The Inflation Reduction Act: Fossil Fuels Become Law

WASHINGTON, DC – JULY 21: Sen. Joe Manchin(D-WV) faces reporters as he arrives at a hearing of the Senate Energy and Natural Resources committee at the Dirksen S.O.B. at the U.S. Capitol, in Washington, DC. (Photo by Bill O’Leary/The Washington Post via Getty Images)

The so-called Inflation Reduction Act of 2022 promises much, but better read the fine print in this massive 700 page proposal.

A patchwork compromise with coal baron Senator Joe Manchin, its motivation is the Democratic Party leadership’s desperate need for a legislative victory in addressing escalating inflation, the primary concern of American voters, as the mid-term elections loom. Thus the bill’s name. (The previous version was called Build Back Better).

With close analysis, you’ll discover it isn’t up to the hype. While an unprecedented $369bn is dedicated to mitigating climate change, it locks in reliance on fossil fuel expansion by hamstringing the Interior Department: no renewable energy development on public lands unless drilling leases are also offered to oil and gas entities.

As such, this bill is pure political charade. Fossil fuels cause climate change, yet they’re locked into the bill’s provisions. There is no mechanism to phase them out.

What we get is the loosening of regulations regarding environmental review and, horribly, mandated drilling leases in Alaska’s Cook Inlet and the Gulf of Mexico. The result? More pipelines, oil leaks, methane leaks, wilderness lost, species endangered, and continuing temperature rise. In 2016, the U.S. averaged one crude oil spill every other day (undark.org).

There are no caps on carbon admissions!

While the legislation features tax credits for carbon capture and sequestration, the fallout is that this could extend the life of polluting coal plants, exposing the public to toxic fumes, and making it difficult to achieve clean power goals.

Not talked about is an ominous separate agreement to move a bill in September that could potentially weaken protections under the Environmental Policy Act, which grants communities a say in what happens to their local environment. This is subterfuge, pure and simple.

You’re told the legislation will reduce greenhouse gas admissions 40% by 2030 (Rhodium Group, rpg.com). Considering the pressing problems we have with securing energy resources, it’s dangerously possible that fossil fuels will gain the upper hand over renewables, upsetting any trajectory of even-handedness. As is, the Biden administration in early July held its first onshore lease auction, releasing a proposed plan for off shore drilling, despite Biden’s campaign pledge to cease new oil and gas development on federal lands and waters (insideclimatenews.org).

In short, the Inflation Reduction Act takes back what it gives out, a Faustian wager that forfeits the future for a short-sighted political shell game in the present.

I’m not saying there aren’t good things in the bill. And, yes, there are groups like Nature Conservancy, the Sierra Club, and Earth Justice, urging speedy passage of the legislation. They may be willing to drink the Kool-Aid, but not me, nor should you.

I go by the late E. O. Wilson, “Darwin’s heir,” my icon in environmental matters, who repeatedly denounced such organizations for their compromises, perpetuating environmental demise. They’ve thrown in the towel, their credo, Nature is already gone. We live in the Anthropocene. Wilderness must serve human needs (Wilson, HalfEarth: Our Planet’s Fight for Life).

This is a climate suicide pact,” comments Brett Hartl, government affairs director for the Center for Biological Diversity (CBD). “It’s self-defeating to handcuff renewable energy development to massive new oil and gas extraction.”

–rj

Corporate Gauging and Rising Prices

The U.S. Federal Reserve continues to raise interest rates to slow raging inflation. The root culprit isn’t the consumer, but the greedy corporate sector, which is using inflation as cover to maximize its profit margins. We know this every time we shop and see goods priced double, or more, the rate of inflation. What’s needed immediately is a windfall profit tax.

Meantime, the average worker faces an insufferable erosion in purchasing power, and the plight of those living on fixed incomes exacts the ultimate cruelty.

Three principal parameters to assess market expense are labor costs, nonlabor inputs, and the “mark-up” of profits beyond the first two. Recent measurements (economic policy institute.org) reveal record profit margins over the former two, or plus 53.9% growth in corporate profits, as opposed to 38.3% for non-labor cost, which includes the supply chain crisis induced by the pandemic, and just 7.9% for labor costs.

Certain sectors of the economy have especially profited, averaging above 20% in profit margins such as information technology and fossil fuels. Exxon, for example, has just published a record profit of $17.9 bn for the second quarter (NYT).

Fueling inflation is the accelerating corporate buy outs, lessening competition. You’re aghast at rising meat prices? That happens because just four meat conglomerates now control the market. Since 1990, some 75% of corporations have consolidated and control as much as 80% of the market, reports the Official Monetary and Financial Forum (OMFIF).

And things may likely get worse as a looming recession makes itself felt and corporations cut expenses to stabilize profitability. Amazon has laid off 100,000 workers, even as profits bulge. Others include Twitter, Google, Netflix, Peloton, Best Buy, Tesla, Ford, General Motors and Exxon Mobil.

Corporations aren’t by nature altruistic. They exist to reap maximum profit for their CEOs and investors. They think in numbers, not individuals.

–rj

Trans Pacific Partnership: Corporate Mayhem Alive and Well

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Despite President Obama’s spirited pledge to reduce the growing gap between rich and poor, his administration has been covertly involved in negotiating a Trans Pacific Partnership (TPP) trade agreement whose potential fallout would only exacerbate, not lessen, the economic divide, consolidating what is essentially an oligarchy of Wall Street interests.

