Last week I presented basic facts and issues around family income inequality in America, a hot political issue in the last decade.  Today, let’s turn to the related matter of wealth inequality.

First, the distinction between them.  Income refers to the net money or benefits we receive each period of time – typically, a week or month.  It includes pay for work; earnings from savings and investments; “transfer payments” such as social security, welfare, food stamps, health care subsidies, etc.  The sum of all those items, less the taxes folks pay directly or indirectly, constitutes income.

Wealth is the net value of all we own.  The value of our homes, bank and investment accounts, vehicles, personal property, businesses and real estate, etc., less the amounts we owe in mortgages, auto, consumer and student credit, etc.  Economists call income a “flow” variable and wealth a “stock” variable.

Two outstanding analysts at Washington’s Cato Institute, Chris Edwards and Ryan Bourne, assisted by David Kemp, produced a 74-page in-depth analysis this month titled, “Exploring Wealth Inequality.”  To best fit their findings into this column, below I quote from their summary, which has stated them far beyond my poor power to add or subtract (as Lincoln said at Gettysburg).

“Many political leaders and pundits consider wealth inequality to be a major economic and social problem. They complain about a shift of wealth to the top at everyone else’s expense and about plutocrats dominating policymaking in Washington.

“Is wealth inequality the crisis that some people believe? This study examines six aspects of wealth inequality and discusses the evidence for the claims being made.

“Section 1 describes how wealth inequality has risen in recent years but by less than is often asserted in the media. Indeed, wealth inequality has changed surprisingly little given the large economic changes in recent decades from technology and globalization. Furthermore, most estimates overstate wealth inequality because they do not include the effects of social programs.

“Section 2 argues that wealth inequality data tell us nothing about levels of poverty or prosperity and thus are not useful for guiding public policy. Wealth inequality may reflect innovation in a growing economy that is raising overall living standards, or it may reflect cronyism that causes economic damage.

“Section 3 examines the sources of wealth for the richest Americans. Most of today’s wealthy are business people who built their fortunes by adding to economic growth, and some have created major innovations that benefit all of us. The share of the wealthy who inherited their fortunes has sharply declined in recent decades.

“Section 4 looks at cronyism, which refers to insiders and businesses securing narrow tax, spending, and regulatory advantages. Cronyism is one cause of wealth inequality, and it has likely increased over time as the government has grown.

“Section 5 explains how the growing welfare state has increased wealth inequality. Government programs for retirement, healthcare, and other benefits have reduced the incentives and the ability of non wealthy households to accumulate savings and thus have increased wealth inequality.

“Section 6 examines whether wealth inequality undermines democracy, which is a frequent claim of the political left. Research shows that wealthy people do not have homogeneous views on policy and do not have an outsized ability to get their goals enacted in Washington.

“In sum, wealth inequality has increased modestly but mainly because of general economic growth and entrepreneurs creating innovations that are broadly beneficial. Nonetheless, policymakers should aim to reduce inequality by ending cronyist programs and reducing barriers to wealth-building by moderate-income households.”

The authors title their second section, “Poverty Matters, Not Inequality,” and they show that poverty has greatly decreased domestically and around the world in recent decades – greatly due to the creation of wealth by those at the top.

As I noted last week, recent research shows that when transfer payments and taxes are included, the average yearly income of American families in the lowest income quintile (20 percent) is $50,901 and that of top-quintile families is $194,906.  That’s a ratio of 3.8:1, not the erroneous much higher figures often quoted by liberals, progressives, class warriors and mainstream media.

As my friend Joe Morabito notes: “The poor are not poor because the rich are rich.”

 

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Ron Knecht is a contributing editor to the Penny Press - the conservative weekly "voice of Nevada." You can subscribe at www.pennypressnv.com. This is an edited version of his column which has been reprinted with permission. 

 

 

 

 

 

Published in Money
Friday, 15 November 2019 18:11

Income inequality in America: Facts and issues

Income inequality among Americans has been a major subject of debate for a decade, and ever more so with leftwing extremists now dominating the ranks of Democratic presidential aspirants.  So, let’s get the basic facts and issues straight.

A salient claim in this area comes from the French economist Thomas Piketty in his 2014 book, Capital in the Twenty-first Century, a 700-page tome.  His starting point is that the rate of return on capital investment is generally significantly greater than the growth rate of a market economy (or, r>>g).  This is generally uncontested.

So, Piketty concludes that the rich, whose incomes derive greatly from their ownership of capital, will get ever greatly richer.  On the other hand, the middle and lower classes, whose incomes derive mainly from their labor, will see those incomes increase only at the growth rate of the economy.  Hence, they will fall ever farther behind the upper-income people.

