Insta-Millard: In the new Gilded Age, the rich do not share the wealth

May 6, 2014

Have the GOP and the Über-wealthy set up the whole world for another Great Depression?  Should we expect a World War to follow?

Or, do we have time to make our societies more egalitarian, and more anti-poverty, and more stable?  Graphic from BusinessWeek:

Super wealthy have concentrated the wealth of the world in their personal control.  Capitalism run riot? Graphic from BusinessWeek

Super wealthy have concentrated the wealth of the world in their personal control. Capitalism run riot? Graphic from BusinessWeek

Opportunity to move up, economically, is stifled when so much wealth blocks access to the top economic rungs.

These figures come out of a clever analysis by economists Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, who is a visiting professor at Berkeley. The Internal Revenue Service asks about income, not wealth, which is the market value of real estate, stocks, bonds, and other assets. Saez and Zucman were able to deduce wealth by exploiting IRS data going back to when the federal income tax was instituted in 1913. They figured out how much property different strata of society owned by looking at the income that was generated by that property, such as dividends and capital gains. To simplify, if a family reported $1 million in rental income one year and the market rate of return on rental properties was 10 percent, then Saez and Zucman concluded that the family must have owned property worth $10 million.

The message for strivers is that if you want to be very, very rich, start out very rich. The threshold for being in the top 0.1 percent of tax filers in 2012 was wealth of about $20 million. To be in the top 0.01 percent—that’s the 1 Percent club’s 1 Percent club—required net worth of $100 million. Of course, even $100 million is a pittance to Bill Gates, whose net worth, according to the Bloomberg Billionaires Index, is nearly 800 times that.

It will require great creativity to work our way out of this maldistribution without some sort of catastrophe.

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Can America afford to be great anymore? Many say, “no”

May 1, 2014

A friend posted this on Facebook:

“As of today our total national debt is roughly $17 1/2 trillion. Of that number nearly $12 1/2 trillion is publicly owed. Can you even get your mind around it?”

To which I responded:

As a portion of GDP, our national debt was much greater in 1946.

So, the Congress did what it had to do.

Congress borrowed money to educate millions of returning veterans, and to subsidize their homes. The greatest education aid and housing aid programs in history, both in the GI Bill.

Poster honoring the Marshall Plan, to rebuild Europe after World War II -- on borrowed money.

Poster honoring the Marshall Plan, to rebuild Europe after World War II — on borrowed money.

Congress borrowed money to give it away to our allies in World War II, to rebuild their industrial capabilities, on the assumption that an ally with a strong industrial base and good economy is stronger, and can come to our aid if and when we need it.

Congress borrowed money to give it away to our enemies in World War II, to rebuild their industrial capabilities, because a nation with a good economy and health trade tends to stay out of war. Those nations became our allies.

Congress borrowed to build the greatest road system in history, connecting nearly every corner of America — under the pretense that such a road system would allow us to move troops and armaments quickly from coast to coast in event of a defense emergency.

Congress borrowed to finance space exploration, to go to the Moonbecause, you know, it’s hard.

Congress borrowed to build a library in every county in America, and fill it with books — so that if there were ever nuclear war, everybody who survived would be close to the information necessary to rebuild civilization.

Congress borrowed to build the world’s greatest air transportation system, with airports for sport, business and commercial aviation all over the place.

Congress borrowed to build sewer systems and water systems, doubling down on public health service spending, to prevent disease and make health people.

Funny things happened. Our economy boomed. The world economy boomed. Millions of new jobs were created, filled by people who paid whopping taxes. And the debt sorta melted away.
___________

When I hear people complain about our national debt, and how we as Americans must stop spending money, I hear them saying, “We cannot afford to be great anymore. Our time as the world’s leading economy and leading democracy has passed. It will be a lot cheaper for the nation to curl into a national fetal position, and then taxes won’t be so high.”

In 1946 — and in 1948, 1950, 1952, 1956, 1960, 1962, 1964, 1968, and other election years — there were plenty of Americans who said “we can’t afford the Marshall Plan; we can’t afford foreign aid; we can’t afford to build all these roads; we can’t afford to go to the Moon; we can’t afford to pay for college (or other schooling) for all these veterans/students.”

What would America look like, had leaders listened to those people, and then NOT borrowed the money to build America?  What would the world look like?

I don’t think George Washington spent 8 years at war to curl into the fetal position and give up.

Am I wrong?