You may be unfamiliar with the TPP, as it’s not played up in the media, unless you’re a rare aficionado of the marketplace.  Briefly, 14 nations bordering the Pacific, controlling 40% of the world’s GDP and 26% of its trade, have been at work for more than a year, hammering out the final details of a complex agreement that would eliminate tariffs on goods and services.  Composed of 29 chapters, its scope would include not only the area of finance, or banking, but telecommunications (i.e., the Internet), and even food services.  It would have devastating consequences for those of us committed to environmental concerns that include global warming.

Ominously, it includes proposals that would curtail consumer protection across a wide spectrum.  According to Republican Reports, leaked TPP negotiation documents reveal the Obama administration’s attempts to stymie other governments from implementing financial regulations, believing they could mitigate another bank collapse.

These leaked documents (see citizen.org) indicate proposals allowing corporations to sue governments under the auspices of “foreign tribunals,” thus circumventing domestic courts and local laws.  Corporations could even demand financial compensation for “tobacco, prescription, and environment protections” that undermine their profits.

As Senator Elizabeth Warren–I like her more everyday–warns, such provisions allow “a chance for these banks to get something done quietly out of sight that they could not accomplish in a public place without the cameras rolling and the lights on.”

Alarmingly, even without the TPP, over $3 billion has already been paid out to foreign investors under current U.S. trade and investment agreements, with another $14 billion pending, “primarily targeting environmental, energy, and public health policies” (citizen.org).

Representing the U.S. in the negotiations is Obama appointee Stefan Selig, a former Bank of America investment banker nominated to become Under Secretary for International Trade at the Department of Commerce.  Since his nomination, he’s received $9 million in bonuses.  (He had received $5.1 million incentive pay the previous year.)

Slated to join him in the negotiations, pending Congress’ approval, is Michael Froman, presently U.S. Trade Representative.  He received $4 million from CitiGroup as an exit payment in addition to $2 million in connection with his holdings in several investment funds.

This practice of banks lining the pockets of their former cohorts upon joining government is pervasive in the banking industry, pocket money for establishing influence in contexts affecting public financial policy.

Unfortunately, for all the pretty rhetoric coming out of the White House, the oligarchy of the one percent remains entrenched, and even abetted, while the TPP, added to its already formidable arsenal of financial peddling, poses a potent means to intimidating the common citizenry, here and abroad, opposed to its hegemony of privilege.

It certainly doesn’t contribute to economic parity.  According to a study by the Center for Economic Policy and Research, as reported in the Washington Post, the economic gains would largely accrue to the wealthy.

–rj

On Class Warfare in America: The Yacht Mentality Revisited

yachts3

I wanted to revisit my last post of several days ago, “The Yacht Mentality that Threatens our Economy,” with this apropos poem by William Carlos Williams, one of America’s foremost modernist poets.  As you may have surmised, it’s called “Yachts,” which I employed as my central metaphor in depicting the economic inequity rampant in our nation.

Williams, by the way, was a physician from Hoboken, NJ, who compassionately dedicated his practice to treating the poor, who were never far from his thoughts.  We see this vividly in his symbolically dense poem that comes close to being allegory in its one-to-one application, or depiction, of the tensions governing the relationship between the oligarchy of the economically privileged (shall we call them them the 1%?) and the majority, marginalized working class folk like you and me.  But first the poem, then my commentary:

Poem:

The Yachts

contend in a sea which the land partly encloses
shielding them from the too heavy blows
of an ungoverned ocean which when it chooses

tortures the biggest hulls, the best man knows
to pit against its beatings, and sinks them pitilessly.
mothlike in mists, scintillant in the minute

brilliance of cloudless days, with broad bellying sails
they glide to the wind tossing green water
from their sharp prows while over them the crew crawls

ant-like, solicitously grooming them, releasing,
making fast as they turn, lean far over and having
caught the wind again, side by side, head for the mark.

In a well guarded arena of open water surrounded by
lesser and greater craft which, sycophant, lumbering
and flittering follow them, they appear youthful, rare

as the light of a happy eye, live with the grace of all
that in the mind is fleckless, free and
naturally to be desired. Now the sea which holds them

is moody, lapping their glossy sides, as if feeling
for some slightest flaw but fails completely.
Today no race. Then the wind comes again.  The yachts

move, jockeying for a start, the signal is set and they
are off.  Now the waves strike at them but they are too
well made, they slip through, though they take in the canvas.

Arms with hands grasping seek to clutch at the prows.
Bodies thrown recklessly in the way are cut aside.
It is a sea of faces about them in agony, in despair

until the horror of the race dawns staggering the mind,
the whole sea becomes an entanglement of watery bodies
lost by the world bearing what they cannot hold.  Broken,

beaten, desolate, reaching from the dead to be taken up
they cry out, failing, failing! Their cries rising
in waves still as the skilled yachts pass over.

Commentary:

When you first get into this poem it seems to feature Man vs Nature, but by l. 13 with the specifics about the crew, which “crawls solicitously,” it dawns on you that it also takes in humans pitted against one another.