If that were the full story, why didn’t income inequality spiral up long ago?  In part, it’s because taxes burden upper classes very disproportionately and government transfer payments (mainly welfare, food stamps and health-care subsidies) are concentrated on the lower classes.  Piketty’s comparisons are based on pre-tax income, not including transfer payments, as are almost all the data advanced by those obsessing about income inequality.

These folks also fail to adjust for declining household size in recent decades when they allege falsely that middle and lower family income levels have not increased.  And Piketty’s analysis overlooks that the wealthy usually divide their estates among charities and various heirs and other folks when they pass it on, thus counteracting the fast growth of family incomes based on capital.

But the important point is that taxes and transfer payments have continued to grow relative to our economy.  So, they now overwhelm every other factor, as shown by recent research by Phil Gramm, former economics professor and chairman of the Senate Banking Committee; and John F. Early, twice assistant commissioner at the federal Bureau of Labor Statistics.

When we consider family incomes after taxes and public and private transfer payments, the story is very different from that based on the pre-tax and -transfers data.  That’s because 80 percent of all taxes are paid by the top two income quintiles (that is, the top 40 percent) and 70 percent of all transfer payments are received by the bottom two quintiles.  Aggregate taxes paid and transfers received by the middle quintile are almost exactly equal.

The average bottom-quintile household earns $4,908 annually while the average top-quintile household earns $295,904, or 60 times as much.  But when we consider the $45,993 additional income the lowest-quintile homes get from public and private transfer payments, less taxes they pay, their average incomes rise to $50,901.  For the top quintile, the net of taxes and transfers is a reduction of $100,998, leaving them with $194,906.

So, the real ratio between the top and bottom quintiles is only 3.8 times, not 60 times.

And government and the private sector shift enough net income to the lowest quintile to raise their net income to middle-class levels at $50,901.

So, is a 3.8:1 ratio fair and reasonable?

One important fact is that income mobility is higher in America than in most other countries.

Also, 50 years of increasing transfer payments and rising and progressive taxes have had another effect.  When the War on Poverty transfers began in 1967, nearly 70 percent of bottom quintile prime-working-age adults were employed.  Today, that figure is only 36 percent.  For all the top three quintiles, however, labor-force participation has increased.

Ultimately, though, the question depends on what fairness is, as much as it does on data.  Progressives, populists and class warriors erroneously claim it means equal outcomes for everyone.  They forget that in market systems income flows to people roughly in proportion to the value they deliver to others – that is, proportionately to their contribution to human wellbeing and the public interest.   Not so for systems that politically allocate resources.

Finally, recent research shows that three-quarters of the high incomes made by entrepreneurs flows from their own “human capital” contributions, not from the financial capital they employ.  So, yes, 3.8:1 seems quite fair.

 

 

Published in Money
Thursday, 07 November 2019 18:40

A summary of key problems we face, and what to do.

What are the main social, political and economic problems we face today?

I think they fall into two groups, economic-political and cultural.

The economic-political issues are the continuing and still growing over-reach of government, both domestically and in international affairs.  Domestically, this means excess spending, taxing and borrowing by government at all levels since about 1960 – an excess that keeps growing every decade.  These fiscal problems are enabled to some extent by the federal monetary policy of printing excess dollars and thus inflating the currency.

It also includes the ever-growing excess in regulation of all kinds – health, safety, environmental and economic.  Plus government expansion into ever more sectors of the economy as a direct provider of services that would better be served by private markets.

The growing regulatory and intervention excess together make up the bulk of the modern administrative state; combined with excess government spending, it depresses economic growth.  Slowing economic growth means people on average are less well-off than they would be without these excesses.  That is, government excess diminishes aggregate human wellbeing – and also fairness.

Thus, from the 1960s to the Great Recession, we had real per-person growth in incomes of about 2 to 2.5 percent per year.  During that time, the growing government excess was offset by favorable trends in population growth, labor force participation, debt both public and private, foreign trade and international economic growth.  These trends are somewhat organic, but also greatly influenced by public policy.

In this century, all those favorable trends have reversed or slowed, and growth in government spending, regulation, etc. has continued.  So, for the last decade, our per-person income growth has been less than half of what we all grew up with.

Per person real growth at 2 to 2.5 percent per year means that incomes, wealth and overall wellbeing double each generation.  That’s a recipe for real progress – new medical cures, better diets, living standards of all kinds – and for general human happiness.

Growth at less than half those rates is a recipe for unhappiness, economic stagnation, political polarization and social upheaval such as we’ve seen in recent years.  It will continue for as long as we have slow growth.  And with continued government excess and the other problems driven by public policy, these problems may last for a long time.

