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Economics Without Greed

Discussion in 'Economics, Business, and Taxes' started by georgephillip, Nov 12, 2015.

  1. georgephillip

    georgephillip Governor

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    Greed kills.
    US income inequality threatens any semblance of democracy left untouched by the last fifty years of neoliberal economics, and, left to its own inertia, it will kill what's remaining of the US Republic.

    "Inequality of income and wealth has set in like a deep rot undermining the foundation of our society and economy.

    "Uprooting it will not be simple.

    I enjoy numbers and think they explain better than anything the problem, so bear with me. 'If wages had kept up with productivity over the last three decades your pay would be closer to:' states the Economic Policy Institute web page, and then one types in an income amount.

    "An income of $20,000 would be $32,576, a 63% increase; an income of $40,000 would be $61,055, up 53%; an income of $60,000 would increase 40% to $83,728, and an income of $80,000 would be $101,782, up 27%.

    "The median worker income for 2014 was $28,851 states the Social Security Administration (SSA), that would be $44,357 states the EPI.

    "The Congressional Budget Office issued a report on income distribution in 2011, revealing that $93,900 was the average household income, and adjusting for inflation it is now $99,000.

    "And adjusting to find average worker income, each worker contributes $80,379 to the national income — mean average.

    "The SSA report shows the lower-earning 45% of U.S. workers earn less than $25,000, and the average income for this 45% is $10,523.

    "The lower-earning 45% of workers earn in wage income about 6% of the total national income.

    "Even though this seems unbelievable, you can do the simple math by following the steps in footnote below."
    http://therealnews.com/t2/component/content/article/472-ben-leet/2553-uprooting-inequality-
     
  2. georgephillip

    georgephillip Governor

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    Remedies for inequality:
    Of the remedies put forth, those that raise wage income are the most promising: 1) create public jobs directly or through infrastructure improvement projects; 2) stronger and clearer labor union rights; 3) increasing the minimum wage and the earned income tax credit.

    "In the late 1990s, during Clinton’s last term, the employment to population ratio reached its historical high, workers became scarce and employers raised wages.

    "The EPI has over the decades become the nation’s strongest advocate for workers, and they present eleven proposals that will raise wages.

    "The renown economist Joseph Stieglitz has just released the book Rewriting the Rules of the American Economy. Ellen Dannin has written about reforming the labor laws in Taking Back the Workers’ Law. And Salvator Babones has presented sixteen solutions for 2016 in his book Sixteen for ’16.

    "And my favorite solution is found in Phillip Harvey’s report Back to Work, proposing a government direct employment program.

    "For an investment of $180 billion a year we could raise the employment to population ratio for prime working age workers, age 25 to 54, back to its high of 2000.

    "This would raise wage income for 80% of workers (who are nonsupervisory workers) in the U.S."
    http://therealnews.com/t2/component/content/article/472-ben-leet/2553-uprooting-inequality-

    180 billion dollars pumped into the Pentagon for national defense against the effects of climate change could put millions of unemployed young Americans back to work in a constructive as opposed to a destructive sense.

    Who knows?

    Peace could become more profitable than war:D
     
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  3. georgephillip

    georgephillip Governor

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    It’s not that I want to snow readers of this article with numbers, but two more examples are very telling.

    "The first deals with wealth.

    "The average private household savings now is $691,000, and only 10% of households reach or surpass this level."
    What, exactly, should we be learning if it's true "(t)he average household savings now is $691,000, and only 10% of households reach or surpass this level?"
    http://therealnews.com/t2/component/content/article/472-ben-leet/2553-uprooting-inequality-

    "The second deals with income.

    "The Bureau of Labor statistics says that the 'median weekly earnings of the nation's 110.4 million full-time wage and salary workers were $803 in the third quarter of 2015,' and that equals $41,756 a year. The EPI says that median income could be $63,259, except that inequality distorted the economy. Today only 20% of workers receive $63,259 a year, not 50% which would make it the median yearly income for full-time workers."
     
  4. Lukey

    Lukey Senator

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    It's ironic to tout Clinton's economy in an effort to argue for policies that are antithetical to the Clinton policy agenda. Clinton declared "the era of big government is over." Stiglitz, Dannin and Babones all propose that government is the "solution" to our economic problems. Theirs is an argument which defeats itself...
     