If the earlier portion of the poem (up to l. 13) gives an imaginative, blissful view of Nature in relation to Man and, in turn, of Man’s inter-relationships, the latter portion gives you the awful reality masked by the seeming tranquility, or the potential for revolt from the status quo of both Nature and Man.

Mention of a “race” sets the stage for transition into a contest for mastery, initially of yacht vs. yacht, but note how the diction changes here with sinister implications:

“Now the sea which holds them is moody”

 “As if feeling for some slightest flaw”

“Now the waves strike at them”

Note as well how the ominous turns into a personification of unleashed violence in what becomes a power struggle waged between haves and have nots, with the yachts metaphorized into repressive knife slashing entities indifferent to whom they maim:

“Bodies thrown recklessly in the way are cut aside.

“It is a sea of faces about them in agony, in despair.”

Williams’ subterranean intent now surfaces:  we have a revolt put down by the yachts, the poem’s symbol for connoting the wealthy, of the normally “solicitous,” or working classes, whose labor has made their wealth possible, though they’ve gleaned little for themselves, “bearing what they cannot hold.”

“…the horror of the race dawns staggering the mind,
the whole sea become an entanglement of watery bodies

The yachts, or impervious upper class, obviously win out on this particular day, but not without leaving in their wake their decimated victims:

“Broken,
beaten, desolate, reaching from the dead to be taken up
they cry out, failing, falling! their cries rising
in waves still as the skillful yachts pass over.

In sum, Williams has delivered a Marxist polemic of poignant genius in its thematic rendering of class struggle against inequity.  The very style of the poem adroitly reinforces this theme of worker repression by the economically removed in its run-on lines and skillful alliteration at poem end, the yachts unheeding of the crying wounded in “waves still as the skillful yachts pass over,” suggesting speed and, hence, indifference.  For Williams, this hierarchy “live(s) with the grace of all that in the mind is fleckless, free and naturally to be desired.”

In short, their narcissism of self-indulgence (materialism) mirrors behind its proffered beauty their willful escape from responsibility to the working classes on whom their wealth is built (“the crew crawls/ant-like, solicitously grooming them”).

In an America where 37% possesses half its wealth and the top 1% often pays minimal taxes, Williams’ poem reminds us that we have much work to do to render the American dream palpable for not just a few, but for the many.

–rj

The Yacht Mentality that Threatens our Economy

unemploy I turned on the TV while eating lunch yesterday to a feature called “Island Paradises,” thinking Hawaii or maybe some Caribbean gem like Dominica or St. Vincent’s.  Instead, it was about one man’s substantial investment, worth $28 million, in a plus 100 foot long yacht, sporting 3 recreational decks with pools, 7 bathrooms and 15 bedrooms, plus 3 bars and a below deck garage replete with several sleek motorized boats.  Docked in Ft. Lauderdale, it costs– Can you believe this?–$50,000 a fill-up.

I don’t know about you, but this kind of ostentatious display of wealth rankles me, not because I’m covertly envious, but because I think it represents excess and is just plain ethically wrong in a world of so many poor.  Again, I think of the 1% in my own country (USA), who own 37% of its wealth and whose income has actually increased since the economic downturn of 2008 (Pew Report, February 2013).  Meanwhile, hundreds of service food workers have staged walkouts in quest of a more sustainable minimum wage, presently $7.25 an hour. The average food service worker actually makes about $11 an hour, barely above the poverty line for a single parent with one child.

The President is compassionately urging an extension of unemployment benefits for 1.3 million presently receiving unemployment insurance.  (The total number of long term unemployed, however, stands at a stubborn 3.5 million.)  As he rightly put it in Saturday’s weekly address, “The holiday season is a time for remembering the bonds we share and our obligations to one another as human beings.”

It isn’t that the vast majority of these folks are free loaders.  It’s simply that they’ve been looking and can’t find work and that, by the way, is what the drop in unemployment to 7% really means, that thousands of despairing workers have simply given up looking for work. Unfortunately, the longer you’re out of work, the more companies shy away from you.  What’s more, in a strained economy, many companies are resorting to part-timers to circumvent having to pay benefits and to maximize profits.

What really hurts is when you’re past 50 and lose the job you’ve worked at a good many years, anticipating a reasonable retirement package just a few years up ahead.  This recently happened to a friend of ours, an engineer with a strong resumé in computer skills. Though he looked everywhere, he ended-up driving a school bus.  So even if you find work, you’re likely to find your sharply reduced wages sure to contribute to your continuing financial distress.  The situation for blacks and hispanics is even bleaker.

That yacht feature reinvests my thoughts as I write.  The obscenity of it!  The truth is, despite what conservative pundits tell you, a massive transfer of wealth is taking place in America and it’s not Robin Hood style from rich to poor.  Consider this from the Pew Report:

During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%.

Think movie stars with their posh Bel-Air and Malibu compounds; instant millionaire athletes, Wall Street traders; bank CEOs.  Hey, think Walmart with its six family progeny having a bloated net worth of $144.7 billion.  Wal-Mart currently pays its “associates” $8.81 an hour.

Again, our President weighs-in:

If Members of Congress don’t act before they leave on their vacations, 1.3 million Americans will lose this lifeline. These are people we know. They’re our friends and neighbors; they sit next to us in church and volunteer in our communities; their kids play with our kids. And they include 20,000 veterans who’ve served this country with honor.

