Wednesday, August 31, 2011

Debunking the Job Creation Hoax

True Or False?  Providing stimulus funds, tax cuts, and financial incentives to major corporations and wealthy individuals will lead to extensive job creation that will be a boon to our sagging economy.  At least, that was one of the premises of our government's economic stimulus plans -- the "trickle-down" theory.  How has this premise worked out?  Not very well, apparently. Our unemployment rate still hovers above 8% despite the stimulus funds and financial incentives.  Meanwhile, corporations are piling up huge cash balances, while the rest of the nation languishes in one of the biggest recessions in our history.  Conclusion:  The opening statement is false.  

A Billionaire Debunks the Job Creation Myth. Some of the best voices of reason and sanity regarding job creation have come from the so-called job creators themselves. Nick Hanauer, a self-made billionaire, is a member of the top one percent. Here is what he has to say about wealth, corporations, and job creation.
"It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.”
“Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s 'job creators' is every bit as false."
“I’m a very rich person.” … “Even so, I’ve never been a 'job creator.' I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.”
“That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.”
“It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.”
When we have a tax system in which the greatest benefits are enjoyed by the richest at the expense of the middle class and the poor, We don't get job creation. All that happens is that the chasm between the top 1% and the bottom 99% just gets bigger and our economy eventually collapses around us..

Trickle-Down Economics Doesn't Work.  Let's look at  the "trickle-down" theory that  was the hallmark of the Reagan administration and is still trumpeted by conservatives today. Here is how one source describes Trickle-Down Economics: "Proponents of this theory believe that when government helps companies, they will produce more and thereby hire more people and raise salaries. The people, in turn, will have more money." (Ref::http://www.investopedia.com/terms/t/trickledowntheory.asp#ixzz1WjKrVISz) This is all just theory, of course, and not an established fact, as we have observed in our present economic situation. As a matter of fact, capital doesn't produce jobs.  It's jobs that produce capital.  A company doesn't create jobs just because it has sufficient capital to do so.  Companies normally create jobs only when these jobs have a reasonable expectation to produce more capital for the company -- either directly or indirectly.  Jobs are the foundation and the backbone of capital and the basis upon which capital is achieved, not the other way around..

An Analogy.  When I think of the term "trickle-down," I envision some liquid running down a wall.  As it runs down, most of it tends to evaporate or soak into the surface.  Much of what doesn't, dries on the wall and becomes a stain.  In the end, very little usually reaches the bottom.  I think of the trickle-down theory as it applies to job creation in a somewhat similar manner.  In this case, the liquid  consists of the liquid assets of the company that are available for job creation. The assets that disappear (evaporate or soak in) are those that are absorbed on the way down by other parts of the company for projects of their own. The stains left behind represent money that is wasted in the trickle-down process, and the small amount of liquid that reaches the bottom represents the few jobs that are produced by that flow of assets.

Why Should Corporations Create Jobs?   We gave huge chunks of money to a large corporations at a time when demand for their products was down, partly because of the lack of money available to spend due to high unemployment.. And the cycle begins to feed on itself.  Companies create jobs to provide products or services that are in demand.   It doesn't benefit companies to create jobs if there is no market for their goods or services.  There will be no additional sales, and no additional profit, so why would they do that?  The answer is:  They won't. 

What Happened To That Stimulus Money?    In true "trickle-down" style,  much of it has never been accounted for.  It is as though it just evaporated, with no measurable results at all.  We have good reason to believe that at least a few of the companies used those funds wisely (such as the auto industry), and have even been able to pay back some or all of the money provided to them. And these few have been able to create or save hundreds of thousands of jobs for the American people, thereby keeping a very serious problem from getting even more serious.

But Then There Are The Others.  We can only speculate on where their funds might have gone.  Some of it may have gone to investors in the form of stock dividends.  Some of it could have been used to buy back outstanding stock, thereby raising the value of that company's stock to the financial benefit of that company's executives who have massive options.  Some of it might have been used to provide huge salaries and bonuses to some of the very people who contributed to our economic disaster.  I am sure that at least some of it did reach the bottom, where it was used to create some jobs. But I think a great deal of it just sitting amid corporate cash reserves and short term liquid assets, growing to massive levels.
  