A particular aspect will exacerbate these problems in the future.  Generous payouts for social security, Medicare, and pension and benefits systems constitute a transfer of income from young people to older folks.  These Ponzi schemes are, like all such schemes, unsustainable.  They will breakdown or blow up in the future, damaging many people, families and businesses, and producing more social and political upheaval.

What’s the government excess in foreign affairs?

With the collapse of the Soviet evil empire – which, thank goodness, we helped precipitate – our foreign and intelligence Deep State looked for new adventures to keep its numbers employed and growing.  The Deep State is the illegitimate child of the modern administrative state.

Certainly, Islamic-fascism is a major problem, but it doesn’t justify our continuous involvement in war in the Mideast and elsewhere, as favored by the Deep State. 

It’s also promoting more strategic responses to our next major international problem, the ever-aggressive Chinese state.  However, despite Chinese theft of intellectual property and similar aggressions, a trade war and tariffs are not the answer.  They diminish overall human wellbeing here and in China.

Cultural problems?

Participation trophies, trigger warnings, safe spaces, etc. get more attention than they deserve.  But they are the tip of the spear, reflecting a softening of society, a cult celebrating victim status, corrosive identity politics, and a deep sense of entitlement.  These, coupled with government over-reach in social and political matters, are leading to an inversion of fundamental historic values and rights such as freedom of speech and religion, due process and the presumption of innocence, and Second Amendment self-defense.

What to do?

First, live a good life as a spouse, parent, friend, neighbor and citizen.  Second, stay politically active to leave all our children and heirs a better legacy and life.  For their sake, don’t give up.

 

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Ron Knecht is a contributing editor to the Penny Press - the conservative weekly "voice of Nevada." You can subscribe at www.pennypressnv.com. This is an edited version of his column which has been reprinted with permission. 

 

Published in Opinion
Wednesday, 09 October 2019 20:20

Medicare hypocrisy for all

Ever since Senator Bernie Sanders made “Medicare for All” (M4A) the centerpiece of his campaign, it has attracted support, and others have joined the bandwagon. In a Kaiser Family Foundation poll earlier this year, 56 percent of respondents and 81 percent of Democrats backed “a national health plan, sometimes called Medicare for all,” which has been used to assert a mandate for M4A.

Medicare’s Unfunded Liability

Since exactly what M4A details (where the devil lurks) are less than crystal clear, and even the best-articulated versions are more like political talking points than complete plans, backed by questionable, if not provably incorrect assumptions, the goal is clearly to pass a bill that would be very hard to undo before most citizens have any clear idea of what is involved.

Consequently, it is important to remember what most stories hyping the popularity of M4A leave out: When people were informed it would entail a massive increase in costs and taxes, support cratered. Given that Sanders’ proposal could add $3.2 trillion in annual government spending (when America now spends $3.5 trillion annually on health care), that is easy to understand. However, there is also another multi-trillion-dollar reason why many who now support M4A might switch sides: Medicare’s massive unfunded liability.

As with other Social Security expansions, when Medicare was created in 1966, those in or near retirement paid little or no more in taxes but got substantial benefits throughout retirement. That imposed a large unfunded off-budget liability on later generations. And every expansion since (most recently, Medicare Part D’s prescription drug benefit, whose officially estimated unfunded liability at the time was $17 trillion) has created another free lunch for those older, expanding the huge tab facing later generations.

The same sort of conclusions were reached in an Urban Institute study of Medicare, which found that in 2012, average-earning males were “buying” $180,000 in Medicare benefits for $61,000, while similarly situated females, with smaller lifetime contributions and longer life expectancies, did even better.

Optimistic Assumptions

The result, as reported by Michael Tanner, was a 2015 forecast of almost $48 trillion of unfunded liabilities under implausibly optimistic assumptions. A return to higher medical cost inflation rates could make it $88 trillion. A continuance of lower birthrates than forecast would push it higher. So would including future commitments to recipients who have qualified for but not yet received all their benefits as of the end date of a study.

So why might recognizing that massive unfunded liability and its continued expansion move Americans into the “anti-M4A” camp?

Because of the wealth transfer to early enrollees, as well as from ensuing expansions, Medicare provided many with a great deal. But that deal was the result of dumping an enormous bill on future generations (bigger than the unfunded liabilities for Social Security plus the national debt).

With that bill starting to arrive, Medicare is not even close to sustainable in its present form, much less to be leveraged to cover the entire population (although one can understand the vote-buying potential in promising massive new M4A generational transfers).

Not only is a massive expansion of an already far-in-the-hole Medicare program a fool’s errand, but the massive unfunded liabilities it has built up also mean that the previous costs were far higher than what recipients paid and continue to be so (even underestimates of its unfunded liability growth add more than $1 trillion per year of hidden costs to Medicare).

