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Bernie Sanders: Socialist…

     “I call him a socialist-slash-communist because that’s what he is.”

                                       – Donald Trump on Vermont Senator Bernie Sanders

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Conventional political wisdom holds – we all know how “conventional” the current campaign has become – that Bernie Sanders has no (nadda, zip, zero) chance of becoming the Democratic nominee for president, let alone reaching the Oval Office.

Unthinkable, the Beltway Gasbags say, that the former mayor of the People’s Republic of Burlington wins, even though Vermonters have been sending him to Washington since 1991.

Senator Bernie Sanders

Senator Bernie Sanders

Sanders must then be doomed by his age? He is 74-years old.

Or maybe it’s his unruly shock of white hair that looks like it was styled in a wind tunnel. Maybe he’s too Jewish. Maybe its because he comes from Vermont, a small, weirdly shaped state that unless you are from New Hampshire (or Canada), most Americans couldn’t find on a map.

Or perhaps it’s the native New Yawker in Sanders, who sounds like a Big Apple cab driver, well at least he sounds like the kind of cab driver New York had before all New York cab drivers started sounding like they grew up in Somalia or Pakistan.

Maybe Sanders’ positions on the issues will disqualify him, even though a good number of polls indicate that many, many Americans agree with Sanders’ call to deal with income inequality and educate young people without saddling them with a lifetime of tuition debt.

It’s All About the “S” Word…

None of his apparent political shortcomings – age, hair style, positions – fully explains why Sanders has a “he can’t be elected” problem. His real problem is the “S” word – he’s a s-o-c-i-a-l-i-s-t.

Actually, Bernie describes himself as a “democratic socialist,” which in real life – and in Europe and Canada – means he believes in the democratic political process – things like elections, representative government, trying to convince others to agree with you. But, he also believes the system is too often rigged to leave out the little guy. What a radical idea. He’s actually been very consistently saying this for, like, 40 years.

MaoStill, in our politics describing yourself as a “democratic socialist” is a little like being convicted of child abuse while reading Chairman Mao’s Little Red Book. It is the kiss of political death this socialism.

But why? Why has only the United States among the rest of the world’s industrial and, yes democratic societies, never had a particularly serious socialist political movement? Canada, France, Great Britain, Denmark, Sweden, on and on have a 20th Century tradition of what Sanders calls democratic socialism, but not the United States.

But before we lock up the women and children and worry about nationalizing the railroads, let’s consider what Sanders (and others of similar ilk) have actually said and done over the course of American history and why the term and the idea have become such political kryptonite.

In their book It Didn’t Happen Here – Why Socialism Failed in the United States authors Seymour Martin Lipset and Gary Marks observe that an American “working class party,” with a foundation of trade union members, never caught on in the U.S. precisely because what social democrats offer is what many Americans already believe they have – “a democratic, socially classless, anti-elitist society.” The authors call it Americanism.

In essence, although most Americans would never say it this way, we have long embraced a political philosophy – Americanism, if you will – that is wrapped up in our aspirations, our myths, and our ideas of exceptionalism. Americanism is also deeply rooted in our notion that our political system is in no way separate from free market capitalism and that by extension, capitalism translates to “a democratic, socially classless, anti-elitist” society.

As a result, when a political candidate suggests that capitalism might not be the complete answer to American issues like wide spread poverty, racial or class inequality or, just to mention one of Sanders’ key issues, making certain every young person who wants a higher education gets one.

Capitalism = Democracy…

For most of the 20th Century the Americanism equals capitalism construct has defined American politics. To suggest that capitalism might not be the answer to every one of society’s issues has been a good way to get branded with, well, the socialist label. Suggest that the really wealthy need to pay a greater share of taxes because, well, they can afford to do so and you are guilty of “class warfare,” the ugly twin of socialism.

But it wasn’t always so. Once the Sanders’ notion of “democratic socialism” was seen as a legitimate alternative to the policy prescriptions of conservative Republicans and more left of center Democrats.

Wilson, TR and Taft in 1912

Wilson, TR and Taft in 1912

In the election of 1912, one of the most interesting, complicated, and important presidential elections in our history, four major candidates sought the White House. Two of the contenders – Theodore Roosevelt, running on the Bull Moose ticket, and the election winner, Democrat Woodrow Wilson – were certainly not socialists, but did advocate a robust form of progressive politics that included sweeping attacks on the excesses of big business, support for organized labor, and improvements in the lives and economic conditions of working Americans.

A third candidate, incumbent Republican President William Howard Taft, was a kind of “establishment Republican” of his day and ours. Taft would not be out of place or uncomfortable in the modern Republican Party of John Boehner or Jeb Bush. Taft was a candidate embraced by big business, a big man with little interest in the kind of “activist” presidency that Roosevelt or Wilson personified.

Eugene V. Debs

Eugene V. Debs

The fourth major candidate in 1912 was a socialist – Eugene Victor Debs, an Indiana-born, railroad union leader who ran for president five different times. Debs captured nearly a million of the 15 million votes cast in 1912 – his issues then were essentially Sanders’ issues now – and that election proved to be the high water mark of American socialism.

