Middle Class

curiously neglected

SEE UNION THOM

see inequality (maybe polarization?)

see 2 santas

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AN 8 26

Republicans appear to be realizing that President Donald Trump's claims that "affordability" is a "con job" aren't winning messages for the GOP as the November 3 election nears.

Writing for The New Republic on Tuesday, Alex Thomas explained that for years, critics have claimed that Republican economic policies aren't working for the vast majority of Americans. Some have gone so far as to claim that it's outright hollowing out the middle class.

Vice President JD Vance appeared on Joe Rogan's show, where he complained that Republicans allowed Wall Street to turn “every asset of modern life” into a profit machine. So, homes, jobs, health care and basic stability are being treated as investments for the wealthy rather than necessities for working families. Vance explained that this was the reason so many younger Americans are open to socialism. The GOP has spent generations championing deregulation, tax cuts for the wealthy, union-busting and free trade. When big banks and mortgage companies were caught making risky financial decisions and companies collapsed, the government swooped in to bail them out. The victims of the banks were not similarly rescued.

Republican Sen. Josh Hawley (Mo.) has criticized his party over corporate giveaways and drastic cuts to social programs. Sen. Bernie Moreno (R-Ohio) supports restrictions on investors buying up homes all over the U.S. Even Secretary of State Marco Rubio acknowledged that "free and unfettered trade at the expense of our national economy has shrunk the middle class and left the working class in crisis."

Thomas argued that these statements aren't merely minor changes in rhetoric. He believes that they amount to a growing recognition that the old Republican economic model failed millions of Americans.

In a way, Thomas wrote, Republicans are the dog that caught the car. Meanwhile, Donald Trump's economic policies trend toward being a "dedicated transactionalist." He has "stacked up a Jenga tower of economic policies that are largely short-sighted. Not the sort of ideas you would use to rebuild a party platform that has failed, let alone revive a crumbling economy," Thomas wrote.

Calling Trump's economic policies "zaney," at least "as much as they can be coherently understood," Thomas called it a sharp reversal of the Republican doctrine.

Then there is the party’s biggest obstacle: its donors. Vance may talk about restoring worker power and rebuilding private-sector unions, but he will need the billionaire backers when it's time to begin collecting his own campaign war chest.

Vance may compare AI to the Industrial Revolution, but that was also a period that created huge fortunes while workers fought for basic rights. The difference this time is that the industrialists are already in control, the labor movement is weaker and the Republican Party is still dependent on the billionaires who stand to benefit most, Thomas closed.

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an 8 25

CNN data analyst Harry Enten crunched the numbers and discovered a large swathe of U.S. residents no longer believe in the American dream.

“America, we have a problem,” said Enten, describing a growing nation of economic pessimists.

“If you work hard, you'll get ahead: that is the American dream,” said Enten. “[Respondents answering] ‘Never/Not true now’, in 2010 to 2011, 15 years ago, it was 51 percent who said it wasn't true. Now look at this number! Whooo! Through the roof: 70 percent.”

Conversely, Enten discovered the percentage of Americans who still believed the American dream to be true “falling through the floor.”

IFrame Content

“It was 47 percent 15 years ago. Now it is just 29 percent, so we basically had a 50/50 nation on whether the American dream was still true 15 years ago, but now it's over two thirds of Americans who say it's never or no longer true,” Enten said.

Enten reported the group experiencing the most pessimism or loss in faith of the American dream was younger Americans between the age of 18 and 29, with optimism dropping from 56 percent in 2010 to just 21 percent in 2024.

“Look at where that number has absolutely tumbled to. It has dropped … 35 points to just 21 percent,” said Enten, adding that faith in the American dream also appeared to have dropped with some senior citizens, with those 65 or older experiencing a drop from 53 percent to 41 percent.

“What is essentially going on here is the American youth have lost faith pretty much completely in the idea of an American dream,” Enten said. “And that, of course, goes back to the idea of why there's poll after poll after poll that shows that younger people, more so than any other part of our nation at this point, have seen deepening pessimism in their personal lives as well.”

Another “scary” percentage that came up in polling was the falling number of friends that Americans appear to have, said Enten, with the percentage of Americans reporting “no close friends” jumping up from just 3 percent in 1990 to 17 percent now.

“No wonder pessimism is really taking a hold in the American public” Enten said.

Watch the video below or at this link.

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AN 725

NO LNX

Here's the real reason Republicans hate the middle class

U.S. Senator Lindsey Graham (R-SC) looks on, on the day he meets with German Chancellor Friedrich Merz along with other Senators, on Capitol Hill, in Washington, D.C., U.S., June 5, 2025. REUTERS/Nathan Howard

Thom Hartmann July 02, 2025

A Pew poll published last week finds that 59 percent of Americans say the GOP’s “Big Beautiful Bill” that cuts taxes for billionaires and raises them for working-class people — and was passed by the Senate on Tuesday — “would hurt lower-income people and 51 percent think it would hurt middle-income people.”

And they’re right. According to the nonpartisan Congressional Budget Office, the bill will measurably reduce the income and spending power of low- and middle-income people while giving a ~$4 trillion gift to the morbidly rich.

Americans have figured this out: according to a Fox “News” poll published last week and reported by Newsweek:

“Only 38 percent favored the bill, while 59 percent opposed it, a 21-point gap against the bill. About half of all voters believed the legislation would be detrimental to their families, and just a quarter thought it would deliver any benefit.”

So, why would Republicans want to further reduce the size and wealth of America’s middle class?

Turns out, there are two good reasons that answer that question.

The first and simplest is that ever since five corrupt Republicans on the Supreme Court made it legal for billionaires and big corporations to bribe politicians, the GOP has done the bidding of the morbidly rich to the exclusion of everybody else.

And there’s considerable truth to that argument. The Court opened that door with their Buckley and Bellotti decisions in the late 1970s, laying the foundation for Ronald Reagan’s war against unions and working people and his so-called “Reagan Revolution” on behalf of the wealthy.

As Justice Ketanji Brown Jackson pointed out in the Diamond Alternative Energy v EPA case that was decided on June 20 and made it easier for the fossil fuel industry to challenge environmental regulations:

“This case gives fodder to the unfortunate perception that moneyed interests enjoy an easier road to relief in this Court than ordinary citizens. … Our ruling will no doubt aid future attempts by the fuel industry to attack the Clean Air Act. … I worry that the fuel industry’s gain comes at a reputational cost for this Court, which is already viewed by many as being overly sympathetic to corporate interests. …“For some, this silence will only harden their sense that the Court softens its certiorari standards when evaluating petitions from moneyed interests, looking past the jurisdictional defects or other vehicle problems that would typically doom petitions from other parties. This Court’s simultaneous aversion to hearing cases involving the potential vindication of the rights of less powerful litigants — workers, criminal defendants, and the condemned, among others — will further fortify that impression. …

“The Court’s remarkably lenient approach to standing in this case contrasts starkly with the stern stance it has taken in cases concerning the rights of ordinary citizens. … The Constitution does not distinguish between plaintiffs whose claims are backed by the Chamber of Commerce and those who seek to vindicate their rights to fair housing, desegregated schools, or privacy. But if someone reviewing our case law harbored doubts about that proposition, today’s decision will do little to dissuade them.”

But while it’s true that Republicans have been naked toadies for rich people and big corporations for a century, there’s a larger reason why Trump and the GOP are working so hard to immiserate and impoverish working class Americans.

That reason has to do with something called “modernization theory.”

Back in 1959, one of the inventors of modernization theory, Seymour Martin Lipset, famously wrote:

“The more well-to-do a nation, the greater the chances that it will sustain democracy.”

Lipset argued that industrialization led to unions and higher wages, which in turn funded higher-education opportunities and urbanization, which both grew a larger middle class. As people’s material conditions improved, Lipset noted, their focus shifted from survival issues like food and shelter to more aspirational elements like democratic values, civil and human rights, representation in government, and the rule of law.

In other words, the wealthier the middle class becomes, the more it will demand a vibrant democracy and a government that represents its interests.

On the other hand — and here is the GOP‘s real goal — if you can do away with or diminish the wealth and political power of the middle class, you can more easily loot the government and act exclusively in the interest of the morbidly rich.

As Barrington Moore noted in his book Social Origins of Dictatorship and Democracy: “No bourgeois [middle class], no democracy.”

