There Are No Real Republican “Deficit Hawks.” Here’s Why.

Democrats are making a terrible mistake fighting the Republican tax cuts by saying they add to the deficit, that they will “blow a hole in the budget,” etc.

Why are Democrats saying this? They are using the “increase deficits” line because they think they can appeal to a few “deficit hawk” Republicans who spent the Obama years complaining about government sending and “deficits.”

It is a mistake for Democrats to think they can “get Republican votes” by mouthing Republican deficit-fear rhetoric without understanding the strategy behind their rhetoric.

Strategy: Republicans Create Deficits, Stoke Deficit Fear, Then Campaign Against Government Spending

Here’s the thing. There are no real Republican “deficit hawks.” Republicans stoke deficit fear, and then say they are opposed to budget deficits. But they always, always increase deficits. On purpose. There’s a reason.

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Corporate Tax Cuts Are Really Just Tax Cuts For The Rich

Republicans are proposing a huge, huge cut in corporate tax rates. They are also proposing to let giant, multinational corporations keep much of the taxes they already owe on profits they are keeping in “offshore” tax havens.

Lower tax rates mean higher after-tax profits, which increases the value of stock holdings.

Who owns corporate stock, and therefore receives the benefits of these tax cuts?

Do We All Benefit From Corporate Stock?

Lets look at just who owns corporate stock.

Republicans like to pretend that all of us are invested in the stock market, if not by directly owning stocks, then through “our” retirement plans. This is usually written by and believed by upper-level, comfortable people that actually do have retirement plans.

But 45% of Americans have no money for retirement at all. Only 44% of Americans put anything into a 401K if their company offers one — and this number includes workers with only $100 in the plan. Only 18% of Americans are putting money in an Individual Retirement Account (IRA), ehich may or may not hold stocks. Only 4% of private-sector workers have only a “defined benefit” plan, usually called a pension.

So much for “our” retirement plans. Aside from retirement plans, a 2016 Gallup survey found that only 52% of Americans own any stocks at all – down from 65% in 2007.

So Who Does Own Stock?

Here is a chart of who owns corporate stock (and therefore pays those taxes.)

As of 2007, the top 1 percent owned 50.9 percent of all stocks, bonds, and mutual fund assets. The top 10 percent owned 90.3 percent. Things have only concentrated upward since 2007.

How much have things concentrated upwards since then? 20 Americans now hold as much wealth as half of all Americans put together and “the 400 richest Americans now have more wealth than the bottom 61 percent of the population.”

People talk about an “upper class” that holds most of the wealth in our society now. Maybe the thinking on this needs to change from a “class” of people to just a few people.

It is these few people who are the beneficiaries of corporate tax cuts. As tax rates drop the value of their stock holdings rises. The rest of us lose our ability to have good schools, roads, health care, courts, scientific research and all the rest of the things our government tries to do to make our lives better.

This is who we are talking about when we talk about corporate tax rates. It’s not anonymous, nameless corporation, it is people — just a few people.

Must Must Must Listen Podcast: Robert Reich On This Election

I listened to this on a walk, and it is a must, must, must listen podcast.

Robert Reich, speaking Tuesday at the Commonwealth Club in San Francisco: “The Oddest Presidential Election in Living Memory

From the website:

Tue, Sep 27 2016 – 6:30pm
Robert Reich, Chancellor’s Professor of Public Policy, University of California, Berkeley; Former Secretary of Labor; Author, Saving Capitalism

Holly Kernan, Executive Editor for News, KQED—Moderator

In the midst of an unpredictable presidential election, get insight from a veteran political figure who knows Washington inside and out. Time magazine named Reich one of the 10 most effective cabinet secretaries of the 20th century. He is a founding editor of the American Prospect magazine and chairman of Common Cause. Come hear his provocative thoughts on the presidential election and the future of America.

Banks Used Low Wages, Job Insecurity To Force Employees To Commit Fraud

The manager instructed her to push accounts but not to tell the customers about the downfalls and fees of new accounts. “Make them read the paperwork.” She replied, “But you know no one ever reads the paperwork.” His response: “Exactly.”

You might have heard that Wells Fargo Bank was busted by the Consumer Financial Protection Bureau for opening millions of fraudulent accounts – ruining customer credit scores and finances to rack up profits from big fees – and had to pay a $185 million fine.

You might have heard that the bank said management didn’t know about the 1.5 million to 2 million fraudulent accounts that were racking up big profits, gave the head of the division responsible for those accounts a $125 million bonus, blamed low-level employees and fired more than 5,000 of them. Now those former employees have the words “ethics” and “fraud” on their records.