Eight years later Debs was running for president again, but this time from behind the bars of the federal penitentiary in Atlanta where he was doing time for speaking against U.S. involvement in the Great War, a victim of the era’s hysteria about “radicals” who dared to veer from conventional ideas about American patriotism.

The “Radical” Ideas of Eugene V. Debs…

At the end of Debs’ trial – he was convicted under the Sedition Law of 1917 – he spoke to the court and said, in part:debspin

“In this country—the most favored beneath the bending skies—we have vast areas of the richest and most fertile soil, material resources in inexhaustible abundance, the most marvelous productive machinery on earth, and millions of eager workers ready to apply their labor to that machinery to produce in abundance for every man, woman, and child—and if there are still vast numbers of our people who are the victims of poverty and whose lives are an unceasing struggle all the way from youth to old age, until at last death comes to their rescue and lulls these hapless victims to dreamless sleep, it is not the fault of the Almighty: it cannot be charged to nature, but it is due entirely to the outgrown social system in which we live that ought to be abolished not only in the interest of the toiling masses but in the higher interest of all humanity…”

Little surprise that as a young fellow Bernie Sanders produced a documentary on Eugene Debs.

In his fascinating history of the Socialist Party in America, historian Jack Ross details the number of elected officials in the country who were elected on a Socialist ticket, most of them at time Eugene Debs was the American face of socialism. Ross’s list makes for interesting reading.

When Milwaukee and Many Other Cities Elected Socialists…

In the first two decades of the 20th Century, hundreds of Socialists were elected to city councils, as mayors, and state legislators in nearly every state. Wisconsin – take that Scott Walker – elected literally hundreds of Socialists and Milwaukee had a Socialist mayor nearly continuously from 1910 to 1960. One of those mayors, Daniel Hoan, served from 1916-1940 and another, Frank Zeidler, from 1948-1960.

Frank Zeidler was Milwaukee's Socialist mayor from 1948-1960

Frank Zeidler was Milwaukee’s Socialist mayor from 1948-1960

These so called “sewer socialists” sounded a good deal like Bernie Sanders in their demands for greater focus on the needs of the working class and they governed well, providing efficient and effective city governments. They would not have been re-elected time and again had they not been good at the nuts and bolts of governing and a good place to look for evidence of Sanders’ version of democratic socialism is his time as a small town mayor.

Butte and Anaconda, Montana had Socialist mayors before the Great War. Socialists were elected as county clerk and sheriff in Minidoka County, Idaho in the same period, a place where no Democrat has been elected in decades. The city of Sisseton, South Dakota had a Socialist mayor and Nebraska elected a Socialist to the state board of regents. But no more.

With the exception of the owners of a few Che Guevara posters leftover from the 1960’s, American socialists are about as prevalent today – and relevant – as, well, Che Guevara.

      “Socialism only works in two places: Heaven where they don’t need it and hell where they already have it.” – Ronald Reagan

My own theory as to why the socialist philosophy failed to gain greater political traction in the United States relates to the aggressive and very effective demonization of American socialists that began in the post-Civil War era, accelerated during the Red Scare of the 1920’s, climaxed with Joe McCarthy in the 1950’s, and has remained a key fixture of conservative political rhetoric ever since. The steady branding of “socialism” as far outside the American mainstream, combined with the conflating of “democratic socialism” with Soviet communism sealed the political fate of the heirs of Eugene V. Debs.

In post-World War I America, the Palmer Raids, initiated by the attorney general in a Democratic administration, rounded up thousands of “radicals,” many of them immigrants, and hundreds were deported because of their alleged leftist or un-American attitudes. America suffered a “red scare” that tended to feature more violations of civil liberties than any real threat to national security.

Congressional committees and J. Edgar Hoover’s FBI later lavished attention on leftists in Hollywood, the media, and in government. Increasingly little if any distinction was made between “democratic socialists” and communists, even though you can plausibly argue that anti-communism (and anti-socialism), with all its excesses, has been a far more powerful force in American politics than any theory advanced by Karl Marx.

Joe McCarthy’s “red baiting” in the early 1950’s briefly made him the most feared and loathed man in the country and his reckless methods destroyed careers and reputations. Every Democratic president since Franklin Roosevelt has been called a socialist or a communist by someone on the political right. Roosevelt, a New York multi-millionaire, was no socialist and, ironically, may have actually saved the country – and American capitalism – from moving to a radical leftist place during the Great Depression. Still the far right, even now, laments the “socialist” agenda of the New Deal.

Even FDR was a “Socialist…”

Roosevelt did accomplish some radical change – massive spending on public works, breaking up the huge and often corrupt utility holding companies, creating an old-age pension program that has proven to be kind of popular ever sense – and FDR did try to implement large scale planning of the economy with the National Industrial Recovery Act. The Supreme Court told him no.

I love the story of Roosevelt’s Labor Secretary Frances Perkins testifying before Congress on the legislation we now call Social Security. A skeptical senator, probing for the Achilles heel of the idea that the government might create actually create a program we all pay into in order to provide a degree of security for all of us in old age, pressed Ms. Perkins: “Isn’t this just a tiny bit of socialism,” the senator asked. No, she replied, it isn’t.

