Our Chronic Wage Stagnation, Symptoms and Treatments

by Brian T. Lynch, MSW

Decades of frozen wages relative to our expanding wealth is the root cause of many economic problems. More people falling into poverty, a shrinking middle class, declining retirement savings, increased welfare spending, higher unemployment, more aid to working families, declining government tax revenues, diminished funding for Social Security and Medicare, a sluggish economy (despite a record high stock market), slow job growth and heighten social tensions along the traditional fault lines of race, ethnicity and gender are among the many issues influenced by decades of wage stagnation.

Beginning in the late1970's most American workers received only cost of living adjustments in their paychecks while their real earnings gradually diminished each year. Employers increased hourly wages to keep pace with inflation, but they suddenly stopped raising wages to reward workers for their productivity. Earned income has declined for most Americans as a percentage of our gross domestic product (GDP) This amounts to a dramatic and intentional redistribution of new wealth over the last 40 years. Nearly all this new wealth has gone to the rich and powerful. 

The visual evidence of wage stagnation relative to hourly GDP is apparent in one powerful graph (below). You may have this it before.



SYMPTOMS

The effects of wage stagnation on our economy have been gradual and cumulative. Its impacts don't raise red flags from one year to the next, but the cumulative effects are obvious. The trending rise in income inequality, for example, was missed entirely for 25 years, and then it still took another decade for it to catch the public's attention.

According to USDA data on the real historical GDP and growth rates[i], the U.S. economy grew by $368 trillion between 1976 and 2013. That is a 109.4% rise in national wealth, more than a doubling of the national economy. Almost none of that wealth was shared with wage earners. If hourly wages continued to grow in proportion to hourly GDP, as it had for decades prior to the mid-70's, the current median family income today would be close to $100,000 a year instead of the current $51,017 per year.[ii]

Think about that for a moment, and about all the implications for wage based taxes and payroll deductions. For simplicity sake, let's say wages would have double if the workforce received productivity raises. That would significantly reduce the number of families currently eligible for taxpayer subsidies such as SNAP (food stamps), housing assistance, daycare and the like. At the same time the workforce would be generating much more income tax revenue. 

Consider next the impact wage stagnation has had on payroll deductions. Social Security and Medicare premiums have not financially benefited from the growing economy. Double current wages and you double current revenues for these programs as well. Moreover, the economy has grown at an annual rate of 2.9% since 1976. If Social Security and Medicare had benefited from this new annual wealth, the effect on current revenue projections would be profound. We would not be looking at a projected shortfall any time in the future.

The impact of wage stagnation on consumer spending is perhaps the most insidious problem. While worker wages have stagnated, the production of goods and services has grown. How is that possible? Some of this production is sold in foreign markets, but domestic markets are still primary. And it is here where economic theories have done a disservice.

A generation of economists and business leaders have treated consumers and workers as if they were not one and the same. This has fractured how we look at the economy and given rise to the notion that labor is just another business commodity. It disguises the fact that labors wages fuel consumer spending. Wages help drive the whole economy while wage stagnation reduces consumption over time.

To overcome this effect we have seen the need for mother's to enter the workforce in mass, and for banks to invent credit cards to bolster consumer spending. These and other creative measures can no longer forestall the decline in worker spending. So while the financial markets ride the tide of America's growing wealth, the fortunes of those who have been cut off from that new wealth continue to slip beneath the waves.

As for social tensions among different racial, ethnic and gender groups, the effect of stagnant wages relative to the nation's growing wealth creates a lifeboat mentality and zero sum thinking. For the first time in many generations parents are worried that their children will have less in life than they had. When the whole pie is shrinking a bigger slice by one person means a smaller piece for others. This thinking exists because for over 95% of wage earners the economic pie hasn't grown in 40 years.


TREATMENTS

You may not be ready to accept chronic wage stagnation as "the syndrome" underlying our economic woes, but it's also true from my experience that having solutions (or "treatment options") at hand often makes it easier to identifying the problems they resolve. With that in mind, I want to offer some solutions to America's low wage conundrum.

One direct approach to raising worker wages is the one currently being discussed in the public dialogue, raising the minimum wage. This benefits the lowest paid workers and also puts pressure on employers to increase pay for other lower wage earners. The current target of $10.10 per hour would still leave many families at or below the poverty line. Workers making the new minimum wage would still be eligible for some public assistance for the working poor. While passing a minimum wage law is at least possible, this option is not a systemic solution to wage stagnation. Even index the minimum wage to inflation would not compensate for declining wages relative to GDP growth.

Another direct approach to ending wage stagnation is to pass a living wage law. This would set the minimum wage at a level that would allow everyone working full-time to be financial independent from government assistance, including subsidized health care. A living wage law could be indexed to the local cost of living where a person is employed. This is idea because it takes into account local economic conditions which are determined by market forces rather than government edict. But passing a living wage law in the current political climate is unlikely.

There are other ways of encouraging wage growth that don't involve direct wage regulation. One idea would require the federal government to recoup, through business income tax rebates, the cost of taxpayer supported aid to working families from profitable businesses that pay employees less than a living wage. Employee wages are easily identified through individual tax returns. Eligibility for taxpayer supported subsidies are relatively easy to estimate as well, so recouping public funding to support a company's workforce is a practical possibility. A portion of the recovered money could be paid into Social Security and Medicare to make up for lost revenue due to substandard wages.

A welfare cost recovery plan could gain popular support given the growing public resentment towards taxpayer funded social programs. At least 40% of all full-time employees in America currently require some form of taxpayer assistance to financially survive. More importantly, this plan places the burden of supporting the workforce back on profitable businesses where the responsibility lies.

