February 21, 2012

Good business leaders know collaboration fuels their success

Posted in economic recovery, income inequality, role of government, U.S. Economy tagged , , , , , , at 9:21 am by realitytax

If the 1% saw the acquisition of wealth as a collaboration, if the rich, well-to-do, “successful” people recalled they aren’t doing ALL the work, the research suggests they’d be better at sharing.


Business owners guided by both concern for others and insight into the overall factors that lead to success, know this.

If the Democrats really want to get moral psychology working for them, I suggest that they focus less on distributive fairness — which is about whether everyone got what they deserved — and more on procedural fairness—which is about whether honest, open and impartial procedures were used to decide who got what. If there’s a problem with the ultra-rich, it’s not that they have too much wealth, it’s that they bought laws that made it easy for them to gain and keep so much more wealth in recent decades.

Johnathan Haidt
“How to Get the Rich to Share the Marbles”

20 February 2012

The role of government is always a subject of debate, but ensuring that scoundrels who are only motivated by putting money into their own pockets, and businesses that treat workers as disposable rather than seeing them as part of the collaborative effort that leads to success, are not allowed to enrich themselves without any oversight.

Jonathan Haidt is a professor of psychology at the University of Virginia and a visiting professor at the N.Y.U.-Stern School of Business. He is the author of “The Righteous Mind: Why Good People are Divided by Politics and Religion.”

February 3, 2012

So-called “Right-to-Work” has dangerous side-effects

Posted in health care, role of government, states' rights tagged , , , , at 3:41 pm by realitytax

So-called "Right-to-Work" has dangerous side-effects.

NFL players understand exactly what’s at stake for workers. They oppose these so-called “Right-to-Work” laws fervently. It was one of the first topics raised at the NFLPA’s Groundhog Day news conference leading up to this year’s Superbowl.

INDIANAPOLIS (AP) – Quarterbacks Jay Cutler of the Chicago Bears and Rex Grossman of the Washington Redskins are among six NFL players urging Indiana lawmakers to oppose right-to-work legislation.

Cutler, from Santa Claus, Ind., and Grossman, from Bloomington, joined New Orleans’ Courtney Roby, Pittsburgh’s Trai Essex, St. Louis’ Mark Clayton and San Diego’s Kris Dielman in sending letters to Indiana House members Monday. Days earlier, the NFL Players Association came out against the measure that would ban private contracts that require workers to pay union fees for representation.

Cutler called it a “political ploy” against workers.

April 7, 2011

Should Nuclear Energy Producers Invest in Alternatives?

Posted in energy policy tagged , , , , , , , at 11:28 am by realitytax

That’s a daunting potential, in some people’s minds. There’s recent interest in nuclear companies “Hedging Their Bets” by investing in Wind/Solar assets. Could they be planning to stifle competition? I don’t think so.

With lesser known French and British firms competing against key U.S. players such as Exelon (which invested $900 million to acquire John Deere Renewables) or the mega-conglomerate General Electric ($600 million to build a solar factory) they are all assuredly anticipating substantial ROI or risking their shareholders wrath.

If the U.S. is relying increasingly on energy from wind and/or solar sources, demand will likely be to move it beyond the borders of the property where it’s generated along the existing grid. Grid providers have incentives to maintain access, and I’m heartened to think that if any business invests substantially in any asset or resource they have at least some market-based incentive to protect that investment and reaping monetary return than letting it go to waste, just as those who provide and maintain the grid want reliable sources to deliver for their customers.

(Reuters) – General Electric Co made a big push in solar power, saying it will invest $600 million to build a new factory as it pursues what it thinks could be an up to $3 billion business by 2015.

By Scott Malone and Matt Daily
BOSTON/NEW YORK | Thu Apr 7, 2011 12:16pm EDT

Of course, none of that technically precludes simply holding those assets away from the market to drive up demand for nuclear power, which represents a potential return on the investment – a traditional bottom-line goal. So let’s agree that GE, Exelon, Areva, and others investing large sums aim to stay in business.

Nellis AFB Solar Panels
It follows that as nuclear becomes either unacceptable or even less cost-effective (and increasingly there’s actuarial data supporting the latter in the wake of the Fukushima disaster) that corporate growth, vitality, and “business success” will require savvy, competitive utilization of resources and assets, which now include literally hundreds of millions of dollars each of wind and solar investments.

