It’s about consumption security not income inequality

The Republican Party has taken the bait from the progressive narrative on income inequality and, according to a post in The New York Times, its potential candidates for the GOP nomination for president have rumblings apparently in line with the position taken by America’s upper crust.  For example, the usual buzz terms, such as tax cuts and reduced regulations have been used by Senator Ted Cruz, Republican of Texas, and neither he, Jeb Bush, or his fellow senator Marco Rubio of Florida believe that government intervention is the best approach to resolving the problem.

This position appears out of line with a significant portion of Americans, even their fellow Republicans.  According to the Times, 69% of Americans believe that the U.S. government should take initiatives to close the gap while approximately half of Republicans feel this way as well.

The wealthy don’t share the rest of America’s sentiments.  While a significant portion of the wealthy consider the ga to be a problem, only 13% of the wealthy, according to the Times, believe that government should be taking any action.  This sentiment holds even as the wealth gap is at its widest in years. According to a survey conducted by the Pew Research Center, median net worth for upper-income families is 6.6 times that of middle-income families and 70 times that of lower-income families.

Although the Democrat Party has been sounding the charge for the barbarians to storm the walls of the wealthy, the Party’s all but crowned nominee, Hillary Clinton, has not exactly been a chalkboard of specifics and statistics on the issue.  Mrs. Clinton has been vague when it comes to policy proposals, probably because she may not want to alienate potential donors with whom she now shares more in common with than we ordinary folks.

One problem I see is how both Republicans and Democrats conflate the issues of “wealth gap” and “income inequality.”  They are not the same.  In theory an individual can make $36,000 a year and have a $200,000 in assets while a person making $80,000 a year may have negative wealth.  Should government risk putting together a policy package that provides. say, tax cuts, expanded earned income credits,  Medicaid, and an increased minimum wage that flows in part to a consumer that has moderate or even low-income from wages but has assets that can generate additional passive income?  To me such a policy would only aggravate the problem, assuming a problem even exist.

Yes, wealth has been moving more to those with capital versus those without but in a capitalist, market economy that is the norm, not a shocker.  I also don’t think that low and moderate income Americans are losing too much sleep over what Mitt Romney or Warren Buffet rake in from their investment income.  What Americans are concerned about is consumption security; the ability to buy food, clothing, transportation, and electricity so that they have a safe and stable life for their families.  If there is to be any effective public policy in the poverty space, this realistic focus should be the starting point and selling point.  I’ll get to why I say selling point in a minute.

First, let me propose this.  To abate consumption security while providing a platform upon which the poor can begin building wealth, the U.S. should abandon its social welfare program and replace it with an annual consumption voucher for the working poor.  Along with a Medicaid/Medicare program financed in part by the working poor via premiums, the working poor will be able to supplement the income they receive from their current jobs, using this supplement to not only consume but to build wealth.

Such a program should meet the needs of the political elite to reduce budgets while providing the commercial elite with additional revenues and wealth derived from additional consumption of goods and services.

Just how much would a voucher program cost?  According to the U.S. Bureau of Labor Statistics, there are approximately 5.6 million working poor families in the United States.  At $30,000 per working poor family, the total bill for this voucher program would be approximately $165 billion a year.  This is considerably less than the $370 billion a year spent on safety net programs such as food stamps, refundable portions of the earned income tax credit, in-kind assistance transfers, and other direct cash payment programs.

We may ask aren’t we doing this now, but under a voucher program, we directly address a market problem.  Consumers living in poverty who are willing but not able to make purchases to address the most basic of needs would get a direct cash infusion and make their own consumption choices.  They wouldn’t need the hand holding of numerous government agencies and why should they.  The working poor are already demonstrating responsibility by getting to a job that contributes toward taking care of their families.  Rather than bringing additional and onerous rules to bear on the working poor, streamlining the requirements for aid by offering a once a year cash payment reduces the stigma on the poor while making the state administratively efficient.