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Paul Ryan Says Poor Are Victims, But Blames Them For Being Poor

House Speaker Paul Ryan in an NPR interview Monday acknowledged that the poor are victims of our economic system. The interview sounds reasonable, almost soothing, until you examine what Ryan is really saying.

After acknowledging that poverty is systemic, he turns around and blames the poor themselves as being personally – even morally – responsible for being poor. He implies the poor are just lazy. He cited addiction, lack of skills, and, of course, government handouts as the real causes of poverty. He said raising the minimum wage would not help. His soothing-sounding words are actually quite radical and extreme.

The Interview

Ryan was interviewed on Monday’s NPR’s Morning Edition by Steve Inskeep about his ideas on helping people get out of poverty.

When asked about people born into poverty who can’t get out of poverty, Ryan responds “That’s right … you go look at the country and the conditions, you’re just as likely to stay poor today as you were if you were born into poverty 50 years ago. … There are people out there fighting poverty … that do well, succeed but for government I think in many cases they could do more.”

Q: You’ve argued that welfare “is keeping people away from work, it disincentives work.”

Ryan: “Right. Yeah.”

Q: Do you want to cut welfare?

Ryan: “The smarter thing to do is to customize a benefit to a person’s particular needs. … Maybe this person needs addiction counseling, or maybe she needs a GED or transportation or something. You customize the benefits for her particular needs with the proper accountability.”

Asked about low minimum wages keeping people in poverty, Ryan rejects raising the minimum wage as a “one-size-fits-all solution.” Inskeep asks, “Why not do something that raises wages?”

Ryan: “Well, skills. I think when you raise the minimum wage … you’ll lose over a million jobs … So you don’t want to take away those entry-level jobs that give people hard and soft skills they need just to learn how to do work. Every person has a different problem, sometimes a person has an even deeper problem like addiction or something like that.”

What Ryan Is Saying

Ryan begins by acknowledging that the “country and the conditions” are what is keeping people poor. He says if you “look at the country and the conditions, you’re just as likely to stay poor today as you were if you were born into poverty 50 years ago.” But then he says there are people who are fighting poverty whose efforts would succeed “but for the government”

Ryan then contradicts what he said about “the country and the conditions,” and blames the poor themselves for being poor. They don’t have skills, they don’t have an education, they are addicted, and they are so lazy that a little bit of “welfare” keeps them from looking for work. He says they need to “learn how to do work.”

Several states have bought in to this “blame-the-poor” mentality to the point where they require drug testing before a person can get assistance. Earlier this year Think Progress surveyed these programs and found that despite the cost of this drug testing, several states did not find even one person testing positive. The national total was 321 positive tests, out of the millions in circumstances where they need help.

So why does Ryan bring up “addiction” when talking about poverty? For the same reason he talks about government and “welfare” causing people to not bother to look for work or even “learn how to do work.” These kinds of words point the finger at people for personal, moral failings, and contribute to a story that the poor are really just bad people who do not deserve our assistance.

Minimum Wage

Ryan also implies that people in poverty are lazy, saying “welfare” is “keeping people away from work.” But because of the decrease in the purchasing power of the minimum wage, many working people, even those working in full-time jobs, make so little that they qualify for “food stamps” and other government aid.

This chart, “Share of workers receiving public assistance for the poor, by industry” from The Washington Post Wonkblog report, “When work isn’t enough to keep you off welfare and food stamps,” tells the story:


“Share of workers in each field who rely on at least one program among Medicaid/CHIP, TANF, the EITC or food stamps. UC Berkeley Center for Labor Research and Education”

According to the Wonkblog report, “The problem, according to this picture, isn’t that poor people won’t work — it’s that the work they do can’t sustain them.”

Ryan also says “when you raise the minimum wage … you’ll lose over a million jobs.” But a National Employment Law Project (NELP) report from May, titled “Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels,” found that,

The results were clear: these basic economic indicators show no correlation between federal minimum-wage increases and lower employment levels, even in the industries that are most impacted by higher minimum wages. To the contrary, in the substantial majority of instances (68 percent) overall employment increased after a federal minimum-wage increase.

So raising the minimum wage, giving working people more money to spend in local stores, not only doesn’t kill jobs but increases demand in the economy enough that it might actually cause those stores to hire people. Who could have predicted?

Plus, never mind that increasing the minimum wage to a “living wage” level would end the need for public assistance for millions of people.

