The Weiner Component #98 – Income Inequality

Income inequality and mortality in 282 metropo...

Income inequality and mortality in 282 metropolitan areas of the United States. Mortality is correlated with both income and inequality. (Photo credit: Wikipedia)

The United States and, for that matter, most industrial nations are today facing numerous major problems, economic and otherwise, that can and will definitely affect their futures negatively if they are not, more or less, solved in the near future.

According to the World Economic Forum: the gap between the rich and the poor is one of the major global risks we face today. The upper ten percent of most of these countries are expeditiously getting richer while the rest of the populations are either maintaining their level of income or finding it continually decreasing. How long can these conditions continue until the consumer base can no longer purchase the goods and services needed to reasonably survive and violence erupts from the level of subsistence more and more people find themselves living. The 21st Century could be bloodier than the 20th Century. The coming depressions could be deeper and far bitterer than that of 1929, the Great Depression of the 20th Century.

Over the last year or so in the United States many food prices have risen significantly, particularly the cost of many protein products have gone up 20 to 45 percent. Meanwhile the minimum wage remains at $7.25 an hour and has been at that level for the last five years. Someone with a family earning that much and working a full forty hour week needs government aid to survive. This is true even if his wife is also earning that much.

In order for this family to survive it has to be subsidized by federal and state entitlement programs which the taxpayers subsidize. One can say that a percentage of companies like Walmart’s profits, are indirectly supplied by the taxpayers.

Rand Paul, a hopeful presidential candidate for 2016, who like his father, is essentially a libertarian, in a recent interview, stated that to raise the minimum wage would be to increase the level of unemployment in the United States. Here someone who is opposed to government interference in the marketplace is supporting a system that is ultimately socialistic, with the government paying the difference between the family earnings and what is needed for survival.

Of course the overall Republican attitude toward all entitlement programs, like payments to the unemployed and aid to dependent children, is to reduce these government programs. They seem to want to bring about more privation than already exists.

I fail to understand the thinking here. These people are loudly and dramatically supporting a system that they adamantly oppose, indirect government support of the marketplace. It would seem that the Republicans are totally ignorant of some of the basic principles of economics; they cannot think far enough ahead to realize that they are espousing socialism, having the government provide for people, by their definition of a free marketplace. Wouldn’t it be easier to raise the minimum wage to a level where people can earn enough to pay for their family’s basic needs without needing to apply for government help?

Another interesting area pertains to student college loans. It is estimated that student loan debt has surpassed one trillion dollars.   Approximately three of every five college students have taken out student loans in order to pay for their tuition and books. These loans are strung out over their university career and have to be paid back after they graduate. The average college graduate has over $26,000 in student loan debt at graduation.

Many students can end up owing many more thousands of dollars at a good rate of interest which they generally have to begin paying back six months after graduation. It can, in many cases, take a decade or more to repay these loans and the interest charged on them, in some cases it can be even longer. Even if the ex-student declares bankruptcy it is practically impossible to have the college loan removed from his/her record.

People like Senator Elizabeth Warren have tried to reduce the interest rates but Republicans have refused to go along and support such legislation. I remember one such legislator commenting publically that the interest rate can’t be reduced because the government needs the money. This, of course, is pure idiocy because it means that whole generations of former college graduates have to wait years before they can afford to marry or otherwise start their lives. They have to spend their early work years for a decade or more paying back their college loans. But even more than that it also means that these young people will not really contribute to the economic growth of the nation unit they have freed themselves from debt.

There is in economics a principle called the multiplier effect. This means that money spent in the society tends to be spent numerous times. The amount, for example, that I spend at the supermarket is spent again as salaries or for the purchase of more goods, which, in turn, is spent as rent or a mortgage payment by the employee who receives it. It can then pay for the bank’s utilities or be used as salaries, and so on. The money is spent over and over again until it becomes part of the natural flow of currency creating for the GDP up to six or eight times the original amount. This principle also works in the reverse, negatively, on monies not spent. Dormant or non-spent funds can subtract six to eight times their initial amount from the GDP. All the ex-student payments to their college loans have this effect on the GDP, not allowing it to grow as it would if these people did not have this debt. The overall effect of the payment of these loans actually shrinks the GDP.