Suffice it to say that, regardless of where that money went (or didn't go), we now know that huge handouts to large corporations have not succeeded in stimulating the economy with the desired and even expected level of new jobs.  Here is a statement on this situation from The Economic Populist: "What is astounding is the massive amount of cash corporations have for investment. Net cash flow increased $83.8 billion from Q1 and corporations now have over $1.8 trillion dollars available for domestic investments and hiring people, which everyone in America is aware they are not doing, astounding." (Source: www.economicpopulist.org/content/corporate-profits-q2-2011-30) 

The Bottom Line.  Very little of the stimulus money is trickling down to the ranks of the unemployed in the form of new jobs.  This means that our unemployment rate will continue to hover around 9% until there is a turnaround outside those corporations, even though they have the fund to do something about it.  Building from the bottom with a strong foundation does work, and it does create capital.  Working from the top down does not create many, if any, jobs.  We need no better proof than clear, simple logic and what we have witnessed in the past three years.. Economic wealth does not trickle down, and neither do jobs.

How Many Unemployed Are There, Anyway? According to the figures cited by the Bureau of Labor Statistics (http://www.bls.gov/news.release/pdf/empsit.pdf, we have a 9.1% unemployment rate, but this applies only to the unemployed who are still considered to be“in the labor market” (i.e., those who are actively seeking work). This amounts to about 13.9 million people. However, in addition to this, there are approximately 8.4 million who are underemployed or part-time, 2.8 million who are long-term unemployed and not actively seeking work, and 1.1 million discouraged with their situation and have given up their job search altogether. Using all the different definitions for unemployment, that amounts to 26.2 million total unemployed. Keep that in mind as we go onto the next few paragraphs.

Huge Corporate Cash Balances. The Federal Reserve reports that U.S. non-financial corporations have hoarded liquid assets amounting to $1.93 trillion, as of September, 2010.. These are the biggest corporate cash reserves in the past 51 years. (Source:  http://moneymorning.com/2010/12/12/us-companies-1-93-trillion-cash-hoard-biggest-in-51-years/)

What If?  If this money had been invested in jobs at an average annual cost of $50,000 per employee ($33,000-40,000 in salary and an additional $10,000-17,000 in benefits and support costs), that $1.93 trillion surplus could have created approximately 38 million additional jobs in our country (as long as we could keep those same corporations from adding those jobs overseas instead of in their own country). Contrast that with the official unemployment figures of 13.9 million unemployed.  Those 38 million jobs are 45% greater than all the unemployed in all of the categories! That's 100%+ employment! Think of the impact that would have on our economy, and how much stimulus our economy would receive if $1.93 trillion of additional purchasing power were put into it. Just imagine the decreases in unemployment benefits, home foreclosures, bankruptcies, and all the personal grief presently endured by the American people.

Unrealistic? Impractical?  Unfortunately, that is probably true.  So, let's lower our sights a quite a bit. Let's say that the corporations were to keep about $1.25 trillion of their gigantic cash balance for the time being.  That would provide $680 billion  which could be used to create 13.6 million jobs, which would reduce the official unemployment rate to almost zero and reduce total unemployment by around 50%.  Wouldn't that be at least a good step in the right direction?  Isn't that better than having these funds essentially sit idle while people are starving, having their homes taken away from them, and declaring bankruptcy?  And the corporations would still have an excess of riches in their $1.25 trillion reserves. And throughout this period,the companies could be training these new employees to step into truly productive, profit-generating jobs when the economy picks up and demand increases.  Pie in the sky?  Perhaps.  But I would rather have pie in the sky than pie in my face, and that is how our country looks right now. .

Job Creators Or Capital Hoarders?  Many major corporate CEOs are guilty of hoarding their company’s cash, and this is the worst possible time to do so -- while their country suffers from one of its biggest recessions in its history.   So much for the political claims that corporations are “job creators.” “Just give them lower taxes loopholes, deductions, and other incentives,” the politicians say, “and they will create more jobs.”. This huge cache of corporate cash totally refutes that theory. In fact, it would be more correct to refer to these entities as "job preventers" rather than job creators. To call these people and these corporations “job creators” goes beyond being a myth . It is tantamount to fraud against the American people.  This is just one example of how corporate wealth, left unchecked and unregulated, exerts a tremendous amount of control over the economy to the severe detriment of the country.

Generosity Begins At Home. There is one area, however, in which corporations are most generous. That is with the pay of their top executives. While the average American's income, purchasing power, and economic well-being are plummeting sharply, corporate executives' already-huge compensation packages are skyrocketing.

Highest-Paid CEOs. A New York Times article published on April 10, 2011, stated that the highest paid CEO in 2010 was Philippe P. Dauman of Viacom, who made $84.5 million in just nine months. Second was Ray R. Irani of occidental petroleum, with $76.1 million last year (up 142% from 2010), and third was Lawrence J. Ellison of Oracle, with a total of $70.1 million.(Source: http://www.nytimes.com/2011/04/10/business/10comp.html?_r=1&pagewanted=all)

Surprise! The Rich Are Getting Richer. In 2010, there were huge gains in executive compensation in nearly every sector of the economy. "The average pay package of a majority of CEOs at S&P 500 companies was $11.4 million in 2010, an increase of 23% from2009" (Source: http://www.marketwatch.com/story/ceo-pay-up-23-in-2010-labor-union-2011-04-19), while the rest of us have had to face salary freezes, wage cuts, decreased benefits, and unemployment due to our severe economic crisis.