Note that “welfare” as Ryan and Republicans describe it – giving cash to people who don’t work – ended with the 1996 “welfare reform”. Today people – overwhelmingly single mothers with children – can get minimal temporary cash assistance, minimal food assistance and health care. Some can get housing subsidies and a few other forms of aid.

The results of the 1996 experiment of ending “welfare” have not been good. Studies show it has “failed,” had a “negative impact,” has “shortened lives,” led to “less education,” and “created a system rife with racial biases.”

Personal Responsibility

Ryan is repeating the old “personal responsibility” language conservatives have developed to shift people’s thinking about government and democracy away from the idea that We the People are in this together, toward a selfish idea that we should all be on our own. Of course, this leaves individuals defenseless against the powerful forces of aggregated wealth and power.

Paul Ryan, like many Republicans, is an admirer of Ayn Rand, who taught that society consists of a few “producers” and lots of “looters” and “parasites.” Rand taught that democracy is a “statist” “collectivism” of those parasitic looters, that it is wrong for people to help other people, altruism is evil and government is “monstrously evil,” “the political expression of altruism.”

Ryan’s words on “welfare” fit right into this radical, extreme framework, but in a more soothing-sounding way.


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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progressive Breakfast.

Exposing Trump’s Trade Appeal To Working-Class Voters For What It Is

Donald Trump is selling himself as the champion of working-class voters. He says Democrats and their presumptive presidential nominee, Hillary Clinton, are selling them out with trade deals. But Trump is just a fraud.

Unfortunately, President Obama is pushing the Trans-Pacific Partnership (TPP) agreement and Clinton is not confronting him for doing so.

That has to change – fast. Clinton must publicly, directly and loudly challenge President Obama and demand that he withdraw TPP from consideration by Congress.

Trump’s Trade Speech

Trump’s speech on trade and “globalization” issues attempted to frame Clinton and Democrats as being on the side of the “Wall Street” forces that have pushed low-wage policies on working-class Americans. He is using the upcoming and hated TPP being pushed by President Obama as an example of this, saying Clinton is only “pretending” to oppose TPP in order to get votes.

From the speech:

The legacy of Pennsylvania steelworkers lives in the bridges, railways and skyscrapers that make up our great American landscape.

But our workers’ loyalty was repaid with betrayal.

Our politicians have aggressively pursued a policy of globalization — moving our jobs, our wealth and our factories to Mexico and overseas.

Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.

[. . .] The people who rigged the system are supporting Hillary Clinton because they know as long as she is in charge nothing will ever change.

In Trump’s usage, the words “trade” and “globalization” mean one and only one thing: moving American jobs and factories to low-wage countries. This movement of jobs in recent decades, pitting American workers against exploited workers who are paid squat and can’t do anything about it, has been used as one lever to intentionally create unemployment, break the unions and force down wages. (Inflation panic leading to Federal Reserve interest rate increases, deficit scares leading to austerity — especially the refusal to spend on infrastructure – and obstruction leading to minimum wage stagnation are others.)

Trump is appealing to disaffected working class workers who used to vote Democratic, but have seen their jobs shipped out of the country and/or their wages cut or stagnate. These workers see Democrats as complicit in adopting free-trade deindustrialization policies. The North American Free Trade Agreement (NAFTA), pushed and signed by President Clinton, has become a catchall symbol of this disaffection with free-trade policies, but Democrats are generally seen as having done little to fight such policies.

President Obama contributed to the problem by campaigning with a promise to renegotiate NAFTA, then reneging on this promise once elected.

Trump also went after the Chamber of Commerce for their TPP support, implying they back Clinton. The New York Times reports:

Pressing his staunch opposition to trade deals, Donald J. Trump escalated his attacks on the U.S. Chamber of Commerce on Wednesday, saying it was “totally controlled by the special interest groups.”

“They’re a special interest that wants to have the deals that they want to have,” he told a packed arena at a rally here, to whoops and cheers. “They want to have T.P.P., the Trans-Pacific Partnership, one of the worst deals, and it’ll be the worst deal since NAFTA.”

[. . .] saying the Chamber was “controlled totally by various groups of people that don’t care about you whatsoever.”

Obama Pushing TPP As Election Nears

Clinton has said she is opposed to TPP, and opposed to letting TPP come up for a vote in the “lame duck” session of Congress that follows the election. But as Trump makes trade a centerpiece of his campaign, her opposition and trade focus has not been particularly vocal. She has not asked Democrats in Congress to oppose the TPP, and thanks to past Democratic betrayals many in the public just do not believe her.

