This morning, we heard on the news that there are more Americans receiving food stamps than ever before because they cannot afford to feed their families.
Earlier this month, we learned that the really big banks that received loans from the government to bail them out of total collapse a year ago are all ready to pay back those loans. During 2009, they all have recovered extremely well and are now anxious to pay off those loans and get out from underneath the government oversight. Why? One big reason is so they can again give executive bonuses and raises. People, along with many members of our Congress, are pretty outraged about this especially since the banks recovered mostly by stock trading and still are not making credit more available, as they were asked to do as recipients of the government loans. It remains to be seen what happens next.
This situation is one example of the fact that there is a huge and growing disparity in income between people in the USA. What are the roots of this great disparity?
According to Paul Krugman in his book, Conscience of a Liberal, since about 1973, the last year of the great post war boom in the US, there has been a 'Great Divergence' in income distribution. Krugman points out that the median household income, adjusted for inflation, has made a total gain of 16% from 1973 to 2005 - pretty small! Meanwhile, the really rich have been getting even richer. Folks in the top 0.1% have made huge gains in the range of 500 to 700%!!
Who are these folks? They are CEOs and others in the highest ranks of the major companies plus sports and entertainment celebrities. Even in the '70s CEOs made much more than the average worker - about 30 times more. But today the differential is 300 times!
The differential between average worker and executive compensation has always been controversial but at a very low level. After all, the decisions on executive pay have always been made by Boards of Directors. Individual stockholders (like us) don't have the power to change these decisions. The American people, believing in capitalism, have never really supported government intervention in these decisions either - until recently.
Personally, we have always been very skeptical that those CEOs were doing such important and critical work for their companies to justify the super salaries. At the same time, we, like other average Americans are not empowered to change this situation.
So, what to do?
In our view, a better strategy than asking the government to moderate executive compensation, or expecting the companies' boards of directors to do so, is to raise the tax rate for the very wealthy. An easy first step would be to let the temporary tax cuts for the very wealthy that were passed by George W. Bush and the Republican Congress expire. In addition, the health care insurance reform legislation that is being considered includes a tax on rich people to help pay for insurance for the poor and uninsured people. Maybe these steps will help to reduce the income disparities - we hope so
Wednesday, December 23, 2009
Thursday, November 19, 2009
Democracy in Action
"Democracy is good. I say this because other systems are worse."
Jawaharlal Nehru
The observation of Mr. Nehru about the goodness of democracy finds broad agreement among the world's citizens and, in fact, most of the countries on the planet elect their leaders.
While it is true that elected leaders might be tempted and even succumb to a range of temptations offered by their positions of power, the people will decide in the next election if any infractions committed were serious enough to outweigh the ability of the leader in question to govern well. In contrast, history has shown that even the most benevolent, but unelected, leader must struggle to govern well and unelected leaders often succumb to temptations.
It is important to realize that just holding an election does not guarantee democracy. After all, some countries hold an election and the elected leader becomes ruler for life! The leader, after being elected, may censor the press to squelch dissenting voices, manipulate the courts so that the rule of law is compromised, enfeeble the legislature so that policies are constrained, and take advantage of position to gain illicit wealth.
So, knowing all this, we were privileged to observe the 2009 parliamentary elections in India, arguably the greatest exercise of democracy on the planet. Links to our observations follow:
Jawaharlal Nehru
The observation of Mr. Nehru about the goodness of democracy finds broad agreement among the world's citizens and, in fact, most of the countries on the planet elect their leaders.
While it is true that elected leaders might be tempted and even succumb to a range of temptations offered by their positions of power, the people will decide in the next election if any infractions committed were serious enough to outweigh the ability of the leader in question to govern well. In contrast, history has shown that even the most benevolent, but unelected, leader must struggle to govern well and unelected leaders often succumb to temptations.
It is important to realize that just holding an election does not guarantee democracy. After all, some countries hold an election and the elected leader becomes ruler for life! The leader, after being elected, may censor the press to squelch dissenting voices, manipulate the courts so that the rule of law is compromised, enfeeble the legislature so that policies are constrained, and take advantage of position to gain illicit wealth.
So, knowing all this, we were privileged to observe the 2009 parliamentary elections in India, arguably the greatest exercise of democracy on the planet. Links to our observations follow:
Wednesday, November 18, 2009
Be a Proud Taxpayer - Good Government Needs Financial Support
Ask anyone if they feel their taxes are too high and you will likely hear a resounding "YES".
Every year, we cringe at the thought of gathering together all the records, receipts, 1099s, W-2s and completing all the forms, making the final calculation of the income tax we must pay for this year. And then there is sales tax (also known as value added tax or gross receipts tax) on each purchase we make all through the year. If we own property or a car, we must also pay tax each year on their value.
But are we Americans paying too much tax? If we add up all the taxes that Americans pay and calculate the total tax as a share of national income we would discover the taxes we pay are lower than most other rich countries.
Yet, for as long as we can remember, Americans have rejected "government solutions" to such problems as health care, poverty, education, and environmental protection by refusing to pay the needed taxes.
At the same time we expect government to ensure that we have good roads, police protection to keep us safe, nice parks, safe food, snazzy airports, and a secure financial system; functions that are being met largely with mixed results and huge budget deficits.
This raises an obvious question - Will we agree to pay for the government we need?
Every year, we cringe at the thought of gathering together all the records, receipts, 1099s, W-2s and completing all the forms, making the final calculation of the income tax we must pay for this year. And then there is sales tax (also known as value added tax or gross receipts tax) on each purchase we make all through the year. If we own property or a car, we must also pay tax each year on their value.
But are we Americans paying too much tax? If we add up all the taxes that Americans pay and calculate the total tax as a share of national income we would discover the taxes we pay are lower than most other rich countries.
Yet, for as long as we can remember, Americans have rejected "government solutions" to such problems as health care, poverty, education, and environmental protection by refusing to pay the needed taxes.
At the same time we expect government to ensure that we have good roads, police protection to keep us safe, nice parks, safe food, snazzy airports, and a secure financial system; functions that are being met largely with mixed results and huge budget deficits.
This raises an obvious question - Will we agree to pay for the government we need?
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