Another solution has been suggested by former US Labor Secretary, Robert Reich, and others. They support proposed legislation, SB 1372, that sets corporate taxes according to the ratio of CEO pay to the pay of the company's typical worker. Corporations with low pay ratios get a tax break. Those with high ratios get a tax increase. This would effectively index worker wages to CEO compensation in a carrot and stick approach to corporate taxes. The details and merits of this approach is outlined elsewhere.[iii]

Do U.S. businesses have the financial capacity to offer higher wages to their workers? I would like to answer that question with another graph that you may also have seen before.


Credit: Blue Point Trading http://www.blue-point-trading.com/blue-point-trading-market-view-june-07-2012

There is a clock ticking somewhere in the background on this issue. There is a point somewhere in the future where it will be too late to fix wage stagnation through the normal democratic processes. History has proven this to be true. We are not at that point now, but we are past the point treating wage stagnation earnestly.

---

[i] Link: Real Historical Gross Domestic Product (GDP)

[ii] As of 2013 the median family income of $51,017 x GDP growth of 109.4% = $104,796 per year

[iii]  Link: Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs

Favorite Posts on Taxes, Wages, Wealth and Democracy

What follows below are the best (most read) and latest of my blog entries on the economy. I annotated it so you can pick which might interest you.

Wage History and The Case for A Living Wage  - This lays the groundwork for understanding what I believe is at the root of our economic woes today. It is the loss of income relative to the ever growing wealth that our labors generate. It talks about the dwindling responsibility of business owners towards their workers, neighbors and a community. It also demonstrates how, as wages fall over the decades (relative to hourly GDP), government aid to working poor families has grown while income tax revenues shrink.

A 99 Year History of Tax Rates in America  - This is the story of America's progressive income tax and the shifting sense of fairness that has flattened our progressive tax code. People making a billion dollars a year pay the same tax rate as those making a $200k per year. Corporate taxes are also only a fraction of what they were. The decline in the progressive income tax and the suppression of wages since the mid-1970"s together are driving forces between our growing wealth inequality.

Four Graphs on What's Hurting the Working Class  - This is a short, graphical depiction of what has happened to the forgotten economic class once known as "working class."

Does Higher Taxes Hurt Job Growth? Answer: No!  - This is sort of self-explanatory. It answers (in part) the critics of those who want to further unburden taxes on the rich.

  

Do Pro-business Policies Benefit the Poor?  - This is a more in-depth look at our "pro-business" politics and the assumption that what is good for business is good for everyone, including the poor. It is directed at all those who think everything will be find if we just grow the economy.

OUR VOTING RIGHTS - A State-by-State Analysis - This isn't economic, but is a crucial understanding we need to have in our democracy. Voting and the whole election process precedes, or should precede politics. And what we think are our voting rights is an illusion.

New Jersey's Regressive Public School Funding - This is in response to how New Jersey relies on property taxes (really a wealth based tax scheme) to fund public education and why, especially in today's economy and the runaway capital income of the wealthy, why this is a very regressive way to fund our schools. It has applications beyond New Jersey.

Civil Service Pensions - A Marker for What We've Lost - This article is a personal observation of the politics and evolution of attitudes towards public employee pensions. It is significant application to other states as the attack on teacher and public pensions is actually a centrally coordinated attack across the country.

 Main Street Meets Their Wall Street Landlords - This article just plain scares me. It should be seen as an early warning of what might come as private equity corporations turn their attention to all the under market value housing they created. They have begun buying it up and renting out these post-foreclosure single family homes. 

I hope you enjoy this selection of articles from my publications. 

Brian T. Lynch, MSW

www.aseyeseesit.blogspot.com

www.datadrivenviewpoints.com 

New Jersey's Regressive Public School Funding

by Brian T. Lynch, MSW

New Jersey recently published the annual "Taxpayers Guide to Educational Spending". The headline in the Star Ledger was that school spending is up 5% over last year. This is hardly news given that inflation alone accounted for 1.7% of the increase.

Much of the remaining 3.3% increase in school spending is structural by design. Consider that new teacher salaries start low and increase annually as they gain experience. We also compensate teachers as they obtain higher educational degrees as a means of improving the quality of our teachers. Add to this the fact that the total number of teachers gradually increase as student enrolled numbers creep up a little every year. Then there is the higher than inflation increases in fuel costs that drive up the cost of student transportation each year. The retirement of higher paid teachers and administrators don't quite balance out these other factors.

What irks the public most about this 5% increase is really the story behind how we fund public education in New Jersey. It just seems unfair. And when you look under the hood, it really is unfair. Wealth based public school funding is regressive in nature. It favors the wealthy and disfavors the poor. What it costs to educate a child doesn't vary that much between wealthy and poor school districts, but the value of property and therefore the tax base varies a lot. In today's economy especially, the prosperity in wealthy school districts is growing rapidly relative to per pupil costs while property values in less prosperous school districts are in decline.

