The Rich Don't Create Jobs - Consumers Do.

I knew this was out there.  Thanks to one of my readers for pointing me to this.

See this YouTube video and understand the fallacy of giving the rich a tax break (15% tax on investment income versus 35% tax on work).

Nick Hanauer on job creation and the rich

"Socialism!"

There are different ways of discrediting your opposition.  Senator Joe McCarthy was notoriously successful with the smear.  He would accuse someone of being a communist – either outright, by innuendo, or using guilt by association.  Proof was unnecessary because the word itself was toxic and stuck like velcro.  In a formal study of debate or polemics a straw man is a debating technique and also an example of something called an informal fallacy.  You can set up a “straw man” – an argument that is superficially similar to another – and knock it down.  Logically you have not actually undermined the target argument but it looks like you have.

A recent example could be a response to the argument, “There is a predominant role for government in managing Obamacare.”  A straw man counter-argument might be “That’s Socialism!”  Determining the truth, falsity, or merit of the initial statement has not been advanced, hence the logical fallacy. A sarcastic rejoinder to the “Socialism!” attack could be “Oh, you mean like public schools, Social Security, and the National Park Service?” This example brings us closer to the crux of the problem: not everyone values public schools, Social Security or the National Park Service perhaps because they are, indeed, socialist –ic.

If words are going to be used as though they are “proof” of something or other, we’d better take a look at the words. To determine whether or not you care if something is “Socialism!”, there is an awful lot in our American culture – not only our government - that you will have to evaluate piece by piece.  We are a mixed economy which, formally, means you can find elements of a command system (“Socialism!”), a market system and traditional institutions within our way of life and our way of doing business.  We are also called a regulated market system because we are primarily a market system with considerable oversight and control by the government (“Socialism!”). 

Socialism includes, to a greater or lesser degree, some or all of these elements: 

• The government owns or controls productive resources including factories, farms, dams, rivers, forests, housing stock, etc. 
• The economy is centrally planned from the top down and your individual role may be largely determined by institutions beyond the control of your personal initiative (like a military draft or assignment to a vocational track in school). 
• The nation is a welfare state: it is the primary responsibility of the government to assure that the needs of the people are met. 
• Equity is a stated economic goal:  in this case equity does not mean a share or ownership; it means fairness or rough equality. People may be accorded some perquisites based on their contribution but there are no desperately poor nor conspicuously wealthy in such a system.

As a footnote, Comunists – on their own terms - would say (have said?) that they have not achieved Communism yet but that they are working to achieve Communism through Socialism.  Informed understanding of the label Socialism recognizes that  something is an example of Socialism because it conforms in some ways to the elements described above – that it is socialistic.

Many may argue that a completely Socialist society would fail.  That is almost certainly true.  I can say in my own mind that the same is equally true of a pure market system.  Fortunately both creatures dwell in the land of unicorns and fairies.  We have to live in reality every day and evaluate choices rationally.  This approach includes discounting scare words as “proof”.

Stalking the Wealthy in Oregon

Forbes is very helpful in reporting on the richest in the world or the United States.  Phil Knight is the only Oregonian currently on that list.  We know his net worth, depending on where the markets close on any particular day, is somewhere around $14.4 billion.  Tim Boyle, CEO of Columbia Sportswear, made the list in 2007. With somewhere around $1 billion, he was 891^st wealthiest person in the world.

 

If a Who’s Who of captains of industry could provide any indication of who is wealthy, such a list of privately held companies in Oregon was compiled by Oregon Business in 2011.  The top two classifications on that list are “More Than $1 Billion” (annual revenue, I presume) and “$1Billion - $250 Million.”  There are five Oregon companies in the first category and 22 more make up the second rank.  A similar list for publicly traded companies could probably be found or compiled easily enough – and those CEOs would certainly be fairly well-off.  But “privately held” suggests that the CEO has a strong family connection to the company.

Here are the first ten names on the list, in order of company revenues:  Roderick C. Wendt, President and CEO of JELD-WEN;  Peter Maslen, Acting U.S. CEO of Knowledge Universe – US;  Dick Borgman, CEO of Les Schwab Tire Centers; Robert G. Gootee, CEO of ODS Health;  Scott B. Walker, President of EPIC Aviation LLC; Delford M. Smith, Chairman of Evergreen Holdings, Inc.;  Cal Collins, CEO of ESCO Corp.;  Allyn C. Ford, CEO of Roseburg Forest Products;  Ron King, President and CEO of Western Family Foods; Wayne A. Drinkward, President of Bi-Mart Corp.