The selling point here is that given the reduction in administrative costs, taxes need not increase.  That should soothe the fears of the wealthy.  In addition, communities within which $30,000 of direct spending is made available should enjoy the multiplier or ripple effect such spending creates.

This is not a new idea, providing the poor with vouchers, but what would be new would be for the GOP to aggressively push this alternative to the current welfare state and educate the voting public on its benefits.

Posted in Democrats, poverty, Republicans | Tagged , , , , , , | 1 Comment

Fifty years after ‪#‎Selma‬, we still don’t get it….

Earlier today on C-SPAN there was a panelC-SPAN: Voter access and elections administration on voting access and election administration. There is an irony here; that every panelist is a member of the socio-economic group known as “white people” while there are no members of the socio-economic groups known as “Hispanic” or “black” people; groups that have been historically denied the vote.

Adding to the irony is that this group of panelists is able to excitedly utter the word, “Selma” with some reverance as they emphasize the customer service aspects of voting, you know, the complaints about long lines and being turned away because someone does not have the right ID. It’s easy for this group to focus on inane complaints about long lines and ID when most voters have waited overnight to buy concert tickets and iPhones. Assinine.

The real and only issue about voting in a consumer-driven, market based, capitalist political economy is how to best translate the vote into an effective mechanism for manipulating capital and wealth flow such that economic development is better allocated in as many communities as possible which leads to a significant decrease in crime, delinquency, unemployment, hunger, and other stress and social ills related to a poor economy….

Oh well, I guess both black and white people are happy with the popularity contest aspect of voting such that the question of strategic political action remains too far outside the box. (Let the choir sing, “We shall overcome someday…..”)

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America’s constitution isn’t found on paper

To resolve fiscal or societal issues in the United States, the last place you want to start is the U.S. Constitution. It tells us very little if anything about how political and economic power are generated, allocated, or used.  A better public policy approach requires that you understand the real constitution of the United States and then be honest as to what government’s current role is in this constitution and modifying that role so as to make government more effective.

As written, the U.S. Constitution does not describe or mandate a particular economic rule for the production and allocation of output.  This is probably a good thing in that it gives American society flexibility in how best to structure its economy given existing constraints and resources. On the other hand, the lack of guidance on how the American economy should be structured provides the prevailing economic narrative to remain unchallenged the longer it remains in place.

As a political document while the U.S. Constitution describes the structure of American government, the duties and powers of its executive, legislative, and judicial branches, and how the populace participates in the selection of the representatives to the government, the document gives no guidance on how the political mechanism is expected to help allocate economic output.

The U.S. Constitution is not a going forward document. It’s a cautionary document written mostly to prevent tyrannical treatment of the masses, at least on the surface, the best evidence of this contained in its bill of rights.  Conservatives celebrate its caution and relish in arguing its precedence and dominance in all of society’s decisions, from funding social security to providing health care to balancing the United States’ federal budget.  It’s why conservatives are usually calling for amendments to this piece of paper hoping that such an act takes care of today’s fiscal and societal problems.

The real constitution of the United States, however, is found in the makeup of its population.  What I’m arguing is nothing new per se so here is my take on America’s “constitution.  The United States can be broken down into three classes.

First, there is a political elite made up of your usual suspects: elected officials, administrative agency heads, and advocates.  The political elite control public rights-of-way; bridges; roads; harbors; airports; and the coining of currency.  They use political mechanisms, i.e., the election process, litigation, administrative agency rules; legislation to allocate access to capital.

Second, there is a commercial elite.  This group is made up of the private owners of factors of production (capitalists) and the entities that underwrite them (equity and bond holders).  They control access to financial capital; regulate commerce via contractual agreements; and conduct the day-to-day operations of America’s markets otherwise known as the economy.