Unfortunately, as the election nears, President Obama is pushing and pushing hard to get the TPP passed. Doing this directly conflicts with Clinton’s need to show that Democrats are on the side of working people and provides Trump with powerful ammunition.

Making matters worse, efforts to write TPP opposition into the Democratic Party platform were voted down – by Clinton delegates. Unlike Trump, Democrats do not appear to understand how much this matters to voters.

Brexit Warning

The recent “Brexit” vote should serve as a warning to Democrats to take issues like this more seriously. Working-class voters in the UK voted to leave the European Union (EU) for reasons similar to the appeal Trump is making to working-class voters here.

Analyzing the “Leave” vote in “A Working-Class Brexit,” University of Kent Professor Tim Strangleman writes the following. As you read it, substitute “Democrats” for “Labour”, “Bill Clinton” for “Blair”, “elites supporting free trade agreements” for “remain”, “anti-TPP” for “leave” and “Trump” for “UKIP”:

Resignation, despair, and political apathy have been present in many former industrial regions since the wholesale deindustrialisation of the … economy in the 1980s and 1990s. The election of the Blair-led Labour administration … masked the anger felt in these areas as traditional labour supporters and their needs were often ignored, while traditional Labour supporters were used as voting fodder. Over the … years of Labour power, that support ebbed away, first as a simple decline in votes, but gradually turning into active hostility to the Labour party. Many embraced the UK Independence Party (UKIP).

…for unskilled workers with only a secondary school education, three decades or more of neo-liberalism has left deep scars socially, politically, and culturally, with little hope or expectation that anything would change for the better.

This opposition, so skillfully drawn on by the leave campaign, is in part a working class reaction not only to six years of austerity but also to a long and deep-seated sense of injustice and marginalisation. Most of the remain side, which was a cross party grouping, didn’t seem to understand this before the referendum and, even more depressingly, doesn’t seem to understand it fully now. A stock characterisation of working-class people who intended to vote leave was to label them as unable understanding the issues, easily manipulated, or worse, racist ‘little Englanders’.

Doesn’t this sound just like the working-class voters in places like Ohio, Michigan, Indiana, Pennsylvania and other “deindustrialized” parts of the country? These voters used to reliably vote for Democrats, the party that watched out for working people. Donald Trump is appealing directly to these voters. Democrats should not dismiss these voters as “ignorant” or “racist.”

Trump Is A Fraud On Trade

The Economic Policy Institute’s (EPI) Robert Scott, speaking to VICE, summed up why Trump only appears to have the correct analysis on trade:

“Like a drive-by shooting, he fires enough bullets, he’s going to hit some things that might look like a policy that works,” Scott told VICE. “But it doesn’t have a coherence.”

“The problem with NAFTA is that we failed to effectively help Mexico develop as part of the agreement,” Scott continued. A good model, he said, was what wealthier European nations did for their neighbors like Greece and Spain decades ago, pumping money into their economies to create new markets for goods, thus making a Pan-European economy possible.

“We could create such a vision and implement a truly united North American economy that worked for everybody but nobody’s put that on the table,” he said. “Certainly Trump is not talking about that—he’s talking about building walls.”

EPI’s president Lawrence Mishel goes further, pointing out who got us into this mess:

It’s true that the way we have undertaken globalization has hurt the vast majority of working people in this country—a view that EPI has been articulating for years, and that we will continue to articulate well after November. However, Trump’s speech makes it seem as if globalization is solely responsible for wage suppression, and that elite Democrats are solely responsible for globalization. Missing from his tale is the role of corporations and their allies have played in pushing this agenda, and the role the party he leads has played in implementing it. After all, NAFTA never would have passed without GOP votes, as two-thirds of the House Democrats opposed it.

Republican efforts to drive wages down are the real culprit here:

Furthermore, Trump has heretofore ignored the many other intentional policies that businesses and the top 1 percent have pushed to suppress wages over the last four decades. Start with excessive unemployment due to Federal Reserve Board policies which were antagonistic to wage growth and friendly to the finance sector and bondholders. Excessive unemployment leads to less wage growth, especially for low- and middle-wage workers. Add in government austerity at the federal and state levels—which has mostly been pushed by GOP governors and legislatures—that has impeded the recovery and stunted wage growth. There’s also the decimation of collective bargaining, which is the single largest reason that middle class wages have faltered. Meanwhile, the minimum wage is now more than 25 percent below its 1968 level, even though productivity since then has more than doubled. Phasing in a $15 minimum wage would lift wages for at least a third of the workforce. The most recent example is the effort to overturn the recent raising of the overtime threshold that would help more than 12 million middle-wage salaried workers obtain overtime protections.

