WASHINGTON (Reuters) - New claims for jobless benefits unexpectedly rose last week (Oct 14, 2010).
Let's be honest. Wouldn't you like to rake in a cool $900,000 for one hour's work? No? Still have hippie ideals, perhaps? You could work for just 10 minutes and walk off with $150,000. Push yourself to work one entire day and we're talking $7.2 million. Hang in there for a month, and you'll pull in more than the richest athletes make in 10 years -- $256.5 million. And in one year? Well, you'll be earning what the top ten hedge fund honchos each averaged in 2009 -- $1.87 billion. Wouldn't you like to know their secrets? Here are a few:
Step 1: Check your conscience at the door.
You must be able to live with the knowledge that while you were making $900,000 an hour, more than 29 million other Americans had no job at all or were forced into part-time work. Also you'll have to live with the uncomfortable fact that your sector -- high finance -- crashed the economy, leaving eight million Americans jobless in a matter of months.
You're obviously good at math so you'll be able to calculate that it will now take 22.5 million new jobs to bring the economy back to full-employment (an unemployment rate of 5 percent or less). That's the equivalent of creating 630 new corporations the size of Apple Corp. (35,000 employees each). Sadly, you're also a realist, so you know that unemployment is likely to remain at record post-WWII highs for years to come.
Feeling guilty? Don't. Remind everyone again and again that hedge funds like yours didn't get bailed out. You're not too big to fail. You just figured out how to be better at investing than anyone else. You're what capitalism is supposed to reward. You earned your $900,000 an hour fair and square! Suppress all your doubts and just keep telling yourself -- and everyone else -- that you have nothing to do with rising poverty or the fact that nearly 50 million people can't afford health care. You're the solution, not the problem. Conscience be damned!
Step 2: Remember: None of this is your fault!
Yes, a few tiresome critics will keep pointing the finger at you, saying that the financial sector crashed the economy. Ignore them and put the blame where it belongs - somewhere else. When in doubt, seek guidance from the pros on Wall Street. They know exactly who to blame:
Assert with the utmost confidence that it's Wall Street billionaires who make our system the envy of the world, so help me god.
Step 3: Proclaim that you are the solution:
It's not enough to dodge the blame. You've got to convince academics and journalists to anoint you as the savior. You see, it's you and your fellow high finance moguls who will save us from ever having to endure a crisis like this again. Fortunately for you, they've already bought the story. For example, in More Money than God, Sebastian Mallaby writes:
How can governments promote small-enough-to fail institutions that manage risk well? This is the key question about the future of finance; and one part of the answer is hiding in plain sight. Governments must encourage hedge funds....The chief policy prescription can be boiled down to two words: Don't regulate." (p 380-81)
Imagine that! Top hedge fund managers who earn $900,000 an hour are the answer to too-big-to-fail bailouts, and you don't even need government regulations to keep them honest! People who suggest that Wall Street billionaires are essentially card counters in a Las Vegas casino? They're just envious. People who question whether the entire casino has any redeeming social or economic value at all? They're just stupid. (For my envious and stupid account, see The Looting of America.)
Step 4: Tell people, "Sure, go ahead and raise taxes on the super-rich!" (wink, wink): Because of Wall Street billionaires our income distribution is the most extreme since 1929. By some estimates it's even worse, with the top 1 percent hoarding nearly 50 percent of our nation's wealth. And yet, a recent academic survey suggests that most Americans have no idea things are so skewed. The vast majority actually said they would prefer a wealth distribution more like Sweden's. Heaven forbid!
So -- why on earth would someone like Warren Buffett be offering to pay more taxes? Well, for one thing, there are worse things than higher income tax rates. What you want to avoid at all cost is any reform that might reduce financial industry profits -- like controls on derivatives and financial transaction fees.
As for raising taxes: Just because you say you're willing to pay them doesn't mean you'll actually ever have to. Everyone knows that the moment anyone actually tries to tax the super-rich, a Greek chorus of greed will chant: "Investor confidence will crash! Small businesses will suffer! Jobs will crumble! The recovery will stall!"
So, once you get to be a billionaire, join the cavalcade of gurus who insist they should at least pay the same tax rates as their secretaries. And if those weak-kneed politicians simply refuse to raise your taxes, well, what's a billionaire to do?
Step 5: Count on America's admiration:
Americans may say they want wealth to be distributed much more evenly. But they also have a perpetual love affair with the super-rich. Any effort to rein in billionaires grates against one of our most fundamental values: the right to make as much money as we can, however we can, whenever we can. The very existence of Wall Street billionaires opens up the possibility that we ourselves will become super rich someday.
Fortunately for Wall Street billionaires, Americans tend to view even modest proposals to redistribute wealth as cataclysmic. (Remember Joe the Plumber?) When I propose that maybe we would be better off without Wall Street billionaires, even non-plumbers tell me: "Oh, no. We don't want to live in a socialist society where incomes are flat. Everyone would lose their motivation. And we'd be stuck with only one flavor of ice cream at our dilapidated collectivist food co-op!" In our political culture, there seem to be no mental resting points between North Korean communism and an economy that lets Wall Street billionaires run wild.