As a result, Medicare was a far worse deal than M4A salesmen and women admit, and it is now decaying at an increasing rate, making its extension to all a 14-digit boondoggle, not a boon. And doubling (or more) down on the already unpayable burdens Medicare has laid on future generations also highlights the blatant hypocrisy of backers who, at the same time, preen about all the new plans they have to “invest in the future.”

 

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Gary M. Galles is a professor of economics at Pepperdine University. His opinions are his own. This article originally appeared on fee.org, then pennypress.com Reprinted with permission. 

Published in Money
Thursday, 19 September 2019 18:47

Corporate execs throw stockholders under the bus

In college 50 years ago, I took Introduction to Political Science from Stephan A. Douglas.  Not the short, fat Little Giant who debated Abe Lincoln.  But a very good tall and angular professor at Illinois.

The main thing I remember from his class is his explanation about a compelling revolution in political science and economics that began a decade earlier.  Traditionally, he said, political scientists sought to explain how institutions, practices and people in political and economic processes worked to promote the public interest and the common good.  It was Pollyanna-ish: All for the better.

Then some iconoclasts said that’s not how things work at all.  Most folks in the political and economic spheres aren’t trying to promote the public interest.  To the extent they can, they use institutions and practices to promote their own special interests.  This insight, which today seems obvious, changed political science and helped foster a branch of economics known as public choice theory – which has produced a number of Nobel Prizes in economics.

Against the background of the Viet Nam war and the turmoil in American politics in the 1960s, it was a bracing idea, and it quickly became a formative part of my intellectual make-up.  It has served me well in politics and public service.

Now come our corporate leaders with a perfect example of how political and economic behavior masquerades as public-spirited when it’s really completely self-serving.  The Business Roundtable, an association of chief executive officers of America’s largest companies, issued a new “Statement of the Purpose of a Corporation,” signed by 181 CEOs.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” reads the key sentence.  It names those stakeholders: customers, employees, diversity and inclusion, suppliers, the communities where they work, the environment and sustainability.  Oh, yes, also “effective engagement with” company stockholders.

Since 1997, their periodic “Principles of Corporate Governance” statements have endorsed the notion of shareholder primacy: that corporations exist primarily to serve stockholders.  In the New York Times Magazine on September 13, 1970, economist Milton Friedman, one of the intellectual giants of the 20th Century, said business executives who pursue a goal other than making money for their equity investors are wrong.

They are, he said, “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”  They become “unelected government officials” who essentially tax employees and customers.  They violate their legal and ethical fiduciary duties.

But the new diktat declares all “stakeholders” equal – leaving corporate moguls, our enlightened visionary betters, to decide how to balance their interests via corporate actions.

The concept of corporate stakeholders arose soon after the public choice revolution.  Originally, it was descriptive: It described the groups that were affected by actions of corporations.  But once the term was invented, it morphed into a normative concept suggesting the stakeholders have some kinds of claims on the actions of companies and their decision-makers that legitimately compete with the fiduciary duties owed to those who put their capital at risk by investing in the firm.

Now the CEOs have thrown in the towel and joined these predatory special-interest claimants.  Why?

It’s something I’ve observed the last 40 years in regulation, politics and business.  Essentially, executives are – surprise! – pursuing their own self-serving interests.  They want to be lionized everywhere as great leaders, compassionate souls, visionary intellectuals.  They want to use the resources their stockholders have entrusted to them to buy off everyone – unions, politicians, predatory special interests such as environmentalists, and the lamestream press.

Maximizing long-term discounted stockholder value within ethical norms crimps those aspirations.

This rot is clearest with regulated utilities, where executives can cut implicit (sometimes explicit) deals with regulators: We’ll do almost any foolish thing you want us to, as long as we can pass on the costs to ratepayers.

The problem started a century ago when large corporations were no longer managed by their primary owners, but instead by hired professional managers with their own self-serving agendas.  Ironically, consumers, employees and the real public interest in economic growth and fairness suffer with stockholders in this scheme.  Friedman was more right than he knew.

 

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Ron Knecht is a contributing editor to the Penny Press - the conservative weekly "voice of Nevada." You can subscribe at www.pennypressnv.com. This is an edited version of his column which has been reprinted with permission. 

Published in Money

“Job growth was about 227,000 in June but 46 percent of the people surveyed say they are not better off.  Democrats claim the 50 percent growth of the stock market does not help the common people because most do not invest in stocks, except those with 401(k) plans.  But the stock market indicates companies are willing to invest, which leads to job growth.  Please explain.”

Good points from a thoughtful reader.