To understand the disparity of wealth based public education funding, let's take affluent Morris County as an example (located in the central most area of the Northern half of the State). Morris County has many wealthy school districts, such as Harding where the average home sells for over a million dollars. It also has districts like Wharton where the average home sells for a quarter of that amount, or about $251,000. Property values in Dover are a bit higher, but the median family income in the Dover school district is just $59,000 compared with $160,000 per year in Mountain Lakes. (Fig.1 below)

One way to gain some perspective on property based school funding is to compare what it costs to educate a student with what it costs to buy a home in the same district. In the eleven wealthiest districts of Morris County, home prices are 30 to 50 times more than the educational cost per pupil. Home values are just 16 to 18 times more than per pupil costs in the 12 poorest districts. As a general rule, the higher a district's property values, the lower the tax rates. The reverse is usually true in poorer districts. Districts with lower property values, and lower income levels, generally have higher tax rates. While the 11 wealthiest districts in Morris County pay a little more to educate children in their district, their property tax rates are about one-third less than in the 12 poorest districts. (Fig. 2 below)

The dramatic contrast between home values and per pupil costs is partially masked when just comparing tax rates because, in the suburbs, wealthier districts tend to have fewer households. Fewer household to share the tax burden mean higher tax rates to generate sufficient revenue. Despite this fact, tax rates in 8 or the 11 richest districts is among the lowest in Morris County. Only three of these wealthy districts have higher per pupil costs while three have among the lowest per pupil costs. This highlights the fact that education costs are similar across the county. The average district cost per pupil is $17,730, plus or minus $2,038. There are a few outliers in either direction.

Educational costs vary far less than home values from district to district, so families in wealthier districts have a far easier time affording public education than families at the lower end of the economic ladder. While New Jersey's State School Aid formula is supposed to help balance school funding across all districts, it does little to correct the underlying inequality and unfairness of wealth based educational funding.

Sources

Taxpayers' Guide to Educational Spending 2013: http://www.state.nj.us/education/guide/2013/
General Tax Rates : http://www.state.nj.us/treasury/taxation/pdf/lpt/gtr13mor.pdf
Average Home Sales : NJ Spotlight News @ http://www.njspotlight.com/stories/13/02/28/average-home-sales-prices/ For March 1, 2013
Median Income and # Households: http://www.njspotlight.com/stories/13/12/19/median-income/

Figure 1





Figure 2

The Worthy and Unworthy Rich

By Brian T. Lynch, MSW

How should sensible people respond to divisive attacks on the poor and vulnerable? Should we begin making similar distinctions between the worthy and unworthy rich? Should we affirm those who earned their great wealth and provide social benefit but rescind all advantages given to those who use their inherited wealth to squeeze the people and their government for still more?

It should be obvious that social polarity isn't original between Democrat versus Republican, or liberal versus conservative, but between rich and poor, the have and the have nots, It is between the ruling establishment elite and the redundant masses.

http://aattp.org/gop-senate-candidate-republicans-must-turn-poor-against-each-other-video/#comment-190804

GOP Senate Candidate: Republicans Must Turn Poor against Each Other (Video)


Watch N.C. House Speaker Thom Tillis explain: .“What we have to do is find a way to divide and conquer the people who are on assistance,”

Tillis said. “We have to show respect for that woman who has cerebral palsy and had no choice, in her condition, that needs help and that we should help. And we need to get those folks to look down at these people who choose to get into a condition that makes them dependent on the government and say at some point, ‘You’re on your own. We may end up taking care of those babies, but we’re not going to take care of you.’ And we’ve got to start having that serious discussion.”

 ATTP.ORG

When a person chooses a life of poverty they are most often saintly, not desperate. Our boom and bust capitalism produces variable prosperity for most of us but rarely lifts the chronic poor out of poverty. These are folks who are not just without money but without opportunities, people who are stigmatized for being poor or marginalized due to race or status. When politicians in any party denigrates the poor, they reveal themselves to be tools of the ruling elite. 

Are You Forced to Subsidize Low Wage Earners?

by Brian T. Lynch

According to the NY Times: "As in 2011, 46 percent, or nearly half of New Yorkers, were making less than 150 percent of the poverty threshold, a figure that describes people who are struggling to get by.

Even with fewer people unemployed, the poverty rate for working-age adults working full time reached 8 percent, by the city’s measure. Fully 17 percent of families with a full-time worker lived in poverty, and even among families with two full-time workers, the rate was 5.2 percent."

NOTE: This means that 8% of adults working FULL-TIME are at or below the poverty line, while 46% percent of all EMPLOYED New Yorkers are struggling to get by. This reinforces my analysis that NEARLY HALF of all working families must rely on some form of PUBLIC ASSISTANCE to make ends meet. Government assistance to these fully employed families = a tax subsidy on labor costs for the companies that employee them.

Put another way, people who earn more are being made to subsidize the company's low wage employees through their federal income tax withholding. Ordinary wages have been held hostage to the 1% for almost 40 years.

AMERICANS NEED A RAISE

In, "Making the Case for a LIVING WAGE" I discussed more fully why it must be the obligation of business to compensate their employees to a level of at least minimal self-sufficiency (a living wage). Once all wage earners realize they shoulder the burden for low wage workers there will be more activism to at least raise the minimum wage. Ask yourself, "How much does my companies low wage policies cost me in income taxes?" 

Here below is the link to the New York Times article which is about New York City, but could be about any city in America. 

http://www.nytimes.com/2014/04/30/nyregion/nearly-half-of-new-yorkers-are-struggling-to-get-by-study-finds.html?_r=0

Nearly Half of New Yorkers Are Struggling to Get By, Study Finds

Forty-six percent of New Yorkers in 2012 were making less than 150 percent of the poverty threshold, and New York City’s share of poor people appears to have plateaued since the...

THE NEW YORK TIMES|BY SAM ROBERTS

Prologue To Wealth Inequality Awarness

By Brian T. Lynch, MSW

Before I had a blog, before the Wall Street "privateers of equity" crashed the economy, and long before the Occupy movement occupied anything, there were seemingly crazy folks like me trying to sound the alarm on our economy. I wrote Letters to the Editor in local newspapers and sent copies to every newspapers across the country for which I had an email addresses. What disturbed me back then was that no one in the media, or even in academia, seemed to be paying much attention. Event have consequences, and the crash in 2008 caught us flat footed.

