What do unions do?

from David Ruccio

When I ask my students that question, they don’t really have an answer. That’s because, like much of the rest of the U.S. population, they don’t have much experience with unions, either directly or indirectly—not when the union membership rate has fallen to below 11 percent nationwide and is only 6.4 percent in the private sector.  

Bread and roses

from David Ruccio

Mainstream economists and politicians have answers for everything.

Lose your job? Well, that’s just globalization and technology at work. Not much that can be done about that.

And if you still want a job? Then just move to where the jobs are—and make sure your children go to college in order to prepare themselves for the jobs that will be available in the future.

The fact is, they’re not particularly good answers. And people know it. That’s why working-class voters are questioning business as usual and registering their protest by supporting—in the case of Brexit, the 2016 U.S. presidential election, the 2017 snap election in Britain, and so on—alternative positions and politicians.  

American myth

from David Ruccio

One of the most pernicious myths in the United States is that higher education successfully levels the playing field across students with different backgrounds and therefore reduces wealth inequality.

The reality is quite different—for the population as a whole and, especially, for racial and ethnic minorities. 

Capital’s rising shares

from David Ruccio

Recently, I showed that conventional thinking about factor shares has been finally overturned: they are not necessarily constant, especially within existing economic institutions.

In fact, labor’s shares have been declining for decades now.

The opposite is true of capital’s shares: they’ve been rising for almost three decades.  

Pulling away

from David Ruccio

Apparently, Richard Reeves is worried that the top echelons of the U.S. middle class—those earning over $120,000—are separating from the rest of the country, and pulling up the drawbridge behind them.

“The upper middle class families have become greenhouses for the cultivation of human capital. Children raised in them are on a different track to ordinary Americans, right from the very beginning,” he writes.

The upper middle class are “opportunity hoarding” – making it harder for others less economically privileged to rise to the top; a situation that Reeves says places stress on the efficiency of the US economic system and creates dynastic wealth and privilege of the kind the nation’s fathers sought to avoid.

Hiding the surplus

from David Ruccio

Most of us pay the taxes we’re required to pay. That’s because there aren’t many ways to avoid them. Sales, property, payroll, or income—the tax is paid at the time of the purchase, the amount is deducted from our paychecks, or the records go directly to the government. There’s no real way around them. And we pay those taxes out of wages and salaries more or less willingly, since that’s how government services are financed.

Not so for those who are able to capture the surplus. Large corporations and wealthy individuals pay far less than their fair share of taxes. Their ability to evade taxes is only matched by their insistent demand that their tax rates be lowered even more.

We’ve known for a long time that large corporations use a variety of mechanisms—from claiming tax deductions and using loopholes to stashing profits in tax havens abroad—to lower their effective tax burden.

Thus, for example, according to Oxfam America (pdf), between 2008 to 2014, the top 50 companies in the United States paid an effective tax rate (to the federal government as well as to states, localities, and foreign governments) of just 26.5 percent overall, 8.5 percent points lower than the statutory rate of 35 percent and just under the average of 27.7 percent paid by other developed countries. And then they use their tax savings to lobby for even more tax advantages. 

Bottom line

from David Ruccio

The business press is having a hard time figuring out this one: the combination of unrelenting drama in and around Donald Trump’s White House and the stability (signaled by the very low volatility) on Wall Street.

As CNN-Money notes,

One of the oldest sayings on Wall Street is that investors hate uncertainty. But that adage, much like other conventional wisdom, is being challenged during the Trump era.

Despite enormous question marks swirling around the fate of President Trump’s economic agenda and his political future, American financial markets have remained unusually calm.

What’s going on?

Making corporate taxes great again

from David Ruccio

I continue to maintain that Congressional Republicans will stick with President Donald Trump until they get their favorite policies enacted—or until Trump’s missteps and declining popularity stand in the way of their getting what they want.

And one of the things they want is tax reform—specifically, a cut in corporate taxes.

Here’s the problem: U.S. corporations aren’t taxed too heavily. They’re taxed too little.

As is clear from the chart above, corporate profits (as a percentage of GDP) have risen dramatically since the mid-1980s—from 5.8 percent in 1985 to 11.8 percent in 2016. 

Risk vs. arrogance

from David Ruccio

Most of us are pretty cautious when it comes to spending our money. The amount of money we have is pretty small—and the global economic, financial, and political landscape is pretty shaky right now.

And even if we’re not cautious, if we’re not prudent savers, then no harm done. Spending everything we have may be a personal risk but it doesn’t do any social harm.

It’s different, however, for the global rich. The individual decisions they make do, in fact, have social ramifications. That’s why, back in 2011, I suggested we switch our focus from the “culture of poverty” to the pathologies of the rich.

Consider, for example, the BBC [ht: ja] report on the findings of UBS Wealth Management’s survey of more than 2,800 millionaires in seven countries.

Some 82 percent of those surveyed said this is the most unpredictable period in history. More than a quarter are reviewing their investments and almost half said they intend to but haven’t yet done so.

But more than three quarters (77 pct) believe they can “accurately assess financial risk arising from uncertain events”, while 51 percent expect their finances to improve over the coming year compared with 13 percent who expect them to deteriorate.

More than half (57 pct) are optimistic about achieving their long-term goals, compared with 11 percent who are pessimistic. And an overwhelming 86 percent trust their own instincts when making important decisions.

“Most millionaires seem to be confident they can steer their way through the turbulence without so much as a dent in their finances,” UBS WM said.

Most of us can’t afford that kind of arrogance in the face of risk. But the world’s millionaires can. Just as they did during the lead-up to the crashes of 1929 and of 2008.

They trusted their instincts—and everyone else paid the consequences.