In 2003, researchers Carles Boix and Susan Stokes found strong evidence that wealthier countries are more likely to be democracies, and once established, democracies are far more stable in richer nations. Similarly, in their bookEconomic Origins of Dictatorship and Democracy", Daron Acemoglu and James Robinson prove that when economic growth empowers new classes (especially the middle class), those groups will demand political reforms.

Using examples including South Korea, Taiwan, Eastern Europe, and Tunisia, multiple cross-national studies using World Bank income data and Freedom House democracy scores show a strong correlation between per capita income and democratic governance; as people become wealthier they more vigorously demand a small-d democratic political system.

This happens because middle class people have economic security, giving them the time and energy to demand their rights; want property protections, honest courts, education, and fair governance; and typically have relied on meritocratic systems (education, hard work) to achieve their status instead of using corruption or inherited wealth and privilege.

By 1981, the American middle class was at its peak because of a 74 percent top personal income tax bracket, a 50 percent top corporate income tax rate, a strong and healthy social safety net, cheap healthcare (because hospitals and insurance companies were required to be nonprofits in most states), and free or near-free college.

Democracy was also arguably at its peak; for the previous 40+ years Congress had passed, one after the other, bills that primarily benefitted average working people and the middle class. Voting was easy, women and minorities were empowered, and we led the world in education and innovation.

This is not, however, what many wealthy oligarchs want, particularly those who become politically active.

Instead of democracy, they want government to protect their wealth and privilege to the exclusion of “the rabble.”

Instead of paying the cost of a government large enough to guarantee the emergence and sustenance of a middle class, they want tax cuts and subsidies for their businesses. Instead of rights for average people, they want police and courts that will, as Justice Jackson noted, focus instead on their unique wants and needs.

When Reagan came into office in 1981 about a third of American workers had good union jobs, meaning that about two-thirds of all American families lived good middle-class lives on a single paycheck (because the union jobs established the wage and benefits floor for non-union employers who had to compete with them for workers).

That was the year the GOP declared war on working-class people because, in the estimation of the Nixon- and Reagan-era Republicans, our democracy had gotten out of hand.

Workers were demanding good pay and benefits; women, racial, and gender minorities were demanding equal rights; and students demanded an end to the war in Vietnam.

Conservative thinkers like Russell Kirk and William F. Buckley saw these demands as symptoms of a “cultural decay” caused by working class people having more wealth and leisure time than they were “intellectually and culturally capable of handling.”

So, in 1981 the GOP set about dismantling the American middle class with their so-called Reagan Revolution.

The result is that today only about 45 percent of Americans are in the middle class, and it takes two jobs to establish that same lifestyle; since Reagan took office fully $50 trillion has been transferred from the homes, savings, and retirement accounts of working class people into the money bins of the top 1 percent.

As the social scientists cited above found, when the middle class shrinks below a certain threshold its demands for democracy are replaced by populist demands for, essentially, revenge.

“Who did this to us?” is the battle cry, and the GOP’s ready answer — first emerging in the 1980s with Rush Limbaugh, going on steroids in the 1990s with Fox “News,” and pounded on by Donald Trump ever since he first came down that escalator in 2015 — is, “It’s the immigrants, Black people, uppity women, college students and professors, and the union bosses.”

MAGA — particularly its white racist base — bought it hook, line, and sinker, leading us to a massive tax-cut bill, court decisions that screw working people and the environment, and an explosion in hate crimes and politically inspired violence.

The bottom line is that the GOP opposes democracy because it interferes with and complicates their very well paid efforts to suck up to — and legislate on behalf of — the morbidly rich. And they disdain the middle class (but love the uneducated poor) because the larger the middle class the louder come the demands for fairness in the distribution of the common wealth and democracy.

So, the next time somebody asks you why Republicans hate the middle class, let them know that, “It’s the democracy, stupid!”

NOW READ: The 'cracks' are showing: Behind the battle for who leads the GOP when Trump is gone

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no lnx

Republicans and the biggest political con of the last century

Thom Hartmann May 24, 2025

Neal deGrasse Tyson makes a very relevant point this week:

“If a foreign adversary snuck into our Federal budget and cut science research and education the way we’re cutting it ourselves — strategically undermining America’s long-term health, wealth, and security — we would likely consider it an act of war.”

Donald Trump’s administration just said you can’t get the Covid vaccine unless you’re over 65 or sick, setting up America for more death and disease. As Noah Berlatsky notes in his great Substack newsletter:

“This is the latest effort by Trump to try to kick start a major US pandemic and degrade the health and welfare of the country. Trump as also rolled back food testing, including testing for bacteria in infant formula. He’s made major cuts at the FAA, leading to fears for airline safety—and a number of dramatic airline safety failures already may be related to the destruction of capacity. Cuts at the NOAA may diminish the ability to warn about dangerous weather events. The Republican proposals for Medicaid cuts are likely to lead to tens of thousands of deaths. And of course Trump’s senseless tariffs are increasing inflation, destroying jobs, and could still easily end us in a recession.“

But why? What the hell is going on here?

Almost two-thirds of us Americans can’t afford the basic necessities of life, according to a new report from the Ludwig Institute for Shared Economic Prosperity (LISEP) reported by CBS News. They point out that if unemployment numbers included the underemployed and those stuck in “poverty-wage jobs,” it would be around 24%, not the 4.2% recently reported, leading to an acknowledgement of a widespread misery that’s largely hidden by the way we currently calculate unemployment.

Income for the bottom 60% of Americans, for example, actually declined by 4% in the years 2001 to 2023 while costs — particularly for healthcare, housing, food, and education (college tuition, for example, is up 122% since 2001) — have exploded.

Before the pandemic, half of all homes on the market were affordable to a family earning $75,000 a year; today it’s only one out of five houses that such a family could afford to purchase.

The initial result of this post-Reagan Revolution economy was to kneecap the middle class and working class; now Republicans are using the same strategy they employed to destroy our middle class to dismantle our nation’s government and its core functions to leave us vulnerable to the predation of foreign nations, vulture capitalists, and the morbidly rich.

And nobody’s sure why.

The history of how we got here is shocking. And the place it’s taking us — gutting government functions while handing our role in the world over to China and Russia — is downright scandalous.

At first, it was simply a political strategy to claim the mantle of Santa Claus from the Democrats by “gifting” America with tax breaks. Then it became a program to force Dems to kill off their own social programs by driving up the national debt. And now it’s being used to disassemble the American government itself, abandoning what’s left of the middle class while handing America’s dominant role in the world to China and Russia.

You could call it treason, except that it’s become so normalized and institutionalized that most Americans wouldn’t even understand the reason for the label.

Republican policy weirdness that brought us to this moment began around the national debt in 1981.

The U.S. was significantly in debt following our Revolutionary War, the Civil War, World War I, and World War II. Following the philosophy that a large national debt should only exist during a time of national emergency, in each case, after the end of each war, we began a serious effort to pay down that debt.

Andrew Jackson finished paying off the entire debt from the Revolutionary War in the 1830s. We’d largely paid off the debt from the Civil War by the end of the 19th century, and, as the Treasury Department notes on its debt history site, our “government ended the century with its finances in very good order.”

We paid the national debt for WWI down to a mere $17 billion by the time the Republican Great Depression hit, but between the cost of the New Deal and World War II, we entered the post-WWII era in 1946 with a debt equal to 106% of GDP, a ratio we hit again in 2015.

Republicans and Democrats quickly united around the idea of paying off our national debt in the post-war years, driving it down to a mere $800 billion ($0.8 trillion) between 1945 and 1981 when Reagan came into office.

And then, following Jude Wanniski’s “Two Santas” plan, the GOP embarked on an experiment that had never been intentionally tried in the U.S. or any other developed country in world history: drive up the national debt as high as possible with massive tax breaks for the very richest among us.

Reagan did this for two reasons:

— First, deficit spending with trillions in borrowed money (he ran the debt up to $2.4 trillion in a mere 8 years) stimulates the economy, so people thought Reagan had produced good times. (Give me a $2 trillion credit card, and I’ll show you what it looks like to live large, too!)

— Second, the rising debt gave Republicans the perfect excuse to follow Wanniski’s advice to force the Democrats to “shoot their Santa [of programs like Social Security and Medicaid] in the face.” Whenever a Republican is in the White House, Wanniski argued, Republicans should run up the debt as hard and fast as possible, so when a Democrat is in the White House they can squeal about “the debt our children will inherit! Oh, the humanity!”

The GOP has stuck to this strategy for 44 years now, running up $36 trillion in debt (and our entire Gross Domestic Product was a mere $27.7 trillion last year) and now, finally, we’ve reached the point where this unsustainable debt is not only costing us a trillion dollars a year in debt service (interest payments) but has led to a downgrade of our nation’s credit score.

