Category Archives: Economics

The Truth About Inflation

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It’s time to re-examine the myth that Republicans are “better on inflation”. Those who believe this seem to think that a president can wave a magic wand to instantly lower prices.

Presidents don’t set prices… they’re set by producers and retailers. Economics professors will invoke “supply and demand”, which is behind much of the inflation of the early 2020’s. The pandemic disrupted global supply chains, and people with time to kill and money to spend increased demand. Even though our inflation rate was high during this period, it was a problem everywhere. In fact, the US under Biden/Harris had one of the lowest inflation rates in the world. (See chart)

So instead of “blaming” Democrats for inflation, they should get credit for controlling it more effectively than their global peers.

Producers and retailers, motivated by profit, will set prices as high as they can get away with. When wages started rising after the pandemic, corporations used “inflation” as an excuse to raise prices. If wages rose 10%, they would raise prices 20%. This is documented as skyrocketing profit margins in their earnings reports. During their earnings calls, many corporate leaders bragged to their shareholders about raising prices (Guardian investigation, Jim Hightower column, Institute for Policy Studies analysis). They used obfuscatory terms like “increasing margins” to “add value for shareholders”.

This is price gouging, plain and simple. The president did not raise prices, they were raised by CEOs and high-level managers, and nearly all of those people are Republicans.

Before leaving this discussion of inflation, it’s important to understand how the word has different meanings depending on the context, and how it’s weaponized to deceive us.

The scholarly definition of inflation is a condition where rising prices leads to demand for higher wages, the increased wages lead to higher prices, and the cycle repeats itself.

Most of us think of inflation as higher prices we pay for essential commodities (gas, food, housing, etc.).

But when economic pundits on the business pages, or high-level bankers at congressional hearings, solemnly talk about “keeping inflation under control”, they are talking about keeping your wages from rising. Meanwhile, they know that the rest of us will politely nod in agreement about keeping inflation (prices) under control, even though their tight-fistedness with wages does not make them our friends.

So remember that when prices go up and wages don’t. It’s Republicans that are doing this to us.

Let’s Nationalize the Railroads

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Our highways are not owned by trucking companies. Our skies are not owned by the airlines. These public assets are part of “The Commons,” and are managed by officials accountable to We The People.

Why should railroads be any different? Why should private corporations control these vital corridors, often in violation of the public interest?

When corporate bosses demand that decrepit trains keep moving, private rail inspectors end up sacrificing public safety at the altar of profit.

Even though passenger traffic has priority by law, Amtrak riders often find their trains parked on sidings waiting for coal trains to pass.

It’s time for rail corridors to be transferred to public control, and for traffic management and safety inspections to be overseen by responsible public servants.

The railroads that we know still have a role to play. Just as trucks and planes are privately owned, existing carriers would continue to own locomotives and rolling stock. They would own their switching yards, employ train crews, and do rail construction and maintenance under government contract.

But the main line track must become part of our national infrastructure. The railroads should be fairly compensated for their investment in the tracks and other infrastructure, but this is not insurmountable.

Railroads are a vital component of our national transportation system, and their importance is growing. Private corporations have repeatedly violated the public trust, so railroads must come under the same public oversight that applies to highways and skyways.

Poison at Half-Price – A Fable about Cheap Gas

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Imagine a time and place when everyone was healthy. The grass was green, the air was fresh, and attractive birds sang sweetly over clean streets.

Then one day someone started selling poison from a shop on the corner. People started using this poison because they thought it made their lives easier.

But the poison was highly addictive. Users quickly became dependent on the poison, and they sacrificed large portions of their incomes to this addiction.

Worst of all, widespread use of the poison caused the grass and the skies to turn brown, and the only birds to be seen over the dirty and trashy streets were nasty pigeons.

Then a new generation grew up watching their parents struggle with this addiction. They saw what the poison was doing to their world, so they developed ways to do without it.

As more of these young people came of age, the dealer on the corner had a harder time moving his product. So over the past few months the price kept coming down in order to boost business and clear inventory.

In effect, the poison dealer on the corner is now having a half-price sale. I don’t know how the rest of this story turns out.

The poison dealer hopes that his half-price promotion will create a new generation of addicts. Once they’re hooked, he can go back to charging full price. In fact, it won’t be too long before he charges double the normal price. The addicts might grumble, but by then they’ll have no choice but to pay up.

Meanwhile, the world would become darker, dirtier, and hotter.

On the other hand, we could recognize that these low prices are only temporary. We could remember the exorbitant prices from just a few years ago, and we could see how easily those prices can happen again.

