What if North Korea, a brutal and repressive regime that lets its population starve, and murders non-compliant people, managed to take control over the US. Well, immediately some would say over my dead body and pick up a gun. But let's just dismiss the saber rattling for a moment and pretend.
What if North Korea said, "We're going to kill 33,000 of your citizens a year, and victimize half a million people, because that's our nature." What if they said, "We're going to let millions of you suffer and die, men, women, children - we're just going to take away your access to medical care, because that's the way we operate."
What if they said, "We're going to make sure 1 in 5 of your children goes hungry, just because that's the way it is." What if they said, "Every year we're going to make 3.5 million people homeless, even if a third have kids, because that's the way we do."
What if they said, "Every year your wages are going to go down by 4%, because that's the way we do things, and we say you're going to like it and be grateful, or else you won't have a job." What if they said, "We're just going to keep pushing you all down into poverty, because we want you hungry and powerless."
What if they said, "We're going to kick millions of you off the work rolls, and ignore your pleas for a job, because in North Korea, we just don't care." What if they said, "We're going to poison your drinking water for your resources, and warm the climate, and laugh with glee at our new wealth."
Terrifying! What if we stood up and said, "But we want to be like other wealthy Western countries; we don't want your kind of oppression."
Well, we don't stand up, and the overwhelming evidence is, the above are not threats, but actions that we and our government permit in the US. This is what happens when people don't vote and let those with power, contrary ideologies, and agendas have the country. A variety of confirming links to these accurate statistics are below.
Is there a solution? It depends on the character of the US citizens.
The polity of this country was born from immigrants who came here from many countries, each with things they were for and against. Some came as opportunists to gain fortune, or hard workers to make their own fortune.
Some came because they ran from religious tyranny. Some came to start their own religious tyranny. Not that religion itself is bad, but in Europe it was known for suppression, death, and destruction, and in some countries still is.
Some came to discover a new land and a new beginning. Some came to escape political persecution and the tyranny of government, which was heavy in Europe and Asia. Many rugged individualists went West, facing severe hardships for which they used self-reliance to overcome. They learned a new way of life.
We see many of those same reasons and attitudes in today's US. Politicians and their constituents quarrel with each other endlessly about the size and power of government, about state VS federal, about the role of religion in influence, about the independent thought and action of the individual VS the common good, about individual wealth VS common wealth, about the role of influence groups, companies, and the wealthy VS the citizens, about majority rule VS individual rights, about taxes VS who should bear the weight of government, about military power VS isolation, and about social policy and funding VS individual right to income.
Those arguments are never far from our sight, plastered as pithy memes and slogans over social media and bumper stickers, and propaganda smears in video and commercials. Some still question the absence of the gold standard. Some think the government has no power to tax. There is nothing that isn't questioned. Somehow we have managed to go forward in progress despite the endless effort of many to end whatever has begun.
We are not the same nation we were in 1620 when the Pilgrims landed, or 1787 when our Constitution was signed, nor as we were at the end of WWII. We are not sparsely populated. We are not an agrarian culture dependent on what we raise in our gardens. In fact most of the population has moved from farms to cities, and farming is mostly given over to large enterprises.
We are not a world in which everyone pumps their own water from their wells. We purchase water, sewer, gas, and electric from suppliers. We are not a world where we travel on horseback or foot, over trails or bare ground - we have paved highways and streets.
We are not a world running from government and religious tyranny - we have majority rule and minority rights, and are free to choose our religious beliefs and associations. We are not guarding our land individually or as small militias from marauders, pirates, and invaders - we have the police and National Guard for that.
We are not a world in which the poor, disabled, and needy have to beg for money in the streets for their care, and suffer and die - we have retirement, medical care, Social Security, and Welfare. We have fundamental principles that this nation was founded upon, but we are free to choose our way forward in all of these areas. It is up to us, the American people.
The modern society that we have is costly to maintain, for sure, but it improves our well-being, continuously raises our standard of living, keeps people employed, gives them opportunity in careers, and most people live better than kings in previous centuries. Think about that, we live better than kings in most of history.