At first, the main effect of the Two Santas strategy was merely to make the morbidly rich among us fabulously richer, while extracting much of that wealth from the homes, retirement plans, and savings of the middle class. It was, quite simply, a planned and successful transfer of roughly $50 trillion into the money bins of the rich, almost all of it coming out of the hides and lives of the rest of us.

When Reagan came into office in 1981, about two-thirds of Americans were solidly middle class with a single paycheck being able to buy a home, a car, raise a family, put the kids through school, and provide for a decent retirement.

Today, that same standard of living requires a bit more than two full-time jobs, and only about 47% of us are in the middle class (with two wage earners instead of just one in 1981).

“‘The middle class has been declining — we just haven't recognized it fully,’ LISEP Chairman Gene Ludwig told CBS MoneyWatch. ‘It’s really dangerous because it’s the kind of thing that leads to social unrest, and it’s not fair. The American dream is not that it’s given to you — it’s that if you work hard, you have a chance to get ahead and achieve the things in life that you want to achieve. It’s not living in a tent, not having to steal.”

But now Trump, Musk, Vance, and congressional Republicans — having first crushed the American middle class — are doing everything they can to destroy America’s preeminent position in the world along with our social safety net.

— Instead of investing in education and science, they’re making it harder for students to get an education.

— Instead of promoting democracy around the world, they’re embracing murderous dictators while broadcasting rightwing neofascist propaganda on Voice of America.

— Instead of lifting up Americans by helping our veterans and providing food, healthcare, and shelter to the poor and disabled, they’re gutting the VA and the social safety net.

As a result, today nearly half of American children (45% or 34 million kids) rely on food and medical programs that are now targeted by “Christian” Mike Johnson’s House Republicans in their Big Brutal Bill providing trillions in tax breaks to billionaires. The proposed cuts to SNAP (food stamps) and Medicaid, for example, would be the largest in the history of the U.S.

Reagan’s Two Santas strategy has done serious harm to America, collapsing the economic futures of two entire generations.

And now they’re going after our government itself.

But, why? Nobody’s sure.

— Did Vladimir Putin, Xi Jinping, or both tell Trump and/or Elon Musk to destroy America?

— Are our country’s billionaires so psychopathically greedy that they’re willing to sell us all out for another few billion dollars in tax breaks?

— Do Trump’s allies believe that if they can impoverish Americans we’ll be more willing to go along with their authoritarian agenda the way Germans did after being immiserated by the Republican Great Depression of the 1930s?

— Are they following the “Dark Enlightenment” philosophers of Silicon Valley who argue that democracy is outdated and “we need to get over our dictator phobia” and let the tech giants run the country?

Nobody knows for sure. Nobody can really explain it.

Republicans are aren’t even pretending anymore; they’re not even bothering to proclaim BS like “trickle down” or the “need to support the job creators.“

Most distressing, there’s virtually no discussion of any of this in the mainstream press.

— The Two Santas strategy is easily documented, but never mentioned.

— The explosion of our national debt is all over economists’ websites, but when the American media mentions it, it’s always in the context of Democrats needing to “reduce spending” rather than the fact that virtually 100% of our debt today was put there exclusively by Reagan, Bush, and Trump tax cuts and Bush’s two illegal wars.

— Nobody, it seems, is speculating about why Trump and Musk would want to kill off USAID or kneecap the FAA and the National Weather Service. Qui bono (who benefits?) other than Putin and Xi? The savings are a drop in the billionaire’s bucket; there must be a larger agenda than just funding tax cuts for billionaires.

— And, they’re now holding their votes in the middle of the night; I think we all know what they are hiding and the credulous press is letting pass.

I don’t know why Republicans have been so enthusiastic about first destroying the American middle class and now our government itself, but the consequences have driven the explosion of rightwing anger, racism, and misogyny that’s been sweeping the nation since Trump’s appearance on the scene in 2015.

And now they’re threatening our position in the world, as well as possibly leading us all into a third world war.

Why do you think this is happening?

NOW READ: 'Trump's tactics are in fact communist': Former Tea Party congressman busts MAGA for what it is

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vs perm corp tax cut?

https://www.alternet.org/2020/11/republicans-planted-a-time-bomb-in-their-2017-tax-cut-bill-that-will-actually-raise-most-peoples-taxes-nobel-economist/

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thom 12 23 an

— How Trump screwed working people to pay for his tax cuts for the rich... When Republicans were putting together Trump’s massive tax cut for himself and his billionaire buddies back in 2017, they wanted to squeeze an additional few billion out of average working people to pay for some of Trump’s billionaire tax cuts. So they ended, from 2017 to 2025, the deductability of “personal casualty” losses: things like money lost to scams, or homes destroyed by weirding weather. The result has been a wave of middle class people being wiped out after being scammed out of their life savings because now they can no longer deduct those stolen funds from their tax obligations but instead have to pay taxes on them as if they’d “stolen” the money themselves.

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we MC do not hold that much stock, rely on pension Buffer/moderating

https://www.alternet.org/2020/10/retirement/

pro publ

The Federal Reserve, which these days seems to be the only major part of the federal government capable of operating drama-free, has done a lot to help keep our economy afloat. It has cut interest rates to unprecedented low levels, bought billions of dollars of corporate IOUs, helped stabilize the debt markets and helped rescue a stock market that had begun falling sharply in mid-February when the COVID-19 recession started and that seemed headed for a crash.

In the process, the Fed has indirectly provided support to house prices and to the vital home construction business by forcing down mortgage interest rates to all-time lows of about 3%. Given that home equity is a major asset for many middle-class Americans, supporting home prices is especially important. As is supporting the home construction industry, which is a major source of blue-collar jobs.

But if you dig deeper, you'll see that the Fed is unintentionally worsening economic inequality by providing the most help to Americans who are least in need of it. And it's also putting stress on the middle class' most important asset: retirement benefits.

Higher stock prices are great for people (including me) who own a lot of stocks, but those people are primarily the top 10% of the country, in terms of wealth. According to Fed statistics, more than half of stocks — 52% — are owned by the wealthiest 1% of Americans, and 88% are owned by the top 10%.

To show you a different aspect of helping the upper class but not the working class, the Fed's securities purchases include buying debt issued by firms that are laying off workers while paying substantial dividends to shareholders. And for some imprudent or troubled corporate borrowers, the Fed's moves have been hugely helpful.

But those moves are hurting prudent savers of modest means by greatly reducing the income they can earn on Treasury securities and other no-risk investments such as bank certificates of deposit. That tends to drive people seeking income into the stock market, where their capital is at risk. By contrast, if you buy a Treasury security, you're sure of getting your money back when the security comes due, even though the security's market value will fluctuate both up and down while you hold it.

Interest rates are so low that they've largely erased the key benefit — income — Treasury bonds are theoretically supposed to provide over stocks. If you own a low-cost Standard & Poor's 500 index fund, you're getting much more income from dividends than the interest you'd earn having the same amount invested in a 10-year Treasury note. For example, the dividend yield (a year's worth of dividends divided by the current market price) on Admiral shares of Vanguard's S&P 500 fund is more than double the interest yield of a 10-year Treasury. It's even higher than the yield on a 30-year Treasury bond, something that you rarely see.

The yield on the Vanguard fund was 1.65% as of Sept. 30, the most recent available date. As I write this, the yield on a 10-year Treasury, the security it generally makes the most sense for a retail investor to buy and hold to maturity, was 0.76%. The yield on the 30-year Treasury was 1.56%.

Despite its good intentions, the Fed is setting the stage for huge problems down the road for pension funds and, therefore, for potential pension recipients. There are also going to be problems for insurance companies and for other firms onto which many corporate employers have offloaded their pension obligations in order to clean up their balance sheets and minimize their future financial risks.

The firms that have assumed the responsibility for paying these pensions typically own bond-heavy portfolios. And while bond prices have risen because interest rates have fallen — I'll explain how that works some other day — rates seem much more likely to rise from their current low levels in the future than to fall even lower. And when rates rise, it will decrease the market value of the bonds held by the firms that have assumed responsibility for paying pensions.

What it all adds up to: The Fed is trying to salvage the present by pumping trillions of dollars into the U.S. and world financial systems but in the process is putting our economic future at risk. “We're bailing out the present and making the future pay for it," said Gene Steuerle, a co-founder of the Tax Policy Center.