June job growth of 227,000 was good, and recent upward revisions of prior-month figures likewise.  However, longer-term job growth hasn’t been very robust, even though unemployment is at record lows.

Some people who were dropped from the job market during the Great Recession and tepid recovery that followed it simply haven’t returned.  But some are beginning to.  Some are seniors who entered retirement early and aren’t being welcomed back by hiring managers.  And some are millennials who retired to their parents’ basements or similar quarters.

Dems err when they claim securities market price gains don’t help common folk.  Beyond 401(k) plans and personal portfolios, the much larger impact is that the vast majority of those people depend on retirement plans that are invested in the markets.  Given the poor management of most plans, members need markets to soar, for otherwise their golden years may not be so rosy.

And stock market rises don’t necessarily indicate strong investment by firms, so long-term job growth has been weak, as noted above; however, in the last decade, things have changed significantly from the pre-recession decades: thus, the “new normal.”  And I think those long-term changes explain our national ennui and sourness.

The key fact is that, even after a decade of recovery and stock market growth, our economy is growing significantly slower than in previous decades.  So, people’s incomes and wellbeing are rising much slower than they did during most adults’ lives, when annual per-person real growth of 2.0-2.5 percent meant that standards of living doubled every generation.  Now, the generational growth is only about 40 percent, instead of doubling.

Although people don’t much consciously think or talk about that, it greatly conditions their sense of wellbeing and their outlook.  For example, living space in the average home has doubled over about 40 years, and home amenities have also greatly improved.  So, people are less burdened by preparing and cleaning up after meals with microwave ovens and dish washers.  And they enjoy more TV options on much bigger and higher quality screens.  Life seems better, and it is.

Although they don’t think about per-capita real growth having been cut in half, they do get a sense the last decade that things aren’t getting better the way they had come to expect from life-long experience.  The fact they don’t know the exact reason for that is itself discomforting.

In my controller’s annual reports the last four years, I explained some key reasons for the new-normal slow growth.  Government excess – spending, taxes, and debt rising continuously relative to the economy, plus continuously proliferating regulations of all kinds – all slowed growth ever more.  Labor force participation grew before the turn of the century, helping growth, but has slowed since.

Debt of all kinds grew unsustainably before the recession, accelerating growth, but has stalled since then.   And increasing trade and international investment, plus strong world economic growth, all helped us before the recession, but those trends too have reversed since then.

These are the important drivers people don’t see, but they definitely feel their effects of slow growth of productivity, jobs and incomes.

As noted above, people generally don’t think consciously about then versus now, although such considerations may play a subconscious role in their outlooks.  Instead, regardless of how much their lives have improved, they always focus on us versus them: They are acutely aware of how well off they are compared to other folks.

And when they feel things aren’t going well for them, they look for scape goats and others to blame.  When they don’t understand the economic complexities and long-term issues, they look for single-factor causes and immediate trends.  

 

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Ron Knecht is a contributing editor to the Penny Press - the conservative weekly "voice of Nevada." You can subscribe at www.pennypressnv.com. This is an edited version of his column which has been reprinted with permission. 

 

Published in Opinion

If you think the American economy is booming now, just think what it would be like if American collegians had an extra $1.5 billion to spend—especially with President Donald Trump’s tariffs set to raise the prices of imported consumer goods despite he and his administration saying the tariffs won’t result in price hikes.

 

Well, if prices aren’t increasing, tariffs aren’t working. The point of a tariff is to make locally produced products more attractive to local consumers by raising the price of imported alternatives. This, in theory, would result in more local production and fewer imports. But a tariff is paid by the importer of a product, not the exporter. So the 25-percent tariff Trump recently leveled on Chinese imports is transferred to the American consumers of those goods, not the Chinese producers.

 

The trade war isn’t taking money out of the pockets of Chinese manufacturers; it’s taking money out of the pockets of American consumers of Chinese products and Chinese consumers of American products. And since the United States runs a $375 billion trade deficit with China, the only way Trump can “win” his trade war is if Chinese economists can’t do the math to match Trump’s tariffs dollar-for-dollar. It’s even becoming more likely trade with China ends altogether. China has already cancelled planned trade talks with Trump.

 

It is impossible for America to run a trade surplus with China because China produces more products Americans consider essential than America produces for the Chinese, including car, computer and mobile phone components. It’s lower labor costs and Americans’ addiction to consumption allow China to perpetually have the upper hand in a trade war. If an iPhone were made entirely in America, it would cost as much as a brand new car, so while Trump might be making some American-made products more attractive to American consumers, he’s doing so at the expense of American consumers who can’t do without many of the Chinese imports found in their technology and automobiles. Even the Tesla Model 3 can only be 95-percent American-made at most.