More Jobs. It is a matter of simple math to see that $11.4 million X 500 = $5.7 billion. And it is still simple math to calculate that, at an average annual cost of $50,000 per employee, this amount of money alone could add more than a million jobs to the economy. Of course, we would not expect these executives to work for nothing, so let's say we just cut their compensation packages down to a mere $5 million a year. That should allow them enough to eke out a decent standard of living, but it would still be enough to create more than 600,000 new jobs.  That would bring our official unemployment figure down to just over 6%. In these rough times, when many of these executives already have total wealth in the billions of dollars, wouldn't this be the patriotic thing to do for their country that has done so much for them? Or are they personally hoarding money (along with the power and prestige it brings), just as they do for their corporations, at the expense of the working class? It is indeed a sad day for America.
For more information on corporate cash hoarding, go to

Corporate Profits for Q2 2011 up 3.0% | The Economic Populist
www.economicpopulist.org/content/corporate-profits-q2-2011-30


Treasury Strategies | The Power of Experience

For more information on executive pay, go to:

CEO pay up 23% in 2010: Labor union - MarketWatch

www.marketwatch.com/.../ceo-pay-up-23-in-2010-labor-union-201...

Executive PayWatch: Trends in CEO Pay, where you can search by:
Coming Up Next:  Money Talks, And Politicians Listen! -- and it all favors the wealthy at the expense of the lower economic classes.
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Friday, August 26, 2011

The Great Economic Divide

The Increasing Gap Between the “Haves” and the “Have-Nots."  Surveys taken over time show that the gap between the “haves” and the “have-nots” is very wide and continues to get wider with each passing year. Most people know that a gap exists, but few truly comprehend just how wide that gap has become, that it is actually increasing, and that the impact that this gap has on our government and our economy. Here are a few examples of the disparity:

Wealth Disparity. A 2001 survey reported that the top 1 percent owned 39.7% of the non-home wealth, while the bottom 95 percent owned 32.5%
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By 2004, the gap grew, and the survey reported that the top 1 percent owned 42.2% of the non-home wealth, while the bottom 95 percent owned 31%.

By 2007, the gap widened more, as the survey reported that the top 1 percent owned 48.4% of the non-home wealth, while the bottom 95 percent owned 20%

In only six years, the non-home wealth of the top 1% went from 39.7% to 48.4%, up by 8.7%.  Meanwhile, the non-home wealth of the bottom 95% went from 32.5% to 20%, down 12.5%.

The gap between these two groups widened from 7.2% to 28.4% – almost a fourfold increase in a six-year period. Yes, the rich got richer and the poor got poorer. And, if something isn't done about it, that gap will just continue to widen, along with all the political clout and influence that wealth brings to what is, in sheer numbers, an infinitesimal minority called the super rich.

Nota Bene. Keep in mind that these figures are comparing a very small 1%of the population against a huge 95%, which makes the results far more dramatic. They also do not include homes, which are generally going to cost significantly more for the exceedingly wealthy, and are likely to include second and third homes, and more. costing millions of dollars. The inclusion of these would make the disparity even wider.

Privately-Held Wealth Disparity. In 2007, the top 1% (the uppermost class) owned 34.6% of all privately-held wealth in this country. The next 19% (mostly managers, professionals, and small business owners) held 50.5%, As a result, this 20% minority owned a huge 85% of all privately-held wealth, while the bottom 80% (primarily wage and salary workers) were left with only15% of all privately-held wealth – a tremendous disparity.

Stock Ownership Disparity. When it comes to stock ownership, we see similar disparities:  The top US 20% owned 89.1% of the stock in 2001, 90.6% in 2004 and 91.1% in 2007.  The bottom 80% owned 10.7% of the stock in 2001, 9.4% in 2004, and 8.9% in 2007.  The top 20% (in actual numbers, only one-fourth the size of the bottom 80%) owns ten times more stock.

Income and Capital Gains Tax Rate Disparity.  To add insult to injury, Forbes Magazine recently reported that the The 400 Richest Americans pay their federal income tax at an effective rate of on;y 18% That's right – only 18%. Even Warren Buffett, one of America's riches, reports that his effective tax rate is only 17.4%, while the 20 people who work for him in his office pay at rates ranging from 33% to 41%.  The wealthy elite once paid an average 30% of their total income in taxes, but now they pay 40% less, thanks to the Bush era's income tax cuts and a cut in the capital gains rate -- both of which favor the wealthy..