Please note that I'm not blaming the Fed for what it's doing. It's trying to fulfill its mandate to keep employment high, inflation relatively low, the dollar reasonably stable and interest rates at what it considers an appropriate level. The Fed's job, which is already difficult in strange and uncertain economic times like these, is being made much harder by the lack of new economic stimulus packages from Congress and the White House. These packages, as we saw when they were in effect earlier this year, not only help individuals but also stimulate the economy when recipients spend the money they've gotten.

The Fed, by contrast, can help the financial markets and the economy but can't directly help individual people.

Now, let me show you how the Fed's near-zero rates, the culmination of a dozen years of ultralow rates and which Fed Chair Jerome Powell says will continue indefinitely, are undermining the long-range future of the U.S. retirement system. This matters — a lot — because Fed statistics show that retirement benefits (not including Social Security) are hugely important to the middle class.

Prof. Edward Wolff of New York University, who specializes in studying income and wealth inequality, told me that Fed statistics show that pension wealth accounts for 70.3% of the net worth of the middle class, which he defines as people ranking in the 20^th through 80^th percentiles in terms of wealth. By contrast, he said, retirement benefits are only 2.2% of the upper class' wealth.

This makes the middle class particularly vulnerable to rising rates in the future. Let's take this piece by piece.

For starters, near-zero rates are making the financial problems of the already-stressed Social Security system worse than they would otherwise be by sharply reducing the interest that Social Security can earn on its $2.9 trillion trust fund. That trust fund consists entirely of Treasury securities and is legally barred from owning stocks. That means that the fund's interest yield is falling and it's not benefiting from the 50% rise in stock prices since the market bottomed on March 23.

The near-zero rates also affect private pensions. David Zion of Zion Research estimates that the pension funds of the Standard & Poor's 500 companies, which he says were underfunded by a total of $279 billion at the end of 2019, were underfunded by $407 billion as of June 30. “The main driver of the increase is lower interest rates," he said. (I'll explain the math behind lower rates raising pensions' underfunding in a bit.)

Large as it is, the S&P companies' total shortfall is only a fraction of the underfunding afflicting state and local government pension funds. Keith Brainard, director of research for the National Association of State Retirement Administrators, estimates that the 5,332 retirement funds sponsored by state and local governments were $1.96 trillion underwater as of June 30, the most recent available number, up from $1.90 trillion as of year-end 2019. This has happened, he said, even though the funds' assets totaled about $4.65 trillion, an all-time high.

What's more, if you use dispassionate math rather than the generous accounting principles that public pension funds are allowed to use, you see that lower long-term interest rates are doing much more damage to these funds' financial status than the numbers from Brainard's organization suggest. For instance, Steve Church of Piscataqua Research estimates that the shortfalls of the 127 public pension funds that he follows, which have a total of about $4 trillion of assets, are about $7.44 trillion. That's more than quadruple the funds' reported $1.53 trillion shortfall.

This huge difference stems mostly from different assumptions about interest rates and different ways of calculating how much money a fund needs to have on hand today to meet a future obligation. A public pension fund comes up with how much it needs to have on hand today based on the income it expects to earn on its portfolio. Corporate pension funds engage in the same process, but they are required to make far less optimistic assumptions. They have to set aside enough money to meet that obligation if the money were invested at the interest rate on high quality, long-term risk-free bonds.

Let me give you one example of the difference. If a pension fund expects to pay someone $10,000 in 10 years and anticipates it will earn 7% a year, compounded, today's cost of that benefit — what numbers crunchers call its “present value" — shows up on its books as a liability of $5,083. If, however, the fund predicts it will receive 3% per year, which is about the rate that corporate pension funds use these days, the fund would need to set aside $7,441.

All of this is leading private and public pension funds to take on more risk. “When yields are low, you go looking for income somewhere else," Zion told me.

That means putting money into stocks and various aggressive (and high-cost) Wall Street schemes such as private equity and venture capital funds.

In addition, some public pension funds are borrowing money to try to earn what financial types call “spread income" by investing the borrowed money in assets whose returns exceed the funds' borrowing costs. “When the risk-free rate is zero and you need seven, that's what prompts plans to move outside their traditional comfort zones," Steve Foresti, chief investment officer of Wilshire Consulting, said.

Foresti, who advises numerous public pension funds, says that the use of borrowed money, alternative investments and such began getting more popular about a decade ago. That's about when the Fed knocked rates to near zero and has pretty much kept them there.

One prominent example of a fund trying to borrow its way out of trouble is the California Public Employees' Retirement System (CalPERS), the nation's largest government pension fund. It's considering borrowing up to $55 billion more than it has already borrowed, hoping that its return on the assets it will buy with that borrowed money exceeds what it will pay in interest.

The fund, which says it currently has about $25 billion of borrowed money for which it's paying an average interest rate of 0.18%, now has authority to borrow up to 20% of its assets. That's roughly $80 billion. CalPERS says borrowing has helped it because it's been earning more on the assets it bought with the borrowed money than the interest it's paying.

“It's a moderate use of leverage. We will do it opportunistically and gradually," Marcie Frost, CalPERS' chief executive, told me. “We can tie up our capital for a long time. …We are able to be opportunistic." However, as Frost readily acknowledges, “Leverage can exacerbate your losses."

Or let's look at another big fund, the Teacher Retirement System of Texas, which last year lowered the assumed rate of return on its investment portfolio to 7.25% from the previous 8%. Among other things, that lower assumption is indirectly responsible for teachers, school districts and the state of Texas having to increase their future contributions to the pension fund to avoid the fund having to slash future benefits.

Jase Auby, TRS' chief investment officer, says the fund has been borrowing 4% of its assets for about a year. The idea, he said, is “to diversify away from equity risk" — the danger that stock prices will fall — caused by low interest rates. “Equity risk is greater because interest rates are low," he said.

The fund says its borrowing cost is currently about 0.25% a year. TRS says there were no specific assets financed by its borrowings, but it's ahead so far because its total fund return has exceeded its borrowing costs. If, however, the value of the assets bought with the borrowed money goes down, the fund obviously will be worse off than if it hadn't borrowed the money.

By forcing bond yields down sharply and helping drive up stock prices, the Fed's low-interest rate regime has made 401(k) and 403(b) and other individual retirement accounts more valuable — for now — by boosting the market values of both stocks and bonds.

However, these low rates are now exposing those individual accounts to considerably more risk than if stock prices were lower and bond yields higher.

Why do I say this? Because high stock prices can fall — we've had two 50% market drops in the past 20 years — and low-yielding Treasury securities will lose value if interest rates move higher.

How can U.S. Treasury securities lose value, given that the federal government can create as many dollars as it needs in order to redeem its obligations? Let's say that you spend $10,000 to buy a 10-year Treasury note yielding 0.76%, the current rate. You'd collect $76 in interest a year, $760 over the issue's lifetime, before getting your $10,000 back in 2030.

But let's say that a year from now, despite Fed Chair Powell's predictions, the rate on such a security has risen to 1.76%, around where it was for parts of last year. The market value of your now-nine-year security would be only about $9,174, according to my handy-dandy online bond calculator. That $826 decline in value is more than the total interest you stand to collect over the Treasury note's lifetime. You can take your loss directly by selling your security, or you can take it indirectly by collecting $76 of annual interest for 9 years rather than the $176 that holders of market-rate securities would be getting.

I'd love to be able to quote Fed people to give you the Fed's side of all of this. Alas, none of the people I've talked with or approached, some of whom I've known for years, are willing to be quoted by name.

Privately, various Fedniks past and present readily agree that there are serious downsides to what the Fed has been doing since then-chair Ben Bernanke (who declined, through a spokeswoman, to talk with me) first cut rates to near zero in 2008 and successfully ended the stock market meltdown and financial panic.

These Fedniks are also familiar with the risks that ultralow rates pose to the retirement system and the impact these rates have on economic inequality by sharply raising the values of financial assets, which are owned disproportionately by high-net-worth people, while doing relatively little for the less well off.

But they won't talk about it publicly.

Still, the issue needs to be recognized. If we don't do something to offset the damage to our retirement system, today's problems could end up looking like a rounding error compared to what the future holds.

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in these times on Janus

....

DEGRADATION OF CRITICAL SERVICES

The Democratic Party is not the only loser in this scenario; real harm will be done to U.S. workers and their families. Following World War II, unions expanded dramatically, representing 35 percent of the workforce at their peak in the mid-1950s and helping to usher in an era of shared prosperity. According to the Economic Policy Institute, unionized workers make 20 percent more, on average, than other workers, but their ranks have shrunk to 6.5 percent of private-sector workers and 34.4 percent of public-sector workers in 2017.This decline has exactly tracked the decline of the American middle class.