Loyalty Oaths, Alger Hiss, the John Birch Society…Oh, My…

After World War II and into the Cold War, Harry Truman, in so many ways an exemplary president and person, instituted “loyalty oaths” to root out communists (who now interchangeably were also called socialists), state legislatures debated the so-called “Liberty Amendment” to the Constitution in the interest of making America more American, the John Birch Society equated American political liberalism with Stalinist communism, and we fought a war in Southeast Asia designed to stop the insidious expansion of the socialist/communist ideology.

Commie hunter Richard Nixon was a junior congressman when he went after former State Department official Alger Hiss. Image by © Bettmann/CORBIS

Commie hunter Richard Nixon was a junior congressman when he went after former State Department official Alger Hiss. Image by © Bettmann/CORBIS

Richard Nixon owed his national profile while still a very junior member of Congress to his pursuit of Alger Hiss, one of the few people from the 1950’s who actually did have questionable allegiance to his country. Nixon, according to his most recent biographer, clung to the memory of his victory over Hiss, ironically, all the way to détente with Moscow and his historic opening to China.

As for that horrid war, Lyndon Johnson, in part, thought he could not stop it for fear of Democrats being labeled soft on communism. Today, of course, Vietnam, still a communist country last I checked, is one of the United States’ top trading partners.

You can write your own 21st Century sentence about what we used to call “Red” China, and as you do, remember that the Chinese president recently dined at the White House with the CEO’s of Microsoft, MasterCard, Netflix, Oracle, Walt Disney, and Morgan Stanley – socialists all, I’m sure.

Bernie Sanders probably won’t be president and you didn’t hear it here first, but like many democratic socialists in America’s past – from Debs to Norman Thomas, one of the most impressive Americans of the last century, to Michael Herrington to the old mayors of Milwaukee – his ideas have relevance and, if you listen closely, contain an important message about what America says it is, but has not yet fully become.

None of these socialists advocated or even privately believed, Sanders included, in violent revolution or the kind of reprehensible system Stalin built in Soviet Russia. They believed in using the tools of democracy, including persuasion and elections, to bring about societal and political change.

But, given our often-tenuous grasp of our own history, not to mention inability to consider nuance, that message gets lost, while the label – “he’s a socialist-slash-communist” – stings and sticks.

“In America today, the rich are getting richer, the poor are getting poorer and the millions of families in the middle are gradually sliding out of the middle class and into poverty,” Sanders says. ”In the final analysis, the people of America are going to have to say that the wealth, labor and natural resources must be used to benefit all the people, not just a few super-rich.”

That is not much different than what the old railroad union member Gene Debs said on the eve of going to prison in 1919 for speaking his mind: “I am opposing a social order in which it is possible for one man who does absolutely nothing that is useful to amass a fortune of hundreds of millions of dollars, while millions of men and women who work all the days of their lives secure barely enough for a wretched existence.”

The Worst Features of Petrograd and the Gilded Age…

It has long been un-American to embrace such language – the workers versus the governing class – but in an age when the super wealthy and super powerful at the very top of our social order display, as historian Jack Ross has written, the “worst features of both Petrograd and the Gilded Age,” the guy who will not win is making lots of noise and lots of people, including many younger Americans, judging by the polls, are listening.

“The concept that motivates us is a community good as opposed to the concept of an individual pursuing their own self-interest and that somehow the public good comes out of that,” Frank Zeidler, the one-time Socialist Mayor of Milwaukee once told the Nation magazine. “Our concept is that a pursuit of the good of the whole produces the best condition for the good of the individual.”

Sounds like a radical idea, doesn’t it? Eugene Debs went to his grave believing, as he often said, “Yes, I am my brother’s keeper.” 

Bernie Sanders may not get to the White House, but he may convince a new generation of Americans – a generation sick and tired of too much money in politics, too much power in too few hands, and too little hope for a shrinking middle class – to think seriously about what that dreaded word – socialism – might really be all about.


Velveeta and the 1 Percent

Last in a series…

The steady demise of the middle class in America offers many story lines. Velveeta, that awesomely yellowy imitation cheese-like substance, is just one.140107175754-velveeta-shortage-620xa

Reuters reports that the Kraft Foods Group, maker of Velveeta, has long been experiencing a decline in sales for the product, but recently the company “reversed course after considering stopping the sale of single-serve packages of Velveeta cheese sauce, which wasn’t moving in traditional grocery stores. After another look at the numbers, Kraft found that shoppers on tight budgets at dollar stores were gobbling up Velveeta sauce in the affordable small size, and the food got a new lease on life.”

The Reuters’ story quotes Anielle Troyan, a call center worker in New York, who said she shops at discount retailers like Family Dollar for items like soap and detergent, but also for Kraft macaroni and cheese and small-sized condiments.

It’s “expensive to cook for one,” she said. “I’m 25, I’m poor, I’m usually going to buy what’s cheapest.” Velveeta has been reborn.

