today the lower-earning 50% in France has a higher standard of living -- with incomes 16% higher -- than the bottom 50% in the U.S., despite the fact that the per capita income is $36,205 in France and $56,115 in the U.S. according to the World Bank.  

The problem is quite obvious, isn't it. 
___________________________________________________________________

About Inequality 

This may be redundant to anyone who's read my blog. But it's still worth your attention. It's shocking, no less. See the last paragraph.  

We have abundant prosperity in the U.S. but it is not shared. 
A new vision must emerge to share this abundance with all. Of the total annual income of the U.S. economy, 22% goes to the top-earning one percent, while the lower-earning fifty-five percent earn a collective 16%. The best report on this comes from this site, The Washington Center for Equitable Growth. I quote it's report below, but as an example it states that the standard of living in France for the lower 50% is higher than the standard in the U.S. for the lower 50%, as their income is 16% higher (I mentioned already, yes.) 

The Bureau of Economic Analysis, Department of Commerce, reports that the annual post-tax income of each citizen, all 325 million citizens, is $43,075 in Q2 of 2016. This works out to an “average” income for all four person families of $172,300 per year. Yet half of these families have incomes of less than $64,700 after paying all taxes, and $63,741 is the national median cost of living for this 4 person family according to the Economic Policy Institute. Therefore, about half of all such families have less income and are struggling to achieve a modest lifestyle. Half of the U.S. has no money for frills of savings. They are working paycheck to paycheck. (I cover most of this with links to sources in the previous essay at this blog.)

30% live in poverty, unable to "achieve a safe and decent standard of living". 
The author of the U.S. Census report Supplemental Poverty Measure states (on page 23 of linked report) that 140% of the poverty level is the accurate poverty level below which people “are unable to meet their basic needs”, and 30% of the U.S. population, about 95 million in 2016, fall into the category. 

From the report: 
"The overall poverty rate using the updated modified family budget thresholds was 30.0 percent, about 13.9 percentage points higher than the 16.1 percent SPM rate.  . . . 
approximately 140 percent of the SPM threshold, rather than 200 percent, may be characterized as not able to meet their basic needs and achieve a safe and decent standard of living, or as families with ‘low income’. 

Therefore, 50% of U.S. citizens are struggling and 30% are living  in poverty. Yet we have abundant prosperity, over $100,000 of income for all households says the report from the Congressional Budget Office.  Over $721,000 of savings per household, states the Federal Reserve Flow of Funds report, page 2. 

Yet half of U.S. households own less than $85,000, the lower-saving 50% of households own 1.1% of the nation’s total household savings. And 35% of households own less than $10,000, see here
The median household savings is slightly higher than 50 years ago, see here

The United Nations ranks nations according to a Human Development Index. The U.S. falls into 8th place before the reality of inequality is taken into consideration. The adjusted inequality status places the U.S. in 28th position, and its neighbors were Italy and Greece, in one year, and Poland and Cypress in another. 

Stanford University's Center of Poverty and Inequality published a report in late 2016 stating on page 5: "the U.S. has the lowest overall ranking among our 10 well-off countries, a result that arises in part because it brings up the rear of the pack in three of the six domains covered here (safety net, income inequality, wealth inequality). Even when the comparison set is expanded to include the less well-off countries, the U.S. still ranks a dismal 18th (out of 21 countries), with only Spain, Estonia, and Greece scoring worse (see Table 4). 

This inequality and poor results to share our prosperity is ignored in political discussion, and solutions to it are off that table. But clearly we have the resources and the available programs, we just have failed to reach a national awareness and consensus on how to remedy the condition.   

The Corporation  
The 14 Solutions I propose are radical because they restructure our major institution, the corporation. A U.S. Census report states that 50% of non-supervisory employees, about 60 million workers, work in firms with more than 500 workers, and 66% work in firms with more than 100 workers. The corporation is where America works, and is underpaid. Professor William Lazonick reports that 91% of corporate profits among the S&P 500 corporations, between 2001 and 2011, an amount of $4.44 trillion, went to shareholder dividends and stock buybacks, leaving very little for wage increases or research and development. The author concludes this will be catastrophic to the economy if it continues, and corporate reform must be included in a broader appreciation of our problems and solutions. 