March 11, 2011

Budget, Deficits, Ideas, and Stuff

Posted in federal budget, role of government, taxes, U.S. Economy tagged , , , , , , at 12:48 pm by realitytax

The thing people are best at is exchanging stuff, including ideas; that’s what sets us apart from every animal on the face of the earth. Dogs don’t exchange bones with each other, chimpanzees and dolphins don’t ask for advice, and yet nobody reading this could build the simplest device we rely on every day in any reasonable amount of time without the active participation of many, many other people.

You doubt it? Name your example: Could you make a toothbrush? How will you get the petroleum to make the various plastics? OK, so you can whittle down a piece of wood to serve as the handle, sure, but are you going to use a knife you traded for or make your own? You can collect some stiff bristly stuff, but to trim it all to a nearly uniform length would you like a scissors? …and glue the bristles in place…how? Let’s not even consider transportation machines and mp3 players. So much more efficient to let somebody else mine and smelt the metals, while legions of people build and maintain the systems to distribute the stuff, and still others focus on food, wouldn’t you agree?

Another way to think of it is that while any of us can probably manage to be self-sufficient, it wouldn’t leave us much time for anything else at all. Complex trading makes it possible for specialists to efficiently do what they’re best at, and the whole society can enjoy the fruits of the labor of others.

Now what’s that got to do with the U.S. economy, government budget decisions, and the federal deficit?

Well, while we can all agree that while the government has a long-term fiscal management issue, (call it a problem if you like,) the key factor in the budget challenges is health care costs, and more to the point the rate at which those costs are growing. According to a recent article in the New York Times, “The Congressional Budget Office expects Social Security outlays as a percentage of G.D.P. to rise 30 percent over the next quarter-century, as the population ages, but it expects a near doubling of the share of G.D.P. spent on Medicare and Medicaid.

We don’t solve that by reducing what we spend on either education or job creation. Cutting the benefits for military veterans only shifts the costs of their health care, it doesn’t control it. Cutting taxes surely doesn’t provide any free-market incentive to rein in runaway health care costs, nor does reducing and/or eliminating the collective bargaining rights of public-sector employees (another way of shifting the costs without actually addressing the cause.)

There’s a time for catching the drips coming through the roof, but that’s a stop-gap until you can properly fix the roof. If you’re in charge of the building it’s not responsible to tell the people who live or work in it to just keep emptying their buckets – if you don’t know what to do yourself, you call somebody who can fix it, and if you have to raise the rent you do that, too. That’s the whole point of participating in society instead of being self-sufficient.

Bernie SandersIt’s time for Congress to do their job and stop asking the American people to keep emptying the buckets. They asked voters to trust them to solve problems – to keep the roof in good repair – not kick them down the road while we collect rainwater and listen to their complaints about how hard it is to fix. Lowering taxes to fight a budget deficit is like bringing gasoline to fight a fire.

Those elected officials that have no idea how to actually live up to that promise should get out of the business and let somebody with real solutions work on it before they ruin the building and bring down the value of the whole neighborhood even further. Stop talking about “partnering with business” and how regulations are a burden and go work on whatever stuff it is you’re actually good at doing (other than interviews with sound-bites and acting like absentee slumlords, that is,) and leave my government – for the people – alone.

February 18, 2011

$6 Trillion in play: derivatives markets

Posted in Finance Reform, GOP, immigration, role of government, U.S. Economy tagged , , , , , , , , at 10:32 am by realitytax

Reuters is reporting on a ploy to stall the re-regulation of derivatives markets as proposed by the Dodd-Franks financial reform bill. GOP strategists are now asserting that rushed rule-making can’t become a higher priority than economic analysis, so we ought to slow down and (finally) do the sort of analysis that might have prevented the market crash and the resulting recession (if only we hadn’t let Wall Street insiders write their own rules for so long.)

signing of Dodd-Franks billAs I discussed earlier this week elsewhere, the provocatively-titled Wall Street Journal article “Study: Strict Derivatives Regulation Could Cost 130,000 Jobs” echoing the “government regulations hurt business” talking-point has been yet again defused — this time by professors John E.  Parsons and Antonio S. Mello, who pointed out, “It’s always possible to ignore the system-wide purpose of a regulation and claim it is costly due to the burden it imposes…”

“We have regulations controlling immigration, restricting tobacco and alcohol sales, establishing speed limits, and prohibiting the use of dangerous materials such as lead paint. We embrace regulations about what can’t be in our drinking water, and insuring we have the freedom to practice religion unfettered by the preferences of government agencies…

…laws about everything from voter registration to verifying the safety & efficacy of drugs because we know we can’t simply trust everybody to do the right thing if there’s no referee…

…the GOP has been persuaded to slow down the process of reforming Wall Street’s greedy, self-serving behaviors.”