In the meantime, House Speaker John Boehner, emerging as America’s Scrooge, has served notice of his opposition to any extension of unemployment insurance, set to expire December 28.

This is America.  We can do better than a yacht mentality of self-absorption, extravagance and indifference.

–rj

The Fading of the American Dream: a Tale of Two Nations

You may have seen this morning’s AP report on growing poverty in America.:

Four out of 5 U. S, adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream.

I found the report disturbing, but not unexpected, as I’ve done a lot of reading on the subject over the last several years.  Things aren’t going well for us these days on so many fronts, but foremost, economically.  This isn’t the America I grew-up in.  Nothing is perfect, but I think of that world of the early 60s as just maybe our high water mark.

Take crime, for example: In 1963, there were only 18 arrests for drugs per 100,000 people.  Our jails held far fewer people, but if you were convicted, you went to jail.  We still had a lot of work to do when it came to civil rights and feminism was just coming into its genesis, but they were underway with their promise of inclusion into full citizenship.  The Cold War was almost palpable, and while none of us would wish its return,  ironically it may have fueled our energy,  propelling us into space.

What makes things hard to swallow in difficult times like these, however, is the growing gap between rich and poor.  What may surprise you is that, in sheer numbers, Whites are the majority poor, confirmed by the government’s own data, with 76% of Whites likely to experience economic insecurity (job-loss,  or a year or more of dependence on government aid, or income 15% below the poverty line) by age 60.  White-mother headed homes now equal those among Blacks.  Overall, the number of poor in America stands at a staggering 46.2 million. Things are still difficult for minorities, but the biggest jump in poverty is among Whites.

In contrast, the well-off are doing better than ever, with 1% possessing 50% of the nation’s wealth.  Since 1993, this 1% has seen a 58% increase in that wealth.  Following the downturn of 2008, it has experienced 93% of the income gains.  We are, in short, in danger of becoming two nations, or of those few who have, and have it abundantly, and the many who barely make ends meet, or are without work, or in danger of losing their work.

Increasingly, this confers not only economic disparity, but cultural dislocation in education, politics, and even social and intellectual values.  It decides where you live, the schools your children attend, and even your personal well-being, as poverty is the primary instigator of crime.  In this rare moment of American social history, many Whites now find themselves in the same realm of exclusion from opportunity as minorities.  When it comes to Affirmative Action, it strikes me that the new poverty calls for a redefining of its premises, or the consideration of economic disadvantage and not soley race.

Certainly, we live in a changing world where a global economy has shrunk the market for our domestic exports and we’ve experienced a sharp decline in our manufacturing base as a consequence.  When I grew up, you could reasonably expect to land a job with a steel mill, auto manufacturer, or in a coal mine for good wages, pensions, and the like, if you didn’t go to college.

Another factor exacerbating inequality is living in an information age that posits a market value on sophisticated skills that are often bred in a nurturing context of means, family stability, the right schools and colleges, and the cultivation of a network of those with influence.   We’re talking then about a wholly different lifestyle for those with means.

Like most of our family members, my father was a leather worker.  We weren’t well-off, but we had sufficient to make our way in a world without food stamps.  With the loss of domestic shoe manufacturing to other countries, it’s a world now relegated to the back recesses of memory.  I’ll not give you a litany of lost industries from textiles to furniture, for example, and their contribution to the retreating American dream.

Nobody puts the American economic malaise better than the New Yorker‘s George Packer in his must read, The Unwinding (2013):

If you were born around 1960 or afterward, you have spent your adult life in the vertigo of that unwinding. You watched structures that had been in place before your birth collapse like pillars of salt across the vast visible landscape—the farms of the Carolina Piedmont, the factories of the Mahoning Valley, Florida subdivisions, California schools.”

Lately the President has returned to emphasizing economic issues.  He envisions creating “a ladder of opportunity for all.” He wants to shrink the income gap.  I don’t doubt his sincerity, but is this simply a euphemism for government throwing more money at the problem, or perhaps an innuendo of Marxism with its inherent penchant to restructure the classes?

Money bailouts haven’t helped us before, though it did save the auto industry and the banks.  On the other hand, Libertarians favor deregulation.  Last time I looked, it got us into trouble and we’re still trying to right our balance following the Great Recession of 2008.  Some think focusing on equal opportunity rather than income redistribution is the ticket.  Good arguments can be had both ways.

But the President is surely right about closing the income gap, however it’s done, and most of us everyday folks are probably in lock-step with his goal, though we may differ as to method.   As Charles Murphy points out in his trenchant Coming Apart, we are witnessing America’s increasing bifurcation into two classes, rich and poor:  “…the divergence into these separate classes, if it continues, will end what has made America America.”  Murphy’s thesis is that America is being torn apart, not by race, but by class, and I agree.

The sad thing is, nobody really knows what to do.  In the meantime, what can be worse than to lose faith in your own future?

–rj

Happy Days are here again: and the banks roll on

obama

If you’ve been watching the headlines on the economic front, you may have seen the news about record bank profits in the first quarter of the year to the tune of $40.3 billion, an all time high.  In fact, profits surged 15.8% over the same quarter a year ago. This marks the 14th straight quarter of bank gains. In short, the bailed out banks (you and I paid for that), are making money hand-over-fist.  Not so, mainstream America.