It is unknown how social problems that exist for years suddenly become public issues to be solved. No one knows what triggers these tipping points. Even when a single individual is clearly associated with a change or a movement or a discovery (Einstein, for example), that person is responding to what ever came before. Sometime it is the consequential event rather than any alarm bells that finally get our attention. The firmament that precedes public cognition before a disastrous event remains a mystery to me.

My wife just came across one of my old letters. What startled me is that I could have written this same letter today, except the statistics are far worse now.

Here below is my Daily Record Letter to the Editor published on Christmas Eve, 2006.

Main Street Meets Their Wall Street Landlords

by Brian T. Lynch, MSW

If you lost your home when Wall Street investment bankers made a hash of the home mortgage industry, you may be terrified to learn they want to become your landlord.

Up to now most single home rentals have been owned by local owners or regional companies. Private equity firms are taking advantage of loopholes in financial regulation and the depressed housing market to create national home rental corporations. They are scooping up foreclosed homes at fire sale prices all across the country and turning them into rentals. Their ultimate aim is to turn the equity in all those rental agreements into rent-backed securities that can be bought and sold on Wall Street. (Gentlemen, place your bets!)

Under this business model, the equity present in rental agreements will be aggregated into tranches based on confidence in the financial ability of the tenants pay their rent. The collateralized security instruments from these tranches will have various rates of return based on risk factors from the underlying leases. Should these rent-backed securities default, the security owners may even have an ownership stake in the properties to fall back on. If you haven't heard about this before, you can read more in the Wall Street Journal, the Daily Finance or one of several good articles in Mother Jones.

The initial sale of rent-backed securities by these corporations will allow them to free up equity in these properties to purchase even more distressed homes. If the underlying financial structure of these plans sounds familiar, it should. Substitute mortgage equity for equity in these lease agreements and the securitized bonds are nearly identical to mortgage backed securities that inflated the housing bubble and crashed the economy in 2008. The only element missing so far are the "credit default swaps" inside investors bought to bet that the mortgage bonds would fail.

Hubris is the word that comes to mind when considering that the same class of players who foreclosed on the American Dream now want to be our landlord under these same self-serving schemes.

To be fair, the concept of private equity firms buying distressed houses to fix up and rent does has merit. Turning vacant houses into renovated rental properties has a positive patina best explained in their promotional videos.

Moreover, whenever investment money is applied directly to tangible projects that benefit ordinary families it is always a blessing. It brings jobs, boosts local economies, improves the quality of life and strengthens families.

If Wall Street investors could just be satisfied with the profound social benefits and ordinary financial returns on their investments it would be great. In fact, it is what Wall Street owes Main Street for all the pain they inflicted. But social benefits are not the things they value these days, and ordinary investment returns are never good enough. They must relentlessly drive to maximize profits.


Scratch the surface on their nationalized real estate plans and ominous consequences emerge. Ask yourself, what type of landlords will these national private equity firms become?

On April 15, 2014, the grass roots housing advocacy organization, Occupy Our Homes Atlanta (OOHA), published their "grassroots research" to answer that question. They looked at the earliest entrant into this field, the Blackstone Group, which owns Hilton Hotels, the Weather Channel, Sea World and Invitation Homes, a subsidiary that has purchased tens of thousands of homes across the country.

Here is some background on the Blackstone group. It is a private equity firm with global real estate holdings in the U.S., Parts of Europe and China. According to Jon Gray, the Head of Global Real Estate for Blackstone, their real estate holdings make up 60% of their assets, or around $80 billion dollars. It is already the largest landlord in the united states and it sees the distressed U.S. housing market as a growth opportunity.

According to an April 9th, 2014, interview Gray gave on the Fox News network "... distressed asset pricing is attractive," with single family homes selling for less than half their pre-recession values in parts of Europe and the U.S. Blackstone has already purchased 47,000 foreclosure homes in 14 US cities, spending $8 billion dollars, or an average of $190,000 per home. Blackstone is betting on rising housing prices in part because depressed new home construction is a third of what it was before the recession.

What Blackstone doesn't say can be found in the OOAH research report on how this nation's biggest landlord has affected renters in Atlanta. Families who rent from Invitation Homes in the Atlanta area face higher rents, higher rental fees, less responsive property management service and some even face automatic rent increases as high as 20% per year. The OOAH report caught the attention of Congressman Mark Takano, who sent out a disturbing press release highlighting some of the findings ( appended below).


And there are other potentially negative consequences yet to follow. Tenancy laws and regulations are diverse across the states and local municipalities to reflect local and regional values. What impact might the power of national corporate landlords have in influencing those laws to suit their business interests?

The shame of it all is that most of the former home owners now renting from private equity landlords would still be in their own homes if it hadn't been more profitable for banks to foreclose than to participate in the federal government's HAMP, HARP, PRA or 2MP mortgage assistance programs. But then, if that happened, this private equity investment opportunity wouldn't exist today, would it?

--------------------------------------------------------------

FOR IMMEDIATE RELEASE

Wednesday, April 16, 2014

Contact: Brett Morrow
brett.morrow@mail.house.gov; (202) 225-2305

Rep. Mark Takano Statement on “Blackstone: Atlanta’s Newest Landlord” Report

Washington DC – Earlier today, the organization Occupy Our Homes Atlanta released its report titled “Blackstone: Atlanta’s Newest Landlord” showing that:

· Tenants wishing to stay in their homes can face automatic rent increases as much as 20% annually.