Very few people would return to the way our land was in 1787, but there are a few. And there are many who want to regress to earlier times, and take away any social program, military program, support for transportation, etc. Times of change, and we are in times of rapid and prolonged change, inspire great fear in people so they want to stop the world or go backward. Politicians who want to dismantle programs, thrive on spreading fear.
We are now at a very grave moment in our history. Our government cannot come to agreement about most issues, which means that we don't have consensus on where we want to go. An important study showed that what the US people want has minimal effect on political decisions. We have to vote, and keep voting to get what we want.
For the first time in our history, people no longer think that future generations will be better off, or that we can pursue the "American Dream." We are in turmoil. Americans in Gallup polls, list their concerns in order from high to low: 1. Dissatisfaction with government. 2. The economy. 3. Employment. The big question we face is, "Do we move forward and boldly face the challenges, or shrink in fear and go backward?"
Evidence is sound that shrinking backward will destroy the economy.
We need to work hard on the following:
We have no choice but to get out and vote for people we want to represent us, and the issues we want addressed. If we don't, our future is downward.
In economics, our faltering steps up out of the Great Recession of 2008, ask whether or not we are economically viable as a society. Consumer spending does not appear to support business, and company stock has been kept artificially high through low borrowing rates from the Fed and from stock buybacks by companies. But the buybacks appear to largely have come to an end, and the stock market is into a major correction (Aug. 26, 2015) and we don't know where it will settle. The big question is, "Why is our economy faltering like this?" Our well-being and our future depend largely on our economy.
Making our economic problems worse is the role of technology in making companies more efficient, which eliminates jobs or the need to hire more employees, and the role of mergers and acquisitions, which eliminates many overlapping jobs or entire companies. Further, the creative commons in software, and companies like Uber, are alternatives that have much lower operating costs and sell directly to consumers, often with no overhead at all, and at very low to free prices.
In social programs and tax policy, we are well onto our way into socialism. Capitalism is failing to benefit most citizens, so it has to make up the difference, or risk anarchy. Real wages have slipped every year since 1950, and current wages appear to be declining during a period of record stock prices and corporate profits.
The middle class has been decimated, and is sliding toward poverty, while, as widely reported, the top 1% received 93% or more of Income Growth. CEO wages account for most of that. This is part of a historic trend in which the gap between the wealthy and the rest of us has continuously widened since 1980. The US is now the most unequal of all advanced economies in the world. Government leaders can't come to an agreement on what to do about it.
It is difficult to compare 1950 with 2015. Many prices have increased, such as gasoline, from 30 cents a gallon to ~$3.00 a gallon. Six giant candy bars no longer cost 25 cents, they now cost ~$6.00 or more. Appliances have more than doubled in price. 1950s rent in NYC might have been $60.00 a month, by 1960 was $200.00, and now is over $3500.00. Homes are generally larger, except maybe in NYC, but individual annual incomes have only increased $10,000.00 total. The $833.00 monthly increase in income doesn't quite cover the $3440.00 increase in rent.
The two major political parties have different approaches to the issue. Democrats emphasize that economic growth should result in shared prosperity, while Republicans tend to downplay sharing, while promoting the wealthy and business. Every year since 1980, we have seen that emphasizing business in economics related legislation, instead of the individual, is counterproductive for the American people.
By measures of income inequality, real wages, good paying jobs, minimum wage, benefits from production efficiencies, and the number in the middle class and those in or close to poverty, the policies and economy have failed to benefit most citizens. This is not gloom and doom and emphasizing the negative, this is reality.
We entered socialism. The top earning 1% will pay 47.5% of the nation’s income taxes. The upper 10% pay 70% of the Federal income taxes. This means they pay 70% of EITC payments to the poor, welfare, government employees, road maintenance, military costs, entitlement costs – all of the things that the government does except Social Security. The rest of us pay for 30% of government finances. So we are already well on our way to socialism. But we are not benefiting from it the way other countries do that employ socialistic policies in their economy, which are a large number of Western countries that prosper well, and often have better standards of living than the US.