The future of an America that is afraid to be great, even if we need to borrow money to do it? (Image from Brogan Knight)

The future of an America that is afraid to be great, even if we need to borrow money to do it? (Image from Brogan Knight)


Insta-Millard: Greenspan explains why and how Fed is accountable

April 30, 2014

A group of people, including a lot of the acolytes of Ron Paul, claim the Federal Reserve Bank system is a renegade organization, unaccountable to anyone.

Alan Greenspan, by the late, very great David Levine

Alan Greenspan, by the late, very great David Levine

Turns out that Ron Paul actually had the guts to ask Fed Chair Alan Greenspan about that.  Greenspan’s answer is worth watching, and hearing.

It was on CSPAN-2, so you probably didn’t see it.  Not the sort of thing Fox likes to run over, and over, and over again, to distraction.

Still looking for  video of Greenspan explaining the annual Fed audits that Ron Paul claims don’t exist . . .

 


Hey, Congress! Fix the roads!

April 24, 2014

Just a crazy idea, I know: But do you think Congress could pass a bill to help the states fix potholes in federal highways, make the thousands of decrepit bridges, safe, and put a few thousands of people to work?

Economist wrote:

ONLY the drunk, they say, drive in a straight line in Chicago. The sober zigzag to avoid falling into the city’s axle-breaking potholes. This year the craters, caused by continual freezing and thawing, are worse than ever, and the spring thaw has brought three times the usual number of complaints from citizens.

As winter retreats, holes in roads and budgets are being revealed—especially in midwestern states, which were hit hard by the polar vortex. Those states with money have made emergency appropriations for repairs; those without will have to cut summer programmes. This means not mowing the grass in parks or picking up litter. It also means delaying resurfacing of highways or fixing guard rails, and putting off capital spending.

Looking after America’s roads is a persistent headache. Although $91 billion is spent on them every year, that is nowhere near enough to keep the country’s 4.1m miles (6.6m km) of public roadways in good nick. The Federal Highway Administration estimates that $170 billion in capital investment is needed every year. Last year a report from a civil-engineering group said that 32% of America’s major roads were in poor or mediocre condition. Main roads through cities were in worst shape: almost half the miles travelled over urban interstates in 2013 were a bumpy ride. Ray LaHood, a former transport secretary, thinks the roads are probably in the worst shape they have ever been.

Is it too big a stretch to go back to the hopes in 2009, that we might get a jobs bill to fix this stuff?  Yeah, it’s 2014 — and the roads, and the American people, need a jobs bill more than ever.

Photo from The Atlantic

Photo from The Atlantic

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A lot of people reading Piketty — the right ones? Enough to matter?

April 23, 2014

An article in the Washington Post calls Thomas Piketty’s book, Capital in the Twenty-first Century, a “runaway best seller.”

Have you read it?

Thomas Piketty - Professor of Economics, Paris School of Economics; photo from The Next Deal

Thomas Piketty – Professor of Economics, Paris School of Economics; photo from The Next Deal

Are you aware of the contents?

Are the right people reading it — especially GOP Members of Congress whose minds need to be changed?  Or, are enough people reading it to make a difference in American politics?

There are presses cranking it out in the United States, India and Britain, and the book is in at least its fourth run. Even though the book was already a hit in its native France, it’s now taking off among English readers around the world, said Donnelly. She expects that sales in China, Hong Kong and Japan will also soon follow.

Piketty, already widely cited for his work on income inequality, has clearly touched a nerve. The book argues that the underlying mechanisms of capitalism tend towards massive inequality. Piketty argues that the era between 1930 and 1975 — often hailed for the way in which wealth was broadly shared — was actually a departure from the norm. That period of economic growth, he says, was the result of unusual circumstances like World War II, a global depression and the government’s actions in the aftermath of those events: strong policies raising taxes and increasing regulation. But now, with many of those policies rolled back, societies are reverting back to extreme inequality.

What do you think, read it or not?

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Great benefits to America from having MORE immigrants – 5 key points from the Dallas Fed

April 19, 2014

Did you know?

Interesting fact sheet from the Dallas Branch of the Federal Reserve Bank system.

All material below this point is directly quoted from the .pdf fact sheet; it is here in text format to aid in indexing, and quoting.

Immigration Get the Facts header

An Economic Overview

As U.S. immigration reform moves forward in 2013, a variety of facts and figures continue to be presented around immigrants and their current and potential contributions to the U.S. economy. This fact sheet—the first in our series on immigrants and the economy—provides key data points on why immigrants are vital to the U.S. economy and why comprehensive immigration reform is necessary for future U.S. competitiveness.