Sharing the Pain?  Forbes also noted that “Shockingly, the plan to raise the debt ceiling collects nothing from the wealthiest Americans to reduce our budget deficit.” Nor does it address our national debt, the burden on the average citizen, or the huge and growing disparity between the super-rich and the rest of the population. Forbes states further, “It’s a sad day for the principle of sharing the pain equitably.”


Coming Up. 

How the Pursuit of Profits Kills Innovation and the Economy

An Open Letter to the One Percenters

Duopoly and Wealth: The Ties that Bind
                        Political Duopoly: Working Partner of the Plutocracy
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Monday, August 22, 2011

Plutocracy to Plutonomy: From Bad to Worse!

Yes, It Does Get Worse!  As if a plutocracy supported by a government that is controlled by a political duopoly isn't bad, enough, the story gets even worse. Now we have to deal with a couple of other dirty words -- plutonomy and plutonomics..

How Plutocracy Works.. Our plutocracy is based upon the rich (the wealthiest 5%) and the super rich (the wealthiest 1%) in our country who finance the political duopoly that comprises our government. This government then passes legislation that is favorable to the wealthy. The wealthy then contribute more to the politicians, and the cycle repeats. It's an insidiously symbiotic relationship that benefits nobody but the super wealthy and the politicians, some of whom are members of this financial elite themselves. And this is all done at the expense of the remaining 95% of the population. Obviously, this is not exactly a textbook case of democracy in action. Rather, it is a textbook example of how democracy can be bought and has been lost in this country. All we have now is a plutocracy cloaked in a facade of democracy.

Plutonomy Rears Its Ugly Head.  The word plutonomy is a contraction of the Greek word plutus (meaning wealth) and the suffix -onomy (meaning management). It is in effect the management of wealth. However, in actuality, it can be somewhat more than that. The web site Investopedia defines plutonomy as "Economic growth that is powered by the wealthiest upper class of society." .

Plutonomy vs. Plutocracy. To make a distinction, plutocracy pertains to the extremely wealth as a major controlling interest in government. Plutonomy pertains to the extremely wealthy as a major controlling interest in our economy. The two are different, even though they may be inextricably intertwined in this country. The end result is essentially the same: a country in which 95% of its non-rich people are subservient to the richest 5% and who involuntarily contribute to that minority’s increased wealth and further control.

Plutonomics. You may also encounter the word plutonomics. In his book, "Plutonomics:A Unified Theory of Wealth," S. E. Harrison's book defines plutonomics as:

"The science or study of wealth, wealth measurement, and wealth management."  [It can be thought of as a methodology for accumulating massive wealth, retaining it, and making it grow -- even at the expense of an overwhelmingly huge majority.]

Great!  Not only do we have a tremendous imbalance in the distribution of wealth in this country, but now we even have a methodology for making the imbalance worse.

Bill Moyers on Plutonomy.  (May 1, 2010). "Plutocracy is not an American word but it's become an American phenomenon. Back in the fall of 2005, the Wall Street giant Citigroup even coined a variation on it, plutonomy, an economic system where the privileged few make sure the rich get richer with government on their side."  [Emphasis added.]

The Citicorp Reports. In 2005 and 2006, Citigroup issued two major reports catering to and for the exclusive use of its richest clients. These were supposed to be confidential reports for the eyes of their wealthy elite. However, someone leaked these reports, and when they hit the public, they caused quite a stir for some -- and a stink for others.. As a result, one of the world's largest financial conglomerates was unmasked for espousing the concept of plutonomy and selling it to their richest investors..Here are some of the comments extracted from these documents that give the reader a flavor as to what Citigroup was pitching 

"Our thesis is that the rich are the dominant drivers of demand in many economies around the world (the US, UK, Canada and Australia). These economies have seen the rich take an increasing share of income and wealth over the last 20 years, to the extent that the rich now dominate income, wealth and spending in these countries. Asset booms, a rising profit share and favorable treatment by market-friendly governments have allowed the rich to prosper and become a greater share of the economy in the plutonomy countries." [Emphasis added.]

“The world is dividing into two blocs - the plutonomy and the rest. The U.S., UK, and Canada are the key Plutonomies - economies powered by the wealthy.”

“There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.” [Emphasis added.]
'
“At the heart of plutonomy, is income inequality. Societies that are willing to tolerate/endorse income inequality, are willing to tolerate/endorse plutonomy."  [Are we willing to tolerate the tremendous income inequality we have in this country?]