I refuse to ever demonize the wealthy, the poor, business, or any other group in the US. They are generally not at fault. In fact, most people, including the wealthy, do good things for others when they see a need. Some of the wealthy tackle world-wide problems. In my view it is always best to be in a position of strength, and help others from that position. But even the poor help others even from their poverty condition.
We have a systemic problem. As economist Thomas Piketty, a very socialist leaning economist, has shown in research, wealth accumulates faster for the wealthy than it does for others. This is actually obvious because the wealthy don't spend as much of their income. They invest it in stock that returns 7 to 25%, often even during recessions, while the average person who has money left, may invest some in stock for retirement, but mostly spends all the money he has. His main wealth growth is through home ownership, whose value grows at up to 4% each year... as does the homes of the wealthy, but for much larger amounts. Home ownership has dropped in 2015 to around 61%, so this growth in wealth doesn't affect 49% of the people. The poor are left in the dust, with stagnant wages, and steady real wage decline.
The problem is, we become removed, develop walls that prevent us from seeing, and create attitudes. Most walls are mental walls, basically stereotypes, that say, "It's their fault - they brought their situation on themselves, and they will have to do what I did and raise themselves by their own bootstraps."
Attitudes can be dangerous things. Some have the attitude, in areas where strength and self-reliance are important, that only the strong survive. Nature shows us instead that only the adaptable survive. The French Revolution in which the leaders were executed, shows what happens in nature when the wealthy and leaders, have no sympathy for and refuse to lift up the have-nots. The wealthy and leaders could not adapt to reality.
I will just mention one example about our warped view of others: the poor and the homeless. I have helped churches provide material and other support to the poor and homeless for over 10 years in the heartland, and previously helped and observed a few in NYC and L.A. The working poor are families that need food support, and sometimes can't pay utility bills. The homeless are usually those that lost in our economy, and not by their own devices.
In one small city, like several cities around me, there is a motel where the homeless from that city and others, can come and receive assistance. They are families with children. They have lost their jobs and their homes. That's what our economy does to people, relentlessly, to the tune of 3.5 million a year.
In supporting the homeless, they are given a bit of time to find a job, and they are given housing and some food and a bicycle for transportation, rain or shine and regardless of distance, while they get back on their feet and are able to support themselves again. It often takes a year.
While grateful for the help, they would highly prefer to be on their own. These people really don't fit the stereotype that people use to conveniently overlook their plight and blame it on something else. It's our economy. It's not some other person's economy, we own it. We're responsible for it. We can change it.
The poor may have shelter over their heads, but they live in fear of the next minor expense that may take away their ability to pay the rent, or have a car, or pay the electric bill, and make them homeless. All it takes is a small medical payment, or a flat tire, if they even have a car. The "average" wage in this country is $50,000.00. But most of those making under $30,000.00 a year, and in or near poverty make around $15,000.00. And like North Korea, we choose not to care.
I am not for a basic income as a handout. Even though we may have higher unemployment in the future because of technological innovation and robots, I don't think this is the best way to go until we reach the point at which we can't keep everyone employed.
We already have a similar system in place. Those who fall on hard times can fall on welfare and unemployment for a while - not forever. And the Federal government will contribute EITC each tax year to those who do work.
States have broad flexibility in designing time-limit policies, in large part because the federal time limit does not apply to state-funded benefits. Currently, 40 states have time limits that can result in the termination of families’ welfare benefits; 17 of those states have limits of fewer than 60 months. However, nearly half the national welfare caseload is in states that either have no time limit (2 states) or a time limit that reduces or modifies benefits when the limit is reached (8 states and the District of Columbia).
State Welfare Time-Limit Policies and Their Effects on Families
We need to encourage people to do useful things with their time. My experience with people is that those who have nothing assigned to do, will fill their time with triviality. They will do something with it. Sometimes that will be trouble. We already have welfare dominant areas where those with nothing to do, especially young adults, feel hopelessness and crime is high. Additionally, people lose a sense of self-respect, and see themselves as dependents, not contributors. I don't see a basic income as solving the problem of the poor. I do see it making it worse. Welfare is a poor answer.