Trump in his “trade” speech also called for getting rid of corporate taxes and getting rid of regulations on corporations. He also opposes having any minimum wage at all. Trump and the Republicans are hardly friends of working people.

Opposing TPP Must Be In The Democratic Platform

British elites were surprised when working-class voters decided to “Brexit” and “Leave” the EU. They had been more-or-less complacent about the anger that working people are feeling out there as jobs leave the country, wages are stagnant or falling, work hours get longer for those who have jobs, and the rich just get richer.

Voting against opposition to TPP in the Democratic platform shows that Democrats appear to have the same complacency on trade.

Democrats must get this right. They have to stand up for working people and demand that our trade policies start helping people instead of hurting them. That starts with Clinton demanding that the president withdraw TPP from consideration by Congress.

Clinton must pledge to renegotiate all of our trade agreements, this time with labor, environmental, consumer, human rights and other “stakeholder” groups at the table. This is the best way to show the public that she is on their side.

Here are ways to help Democrats get to the right place on this, and put TPP opposition in the platform:

● Campaign for America’s Future: Sign our petitions to Leader Nancy Pelosi. Tell her she and other democrats to send Obama a message: Don’t undermine our nominee. No vote lame duck vote on TPP.

● CREDO Action: Sign the petition: The Democratic Party platform must include unequivocal opposition to the TPP

● Keith Ellison via Democracy for America: Will you sign my petition to the DNC’s Platform Committee and join me and DFA in asking them to adopt an anti-TPP amendment when the full committee meets in Orlando on July 8-9?

Also see Bill Scher, “Trump is a William McKinley Protectionist, Not a Bernie Sanders Populist.”

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progressive Breakfast.

Larry Summers Gets This Right: We Really Need An Infrastructure Decade

Here we are in “Infrastructure Week” and here we are with a new argument for a massive infrastructure investment project – worldwide.

Last week Peter Coy wrote at Bloomberg, in “How to Pull the World Economy Out of Its Rut,” about economist Larry Summers’ argument that we need massive public investment. Coy writes that Summers has been “jetting around the world” trying to convince central bankers “to reach out to the governments they work for … and insist on strong fiscal stimulus in the form of infrastructure spending and the like.” (i.e. “Public investment”.)

The case for this is very, very strong. Never mind that around the world infrastructure is crumbling. Just doing the basic job of government and making sure that things like infrastructure are up to par has fallen out of favor among the world’s elites, because “government spending.” Summers makes a different argument about why public investment – government spending on things countries and people and economies need – is essential to keep the world’s economy going.

Coy writes, “Summers’s deeper argument is that world growth is stuck in a rut because there’s a chronic shortage of demand for goods and services and a concomitant excess of desired savings.”

This Is Extremely Important And Summers Is Exactly Right

This is extremely important and Summers is exactly right on this. Too many people don’t have enough income, while a few people have lots of savings. But the few with lots of savings don’t have safe places to invest it because too many people don’t have enough income. In other words, the world faces a “chronic shortage of demand” and a “concomitant excess of desired savings.”

Capitalist economies necessarily move toward concentration of wealth, so over time a few people end up with lots of savings while most people get poorer. (Economist Piketty: “r > g” where ‘r’ is the rate of return on capital and ‘g’ is the rate of growth in the economy.) Since regular people participate in the economy by using money to demand goods and services, demand decreases as they get poorer.

Without something stepping in to break this cycle more and more of the resources end up in fewer and fewer hands, and after a while the entire system breaks down. Therefore in a capitalist economy government action is needed to redistribute “money” (resources and savings) away from the concentration at the top, back to more of “the people” so that they can again participate in the economy (demand).

This circle of money flowing around – demand gives savings good places to invest to meet that demand – shows why government redistribution is essential to keeping capitalist economies going. Taxing those who have a lot and using the money to build a sidewalk is redistribution because even poor people get to walk on the sidewalk. But even for those who hate the idea of redistribution, those sidewalks and roads and bridges and the rest are absolutely essential to economies. Even more essential, the jobs that are created to do the work building those things creates essential consumer demand.

The whole world is stuck in a rut because there is too much money at the top chasing insufficient demand.

Too Much Money At The Top Chasing Insufficient Demand

Wealth has concentrated. Inequality is extreme worldwide. The result is a worldwide “savings glut.” There is very little consumer demand so investment in things consumers/the private economy might buy is not bringing much of a return. This means there is too much money floating around the world looking for a safe investment that will bring a return. With few investments promising a safe return investors don’t want to risk investing.