 

Since Americans will be paying more for computers, mobile devices and cars, it’s not entirely unreasonable to forgive the $1.5 billion in student loan debt and allow those accepted into college two years of college education free of charge. Students and parents are going to pay more for the devices required to attend college, and colleges are going to pay more for them as well, which will be reflected in tuition costs, which will further increase student loan debt while decreasing consumers’ available income for spending in the American economy, potentially sinking the stock market.

 

There are other reasons besides boosting the economy for the government to payoff student loan debt. First, today’s Associate’s degree, usually obtained in two years at a community college, is the equivalent of a 1980s high school diploma. Advances in technology have made working in what is now a global economy much more complicated and necessitates further education be obtained. Students are not leaving high school with the education necessary to provide for themselves let alone a family, and it’s not their fault.

 

Secondly, with 17 states offering tuition-free college programs, the trend seems to be students at least delaying the accumulation of student loan debt for two years, potentially lowering accrued interest as well as principal loan balances. In short, future college students in the United States will be saddled with considerably less student loan debt than current and past college students. Meanwhile, entire generations (and student loan debt does span generations), are suffering student loan debt and unable to stimulate the American economy by spending money on anything but debt and living expenses.

 

Finally, the collective credit rating of American college students, past, present and future, would receive a boost that could spur entrepreneurial growth and investment in businesses as a whole. America was the land of opportunity, where you could go from “rags to riches” with enough hard work. America used to be the best place to start a small business and be your own boss. That isn’t the case these days because despite incomes increasing for middle-class Americans, their purchasing power has barely budged since 1965. You can’t grow an economy in which most consumers have hardly more purchasing power than their grandparents did over 50 years ago, and consumer confidence in the stock market can’t increase if consumers have no means to express their confidence by purchasing stocks.

 

Lifting the $1.5 billion in student loan debt owed by 44.2 million American borrowers would allow 44.2 million Americans to spend their student loan payment, averaging $351 per month, stimulating the American economy instead of simply paying off interest. Lenders can’t be the only ones making money if the American economy is going to grow.

 

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Published in Opinion

In the poker game of American life, the white man is on tilt, bleeding chips like he’s giving them away—because that’s exactly what the white, American man has been doing for 150 years. White, American men started comfortable and stayed comfortable. Some got lazy, and now the chip leader in the poker game of American life senses his chip stack dwindling at the poker table that is American capitalism.

Income inequality grew in 2017 to the largest income gap ever recorded, but for roughly 200 years the white man was the only person at the poker table that is American capitalism. His chips were safe and regularly augmented along with a glass of lemonade by a slave who did the work responsible for the chip stack while his master played solitaire alone.

But when the white man’s first challenger arrived in the 1820s, he felt immediately threatened despite his massive chip stack and perceived mental and physical advantage over his opponent. White men were threatened by women entering the workplace because they’d work for less and advanced machinery made factory jobs easier for them to do. So when a white, American woman approached the poker table with her modest chip stack in hand, the white man went to work, teaching the white woman about American capitalism by using his superior stack of money to take hers. The white man didn’t take the white woman lightly, but he enjoyed her company and gave her enough time and just enough money to learn the game—opportunities not afforded his male opponents. When civil war broke out in the states the white woman’s chip stack grew considerably, and when slavery was abolished, more new players sat at the poker table that is American capitalism.

When a black, American man brought his meager chip stack to the poker table in 1865, the white man might have lost his means of subsidizing his stack, but he knew he could still steal chips from the black man as he did the white woman. And he did and continues to do so, but less often and at an ever-decreasing rate of success.

In 1910, the Mexican Revolution sparked a wave of immigration in the United States, but the first successful labor movement of immigrants in America took place in 1903, when Mexican and Japanese farm workers unionized. It was the first union to win a strike against the giant, California agriculture industry. Then the first wave of Asian immigration to the United States during the California Gold Rush in the 1950s brought more players to the table, each with a larger chip stack than the last. The white man gained another opponent to bully each player who dared sit at the poker table of American capitalism, but that window of opportunity grew shorter with each new player. 

When your chip stack is bigger than everyone else’s, you don’t actually have to play poker, or any game for that matter, including the game that is the American economy. You just have to use your money to repeatedly force the poor to decide whether they’re ready to lose everything they have, and they seldom are regardless of the amount. That’s not poker; it’s old-fashioned bullying. The haves lean on the have-nots until they break, at which point the white man borrows them money to buy back into the game, with interest, of course.