  5. georgephillip

    georgephillip Governor

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    Perhaps we should ask what's changed in the economy since Bill left town? If it's true the employment to population ratio reached its historical high during Bubba's last term, we've seen a generation pass since then. If private sector capitalists can no longer afford to provide jobs to all who need one, government would seem the only alternative.
     
  6. Lukey

    Lukey Senator

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    What changed? Sarbanes Oxley, the Patriot Act, ARRA, ACA, Dodd Frank! Big Government is back, along with the debt, weak currency and economic weakness that accompanies it. Government is the PROBLEM, not the solution!
     
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  7. Woolleybugger

    Woolleybugger Mayor

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    Sarbanes Oxley? Really? Before it, corporate malfeasance was common, now it is a crime. Let me give you a little example. In the 90's, it was common for startups to give friends and family stock options to customers in return for an endorsement, a field trial or an order. In effect, it was a bribe. In the 90's, it was common to stuff inventory down the throats of distributors and consider it revenue, now that is illegal. In the 90's one could ship on the last day of the quarter, have the product arrive in the next month and call it revenue in the last quarter even though the product never reached the customer until the next quarter. The reason it was passed was because corporations and CEOs and CFOs and VP of Sales lied, cheated and preyed upon shareholders and investors. It is still an issue but now the people who sign off on the statements are all personally responsible, they go to jail if they lie, cheat or otherwise mislead the market through chicanery.
     
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  8. georgephillip

    georgephillip Governor

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    Government in service to the richest 1% of its citizens is a more likely culprit, imho. What prompted Sarbanes Oxley?
    https://en.wikipedia.org/wiki/Sarba...ing_to_the_adoption_of_Sarbanes.E2.80.93Oxley

    "A variety of complex factors created the conditions and culture in which a series of large corporate frauds occurred between 2000–2002. The spectacular, highly publicized frauds at Enron,WorldCom, and Tyco exposed significant problems with conflicts of interest and incentive compensation practices.

    "The analysis of their complex and contentious root causes contributed to the passage of SOX in 2002.[7]

    "In a 2004 interview, Senator Paul Sarbanes stated:

    "'The Senate Banking Committee undertook a series of hearings on the problems in the markets that had led to a loss of hundreds and hundreds of billions, indeed trillions of dollars in market value. The hearings set out to lay the foundation for legislation. We scheduled 10 hearings over a six-week period, during which we brought in some of the best people in the country to testify...The hearings produced remarkable consensus on the nature of the problems: inadequate oversight of accountants, lack of auditor independence, weak corporate governance procedures, stock analysts' conflict of interests, inadequate disclosure provisions, and grossly inadequate funding of the Securities and Exchange Commission.'[8]"
    And then came the Great Recession...
     
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  9. Lukey

    Lukey Senator

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    What those companies did was fraud - and it was already illegal. Sarbanes Oxley was just Congress seeking to appear like they were doing something about the problem when in fact nothing was being done to prevent fraud, and in effect it drives up the cost of doing business for all companies, including the honest ones and the small businesses and even non-profits. It should be repealed.
     
  10. georgephillip

    georgephillip Governor

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    Repealed entirely?
    https://en.wikipedia.org/wiki/Sarba...ing_to_the_adoption_of_Sarbanes.E2.80.93Oxley
    • "Auditor conflicts of interest: Prior to SOX, auditing firms, the primary financial 'watchdogs' for investors, were self-regulated. They also performed significant non-audit or consulting work for the companies they audited. Many of these consulting agreements were far more lucrative than the auditing engagement. This presented at least the appearance of a conflict of interest. For example, challenging the company's accounting approach might damage a client relationship, conceivably placing a significant consulting arrangement at risk, damaging the auditing firm's bottom line."
     
  11. georgephillip

    georgephillip Governor

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    Do you know if there have been any convictions since SOX was passed that would not have occurred in its absence?
     
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  12. Lukey

    Lukey Senator

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    Yeah I'm aware of that. I've worked in finance all my life. And even before SO I would never permit an auditing firm to do any significant management consulting. I just don't think they are very good at it. In fact I generally eschew consultants altogether. They are all a bunch of idiots as far as I'm concerned.

