Letters We Wish We'd Written Dept., War On The Middle Class Edition

The letter below was in response to a recent op/ed by the once great Washington Post Bezos Bugle's conservative plutocrat shill and non-economist Robert J. "Not Paul" Samuelson on why "the system" is rigged toward the middle class, not the wealthy (you need only read the first few paragraphs to get the gist of Samuelson's argument).  That's right: those greedy middle class "takers" are grabbing all the goodies from the one percent "makers!" (Let's pause here for a serious question to our reader demographic:  Do you feel the system has been rigged in your favor?  We didn't think so.)  But, as we know, reality has a liberal bias:

Robert J. Samuelson’s op-ed column had a fundamental flaw. He claimed the federal government has a bias for the poor and middle class as opposed to the rich, citing funds spent on Social Security and the fact the rich pay the majority of taxes in the United States. 

He failed to note that U.S. workers paid through their working lives for Social Security. He completely ignored that, for the past three decades-plus, incomes of the rich have risen several hundred percent while middle-income workers’ wages have been stagnant. Since the economic recovery, the top 1 percent have gained 95 percent of all new income with the remaining amount going to the next 9 percent. Nine out of 10 Americans received a great big nothing in new income. 

Public policy has been deliberately framed to favor the rich and well-connected. Mr. Samuelson might examine the recent omnibus spending bill that gave banks the power to use federally insured deposits in derivative speculation. If the deal goes well, bankers keep the bucks. If not, taxpayers foot the bill. Thanks to the same bill, retirees might lose part of the pensions they already receive and the government won’t help. 

Bias for the middle class, indeed! 

Fred Rotondaro, Washington  

The writer is a senior fellow at the Center for American Progress.

Another letter writer named Gregory Diercks had a more detailed rebuttal to Samuelson that we're not reprinting here, but is worth your time to check out.

Basically, Samuelson is Oxycontin Rush Limbaugh with some intellectual patina.  They share the same view that the 2008 crash was the result of gummint policies allowing expanded middle class homeownership, rather than the greed and sociopathy of Wall Street and its network of shady lenders and speculators.  What a joy that the once great Washington Post Bezos Bugle is affording this reactionary valuable space on its op/ed pages.

On The Eve Of Labor Day

Tomorrow is Labor Day in the U.S., which makes it an appropriate time to reflect on the American workforce, income inequality and the resulting erosion of the middle class.  The New York Times editorial this morning is worth a read.  Here's a snippet:

On its own, however, growth will not raise wages. What’s missing are policies to ensure that a large and growing share of rising labor productivity flows to workers in the form of wages and salaries, rather than to executives and shareholders. Start with an adequate minimum wage. Provide increased protections for workers to unionize, in order to strengthen their bargaining power. Provide protections for undocumented workers that would limit exploitation. Add to the mix regulations to prevent financial bubbles, thereby protecting jobs and wages from ruinous busts. Adopt expansionary fiscal and monetary policies in troubled times to sustain jobs and wages.

Or, put in simpler, visual form (click to enlarge):

 (Signe Wilkinson, via gocomics.com)

At Least The War On The Middle Class Is Going Well

In today's once great Washington Post  Bezos Bugle, Jia Lynn Yang traces the change in corporate culture and the "social contract", and the changes wrought in one of America's great companies, IBM, and a town in New York -- Endicott:

This town in the hills of Upstate New York is best known as the birthplace of IBM, one of the country’s most iconic companies. But there remain only hints of that storied past.

The main street, once swarming with International Business Machines employees in their signature white shirts and dark suits, is dotted with empty storefronts. During the 1980s, there were 10,000 IBM workers in Endicott. Now, after years of layoffs and jobs shipped overseas, about 700 employees are left.

Why are employees doing so badly while the company is surviving?

It used to be a given that the interests of corporations and communities such as Endicott were closely aligned. But no more. Across the United States, as companies continue posting record profits, workers face high unemployment and stagnant wages.

Driving this change is a deep-seated belief that took hold in corporate America a few decades ago and has come to define today’s economy — that a company’s primary purpose is to maximize shareholder value.

It wasn't always so, of course:

In the decades after World War II, as the U.S. economy boomed, the interests of companies, shareholders, society and workers appeared to be in tune. Towns such as Endicott flourished.

Even until 1981, the Business Roundtable trade group understood the need to balance these different stakeholders.

“Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts ­investment to continue and enhance the enterprise, provide jobs, and build the economy,” the group said at the time, in a document cited this year in an article in the publication Daedalus.

There must have been a shift in corporate philosophy, and not just at IBM, right?

In 1970, Nobel Prize-winning economist Milton Friedman wrote an article in the New York Times Magazine in which he famously argued that the only “social responsibility of business is to increase its profits.”

Then in 1976, economists Michael Jensen and William Meckling published a paper saying that shareholders were “principals” who hired executives and board members as “agents.” In other words, when you are an executive or corporate director, you work for the shareholders.

Stout said these legal theories appealed to the media — the idea that shareholders were king simplified the confusing debate over the purpose of a corporation.

What the article goes on to show is that not only are people losing good middle class jobs,  but pensions have been disappearing, and customer satisfaction is suffering.  In their mania to please the shareholders (and Wall Street), executives don't concern themselves with anything other than setting ambitious Earnings Per Share targets, and sitting on record corporate profits.  Not product, certainly not any "social contract" that might lead them to do what's right for the people who are the company, or their country.

So, who comes out ahead? The shareholders (many of them fellow boomers and retirees) and the short-sighted executives.  And the vicious cycle will continue until there is no more middle class to buy their products or services:

But as sales flatten, questions have emerged about how the company will hit its ambitious target, aside from slashing jobs.

“This is a horrible business model,” said Lee Conrad, a coordinator for Alliance@IBM, a group that advocates for company employees. “It’s all about the EPS [earnings per share] and not about growing the business. The customers are being impacted by this when good employees are being cut. It’s just a mess.”

Such is the "I, Me, Mine" world in which these corporate myopes and their precious/ feared shareholders are living.

Headline of the Day - Income Inequality Edition

"Income Growth For Bottom 90 Percent Of Americans Averaged Just $59 Over 4 Decades"

And the top 10 percent, how did they do?  Their income rose $116,071 over the same period. Tell us again, who are the "makers" and who are the "takers?"