From comments made by a House of Representatives Republican and by the minority leader in the Senate, Mitch McConnell, the young college graduates rather than the upper 10 or 20% of the population are needed to help fund the government. Their paying the interest on their college loan debts will importantly help the government financially. The concept is inane. Interest on the debt should be mostly reduced or completely done away with. Having the ex-students spend their earnings on goods and services that will allow them to live in a positive and normal fashion will most aid the nation by adding to the GDP. Their welfare adds to everyone’s welfare and the monies they pay in taxes will exceed what they have to pay on their college loans.

By succeeding in completing college they put themselves on an earning level far greater than they would earn as high school graduates. The government has actually invested in them and the return over their lifetimes will be far greater than the cost of their education. This is a good argument for actually forgiving the loans. People invest their money to make a profit; so does government in its population with the use of taxes.

To get back where we started, the ever increasing gap between rich and poor is one of the biggest problems currently existing within the United States. The Congress is largely at a state of gridlock with the Republicans actually continuously trying to pass legislation to expand the economic space between the two groups. And, of course, many of the conditions causing this problem already exist in law. The conservative right in Congress will allow no reform of archaic legislation, some of which was passed during World War II to encourage oil production. Unless there is change this country will eventually find itself a second rate nation with a largely growing unemployed poor not able to afford the basic needs of survival.

The oncoming Midterm Election can help or worsen already negative conditions. The people of the United States will decide our immediate future. If they don’t vote or do vote for the conservative Republicans they will be asking for continued gridlock in Washington and continued misery for many of themselves and the rest of the population. It will be interesting to see what happens!

The Weiner Component #58 – Christmas 2013 & the Republican Party

Santa Parking Only

On Wednesday, December 25, 2013, Christmas day, The Los Angeles Times, on its front page, ran an article entitled “222,000 in state to lose jobless aid.”  Merry Christmas from the Republican run House of Representatives.  The members of the House left a number of bills untouched because they wanted to go home for their holiday vacation to be with their families at this special time.  Their responsibility to the people of the country came a far second to their immediate needs.

For the week before Christmas many of the TV stations had been running different versions of Charles Dickens’ short story “Christmas Carol” over their networks.  It struck me that Ebenezer Scrooge, when asked for charity, recommended that the poor be sent to workhouses where they could get free housing and a bed in exchange for twelve hours of tedious labor six days a week.  The Republicans had not even offered the long term unemployed that benefit.

In fact Rand Paul, the Junior Senator from Kentucky, had stated that taking them off unemployment would be doing those people a favor since they’d have to find work.  Somehow the fact that there is currently 7% unemployment throughout the United States seems to have escaped his ability to understand what is happening.  And the fact that 7% is an improvement over unemployment levels since the Debacle of 2008 has also escaped his mental abilities.

What angered me most was that these “fat tea party cats” from the House of Representatives with their $174,000 a year salaries had gone home leaving a program that will end on Saturday, December 28.  We are dealing with a situation that began with the Presidency of Ronald Reagan, a Republican President, who gave the financial institutions of this country almost limitless control over what they could do and in 2008 they brought about the Real Estate Debacle.  This was a Republican sponsored process for which they accept no responsibility.  Now they are ready to punish the people, whose unemployment has come about as a result of their action, for being unemployed.  Morally it is ludicrous!

To counter Rand Paul’s non-thought out comments, the amount of money involved for each unemployed individual has a maximum setting of $450, with the average payout being about $305.  On a yearly basis, 52 weeks with no vacation time that’s $23,400; that’s slightly above the poverty level for a family of four.  The average, $305 a week, is 15,860; well below the poverty line for a family of four.

There are currently throughout the United States about 1.3 million people who have been out of work for six months or more; and, it seems, that the Republicans, who control the House have no inclination to take up the measure when the lawmakers return on January 7.