Finally, there is the general citizen class or the “me and everybody else” class.  This group serves the constitution in two ways.  First, it pays the taxes that are used to underwrite the economic infrastructure upon which the commercial class sells its goods and services.  Second, the “me and everybody else” class consumes the goods and services produced by the commercial elite.

In an economy where 70% of it is driven by consumption, the “me and everybody else” class plays a very important role.   It subsidizes the two prongs of America’s effective constitution, paying for political packages with its taxes and paying for goods and services with its disposable income.  Yet when it comes to ownership of the capital and other resources that make the American economy exceptional, it has very little in residual income or equity.

Class divisions are found in most societies and the United States is no exception. Class divisions may not appear inherently fair since greater benefits flow upward to a smaller number of people on the food chain, but can a government run by a political elite that uses particular tools to balance society via an inequitable flow of capital and resources, be the appropriate entity for bringing about equity?

Posted in Economy, government, Political Economy | Tagged , , , , | 1 Comment

Yes. ‪#‎Obama‬ is a fraud….

The purpose of government-sponsored social welfare programs is to secure a ready market for producer surplus, including food, clothes, and medical care. Social welfare “preserves” the masses for future economic exploitation. This is how a capitalist system works. The more people starving and homeless, the fewer consumers there are for future exploitation by capitalists and their underwriters aka investors.

This may be hard for proponents of social welfare to digest, but every time you advocate for these programs, you are a willing pawn for the oligarchy, the elite. In other words, you are being played.

A true, “people caring” program is one that promotes true economic integration into the system. What that means is that every citizen participating in the labor market and subject to certain requirments, shares in the residuals or dividends that result from revenues generated. It means that society actively participates in the structure of the economy and decides how output is produced and distributed. In my opinion that would be a truly equitable market economy. Anything less is merely a narrative that says that the poor should simply settle for scraps while downplaying ownership.

Capitalism and free markets need not suffer from this approach. I would argue that capitalism and free markets would be enhanced and increasingly validated with this approach because more people will believe they are a part of growth, income, and output generated by markets. Telling people that they should aim to be a part of an increasingly poorer middle class, however, is the same as saying that your opportunities are limited and that you should settle for scraps, whether those scraps be low wages or state-funded social welfare.

This is the main reason I do not support our current president; the main reason why I consider him and most members of both political parties to be nothing but frauds. Rather than restructuring the system so that it is truly equitable, they compromise on a low quality model of distribution that finds people growing increasingly poorer and disenfrachised. The electorate should be ashamed to put anyone of these people on any pedestal.

True change means admitting that your system doesn’t work and having the courage to tear up the model and start over…..

Posted in Economy, middle class, social welfare | Tagged , | 1 Comment

No, Mr. Wheeler. Your net neutrality rules have had no positive impact on the markets.

During testimony before the U.S. Senate Committee on Science, Commerce and Transportation, Federal Communications Commission chairman Tom Wheeler argued that the Commission’s net neutrality rules would have a positive impact on investment, citing an uptick in the market the day after the Commission issued its broadband reclassification order.  Mr. Wheeler is correct that the market enjoyed a sweet ride upwards on February 27.  CNN reported that the Nasdaq increased 7% while the Dow rose 5.6%.  The S&P 500 gained 5.5%.

But were these returns the result of the Commission’s decision to take us back to 1995?  No, they were not.  The jump in stock market values were likely due to signals from central bankers around the globe, including insights shared by Federal Reserve Board of Governors chairman Janet Yellen.  Dr. Yellen opined before Congress that the economic outlook for the United States in 2015 was good.  Also adding to the positive outlook on that day were actions taken on the part of a number of European central banks.  For example, the European Union approved another stimulus package for the Euro Zone with particular emphasis on Greece’s struggling economy.  That type of positive news out of Europe could only signal to investors that an important market for American business was thawing.