· Survey participants living in Invitation Homes pay nearly $300 more in rent than the Metro Atlanta median.

· 45% of survey participants pay more than 30% of their income on rent, by definition making the rent unaffordable.

· Tenants face high fees, including a $200 late fee for rental payments.

· 78% of the surveyed tenants do not have consistent or reliable access to the landlord or property manager.

After the report was released, Rep. Mark Takano issued the following statement:

“The report released today gives a snapshot of the experiences faced by Invitation Homes renters in the greater Atlanta area, and further shows the need for Congress and regulatory agencies to examine the growing phenomenon of large institutional investors owning rental properties. Local residents who rent from large institutional investors should not be subjected to unfair practices or poor service. I once again call on the House Financial Services committee to hold hearings on the issue, and request regulatory agencies begin looking at the emerging REO to rental market.”

Background Information:

In January, Rep. Takano released his Riverside" report examining the cause of rising rents in Riverside County, California. In the report, Takano discovered that one of the potential causes of rents increasing is the rise of large institutional investors purchasing single-family homes, renting them out.

Takano then sent a letter to House Financial Services Chairman Jeb Hensarling and Ranking Member Maxine Waters requesting Congressional hearings into single-family rental backed securities that are being developed by The Blackstone Group, Colony Capital, American Homes 4 Rent, and others.

Takano later sent letters to federal regulators, including the Department of Housing and Urban Development and the Federal Housing Finance Agency, requesting information about how institutional landlords can impact local housing markets and the tenant experience.

###

Brett Morrow
Communications Director | Congressman Mark Takano
1507 Longworth HOB, Washington, DC 20515
Office: (202) 225-2305 | Cell: 202-440-2268

________________________________________

Image Credits:

House Image : (World Law Directory) http://www.worldlawdirect.com/forum/law-wiki/12476-unlawful-detainer.html

Jon Gray Image: (Fox News Network) https://www.youtube.com/watch?v=d5pGbKGQtrU)

Wall Street: (Google Images) etruthseeker.co.uk/?p=54365

Government of the People Is Gone- Here's Proof

by Brian T. Lynch

Martin Gilens of Princeton University, and Benjamin I. Page of Northwestern University, conducted a multivariate analysis of 1,779 policy issues in the United States, the results of which confirmed that the United States is no longer a Majoritarian Electoral Democracy.

 In other words, we have lost majority rule. The United States has become an oligarchy. Business interests and the interests of the wealthy elite have overwhelming dominance in influencing United States policy and laws. You can read their conclusions below and read this newly published study [Septerber 18, 2014] by the Cambridge University Press.

http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%20and%20Page/Gilens%20and%20Page%202014-Testing%20Theories%203-7-14.pdf

According to the authors, "Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism."

 Of course, anyone paying attention to government policies versus the popular will of the electorate would already have drawn this conclusion. I recently posted a two-part piece on this very subject a few months ago:  http://j.mp/1bz7aO5

The Gilens and Page study opens by asking a critical question, who really rules? Are we, the people, the sovereigns of our nation, or have we become "largely powerless?"  He begins to answer this by summarizing four different theoretical traditions recognized by scholars who study democratic governance.

 The first of these theoretical traditions discussed is the Majoritarian Electoral Democracy, which is best "... encapsulated in Abraham Lincoln's reference to government "of the people, by the people, for the people." This tradition holds that laws and policies should reflect the views of the average voter and that the positions of politicians seeking election should converge towards the center of the normal range of voter opinion.  It is this view of democracy most often presented by major media outlets when covering our politics. More importantly, this is these are the outcomes most of us expect from our democracy.

The second tradition is the Economic Elite Domination tradition in which US policymaking is dominated by those with high levels of wealth or income.  Some scholars also include social status or position as part of this tradition. The economic elites often exercise their influence through foundations, think tanks and "opinion-shaping apparatus," as well as to the lobbyists and politicians they finance.

Majoritarian pluralism is the third theoretical tradition that Gilens and Page discuss. This tradition analyzes politics through the lens of competing interest groups within the population. These groups may include political parties, organized interest groups, business firms, or industry sector organizations.  All things being equal, the struggle between diverse factions within the population should also produce policy outcomes that are at least compatible with civil majority opinions.  But all things are not necessarily equal, leading to the fourth, related tradition called Biased Pluralism.

Biased pluralism entails policy outcomes that result from contending, but unrepresentative organized interest groups. These unrepresentative interest groups are generally made up of upper-class citizens with the power and influence to tilt policy towards the wishes of corporations, businesses, and professional associations.

So, after statistically comparing almost 2,000 policy outcomes against these four models of political influence in our democracy, what did the researchers find?  In their own words:

"By directly pitting the predictions of ideal-type theories against each other within a single statistical model ...  we have been able to produce some striking findings. One is the nearly total failure of “median voter” and other Majoritarian Electoral Democracy theories. When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy."

"Nor do organized interest groups substitute for direct citizen influence [snip]... Overall, net interest group alignments are not significantly related to the preferences of average citizens." The net alignments of the most influential, business-oriented groups are negatively related to the average citizen’s wishes."

"Furthermore, the preferences of economic elites...  have far more independent impact upon policy change than the preferences of average citizens do.

What then has become of our democracy? It has been usurped by billionaires who directly fund candidates for public office, directly influence policy through lobbying and heavily fund public marketing campaigns to influence public opinion for their own advantage.