"Perhaps one reason that societies allow plutonomy, is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Why kill it off, if you can join it? In a sense this is the embodiment of the “American dream”. But if voters feel they cannot participate, they are more likely to divide up the wealth pie, rather than aspire to being truly rich."  [A very good reason for all of us to vote.]

"We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization."  [Emphasis added.]

"Society and governments need to be amenable to disproportionately allow/encourage the few to retain that fatter profit share. The Managerial Aristocracy, like in the Gilded Age, the Roaring Twenties, and the thriving nineties, needs to commandeer a vast chunk of that rising profit share, either through capital income, or simply paying itself a lot."  [Emphasis added.  Especially take note of the term "Managerial Aristocracy.]

"The wave of globalization that the world is currently surfing, is clearly to the benefit of global capitalists, as we have highlighted. But it is also to the disadvantage of developed market labor, especially at the lower end of the food-chain."  [What an insult to be referred to as the lower end of the food-chain.]

Conclusion. "Our overall conclusion is that a backlash against plutonomy is probable at some point. However, that point is not now. So long as economies continue to grow, and enough of the electorates feel that they are benefiting and getting rich in absolute terms, even if they are less well off in relative terms, there is little threat to Plutonomy in the U.S., UK, etc."

Where Things Now Stand. The economic elite now control our government,our economy, and our pocketbooks. And they have brainwashed a great percentage of our population into believing that we still live in a democratic society with free enterprise and an open market.

In reality, a minuscule minority is controlling a humongous majority from the top down. We are no longer participants in the system, controlling our own futures. Rather, we are slaves to the system and controlled by our masters, doing the bidding of the “Managerial Aristocracy” -- in the workplace, in our homes, and even at the ballot box...

In medieval times, the population was divided into nobility and commoners. Our founding fathers wanted something better for the people of this country. However, we have undone much the good they accomplished, all to our own detriment. We are once again a country of nobility and commoners, lords and subjects, aristocrats and peasants. Is that what our founding fathers wanted for us? And is that what we want for ourselves and those who follow us?

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Thursday, August 18, 2011

Duopoly and Wealth: The Ties that Bind

Our Plutocratic Duopoly. As previously stated, our country is governed by a political duopoly (the Republicans and the Democrats), who freeze out any viable attempts at representation by any other party. This duopoly is in turn controlled by the plutocrats (the wealthy). What has happened over the years is that our so-called representatives have been increasingly generous to the wealthy, and the wealthy have responded in kind with generous financial support. As a result, the politicians have doled out more favors for the rich, and the rich continue to reciprocate in kind.

Democracy On the Auction Block.  Almost a nine years ago, this problem was recognized and brought to the attention of the American people by Senator Paul Wellstone.  Here is what he had to say on the Phil Donahue Show! in December of 1992:

"We've got government to the highest bidder. We've got auction block democracy. It's not true that each voter counts for one and only one; that's the way it's supposed to be in a democracy. Money determines who gets to run for office, how people run for office, it determines what people do while in office and the fact of the matter is the vast majority of people are cut out of the loop."

The Rich Get Richer … And the poor get poorer.  While the wages of the working class have stagnated or even dropped over the years, the incomes of the plutocrats have increased in drastic proportions.  According to one source (How Rich Are The Rich?), a gigantic proportion of our country's economic growth over the past 30 years has gone directly into the pockets of the top one-hundredth of one percent of the population, who now have an average annual income of $27 million per household. Meanwhile, the average annual income for the bottom 90% is only $31,244.  Yet Congress goes along with huge tax breaks for the rich.

Our Congressional Elite. To make matters even worse, some of the Congressional members who act on legislation favoring the wealthy are wealthy themselves. According to an article published by the Center for Responsive Politics titled “Congressional Members' Personal Wealth Expands Despite Sour National Economy,” almost half of our federal legislators are millionaires themselves.  Roll Call's "Guide to Congress" lists the 50 Richest Members of Congress. You can be sure that most of those who are not yet millionaires certainly will be after they leave office and move into lucrative corporate, consulting, or lobbying positions.

Taxing the Wealthy.  Here is a recap of the highest income tax brackets in effect from 1936 to the present. (source:http://ntu.org/tax-basics/history-of-federal-individual-1.html)
  • From 1936-1963 (24 years), the rate ranged from 81% to 94%.  
  • From 1950-1963 (14 years), the rate ranged from 91% to 92%.  
  • From 1964-1981 (8 years), the rate ranged from 69.125% to 77%..  
  • From 1982-1986 (5 years), the rate was reduced to from 69.125% to 50%.  
  • From 1987-1992 (6 years), the rate fluctuated between 28% and 38.5%.
  • From 1993-2000 (8 years), the rate stabilized at 39.6%.  
  • In 2001, the rate was reduced from 39.6% to 39.1%.
  • In 2002, the rate was reduced from 39.1% to 38.6%.
  • In 2003, the rate was reduced from 38.6% to 35%, where it still stands in 2011.