Meanwhile, in the past 12 months, scandal- ridden JP Morgan has garnered $24.4 billion in net profit, evidencing once again that banks could evade laws with impunity.  The precedent, after all, had been the release of the 2000 page examiner’s report on Lehman Brothers in 2010,  suggesting fraud had brought about its bankruptcy, yet nothing was done.

You’d never have expected hand-outs from the Obama administration, given their campaign pledges to look out for us po’folk and their left of center politics.  Their hand-outs, not loans, to banks and other fiscal institutions, are shockingly in the trillions, with $85 billion dished out every month from the Federal Reserve.

But then again, we can better understand the forces in play when we look at the cohorts Obama gathered about himself:  Jacob Lew, former Citigroup executive, appointed deputy secretary of state, with a cool $900,000 bonus in his pocket from Citigroup;  Mark Patterson, Goldman Sachs lobbyist, made chief of staff at the Treasury, despite a ban on lobbyists;  Timothy Geithner, who became the architect of the bailouts, appointed as Treasury secretary, even after it was discovered he hadn’t fully paid his taxes;  Larry Summers, who authored many of the pro-bank policies of the nineties, recruited as a mainstay economic advisor; and Rahm Emmanuel, appointed Chief of Staff, after gleaning $16.5 million as a Chicago investment banker in just 30 months in-between government jobs. All of them Democrats.  All of them with dirty hands.  

At the present moment, Larry Summers is being touted as the next Federal Reserve Chairman, replacing the retiring Ben Bernanke.  A long time Goldman Sachs executive and trader, he played a primary role in deregulating Wall Street in the Clinton administration.

So far, and probably never will happen, not a single bank or CEO has been brought to account for their criminal mismanagement of the people’s money, leading to the 2008 meltdown and consequent suffering for millions of Americans. Their suffering continues.

Now you would think from the President’s major address on the economy this month that happy days are here again for you and me, what with his boast of 7.2 million new jobs created in the business sector in the last four years.  But politicians do prevaricate, and it’s up to you and me to hold their feet to the fire.  Fact is, long term unemployment is at its highest level since the Great Depression, and of the newly minted jobs, most are low wage (often in the service sector), temporary, or part-time.

Curiously, nowhere did the President mention the plight of Detroit facing bankruptcy and the possible erosion of pension and health benefits for the city’s workers, including police and fire personnel.

To give him his due, he did allude to the growing income disparity between the rich and the majority of Americans:

Even though our businesses are creating new jobs and have broken record profits, nearly all the income gains of the past ten years have continued to flow to the top 1 percent. The average CEO has gotten a raise of nearly 40 percent since 2009, but the average American earns less than he or she did in 1999. And companies continue to hold back on hiring those who have been out of work for some time.

But how did this happen?  He didn’t mention government’s largesse to the wealthy through bank bail outs, corporate tax breaks, and reduced wages for autoworkers.  In the first two years of the President’s tenure, or after the downturn of 2008, the richest one percent enjoyed an 11% increase in income, unlike the rest of Americans whose incomes declined.

Again, nobody’s been minding the store.  In 2011, the Senate Permanent Subcommittee  noted Wall Street’s culpability just prior to the 2008 market collapse as “a financial snakepit rife with greed, conflicts of interest and wrongdoing.”

While it may appear that things are humming along nicely, the banks booming, the real estate market up, stocks at their peak, the reality is that more than 3 million of us can’t find work.  Those who do, work for less, often part-time.  Many, particularly those 50 and over, may never work again.  Black youth unemployment is currently at 42 %.

Several million Americans have been foreclosed upon by the banks, losing their biggest investment stake and, sometimes, a whole lot more.  Many others owe the banks for houses purchased at inflated prices, now worth considerably less.

But the banks roll on, too big to take on, as Attorney General Eric Holder recently let slip. What’s more, their lobbyist legions do their work well, busy button-holing members of Congress.  It’s a game of money, always has been, money spelling influence.  It’s America, you know.

This just  in:  The President remains committed to slashing Medicare by $400 billion and Social Security by $130 billion in his projected 2014 budget.  (In 2008, candidate Obama had pledged, reiterated by Biden in 2012, that he wouldn’t cut Social Security.)  Apparently, the bankers are a privileged class; the people, expendable to the exigencies  of  power and influence.

-rj

Wal-Mart: an anatomy of a colossus

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You see them everywhere now, spreading like a fungus, invasive, unstoppable, a contagion blighting main street America.  What we used to call downtown is a pale shade of what once gave vitality and lent identity to our cities and towns, now reduced to a town hall, a few restaurants, maybe a police station, a bank or two, perhaps a post office and a motley of lawyer offices.

While the rise of the shopping mall, geared to a modern, mobile consumer, has played a significant role in emptying our town centers, the rise of box stores has accentuated the trend, with Wal-Mart foremost among them.

In the U.S., Wal-Mart is our largest retail employer, with 1.2 million workers; worldwide, more than 2 million.  It’s also the richest, with 2012 sales of $444 billion.  Each week, an estimated 200 million visit a Wal-Mart, at last count, some 10,700 stores located in 69 countries.  There are also ten web sites internationally for those finding it more convenient to shop at home.