This poison drains money from the pockets of its users. Using this poison adds stress and misery to our lives, and it degrades the quality of life for everyone – users and non-users alike.

Even if it’s half-price, it’s still poison!
Even if it’s free, it’s still poison.

If you don’t use the poison, this is no time to start. Addictions are easy to fall into, but much harder to break.

If you are a current user of the poison, this half-price sale has given you some extra money. So instead of spending it on more poison, why not invest that money into kicking the poison habit? Imagine never needing to buy any poison ever again.

The dealer on the corner is getting desperate, so we must be doing a lot of the right things. Let’s keep it up.

Competing with the Third World – An American Coder’s Lament

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As many of my readers may know, I’ve been seeing a bit of down time in my professional life lately. And like any professional looking for his next project, I’ve made my trade’s LinkedIn discussions a daily stop on my journey.

But something disturbing has happened in the couple of years since I last had this habit. Everybody seems to be talking about how wonderful it is to bypass professional developers, or failing that, to hire developers from third-world countries for $7/hour or less.

Read on →

NCAA – The Farm System for the NBA and NFL

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While we’re in the season of watching college students play basketball, it’s time to consider how much of this multi-billion-dollar business is shared with the players themselves.

Major universities each collect millions of dollars from their football and men’s basketball teams (at some schools, hockey and/or women’s basketball are also big money-makers). The cash comes not only from ticket sales, but from lucrative TV broadcast deals and merchandising. Jerseys are sold with players’ names on them, promotional materials with players’ likenesses are published, yet these players aren’t paid a cent.

The NCAA gets rich off the myth of the “student athlete.” But a serious student who happens to be on The Team is likely to graduate with lower grades than a similar student who’s not on The Team. Many other “students” are shepherded thru a program of easy courses designed to keep star athletes “eligible.” Some drop out of school early to grab lucrative contracts in the NBA or the NFL. It’s all a charade.

I have a better idea: Let the college conferences function like the minor leagues in baseball. Let the players put their full concentration into being elite players by not forcing them to go to school at the same time. Pay the players a modest salary and let them make money from merchandising their names and likenesses. Set up a system to keep the pay rates fair and equitable, and have it subsidized by the professional leagues who benefit from this player development system.

Then, for each year a player participates in this manner, he or she is guaranteed a year of full scholarship at the host university, to be redeemed at the time of the athlete’s choosing. So after the athletic career is over, an athlete can focus on getting the education needed to set up the next phase of his/her life.

The recruiter’s big promise to a star high-school athlete: play for our school and you’ll get a world-class education. It doesn’t work that way when the kid is asked to do both at once. Let them make a modest living focussing on their athletics, so they can concentrate on being the best students they can be when their lives in sports wind down.

“Creating Jobs” is the Wrong Reason

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There’s an illogical argument consistently used to support big projects. I hear it in support of projects I’m against, but I’m equally uncomfortable with its use in favor of projects I support. It’s the argument that a project will “create jobs.”

Any endeavor must be evaluated based on whether the result will enhance our lives and improve our world. Once we decide to do something, then we find the workers to complete the project. I’m not denying that many people need more work (I’m one of those people). But at times like these we must ask, “What is the best way to deploy this idle workforce?”

Let’s look at an extreme example of the “create jobs” argument: War creates jobs. There are jobs building tanks, planes, guns, bullets and bombs; and jobs operating the machinery and firing the guns. But the end result is that a lot of the stuff we built gets blown up, and a large part of our population comes home emotionally and physically crippled (if  at all). “Creating jobs” is not a reason to start a war.

Before we blindly “create jobs”, we should make sure the product of those jobs will make our world a better place. Then we can offer our citizens work that is worthy of their efforts, and that produces results they can point to with pride and accomplishment and say, “I helped build that.”

How Much is Enough? The Case for a Maximum Wage

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We keep reading about corporate big-wigs, banksters, and other assorted riff-raff who collect annual salaries in the hundreds of millions of dollars. $100 million/year is $2 million/week, $400,000/day, or $50,000/hour. At that wage, I could work for an hour and take the next year or two off, or I could work for a week and retire for life on $100K/year ($2 mil at 5%, do the math).

Two questions: 1) How can any one person deserve that much money? 2) What can one possibly do with that much money? Does a $10 million bankster crash the economy only one-tenth as hard as a $100 million bankster? If the $10 million CEO gets a raise to $100 million, does his life instantly become ten times as awesome? I submit that the answer to both those questions is “no.”

One doesn’t need to spend much time reading gossip columns or celebrity biographies to know that the wealthy harbor the same pain and struggles that the rest of us do (and in many cases, far more so). So more money does not make life more awesome.