Understandably, the truly wealthy like their privacy and can afford to buy it.  But some are not shy about “outing” themselves or they simply can’t avoid it.  Celebrity and notoriety can provide hints or glaring evidence of who else should be on the list.

Phil Knight is mostly on the celebrity side, up there on the Forbes list.  The legend of his collaboration with Bill Bowerman and the waffle-soled Nike prototype is well-known.  So is Knight’s philanthropy.  Perhaps less known are the continuing controversies surrounding labor conditions at Nike’s overseas manufacturing partners.

How about Arlene Schnitzer?  She’s famous.  The namesake of the Portland landmark, Schnitzer Hall, is frequently associated with Schnitzer Steel.  Actually, Arlene’s husband, Harold, quit the family business.  Wikipedia reports:

After the war, Schnitzer entered the family business, Schnitzer Steel Industries, for a time. He did not wish to compete with his four brothers in the company, however, so in 1950 Harold Schnitzer decided to shift gears, selling his share of the business to provide capital for a new enterprise. The new enterprise founded was a real estate investment company known as Harsch Investment Properties. The name of the firm, Harsch, derived from the first three letters of Harold Schnitzer's first and last names.

The Schnitzer’s are known, somewhat erroneously, for their association with Schnitzer Steel and for their philanthropy.  Harold is deceased.

Loren Parks “is the biggest political contributor in the history of (Oregon)” per Wikipedia.  He lived in Oregon from 1957 to 2002 and now resides in Nevada.  He is a long-running political activist, fighting union penetration in Oregon for quite some time.

Andrew Miller is CEO of Stimson Lumber which has revenues somewhere in the neighborhood of $260 million a year.  He has a very high profile as an activist and political contributor.  A recent quote by him is, “The Democratic Party has been a monolithic front for public-employee unions.”

What do we know about these folks as a group? It’s like squeezing blood from a stone to find useful public information.  The census statistical abstract a provides this tidbit which was current in 2004:  In Oregon, there were 15000 Top Wealth Holders with total net worth of $61.328 billion.  A Top Wealth Holder has a net worth of $1.5 million or more.

Why should we care?  The very wealthy are in a position to comprise a plutocracy.  Many argue that  they are indeed.  Money buys access to political power and the ability to promote one’s agenda and interests.  This disproportionate concentration of power is contrary to the interests of the many wherever those interests diverge.  The concentration of wealth by itself is also a concern. 

The trillions locked up in personal net worth are not necessarily being actively invested in useful economic pursuits.  How much of it is sitting in accounts representing shares owned?  If it’s not being traded, the transactions are not being taxed and the cash is not ending up in accounts to be loaned, invested, spent, re-deposited and loaned again.  Much innovation and cleverness has been applied to provide arcane avenues of speculation that yield huge personal windfalls but miniscule macro-economic returns. 

The public interest outweighs customary values that protect such personal opulence.  Wealth that can’t be spent in several lifetimes has no relationship to the expected rewards of hard work, character and entrepreneurship.  Dynasties and fortunes that beggar the public are at odds with democratic values and the ideal of a large, thriving middle class.

PS  Who else belongs on the list?  I’d love to hear from you.

A Trojan Horse

In an e-mail, US Senator Jeff Merkley shared the frustration that he heard from business owners throughout Oregon who said they were having trouble finding applicants with technical skills.   The Senator responded deftly with an invitation to those constituents, and to anyone casting a critical eye at the state of education, to put their money where their collective mouth is.  Merkley introduced a bill, the  BUILD (Building Understanding, Investment, Learning, and Direction) Career and Technical Education Act of 2013.  It would “provide grants to support state efforts to restart career and technical education programs that have been scaled back or eliminated.”  The grants, of course, would be funded by the US Treasury and the taxpayers.