The rules of both a poker game and a capitalistic economy cease to govern the gameplay when the majority of wealth is controlled by an extreme minority of players. The game has never been fair and still isn’t, but white, American men are scared anyway. While their chip stack hasn’t decreased significantly, there are more players at the table, and the white man fears there will be more coming for his ill-gotten gains. They can sense the table turning, which is why they’re expressing their anger more boisterously than in the past. They didn’t have much reason to complain while they were buying pots with busted, gutshot straight draws and suited connectors that found no similar suits nor connections amongst the community cards. The white, American man was probably only called and forced to show his cards once every few years in the poker game of American life.

The wealth gap between white and black households in America persists, as does the gap between white and black men. And the wealth gap between white and Hispanic-American men is expected to widen until 2020. But that’s not the case for white and black women. While women have and continue to make less than their male counterparts, white women do not make considerably more than black women raised in similar households. So while white and black women aren’t winning pots as big as the white or black men, they are winning similarly-sized pots relative to each other.

The white man has managed to avoid losing chips to the black man, but the white and black women at the table have charmed the chips right out of the hands of the white man. And he’s enjoyed losing to the women so much the white man has only just realized the growing chip stacks of his other opponents at the table, like the Hispanic- and Asian-Americans. Worse yet, the white and black women at the table are starting to call the white (and brown) on their attempts at getting more than just a handful of chips from the ladies. 

Instead of observing the tendencies of his opponents and acting on them, the white man has resorted to bullying the rest of the table with his chip stack, over-betting the pot and forcing his opponents to either risk all their chips or fold. But it’s harder to buy pots with a dwindling chip stack, and the rest of the table has him figured now. The white man doesn’t have the chips to bluff with garbage cards anymore, and while he thinks he’s on a frozen wave of cards you read about, he’s really just scared of all the new action at the table. More players means more cards are out, too, so with every new player at the table, every hand becomes less and less valuable. But that doesn't make immigrants a threat; they can actually pad the chip stack of white, American men, too

"Meat packing plants and lumber mills that rely on refugee employees need many more. Manufacturing and other industries across the country are looking to hire refugees." —Sasha Chanoff, USA Today

Immigrants work the jobs American men and women won't do, and they pay income taxes for doing them, and spend their income in the American economy, creating more jobs and more wealth for everyone. More players means more action, which means bigger pots and bigger swings of fortune. That worries the white man, as it should, because he's the only one who hasn't been playing poker these last 150 years or so.

White, American men have always been unreasonably angry, but how can you be mad after enjoying an economic advantage built on the backs of slave labor for over 150 years? White, American men tilted the economic playing field so much with slavery and ensuing racial discrimination that their advantage persists to this day. But they sense that advantage dissipating with every immigrant that arrives at the poker table of American capitalism, and that pisses them off, but not rightfully so. Simply being entitled to earning more money isn’t reason enough to be angry about that entitlement decreasing ever so slightly. Being the reason for providing that entitlement against your will, as black Americans were and continue to be (as well as women), is reason enough to be angry, and to be angry for however long the table is tilted in the white man’s favor.

Published in Opinion
Saturday, 28 October 2017 18:52

5 steps to get out of student loan debt

It might be a while before post-secondary education is free for any American accepted to a public college or university. New York has become the first state to offer residents a tuition-free, post-secondary education at community colleges and public colleges and universities, and California could be next. That doesn’t help those of us who have already graduated from college with massive student loan debt, but you can get out of student loan debt without paying it all or worrying about interest accruing. The earlier you take these steps the better.

1) Don’t get scammed by student loan “negotiators”

There are a ton of corporate scammers out there preying on recent college graduates struggling to repay their student loan debt. These companies offer nothing you can’t do yourself from the StudentLoans.gov website but charge a monthly fee for playing middle man between you and your student loan servicer(s).

You should be able to identify these scammers by their too-good-to-be-true offer, but if you ever call any other number besides (800) 557-7394 or (800) 557-7392, you’re likely dealing with a scammer. Keep in mind, though, that these companies already get a bad rep, so if you do end up being scammed, do not hesitate to demand a full refund.

2) Don’t take on new debt

This might sound impossible for an unemployed, college graduate, but it’s essential to improve your borrowing power during the six-month grace period you have before your first student loan payments are due.

What you can borrow depends on your debt-to-income ratio, which is probably pretty terrible for any recent college graduate looking for a job. But even if your income is low (or nonexistent), you can take steps to improve your financial situation by simply moving your debt around. The first step is prioritizing your non-student-loan debt.

Credit cards can be an asset if you use them correctly. If you’re struggling to find a job to improve your debt-to-income ratio by increasing your income, you must improve your debt-to-income ratio by reducing your debt. But how can you reduce your debt without income?