Late capitalism?

from David Ruccio

Apparently, “late capitalism” is the term that is being widely used to capture and make sense of the irrational and increasingly grotesque features of contemporary economy and society. There’s even a recent novel, A Young Man’s Guide to Late Capitalism, by Peter Mountford.

A reader [ht: ra] wrote in wanting to know what I thought about the label, which is admirably surveyed and discussed in a recent Atlantic article by Anne Lowrey. 

Crimes against humanity

from David Ruccio

As regular readers of this blog know, I am no fan of the way healthcare is currently organized in the United States.

The U.S. healthcare system, as it is currently configured, only really works for those who make a profit—selling health insurance, pharmaceuticals, and in-patient and acute-care services in hospitals—and those who have the wherewithal to finance their own healthcare.

But Republican plans to repeal the Affordable Care Act, aka Obamacare, and replace it with the American Health Care Act will move us even further from the goal of providing universal, affordable, high-quality healthcare for the American people.

The new act, aka Trumpcare, hasn’t yet been been scored by the Congressional Budget Office. And it will likely change as Senate Republicans get their hands on it.

source [ht: ja]  

End of Second Great Depression

from David Ruccio

I am quite willing to admit that, based on last Friday’s job report, the Second Great Depression is now over.

As regular readers know, I have been using the analogy to the Great Depression of the 1930s to characterize the situation in the United States since late 2007. Then as now, it was not a recession but, instead, a depression.

As I explain to my students in A Tale of Two Depressions, the National Bureau of Economic Research doesn’t have any official criteria for distinguishing an economic depression from a recession. What I offer them as an alternative are two criteria: (a) being down (as against going down) and (b) the normal rules are suspended (as, e.g., in the case of the “zero lower bound” and the election of Donald Trump).

By those criteria, the United States experienced a second Great Depression starting in December 2007 and continuing through April 2017. That’s almost a decade of being down and suspending the normal rules!

Now, with the official unemployment rate having fallen to 4.4 percent, equal to the low it had reached in May 2007, we can safely say the Second Great Depression has come to an end.

However, that doesn’t mean we’re out of the woods, or that we can forget about the effects of the most recent depression on American workers.* 

Class, in a nutshell

from David Ruccio

What happens when you combine conspicuous consumption and consumption productivity?

You get Barracuda Straight Leg Jeans—complete with “crackled, caked-on muddy coating”—on sale for $425 at Nordstrom.

When Thorstein Veblen

Conspicuous productivity

from David Ruccio

source

First, it was conspicuous consumption. Then, it was conspicuous philanthropy. Now, apparently, it’s conspicuous productivity.  

Mind the growing retirement gap

from David Ruccio

I find myself thinking more these days about the fairness of Social Security and other government retirement benefits.

One reason, of course, is because I’m getting close to retirement age—and, as I discover each time I raise the issue with students, young people don’t think about it much.* Another reason is because Social Security (in addition to Medicare, Disability, and other programs) is the way the United States creates a collective bond between current and former workers, by using a portion of the surplus produced by current workers to provide a safety net for workers who have retired.

That represents a kind of social fairness—that people who have spent a large portion of their lives working (most people need 40 credits, based on years of work and earnings, to qualify for full Social Security benefits) are eligible for government retirement benefits provided by current workers. Another aspect of that fairness is the system should and does redistribute from those with high lifetime incomes to those with lower lifetime incomes. While that makes the actual “rates of return” unequal across groups, it’s designed to provide a floor for the poorest workers in society.

Many people consider the U.S. Social Security system fair on those two grounds. That’s true even though some people, by random draw, may live longer than others. However, as Alan J. Auerbach et al. (pdf [ht: lw]) report, that fairness may be put into question if there are identifiable groups that vary in life expectancy, “as this introduces a non-random aspect to the inequality.” 

After the “Thirty Glorious Years”?

from David Ruccio

On the eve of their presidential election, the French people and politicians continue to debate how they should respond to the end of “Les Trente Glorieuses,” a period that appears to receding into ancient history.

Except, as it turns out, for those at the very top, for whom the last thirty years have been quite glorious.

According to new research by Bertrand Garbinti, Jonathan Goupille-Lebret, and Thomas Piketty, between 1983 and 2014, average per adult national income rose by 35 percent in real terms in France. However, actual cumulated growth was not the same for all income groups: 

Income and wealth—the top and the very top

from David Ruccio

Skellington is right: in my post on Tuesday, I did not separate out people at the very top from the rest of those at the top. That’s because, in the data I presented, those in the top 0.1 percent were included in the top 1 percent.

Unfortunately, I don’t have the same kind of breakdown in the composition of incomes as I used in those charts. What I do have are data on the shares of income and wealth for the top 0.1 percent versus the remainder of the top 1 percent (so, top 1 percent to but not including the top 0. 1 percent).

The top and the very top

from David Ruccio

Who’s running away with the surplus, those at the top or those at the very top?  

Left behind

from David Ruccio

Liberal stories about who’s been left behind during the Second Great Depression are just about as convincing as the “breathtakingly clunky” 2014 movie starring Nicolas Cage.

For Thomas B. Edsall, the story is all about the people in the “rural, less populated regions of the country” who have been left behind in the “accelerated shift toward urban prosperity and exurban-to-rural stagnation” and who supported Republicans in the most recent election. 

Academic precariat

from David Ruccio

As we know, the share of part-time faculty in U.S. higher education has increased dramatically over the past four decades.

According to the latest report from the American Association of University Professors (pdf),

Part-time faculty today comprise approximately 40 percent of the academic labor force, a slightly larger share than tenured and tenure-track faculty combined.