Any scheme to sneak money back into the public school system should be applauded: even if it has to be disguised, trojan-horse fashion, as a business-friendly measure.  I would suggest that the whole enchilada of public schooling is business friendly:  including art and music to give our potential worker a personally meaningful reason to stick around and complete his/her education; including English so our employees can string properly spelled words together in a complete sentence; including social studies so that our workers value and participate in the whole give-and-take of a social contract.  The social contract – admittedly abstract and not very “hands-on” – encourages certain business-friendly qualities like a work ethic, respect for property and an incentive to do one’s best in order to reap certain promised rewards.

edutopia

A way not to provide applicants with technical skills is to starve the public sector – not only schools but health care and human services as well.   A frustrating lesson for the business community, or anyone being asked to pay the bills, is that the closer you get to the people part of providing a shared basis for prosperity, the less likely a business model is going to solve your problems.  Organization, productivity, innovation and technology will obviously support education. A business model suggests a system of incentives to drive productivity:  Pay teachers for merit instead of experience and hold them accountable.  Common sense can tell you that no matter how much “merit” you want to hold your teacher “accountable” for, funding at a level that requires 35+  students in a high school classroom will not buy you a competent workforce, let alone a globally competitive one.

Your Other Job

Be sure to read the article in the Atlantic, provided here in full.  It shows that you can make ends meet on a full-time minimum wage job … as long as you have another job that provides about 90% as much as your regular 40-hour-a-week job.  

That sounds reasonable.  Some of the other budget assumptions are less reasonable:  $0/month for heating?   $20/month for health insurance?

McDonald's Can't Figure Out How Its Workers Survive on Minimum Wage

By Jordan Weissmann

Well this is both embarrassing and deeply telling.

In what appears to have been a gesture of goodwill gone haywire, McDonald's recently teamed up with Visa to create a financial planning site for its low-pay workforce. Unfortunately, whoever wrote the thing seems to have been literally incapable of imagining of how a fast food employee could survive on a minimum wage income. As ThinkProgress and other outlets have reported, the site includes a sample budget that, among other laughable assumptions, presumes that workers will have a second job. 

As Jim Cook at Irregular Times notes, the $1,105 figure up top is roughly what the average McDonald's cashier earning $7.72 an hour would take home each month after payroll taxes, if they worked 40 hours a week. So this budget applies to someone just about working two full-time jobs at normal fast-food pay. (The federal minimum wage is just $7.25 an hour, by the way, but 19 states and DC set theirs higher). 

A few of the other ridiculous conceits here: This hypothetical worker doesn't pay a heating bill. I guess some utilities are included in their $600 a month rent? (At the end of 2012, average rent in the U.S. was$1,048). Gas and groceries are bundled into $27 a day spending money. And this individual apparently has access to $20 a month healthcare. McDonald's, for its part, charges employees $12.58 a week for the company's most basic health plan. Well, that's if they've been with the company for a year. Otherwise, it's $14. 

Now, it's possible that McDonald's and Visa meant this sample budget to reflect a two-person household. That would be a tad more realistic, after all. Unfortunately, the brochure doesn't give any indication that's the case. Nor does it change the fact that most of these expenses would apply to a single person. 

Of course, minimum wage workers aren't really entirely on their own, especially if they have children. There are programs like food stamps, Medicaid, and the earned income tax credit to help them along. But that's sort of the point. When large companies make profits by paying their workers unlivable wages, we end up subsidizing their bottom lines. 

This article available online at:

http://www.theatlantic.com/business/archive/2013/07/mcdonalds-cant-figure-out-how-its-workers-survive-on-minimum-wage/277845/

Copyright © 2013 by The Atlantic Monthly Group. All Rights Reserved.

A Couple of Great Ideas

New York flagship papers and media as far afield as Australia hail it as a done deal but the Oregon legislature only commissioned a feasibility study.  The plan would be that students could waive their tuition and fees at state four-year universities as long as they agree to pay back 3 percent of their income over 24 years.  Any consideration of  ways for poor and middle-class students to go to college without racking up an average of $25000 of personal debt is welcome news.  The idea of generous support of college students is a no-brainer.   Historically it is an investment with a robust payoff – not only economically but as a cohesive, democratizing social force.  Even without comparisons to the post-war GI bill, the resources available today comprise a pale shadow of what was available to the Baby Boomers, the children of those who weathered the Depression and World War II.   Hopefully we will see a trial program proposed to the 2015 Legislature.

And while we’re at it, why can’t everyone aspire to a secure retirement – not just CEOs and PERS tier one-ers?  Real pensions are as much an entitlement as free tuition to college – in other words, not at all.