Forget immigration, climate change, even ISIS, Anielle Troyan’s shopping habits present the biggest political challenge of the moment and the greatest challenge to anyone who wants to become the next president. By the way, why would anyone want to become the next president? But, I digress. A subject for another day.

gilded-age.gjf_The gulf between the American life of a Ms. Troyan and the lives of the nation’s political and business elite has rarely been farther apart, perhaps rivaled in modern history only by the run up to the Great Depression or the post-Civil War era that Mark Twain famously dubbed “the Gilded Age.” The ultimate irony for the elites is contained in the capitalist reality that sustaining a robust market economy requires a much larger degree of participation by those, like the Family Dollar shoppers, who have been increasingly left behind.

As the Pew Charitable Trusts noted in a recent report on the state of the American family’s balance sheet: “Between 2010 and 2013, most household incomes fell, particularly among families of color and those without postsecondary education. Over that period, stock ownership decreased for households on all but the top 10 percent of the income ladder, with a particularly steep decline among those on the bottom half. And almost a third of working-age adults reported having no retirement savings or pensions.”

“It is not surprising, then, that recent public opinion polling found American adults pessimistic and anxious about the economy and their own economic stability. They question whether the American Dream is within reach, and many doubt that their children will fare better than they have.”

Among key findings directly from the Pew analysis:

• Although income and earnings have increased over the past 30 years, they have changed little in the past decade. The typical worker had wage growth of 22 percent between 1979 and 1999 but just 2 percent from 1999 to 2009.

• The Great Recession eroded 20 years of consumption growth, pushing spending back to 1990 levels. Over the 22 years before the start of the downturn, household expenditures grew by 16 percent. But households tightened their purse strings after the start of the recession in 2007 and spending has yet to recover. As a result, the net increase in average annual household spending is just 2 percent since 1990.

• The majority of American households (55 percent) are savings-limited, meaning they can replace less than one month of their income through liquid savings. Low-income families are particularly unprepared for emergencies: The typical household at the bottom of the income ladder has the equivalent of less than two weeks’ worth of income in checking and savings accounts and cash at home.

That third finding would seem to speak to the belief, again confirmed by opinion surveys, that many Americans are pessimistic and not at all sure their kids or grand kids will have it better.

The Decline of the Middle Class…

The economics website 24/7 Wall Street has identified the ten states were the middle class seems to be dying the fastest. Four of the ten are in the West – Idaho, Oregon, Washington and California. Idaho, for example, ranked seventh worst in middle class metrics, with the 20 percent of Idahoans in the middle of personal income growth seeing nearly a 5 percent decline since 2009. In terms of personal income the top 20 percent of Idahoans, who enjoy nearly 50 percent of the state’s wealth, saw a 1 percent increase in the same period.

It’s difficult to find a metric that tells a different story about the troubles confronting virtually everyone not among the economic elite. The rabble-rousing Vermont Senator Bernie Sanders may be on to something when he recently told the Washington Post: “The anger is there.” But, he says, “it’s an anger that turns into saying, ‘Go to hell, I’m not going to participate in your charade. I’m not voting.’ So it’s a weird kind of anger. It’s not people getting out in the streets . . . We’re at the stage of demoralization.”

No demoralization at the very top, however. Corporate profits are at an all time high and corporate cash continues to accumulate. Apple alone is sitting on $200 billion in cash, while fending off accusations that it’s not paying anywhere near the taxes it owes in the United States or elsewhere. A good deal of that corporate cash is being used for stock buy backs, a phenomenon economist William Lazonick calls “profits without prosperity.”

Writing in the Harvard Business Review Lazonick says: “Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54 percent of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37 percent of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.”

“Why are such massive resources being devoted to stock repurchases?” Lazonick asks and answers with a simple truth. “Stock-based instruments make up the majority of [CEO] pay, and in the short term buybacks drive up stock prices. In 2012 the 500 highest-paid executives named in proxy statements of U.S. public companies received, on average, $30.3 million each; 42 percent of their compensation came from stock options and 41 percent from stock awards. By increasing the demand for a company’s shares, open-market buybacks automatically lift its stock price, even if only temporarily, and can enable the company to hit quarterly earnings per share (EPS) targets.”

The rich thereby get richer…

While CNN and Fox News have been obsessing over Ebola, or was it measles, the Congress has quietly been doing the bidding of Wall Street and repealing, bit by bit, the Dodd-Frank financial service industry reforms put in place back when the national and world economy was hours from a back-to-the-future visit to 1929.

“In the span of a month,” the New York Times wrote in January, “the nation’s biggest banks and investment firms have twice won passage of measures to weaken regulations intended to help lessen the risk of another financial crisis, setting their sights on narrow, arcane provisions and greasing their efforts with a surge of lobbying and campaign contributions.”

marktwain_cc_img_0In his novel The Gilded Age published in 1871, Mark Twain wrote, we hope tongue in cheek, “What is the chief end of man?–to get rich. In what way?–dishonestly if we can; honestly if we must.”