The attack on public-sector workers is also an attack on women and African Americans, groups disproportionally represented in public-sector unions. According to a National Women’s Law Center analysis, women make up 55 percent of union-represented public-sector workers, and a 2010 analysis from the Center for Economic and Policy Research shows that African Americans are 30 percent more likely than the overall workforce to hold public-sector jobs.

One silver-lining argument contends that an adverse Janus ruling presents an opportunity for unions to simply do their job better: Talk to every member, innovate on services and benefits, and do the kind of “deep organizing” needed to outmaneuver wealthier opponents. The data from Wisconsin, however, is not encouraging. Five years after Walker’s draconian Act 10 bill, Wisconsin’s union membership rate had dropped from 14.2 percent to 8.3 percent of the workforce. The impact of Janus would be less immediate but would snowball over time: Weaker, less effective unions have a harder time attracting members.

“If fair share fees are struck down, it simply won’t be possible to provide the expertise to bargain with employers to increase wages and benefits,” says John Matthews, the retired executive director of Madison Teachers Inc., a National Education Association affiliate in Wisconsin.

The erosion of public-sector unions means that public-sector jobs will pay less and become less attractive, degrading not just a source of good jobs but the critical public functions these workers serve. [THE COMMONS] The average annual salary and benefits for teachers in Wisconsin dropped by $10,843 after Act 10 was passed, a 12.6 percent reduction. The result has been a staggering shortage of teachers, including an “extreme” shortage in math and science,forcing the state’s independent Department of Education to reluctantly issue “emergency” teacher’s licenses.

For the most part, the right-wing machine’s deeply financed, organized and focused attack on workers has rolled its agenda through without meaningful resistance from Democrats. To be sure, in Wisconsin, the union-busting plan was met with one of the largest sustained mass protests in labor history and a 16-day occupation of the Capitol. Fourteen Democratic state senators even fled to Illinois to block a vote on Act 10. But too often, the Democratic Party has been asleep at the switch. First Jimmy Carter, then Bill Clinton, then Barack Obama failed to pass a national “card check” program—a measure that would have made forming a union as easy as signing a postcard—while their party controlled both houses of Congress.

If the Janus verdict goes against public-sector unions, the great challenge for Democrats will not merely be one of funding, but one of leadership. Who will step up to push for the renewal of trade unions, not just for the party’s political future, but for a country that cannot progress toward economic and social justice without a prosperous and muscular labor movement?

MARY BOTTARI is the deputy director of the Center for Media and Democracy (CMD). She helped launch CMD’s award-winning ALEC Exposed investigation in 2011 and is a recipient of the Hillman Prize for investigative journalism.

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an 120 not pul k

Nobel Prize-winning economist: Here’s why Trump is ‘just wrong’ to claim his economic policies help the middle class Alex Hen

:{:{women are becoming politically engaged at an earlier point than ever before. More than 1 million women have donated to 2020 presidential candidates thus far, following the rise of fundraising participation by women in the wake of President Donald Trump's election.}:

But women are not a monolithic fundraising or voting bloc, and there are key differences in fundraising patterns from women in different pockets of the country. Suburban women, who power a significant electoral battleground, are a key demographic for 2020.}:

Read more

America will keep losing its middle class as long as ‘free market’ propaganda dominates the economic debate

Marshall Auerback / Independent Media Institute

National industrial policy was once something you might read about in today’s equivalent of a friend’s Facebook post, as hard as that might sound to believe.

mitchell the nation

As it grows, Amazon is exposing the deficiencies of the Reagan-era changes in how we think about corporate concentration. By collapsing antitrust enforcement to consider only prices, we have lost sight of what earlier generations knew about monopolies: that they can harm us as producers of value, not merely as consumers of it. And their control over our livelihoods and the fate of our communities is inherently political: It’s a threat to liberty and democracy.

Economists have recently begun to document a link between corporate concentration and rising inequality. Dominant companies, they’re finding, are funneling the spoils to a small number of people at the top. And by reducing the number of their competitors, these companies are also making it harder for workers to get a fair wage and for producers to get a fair price. A particularly troubling data point in this research is the loss of a long-standing pathway to a middle-class life: starting a business. The number of new firms launched each year has fallen by nearly two-thirds since 1980, and many economists believe that corporate power is to blame. This lack of start-ups is fueling a broader decline in the ranks of small business:Between 2005 and 2015, the number of small retailers fell by 85,000, a drop of 21 percent relative to population.

https://www.alternet.org/center-not-holding-and-trump-our-proof

As the world’s pre-eminent heads of state gather in Buenos Aires, Argentina, this weekend for the annual G-20 summit, the postwar order has never looked more fragile. War threatens to break out at any moment between Russia and Ukraine, Britain is staring into the abyss of a failed Brexit negotiation and the U.S. faces a rising tide of ethno-nationalism, reinforced in no small part by Donald Trump’s presidency. Compounding this larger crisis, new research indicates we have just 12 years to radically reduce carbon emissions or risk climate catastrophe.

The center is not holding, and if a devastating new report from The New York Times is to be believed, the falconer’s falcon is but one of the innumerable creatures wiped off the planet just in the past 50 years. As Jonathan Aronson argues in his new book, “Digital DNA: Disruption and the Challenges for Global Governance,” we are living through a period of profound social and economic upheaval—one that threatens the very foundations of our political system.

“Last week, Sears declared bankruptcy,” Aronson tells Robert Scheer in the latest installment of “Scheer Intelligence.” “Sears, in many ways, was the Amazon of another age. They were the ones who distributed everything; they changed everything. So what has happened is the world has changed; the economies have changed; the companies have changed; but as usual, the rules have lagged behind.”

...

https://www.c-span.org/video/?447715-2/squeezed

JUNE 29, 2018

Squeezed

Alissa Quarttalked about the economic pressures that American families face.

https://www.alternet.org/americas-white-collar-middle-class-takes-terrifying-slide-down-mobility-ladder

...While they were playing Twister and imagining a bright future, someone apparently decided that they didn’t really matter. Clouds began to gather—a “dark shimmer of constantly shifting precariousness,” as journalist Alissa Quart describes in her timely new book “Squeezed: Why Our Families Can’t Afford America.”

The things these kidsconsidered their birthright—reputable colleges, secure careers, and attractive residences—were no longer waiting for them in adulthood.

Today, with their incomes flat or falling, these Americans scramble to maintain a semblance of what their parents enjoyed. They are moving from being dominant to being dominated. From acting to acted upon. Trained to be educators, lawyers, librarians, and accountants, they do work they can’t stand to support families they rarely see. Petrified of being pushed aside by robots, they rankle to see financial titans and tech gurus flaunting their obscene wealth at every turn.

Headlines gush of a humming economy, but it doesn’t feel like a party to them—and they’ve seen enough to know who will be holding the bag when the next bubble bursts.

The “Middle Precariots,” as Quart terms them, are suffering death by a thousand degradations. Their new reality: You will not do as well as your parents. Life is a struggle to keep up. Even if you achieve something, you will live in fear of losing it. America is not your land: it belongs to the ultra-rich.

If climbing up the ladder of success is the great American story, slipping down it is the quintessential tragedy. It’s hard not to take it personally: the ranks of the Middle Precariot are filled with shame.Much of Quart’s book highlights the mirror image of the downwardly mobile middle class Trump voters from economically strained regions like the Midwest who helped throw a monkey wrench into politics-as-usual. In her tour of American frustration, she talks to urbanites who lean liberal and didn’t expect to find themselves drowning in debt and disappointment. Like the falling-behind Trump voters, these people sense their status ripped away, their hopes dashed.

They are somebodies turning into nobodies.

And there signs that they are starting to revolt. If they do, they could make their own mark on the country’s political landscape.

The Broken Bourgeoisie

Quart’s book takes a sobering look at the newly unstable bourgeoisie, illustrating what happens when America’s off-the-rails inequality blasts over those who always believed they would end up winners.

There are Uber-driving teachers and law school grads reviewing documents for $20 an hour—or less. Ivy Leaguers who live on food stamps.There’s the Virginia accountant who forks over nearly 90% of her take home pay on care for her three kids; the Chicago adjunct professor with the disabled child who makes less than $24,000 a year; and the California business reporter who once focused on the financial hardships of others and now faces unemployment herself.