Five Reasons
Why the U.S. Economy Needs Immigrants
FACTS

1.  Immigrants are more likely to be entrepreneurial and to start new businesses, which, in turn, create jobs for U.S.-born workers.

  • Immigrants started 28 percent of all new U.S. businesses in 2011, employing 1 in 10 U.S. workers. 1
  • Immigrants represent 18 percent of small business owners in the U.S.—exceeding their share of the overall population (13 percent)—and are more likely than those born in the U.S. to start a small business. Immigrant-owned small businesses employed an estimated 4.7 million people and generated an estimated $776 billion in receipts in 2007. More small business owners are from Mexico than any other country.2
  • Over the past two decades, immigrants made up 30 percent of the growth in small business creation.3
  • Immigrants founded 18 percent of 2010 Fortune 500 companies, creating jobs for 3.6 million people. When including immigrants and their children, the number of Fortune 500 companies with immigrant roots jumps to 40 percent, employing more than 10 million people.4

2.  Both high-skilled and low-skilled immigrant labor creates additional jobs across the U.S. economy.  Immigration FRSB Population box

  • With immigration reform, newly authorized immigrant workers would produce enough new consumer spending to support 750,000 to 900,000 jobs.5
  • Every additional foreign-born student who graduates in science, technology, engineering, or mathematics (STEM) and remains in the U.S. creates an estimated 2.62 American jobs.
  • Every low-skilled, non-agricultural, temporary worker who comes to the U.S. to fill a job that may otherwise be left open creates an average of 4.64 U.S. jobs. 6  These low-skilled jobs are the necessary backbone to support higher-skilled positions.
  • Passage of the DREAM Act would add $329 billion to the U.S. economy and create 1.4 million new jobs by 2030.7

3.  Immigrants boost tax revenue, enlarge the taxpayer base and help to keep down the price of goods.  Immigration FRSB DYK box1

  • On average, immigrants, including the undocumented, pay nearly $1,800 more in taxes than they receive in benefits.8
  • Households headed by undocumented immigrants paid $11.2 billion in state and local taxes in 2010. That included $1.2 billion in personal income taxes, $1.6 billion in property taxes and $8.4 billion in sales taxes.9
  • Immigrants lower the price of products used by highly educated consumers by 0.4 percent of GDP and for less-educated consumers by 0.3 percent.10

4.  As baby boomers retire, immigrants will increasingly be critical for continued economic growth and for ensuring a steady flow of new workers.  Immigration FRSB DYK box2

  • Without immigrants, the U.S. will not have enough new workers to support retirees. Seventy years ago, there were 150 workers for every 20 seniors; 10 years ago, there were 100 workers per 20 seniors.  By 2050, there will be only 56 workers for every 20 seniors. The U.S. needs new taxpayers to help fund Social Security and Medicare and new workers to fill retirees’ positions and provide health care services.11
  • Current levels of immigration will temper the aging of the U.S. population over the next two decades, slowing the increase in the old-age dependency ratio by more than one-quarter.12
  • Nearly 65 percent of Latino immigrants in California who stayed more than 30 years are homeowners, making them a critical pool to buy homes as baby boomers downsize.13

5.  The majority of immigrants in the U.S. today are from Latin America, representing a huge potential economic opportunity due to the region’s burgeoning economic standing.

  • Immigrants are a vital link with their home countries and offer new prospects for the U.S. to capitalize on Latin America’s economic expansion, which saw 3 percent growth in 2012—double the 1.5 percent growth in the United States. In addition, 11 of the 20 U.S. free-trade agreements in force are with Latin American countries. Immigrant-owned small businesses have a unique opportunity to connect to the global marketplace.
  • Over 7 percent of immigrant firms export their goods and services, whereas just over 4 percent of non-immigrant firms export.14
  • Mexico boasts the second largest economy in Latin America and grew at a rate of 4.0 percent in 2012, with a projected 3.5 percent growth in 2013.15  With 29 percent of all immigrants and 58 percent of undocumented immigrants coming from Mexico,16 this demographic represents a human gateway to one of Latin America’s fastest-growing economies.