Experiments with guaranteed income have done well. There are more experiments going on. It has positive effects on the economy, as predicted. See the references section below.
Everyone has their biases. Some think no one will work, and some think a basic income will make it possible for the many to do what they want. There is some truth in both, and some error.
Existing at the level of the welfare and EITC base is tolerable for some, and insufficient to motivate others to go after more. That is a difficulty. As our nation's founders realized, people will put up with a lot before deciding to do something about it. This is backed up by studies on happiness. So a basic level of income ensures that we will have a huge number of people stuck at this level, not happy, but not sufficiently motivated to go after more. Having a huge group of malcontents is not a constructive goal.
Economists do a lot of inquiry and studies on what makes people happy. Happiness, supposedly is the key to domestic tranquility. Those who are poor are definitely not happy. While the love of money may be the root of all evil, and becoming more wealthy doesn't bring happiness, pockets of poverty in the US are drivers of crime.
What I would be in favor of is a Federal and state matching contribution that matches to bring income up to a base income level of ~$40,000.00, depending on the State cost of living, and after that ceases to match. During times of unemployment, basic income would be set at ~ $30,000.00.
By doing it this way, people have the basic safety net of an income, but would have both a psychological and monetary influence to work. It's a hand up, not a permanent handout, not an entitled dependency that the government has to fund with higher amounts every year, so it's limited.
And this would be a major benefit to business as it would spur consumer spending to a much higher level.
I examine mechanisms for doing this, and justifications, in this article, The Economics of Financial Redistribution
The Netherlands is experimenting with the idea of a basic income, as is Finland.
Dutch city of Utrecht to experiment with a universal, unconditional 'basic income'.
We need to get to the right wages that share productivity gains with those who make it possible.
Probably not through unions. The unions, which empowered people into higher financial classes, soiled themselves with corruption, over-reach, and nonsense demands. They prevent people from getting jobs through limiting membership and only allowing union members to work. They don't work for all people, they work for a select few, except in Right to Work states. And they tend to set up an "us against them" mentality that is harmful to business. Studies show they don't raise wages for non-union people employed in areas, despite what they claim. Unions are not going to make a comeback. But something has to keep wages up in this country because both people and business are dependent on this.
What I recommend is to broaden the powers of the Department of Labor, and the National Labor Relations Board, to monitor all working conditions, and set minimums on wages for different types of work. They should create a wage council with powers to survey and understand wages and conditions, and cost of living in areas, and interact with businesses accordingly. This would cause the economies in areas to excel. A floor wage on which all other wages are based would be very constructive.
US Department of Labor: "To foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights."
Companies typically try to set competitive wages in their respective fields and areas, but companies generally won't voluntarily raise wages because it can make their prices not competitive. But raising wages across the nation, by industry, then by area, does not make them not competitive. Everyone's prices increase.
The Fed should embrace a full employment strategy that guarantees work, or an income that supports families. The Fed is charged with the responsibility for full employment, but is toothless when it comes to layoffs, business closings, recessions, depressions, and other common events in the US economy.
The Fed also accepts unemployment at a 5% rate and underemployment, part-time employment, and unemployment of those who can't find a job and are off the unemployment insurance rolls. This needs an overhaul.
Citizen wealth is steadily transferred to the wealthy, cleansed through corporate profits and stock, which is reinvested in stock, which basically does nothing, especially for the economy. The wealthy love it because it builds wealth much faster than the average citizen does, which is in negative numbers for around 40% of them, and the wealth is stuck in homes for the other 60%. Retirement savings suffer, or are nonexistent.
The stock market has minimal value today, yet trillions in wealth. Other forms probably should replace it. It helps to know how it works and what it affects.
The idea behind the stock market is that it enables companies to raise capital for investment and expenditure (generally expansion or growth). It enables investors to profit from the use of their money, generally between 7 and 25% annually. The amount of stock issued by a company is a continuous drain on it and the economy. It would be better for companies to borrow from large banks and pay off their loans, instead of paying "rent."
The Federal Reserve regulates the money supply (loans) available to financial companies, which in turn affects the growth of the stock market. During the recession, the money supply, as loans, has been available for no interest. It's generally been noted after the recession to help stock prices be artificially high.