A Boon for the Wealthy. For 45 years, the highest income tax rate for the ultra-wealthy was at 70% or higher, and our country prospered. Since then, the maximum tax rate has been cut in half and look where we stand today. While these tax cuts have generated untold riches for the wealthy, the rest of the country has suffered from huge unemployment rates, loss of home values, loss of job benefits, loss of retirement funds, a substandard educational system, a crumbling national infrastructure, threats of cuts in Social Security, Medicare, and Medicaid,, and an ever-increasing national debt,

It Started with Carter. And it's not just the conservatives who are to blame. Both parties are tainted with this mutual gift exchange between the two major political parties and the elites. It all pretty much started under Jimmy Carter. In 1978, his Democratic Congress passed a bill to cut the top rate of the capital gains tax from 48% to 28% (where it remains today). and Carter signed it into law.  What a windfall for the wealthy!

Continued with Reagan. Not to be outdone, Ronald Reagan, in a can-you-top-this gesture, signed his Economic Recovery and Tax Act into law, which unleashed a bunch of extra benefits for the wealthy, including tax cuts for corporations and reductions in both capital gains and estate taxes -- something to warm the heart of every plutocrat in the country.  And campaign contributions continued to pour into campaign coffers.

And Culminated with Bush. In the year 2000, George W. Bush finally made it public when he stated to a room full of wealthy donors, "Some people call you the elites. I call you my base."  And the wealthiest of the elites were probably his home base.  They rewarded Bush and he went on to pay them back with his big tax cuts that drastically favored the rich over the middle and lower classes.   Bush maintained that his 2001 tax cuts would benefit all Americans, but that proved not to be. A source quoted in Mother Jones claims that 51% of the tax cut benefits went to the top 1% of the population.   (see:How the Oligarchs Took America).

The Rising Tide. Politicians who pass bills giving financial advantages and incentives to the rich like to cite the oft-use catchphrase, "A rising tide floats all boats."  There may seem to be an element of truth in there somewhere, but not everybody in this economy is wealthy enough to own a boat (proverbial or otherwise).  So, unfortunately, all it does for many people is to just flood their back yards with increasing financial problems.

The Ties that Bind. It is increasingly obvious that both parties are in bed with big money interests, and that they are willing to cater to them in order to garner their favor and financial support. And it isn't just a one-night stand. They are joined at the hip. These are indeed the ties that bind our government to wealthy special interests, instead of to the people. These are the ties that have destroyed our democracy.

Coming Up. 
                          Political Duopoly: Working Partner of the Plutocracy

Plutocracy to Plutonomy: From Bad to Worse!

Campaign Funding's Impact On Democracy

Money Talks, And Politicians Listen!
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Monday, August 15, 2011

Political Duopoly: Working Partner of the Plutocrats

Definition Of Duopoly.  The American Heritage Dictionary defines a "duopoly" as: "An economic or political condition in which power is concentrated in two persons or groups." (source: http://www.dictionary.com/duopoly)
             
The Problem With Duopolies.  The people who are dependent on a duopoly for necessary goods or services are only slightly better than those subject to a monopoly,  Because the two entities that comprise the duopoly are the only providers, they jointly control all aspects of research, development, production, marketing, pricing, and delivery of their products and services.  In so doing, they exercise an inordinate amount of power and control over their customers, and their customers have little or not control over them.
 
Our Political Duopoly.  The same problem described above also applies to our political system.  We have a  political duopoly.  The Republicans and Democrats dominate American politics, and minority voices are usually either drowned out, forced out, or made irrelevant. Our elected officials in Washington are supposed to represent their country first, and then the citizens in the areas they represent (regardless of political affiliation).  However, they appear to represent their own personal interests first (doing whatever they think will get them re-elected), their party's bidding second, and their financial backers third. If they listen to the "people back home," it is usually only to those of their own political persuasion, because, after all, they are the ones who are most likely to vote for them again.

Lack of Accountability.  Members of the federal government cannot be recalled by the people. Therefore, elected officials are pretty much free to do whatever they want between elections, and many do not feel that they need to be accountable to the people they were elected to represent. This works to the detriment of a democracy, even a democratic republic.
    
Presidential Debates.  This are a prime example of an area in which the duopoly dominates.  These debates are administered and controlled by a non-profit organization founded by the duopoly.  They set the rules, and the rules essentially exclude any participants other than Democrats and Republicans.  Ross Perot was allowed to participate in the debates in 1992, and viewership was the highest for any presidential debate at almost 70 million viewers.  However, he was excluded in later years, thereby losing major exposure to the voting public and all but killing his chances for success.a plutocracy governed by a duopoly.

