Free Markets, Free People

corporations


Takin’ it too the streets!

Professor Cornel West, who most likely wouldn’t have a job if he an others weren’t able to keep race baiting going, has emphatically stated that entitlements need to be increased, not decreased.  And he’s also made the point that if they aren’t, well, those seeking to have them increased may have to take to the streets:

"I think the problem is that the poor children, keep in mind it’s 42% of poor children who live at or near poverty, it’s 25% in poverty. Our audience needs to keep that in mind." Cornel West said on MSNBC this afternoon.

"Poor children need more than just a $1,000 for their family, they need a war against poverty to make it a major priority in the way which we have a priority for Afghanistan, and a priority to bail out banks, and a priority to defend corporate interests when it comes to environmental issues," West said about more and new entitlements for the poor.

Professor West didn’t just call for another war on poverty (the first war was fought by Lyndon B. Johnson), but went on to say that the push for more entitlements "is going to be fought in the streets." West showered the Occupy movement with praise for making people aware of the issue.

"It’s a major question of priorities here. That’s why the Occupy movement is so important because some of this is going to be fought in the streets. Civil disobedience does make a difference," he said.

A few points.   Poverty in the US is unlike poverty anywhere else.   If you’ve ever traveled outside the US to a third world country you know what real poverty looks like.  The Heritage Foundation gives us a little reminder of what those who are deemed “poor” in the US are likely to have (from the Census Bureau):

  • 80 percent of poor households have air conditioning
  • Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks
  • Nearly two-thirds have cable or satellite television
  • Two-thirds have at least one DVD player and 70 percent have a VCR
  • Half have a personal computer, and one in seven have two or more computers
  • More than half of poor families with children have a video game system, such as an Xbox or PlayStation
  • 43 percent have Internet access
  • One-third have a wide-screen plasma or LCD television
  • One-fourth have a digital video recorder system, such as a TiVo

As for  the claims about hunger and homelessness:

As for hunger and homelessness, Rector and Sheffield point to 2009 statistics from the U.S. Department of Agriculture showing that 96 percent of poor parents stated that their children were never hungry at any time during the year because they could not afford food, 83 percent of poor families reported having enough food to eat, and over the course of a year, only 4 percent of poor persons become temporarily homeless, with 42 percent of poor households actually owning their own homes.

In fact, in the US, poverty is more of a definition than a condition.   And that definition is key, because if you fit it, then you are “entitled” to taxpayer largess.  So painting a bleak picture of poverty in the US in general terms is important to any argument for increased entitlements, even when everyone should know that we can’t afford them. 

Those who’s power is based in their advocacy for the poor see that as a threat.  So they’re left with either accepting the fact that their power will be diminished or threatening to resort to “civil disobedience”.  The reason West likes OWS is because that’s the sort of action he wants to see.  Tantrums in the street designed to get what they want.

And that brings me to point two – civil disobedience in today’s parlance isn’t the same as it was in Dr. King’s day.  OWS makes that clear.   Any demonstration today, even if the intent is non-violence, always attracts a violent faction.   West’s praise of the OWS isn’t just focused on awareness.  The methods they’ve used are fine with him too.  Provocation which eventually turns to violence.

Finally … it is also about holding corporations hostage.  This was a technique refined by Jesse Jackson.  Make the villain evil and greedy corporations.  Threaten them with direct action.  Make ‘em pay.  

So what you see West setting up here is part Jesse Jackson sting operation and part poverty pimping.   As we know from the previous “war on poverty” which wasted trillions and never moved the poverty percentage down a single percentage point, government intervention has been a failure.  So unwilling to be solely dependent on government (taxpayer) largess which, given the sad state of government finances, is unlikely to be increased, West is setting up the next patsy.

The Jesse Jackson model will meet OWS and instead of taxpayers paying the price this time, it will be consumers who will foot the bill while a new generation of poverty pimps use those defined as “poor” as their means of holding up corporations.

But first, the demonization must proceed.    And if you’ve been paying attention, you know that is well underway via OWS and the Democrats.

~McQ

Twitter: @McQandO


Welcome to "Backwardland" – political elite get it wrong … again

You’ve heard of "Flatland"? Well in Davos, we have "Backwardland", where elite politicians are talking about what ails the world. And you’re probably not going to be too surprised by this, but they’ve got it entirely backward.