Investment in the private sector has become too risky because of insufficient demand. So instead of finding private-sector investments, people are “parking” their money in government bonds. Governments that are safe are getting those savings to hold instead, sometimes even being paid (negative interest rates) to hold it.

Using different words, this shows there is a huge demand for government debt. That’s why the price has gotten so high (low interest rates mean there is a high price for a bond). Supply and demand: there is too much demand and too little supply of government debt.

Coy words it this way, “The interest rate, like any price, reflects supply and demand. It’s fallen because the demand for loans is weak and the supply of loans from savers, who have extra cash to deploy, is strong.”

The Things Governments Do Creates Demand In The Private Economy

The things governments do creates demand in the private economy when the private economy is not creating enough by itself. Infrastructure, investment in the people, education, job training, science and research, etc. are the underpinnings of the private economy later, but they wear out. Roads and bridges wear out, laid-off workers lose skills and well-educated people eventually get older and you need to do the next round of public investment. Our last round started drying up with the “Reagan era” ideology of “starve the beast” by killing government’s ability to spend.

When the private economy is doing well, savings finds places to invest. When savings is already thus engaged, interests rates rise. High interest rates mean government gets less when it sells its bonds. These higher rates are the market signal that government debt is not so much in demand, and governments need to borrow (and invest) less to keep the economy going. And because the private sector is going well people need fewer public services so governments don’t need to borrow to get the money to provide them…

The Markets Are Demanding That Governments Issue More Debt

Right now interest rates are extremely low – even negative in some countries. This high price for government debt means the markets are demanding that governments issue more debt. This is the law of supply and demand. Again: money markets are demanding more supply of government debt.

What should governments do with the money they get from selling more bonds? They should do what governments do with money. By definition this is “public investment.” Build roads, educate, feed people, etc. But instead of responding to the demands of markets, the anti-government ideology in control is forcing governments to do less, get smaller, need less money, issue fewer bonds.

For decades governments have been trying to follow the “less government” ideological mantra. But economics (and markets) says there is an essential role for government and public investment or economies don’t work. As governments withdraw from their role, economies stop working. Demand dries up, those with lots of money have nowhere to put it… and here we are. Secular stagnation.

So government cutbacks lead to low economy demand. The cycle is necessary, taxing the rich and using the money for government investment both creates demand at the time though spending and jobs, and the things it invests IN create demand later.

So the same thing has now been said about a dozen different and redundant ways here. People and the markets are demanding that governments around the world open up the spending spigot, invest in infrastructure and education and services other things governments do to make people’s lives better. The markets are demanding it and the proof is low interest rates on government debt. Not just here but worldwide.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.

Panama Papers Expose Another Way Our Trade Agreements Fail Us

Global Witness recently presented this TED talk on “how exposing anonymous companies could cut down on crime.”

Should our own government help oligarchs, billionaires and their corporations, criminals and terrorists hide their loot, launder their funds, and drain countries and their governments of needed revenue? Or should our government try to help stop this?

So far our government has too often been on the side of the bad guys.

Criminals, drug cartels, human traffickers, arms dealers, tax evaders, corrupt politicians, terrorists, oligarchs and plutocrats can use anonymous, secret shell corporations in tax-haven countries to stash, launder and hide their money. There are trillions of dollars of hidden wealth, much of it accumulated through crime and corruption. The secrecy is draining governments around the world of badly needed tax revenue, and it is enhancing and accelerating poverty and inequality.

Frederick E. Allen explains at Forbes, in “Super Rich Hide $21 Trillion Offshore, Study Says“:

A new report finds that around the world the extremely wealthy have accumulated at least $21 trillion in secretive offshore accounts. That’s a sum equal to the gross domestic products of the United States and Japan added together. The number may sound unbelievable, but the study was conducted by James Henry, former chief economist at the consultancy McKinsey, an expert on tax havens and offshoring. It was commissioned by Tax Justice Network, a British activist group.

The Panama Papers

The Panama Papers exposé by The International Consortium of Investigative Journalists has helped expose how certain countries enable the world’s plutocrats, outlaws, corrupt leaders, terrorists, warmongers, and the rest of the worst to use tax havens and anonymous shell corporations to hide their wealth, dodge taxes, dodge sanctions and even drain the wealth of countries. The reporting so far shows that just one Panama company had created up to 215,000 offshore shell companies for 14,153 clients. The reports link 143 politicians (or their families and close associates) to the use of tax havens to shield huge amounts of money. Again, this is from just one company in just one tax-haven, anonymous shell corporation-enabling country.