Currently around 712,000 Californians are receiving unemployment benefits.  This is down from 1.5 million at the peak of the recession.   The state jobless rate is now at 8.5% and has been slowly falling.  But California has around 400,000 fewer jobs than it did before the downturn in 2008.

It has been estimated that the elimination of the federal unemployment benefit, that these people paid into when they were employed, will remove $4 billion from the state economy in 2014.  If we consider the other 49 states and territories then the amount to be removed from the National Cash Flow is in the trillions of dollars.  Money is spent several times before it becomes part of the increased National Cash Flow.  By removing these funds Congress is not really saving money but bringing about an economic shrinkage throughout the society, significantly decreasing the amount of cash available in the nation.  They are consequently increasing unemployment and lowering the GDP. In this way everyone in the country is affected by this inaction by the Republicans in the House of Representatives.

It is an interesting fact that this particular Congress has passed less legislation than any other throughout the entire history of the United States.  This is true even against those that met in the 19th Century for only three or four months of each year, when it was a part time job. The current House has initially refused to pass a budget for the country, been loath to raise the debt limit, and shut down the government, costing the nation hundreds of millions of dollars and thousands of jobs.  If one could rate them and their achievements it would probably be below the zero point on a graft.  If on the other hand they were getting paid for their level of productivity then they might very well owe the government money.  Will Rogers, the cowboy philosopher of the 1930s, stated about Congress something to the effect of: We pay for wisdom, what we get is something totally different.

Merry Christmas, Republicans.  It must be wonderful for some of your members in Congress to be able to complain that they are not getting paid enough for the job they do when you are symbolically squeezing a noose around the necks of a percentage of the population and not doing much for the rest of the people.  Your non-gift to the unemployed is creating lots of misery and havoc on this Christmas season.

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The Weiner Component #47 – The Tea Party & The Debt Ceiling

  

English: The holders of the United States nati...

English: The holders of the United States national debt as of December 2008. (Photo credit: Wikipedia)

On October 17th the United States Government will reach its authorized Debt Ceiling unless the House of Representatives passes the bill raising it.  According to the analysis released Tuesday by the Bipartisan Policy Center the Federal Government will be unable to pay its bills and face default as early as October 22 and no later than November 1.  

The Treasury Secretary warned Congress that the 16.7 trillion dollar debt limit must be raised by October 17th or the Federal Government will face default.  At that point the Treasury would have to depend on cash on hand, about 30 billion, and incoming revenues to pay its bills on any given day.  Unfortunately all its multi-thousands of bills are paid by computers that can’t be reprogrammed to pay selectively or partially.

According to some Tea Party members of the House of Representatives this problem is no big deal.  These people’s knowledge of government and economics is non-existent.  They have said that they don’t trust economists who all have different opinions.  One member stated that his knowledge of economics is based upon the fact that he raised a family.  Rand Paul said that the Federal Government has so much money coming in it doesn’t have to worry about having enough funds to pay its bills.  Others have stated that this change won’t even be noticed.  Another’s statement was that the default would stabilize international finances.  Of course all these individuals offered no proof for their inspired statements.

The economic awareness or sophistication of the people in the Tea Party is non-existent; they function by “common sense” based upon limited experience with no awareness of what they don’t know or understand.  I am reminded of the man who didn’t believe in or trust doctors.  His wife came out with a cancerous growth on her neck. His experience with illness had to do with occasional headaches and for these he took three to four aspirins each time he had one.  Since his wife’s problem was more serious than a headache he gave her six to eight aspirins to solve her medical problem.  No doubt she died of cancer.

If the default problem were a burning house and what to do about it then their solution would be to pour gasoline on the flames in order to put out the fire; that way it would burn out faster.  They have a strange solution to a problem that they themselves have created.  Basically they would destroy the economy if they can’t get their way.  And what is their way?  They want to get rid of the Affordable Health Care Law, reduce entitlement programs, reduce taxes for the upper few percentage of the population and force other unpopular programs down the throat of the American public.  Since they can’t do this by taking over the presidency and Congress the will do it by extortion, the House will force the rest of the government to do what it wants.  And in trying to achieve this nefarious goal they are wasting billions of dollars and disrupting not only he United States but also all the other industrial societies that use the dollar as a basis of value.