Poverty and unemployment reared their heads at the World Economic Forum on Thursday, with speakers urging the elite audience to bridge a growing gap between booming multinationals and the jobless poor.

Greek Prime Minister George Papandreou, who also chairs the Socialist International group of center-left parties, said the global crisis had led to an "unsustainable" race to the bottom in labor standards and social protection in developed nations.

"Politically, I believe we are at a turning point where… there are signs in Europe of more nationalism, more racism, anti-Muslim, anti-Semitism, fundamentalisms of all types," he said. "We need to look to a different model."

Maurice Levy, chairman and chief executive of French advertising giant Publicis, said there was "a huge suspicion about CEOs, bankers, corporations."

"People do not understand that these large corporations are doing extremely well, while their lives have not improved and without the support of the people, there is no way we will be able to grow," he told a panel discussion.

"We have been led by greed. We have been led by only the bottom line, the profit and we have sacrificed the workers in order to please the stockholders."

If you’ve wondered why Greece is in the shape it’s in and France isn’t far behind, read this nonsense.  Greece didn’t get in the shape it is in because of corporations.  It is there because the government overspent on generous benefits such as early retirement and the like.   The financial situation of nations isn’t the result of corporate greed or income inequality – it’s because they’ve spent more than they take in, entitlements are out of control, and they’ve provided decades of disincentives to work.

And the nonsense wasn’t confined to Europeans:

Former U.S. President Bill Clinton said tackling income inequalities was essential to future growth and needed to be part of the core of doing business in the 21st century.

The core of doing business in the 21st century is no different than it was in the 17th century.  Good product, affordable price, satisfied customers.  What Clinton is really saying is that the left intends to use the excuse of “income inequalities” to clamp down on corporations, extort more in taxes (we’ve already discussed who really pays those taxes and how regressive that is, not to mention the fact that at some point, when those taxes can’t be passed along, the corporation goes location shopping or dumps jobs) and generally kill the goose that laid the golden egg.

U.S. economist Nouriel Roubini predicted a backlash against budget cuts in Europe if there was no rapid return to economic growth.

Well yes, but again, with the plan that seems to be afoot, that’s almost assured, isn’t it?  What this is, again, is a different approach to collectivizing corporate earnings.  Terms like “income inequality” and “social justice” creep into the conversation.  And “share” – you remember “share” as in “share your toys, little Johnny”.  Well now it is time, say the elites, to “share” what hasn’t been earned by those receiving the “share”.

With unrest in Tunisia and Egypt a major talking point in Davos, Mthuli Ncube, the Tunis-based Chief Economist for the African Development Bank, predicted more trouble ahead if the fruits of growth were not shared more evenly:

"If you are not even creating jobs, not even sharing the economic growth that is coming through, then there will be push-back," he said. "It’s one thing to get good growth going. It is another to share that."

It is indeed – but here’s something that has worked throughout economic history: get good growth going, create jobs with profits and suddenly it is being “shared”.  Tax the crap out of anyone or anything that looks like it is making money and you won’t get growth, you won’t create jobs because the profits won’t be there to support either.

Of course what Mthuli Ncube is talking about is “sharing” through government – they’ll take it and dole it out.  Oh, and by the way, the unrest in Tunisia wasn’t driven by a backlash to “corporate greed”, it had to do with government greed and oppression.

This is the not so new approach by the left to use the financial crisis as an opportunity to loot corporations and support the welfare states that are in big trouble.  Demonization is right around the corner.  The real cause of the unrest among those the leftist elite like to use as their pawns has little if anything to do with corporations and a lot to do with the governments most of these boobs represent.

~McQ


Corporations, unions, taxes and libertarian ideas

Kevin Drum has a blog post up at MoJo in which he supports a claim by Tim Lee that American Liberalism “has incorporated libertarian critiques at a striking rate over the past few decades”.  The claim is that is true especially in the area of economic policy.  For instance:

Income tax rates are way down. Numerous industries have been deregulated. Most price controls have been abandoned. Competitive labor markets have steadily displaced top-down collective bargaining. Trade has been steadily liberalized.