We have seen this before during the "Gilded Age" at the turn of the last century.  We found our voice a hundred years ago and we took back our democracy from the wealthy elite. Today they are smarter, richer, and have more control over the media and government than they did back then, so the challenges we face to save civil democracy and regain majority rule won't be easy. But history tells us that power is ultimately derived from the people.  We must start by recognizing our situation and begin organizing ourselves to collectively act in our own best interest. We need to become, once again, a nation of citizens, not a nation of businesses and the rich.

"Dark Pools" Caste a Shadow Over Stock Prices

We now know that the universe is filled with dark matter. This strange substance cannot be seen, heard, felt or touched, and doesn't interact in any way with ordinary matter. Even so, its presence can be felt by its gravitational influence. It is the enormous amount of dark matter that causes galaxies to form and to spin as rapidly as they do.

While dark matter may ultimately be beneficial to the cosmos, "dark pools" in the financial markets doesn't seem like a good idea. When large investors buy large blocks of stocks outside of public view, they do so to obtain a tactical advantage. The market effect of dark trading is that the real value of openly traded stocks is less certain. This is another example of how the playing field is tilted away from mom and pop investors and towards the rich and powerful.

http://www.reuters.com/article/2014/04/11/us-sec-darkmarkets-idUSBREA3A0CP20140411

Exclusive: SEC eyes test that may lead to shift away from 'dark pools'

WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators are considering testing a proposed reform that could drive business to major...

REUTERS

NSA vs. Citizens of the World.

by Brian T. Lynch

Before Edward Snowden blew the whistle on the clandestine activity of the National Security Agency (NSA) and selectively released documents to the press, no one had any idea what the NSA was up to. This apparently included the President of the United States and the Congressional Select Committee on Intelligence that is charged with agency oversight. 

The Select Committee on Intelligence initially denied the validity of Snowden's claims because they, too, were in the dark about NSA operations. Once the Committee got a hold of Snowdon's documents and investigated, they learned that the NSA concealed a great deal about its operations from Congress and even lied to Congress on occasions to protect its secrets. Since them more has surfaced from release of Snowden's NSA documents. Among the revelations:

• NSA engaged in mass surveillance of US citizens as well as the citizens of allied nations.
• NSA collected metadata on all US domestic phone calls and subjected them to powerful meta analysis that can reveal very personal information about citizens not connected in any way with terrorism.
• NSA collected and analyzed all, or nearly all domestic and foreign emails. 
• NSA engaged in domestic spy on human rights organizations, also not connected in any way with international. terrorism or criminal activity. 
• NSA spied on other international human rights organizations. 
• NSA breached its own protocols many times and targeted innocent civilians for scrutiny.
• NSA tapped the personal cell phones of world leaders who are our allies.
• NSA listened in on lawyers negotiating international trade agreements.
• NSA spied on the UN and on the UN Children's Fund.
• NSA broke the encryption code that protects financial business transactions worldwide.
• NSA has (and may still be) provided U.S. law enforcement agencies with secretly and illegally obtained evidence in domestic criminal cases, even non-violent criminal cases, without ever informing the defendant or the courts of the evidence or its source.

AND this is not a comprehensive list of the illegal, unconstitutional or questionable activities in which the NSA has engaged.

Discussion about these issues began to take place for the very first time only after Snowden brought them to light. These discussions are now taking place worldwide, because before Snowden, no one knew these things were even happening.

Here in the U.S., the investigation of Snowden's claims has prompted Congress and the Obama Administration to being reorganizing and reforming the NSA. It's abusive practices are being curtailed. President Obama has personally and publically apologized to world leaders for the conduct of the NSA. Other nations are now exploring the issues raised by Snowden's revelations and considering how NSA technology in the wrong hand might threaten human rights.

These are the fact that are now out in the open. The main stream media has been far to silent and passive in covering this scandal. Most people remain unaware of the scope and significance of the NSA's illegal activities. This agency has significantly violated our constitution and our personal civil rights. With or without the help of the national press, we have a responsibility as citizens to explore these issues and pass judgment on the activities or our government.

Here is the full video link of Edward Snowden's testimony on April 8, 2014, before the Council of Europe hearing on Mass Surveillance and Whistle Blowing. It is compelling testimony with serious implications, and demonstrates once again, that the rest of the civilized world is having an important discussion about the threat posed by mass surveillance which is absent here in the United States. Our main stream media gave little attention to this event. The United States Government was invited to participate in these discussions, but declined.
http://clients.dbee.com/coe/webcast/index.php?id=20140408-1&lang=en

To be clear, no one disputes the fact that Mr. Snowden broke laws when he turned over classified documents to the press. What he did was clearly illegal. But his actions should be weighed against the greater good that may have resulted from these disclosures. Yes, the law is the law, but justice is our goal and mercy is our higher value. We may want to strike a balance in this case between what laws Snowden broke and the harm that would have followed if NSA abuses had not been brought to our attention. Public discussion and ultimately public opinion following civil dialogue should the final judge in this case.

With respect to prosecution, how do we proceed when government wrong doing is at the heart of the case? I believe this is very much a matter for public debate to seek a popular consensus on his fate. We, the people, should be the jury here. We would be abdicating our responsibilities as citizens to close our eyes and let the establishment laws deal with him when we are all plaintiffs and the government itself is the accused.

Civil Service Pensions - A Marker for What We've Lost

by Brian T. Lynch, MSW

In New Jersey, as in many other states with conservative Republican Governors, the state civil service pension systems are under attack. A friend of mine, who has followed Governor Chris Christie's rhetoric in the newspapers, commented about how reasonable this sounded since the system seems to be going broke. But the story of the pension system in New Jersey is more complicated that the current political sound bites. Let me tell you a true story about how civil service pensions came to be a target for public ridicule.