At the other end of the income spectrum, a little bit of money makes a big difference. It means bills get paid, creditors back off, kids get fed, houses get fixed, and life gets much more awesome. Looking farther up the ladder, houses get nicer, and people buy lots of stuff.

But at a certain point, the house is so big you only use a corner of it, they don’t make cars more expensive than the ones you already have, and you’ve already bought anything you would ever want, so what’s the point of making more money?

We have a minimum wage because to ask someone to work for a wage at which it’s impossible to make a living is oppressive. We need a maximum wage because for an individual to demand more wealth than he/she can possibly use is greedy.

So what should be the maximum wage? And how do we define and enforce it?

Back in the 1950’s, we had a 91% tax rate on annual income over $3.2 million (in today’s dollars). History (and people like my parents) remember this as a prosperous time. Most people don’t like paying taxes, so if rich people made “too much” money they would avoid taxes by paying their workers higher wages, investing in more equipment for their businesses, donating money to charities, and generally feeding that extra money back into their communities until their income dropped out of the top bracket.

Since then, short-sighted corporate stooges have taken over government and dramatically cut taxes on these rich people. So now instead of sharing the excess wealth with their communities, they are hoarding it in tax shelters and offshore accounts. Instead of hiring more people for better wages, they are closing domestic factories and replacing them with cheap contract labor in the third world.

So we can implement a maximum wage by setting a 99% tax rate for all income above that defined level. And by all income, I mean all income: interest, capital gains, rent, inheritances… everything must be taxed as regular income.

I propose that the maximum wage be tied to the minimum wage. Right now the minimum wage is $7.50/hour. (Set aside the issue that this is a pathetic wage. It should be much higher… $10-15/hour would be a good start.) So the formula could be, “The annual maximum wage is one million times the hourly minimum wage.” That way, the maximum wage would be $7.5 million/year, and it could only be raised by raising the minimum wage. The rich don’t get a raise unless the poor get the same raise (in percentage terms).

Excessive income above the maximum wage will go to 1) charities, 2) reinvestment in businesses and higher wages for employees, or 3) taxes that the government can use to hire people (at decent wages) to build stuff. Either way, the money is “in play” in the community doing good things, rather than gathering dust in a vault in the Cayman Islands.

The Evolution of Revolution

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Establishing and maintaining an activist encampment – whether to blockade a nuclear power plant or to occupy a state capital or a city park – is a major logistical undertaking. The Wall Street occupiers learned a lot about doing this from the Wisconsin capital occupiers of last winter, who in turn represent a major progression from the anti-nuclear actions of a generation ago.

In the fall of 1981, I participated in a two-week “blockade” of the Diablo Canyon nuclear power plant on the coast of central California. Nearly 2000 people were arrested during this action, and I was two of them. Occupy Wall Street reminds me of many of the things we did at Diablo that worked, and I also see the OWS crowd improving the things that we didn’t do that well.

The improvement I’m most impressed with relates to communication.

At Diablo, there came a time when money and energy were running out and we had to find a way to end the action and go home. A proposal was floated to declare the beginning of a “Phase 2” of the blockade, and a discussion followed to define what that meant. The consensus process we used gave every individual veto power over any proposal, so we started hearing things like, “We will block any statement that contains the word ‘end’.”

Words that anyone disapproved of were removed and/or replaced. Strong language got weak and ambiguous. A reasonable and well-thought-out statement got watered down into a bland mush that offended nobody and excited nobody. And it burned through hours of our time.

OWS did something right in the way it composed and approved its declaration.* It’s well-written and strongly worded, which can be nearly impossible when writing by committee. I can see the markings of a committee in the list of grievances, but something has improved in the process to keep the well-intentioned saboteurs from muddying the text.

On behalf of the veterans of the Diablo blockade, I will take credit for one innovation in meeting management displayed at OWS: the jiggling of fingers in the air as a substitute for applause. I saw this introduced at the Diablo encampment as the size of the meetings started getting larger. A speaker would say something, and many people would cheer or applaud in agreement. This made it difficult for everyone to hear the rest of what the speaker had to say, and it would disrupt the rhythm and the flow of the meeting.

So someone suggested that instead of cheering, we should wave our hands above our heads to signal our approval and agreement. A “cheer” could erupt without drowning out the speaker we’d be cheering.

It may have been something other activists were doing before. But it shows that at the very least, such actions are networking events. Activists representing a wide range of causes, constituencies and age groups have lots of time to hang out with each other and exchange ideas to solve problems.

Each action gets more organized, and new best practices evolve from this stock pot of activism.