I guess that can all be categorized as “it depends on your perspective”.  While personal income taxes are down in comparison with where liberals would prefer them to be – especially for the rich – corporate taxes remain the highest in the free world.   And,  speaking of economics and libertarians, we at least understand who ends up paying corporate taxes – and it ain’t corporations.

This is major blind spot of the liberal side of the house.  If they admit that corporate taxes are passed along to consumers, then their basis for taxing in such a regressive manner would be questioned.  So they continue to pretend that by demanding higher and higher corporate taxes, they’re somehow calling for equity in income distribution – assuming government will take the money collected from corporations as taxes and parcel it out to those who need it most.  And further assuming that’s a function of government.

Of course what they end up doing is having corporations take money from those who must have their products but can least afford the cost of the increase driven by the taxation.  “Benevolent government” then takes the money, after it takes its cut, and passes it back to the “most deserving”, or the “most in need”.  Corporations then, are a tax collection entity, not a tax paying entity.  

What happens when corporate taxes are raised is it has an adverse effect on the corporation’s consumer base.  If they get high enough, that base begins looking for less costly alternatives or quits buying altogether.

All that to set up this next Drum statement:

The problem is that a system that generates enormous income inequality also generates enormous power inequality — and if corporations and the rich are allowed to amass huge amounts of economic power, they’ll always use that power to keep their own tax rates low. It’s nearly impossible to create a high-tax/high-service state if your starting point is a near oligarchy where the rich control the levers of political power.

You could most likely spend all day on those two sentences.  Completely left out, of course, is who is paying income taxes.  What we all know is somewhere around 50% of us aren’t.  So when we see discussions about taxes we have to keep that in mind.  More importantly – and after all the talk of having much in common with libertarianism – check out what Drum’s ideal is: “a high-tax/high-service state”.

Obviously the libertarian camp would find nothing to agree with there. 

Essentially Drum’s argument is that we, as a nation, have the right to demand such a state.  But while the “corporations and rich” own the “levers of political power” we’ll never achieve it.  Solution?  Implied: take those levers away from them.  Method?  Well all of this has been a prelude to the real reason for the post:

I am, fundamentally, old fashioned about this stuff: I think of the world as largely a set of competing power centers. Economics matters, but power matters at least as much, and I think that students of political economy these days spend way too much time on the economy This explains, for example, why I regret the demise of private sector labor unions. It’s not because I don’t recognize their many pathologies, or even the fact that sometimes they stand in the way of economic efficiency. I’m all in favor of trying to regulate the worst aspects of this. But large corporations have their pathologies too, and those pathologies are far worse because there’s no longer any effective countervailing power to fight them. Unions used to provide that power. Today nobody does.

This is the common cry of the liberal today.  The need for a “countervailing power” to fight the power of corporations – real or imagined.  Weapon of choice?  Unions.  But the power that unions fight against has nothing to do with the supposed problem with corporations that Drum has outlined.  Taxes.  Name a single union that has, in any time in the past, rallied and protested to get their corporation’s taxes raised?  They understand what such an increase could mean to labor.  As for power, unions are more concerned with the internal power of a corporation as it relates to wages and benefits.  It is only recently, with the addition of union PACs, that the union movement has begun to address corporate political power.

And if I had to guess, that’s what Drum secretly laments.  As private sector unions decline, so does any “countervailing” political power he thinks unions could wield.  Of course, it doesn’t help when they act like this .  Unions are and have been the liberal left’s power center in their war against corporations for centuries.  If you don’t believe that, you just need to review recent elections and their pattern of donations:

The UAW has considerable clout in the Democratic party. In the 2010 election cycle, the union spent $10.1 million through its political action committee, according to the Center for Responsive Politics. That was down from $13.1 million in the 2008 election.

The center said that 100 percent of the union’s 2010 federal donations — $1.4 million — went to Democrats. The funds come from voluntary contributions by members and retirees.

That’s the real impact of the “demise of private unions”.  It is also why those like Drum support any effort that makes organizing easier for unions today. 