Wal-Mart has its vociferous critics who malign its resistance to unions, poverty scrapping wages, marginal health benefits, and harsh impacting of local commerce.  Defending itself, Wal-Mart takes pride in pledging $2 billion through 2015 to combat hunger in America.  It gave 17 million to needy Gulf communities in the aftermath of Katrina.

Wal-Mart claims it’s done much to help small farmers by its increasing emphasis on local produce with $1 billion in purchases.  In countries such as Brazil, it has confined its meat sources to those farms not engaging in deforestation.

It has pioneered in garnering healthier foodstuffs in a commitment to reduce sodium by 25%% and added sugar by 10% and the elimination of transfats over the next two years at no price increase.  Last February, it introduced “It’s Great For You icons” to suggest healthier food items.  Along the same lines, it has contributed $26 million to programs promoting better nutrition.

In the sustainability area, Wal-Mart is a leader in transitioning to solar for 5 to 20% of the energy needs of its stores.  Last week, it announced immediate solar implementation for ten of its stores in Maryland.

But much of what Wal-Mart does is all about public relations, or polishing its image, a shellac concealing inequities.  Were it done for its own sake, or from compassion, or a sense of social need, such altruism would doubtless be received warmly.  It continues, however,  to advance itself by marginalizing worker wages and benefits.

In 2002, there were the revelations in Mexico, where bribery was used to purchase land sites and contracts. Initially, Bentonville, AR headquarters hushed up the scandal, only to sense media’s gaining on them and the fact of declining stock value.  Its response, as nearly always with Wal-Mart, was damage control.  Appointing its own investigators, it ultimately sent its findings back to the very authorities in Mexico tainted by the scandal, resulting in exoneration of the accused.

There is also no denying Wal-Mart has been fiercely anti-union.  In Canada, for example, it closed a store just after it had been unionized.  In late 2012, organized union boycotts were staged against Wal-Mart on Black Friday, though few “associates,” about 50 nationwide, took part and consumers virtually nil.  In fairness, unions were a principal factor behind the collapse of Hostess Brands following last November’s strike and have often exacerbated costs elsewhere in a marketplace keenly sensitive to foreign competition.  In Kentucky, where I live, Toyota workers have repeatedly turned down unionization by large pluralities.  My point is that when employees are treated well they have little relish for unions.  The lack of participation by Wal-Mart employees smacks of fear of reprisal, given their meager earnings yet need for income.

In those industries represented by unions, businesses in general have responded to decreased profitability by increasingly resorting to contract labor, reduced hours, reduction in workers hired, layoffs, elimination of stores and factories, or by simply packing-up and leaving the U. S.  Hostess Brands, makers of Twinkies I grew up on,  had already been struggling with indebtedness and sagging profits, and yet one of its several union called a fatal strike.  But it’s one thing to work for Toyota that treats workers like family and quite another working for parsimonious Wal-Mart, which has increasingly been turning to the same cost limiting measures.

It may come as a surprise, but nearly a third of Wal-Mart’s hires come from heavily unionized grocery stores and fast food enterprises that actually paid their workers less in wages and benefits than Wal-Mart.  According to the Bureau of Labor Statistics, the average pay of a Wal-Mart associate is $21,744 (2012) compared with $20,200 for grocery store workers.  The anomaly is that Wal-Mart prospers while retailers like Montgomery Ward have bellied-up, and chains like JC Penney and Sears may be about to follow.  It seems obvious consumers have been voting with their feet.  Sam Walton’s philosophy was to sell cheap and reap volume.  He seems to have gotten  the message, but for self-advantage rather than entering into the ethics good stewardship of wealth demands.

Turnover at Wal-Mart is high, with half of hires quitting after only a year. Still, it’s less than the 65% average in the retail industry at large, which merely demonstrates worker discontent is intrinsic in a market place defined by low wages and marginal benefits generally.

Recent headlines have focused on alleged discrimination against women in areas of  pay and promotion with several class action suits underway.  Though two-thirds of Wal-Mart’s workers are women, only a third are in management.  Wal-Mart’s argument is that the statistical disparity doesn’t reflect context, with many women preferring part-time employment or lacking in prerequisite skills.  Pay and promotion are decided by local stores anyway, not Bentonville.  In a 2011 High Court decision, the Court ruled by a 5-4 vote in Wal-Mart’s favor, based on local determination rather than national policy.  To Wal-Mart’s credit, two years ago it launched a support program to assist women in acquiring management skills.

Walmart has also been taken to task for relying on imports, especially from China, resulting in decimation of the manufacturing sector.  For me, this is reliable criticism, though I would argue America’s manufacturing exodus had begun before Wal-Mart’s emergence as a retail colossus.  I also ask, Where is this not happening and how likely its rebirth?  Still, Wal-Mart has pedaled foreign goods with unabated alacrity from the outset in consort with low wages to maximize profitability.

I started out with the given of the decimated local community; it’s a fact, much of it caused by Wal-Mart, but not solely.  What about Lowes and Home Depot, Best Buy and Macy’s among a plethora of entrepreneurial empires that have increasingly homogenized America’s look and short circuited the mom & pop stores of our childhood?  Will they also go away?