* My favorite declaration came from a blogger at the occupation, which concisely and explicitly covered the most important points. It’s brief enough to quote here in full:

We are the 99 percent. We are getting kicked out of our homes. We are forced to choose between groceries and rent. We are denied quality medical care. We are suffering from environmental pollution. We are working long hours for little pay and no rights, if we’re working at all. We are getting nothing while the other 1 percent is getting everything. We are the 99 percent.

It’s Corporate Greed, Stupid

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Back when Bill Clinton was running for president, his campaign office famously had a sign on the wall that read, “It’s the Economy, Stupid.” It was how they reminded themselves what issue most concerned the voting public. Smart politicians would recognize that most people see corporate greed as the root of our economic problems, and adjust the sign on their wall accordingly.

For two generations, we have watched a handful of rich people hoard the wealth while the rest of us struggle more and more to get by. There’s a limit to how much the monarchs of our world can impoverish the rest of us before angry mobs with torches and pitchforks appear at the castle gates, and Occupy Wall Street is the modern equivalent of that angry mob.

Corporate funded media pundits feign mystification as to the grievances or demands of the 99-percenters. The truth is that these shills can’t say “corporate greed” (grievance) or “economic justice” (demand) out loud. After all, they’re employed by some of the largest corporations in the world, so they wouldn’t dare say anything favorable about the demonstrators. So all they have to offer are insults, ridicule and shoulder-shrugging.

Let me illustrate how greedy the banks have become during my lifetime. My first savings account had an interest rate that fluctuated between 4% and 5%. So if I had $10 in the bank for a year, I had $10.50 at the end of the year. That’s right, I made 5% interest on $10. My student loans had a 7% interest rate, and consumer loans typically were at 9%. Credit card interest rates of 12% were considered an outrage.

So if the bank charged 8% interest on a loan, their “cost” was the 5% they paid the depositors, so they made a 3% profit on the loan. (This sets aside their ability to loan out $5-10 for every dollar in deposits.) Bankers had no problem making a decent living under these conditions.

But now a savings account yields 0.5%, and that’s only if you have thousands of dollars in the bank. Meanwhile, consumer loans below 10% are rare, and credit card interest rates that low are little more than a dream. So the entire (typical) 12% interest rate the bank makes on a loan is gravy, since the depositors get next to nothing. Yet the banksters cry for more, and every time their price gouging is restrained, they find another fee to raise to make up for it.

This is one example among hundreds of how the rich are ripping off the rest of us, and of how the American dream has been crushed. As we were growing up, we were told this was a great country because if you played by the rules, worked hard, and got educated, then you would be taken care of and there was no limit to what you could achieve. But now millions of people who played along find their jobs shipped off to China, and those lucky enough to still have jobs work at poverty wages with no benefits.

So what was once the most prosperous country in the world has become a feudal society, where the money monarchs steal, swindle and hoard the wealth while leaving the rest of us with nothing. And then they wonder what the Occupy Wall Street movement is complaining about.

The great success of the Occupy movement (as of now) is that a national conversation has been started. We are aware that the system is broken, and we know why it’s broken. Now we must develop and enact a series of solutions to bring fairness, equality and opportunity back into our society.

I have a list of ideas that I intend to throw out into the ether for discussion in a series of posts over the coming days and weeks (as time permits). The money monarchs now own every square of the metaphorical Monopoly board we live on, and they’ve also seized all of the money. Now we need to change the rules so that the rest of us can find a way to survive and thrive.

Stay tuned.

Proposals (updated Nov 9, 2011):
How Much is Enough? The Case for a Maximum Wage

Passing the Savings on to the Corporate Till

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The next time some corporate shill cries that raising their expenses will raise prices for their customers, or that lowering their expenses will enable them to pass savings on to their customers, know that they’re spewing bullslop.

The taxing authority of the Federal Aviation Administration (FAA) was shut down recently, so airline passengers should have seen about a 10% reduction in the price of their airplane tickets. After all, there was no tax on those tickets. But did the airlines “pass the savings on to YOU!”? Of course not. Ticket prices stayed the same, except that the money that USED to go to the FAA was kept by the airlines.

So now we know that making products with Chinese slave labor is not to give us low prices, but to give corporations higher profits. When electric utilities get less regulation, we don’t get lower rates – the utilities get higher profits. When big corporations drive down the wages of their unionized workers, they don’t lower their prices – they fatten their profits.

So the next time some pundit is on the radio or TV saying that some policy will mean higher or lower prices for consumers, you know it’s bullslop. “Lower prices” is little more than code for higher corporate profits. We never see lower prices, but those corporations sure have great earnings reports.