    That said I am currently proposing that our current audit firm perform a security test on our network, because their bid was much lower than the others I got from IT consulting firms. Should that be disallowed and I be forced to pay several times what they bid? That is just dumb.

    Yes, it is always best practice to keep the auditors totally independent. But an appearance of a conflict of interest isn't the same thing as a conflict of interest. Have you had the opportunity to oversee an audit lately? They spend more time explaining what they are NOT responsible for and what the audit process is NOT than they do offering an opinion on your financial reports. That's thanks to SO.

    So yes, appeal the whole thing. Just make the audit report include a summary of any consulting work done by the audit firm and the value of the billings for the year in the notes to the audit report. Let people decide if they want to invest in a company that does significant non-audit business with their audit firm.

    Transparency and disclosure is a legitimate regulatory requirement. The government deciding who you can and can't engage in business transactions with is not!
     
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  13. Lukey

    Lukey Senator

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    Exactly. Lying to and cheating investors, customers and employees is fraud, and as such was already illegal. All the regulations did is make the honest people have to waste time and money on superfluous activities.
     
  14. georgephillip

    georgephillip Governor

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    We're on the same page when it comes to corporate monopolies using government to strangle competition. Since fraudulent activities go unpunished without adequate enforcement, would your solution to the problem of cheating investors, customers, and employees require increasing the funding level of the SEC?
    https://en.wikipedia.org/wiki/Sarba...ing_to_the_adoption_of_Sarbanes.E2.80.93Oxley
    "Inadequate funding of the SEC: The SEC budget has steadily increased to nearly double the pre-SOX level.[9] In the interview cited above, Sarbanes indicated that enforcement and rule-making are more effective post-SOX."
     
  15. Lukey

    Lukey Senator

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    Yeah, and that's a start. But I'd pare back or eliminate most of the securities regulations and eliminate the SEC. Then give the enforcement of white collar crime to the FBI (which already does a lot of it). We have too many conflicting (and confounding) rules and too many overlapping agencies. And yet no one ever goes to jail (except the little guys). Why send all that money, time and effort and get so little out of it?
     
  16. Woolleybugger

    Woolleybugger Mayor

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    I'm sure there have been. I myself was deposed as well as the entire sales and management team at a company I worked at after our CFO realized they had been accruing software support revenue incorrectly. Our stock went from 20 to 2 in a couple weeks, it was quite an eye opener. No malfeasance, just sloppy rev recognition practices.
     
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  17. georgephillip

    georgephillip Governor

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    "The fiscal year 2016 Financial Services and General Government Appropriations bill would provide $1.5 billion for the SEC in fiscal 2016, the same budget level the agency is operating on this year. That number is $222 million less than the Obama administration requested."
    Since Wall Street banks captured the SEC long ago, maybe we should send the bill to Goldman Sachs before filling US prisons with rich white-collar criminals?
    http://www.investmentnews.com/article/20150610/FREE/150619991/house-panel-seeks-to-freeze-sec-budget
     
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  18. Lukey

    Lukey Senator

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    I don't disagree with you. The revolving door between regulators and the industries they regulate is legendary. And if THAT isn't the appearance of a "conflict of interest" I don't know what is. This is no different (except for the scale) as the building inspector accepting free lap dances to overlook the fire code violations in a strip club. This stuff is endemic....
     
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  19. georgephillip

    georgephillip Governor

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    Endemic corruption seems like a natural consequence of parasitic economies?:confused:

    http://store.counterpunch.org/wp-content/uploads/2015/08/Killing-The-Host_PDF_V7.pdf


    "Familiar parasites in today’s economy include Wall Street’s investment bankers and hedge fund managers who raid companies and empty out their pension reserves; also, landlords who rack-rent their tenants (threatening eviction if unfair and extortionate demands are not met), and monopolists who gouge consumers with prices not warranted by the actual costs of production.

    "Commercial banks demand that government treasuries or central banks cover their losses, claiming that their credit-steering activity is necessary to allocate resources and avoid economic dissolution.

    "So here again we find the basic rentier demand: 'Your money, or your life.'”
     
  20. Woolleybugger

    Woolleybugger Mayor

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    The problem with your post is that most of what Wall Street does is not illegal. Bernie and Warren want to make it illegal, the GOP does not.
     

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