But there’s a good side, too.  Consider Vermont.  I’d gladly live there if it weren’t so cold and costly.  Vermont has only four Wal-Marts!  This comes about largely through small town pressure to maintain community cohesiveness.  Yet in Burlington, Vermont’s largest city, you’ll find the same crowded Wal-Mart aisles as anywhere else.  What’s more, it’s proved a spinoff as an anchor for other chain stores like Lowe’s.  Nonetheless, it comes at a price and I remember popular writer Bill Bryson commenting on his adopted Hanover, NH town how much he enjoyed the intactness of the town  center not yet impacted by suburban malls.

In today’s troubled economy, at least more than a million Americans have found work at Wal-Mart unlike many millions more who want to work and are open to even lower paying jobs, but cannot.  But this speaks to me of desperation and not free, and first, choice. Personally, I don’t like to shop at Wal-Mart’s and avoid doing so in favor of cleaner, less-crowded aisles; that special intimacy I find at my local drug store where they know me by name; foods that somehow look fresher and less picked-over.

I do sometimes think the Wal-Mart criticism, at times justified, borders on an unceasing venom fostered by some of my fellow Progressives yearning to restore us to a pristine world, which I doubt ever existed except in the weave of human myth, proving again Idealism’s too frequent folly in pursuing a salient, but unhelpful, simplicity. Bottom line, Wal-Mart is not some rude renegade in the business commune. They’re simply the largest and thus most visible target and hardly the sole sinner.

I suspect my fellows resent as I do the oligarchy of the rich, particularly when its comes to the money pinching Sam Walton who became America’s first billionaire, $2.8 billion, in the mid 80s.  Even then, parsimony came easily to Sam, who had a vogue for $5.00 haircuts and never left a tip.  He made sure his family, Helen and the four children, were  well-provided for, however, bequeathing a net worth of $23 billion.  Six of the surviving Walton offspring ultimately had as much money as the bottom 30% of Americans.  But money talks.  In 1992, he was awarded the Presidential Medal of Freedom by President Bush and his wife, who came to Bentonville for the occasion.

I’m chagrined at the $23 million executive salary paid to Wal-Mart CEO Michael Duke this year.  According to the Huffington Post, at an average pay of $12.67 an hour, it would take 785 years for an “associate” to earn Duke’s one year salary.  But maybe this is an unfair gripe or poor sense of what makes for injustice,  After all, Apple’s Tim Cook gets just under $400 million per annum, exhibiting capitalism’s vulgarity at its worst.

What I also fervently dislike about Wal-Mart is its intrusion into virtually every nook and cranny, not just textiles and food.  Not only do they sell gas, they now feature inside banks, subway and McDonalds outlets.  Medicine is currently all the rage, having begun with optometric services.  Now Walmart wants to be your physician, too, with thousands of clinics offering an array of services.

But I’m being unfair again, since Wal-Mart currently lags behind CVC and Walgreens in this market dash to offer such services.  But my insistent defiance leads to my confessing I now shop at a Kroger superstore for our groceries, another box store in other words, where I can also buy furniture, kitchen utensils, even jewelry.  New Yorker writer George Packer eloquently captures my mood in his acute analysis of America’s fall from grace (Unwinding [2013]) in writing of fellow resistant types:

… in parts of the country that were getting richer, on the coasts and in some big cities, many consumers regarded Wal-Mart and its vast aisles full of crappy, if not dangerous, Chinese-made goods with horror, and instead purchased their shoes and meat in expensive boutiques as if overpaying might inoculate them against the spread of cheapness, while stores like Macy’s, the bastions of a former middle-class economy, faded out, and America began to look once more like the country Mr. Sam had grown up in.

Like it or not, we’re all caught in the net. Wal-Mart has coalesced with the landscape, ubiquitous and with many imitators.  We can never, no matter what we do, get quite free again.  We can never go home again.

–rj

Is government planning to nationalize the pension system?

Currently, rumors have been floating like broom-seated witches in the wind that the government wants to not only overhaul America’s pension system, but replace it with its own.  Nationalization then is the buzz word here.  Private plans such as IRAs and 401(k)s would ultimately be eliminated (National Seniors Council).

How tenable are such rumors?  We do know that the Labor Department has been looking at pension reform, soliciting input from several interests such as the AFL-CIO, who are urging more government regulation of private retirement accounts and maybe replacing 401(k)s, for example, with government annuities.  Some on the Left argue that 401(k)s and IRA’s discriminate against the poor.

Those on the right, however, fear that the government would set-up its pension annuities similar to Social Security, which is invariably used as a slush fund to buoy up government spending.  Benefit taxes would be subject to a sliding scale based on individual or family income. In short, redistribution would be built in.

Now let me give my view, not necessarily pleasant, but hardly fraught with fear-mongering conspiracies of a Marxist coup d’etat.

Yes, government is seeking to overhaul the pension system, but only to generate more revenue.   Huge deficits can’t continue without having to pay the piper.  Ask the Europeans.  Washington isn’t interested in nationalizing the pension system, though Argentina is about to do it, or eliminating private pension options.

Let’s take your IRA or 401(k), for an example of the way government sees them as potential sources for increased revenue.  At age 70.5, you have to make regular withdrawals known as “required minimum distributions”.  You pay a tax on those withdrawals, but they can be strung out over a very long duration, depriving the government of revenue.

As is, present contributions to 401(k)s are anticipated to swell tax deferrals by the billions in coming years.  For instance, backtracking to fiscal 2011, deferrals resulted in an estimated $111.7 billion revenue loss.  For 401(k)s alone, the loss is put at $67.1 billion (egis.ebscolhost.com).