However, every once in a while we get pissed off. In 1913 we passed a constitutional amendment to legalize income taxes on plutocrats. From the 1930s to the 1970s we enacted tax rates on the super-rich that hovered between 70 and 90 percent. And long before that Andrew Jackson vetoed the National Bank because, as he said, "the rich and powerful too often bend the acts of government to their selfish purposes." The rigged Bank laws, he argued, "make the rich richer and the potent more powerful, the humble members of society the farmers, mechanics, and laborers, who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government.
We're still complaining. We get upset at government because it seems to favor the super-rich. Yet in the end we protect our Wall Street billionaires by attacking regulations and taxes on the wealthy.
Step 6: Thank the lord for sex, drugs and rock'n roll: Reagan and company may have hated the 1960s youth rebellion, but they sure glommed on to a key feature of it: People wanted to be liberated from society's constraints and from a government that was betraying our nation's ideals. Through either insight or dumb luck, the Reagan revolution successfully melded the idea of accumulating wealth with the idea of gaining freedom from everyone and everything -- the ultimate form of "doing your own thing." (My surfer friend called it "takeoff velocity.")
Few of us who came out of the 1960s trusted government. After all, it had waged an unjust and un-winnable war in Vietnam. Public figures seemed to lie to us on a regular basis -- from Mai Lai to Watergate. You want that kind of government running the economy too?
"Do your own thing" economics also caught on. Free love and free markets may have had a lot in common. Milton Friedman (who also opposed criminalization of drugs) led the way among American economists, arguing that government interference always distorts free markets. Only when markets are left entirely alone can they operate efficiently and create prosperity for all. Friedman's free market philosophy won over the academic and policy establishment. They saw the rise of Wall Street billionaires as a sign of our nation's economic health and prosperity. It wasn't just that their vast wealth might trickle down to the rest of us. It was that the accumulation of such wealth in the first place signaled a strong underlying economy.
According to the free market economists, under our system you can't possibly earn $900,000 an hour unless you produce $900,000 worth of something. So financial industry billionaires must, by definition, have the knowledge, skills, and experience to create that enormous value. Because nobody would cough up that sum of money unless they got equivalent value in return.
Therein may lie the biggest secret of all: Wall Street moguls are confident that Americans will always believe that that the big boys are really worth their money.
But for how long? Will our millions of unemployed workers eventually get fed up? Will the middle class finally get angry at the plutocrats who stole their dreams? Or will our anger continue to focus on government regulations, social spending and taxes instead of on our financial plutocrats? Eventually we'll have to choose or the choice will be made for us: Do we want a $900,000 an hour Valhalla for the few? Or a prosperous America for the rest of us?
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the New Class War, (hopefully to be published in 2011).
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
" The scary actual U.S. government debt "
NEIL REYNOLDS
Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion - 840 per cent of current GDP. "Let's get real," Prof. Kotlikoff says. "The U.S. is bankrupt."
Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble - far worse than the Washington-based lender of last resort has previously acknowledged. "The U.S. fiscal gap is huge," the IMF asserted in a June report. "Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP."
This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF's fiscal fix, a doubling of federal taxes in perpetuity, would be appalling - and possibly worse than appalling.
Prof. Kotlikoff says: "The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.
"America's fiscal gap is enormous."
One way or another, the fiscal gap must be closed. If not, the country's spending will forever exceed its revenue growth, and no one's real debt can increase faster than his real income forever.
Prof. Kotlikoff uses "fiscal gap," not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government's projected revenue (expressed in today's dollar value) and its projected spending (also expressed in today's dollar value). By this measure, the United States is in worse shape than Greece.
Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan's Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.
Step 1: Create vehicles to turn idiotic loans into securities.
Step 2: Buy as many idiotic loans as you can, turn them into securites and sell them to everyone of your clients as safe investments.
Step 3: Tell the lenders that you buy those idiotic loans from to create more of them.
Step 4: Do this over and over again until you create enough housing demand to drive home prices up 300% in just a few years.
Step 5: Short the hell out of all those securities you just sold your clients.
Step 6: Call your Ex-CEO at the FED and tell him you need a trillion dollars or the economy will collapse.
Step 7: Use all your fraudulent gains and the trillions you co-looted from taxpayers to buy all that property back at pennies on the dollar.
Step 8: Buy the next election so you never get prosecuted.
Step 9: Hire an army of security guards so the people can't get at you.
Step 10: Buy a mega yacht for a few hundred million and hide where no one can find you.
If you know how to speak the language. Mr. Leopold is right in contrasting the excesses of the Rich and Famous, like Hedge Fund Managers. But, taking what the "market" gives is not a matter of morals or conscience. As long as the policymakers use current socioeconomic theory to have no effective controls on money, shame is not a strategy. Take it. The lesson is the Standards of Labor have to change to be valued properly and consistently under another economic system and means of exchange. It is the only way out for the economcally disenfranchised. The plutocracy will fear only that as that time is nearing. Which way will the Obama Administration turn, in its two year drive toward re-election. The policy whispering wonks are no comfort to the underclass. Their ranks are growing, without learning.