When I first went into civil service it was a calling to serve, not a career choice for the prospect of making lots of money. I was following the inspired words of John F. Kennedy and asking what I could do for my country. I was, and am still, an idealist. Money didn't matter as much to me. I wanted to help people. I still feel that way now, which is why I blog.

Back when I started with the state, everyone in the private sector had better health care and benefits, better defined pension benefits and they made a lot more money per hour or had higher salaries. Even the state cars we drove back then had no radios or air conditioning as that was considered too extravagant for state employees. That is the way it was, so working for the State came with low earnings expectations.

But things were changing in 1979 when I began my civil service career, even though I didn't know it at the time. Big business had begun organizing politically and started spending big bucks on lobbying government for laws and regulations more favorable to business. Industry organizations were created to raise money and coordinate anti-union marketing campaigns. Ronald Reagan came into power in 1980 and set the tone for union bashing by crushing the air traffic controllers union. Private sector wages, which up to that time always rose in to proportion to increases in hourly GDP, were frozen and have remained frozen ever since. A fear campaign and actual business tactics based on globalization made jobs less secure. Private company pension systems were intentionally dismantled by big corporations to quarterly boost profits. Profit sharing arrangements took their place initially so workers had to invest in their company for their hope of retirement income. Then Wall Street saw all this money and wanted some action. They got congress to pass the IRA laws and all that pension money went to them.

Instead of real raises, businesses only offered cost of living adjustments, which keeps up with inflation but doesn't share the extra wealth that the growing hourly GDP created for their employers. That extra wealth went to CEO's and wealthy stockholders, beginning the cycle of great income disparity we have today. At the same time, Reagan cut the top marginal tax rate from 70% to 28%, a windfall for the rich and a huge loss of tax revenue that the rest of us had to bear.

So while the raises, salaries and benefits I received were always sub-par compared with the private sector during the first half of my career, declining private sector wages and benefits, rather than civil service raises or improved benefits, is the reason civil service looks so good today. In fact, civil service benefits have been steadily eroding for the last 15 years but this decline is slower than the collapse of private sector benefits. Civil service salaries also have barely budged in years and actually declined when you factor in inflation. But the assault on private sector salaries and benefits makes civil service look great by comparison only.

Know this, if corporate business interests had not conspired to suppress wages in America over the last 40 years the median income for a family of four today would be over $100,000/year. Instead it is shrinking and down to $51,000/year.

My point is that people in this country who work in the private sector have to fight back to regain a fair bite of the wealth they create for their employers. Workers need to re-organize and demand their fair share of our GDP. Rather than tearing away at civil servant pensions, people should be working to recreate what has been taken from them and use civil service as the framework and model to rebuild private sector retirement security.

There are particulars about why the pension system in New Jersey is in so much financial trouble.  It isn't because it is too generous. It is in trouble because when New Jersey was flush with money during Governor Christie Whitman's (R) term she stopped making payments. She said she did this because the stock market was booming at that time. She said the pension system was way over-funded and didn't need more cash. By the time she finished bankrupting the state with massive tax cuts and increased credit spending, Governor James Florio (D) didn't have the revenue to pay into the state pension system during his entire term in office. This default model became a habit with subsequent Governors. Nothing, or only fractional amounts, were paid into the retirement system for the last 20 years. Governor Chris Christie (R) refused to put money into the system a few year back, when he had the money to pay, saying he didn't want to put money into a broken system. This is crazy talk since it was the Executive branch that broke the system in the first place by doing exactly what he was doing.

The New Jersey State Pension system is, to a lesser extent, also in trouble because it has been abused for years by politicians bumping up the salaries of their political cronies just before retirement so they get huge pensions that they didn't deserve or contribute towards. Politician's take advantage of the way pensions are calculated to reward their buddies.

In New Jersey, civil service pensions are based on the average salary for the last three years. Recently the Star Ledger newspaper criticized the Governor for bumping up the salary of a political friend such that his retirement income was around $120,000 per year when his base salary had been closer to $30,000 for most of his career. Politician's have treated the state's pension system like it was there private cookie jar.

So when the state's pension system, or any states fixed pension system becomes a target for political destruction, let it be a reminder instead of just how much ground private sector workers have lost. Let state pension systems be the model on which the rest of the work force rebuilds what they once had.

Photo Credit: http://ivn.us/2012/07/11/california-ignores-growing-public-pension-crisis/

New Employment and Health Care Stats Refutes Obamacare Opponents

by Brian T. Lynch, MSW

The latest labor statistics and health care statistics refute the false claims being made against the Affordable Care Act (ACA) by Obamacare opponents. The claims and facts below are summarized from an excellent op/ed in Forbes magazine by Rick Ungar, which can be found here: 

http://www.forbes.com/sites/rickungar/2014/03/10/the-real-numbers-on-the-obamacare-effect-are-in-now-let-the-crow-eating-begin/

CLAIM: Obamacare will lead to a decline in full-time employment as employers reduce hours to below 30 per week to avoid providing health benefits.

FACT: Numbers just released by the  Bureau of Labor Statistics (BLS), shows that part-time workers in the U.S. fell by 300,000 since the Affordable Care Act became law.  This past year, the first full year of Obamacare health coverage, full-time employment grew by over 2 million.  Part-time employment leaders who oppose Obamacare.  Fewer cops, fewer teachers, fewer folks providing essential social services in the public sector  all to make political point.