This also exposes how our own government is sometimes a party to enabling, even encouraging this activity. Our own government allows anonymous shell corporations here at home, and does not fight countries that enable them abroad when it negotiates so-called “trade” agreements that are supposed to lay down rules for financial interaction.

So-Called “Trade” Agreements, For Example

Our government negotiates what are called “trade” agreements with other countries. These negotiations are an opportunity to set up the rules for financial interactions between countries.

The 2012 U.S.- Panama Trade Promotion Agreement is promoted by our own U.S. Trade Representative’s office as “a comprehensive free trade agreement that provides elimination of tariffs and removes barriers to U.S. services, including financial services.” This agreement was an opportunity to fight global tax evasion, shell-corporation secrecy and other results of Panama’s bank and corporate secrecy. We could have negotiated to require an end to bank secrecy and shell corporations. But bank and corporate secrecy were not even part of the negotiations.

This demonstrates how the warped priorities of our “trade” process are hurting not just U.S. citizens and government but all citizens and governments.

Repeated Warnings

Before the Panama trade agreement was approved, individuals, organizations and even politicians warned repeatedly that the agreement would enhance the ability of corporations and individuals to hide wealth and taxable income from governments and criminal investigators.

In 2011, Vermont Senator Bernie Sanders, for example, gave a speech on the Senate floor opposing the trade agreement, warning that Panama’s entire economic output at the time was obviously too low to be of any benefit to American workers. “Then why would we be considering a stand-alone free-trade agreement with Panama?” Sanders said the real reason for the agreement is that “Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade taxes.” He said it “will make this bad situation much worse.”

To show how Panama enables people and corporations to hide behind corporate secrecy, an intern at Public Citizens set up her own personal Panama shell corporation. Here’s what The Huffington Post’s Arthur Delaney wrote about this:

It’s so easy for U.S. corporations to set up an offshore tax haven in Panama, an intern could do it. Really! To make this point, Public Citizen’s Global Trade Watch division had one of its interns call up some Panamanian law firms for advice on starting up a shell company.

“Panamanian corporations basically pay no taxes on foreign-derived income,” one man explained to the intern, Jessica. Another said: “You’re protected by the strictest banking secrecy laws in the world,” thereby “totally removing you from the legal trail.”

Public Citizen was warning that the Panama Free Trade Agreement (FTA) did not fight and in fact further enabled the secrecy:

“It would give investors registered in Panama new rights to challenge U.S. anti-tax haven regulations and other initiatives for taxpayer-funded compensation,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch division, in an interview with The Huffington Post.

… Tucker said that the Panama FTA would compromise the Obama administration’s recently-announced crackdown on tax havens, which the president said would save $210 billion over the next decade. (A 2008 Senate report estimated that the U.S. loses $100 billion to tax havens every year.)

With so many groups and individuals warning that the Panama agreement would boost the ability of people and corporations to dodge U.S. taxes using subsidiary shell corporations and secret bank accounts, the Obama administration announced in 2010 a “Tax Information Exchange Agreement with Panama.” This agreement had a loophole letting Panama to set aside tax transparency provisions if Panama decides they are “contrary to the public policy” of Panama. Of course, Panama invoked the loophole because so much of Panama’s income comes from bank secrecy, tax-free status and the ability to set up anonymous Panama shell corporations.

This week Public Citizen’s Lori Wallach issued a statement on the revelations in The Panama Papers:

“Nearly five years after the U.S.-Panama Free Trade Agreement (FTA) vote, the Panama Paper leak proves once again how entirely cynical and meaningless are the American presidents’ and corporate boosters’ lavish promises of economic benefits and policy reforms from trade agreements. The top promise about the benefit of the U.S.-Panama FTA was that it would end Panama’s financial crime secrecy protections and tax haven and money laundering activities, but what this leak shows is that, if anything, Panama’s outrageous financial crime facilitation has intensified while the FTA’s investor protections and official U.S. stamp of approval have increased inflows of dirty money to Panama.

Our Isaiah J. Poole writes, in “Panama Papers Controversy Offers An Opportunity To Push For Transparency“:

The silver lining in the Panama Papers scandal is that the world’s attention is being focused on a global problem in which the wealthy and powerful act beyond the reach of law, playing by a different set of rules from the rest of us. The United States does not have to go it alone in addressing this problem. But our elected officials, and the people running to be our next president, should lead. Supporting legislation that supports more transparency would be a start.