There is a feeble and fragile directive by the Oregon legislature to look over the idea of a state-supported way to save for retirement – given that nearly half of all working U.S. households fail to save outside Social Security for retirement.  Brent Huntsberger of The Oregonian reports, “House Bill 3436 originally set up the Oregon Retirement Savings Investment Board and directed it to establish a statewide retirement savings plan, similar to one created in California and to legislation considered by other states.  …  But amid objections from the financial industry, the Senate Rules Committee on Saturday amended the bill to drop "Investment" from the board's name and remove references to establishing a statewide savings plan.”

            These are great ideas, on wobbly, baby legs.  To paraphrase Grover Norquist, these ideas are so vulnerable that it would be easy enough to drown them in the bathtub.  Great ideas deserve protection.  Let’s at least give them room to breathe.

Revisiting Relief, Recovery and Reform

      Relief, recovery, and reform, championed during the New Deal, comprise a time-tested formula to lead Curry and Josephine counties out of the fiscal wilderness. Punishing the citizens is counter-productive and ultimately beside the point.  Members of the Oregon congress have alluded to the Appalachianization of Southern Oregon.  And there seems to be tacit agreement that it’s pretty hard to ask people to raise their own taxes when they don’t have jobs.

            There are proposals working their way through the legislature that would provide for a state takeover of certain local government functions including a "public safety fiscal emergency" compact with counties to help fund local services.  These are certainly reasonable and humane measures in light of the seriousness of the problem.

            Providing relief does not solve the problem.  The economic rug was pulled out from under the region – well, OK:  It was slowly and steadily dragged out from under them over a period of years as revenues from the timber industry evaporated.  There is plenty of room for criticism of the inadequate local response to that challenge over time.  But that does not change the challenge that remains. 

            Not that finger-pointing is pointless: the long-term arc of this story – how we got here – must be understood if we are going to make sure it never sneaks up on us again.  That is the gist of reform.

In the meantime, if certain resources that once were mainstays of the local economy are now unavailable, new resources must be developed.  Economic development is a familiar strategy for regional economic recovery.  It provides infrastructure and jobs.  It is the role of the state and federal government to provide the programs and the investment to pull that off. 

When the Smoke Clears

      The Oregon legislature has just passed “a slew of bills” to be able to end their session by the mandated July 13.  Among them are budgets for the states biggest agencies including education, the Department of Human Services, the Oregon Health Authority and the prison system.  I hope it has been a respectful interval.  After the knuckle bumps, the high fives, the smoke clearing, etc. a sober discussion must continue.  We are not done – not by a long shot.

      As mentioned here previously the k-12 budget misses the mark by a wide margin.  The legislature created a method for defining an adequate k-12 budget; it is called the QEM Model.  According to that formulation, the legislature is funding education at 75% adequacy.  The new budget will not prevent further teacher lay-offs nor substantially reduce class sizes.  It is the fiscal equivalent of treading water.

      DHS and OHA will realize increases in their budgets which will make it possible to enroll more people in the Oregon Health Plan and make “modest additions” to services for children, families and older people.  There are voices in the legislature that question the wisdom of DHS and OHA appearing in the state budget at all.  The Statesman Journal reports, “Rep. Tim Freeman, R-Roseburg, questioned whether the billions contained in the two budgets could be better spent in the private-sector economy to fight poverty.

          ‘You are taking $24 billion out of the economy and saying we as a state know how to spend that money better,’ he said.”  

          Those vulnerable populations who rely on these services have no safe haven.  DHS and OHA remain ripe targets for cuts or termination.

            The legislature and the Governor have been scrambling to contain burgeoning costs of Oregon prisons.  This is an alligator born of the Measure 11 sentencing guidelines of 1994.  Love ‘em or hate ‘em, this is an alligator that must be fed.  A ballot initiative (Measure 94) to lighten some of the provisions of Measure 11 was defeated 3-to-1 in 2000.  The people of Oregon have defined the correct level of incarceration in Oregon.  Any tinkering around the edges of this one will have to be careful and creative.  And prisons – even on the cheap – imply a certain minimum of care to feed and bunk prisoners and keep them from dying in ways that would cause a political scandal.

            Oregonians have a responsibility to fund the functions of government to which they have assigned a clear priority.  That means additional revenue and that probably means taxes.  Fair, equitable and effective taxes are not regressive; they don’t target less-privileged populations.  Oregon needs to revise its income tax or develop other non-regressive sources of revenue to adequately fund its services.