Lacking unions, church communities and nearby close relatives to support them, the Middle Precariots are isolated and stranded. Their labor has sputtered into sporadic contingency: they make do with short-term contracts or shift work. (Despite the much-trumpeted low unemployment rate, the New York Times reports that jobs are often subpar, featuring little stability and security). Once upon a time, only the working poor took second jobs to stay afloat. Now the Middle Precariot has joined them.

Quart documents the desperate measures taken by people trying to keep up appearances, relying on 24/7 “extreme day care” to accommodate unpredictable schedules or cobbling together co-living arrangements to cut household costs. They strain to provide things like academic tutors and sports activities for their kids who must compete with the children of the wealthy. Deep down, they know that they probably can’t pass down the cultural and social class they once took for granted.

Quart cites a litany of grim statistics that measure the quality of their lives, like the fact that a middle-class existence is now 30% more expensive than it was twenty years ago, a period in which the price of health care and the cost of a four-year degree at a public college nearly doubled.

Squeezed is especially detailed on the plight of the female Middle Precariot, like those who have the effrontery to procreate or grow older. With the extra burdens of care work, pregnancy discrimination, inadequate family leave, and wage disparities, (not to mention sexual harassment, a subject not covered), women get double squeezed. For women of color, often lacking intergenerational wealth to ease the pain, make that a triple squeeze.

The Middle Precariot in middle age is not a pretty sight: without union protection or a reliable safety net they endure lost jobs, dwindled savings, and shattered identities. In one of the saddest chapters, Quart describes how the pluckiest try reinvent themselves in their 40s or 50s, enrolling in professional courses and certification programs that promise another shot at security, only to find that they’ve beenscammed by greedy college marketers and deceptive self-help mavens who leave them more desperate than before.

Quart notes that even those making decent salaries in the United States now see themselves barred from the club of power and wealth. They may have illiquid assets like houses and retirement accounts, but they still see themselves as financially struggling. Earning $100,000 sounds marvelous until you’ve forked over half to housing and 30% to childcare. Each day is one bit of bad luck away from disaster.

“The spectacular success of the 0.1 percent, a tiny portion of society, shows just how stranded, stagnant, and impotent the current social system has made the middle class—even the 10 percent who are upper-middle class,” Quart writes.

Quart knows that the problems of those who seem relatively privileged compared many may not garner immediate sympathy. But she rightly notes that their stresses are a barometer for the concentration of extreme wealth in some American cities and the widening chasm between the very wealthy and everybody else.

The Dual Economy

The donor-fed establishment of both political parties could or would not see this coming, but some prescient economists have been sounding the alarm.

In his 2016 book The Vanishing Middle Class, MIT economist Peter Temin detailed how the U.S. has been breaking up into a “dual economy” over the last several decades, moving toward a model that is structured economically and politically more like a developing nation—a far cry from the post-war period when the American middle class thrived.

In dual economies, the rich and the rest part ways as the once-solid middle class begins to disappear. People are divided into separate worlds in the kinds of jobs they hold, the schools their kids attend, their health care, transportation, housing, and social networks—you name it. The tickets out of the bottom sector, like a diploma from a first-rate university, grow scarce. The people of the two realms become strangers.

French economist Thomas Picketty provided a stark formula for what happens capitalism is left unregulated in his 2015 bestseller, Capital in the Twenty-First Century. It goes like this: when the rate of return on the investments of the wealthy exceeds the rate of growth in the overall economy, the rich get exponentially richer while everyone becomes poorer. In more sensible times, like the decades following WWII, that rule was mitigated by an American government that forced the rich pay their share of taxes, curbed the worst predations of businesses, and saw to it that roads, bridges, public transit, and schools were built and maintained.

But that’s all a fading memory. Under the influence of political money, politicians no longer seek a unified economy and society where the middle class can flourish. As Quart observes, the U.S. is the richest and also the most unequal country in the world, featuring the largest wealth inequality gap of the two hundred countries in the Global Wealth Reportof 2015.

Who is to Blame?

Over and over, the people Quart interviews tend to blame themselves for their situation—if only they’d chosen a different career, lived in another city, maybe things wouldn’t have turned out this way. Sometimes they point the finger at robots and automation, though they arguably have much more to fear from the wealthy humans who own the robots.

But some are waking up to the fact it is the wealthy and their purchased politicians who have systematically and deliberately stripped them of power. Deprivations like paltry employee rights, inadequate childcare, ridiculously expensive health care, and non-existent retirement security didn’t just happen. Abstract words like deregulation and globalization become concrete: somebody actually did this to you by promoting policies that leave you high and dry.

As Quart indicates, understanding this is the first step to a change of consciousness, and her book is part of this shift.

Out of this consciousness, many individuals and organizations are working furiously and sometimes ingeniously to alter the negative trajectory of the Middle Precariot. Quart outlines proposals and developments like small-scale debt consolidation, student debt forgiveness, adequately subsidized day care, and non-traditional unions that could help.

America also has a track record of broad, fundamental solutions that have already proven to work. Universal basic income may sound attractive, but we already have a program that could improve the lot of the middle class if expanded: Social Security.

Right now, a worker stops having to pay Social Security tax on any earnings beyond $128,400—a number that is unreasonably low because the rich wish to keep it so. Just by raising that cap, we could the lower the retirement age so that Americans in their 60s would not have greet customers at Walmart. More opportunities would open up to younger workers.

The Middle Precariot could be forgiven for suspecting that the overlords of Silicon Valley may have something other than altruism in mind when they tout universal basic income. Epic tax evaders, they stand to benefit from pushing the responsibility for their low-paid workers and the inadequate safety net and public services that they helped create onto ordinary taxpayers.

Beyond basic income lies a basic fact: the American wealthy do not pay their share in taxes. In fact, American workers pay twice as much in taxes as wealthy investors. That’s why infrastructure crumbles, schools deteriorate, and sane health care and childcare are not available.

Most Americans realize that inequality has to be challenged through the tax code: a 2017 Gallup poll shows that the majority think that the wealthy and corporations don’t pay enough. Politicians, of course, ignore this to please their donors.

And so the Middle Precariot, like the Trump voters, is getting fed up with them.

From Depressed to Energized

Quart astutely points out that income inequality is being written into the law of the land. Funded the efforts of billionaires like the Koch brothers, politicians have altered laws and constitutions across the country to cement the dual economy through everything from restricting voting rights to defunding public education.

Several Middle Precariots in Squeezed have turned to independent or renegade candidates like Bernie Sanders who offer broad, substantial programs like debt-free college and universal health care that address the fissures in their lives. They are listening to candidates who are not afraid to say that markets should work for human beings, not the other way around.

If Donald Trump’s political rise “can be understood as an expression of the gulf between middle-class citizens and America’s ruling classes,” as Quart observes, then the recent surge of non-establishment Democratic candidates, especially democratic socialists, may be the next phase of a middle class revolt.

Recent surprise victories in Pennsylvania and New York in the Democratic primaries by female candidates openly embracing democratic socialism, including Alexandria Ocasio-Cortez, who bested Democratic stalwart Joe Crowley by running for Congress on a platform of free Medicare and public college tuition for all, may not be the blip that establishment Democrats hope. In New York, democratic socialist Julia Salazar is looking to unseat long-time state senator Martin Dilan. Actress Cynthia Nixon, running against New York Governor Andrew Cuomo, has just proclaimed herself a democratic socialist and promises to raise taxes on the rich and boost funding for public schools. Michelle Goldberg recently announced in the New York Times that “The Millenial Socialists are Coming,” indicating the intense dislike of traditional politics in urban centers. These young people do not think of things like debt-free college or paid family leave as radical: they see it done elsewhere in the world and don’t accept that it can’t be done in America.

Historically, the more affluent end of the middle class tends to identify with and support the wealthy. After all, they might join their ranks one day. But when this dream dies, the formerly secure may decide to throw their lot in with the rest of the Precariots. That’s when you have the chance for a real mass movement for change.

Of course, people have to recognize their common circumstances and fates. The urban denizens of New York and San Francisco have to see what they have in common with middle class Trump voters from the Rust Belt, as well as working class Americans and everybody else who is not ultra-rich.

If the growing ranks of Precariots can work together, maybe it won’t take a natural catastrophe or a war or violent social upheaval to change America’s unsustainable course of gross inequality. Because eventually, something has to give.

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ref

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america

lynn paramore sp

Ask people to name the key minds that have shaped America’s burst of radical right-wing attacks on working conditions, consumer rights and public services, and they will typically mention figures like free market-champion Milton Friedman, libertarian guru Ayn Rand, and laissez-faire economists Friedrich Hayek and Ludwig von Mises.