So when Tim Lee writes that "Competitive labor markets have steadily displaced top-down collective bargaining," I just have to shake my head. Competitive for whom? For the upper middle class, labor markets are fairly competitive, but then, they always have been. They never needed collective bargaining to begin with. For everyone else, though, employers have been steadily gaining at their expense for decades. Your average middle class worker has very little real bargaining power anymore, and this isn’t due to chance or to fundamental changes in the economy. (You can organize the service sector just as effectively as the manufacturing sector as long as the law gives you the power to organize effectively in the first place.) Rather, it’s due to a long series of deliberate policy choices that we’ve made over the past 40 years.

But here’s the bottom line: if there were indeed a crying need for unionization felt by the “average middle class worker”, the ability to join a union (or form one) still exists. The problem is, it’s mostly fair and thus doesn’t favor the union as previous organizing laws did.  However, if the organizing drive meets the criteria outlined in labor law,bingo, a union is born and members are able to cash in on the supposed benefits of such a relationship.

The problem, however, is fewer and fewer people apparently see any advantage in such a relationship anymore, if declining membership is any indication.  Like anything else in the world, the consumer of a product has to convince themselves that the product’s benefit justifies its price.  It seems that is no longer the case when it comes to private unions.  Drum prefers to blame the demise on “policy”.  I see it as the consumer saying, “no thanks” after the price/benefit comparison is made.  The fact is policy or law doesn’t prohibit the formation of unions.  Only votes do.  And for quite some time, the votes – of those they would unionize – haven’t favored private union organizers.

Drum concludes:

It’s worth noting, by the way, that corporations and the rich know this perfectly well, even if lots of liberals have forgotten it. They know exactly what the biggest threat to their wealth is, and it’s not high tax rates. This is why the steady erosion of labor rights has been, by far, their single biggest obsession since the end of World War II. Not taxes, unions. If, right now, you were to offer corporations and the rich a choice between (a) passage of EFCA or (b) a return to Clinton-era tax rates on high incomes, they wouldn’t even blink. If you put a gun to their head and they had to choose between one or the other, they’d pay the higher taxes without a peep. That’s because, on the level of raw power, they know how the world works.

Of course he’s right, but not necessarily for the reasons he believes.  Unions have grown into an impediment.  A costly impediment to competitiveness.  Whether anyone likes to admit it or not, labor is a commodity.  Despite the emotional arguments of the left concerning labor and “real people”, people who want to work aren’t owed a job or a certain level of compensation.  They have to be worth it to earn it. 

So yes, corporations are more concerned about unions than taxes, at least to the point that passing along increased taxes starts costing them customers. Then they pay more attention to taxes.  And if taxes do start to cost them customers? Where is the easiest commodity for a corporation to cut in order to maintain a competitive price as it collects the increased taxes?  Yes – labor.

Without apparently realizing, the liberal left’s call for increasing corporate taxes dramatically for their “high tax/high services” state is a call for more unemployment.  Unions would attempt thwart the ability for corporations to adjust headcount to remain competitive.  Result?   The US steel industry redux.

Is that really what the liberal left wants?  I can pretty much guarantee it isn’t what any libertarian would want.  But perhaps it is the fact they don’t even realize how it all works (and what they’re really wishing for) that’s the most dangerous aspect of all of this.

~McQ


Policy not profits is the reason for the slow recovery

I‘m always cynically amused by lead sentences like this from the supposedly unbiased media.

Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections – even as a separate report shows corporate profits reaching their highest levels ever.

Of course one has zippity do dah to do with the other. The reason corporate profits are reaching their highest levels ever is because corporations that have survived the recession have done so paring down to a "lean and mean" status by dropping headcount, closing unneeded facilities and cutting spending. Those workers that are still employed are what are necessary to carry the corporation forward in the financial situation and business climate we find ourselves in now. As the economy slowly picks up steam and additional headcount can be justified by additional business, it will be added. But, as we all know, employment is a lagging indicator – i.e. profits and such are going to go up before headcount goes up.

But there’s going to have to be a definite, traceable, unmistakable upward trend with a demonstrable increase in business before corporations add headcount again in the present business climate. And given what this administration and the 111th Congress have done – make war on American business – few are inclined to do that.

So? So it stands to reason that employment is down and will probably stay down until corporations and businesses see a much friendlier and stable business climate than they’re seeing now.