If you were a betting man or woman with the comfort and security of residing in the rarified air of the growing economy you might be inclined to put some money on Jeb Bush and Hillary Clinton ultimately becoming the next contenders for the White House. Bush has had a good week garnering strong reviews for saying in a Detroit speech: “How do we restore America’s faith in the moral promise of our great nation that any child born today can reach further than their parents? This is an urgent issue: Far too many Americans live on the edge of economic ruin.” Bush is asking the right question, but as news accounts pointed out he offered no specifics and he may turn out to be a questionable advocate for the middle class.jeb bush hillary clinton

Not the Best Messengers…

The former Florida governor, sometimes called “the smarter Bush,” began the year by shedding his relationships with various corporate entities that out of office have made him a wealthy man and thereby able to seek the presidency. Among Bush’s out-of-public-life efforts were stints as an adviser to a private equity firm, not unlike the last Republican candidate, and to Barclay’s, the big British banking concern that took advantage of $8.5 billion in government money during the last financial crisis. Bloomberg Business reports, as the Brits quaintly put it, that Barclay’s is facing more than $8 billion in “conduct” costs by 2017. Make that “bad conduct” for rigging interest rates and to settle investigations into the bank’s manipulation of foreign exchange rates. Bush cut ties with Barclay’s just as Bloomberg notes the bank’s new CEO struggles to “change the culture.”

If Jeb Bush has a credibility gap when it comes to addressing “economic ruin,” then Hillary Clinton does, as well. While taking her time announcing a campaign, Clinton keeps to the rubber chicken circuit of paid speeches, including recent appearances sponsored by the Canadian Imperial Bank of Commerce. Typically Clinton has been pulling down at least $200,000 for such appearances. When UCLA asked if there was “a university rate” they were told sure – $300K. The cash is a necessity apparently since she and Bill left the White House, as she put it, “dead broke.” Clinton’s post-State Department take on the lecture circuit, combined with her husband’s lucrative gabbing, has made it certain that she won’t be shopping at any dollar store, or even Walmart where she once sat on the corporate board.

Hillaryworld may not be exactly “the Gilded Age,” but her speaking contracts do require that she be supplied with “room temperature water…lemon wedges…ginger ale…chairs with two long, rectangular pillows and two cushions to be kept backstage in case the former secretary of state ‘needed additional back support.’” And, of course, as Slate reported a while back, there are the pesky interchanges with real people. “Prestaged” group photos must be deftly handled so that Clinton doesn’t have to wait ‘for these folks to get their act together.” The former secretary of state, it is said, “doesn’t like to stand around waiting for people.”

Lots of Americans are, unfortunately, standing around and waiting for an economy and political system that works again for them. Joe Valenti of the Center for American Progress says it well. “An additional dollar in the hands of a middle income earner is going to drive a lot more spending than an additional dollar in the hands of someone in that top quintile.” While households at the very the top are able to spend enormous sums of money, Valenti says, “at some point there’s only so much that an individual can spend, even on all different kinds of luxury goods.”

For the most part, those of us fortunate enough to have a college education, enough income to invest in the market and steady employment are doing just fine. But nothing lasts forever, not even for the economic and political elite. The American middle class really has built the country and a growing economy insures that the middle class will continue to spend and save and invest, and not just at the dollar store.

The American Dream is in trouble. It is time to change the culture. Don’t believe it – just ask Herbert Hoover.

Concentrated Wealth or Democracy

I’ve been teaching a class on American presidents this winter focusing on five men who to varying degrees, at least in my mind, were “touched by greatness.” Hardly anyone has questioned my choice of Jefferson, Lincoln or Theodore Roosevelt. All three are, after all carved into Mount Rushmore and each helps define “presidential greatness.” I get some push back for thinking Lyndon Johnson gets some consideration, but even those who see LBJ’s legacy as being blackened by Vietnam have to admit his civil rights and domestic policy accomplishments were historic.

I get many questions about including Woodrow Wilson.

Searching for a one sentence answer to why Wilson was “touched by greatness,” I’ve settled upon the fact that one of the 28th President_Woodrow_Wilsonpresident’s greatest legacies was having appointed Louis Brandeis to the United States Supreme Court. Brandeis, both acclaimed and hated as a “people lawyer,” was the first person of Jewish faith to serve on the Court and a committed Zionist. He was also an eloquent proponent of judicial restraint, particularly in assessing government regulation of business and above all an enemy of economic concentration. Brandeis was on the Court for nearly a quarter of a century and most Supreme Court historians rank him among a handful of truly great justices. Brandeis died in 1941.

The fact that Brandeis is largely forgotten today, at least outside of legal circles or by alums of Brandeis University, is a real shame. The great man has a lot of tell us about the state of capitalism and the returning cycle that, as in his time has produced vast inequalities in income.

In the time just before the Great Depression – as I noted in a recent piece income inequality has now returned to levels last seen just before the big crash – a booming if artificially inflated American economy seemed to many to be on an endless upward growth trajectory. Brandeis was one of the few to see what was happening in the Roaring Twenties more clearly and to forecast, as his biographer has written, “that the so-called boom had very weak underpinnings.” Vast income inequality was part of the weakness.