Thomas A. Hayes

We’ve seen what happens on Wall Street without adequate oversight and regulation(s): the markets crashed, foreclosures destroyed home values, the economy went into a tail-spin. As if that wasn’t bad enough, the trickle-down effect is that millions of our friends and neighbors are unemployed at precisely the time when their highest-value asset, their home, has collapsed.

Compare the amount of money we’re talking about to the debt-ceiling or the budget for the entire U.S. Government. On Wall Street, in the derivatives market alone, $600 trillion is in play. That’s why the players, and the Chamber of Commerce, are lobbying so hard to be left alone, and trying to scare us with more jobs lost.

“…there is ‘no upside’ to imposing margin requirements on end users, said David Hirschmann, who heads the U.S. Chamber’s Center for Capital Markets Competitiveness.”

Victoria McGrane, from her article
Wall Street Journal February 13, 2011

Recovering our standing as the world leader in agriculture and industry, and creating the millions of jobs our country needs, won’t be enough to keep Wall Street greed from ruining our economy. We abandoned a “free market” approach to firefighting, because the profit motive led to really bad outcomes for the people that fire companies were supposed to protect. There are countless examples of systems that operate better in terms of the “common good” when we don’t let snake-oil salesmen operate unfettered in pursuit of their individual profit.

I’ve been pondering whether or not our financial markets can “create prosperity” other than for Wall Street insiders. It’s certainly not what the evidence suggests they’ve done lately; it’s hard to see an “upside” (to borrow David Hirschmann’s term) to heeding those with the most to gain by slowing down reforms when they’ve shown such willingness to abuse the system.

It’s harder still to trust the tired old assertions about government regulations being nothing more than interference that “burdens small business” which can be, and have been, so quickly, thoroughly debunked by simple logic.

This is not Somalia. The citizens of the United States don’t want an end to government; we want a return to the ideal that good government works “for the people” not the fatcats who game the system for profit at the expense of the majority of fair-minded, hard-working people. We want solutions, not sound-bites.

November 9, 2009

Imperfect Information Undermines “Free-market” Economies

Posted in economic recovery, media coverage, Obama administration, taxes, U.S. Economy tagged , , , , at 8:09 pm by realitytax

It’s no secret that a variety of interested parties exert influence over both economic policies and the general understanding (and reporting) of the effects of changes, just as they do in energy, health care, education, the financial sector, and/or anything else that the Congress or various federal agencies have a role in shaping. Misinformation can lead a seemingly honest, open debate far afield from reality, inhibiting the efficiency of the process while at the same time warping the outcome.

If you don’t understand fiduciary relationships, and you still think most corporate actions reflect the same sort of priorities that pertain when a truly small business is owned by a single person, or a couple, you’re missing a key factor. Shareholders, for instance, seldom have any significant influence on the pay (or bonuses) of officers engaged in potentially risky decisions at major corporations – auto manufacturers, for instance, or the financial institutions that crumbled on Wall Street as the financial crisis became obvious to virtually everybody at home and abroad near the end of the Bush administration, when we ended up dumping billions of dollars into banks without any obvious benefit (it certainly didn’t stimulate consumer lending, as both Bush and early Obama administration initiatives were intended to do.)

In fact, if you look closely, the problem of banks that are “too big to fail” is getting worse, not better, due to consolidation. But that’s not what they tell Congress or the media; the bankers speak instead of “economies of scale” to justify even further growth. Banks are tied to the model that’s ruled economic policy for decades: debt-fueled consumer spending.

Those who talk about concerns over finite resources, such as clean water, are scoffed at, and the countering rhetoric lumps them in with “climate alarmists” and “tree huggers” in such a way that genuine free market forces are not even close to determining the value of any natural resource that cannot be mined – with the curious exception that there are some cities who have privatized their formerly municipally controlled water systems, which does begin to result in a certain market value being placed on that particular resource. Of course, once a profit motive starts driving the price up, citizens in the U.S. and abroad often agitate to re-socialize their water supplies, in an era when “socializing” is used by some to imply everything that went wrong with every non-U.S. form of government.