We haven’t been writing about the hostile climate here for our health or amusement. But as can be witnessed here, the subtle yet telling attempt to shift the blame is found in the first sentence. If only greedy corporations would simply start hiring instead of amassing profit, why everything would be peachy keen and our man in the White House wouldn’t be looking at the probability of high unemployment in 2012.

So prepare yourself to see these sorts of exercises in blame shifting at regular intervals over the next couple of years.

Even as conditions are likely to remain miserable for job seekers for years to come, an extraordinary bounce-back is underway in the nation’s corporate sector, with profits rebounding 28 percent over the past year to an all-time high in the third quarter.

Without this narrative, which the entire left and a good portion of the middle will swallow whole, the administration and Democrats haven’t an identified enemy with which to wage political war – and that, of course, is part of our problem now.

~McQ


Quote of the Day – Obama’s governing style version

Kyle Smith spends the majority of his column talking about the Obama administrations relationship, or lack thereof, with the UK. He also talks about the way the administration is attacking BP, far above and beyond the call of duty as he sees it.

BP after all is British Petroleum, and one of the mainstays of the economy whose profits fuel pension funds there, etc.

The quote? Well, again, it is one of those great one sentence summations and contrasts that grab you as true when you read it:

Obama seems to think corporations are alien invaders sent here to destroy us and should be handled accordingly — yet seething peoples who actually do want to destroy us should be confronted with diplomacy and listening.

Given the last 16 months or so, it is hard to mount an argument that would refute his point.

~McQ


Oregon Voters Raise Their Own Taxes (Update)

If you were to ask them though, the taxes will be collected only from corporations and the rich.  The idea is to stick them with the bill for services the rest of the voters have decided they’d like but can’t afford.  It’s a bit like getting on a train without a ticket, finding a well dressed man, and having the ticket collector point a gun at him and demand ticket money for your trip.

If I were the well dressed man, I’d probably find alternate transportation for my next trip. If I was a “rich” person in Oregon, I might begin scouting out a new place to live. The voters have certainly made it clear they feel they have every right to loot my earnings at will. Why would I want to give them any more chances?

Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax.

Together they generate an estimated $727 million, which has already been budgeted by the 2009 Legislature for public schools and other state services.

So instead of cutting budgets at the state level to what they can afford, Oregon voters have doubled down and bought into the populist notion that they can do it on back of those demonized rich people and evil corporations.

Corporations, of course, have a number of choices. Among them, if the tax isn’t too high, is pass the cost on to their customers. That would most likely be those who voted “yes” on Measure 67 ironically. If it is a large tax which is not easily passed on to the consumer, the corporation has other choices. It can cut headcount – lay people off – to recoup the cost. Or, if it is really crippling, find a new home for their business in a state which is friendlier toward business than is Oregon. What they most likely won’t do, at least not anytime soon, is hire and expand.  And if I was a corporation looking for a new home, this vote would have me cross Oregon off the list.

The “rich” also have options. Find ways to hide that income. Like increase 401k savings so that taxable income is below that number. Many are probably small businesses which will hide income in the business vs. putting it in the owner’s income. If none of that’s possible they may find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.

That’s not to say they will or even that all of them object to this new tax, but Oregon voters shouldn’t fool themselves that this sort of taxation is beneficial in the long run to an atmosphere which will attract and keep businesses or people who have the money to help the economy. Oregon might be a nice place to live, but it’s not that nice – especially when alternatives exist.

UPDATE: Megan McArdle points out something about the  tax on business that makes it even worse:

The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn. Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.

Any business that took in a dollar last year owe taxes on it. That means, as McArdle points out, marginal businesses who have just managed to hang on (and continue to provide employment) may be forced to lay off or close their doors and liquidate to pay the tax. A particularly “smart” move in a recession.

Additionally, as Tonus points out in the comments – the $727 million will be spent on the static analysis which said such a tax would yield that amount of revenue. But life isn’t static and those effected will immediately begin to do things which will lessen the impact on them and, of course, make that revenue stream smaller than anticipated. That means two things – more deficit spending and, most likely, more taxes on those who approved these to measures in order to make up the revenue shortfall.

~McQ