There has never been a Debt Default before in the entire history of the United States.  We can only guess what will happen.  The guesses go from a complete disruption to a total breakdown of the economy, far worse than the Great Depression of 1929 affected the world.  We are talking about ever-growing massive unemployment, disruption and possible destruction of all VA programs, crashing financial markets, virtually destroying a major part of the national economy, plus disrupting Europe and Asia.  This is what the Tea Party seemingly is willing to bring about if they don’t get their way.  This is extortion greater than any ever committed by any criminal.

If we ignore everything above then not increasing the Debt Limit will freeze the Federal Reserve’s ability to use Monetary Policy.  The Fed has been adding 85 billion dollars monthly to the National Cash Flow.  This has been going on for well over a year.  The increased flow of currency has allowed for most economic growth since 2011.  That also includes the housing recovery.  There has been no fiscal policy, spending by Congress to increase employment.  Stopping this flow of currency will cause immediate stoppage of all recovery.  The economy will instead begin a process of ever-growing shrinkage with an ever-increasing level of unemployment.

Will Barak Obama allow this to happen?  I don’t see how he can.  If the Republicans refuse to give in unless they get their way then he is left with two choices: (1) He can give the Tea Party Republicans what they demand and set a precedent for extortion, or (2) He can invoke Section 4 of the 14th Amendment to the Constitution, which states:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment Of pensions and bounties for services in suppressing Insurrection or rebellion, shall not be questioned.”

The next sentence states essentially that the United States shall not be held responsible for paying for the freed slaves and the last section gives Congress the power to enforce this Amendment by proper legislation.

Can the President then authorize paying the public debt or does only Congress retain this power?  It’s an interesting question that in the end can only be answered by the Supreme Court.  And their decision, depending upon the makeup of the Court, could go either way and even be reversed by a future Court. 

But if Congress is irresponsible does the President really have a choice?  He swore an oath to uphold the Constitution of the United States.  He assumed responsibility for the welfare of the nation.  For him to allow this to happen would be breaking his oath.

Currently and each day increasingly there is greater pressure on the Tea Party and other Republicans in the House of Representatives to end the Debt Ceiling and provide a budget for the United States, to again fund the government.  Currently the Tea Party group within the House is reluctant to do this but the more moderate Republicans seemingly are willing.  If the Speaker, John Boehner would bring a clean bill on both of these issues up before the House then, with Democratic support, it should easily pass.  Up to this point he has not been willing to do this.  Doing so will probably cost him the speaker-ship of the House of Representatives.

And when both the Debt Ceiling and the budget problems are resolved there is still the Sequester.

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The Tea Party Group is actually living in the wrong century.  They would have been happy and well adjusted in the late 18th Century, around the time of the American Revolution.  Government then was far away and bothered you very little except for taxes.  Many of the people living then considered taxes a gift that they gave to the government.  The people were very independent, building their own houses, clearing their fields, raising their own food, making their own furniture, running their own stills, bringing meat to the table by the use of their muskets.  They were an independent lot, standing tall, and proud of it.

The problem with the Tea Party is that they are now living in the 21st Century where everyone is interdependent upon everyone else.  The muskets have become automatic weapons capable of firing over 100 rounds a minute and there are specialists to do all the other tasks.  People are crowded in society and function best through endless compromise.  The Tea Partiers see compromise as a sign of weakness.  Real men don’t compromise; they push until they get their way.

Unfortunately for them the group that financially backed the Tea Party, the billionaires like the Koch Brothers and the large corporations are withdrawing their support, which means their money contributions.  I imagine these people thought they could control the Tea Partiers and have just discovered that they created Frankenstein Monsters that are out to destroy the country if they can’t get their own way.

What I suspect we will be seeing in the near future is an inept Tea Party breaking away from the Republican Party and forming its own third party.  They will then be like the No Nothing Party of the 1840s and 1850s, appearing noisily for a decade or two and then disappearing.  Their influence will wane to nothing as time passes.

tea party

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