Similarly there’s an obvious bias in the talk about income tax cuts – it generally originates from those who are well to do, and stirs the emotions of those who have much less, but more importantly if one looks closely at the data, there’s been a strong correlation in the past between those with wealth and those whose tax rates truly go down under most of the recent approaches. Would tax cuts stimulate the economy? Assuredly so – but in what way? A tax cut on income doesn’t have the same effect as, say, a tax cut (or tax credit/investment credit) for spending consistent with our national priorities, such as alternative energy sources, or research and education, etc. Such selective, targeted changes spur spending in specific areas — a very straightforward function of supply and demand, and the result is tangible — money flows to those areas, stimulating job growth and additional investment without any necessary growth of the government (growth which makes most of us justifiably cautious in the wake of the Bush administration’s under-reported increases.)

The reason that governments trying socialism, such as the USSR, to manage resources and markets for the good of the people have consistently floundered and failed is that they don’t — and can’t — have good enough centralized information to succeed making the rapid decisions necessary to control what is arguably the most intricate challenge of any “man-made” system, the decentralized activity of a vibrant, balanced economy. Markets are efficient at managing that information; but we’ve seen a dramatic example of why they cannot be expected to function for the good of the consumers when government fails to regulate those with the profit motives.

Consumers, too, need access to better information than they typically get under the current system, no matter if you’re considering tax-cuts, politics, the price of peanut butter, new home-buyer credits, or anything else. When misinformation is tolerated (or encouraged) it undermines the effectiveness of capitalism. Free markets rely on timely, accurate information – we need to consider new incentives for the reporting of “news” and information systems we base our choices on, or capitalism is absolutely doomed to implode.


October 22, 2009

Income Redistribution and the IRS

Posted in media coverage, states' rights, taxes, U.S. Economy tagged , , , , , , , , , , at 4:56 pm by realitytax

The non-partisan Center on Budget and Priority Policy, a research group forcused on federal and state fiscal policies, looked at IRS data and stated in September that:

“Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.”

In fact, with the exception of a slight reversal that correlates with the Bill Clinton presidency, the chart of this IRS data, reproduced below, reveals an obvious trend in favor of the wealthy.

any economic class warfare in the past century has clearly been dominated by the wealthiest Americans.

Class Warfare?

In point of fact, Piketty and Saez relied on several different income concepts and each naturally results in slightly different estimates of the share of income going to each group, so the Center on Budget and Priority Policy conclusion that the share of the nation’s income flowing to the top earning households increased from 16.9% in 2002 to 23.5% in 2007 could have “quibble room.” Yet the fact remains that change represents a larger share than at any point since 1928.

I strongly urge you to read the entire article, and abandon any sense that the wealthy in America are either paying a disproportionate share of their income(s) or losing some mythical class warfare when people talk about income redistribution or raising taxes.

Taxation without representation

It’s lately become fashionable in certain circles to cite the American Revolution as an anti-tax movement. Nothing could be more misleading, and I suspect many of those who rely on the tea bag as a new rallying symbol neither drink tea nor are conversant with either the series of tax changes, such as the molasses tax (6p/gallon,) which contributed to the uprising against taxation without representation or with the impact of the choice to drink tea over coffee.

Surely many of those who opine that they, “don’t want our government to do anything at all,” and argue in favor of states’ rights, etc., do, in fact, prefer having national immigration laws (and agents to enforce them,) a standing army to provide for the common defense, and even publicly built and maintained highways over the free-market alternative as practiced in present-day Somalia. Yet there’s more to their position than simply a media-distorted, sound-bite-fed outcry being exploited for ratings and ad revenues.

The collective American psyche places great stock in the notion of fair play. Some take it so far that they want the U.S. to be the world arbiter of justice, and accordingly encourage the notion that it’s somehow an American responsibility to prevent piracy on the high seas (the ultimate free-market exercise) or to remove regimes from power in other countries if they don’t believe that leader assumed power fairly.

State budgets are under assault

The American Dream is under assault. There is no free lunch. Taxation to accomplish the legitimate goals of federal and state government initiatives must be fairly distributed. Defining the necessary changes to tax codes is a daunting prospect even if it’s separated pragmatically from debating the role of government to expedite resolving budget crises. But considering higher taxes on the wealthy hardly constitutes class warfare, let alone an unfair burden.

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