Then there’s that issue of fairness I mentioned at the outset.  While you’re currently allowed in 2013 to contribute as much as $17,500 and a catch-up contribution of $5,500 for those age 50 or over, how many of us can actually contribute anywhere near the maximum?  But the rich can and do, reaping substantial tax benefits.  It’s the old formula perhaps that money makes money.

I think you get the picture.  Even here in Kentucky where I live, state government is looking for increased revenue sources too.  Currently, it’s on the drawing board to tax Social Security benefits just like the federal government.  By the way, while some states may seem tax havens for retirees,  know that laws can change.  Right now, Kentucky’s Homestead Exemption Act provides a break in taxes on property assessed value for senior citizens at age 65.  Even that isn’t chiseled in granite.  In 2011, Minnesota dropped their provision.

Conspiracy?  Socialist take-over?  No way!  The fact is that we live in lean times.  The challenge is then to cut spending meaningfully and fairly and safely.  But how you do that in a long-term marginal economy has thus far eluded resolution.

rj

My conversion to the Left

Let me tell you of my conversion to the Left

1.  The Great Recession:  Our worst economic crisis since the stock market collapse in 1928, its genesis clearly lies with Wall Street speculators and the banking industry.  With dollar signs for eyeballs, they lured many home buyers, often minorities, into high end mortgages fabricated by a bubble market swelled by over investment.  Subprime and adjusted rate mortgages flourished.  Ultimately, there were too many houses out there, reducing home mortgage values and, boom, the stock market debacle of 2008.  I believe government banking reform might have preempted this crisis.

2.   The transfer of wealth:  Whatever gains in wealth we’ve made over the last 30 years have largely benefitted the wealthy.   The collapse of the housing market is just one  recent example, with middle class buyers exchanging their already limited capital for long-term indebtedness on over priced homes.  While they may think they own their own homes, the reality is the banks own them for up to the next 30 years; in most cases, at huge profit.  Just do the math.  Ironically, the financiers responsible for the collapse have gotten away with their greed, some of them bailed out with tax payer money, even as they show no such charity towards those who default.  Their current vogue is to buy up these foreclosures for potential investment, particularly by foreigners.  Meanwhile, millions of other below-water “homeowners” struggle to honorably meet their monthly payments on houses no longer worth their purchase price in states where they have no recourse.

3.  Tax inequity:  Is it fair that a candidate for the presidency worth $240 million, owning several mansions, and with $100 million invested for his sons,  should pay at a tax rate of only 14% on his income in the last two years while many of us with median middle class incomes pay proportionately more?  This is but one example that surely could be multiplied by the thousands privileged to enjoy loopholes you and I can’t access.  Even social security gets rigged in their favor, with the salary max for social security taxes on 2012 income capped at $110, 000.  Talk about a windfall for the rich!

4Deficient health care:  Even the progressive Health Care Reform Act (to be fully implemented in 2014),  fails to remedy what ails us–the lack of a single payer system such as Canada enjoys with consequential lower costs and universal access.  As a fallout, you and I pay more for health care than in any of the developed nations,  concurrently with limited options.  I’m a retiree on Medicare, for example, yet must pay out of my pocket fully for eye glasses and hearing aids.  And then there are the ever escalating medical costs for all Americans far in access of annual inflation.  I say we can do better.

5.   Foreign policy:  We’re meddlers strutting our imperialism with a Daddy knows all approach.  We lavish more on the military than all the world’s countries combined, including Russia and China.  We’re beholden to Israel, an apartheid nation that would happily snare us into waging their conflicts for them and is busy killing Gaza civilians as I write.   In America, every decade seems to threaten a new war.  Now there’s pending trouble with Iran.  Our children bleed and die.  Iraq was a terrible folly and Afghanistan seems increasingly pointless.  We got our man.  Let’s go home.  Now!

6.  Environment:  Those on the Right simply laugh off or prove indifferent to climate change, some even proclaiming it a hoax.  For them, it’s business as usual, with profits their end-game.  As such, they remind me of those anti-evolution die-heads of years ago, still latent in today’s creationists.  While a few may admit to climate change, they downgrade its human component.  More coal, more oil.  Now their rage for Keystone. For the sake of a wounded Earth and for future generations, I cast my lot with the Left in its vibrancy as to what’s at stake..

7.  The crazies:  Conservatives, neo-cons, tea party devotees–they make me shiver–all those tirades against pro-choice, gays, immigrants, stem cell research, health care reform;  denigrators of the UN, deniers of global warming, the need for cap and trade, alternative fuels, they wed themselves to the past.  I dislike, too, their moral politics fettered to a religious view:  the creationists conflating theism with science, the zealots for capital punishment while decrying abortion; the unfeeling purists on death with dignity legislation, which they defeated in my native state of Massachusetts two weeks ago.  It’s company I choose not to keep.  I  prefer the affirmers, not the deniers; those who foster fairness and reconciliation, not callousness and division; those who champion change, not stultifying tradition; those who embrace optimism, not pessimism.

While I love my country dearly,  I think it can do better.  Like Bruce Springsteen, I’m proud to be born in the USA.  It’s a really great place. That is, if you’re on top.

Be well,

rj

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