BrandeisBrandeis had a nuanced, indeed complicated perspective on the economic situation but had a deceptively simple way of describing it: “We must make our choice,” Brandeis is reported to have said. “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

Writing in the New Republic in 2010, Jeffrey Rosen said of Brandeis that he “opposed big government as well as big business, and therefore he opposed also the central regulation of the money trusts. Instead he was determined to break up the trusts and to untangle the web of political and economic influence that made concentrated financial power possible in the first place.”

Rosen continues: “The idea of [banks] ‘too big to fail’ is the perverse culmination of Brandeis’s dystopian view of high finance. His main concern was not, as his critics suggest, the economic inefficiency of large firms but the oligarchic influence they wielded over the American financial and political system which allowed them to shield themselves from accountability for their own greed and recklessness. In an irony that Brandeis would not have relished, the smaller banks that resisted the risky proprietary trading of the mega-banks were allowed to fail, while the biggest banks that caused the crisis by flooding the market with junk securities were rescued.”

Brandeis, the legal and economic scholar born before the Civil War, recognized a hundred years ago the perverted connection that exists between the power of politics (and public policy) and the massive influence of finance in a capitalist system. The two combine to help create the kind of economic inequality that now has potential presidential candidates from both parties talking about the need to “focus on the middle class.”

No one, from Elizabeth Warren or Bernie Sanders on the political left or Rand Paul or any of a dozen pretenders on the political right has yet found the effective political language to talk about this issue although the political class is obviously reading the opinion polls and recognizing the need to address some broad-based concerns.  The struggling politicians might do well to read Louis Brandeis’s book Other People’s Money published in 1914.

Other People's MoneyBrandeis began his book, a series of essays really, first published in Harper’s, by quoting the man who put him on the Supreme Court, Woodrow Wilson: “A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men, who, even if their actions be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who, necessarily, by every reason of their own limitations, chill and check and destroy genuine economic freedom. This is the greatest question of all; and to this, statesmen must address themselves with an earnest determination to serve the long future and the true liberties of men.”

Twice in the 20th Century Brandeis’s ideas about “bigness” and “monopoly,” not to mention the concentration of economic power, influenced political action. The first occasion occurred during the struggle between Wilson and Theodore Roosevelt for leadership of the progressive movement. Wilson and Democrats largely won that political battle as the result of the historic election of 1912. Then with Brandeis’s help Wilson moved to create the Federal Reserve System, legalize the income tax and tighten business regulation. The second time was when Franklin Roosevelt came to the presidency and presided over what became the New Deal with much tougher regulation of banks and securities and a much greater role in the economy.

Both presidents understood the connection Brandeis made long ago between concentrated economic power and dominate political power. If income inequality, defined as a huge percentage of the world’s wealth held by a tiny percentage of the richest and most politically connected people, has become – again – a defining issue of our age then the solution requires a recalibration of all that power and influence.

Ironically, it is not a political leader, a legal scholar or even an economist who is most clearly talking about the issues the old Zionist Louis Brandeis spent his lifetime understanding. Rather it is an inquisitive Jesuit, trained in the humanities and philosophy, who comes closest to channeling the great justice.

“Some people continue to defend trickle-down theories which assume that economic growth, Francis encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Pope Francis wrote in 2013. “This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.”

The Zionist knew in 1914 and the Jesuit a hundred years later that we again have a choice between a system of oligarchy invested for the most part in maintaining economic and political power or a system of democratic capitalism where the tangle of influence and control gives way once again to widespread opportunity. Some will always term this “class warfare,” but it’s not that at all. The real issue is about the survival of an inclusive democratic system where the economy works for everyone. The current circumstances prove again that despite our “naïve trust,” as Francis would say, capitalism is simply not self regulating.

As a perfect illustration of the tangled intersection of finance and politics, the print edition of the New York Times on Sunday had two stories that underscore the “oligarchic influence” of finance and politics. The first story detailed the mad race for campaign money that has been set off by Mitt Romney’s abrupt exit from the Republican field. The story mentioned Jeb Bush’s, Chris Christie’s and Marco Rubio’s pursuit of hedge fund managers, billionaire investors, the owner of the New York Jets, the co-founder of Home Depot and Idaho millionaire Frank VanderSloot – the people who finance campaigns and increasingly determine who the candidates will be.

When the lengthy story about money and politics jumped from page 1 to page 12 – I’m sure this was just a coincidence – it ran next to a story headlined: “JP Morgan to Pay Out $99 Million Over Graft.”

That story noted that the largest U.S. bank, a key player in the 2008 Great Recession, “did not admit wrongdoing” in a scheme to defraud investors by “rigging prices in the $5.3 trillion-a-day foreign exchange market.” The nearly $100 million payment the bank will make comes on top of a billion dollars the bank had earlier agreed to pay in civil penalties for what can only be characterized by an old and entirely appropriate word – greed.

Mr. Justice Brandeis would be neither amused or surprised.