This fact sheet is a product of the AS/COA Hispanic Integration and Immigration Initiative, which advances the integration of immigrants and promotes positive dialogue around the economic contributions of immigrants and Latinos overall across the United States. It was produced by Jason Marczak, AS/COA Director of Policy, in collaboration with Leani García. For more information, visit AS/COA Online at:  http://www.as-coa.org.  For media inquiries or to speak with an expert on this topic, please contact Adriana LaRotta in our communications office at:   alarotta@as-coa.org

Population:  The 40 million immigrants in the U.S. today—of which 29 percent are from Mexico— represent 13 percent of the U.S. population.

In addition, the 53 million Latinos in the U.S. account for about 17 percent of the population and 10 percent of voters in the 2012 election.

However, the demographics of new immigrants have changed in recent years, with Asians having overtaken Latinos as the largest group of new immigrants.

Did you know?
Google, Procter & Gamble, Kraft, Colgate Palmolive, Pfizer, and eBay are among companies with immigrant founders.

Did you know?
Hispanic immigrants help revitalize communities across the U.S., including Ottumwa, Iowa, a 30,000-person city southeast of Des Moines, which, according to The Wall Street Journal, saw its taxable property value double in the last 10 years after making a concerted push to bring in new immigrants who opened up shops to replace shuttered storefronts.

Endnotes

1.  Robert H. Fairlie, “Open for Business: How Immigrants are Driving Small Business Creation in the United States,” Partnership for a New American Economy, August 2011. http://www.renewoureconomy.org/sites/all/themes/pnae/openforbusiness.pdf

2.  Fiscal Policy Institute, “Immigrant Small Business Owners: A Significant and Growing Part of the Economy,” June 2012. http://fiscalpolicy.org/immigrant-small-business-owners-FPI-20120614.pdf

3.  Ibid.

4.  Partnership for a New American Economy, “The ‘New American’ Fortune 500,” June 2011.  http://www.renewoureconomy.org/sites/all/themes/pnae/img/new-american-fortune-500-june-2011.pdf

5.  Raúl Hinojosa-Ojeda, “Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform,” Center for American Progress, January 2010.

6.  Madeline Zavodny, “Immigration and American Jobs,” American Enterprise Institute for Public Policy Research and the Partnership for a New American Economy, December 2011. http://www.renewoureconomy.org/sites/all/themes/pnae/img/NAE_Im-AmerJobs.pdf

7.  Juan Carlos Guzmán and Raúl C. Jara, “The Economic Benefits of Passing the Dream Act,” Center for American Progress and Partnership for a New American Economy, October 2012.  http://www.americanprogress.org/issues/immigration/report/2012/09/30/39567/the-economic-benefits-of-passing-the-dream-act/

8.  James P. Smith & Barry Edmonston, eds., The New Americans: Economic, Demographic, and Fiscal Effects of Immigration (Washington, DC: National Research Council, National Academy of Sciences Press, 1997), 220, 353.

9.  Immigration Policy Center, “Unauthorized Immigrants Pay Taxes, Too,” April 2011.  http://www.immigrationpolicy.org/just-facts/unauthorized-immigrants-pay-taxes-too

10.  Patricia Cortes, “The Effect of Low-Skilled Immigration on US Prices: Evidence from CPI Data,” 381-422.

11.  Immigration Policy Center, “The Future of a Generation: How New Americans Will Help Suppport Retiring Baby Boomers,” February 2012. http://www.immigrationpolicy.org/just-facts/future-generation-how-new-americans-will-help-support-retiring-baby-boomers

12.  Ibid.

13.  Dowell Myers, Immigrants and Boomers: Forging a New Social Contract for America (New York: Russell Sage Foundation, 2007).

14.  Robert H. Fairlie, “Immigrant Entrepreneurs and Small Business Owners, and their Access to Financial Capital,” Small Business Administration, May 2012.

15.  The World Bank, “Mexico Overview,” 2013. http://www.worldbank.org/en/country/mexico/overview

16.  Pew Hispanic Center, “A Nation of Immigrants: A Portrait of the 40 Million, Including 11 Million Unauthorized,” January 2013. http://www.pewhispanic.org/files/2013/01/statistical_portrait_final_jan_29.pdf

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Historian David McCullough: What is the value of education?

April 17, 2014

Branch banks of the Federal Reserve work hard to provide economic education; alas, in the era of state standards requiring “teach to the test,” a lot of this stuff goes unused.

What is the value of education?  The Dallas Branch of the Fed had historian David McCullough in for consultations; they asked him on video, and here’s his response.

“We must be an educated people. We cannot be a productive, original, innovative society if we aren’t educated.”

For more information, visit the Dallas Fed’s website.

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