The stock market is supposed to be a tool for economic growth in a country, and does in fact do this in smaller, less wealthy countries. But in wealthier countries it's a fixture of dubious value, except for creating wealth and liquidity. It does enable companies who lack the fundamental valuations for a bank loan to get capital. Essentially investors gamble that weaker or emerging companies have good business plans, and from the investor's point of view if he is right ~3 of 5 times on high returns, he increases his wealth substantially.
Stock is supposed to be based on the expectations of profit from a company with good fundamentals doing well with the investment, to provide a dividend of cash earned that generally gets reinvested. But what it has become in wealthier countries is more of a gambling atmosphere driven by greed and fear.
Greed and fear cause high trading volatility, and a near disregard for dividends - the really important thing has become increasing stock price. Greed pushes stock prices up to ridiculous levels (above fundamental valuations), and fear causes hard resets (corrections) and recessions, which harm the economy. It caused the Great Depression in 1929, caused a recession in 2001, and caused the Great Depression in 2007. Stock prices are hyper-inflated again in 2015 and at this writing is correcting, driven by fear of problems in the Chinese stock market. This destructive volatility has to stop, and be controlled for everyone's benefit.
Greed is a powerful motivator, but fear is a much more powerful motivator. The stock market has controls built into it to prevent panic selling from collapsing the market. It stops trading for a while until people cool off.
Fear is what politicians use to drive people toward austerity when the stock market goes down. While it is counterintuitive, when the economy slows or recedes, that isn't the time to take a hatchet to government spending. Spending has the effect of supporting the economy, and making recessions shallower and shorter.
Whether increased spending is helpful, or a larger money supply to the stock market are helpful, during recessions, is questionable. Increasing taxes during a recession, on the general population, is counter-productive.
Over-investment is part of the problem. Too much money is going after too few high performing stocks, and that pushes the price of stock way high to absorb and reflect the infusion of capital. But there is also the supply/demand causation. It's like an auction where people bid on an item that has an established value, but they want it and bid the price much higher than is supported by fundamentals (the realistic value). Companies use a related mechanism to drive up their stock price to please investors or to merge with or acquire other companies. They buy back their stock so that the money in the market is distributed among fewer shares, or fewer people, or more scarce and in demand, making each share more valuable.
What I believe should happen is to further restrict the stock market, and use it as a source of revenue to counter the transfer of wealth to the top. While those in stock want the world to focus on raising stock prices, the result is a transfer of wealth to the wealthy, trading volatility. Hyperinflation of prices means constant corrections and recessions, excessive CEO wages and resultant fixation on short term things in business.
To fix it, tax stock purchases and transactions so that this all cools down. If every transaction has a tax applied, investors will think twice about the gain they are going after, and are less likely to trade stocks. The additional tax revenue can be used to finance other programs that financially relieve others. Investors would pay more attention to fundamentals, so there would be fewer corrections and recessions.
The Fed is largely responsible for our economy and employment. It's major tools are the money supply and interest rates, and uses these chiefly to control inflation. It also manages the money supply by loaning money through securities sales and repurchases to large banks and securities dealers. Buying back securities increases the money supply. It also sets the interest rate for loans. Businesses, especially financial institutions, need the Fed for liquidity (readily available cash that isn't tied up in assets).
The Fed looks at a number of factors in controlling the economy. Part of that is how much consumers spend, and average citizen wealth. But its focus is largely on macroeconomics, which chiefly is reflected in such numbers as GDP, productivity, and the stock market. The Fed's directors chiefly come from large banks and associations with the stock market, who are not in touch with the average person. In general, people feel that the Fed does little to help the citizens. They feel the Fed helps large corporations and financial institutions, and does little to help things like people losing homes during a recession.
I believe the complaints against the Fed a re on target. The Fed's recent focus on individual wealth focuses on home values going up. It doesn't focus on things that are very important right now for getting out of a recession, such as consumer spending, wage increases, and the overall wages in new jobs.