For the labor producing wealth, a sales force selling the goods and services is probably necessary. Likewise, certain organizational functions, like management, are useful. Even investment has a place; goods and services to build and equip a shop must be paid for.
But notice that the derivative functions serve the labor producing the value. It is distribution, management and investment that are costs of doing business. Productive labor is the business that has these costs. Our contemporary business model has stood this on its head. The "cost" is productive labor, ownership trumps production, the owner of materials and facilities is seen as the central player having a right to reduce their "costs" and maximize their profits. Productive labor is not perceived as having any such right.
But blow away the bogus arguments and it's plain that productive labor has a superior right to maximize its profit, and that the laws have an entirely legitimate function in protecting these fundamental rights of labor - that have not yet been recognized.
Recognition and protection of the fundamental rights of labor is entirely consistent with a market economy where market forces are shaped by legal and governmental constructs. The government has both right and obligation to shape the fundamental rules of the market so as to guarantee labor its fundamental rights.
It was never the dream to grow limitlessly rich at the expense of your neighbors.
The pool of wealth is finite - the number of workers working is finite, the number of hours they can work is finite...and since only work creates wealth, the pool of wealth is therefore inarguably finite. (People who say it isn't are confusing the actual finity with the potential for growth of the finite amount in it at any time.) So, overpay has nowhere to come from but from underpay. If one person is allowed to take out more from the pool of wealth than he put in by his own sacrifice, others are forced to take out less than they sacrificed to put in. The overpay has nowhere else to come from than from underpay.
People can and do give myriad rationalizations for allowing overpay that masquerade as *reasons*, but the big secret is that no one can justify forcing underpay upon some who sacrifice equally to producing the wealth, in order to give overpay.
In short, there is no reason to have super rich, and there is every reason not to have super rich.
Most people will get hot under the collar if you suggest equality, because they think equality is unfair and/or would take away motivation to work. Some people take pride in working hard and they reasonably want to be paid more. They suspect or presume others are working less, and they don’t want those others paid the same as themselves. Reasonable enough, although one can still argue against it further. But the inequality of work does not prove that inequality of pay should be uncontrolled; it argues only that inequality of pay should be proportional to work, which is very different from what we have - as Les Leopold has shown.
We have a social pool of the products of work because we specialize in the myriad necessary tasks we do. We pool the products of work so that everyone can get out the variety of goods they need and desire. Ideally, justly, the money we get paid for work accurately measures the amount of work we put in to the social pool of wealth, and gives us license to take out the same amount of work, in the form of a variety of goods and services, so that no one takes out more or less than they put in. The proper function of money is to facilitate the remixing of goods that have been separated by job specialisation/division of labor.
Justice, nontheft, demands an equality in workvalue between what each person puts in and what they take out. That is, the work that has gone into the goods and services they take out has to equal the quantity of work that went into the goods and services they put into the social pool of work and wealth. Otherwise theft has occurred, which causes the endless escalation of anger and violence.
The root of all evil is love of the chance to have other-earned wealth.
Having self-earned wealth is all good - it's as good as eating the vegetables you grew yourself. Having other-earned wealth is always bad - very, very bad - because it is theft.
Otherearned wealth is overpay. Overpay has nowhere to come from but from underpay. People can have history on repeat on steroids kaboom, or they can have fairpay justice and peace and plenty on Earth. There are no other choices.
Great observation. Our culture is puzzling in its intellectual lethargy and tendency to see things only in terms of one or another predigested extreme rather than with any nuance. You'd think people would naturally want to think things through, especially before the shouting begins. But perhaps we're by and large happier thinking less and shouting more.
"Few today remember that a half-century ago a number of New York and Chicago's top bankers were sentenced into penitentiaries-the New Yorkers into Sing Sing-the senior partner of J.P. Morgan and Company, the president of the National City Bank, the president of Chase Bank. Every one of them had been found to be doing reprehensible financial tricks. They were selling their own friends short. They were opening their friend's mail and manipulating the stock market. They were manipulating everybody. They were way overstepping the moral limits of the privileges ethically existent for officers in the banking game, so a great housecleaning was done by the New Deal."
Buckminster Fuller "Critical Path"
Wealth redistributions does not work. Never has.
I must disagree. It's worked like a well oiled machine the last 2 decades for those at the top. They have continued to earn more, with less effort, all the while paying less in taxes. The work force who are fortunate to still be employed, have to work harder and longer for less and less.
The unemployed now need to be grateful for hard labor for slave wages, on a day to day basis.
And if the destruction of their job, home, family, and life, with no hope of recovery, isn't enough....well they should hang their head in shame for being hungry or near homeless.... because of course, per the haves and have mores, if you're unemployed or in any way disadvantaged with no health insurance or no retirement left....well it's all your fault.
Seems like that wealth redistribution is working quite well for the haves and have mores.
High or low wages.