Next Time: Why the 1 Percent Should Address Income Inequality…

Johnson’s Income Inequality Index

Now that Mitt Romney has decided to take a pass on a third bite at the White House apple it may be US-VOTE-2012-REPUBLICAN CONVENTIONpossible to define Romney’s lasting impact on American politics. While it’s hard to ignore “binders full of women” or the wonderful story of his dog strapped to the top of the family station wagon, I’m betting Romney’s lasting contribution to our political culture will be his historic 47 percent comment.

You may recall Romney’s comments during the 2012 campaign that were caught on tape while he apparently thought he was speaking candidly to a friendly audience.

“There are 47 percent of the people who will vote for the president no matter what,” Romney said. “All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. And I mean, the president starts off with 48, 49, 48—he starts off with a huge number. These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect. And he’ll be out there talking about tax cuts for the rich. I mean that’s what they sell every four years. And so my job is not to worry about those people—I’ll never convince them that they should take personal responsibility and care for their lives.”

The “47 percent” remark in and of itself didn’t doom Romney’s campaign, but added to his otherwise awful overall performance as a candidate the comment did cement the notion that the richy rich former private equity multi-millionaire was out of touch and not only not worrying “about those people,” but not caring much about them either. Left out of Romney’s 47 percent calculation was any consideration of stagnate incomes, the crush of debt that accompanied the home-buying binge or the skyrocketing costs to send a kid to college. Romney seemed to be suggesting that if American’s just worked harder, took more personal responsibility and quit depending on government all would be well. If only it were so easy.

I think we can mark the beginning of the intensifying political focus on income inequality to Mitt and his 47 percent. The fact that candidates in both parties now weave concern about income distribution and the stilted middle class into their stump speeches means the issue has lasting power and may even dominate the next presidential campaign. It’s one issue that appeals to the Tea Party Right and the Elizabeth Warren Left. During Romney’s short-lived flirtation with another run for the White House even the guy with the car elevator felt a need to address income inequality. We’ll hear plenty more in the months ahead.

For some time now I’ve been collecting bits of data and pieces of evidence about this issue in order to attempt to place it in contemporary and historical context. I’ll explore those issues in due course.

For the moment, and as a jumping off point, consider the following, with apologies to Harper’s, The Johnson Income Inequality Index.

Eighty people are as rich as half of the world’s population.

ap110827121143cropA recent report from the global anti-poverty group Oxfam finds that since 2009, the wealth of the 80 richest people in the world “has doubled in nominal terms — while the wealth of the poorest 50 percent of the world’s population has fallen.” Some of the methodology of the Oxfam report has been criticized, but not the essential thrust – a tiny handful of extraordinarily wealthy people dominate the world’s wealth.

In 81% of America’s counties the median income is lower today than 15 years ago.

In Idaho, for example, the median income in Valley County peaked in 1979. In Power County the peak was 1969. The same can be said for Coos County, Oregon; Whitman County, Washington and Fergus County, Montana.

The really, really, really rich are get much richer.

The New York Times reports that “the jet market is splitting in two. Sales of the largest, most expensive private jets — including private jumbo jets — are soaring, with higher prices and long waiting lists. Smaller, cheaper jets, however, are piling up on the nation’s private-jet tarmacs with big discounts and few buyers.”

If the gap between the top 1 percent and the rest of the world is widening, then the really, really, really wealthy are separating from the merely rich. As the Times says, “the super rich are leaving the merely very rich behind. That has created two markets in the upper reaches of the economy: one for the haves and one for the have-mores.”

Not since the Great Depression has wealth inequality been so acute.

A recent academic study shows that in the United States the disparities in wealth – the top 1 percent great-depression-soup-lineenjoying more wealth than the bottom 90 percent – hasn’t been so stark since the Great Depression.

The Guardian says the study shows “The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90%.”

CEO’s make 354 times as much as workers.

Most Americans, according to the Harvard Business Review, think the ratio of CEO pay to worker pay is about 30-1 and would be more or less comfortable with that. In fact the ratio is 354-1.

HBR notes the late management guru Peter Drucker’s warning “that any CEO-to-worker ratio larger than 20:1 would ‘increase employee resentment and decrease morale.’ Twenty years ago the ratio had already hit 40 to 1, and it was around 400 to 1 at the time of [Drucker’s] death in 2005. But this new research makes clear that, one, it’s mindbogglingly difficult for ordinary people to even guess at the actual differences between the top and the bottom; and, two, most are in agreement on what that difference should be.”

Middle class wages have been stagnant for 15 years.

As the website run by the data guru Nate Silver says: “One common definition of the American dream is the belief that each generation will do better than the one before. By that measure, the dream is fading. Take the generation born in 1970. In early adulthood, these Americans out earned their parents, those born in 1950. But their gains stalled in the 2000s, when they were in their 30s. Now in their 40s, their earnings have fallen behind those of their parents at the same stage in their lives.”

City dwellers often have no financial cushion.

Nearly half of all households in major cities don’t have enough money saved to cover essential expenses in an emergency, according to a study from the Corporation for Enterprise Development and reported in the Times.

“For many Americans, living without any cushion can lead to financial disaster. This nerve-racking financial insecurity has come to characterize life in cities across the country.”