In the previous essay at this blog, I showed the EPI.org report "What Should Be Your Pay?" There you enter a yearly salary and discover that it would be about $20,000 higher if wages and salary growth had tracked the growth of productivity, as it had for the 30 years 1947 to 1977. The previous essay, at this blog, deals extensively with literature about this loss of income for most, 80%, of U.S. workers. Maybe you are one of those workers, or live in one of those families?  

The National Jobs for All Coalition reports in its monthly employment report that about 12% of U.S. workers are looking for a full-time job, and another 12% are working full-time and year-round for wages less than the poverty level for a four person family. Since the per capita income in America is $43,075 for all 325 million citizens, it is grossly unequal that 24% of workers are earning less than $25,000. In fact, the Social Security Administration reports that 45% of workers, or 71 million, earn less than $25,000 annually. Together their collective income comes to less than 6 percent of the total annual national income states the report from the Social Security Administration

Raising wage income is the primary theme and concern of the Economic Policy Institute, see their extensive report “Raising America’s Pay”. One of the institute’s reports states, “Between 1979 and 2013, the top 1 percent’s share of income doubled nationally, increasing from 10 percent to 20.1 percent.” And, 
“The average inflation-adjusted income of the bottom 99 percent of families grew by 18.9 percent between 1979 and 2007. Over the same period, the average income of the top 1 percent of families grew by 200.5 percent [or tripled]. This lopsided income growth means that the top 1 percent of families captured 53.9 percent of all income growth over the period.” (see “Income Inequality in the U.S. by state, metropolitan area, and county”).  

Regurgitating details about inequality can take us only so far. We need a comprehensive view of our needs and possible restructuring. 

Since writing and posting this essay I've read Lawrence Mitchell's essays on Financialism. I feel he has captured the germ of the problem, the hoarding of the economic surplus by a wealthy minority, and such action continually pumps-up the value of financial assets, corrupting the motivation for actual productive use of the surplus. Eventually the system will collapse by destroying the host. 

If you owned a successful corporation making abundant surplus where would you invest, in your company or in the financial market? You’d be crazy if you invested in your company. This dynamic parallels the research of William Lazonick who showed, 2003 to 2013, that 450 of the S&P companies spent 91% of profits on dividends and stock buybacks, not on R & D or employee raises.
See my last essay.

The economy adds $41 trillion in savings 2009 to 2016, an increase nominally of 84% Also, since 2009, private household net worth has grown by 64% adjusting for inflation, from $48.9 trillion to $90.2 trillion — Flow of Funds, page 2  — at the same time the economy had its worst performance in 75 years -- 9 million lost their jobs permanently, another 6 million lost their homes through foreclosure, the median household lost 40% of its life savings. 
By my calculation the top one percent increased their average savings from $19 million in 2009 to $33 trillion in 2016. 
That covers wealth, and the Washington Center of Equitable Growth describes income: From 1980 to 2014, average national income per adult grew by 61 percent in the United States, yet the average pre-tax income of the bottom 50 percent of individual income earners stagnated [no growth] at about $16,000 per adult after adjusting for inflation.5 In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent. (See Figures 1 and 2.)

How are these two trends possible -- the immense growth in savings and income for the wealthiest while the typical household loses 40% of its life savings, incomes drop to 1996 levels, and jobs become more precarious, and housing less affordable? Why are so many citizens ignorant of these dual trends? Has the news media in this country failed? Real trillion dollars of gains went to a minority, while the majority suffered. Is this truly a democracy?    
In eight years, 2008 to 2016, GDP increased 10.5%, and real disposable income was up 12.3% (BEA.gov Table 2.1) -- but total savings increased a huge $41 trillion, up 64%, to $90 trillion. The national debt increased by $10 trillion to $20 trillion. And politicians claim it's impossible to pay off the debt, government programs must be slashed.