James McGill Buchanan is a name you will rarely hear unless you’ve taken several classes in economics. And if the Tennessee-born Nobel laureate were alive today, it would suit him just fine that most well-informed journalists, liberal politicians, and even many economics students have little understanding of his work.

The reason? Duke historian Nancy MacLean contends that his philosophy is so stark that even young libertarian acolytes are only introduced to it after they have accepted the relatively sunny perspective of Ayn Rand. (Yes, you read that correctly). If Americans really knew what Buchanan thought and promoted, and how destructively his vision is manifesting under their noses, it would dawn on them how close the country is to a transformation most would not even want to imagine, much less accept.

That is a dangerous blind spot, MacLean argues in a meticulously researched book, Democracy in Chains, a finalist for the National Book Award in Nonfiction. While Americans grapple with Donald Trump’s chaotic presidency, we may be missing the key to changes that are taking place far beyond the level of mere politics. Once these changes are locked into place, there may be no going back.

An Unlocked Door in Virginia

MacLean’s book reads like an intellectual detective story. In 2010, she moved to North Carolina, where a Tea Party-dominated Republican Party got control of both houses of the state legislature and began pushing through a radical program to suppress voter rights, decimate public services, and slash taxes on the wealthy that shocked a state long a beacon of southern moderation. Up to this point, the figure of James Buchanan flickered in her peripheral vision, but as she began to study his work closely, the events in North Carolina and also Wisconsin, where Governor Scott Walker was leading assaults on collective bargaining rights, shifted her focus.

Could it be that this relatively obscure economist’s distinctive thought was being put forcefully into action in real time?

MacLean could not gain access to Buchanan’s papers to test her hypothesis until after his death in January 2013. That year, just as the government was being shut down by Ted Cruz & Co., she traveled to George Mason University in Virginia, where the economist’s papers lay willy-nilly across the offices of a building now abandoned by the Koch-funded faculty to a new, fancier center in Arlington.

MacLean was stunned. The archive of the man who had sought to stay under the radar had been left totally unsorted and unguarded. The historian plunged in, and she read through boxes and drawers full of papers that included personal correspondence between Buchanan and billionaire industrialist Charles Koch. That’s when she had an amazing realization: here was the intellectual linchpin of a stealth revolution currently in progress.

A Theory of Property Supremacy

Buchanan, a 1940 graduate of Middle Tennessee State University who later attended the University of Chicago for graduate study, started out as a conventional public finance economist. But he grew frustrated by the way in which economic theorists ignored the political process.

Buchanan began working on a description of power that started out as a critique of how institutions functioned in the relatively liberal 1950s and ‘60s, a time when economist John Maynard Keynes’s ideas about the need for government intervention in markets to protect people from flaws so clearly demonstrated in the Great Depression held sway. Buchanan, MacLean notes, was incensed at what he saw as a move toward socialism and deeply suspicious of any form of state action that channels resources to the public. Why should the increasingly powerful federal government be able to force the wealthy to pay for goods and programs that served ordinary citizens and the poor?

In thinking about how people make political decisions and choices, Buchanan concluded that you could only understand them as individuals seeking personal advantage. In an interview cited by MacLean, the economist observed that in the 1950s Americans commonly assumed that elected officials wanted to act in the public interest. Buchanan vehemently disagreed — that was a belief he wanted, as he put it, to “tear down.” His ideas developed into a theory that came to be known as “public choice.”

Buchanan’s view of human nature was distinctly dismal. Adam Smith saw human beings as self-interested and hungry for personal power and material comfort, but he also acknowledged social instincts like compassion and fairness. Buchanan, in contrast, insisted that people were primarily driven by venal self-interest. Crediting people with altruism or a desire to serve others was “romantic” fantasy: politicians and government workers were out for themselves, and so, for that matter, were teachers, doctors, and civil rights activists. They wanted to control others and wrest away their resources: “Each person seeks mastery over a world of slaves,” he wrote in his 1975 book, The Limits of Liberty.

Does that sound like your kindergarten teacher? It did to Buchanan.

The people who needed protection were property owners, and their rights could only be secured though constitutional limits to prevent the majority of voters from encroaching on them, an idea Buchanan lays out in works like Property as a Guarantor of Liberty(1993). MacLean observes that Buchanan saw society as a cutthroat realm of makers (entrepreneurs) constantly under siege by takers (everybody else) His own language was often more stark, warning the alleged “prey” of “parasites” and “predators” out to fleece them.

In 1965 the economist launched a center dedicated to his theories at the University of Virginia, which later relocated to George Mason University. MacLean describes how he trained thinkers to push back against the Brown v. Board of Education decision to desegregate America’s public schools and to challenge the constitutional perspectives and federal policy that enabled it. She notes that he took care to use economic and political precepts, rather than overtly racial arguments, to make his case, which nonetheless gave cover to racists who knew that spelling out their prejudices would alienate the country.

All the while, a ghost hovered in the background — that of John C. Calhoun of South Carolina, senator and seventh vice president of the United States.

Calhoun was an intellectual and political powerhouse in the South from the 1820s until his death in 1850, expending his formidable energy to defend slavery. Calhoun, called the “Marx of the Master Class” by historian Richard Hofstadter, saw himself and his fellow southern oligarchs as victims of the majority. Therefore, as MacLean explains, he sought to create “constitutional gadgets” to constrict the operations of government.

Economists Tyler Cowen and Alexander Tabarrok, both of George Mason University, have noted the two men’s affinities, heralding Calhoun “a precursor of modern public choice theory” who “anticipates” Buchanan’s thinking. MacLean observes that both focused on how democracy constrains property owners and aimed for ways to restrict the latitude of voters. She argues that unlike even the most property-friendly founders Alexander Hamilton and James Madison, Buchanan wanted a private governing elite of corporate power that was wholly released from public accountability.

Suppressing voting, changing legislative processes so that a normal majority could no longer prevail, sowing public distrust of government institutions— all these were tactics toward the goal. But the Holy Grail was the Constitution: alter it and you could increase and secure the power of the wealthy in a way that no politician could ever challenge.

Gravy Train to Oligarchy

MacLean explains that Virginia’s white elite and the pro-corporate president of the University of Virginia, Colgate Darden, who had married into the DuPont family, found Buchanan’s ideas to be spot on. In nurturing a new intelligentsia to commit to his values, Buchanan stated that he needed a “gravy train,” and with backers like Charles Koch and conservative foundations like the Scaife Family Charitable Trusts, others hopped aboard. Money, Buchanan knew, can be a persuasive tool in academia. His circle of influence began to widen.

MacLean observes that the Virginia school, as Buchanan’s brand of economic and political thinking is known, is a kind of cousin to the better-known, market-oriented Chicago and Austrian schools — proponents of all three were members of the Mont Pelerin Society, an international neoliberal organization which included Milton Friedman and Friedrich Hayek. But the Virginia school’s focus and career missions were distinct. In an interview with the Institute for New Economic Thinking (INET), MacLean described Friedman and Buchanan as yin and yang:

“Friedman was this genial, personable character who loved to be in the limelight and made a sunny case for the free market and the freedom to choose and so forth. Buchanan was the dark side of this: he thought, ok, fine, they can make a case for the free market, but everybody knows that free markets have externalities and other problems. So he wanted to keep people from believing that government could be the alternative to those problems.”

The Virginia school also differs from other economic schools in a marked reliance on abstract theory rather than mathematics or empirical evidence. That a Nobel Prize was awarded in 1986 to an economist who so determinedly bucked the academic trends of his day was nothing short of stunning, MacLean observes. But, then, it was the peak of the Reagan era, an administration several Buchanan students joined.

Buchanan’s school focused on public choice theory, later adding constitutional economics and the new field of law and economics to its core research and advocacy. The economist saw that his vision would never come to fruition by focusing on whorules. It was much better to focus onthe rules themselves, and that required a “constitutional revolution.”

MacLean describes how the economist developed a grand project to train operatives to staff institutions funded by like-minded tycoons, most significantly Charles Koch, who became interested in his work in the ‘70s and sought the economist’s input in promoting “Austrian economics” in the U.S. and in advising the Cato Institute, a libertarian think tank.

Koch, whose mission was to save capitalists like himself from democracy, found the ultimate theoretical tool in the work of the southern economist. The historian writes that Koch preferred Buchanan to Milton Friedman and his “Chicago boys” because, she says, quoting a libertarian insider, they wanted “to make government work more efficiently when the true libertarian should be tearing it out at the root.”