Born poor, stay poor.

Black children born into poor families tend to remain poor all their lives, according to the Brookings Institution.

“The stain of racism is a stark, depressing reminder of how far short of its founding ideals the nation still falls. Even with the legal scaffolding of American racism dismantled—and even with an African-American in the White House—black children live in the poorest neighborhoods and attend the worst schools; they have the lowest chance of graduating college, and the highest risk of incarceration.

“The race gap is only the most vivid sign that birth is all too often destiny in America. While Americans have always been historically more tolerant of income inequality than their European cousins, this was generally true either because the average standard of living was rising across the board (the “rising tide floats all boats” consolation), or because there was lots of movement up and down the income ladder (the “Horatio Alger” ideal), or both. But the U.S. now faces a threefold threat: stagnant growth in standard of living, a big gap between the rich and the rest, and low rates of upward mobility.”

Rolls Royce is doing fine, thanks.

A Forbes survey last year identified 1,645 billionaires in the world, 219 more billionaires than the year before. Perhaps it is not surprising that the luxury automaker Rolls Royce reported a 33 percent increase in sales in 2014.

2014_rolls_royce_wraith_three_quarters“If you look at the number of ultra-high net worth individuals around the world, that number is clearly growing,” said company spokesman Andrew Ball. “The luxury market is growing at the high end and we are delighted to be part of that.”

Yahoo writes: “The phenomenon helps to explain the strong sales of mega-yachts, rare jewelry and complicated, handmade Swiss watches. There are more people with more money looking for ways to stand out from the crowd — and in this context, a Rolls becomes a very noticeable statement.

“Ball said 70 percent of Rolls buyers are new to the brand, and roughly half choose to customize their cars by adding expensive personal touches. The cost of making a Rolls ‘bespoke’ — the British term for custom-made suits — rather than ‘off the rack’ can dwarf many household budgets.

“It can be simple, like having your initials stitched into the headrest or the veneer,” said Ball. “Customers enjoy this. It’s an emotional process.”

By the way the basic Rolls, without your initials stitched into the headrest, starts at $263,000. There is a waiting list.

Next time: The Political Response to Income Inequality.

Ralph Smeed

smeedOne of the Characters

My dad loved to say that every town had a “town character,” but that in his hometown the characters had a town. If the same can be said of a state, then Ralph Smeed, the crusty, 88 year old libertarian who died yesterday, was one of Idaho’s true characters.

I don’t remember when I first met Ralph, but I do remember it was at the other end of a telephone line. I had just finished what I am sure was another fairly routine half-hour on Idaho Public Television interviewing a panel of guests on some political or economic subject. The phone rang and Smeed boomed down the line: “Johnson, your idea of a good show is getting two liberals to disagree…”

Hello, Ralph Smeed.

Over time the phone calls became more frequent and I came to know Smeed for his unflinching brand of libertarian politics and his political quips delivered almost always with a smile and genuine humor. He was the bane of all liberals, the mostly cheerful opponent of “government TV” – his term for PBS – a champion of Adam Smith, fierce opponent of “statism,” and one of those guys who if not always right, was never in doubt. I have no idea about Ralph’s religious views, but God rest him. I suspect, if he gets a chance, he’ll be engaging St. Peter over the unfairness of the inheritance tax.

Ralph Smeed is one of those characters who can’t help but enrich our political system. As a learning journalist, much younger and, I’m certain, much more sure of myself than I had any right to be, Smeed taught me a lesson. He would argue that his brand of libertarian, unfettered free market politics rarely, if every, received the time that news organizations routinely devoted to more conventional conservative vs. liberal debate. He was right then, of course, but that pendelum has swung.

I would argue back in the early 1980’s that when Smeed’s essential views gained a larger following they would be featured more prominently. He would respond that it would be hard for the libertarian point of view to gain a greater following if the so called “main stream media” didn’t interview their spokesmen. Touche. I think we both had a point.

I like to think I became more open as a result of this running dialogue and I did have the pleasure of reminding Ralph a time or two that he had to watch “government TV” in order to hear Milton Friedman or William F. Buckley.

Ralph may have warmed a little when I had the chance to interview Buckley, an encounter he helped to arrange, while the then-host of the PBS program “Firing Line” made a visit to Caldwell. It was one of the better, more interesting interviews I ever did and I happily came away with an autographed copy of Buckley’s then-latest book, ironically not about politics, but sailing.

You have to like a guy who stood for his beliefs. Not always right, in my view, but never in doubt and someone who could – and would – good naturedly debate his views with anyone. In a way, I envy a guy like Ralph who could be so completely confident in his world view. I don’t think life – or politics – is ever quite so black and white, but as I said, we need the Ralph Smeed’s to enrich the great debate.

College of Idaho political scientist Jasper LiCalzi summed up Smeedism in a comment to the Idaho Press-Tribune: “Smeed has been very vocal. No one has ever questioned where he stood. If anything, from where he started, (Canyon) county and I guess the state are closer to his ideology.”

Whether you believe that is good or bad, it is a true statement.