By excluding third-party candidates from the debates, the duopoly is able to deprive the American voter of exposure to the positions and issues of the third-party candidates, and the duopoly is, to a great extent, able to direct the outcome of the elections to one of the members of the duopoly.
   
Political Appointments.  A particular danger with our political duopoly lies in the fact that the president makes appointments to the Supreme Court.  While such appointees are supposed to be non-partisan, they almost never are, and both the president who nominates them and the Senate who approves them tend to do so purely along their party's ideological lines.  Inasmuch as these are lifetime appointments, they can have very long-lasting effects -- for good or for bad.
   
Congressional Deadlock.  Another negative effect of our particular duopoly is that it can become highly polarize and rigid along party lines, and the two parties can get locked in disputes that do not serve their constituencies or their country well.  This can drastically slow down the legislative process to the detriment of our country and has resulted in a government shutdown in 1996 and threats of a shutdown and a financial default in 2011.  The people are powerless in these sorts of situations.  They can write to their Congressional representatives, but they seem to get ignored unless they agree with what their representatives wanted to do in the first place.
   
Coming Up:

Plutocracy to Plutonomy: From Bad to Worse!

Campaign Funding's Impact On Democracy
                     Money Talks, And Politicians Listen!

U.S. Congress: Bought And Paid For
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Sunday, August 14, 2011

Democratic Republic or Plutocracy?

Is Democracy Dead?  Many people say that we are no longer a democracy or even a democratic republic.  They say instead that our democracy has been taken over by a plutocracy.  Just what is a plutocracy?  It has nothing to do with a planet or a Disney character, but it has everything to do with your freedom and welfare, and how you are represented by our government.  So, let's take a look as several definitions and discuss that matter.

Definitions of Plutocracy.  Before proceeding further, it might be well to establish a few more definitions – in this case, for the word “plutocracy.” Here are a few definitions and their sources. (emphasis added)     

A More Descriptive Definition.  I apologize for showing so many almost identical definitions here. However, I wanted to make the point that there is no disagreement or variation in the definition of this term. The following definition is the one I like best, though, because it is the one that amplifies more fully than the other definitions just how this power is manifest:

“The term "plutocracy" is formally defined as government by the wealthy, and is also sometimes used to refer to a wealthy class that controls a government, often from behind the scenes. More generally, a plutocracy is any form of government in which the wealthy exercise the preponderance of political power, whether directly or indirectly.”
(source: http://www.progressiveliving.org/plutocracy_defined.htm

Bill Moyers Weighs In.  Having read (or at least skimmed) some of those definitions above, can there any question as to whether the United States is a plutocracy or a democracy?  If you still have any doubt, here is an additional quote from :Steven T. Jones in the May 6, 2010 issue of the San Francisco Bay Guardian:
    
“The great public-interest journalist Bill Moyers, 75, ended his long-running Journal program on Friday with a warning: Plutocracy and democracy don’t mix. And these days, it appears that the former has all but destroyed the latter, turning American democracy into a cruel and deceptive farce.”   

“People live with the illusion that we have a democratic system, but it’s only the outward form of one. In reality we live in a plutocracy, a government of the rich.” - Allan Radel

Coming Next.

                                Major Threats to Our Democratic System  
                                The Great Economic Divide
                                How the Pursuit of Profits Kills Innovation and the Economy




                               
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Democracy: From Definition to the Constitution

First let's examine two types of democracy and see how the founding father chose the type they did..

Pure Democracy

A pure democracy is one in which the power to govern lies directly in the hands of the people. Hence, it is sometimes also referred to direct democracy. All citizens are allowed to participate on an equal basis with fellow citizens in establishing policies, regulations and laws, and their enforcement. This form of democracy can work well for organizations or small towns, but it becomes unwieldy and virtually impossible at a national level. Attempts at pure democracy in a few colonies failed, which helped lead our country toward a different form of government.

Democratic Republic

To overcome the unwieldiness of a pure democracy, the drafters of our Constitution turned to a representative form of government. Instead of direct participation of the people in day-to-day governance, they set up a system that provided for elected representatives to enact executive and legislative policies and laws on behalf of its citizens in accordance with the common good and the welfare of our country. Therefore, our country was founded not as a pure democracy but as a democratic republic.