We are retiring people at 3xx,000 a month, and replacing these with lower paid workers, and adding 2xx,000 lower paying jobs a month, barely keeping up with need. Many of these jobs are just over 30 hours a week, and pay no benefits. Employers love creating part time jobs that don't pay benefits. There commitments don't increase, and their expenses are limited. So we are not adding jobs to the economy that increase the well-being of individuals, but do promote business.
The source of the nations economic strength is in its people. Without their spending, business fails. The focus has to be on promoting the well-being of the people, and to a lesser extent the stock market and financial institutions.
I'm not one to dole out money for nothing. I know for a fact that unemployment reduces self-respect, and sometimes reduces respect from others. Failure to provide for the family, or to feel useful and productive, leads some to suicide. Productive work is good for people, and often broadens their training and horizons.
There are a lot of public works that need doing. These should be staffed during slack employment times. If the other problems are fixed that create 3.5 million unemployed, then this program doesn't create a dependency or continuous budget drain, except for a minimal 5%. Unemployment insurance, except for things like temporary short plant shutdown layoffs, would instead go to this program.
Corporations have been identified as net job destroyers, and tax avoiders. The US has about an average tax rate on corporations, compared to other countries. But if corporations can duck out on taxes by registering in some island nation, or ship jobs to other countries, to improve their competitive position and profit, that's what they do, with no remorse.
Background: Corporate taxes on their profits (not sales) are around 15%, and dipped as low as 12% in 2011. Profit is commonly from 0 to 15%, and for most companies is around 7%. After the recession, corporate profits went to record highs. Medium size businesses, the backbone of US employment, continued struggling to make a profit.
To give companies incentive to remain in the US and pay taxes, and keep most employment here, take the tax off of corporate profits, and put it on as a sales tax on products. (Leave it on service companies, who typically try to have zero profit by investing profits back in the business.) While this is counter-intuitive, here's the thing. All taxes on sales in the US are paid by consumers, even if they go through companies. So forget the tax on profits, and add a ~5% tax on consumer spending. But only eliminate taxes for companies that employ at least 95% of their employees in the US.
What a 5% Federal or state sales tax would do is make the taxation playing field level for all companies and foreign companies that sell products in the US, and affect consumers very little. This would also help keep jobs in the US, because there would be no tax reduction for those who employ substantially outside of the US.
Corporate profits in 2014 were 10% of GDP. GDP is around $18 trillion. So corporate profits were $1.8 trillion, which includes foreign and B to B sales of 1.3 trillion. This leaves .5 trillion for a consumer base. 13% of .5 trillion = $3,333,333,333.00. 123 million households. Total 2014 US State Sales tax revenue, ~$60 billion. Result: 5% increase in total taxes for product purchases per household, which would be offset by the decline in corporate taxes.
Keep in mind that government agency figures often depend on voluntary reporting, and are often notoriously low, such as on gun violence where police departments fail to provide statistics.
The following links about homeless indicate snapshot (any one point in time, around 578,000), and annual cumulative (3.5 million), 1 in 50 children, 35% of the homeless population are families with children, which is the fastest growing segment of the homeless population.
HUD (government): The 2013 Annual Homeless Assessment Report to Congress
National Alliance to End Homelessness
13,000 fall into homelessness every month in Los Angeles County (L.A. Times)
Utah found a brilliantly effective solution for homelessness (Business Insider)
USA Gun Violence Statistics (Heeding God's Call)
Gun Violence Archive (taken from media reports)
National Institute of Justice (government): 467,321 persons were victims of a crime committed with a firearm in 2011.
Before ACA, aproximately 47 million people were without access to medical care, and the numbers were getting worse every year because of rising costs that employers couldn't cover. This is a snapshot figure of a point in time, and many of those got medical insurance later. With ACA, 16.4 million more have insurance.
Income inequality and the wealthy / poor divide
Most Americans think the government helped Wall Street more than Main Street after the recession (Business Insider)
Do Stock Markets Promote Economic Growth?
How to Shrink Inequality (Robert Reich)
Gallup poll on American's concerns
Brilliant Harvard psychologist explains how to achieve happiness in this popular TED talk.