CLAIM: Millions of Americans are losing their individual health insurance policy due to Obamacare.

FACT:   A new study  by Lisa Clemans-Cope and Nathaniel Anderson of the Urban Institute found that prior to the Affordable Care Act the number of people kept their individual policy was very low with just 17 percent retaining coverage for more than two years.”  The Urban Institute conducted a survey last December that asked 522 people between the ages of 18 and 64,  “Did you receive a notice in the past few months from a health insurance company saying that your policy is cancelled or will no longer be offered at the end of 2013?” Only 18.6% said their plan was cancelled because it didn't meet ACA coverage requirements, while the expected cancellation rate was 17% in the years prior to Obamacare. You can find the following bar graph and read more  in Health Affairs.

The 18.6 percent who lost individual health insurance coverage due to the ACA requirements amounts to about 2.6 million people. According to the Urban Institute researchers over half of these folks will  be eligible for coverage assistance. Still, roughly one million people will have to replace their cancelled policy with something that may cost them more. This isn't good but it is less dramatic than what has been reported and most of these individuals would have been in the same boat prior to the ACA.  

Facts matter - The Gallup-Healthways Well-Being Index was also just released. It reveals that 15.9 percent of American adults are now uninsured, down from 17.1 percent for the last three months of 2013.  That translates roughly to 3 million to 4 million people getting coverage who did not have it before.  The the number of Americans who still do not have health insurance coverage is on track to reach the lowest quarterly number since 2008.

Here is a link to a website where you can check out state-by-state enrollments using an inter-active map: https://www.statereforum.org/tracking-health-coverage-enrollment-by-state?gclid=COCG7ffPob0CFYt9OgodPTQALQ

And this link is to an inter-active map showing the state-by-state status on Medicaid expansion: https://www.statereforum.org/Medicaid-Expansion-Decisions-Map?gclid=CJ_i4L3Rob0CFYuXOgod2RMA4g

There are currently 5 to 8 million people who can't access Medicaid because their political leaders oppose Obamacare. That means the number of people being denied access to Medicaid expansion for political reasons is greater than the number who have signed up for Obamacare so far.  The Rand Corporation recently analyzed 14 of the states with governors who oppose the Medicaid expansion and found their actions will deprive 3.6 million people of health coverage under Obamacare. These states will forgo $8.4 billion in federal funding. Moreover, their political opposition to Obamacare will cost these states $1 billion for programs that partially compensate medical providers who care for the indigent. (see Huffington Post: http://www.huffingtonpost.com/2013/06/03/medicaid-expansion_n_3367301.html). 

Below is an excerpt and table of the uninsured by state that is taken from the Health Affairs Blog, which you can goto at: http://healthaffairs.org/blog/2014/01/30/opting-out-of-medicaid-expansion-the-health-and-financial-impacts/

Clearly, if the extreme efforts underway to by politicians to derail the Affordable Care Act was instead focused towards making it work, Obamacare would be wildly successful.

Examining the numbers. The number of uninsured people in states opting in and opting out of Medicaid expansion is displayed in Exhibit 1. Nationwide, 47,950,687 people were uninsured in 2012; the number of uninsured is expected to decrease by about 16 million after implementation of the ACA, leaving 32,202,633 uninsured.  Nearly 8 million of these remaining uninsured would have gotten coverage had their state opted in.  States opting in to Medicaid expansion will experience a decrease of 48.9 percent in their uninsured population versus an 18.1 percent decrease in opt-out states.

Exhibit 1: Uninsured Population by State, Pre- and Post-ACA 

Coal Ash Disaster Turns Capitalists into Socialists (Again)

by Brian T. Lynch, MSW

Commentary:

Coal ash is what's left after coal is burned. It's a toxic stew containing heavy metals including arsenic, lead and mercury.  For many years Duke Energy has mixed coal ash with water and pumped this cocktail from coal fired power plants into huge open pits. In February, one of the sludge pits located in North Carolina began releasing millions of gallons of toxic coal ash into the Dan River, a source of public drinking water for thousands of people.

Photo and article: http://www.salon.com/2014/02/26/north_carolina_might_finally_crack_down_on_duke_energy_after_disastrous_coal_ash_spill/

Duke Energy spent millions over the years to keep government from properly regulating their waste products.  For all those decades the stockholders and upper management of Duke energy have profited from this arrangement. Now that the inevitable has occurred, clean up effort will take years and cost a billion dollars. Millions more will have to be spent to correct the improper disposal problems that Duke Energy has practiced for decades.

Safely storing coal ash should have been a cost of doing business for Duke Energy all along, but they have deferred that cost to boost their profits. Now Duke Energy's president and CEO, Lynn Good, thinks taxpayers should bear the cleanup costs. She said, "Ash pond closure has been a plan for very long time. And because that ash was created over decades for the generation of electricity, we do believe that ash pond disposal costs are ultimately a part of our cost structure." She believes the burden of this clean up should be shared by everyone equally.  (Corporate socialism? Again?)

Corporation are legally obligated to maximize profits for their shareholders. This would be fine if they were also legally obligated to paid the full cost of doing business without cutting corners. Cleaning up toxic spills is far more expensive than preventing themand regulations to enforce safe disposal are less expensive in the long run. But asking the victims of their environmental crimes to pay for cleaning up their mess and fixing their problem should not be an option. 

(See also: http://www.politicususa.com/2014/03/14/republican-hypocrites-force-nc-taxpayers-pay-duke-energys-toxic-coal-ash-dumping.html )