Category: Contrarian Economics

Study compares CEO pay with taxes: Three Pittsburgh companies are among 25 U.S. corporations that paid their CEOs more last year than the company paid in U.S. corporate income taxes, according to a study by the Institute of Policy Studies.

The local companies on the list are Bank of New York Mellon, specialty metals producer Allegheny Technologies and Mylan, which makes generic drugs.

The institute compared CEO pay with the federal tax liabilities companies disclose in their 10-K, an annual report filed with the Securities and Exchange Commission. The institute states the figure is “the best approximation of actual taxes paid to the U.S. Treasury.”

The Washington research report examines CEO pay every year. Last year it found the CEOs of companies that announced the largest layoffs earned, on average, 42 percent more in 2009 than the average CEO of an S&P 500 company.

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What Republicans get wrong about capitalism – Great Recession | Economic Recession, Economic Crisis – Salon.com: “Smith would be highly skeptical of such claims. In the final edition of the ‘Theory of Moral Sentiments,’ written over a decade after ‘The Wealth of Nations,’ he added a chapter in which he describes the ‘disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition.’ This disposition, Smith says, colors the way we view the world, leading us to conflate wealth and greatness with virtue and poverty and weakness with vice.

It also leads to confusion in thought. Who makes capitalism work? is a very different question from For whom has capitalism worked best? We should guard against presuming the answers are necessarily one and the same.

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9 Things The Rich Don’t Want You To Know About Taxes: “For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity—so much so that tax revenues will go up, despite lower rates. The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Tax policy is something the framers left to politics. And in politics, the facts often matter less than who has the biggest bullhorn.

The Mad Men who once ran campaigns featuring doctors extolling the health benefits of smoking are now busy marketing the dogma that tax cuts mean broad prosperity, no matter what the facts show.

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S&P’s credit rating cut: Downgrading our politics | The Economist: “Investors largely tuned out the debt-ceiling debate until its final days out of a belief based on long experience that for all the antics and rhetoric of the Tea Party, the people who actually run Capitol Hill would never compromise the country’s credit worthiness. After all, it was Mr Boehner who reminded his freshmen colleagues that on the debt ceiling they’d have to act like “adults.”

That is not what happened. As the fight dragged on, the leadership moved closer to the Tea Party, not the other way around. And they seem happy with the results. Why else would Mitch McConnell have promised on August 1st to do exactly the same the next time the debt ceiling must be raised?

It is striking that the proponents of this strategy seem so oblivious to its impact. Our economy is lubricated by a sophisticated and stable credit market whose most vital component is also the most ephemeral: trust. As the crisis amply demonstrated, when trust erodes, the system freezes up. America has built a reputation for responsible and credible management of its finances over the centuries, and that reputation has been reduced to a political football, like a federal judgeship. Henceforth a foreign pension fund or central bank that once mindlessly ploughed his spare cash into Treasurys will have to think twice.

I never had much sympathy for the view that America’s economy was about to be eclipsed by China’s, and the main reason was our political institutions. Those checks, balances and laws provide an orderly means to change course in response to new challenges. China’s authoritarianism deprives the government of a feedback mechanism to tell it when it is meeting the needs and aspirations of its people. That makes its system intrinsically fragile.

Events of the last few weeks have forced me to reconsider.

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Taking a Side | Crooks and Liars:

Just a terrific paragraph:

To me, that question is the most critical one there is when it comes to government policy. I don’t believe that government is inherently good — having lived through Vietnam, Watergate, J. Edgar Hoover’s corruption at the FBI, the massive deficit producing tax-cuts-for-the-rich policies of Reagan and Bush, the S&L crisis, financial deregulation, media consolidation, the Iraq war, Katrina, and the utter economic incompetence of the President George W. Bush economic years. I have no illusions that government as a whole is always on the side of most people. But what I want and believe in is a government of, by, and for the people — most especially for the people. Given the size and power of the financial industry, and other huge multinational corporations, I want a government that is on our side in making sure these massive companies don’t destroy our economy (again), and then demand bailouts (again) because they are too big to fail. I want a government on our side so that big insurance companies don’t tell people they can’t have coverage anymore because they got sick. I want a government on the side of senior citizens who have worked hard their whole lives and now want to live with some modest measure of dignity and economic security through Social Security, Medicare, and Medicaid coverage. I want a government on the side of working class families thrown out of their jobs and homes through no fault of their own. I want a government that is on the side of our kids and helps them get a good education. I want a government that is on the side of small business and start-up entrepreneurs as they work their butts off trying to compete with huge corporations.

This is the converse of the argument I often make about how wonderful people think private business is viz the government: Ever try switching cell phone carriers? Cable companies? Understand your credit card agreement?

To paraphrase Barney Frank. “If you think government is terrible, private businesses aren’t so hot, either!”

John Kenneth Galbraith understood capitalism as lived – not as theorized / The Christian Science Monitor – CSMonitor.com:

Government’s role

While Friedman never really appreciated the limitations of the market, he was a forceful critic of government. Yet history shows that in every successful country, the government had played an important role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure. Galbraith made this case better than most.

Galbraith knew, too, that people aren’t just rational economic actors, but consumers, contending with advertising, political persuasion, and social pressures. It was because of his close touch with reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson years.

Galbraith’s penetrating insights into the nature of capitalism – as it is lived, not as it is theorized in simplistic models – has enhanced our understanding of the market economy. He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual life: Who will stand up against the economics establishment to articulate an economic vision that is both in touch with reality and comprehensible to ordinary citizens?

A nice and too brief overview of Galbraith v Friedman, by Nobel Laureate Joseph Stiglitz.

It’s the Inequality, Stupid | Mother Jones:

Illustrations by Jason Schneider

Eleven charts that explain everything that’s wrong with America.

It is amazing we haven’t had a revolt yet.

Dissent Magazine – What Would Jefferson Do? How Limited Government Got Turned Upside Down

Surveying the wreckage of the Great Depression,
Roosevelt simply told his followers that “the average man once more confronts the problem that faced the Minute Man,” because “[a] small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor—other people’s lives.”

Roosevelt’s analysis of “economic tyranny” shared a critical assumption with Thomas Jefferson and James Madison and other important founders of our country: that limited government is not an end itself, but the instrument of a particular vision of society, an egalitarian vision. It was a social vision in which extremes of wealth and poverty did not exist, and a relatively equal distribution of productive property secured independence and freedom for the whole citizenry.

As historian James L. Huston writes, it was against the “political economy of aristocracy,” government organized by and for a small, wealthy elite, that supporters of the American revolution embraced the “egalitarian promise of the negative state.” The ideal, simply, was a system that restricted the legal and political power of the wealthy, in order to prevent them from combining against independent smallholders and those without property. Limited government, in other words, was a “populist” ideal, a doctrine of the many versus the few. As a group of North Carolina democrats petitioned in 1776, when “fixing the fundamental principles of Government,” the goal should be to “oppose everything that leans to aristocracy or power in the hands of the rich and chief men exercised to the oppression of the poor.”
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Clearly, for Jefferson and Madison (as for Taylor), the republican social objective of securing a relatively equal distribution of productive property was paramount in their thinking about what government should or should not do.
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OK, just go read it already!………………………