Countries that allow banking secrecy, the formation of anonymous shell corporations and tax-haven status should be considered rogue, outlaw countries. There should be international sanctions against individuals and corporations that do any business with such countries. There certainly should not be “free trade” agreements with such countries.

Harmonizing international tax law and prohibiting anonymous shell corporations should be at the center of our trade negotiations. Unfortunately, our corporate/billionaire-dominated trade process appears to have worked toward just the opposite. We the People and all of trade’s stakeholders – labor, consumer, human rights, environmental, democracy and other such groups – need to have seats alongside our businesses and government representatives at the trade negotiating table.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.

Important Study Looks At Silicon Valley’s “Invisible” Low Wage Workers

“We knew the tech industry was booming, but we weren’t seeing that translate into an abundance of jobs for our communities – until we looked at the low-wage jobs in contracting industries. Those are growing fast, just like tech profits are. It’s no wonder that one in three working households in Silicon Valley can’t make ends meet when these growing industries pay wages that barely cover rent.”
– Derecka Mehrens, Executive Director of Working Partnerships, USA.

Working Partnerships USA and Silicon Valley Rising released a report Wednesday, Tech’s Invisible Workforce, that looks at the contract industry workers at Silicon Valley’s “booming” tech companies.

In the last two-and-a-half decades, the number of Silicon Valley “second-class” jobs in potential contract industries has grown three times faster than overall Silicon Valley employment. These contractors and subcontractors jobs are disproportionately filled by Black and Latino workers compared to direct tech employees, and these workers receive much lower wages. As a result, Silicon Valley’s inequality and occupation segregation is amplified, especially among people of color.

The report finds that direct tech employees earn $113,300. Contractor and subcontractor tech industry workers – workers employed indirectly rather than treated as legitimate employees – are paid much less. White-collar workers in contract industries average $53,200 and blue-collar workers in contract industries average $19,900.

Along with this wage differential, as income drops the proportion of the workforce that is comprised of Black and Latino workers goes up. According to the report, Black or Latino workers make up, on average:

● 10 percent of Silicon Valley’s direct tech workforce.
● An estimated 26 percent of the white-collar contract industry workforce.
● An estimated 58 percent of the blue-collar contract industry workforce.

Lydia DePillis writes about this report at The Washington Post’s Wonkblog, in “What we know about the people who clean the floors in Silicon Valley,”

Silicon Valley companies have gotten a lot of heat in recent years for failing to recruit people black and Hispanic people into their ranks. But if you factor in contractors and others whose jobs bring them inside those companies, the industry appears bit more inclusive — just perhaps not in the way one might hope.

At one time in history, the janitors, bus drivers, food service workers, and security guards who staff corporate campuses might have been employed directly by the businesses where they cooked lunches and cleaned floors. That’s become less and less true in recent decades, according to a new analysis of labor data by researchers at the University of California – Santa Cruz — especially in Silicon Valley.

The Road to Responsible Contracting

The report concludes with a section on how companies could contract out jobs responsibly.

Silicon Valley Rising calls on our region’s leading businesses to commit to the following principles:

Responsibility: Ensure that their subcontracted workers are paid a livable wage, receive equitable benefits, have the right to a voice at work without fear of discrimination or retaliation, do not suffer mass layoffs when contracts change hands, and are protected from misclassification and other forms of wage theft.

Transparency: Release public data on their subcontracted workforces, including diversity, pay, and benefit data for each subcontractor.

Inclusion: Invest in building a community where janitors, security officers, cafeteria workers, teachers, nurses, firefighters and other non-tech workers can afford to live. Support access to full-time work, affordable housing, an accessible, world-class public transit system, and high-quality education for low-wage workers and their children.

Opportunity: Work with advocates to explore new approaches to create education and career pathways for contract workers and their families to move into core tech jobs.

The technology industry faces a clear choice. It can continue the status quo of exclusive jobs and exclusionary growth, widening the existing racial, gender and income gaps and accelerating the race to the bottom. Or it can wield its enormous economic influence combined with its capacity for innovative solutions to become a true global pioneer – to not just disrupt markets and technology, but to disrupt inequality.

Click to read the report, Tech’s Invisible Workforce.

See Also

Campaign for America’s Future has been covering Silicon Valley Rising’s fight to improve conditions for this “invisible” workforce.

The Silicon Valley Rising launch: “Silicon Valley Rising Fights for Worker Justice

The fight: “Silicon Valley Rising Fights To Give Part-Timers “Opportunity to Work”

Related: “Tax Scams, Google Buses Mean Silicon Valley Is #StuckInTraffic

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.