You should know which credit cards are costing you the most in interest. Some of these rates can be upwards of 30 percent, so check to see if there’s an opportunity to transfer your highest credit card balance to a credit card with a lower rate. You might pay a three percent fee on the balance transferred, but if that’s less than you’d pay in interest over the life of the introductory rate, better to pay that amount upfront during your six-month grace period.

The key is to never allow your credit card balance to grow. At the end of every month, your credit card balance should be less than it was when you graduated. That way, when the six-month grace period on your student loans expires, you can work with smaller (or nonexistent) credit card payments.

3) Consolidate your student loans under one servicer

If you are tired of paying multiple student loan servicers, consolidate your loans under one servicer. This will make your student loan payments one payment paid to one servicer. The important thing to keep in mind when consolidating, though, is when asked the question of whether you work for a nonprofit, answer “yes,” even if you don’t. This will assure that your loans are consolidated with a servicer who qualifies for the Public Service Loan Forgiveness Program (PSLF). So if you end up working for a nonprofit in the future, your loans already qualify for the program.

4) Apply for an income-based repayment plan

You can only pay what you have, so anyone with student loan debt should be on an income-based repayment plan, unless, of course, you make a ton of money. If that’s the case you should just pay off your student loans as quickly as possible to avoid paying interest.

While you must reapply for an income-based repayment plan annually, regardless of your change in adjusted gross income, it will result in the lowest qualifying payment you can make on your student loans.

If your income is low enough, you could end up paying $0 per month, but unless you intend to work for a nonprofit for 10 years and have the remaining balance of your student loans forgiven, interest will accrue at an astronomical rate.

5) Work for a nonprofit for 10 years, or start your own

Under the PSLF program, if you make 120 payments -- even of $0 -- while working at least 30 hours per week for a nonprofit organization, the remaining balance of your student loans after those 120 payments will be forgiven. It will disappear.

You don’t necessarily have to be paid by the nonprofit. If you volunteer for 30 hours per week with a nonprofit or multiple nonprofits, you just need an executive of that nonprofit to verify that you work 30 hours per week for them using this form.

You can even start a nonprofit and have a member of your board verify your work hours. I just found out all the work I did for a nonprofit I started to grow ice sports in my hometown qualifies me for the PSLF program, so if there’s a cause near and dear to your heart that isn’t being addressed by a nonprofit, start one. It’s as easy as raising some money and filing some corporate paperwork with the state to acquire tax exempt status. (Note: partisan political nonprofits and labor unions do not qualify.)

Don’t let student loan debt cripple your economic outlook. Take these steps as soon as possible to get out of student loan debt.

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Published in Money

Congress passed a bill Wednesday that makes it harder for consumers to sue banks. The Consumer Financial Protection Bureau’s arbitration agreements rule protected users of credit services from being forced into arbitration rather than being allowed to join together in class-action lawsuits against financial firms with other users who were wronged.

Sixty days after Donald Trump signs the bill it will go into effect, providing little protection for consumers when financial firms wrong them in the future. The right of consumers to join together in class action lawsuits is not unlike the right unions have to collectively bargain contracts with employers, so, Conservatives are, of course, opposed. Democrats, on the other hand, are finally ready to pick a fight on the subject of economic inequality.

Massachusetts Democratic Senator Elizabeth Warren was at the University of Minnesota speaking on the very subject of economic inequality on Sunday. She’s not happy with consumer protections and regulations of financial firms she championed being undermined by the Conservative-controlled Congress, and she’s ready to pick a fight over it. Unfortunately, she and the Democrats are in no position to fight, and likely won’t be until after the 2020 election -- if at all.

The 2020 census will offer an opportunity for Democrats to undo the gerrymandering that has served Republicans so well in state elections since 2010, and it will be just in time for all 435 seats in the House of Representatives are up for reelection. That’s exactly why former President Barack Obama and former Attorney General Eric Holder are spearheading the effort to redraw district lines in 2020.

There are states that have taken the mapmaking pen out of the hands of politicians, though. In Washington, California, Idaho, Arizona, Alaska and Montana, an independent commission redraws district lines. In Maine, New York, Rhode Island and Iowa, an advisory commission redraws the districts, but that accounts for just 10 of the 50 states. The rest allow politicians to redraw district boundaries, most of which consist of legislatures that rarely lean Left, so if Democrats want to pick a fight over economic inequality, they’ll have to level the playing field first.

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If you like this, you might like these Genesis Communications Network talk shows: The Costa Report, Drop Your Energy Bill, Free Talk Live, Flow of Wisdom, America’s First News, America Tonight, Bill Martinez Live, Korelin Economics Report, The KrisAnne Hall Show, Radio Night Live, The Real Side, World Crisis Radio, The Tech Night Owl, The Dr. Katherine Albrecht Show, Free Talk Live

Published in News & Information
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