The Articles of Confederation

The Articles of Confederation were this country's first attempt to draft a constitution, uniting thirteen states under a weak federal government whose primary responsibilities were overseeing the revolution against England, conducting diplomatic discussions and negotiations with Europe, and dealing with territorial matters. There was no president, no cabinet, and no federal departments of any significance. It had no power to levy taxes (which was understandable considering the issues at that time), and was totally at the mercy of the states to make voluntary contributions for its support. This confederation did not establish a new country. Rather, it established only a loosely knit association of thirteen separate, diverse, and independent states. While this confederation was relatively successful in the three areas outlined above, it was totally ineffective in dealing with other urgent matters that required a stronger central government to be effective in other critical areas.

The U.S. Constitution

The United States Constitution was written in 1787 and took effect upon ratification of nine states in 1789. In framing a new constitution, its drafters had to walk a very tight line between national rights and states' rights. Many concessions had to be made on both sides to develop a document that would be acceptable to states with widely varying principles and practices. As a result our Constitution as drafted was considered by many to have been imperfect, even for the times, and had many defects which needed to be corrected after ratification. 

Where Do We Go From Here? 


Our Constitution has served us fairly well for more than 200 years.  It has endured thousands of challenges to our democratic republic.  However, it was not written to address every possible event or development that could arise in the indefinite future.  There is no way our founding fathers could ever, in their wildest dreams, have conceived that one day corporations would be recognized as persons, entitled to the same rights of free speech as private citizens, and that money would be considered free speech.  They could never have perceived of our government and our political system essentially being bought by big money interests. Most of all, they could never have envisioned that this country would one day (today) have established an aristocracy that rivals the very one they sought and fought with their life's blood to escape.  It is small wonder that Supreme Court Justice Ruth Bader Ginsburg recently made the comment,  "I would not look to the U.S. Constitution, if I were drafting a constitution in the year 2012.,".

Our Constitution could not anticipate the challenges of the distant future, and our government has failed to guard our country from adapting it to changing times..  The bottom line is that our beloved Constitution  is in critical condition and needs to be revised.  The only real question that remains now is whether or not we are up to that challenge.


Next Topics:
                      Are We a Democratic Republic or a Plutocracy?

Major Threats to Our Democratic System

The Great Economic Divide

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Democracy, and What It Means to Us

Before starting our discussion, it might be good to define a few terms so we are all coming from a common understanding.  Let's start with "democracy."

What is Democracy?
While there may not be any universally held definition of democracy, there are some commonly-held definitions that can be found in many authoritative sources. Here are five representative examples:
  1. Government by the people, a form of government in which the supreme power is vested in the people and exercised directly by them or by their elected agents under a free electoral system.
    (source: http://dictionary.reference.com/browse/democracy)

  2. Government by the people; especially: rule of the majority
    (source: http://www.merriam-webster.com/dictionary/democracy

  3. A system of government by the whole population or all the eligible members of a state, typically through elected representatives .
    (source: http://oxforddictionaries.com/definition/democracy

  4. Government by the people, exercised either directly or through elected representatives.
    (source: http://www.thefreedictionary.com/democracy)

  5. U.S. president Abraham Lincoln (1809-1865) defined democracy as: “Government of the people, by the people, for the people.”
    (source: http://www.democracy-building.info/definition-democracy.html)
I have boldfaced the text that I perceive as being the most important portion of the various definitions, that is to say – democracy is government by the people. It is not government by monarchy, dictatorship, aristocracy, theocracy, oligarchy, or plutocracy, but by the people.

People Power.  The word democracy itself comes from the Greek: δῆμος (dêmos) "people" and κράτος (Kratos) "power," and thus its true meaning: “people power,” or, as emphasized above, “government by the people.” Ultimate power originates from and resides in the people. Whenever this power is usurped, democracy fails to exist.

A New Nation, Conceived in Liberty.  Our founding fathers and their fathers before them were subjects who bowed before monarchies, aristocracies, and theocracies.  Their new nation was based upon the power of the people, which required the transformation of subjects into citizens.

Are We Citizens?  A citizen within a democracy is endowed with certain inalienable rights, including the right to self-governance. A citizen is allowed to participate freely and fully in the process of governance. This, however, can be a two-edged sword, inasmuch as it is both a right and a responsibility.

Or Are We Subjects?  Subjects have little or no power or control over their government and sometimes even over their personal lives. They are subject to a higher power, be it a monarchy, an aristocracy, a theocracy, a dictatorship, or any other form of government that subjugates its people to their authority and treats them more as property than as people. Subjects have few rights and virtually no voice in their government.

Democracy and the Constitution.  Our founding fathers decided that their new country would be a democracy, or more specifically a democratic republic,  in which ultimate power for governance rested in its people.  Do you feel that is how things are today?  If you do, you need to read on.

Related Topics:   
       Democracy: From Definition to the Constitution
      
Are We a Democratic Republic or a Plutocracy?

Major Threats to Our Democratic System
        
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