With Koch’s money and enthusiasm, Buchanan’s academic school evolved into something much bigger. By the 1990s, Koch realized that Buchanan’s ideas — transmitted through stealth and deliberate deception, as MacLean amply documents — could help take government down through incremental assaults that the media would hardly notice. The tycoon knew that the project was extremely radical, even a “revolution” in governance, but he talked like a conservative to make his plans sound more palatable.

MacLean details how partnered with Koch, Buchanan’s outpost at George Mason University was able to connect libertarian economists with right-wing political actors and supporters of corporations like Shell Oil, Exxon, Ford, IBM, Chase Manhattan Bank, and General Motors. Together they could push economic ideas to public through media, promote new curricula for economics education, and court politicians in nearby Washington, D.C.

At the 1997 fiftieth anniversary of the Mont Pelerin Society, MacLean recounts that Buchanan and his associate Henry Manne, a founding theorist of libertarian economic approaches to law, focused on such affronts to capitalists as environmentalism and public health and welfare, expressing eagerness to dismantle Social Security, Medicaid, and Medicare as well as kill public education because it tended to foster community values. Feminism had to go, too: the scholars considered it a socialist project.

The Oligarchic Revolution Unfolds

Buchanan’s ideas began to have huge impact, especially in America and in Britain. In his home country, the economist was deeply involved in efforts to cut taxes on the wealthy in 1970s and 1980s and he advised proponents of Reagan Revolution in their quest to unleash markets and posit government as the “problem” rather than the “solution.” The Koch-funded Virginia school coached scholars, lawyers, politicians, and business people to apply stark right-wing perspectives on everything from deficits to taxes to school privatization. In Britain, Buchanan’s work helped to inspire the public sector reforms of Margaret Thatcher and her political progeny.

To put the success into perspective, MacLean points to the fact that Henry Manne, whom Buchanan was instrumental in hiring, created legal programs for law professors and federal judges which could boast that by 1990 two of every five sitting federal judges had participated. “40 percent of the U.S. federal judiciary,” writes MacLean, “had been treated to a Koch-backed curriculum.”

MacLean illustrates that in South America, Buchanan was able to first truly set his ideas in motion by helping a bare-knuckles dictatorship ensure the permanence of much of the radical transformation it inflicted on a country that had been a beacon of social progress. The historian emphasizes that Buchanan’s role in the disastrous Pinochet government of Chile has been underestimated partly because unlike Milton Friedman, who advertised his activities, Buchanan had the shrewdness to keep his involvement quiet. With his guidance, the military junta deployed public choice economics in the creation of a new constitution, which required balanced budgets and thereby prevented the government from spending to meet public needs. Supermajorities would be required for any changes of substance, leaving the public little recourse to challenge programs like the privatization of social security.

The dictator’s human rights abuses and pillage of the country’s resources did not seem to bother Buchanan, MacLean argues, so long as the wealthy got their way. “Despotism may be the only organizational alternative to the political structure that we observe,” the economist had written in The Limits of Liberty. If you have been wondering about the end result of the Virginia school philosophy, well, the economist helpfully spelled it out.

A World of Slaves

Most Americans haven’t seen what’s coming.

MacLean notes that when the Kochs’ control of the GOP kicked into high gear after the financial crisis of 2007-08, many were so stunned by the “shock-and-awe” tactics of shutting down government, destroying labor unions, and rolling back services that meet citizens’ basic necessities that few realized that many leading the charge had been trained in economics at Virginia institutions, especially George Mason University. Wasn’t it just a new, particularly vicious wave of partisan politics?

It wasn’t. MacLean convincingly illustrates that it was something far more disturbing.

MacLean is not the only scholar to sound the alarm that the country is experiencing a hostile takeover that is well on its way to radically, and perhaps permanently, altering the society. Peter Temin, former head of the MIT economics department, INET grantee, and author of The Vanishing Middle Class, as well as economist Gordon Lafer of the University of Oregon and author of The One Percent Solution, have provided eye-opening analyses of where America is headed and why. MacLean adds another dimension to this dystopian big picture, acquainting us with what has been overlooked in the capitalist right wing’s playbook.

She observes, for example, that many liberals have missed the point of strategies like privatization. Efforts to “reform” public education and Social Security are not just about a preference for the private sector over the public sector, she argues. You can wrap your head around those, even if you don’t agree. Instead, MacLean contends, the goal of these strategies is to radically alter power relations, weakening pro-public forces and enhancing the lobbying power and commitment of the corporations that take over public services and resources, thus advancing the plans to dismantle democracy and make way for a return to oligarchy. The majority will be held captive so that the wealthy can finally be free to do as they please, no matter how destructive.

MacLean argues that despite the rhetoric of Virginia school acolytes, shrinking big government is not really the point. The oligarchs require a government with tremendous new powers so that they can bypass the will of the people. This, as MacLean points out, requires greatly expanding police powers “to control the resultant popular anger.” The spreading use of pre-emption by GOP-controlled state legislatures to suppress local progressive victories such as living wage ordinances is another example of the right’s aggressive use of state power.

Could these right-wing capitalists allow private companies to fill prisons with helpless citizens—or, more profitable still, right-less undocumented immigrants? They could, and have. Might they engineer a retirement crisis by moving Americans to inadequate 401(k)s? Done. Take away the rights of consumers and workers to bring grievances to court by making them sign forced arbitration agreements? Check. Gut public education to the point where ordinary people have such bleak prospects that they have no energy to fight back? Getting it done.

Would they even refuse children clean water? Actually, yes.

MacLean notes that in Flint, Michigan, Americans got a taste of what the emerging oligarchy will look like — it tastes like poisoned water. There, the Koch-funded Mackinac Center pushed for legislation that would allow the governor to take control of communities facing emergency and put unelected managers in charge. In Flint, one such manager switched the city’s water supply to a polluted river, but the Mackinac Center’s lobbyists ensured that the law was fortified by protections against lawsuits that poisoned inhabitants might bring. Tens of thousands of children were exposed to lead, a substance known to cause serious health problems including brain damage.

Tyler Cowen has provided an economic justification for this kind of brutality, stating that where it is difficult to get clean water, private companies should take over and make people pay for it. “This includes giving them the right to cut off people who don’t—or can’t—pay their bills,” the economist explains.

To many this sounds grotesquely inhumane, but it is a way of thinking that has deep roots in America. In Why I, Too, Am Not a Conservative(2005), Buchanan considers the charge of heartlessness made against the kind of classic liberal that he took himself to be. MacLean interprets his discussion to mean that people who “failed to foresee and save money for their future needs” are to be treated, as Buchanan put it, “as subordinate members of the species, akin to…animals who are dependent.’”

Do you have your education, health care, and retirement personally funded against all possible exigencies? Then that means you.

Buchanan was not a dystopian novelist. He was a Nobel Laureate whose sinister logic exerts vast influence over America’s trajectory. It is no wonder that Cowen, on his popular blog Marginal Revolution, does not mention Buchanan on a list of underrated influential libertarian thinkers, though elsewhere on the blog, he expresses admiration for several of Buchanan’s contributions and acknowledges that the southern economist “thought more consistently in terms of ‘rules of the games’ than perhaps any other economist.”

The rules of the game are now clear.

Research like MacLean’s provides hope that toxic ideas like Buchanan’s may finally begin to face public scrutiny. Yet at this very moment, the Kochs’ State Policy Network and the American Legislative Exchange Council (ALEC), a group that connects corporate agents to conservative lawmakers to produce legislation, are involved in projects that the Trump-obsessed media hardly notices, like pumping money into state judicial races. Their aim is to stack the legal deck against Americans in ways that MacLean argues may have even bigger effects than Citizens United, the 2010 Supreme Court ruling which unleashed unlimited corporate spending on American politics. The goal is to create a judiciary that will interpret the Constitution in favor of corporations and the wealthy in ways that Buchanan would have heartily approved.

“The United States is now at one of those historic forks in the road whose outcome will prove as fateful as those of the 1860s, the 1930s, and the 1960s,” writes MacLean. “To value liberty for the wealthy minority above all else and enshrine it in the nation’s governing rules, as Calhoun and Buchanan both called for and the Koch network is achieving, play by play, is to consent to an oligarchy in all but the outer husk of representative form.”

Nobody can say we weren’t warned

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w/ nancy maclean

https://www.c-span.org/video/?434787-9/panel-discussion-middle-class

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