If we go back to the day of the Commission’s issue of its rules, February 26th, the news was gloomier for the markets overall.  According to the market took a downturn, with the Dow Jones Industrial Average falling .1% and the S&P 500 falling .2%.  The Nasdaq, which weighs heavily toward tech stocks, did see an increase of .4%.  This increase was led, however, by Google, Adobe Systems, and Facebook.  Ironically, Google and Facebook have been proponents to some degree of net neutrality so maybe Mr. Wheeler was doing the happy dance for these guys.

Overall the past four weeks have not been good for the media and telecommunications.  Over the last four weeks, the New York Times Technology Media and Telecommunications index has been down .62%.  For the past 52 weeks, a time period that for the very most part did not include any net neutrality rules, the New York Times TMT increased  9.37%.  With that type of growth the industry didn’t need any rules to spur innovation.

Bottomline, Mr. Wheeler hasn’t shown me any evidence that his latest version of net neutrality rules is having any positive impact on the markets.

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Does the GOP want to turn net neutrality into another Benghazi debate?

Right now Tom Wheeler, chairman of the Federal Communications Commission, is testifying before the House Committee on Oversight and Government Reform. The Republicans have making an issue of President Obama’s supposed influence in the FCC’s rulemaking in the net neutrality space, arguing that until a number of meetings either with the President or White House staff, Mr. Wheeler was pursuing net neutrality rules based on section 706 of the Telecommunications Act of 1996 versus the common carrier rules from Title II of ythe Communications Act of 1934.

Section 706 authorizes the FCC to promote the deployment of advanced communications services with different regulatory schemes including price regulation. Title II, a section of the 1934 Act, allows the FCC to regulate rates, services, classifications, and practices of telecommunications companies. The FCC wants to reclassify broadband operators as telecommunications companies thus sending public policy in the telecom space back to the late 20th century when we sported Kangols and rocked to Dougie Fresh and Slick Rick.

Unfortunately for the American public, the issue of how much influence the White House had over the decision making process at the FCC is turning into another #Benghazi hearing.

The GOP inquiry into how much Mr. Obama was able to twist Mr. Wheeler’s arm and deviate from a section 706-based order to an order dripping with Title II ooze won’t amount to much of anything unless Congress decides to overhaul the disclosure procedure for all government agencies.

Jason Chaffetz, chairman of the oversight committee, echoed my sentiments during the hearing and hopefully Congress can write a rule that provides a 30-day comment period for draft rules before a final vote is taken. This would add credibility to a decisionmaking process where unelected bureaucrats are making policy impacting the decisionmaking process of entreprenuers.

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Net neutrality: An example of the progressive use of statism

Kevin Carson wrote a blog post on net neutrality for the Center for a Stateless Society last month where he describes the primary and secondary purposes of the state.

According to Mr. Carson, the state’s primary purpose is the organized political means to wealth exercised by and for the benefit of a particular class of people.

The state’s secondary role is to keep the barbarians from knocking on or knocking down the gates of the elite; to be a stabilizing or ameliorative force.

In carrying out its primary role, the state confers subsidies, special tax breaks, and other privileges upon corporate and other special interests via the political system.  Executing this role can have destabilizing impacts on society’s members who are not members of its economic or political elite, so the state may implement social welfare measures to ease the pain and keep the social contract between the elite and everyone else intact.

The state’s primary actions role increase the level of statism, the primacy of the rights of government over the rights of the individual, while its secondary action, according to Mr. Carson reduces statism.

So where does Mr. Carson see net neutrality?  Mr. Carson sees net neutrality as a bit of a shell game. All net neutrality does is place a restriction on the privileges and benefits that corporations receive from the state.  In this particular case, all the FCC has done is placed operational restrictions on broadband providers such as AT&T, Comcast, and Verizon.  The FCC’s action has not increased any welfare benefits for consumers nor has it extinguished the privileges received by broadband providers.  They still have, according to Mr. Carson, state-provided access to rights-of-ways, subsidies, and other privileges associated with operating as an oligopoly.

I would go one step further and say that as a statist primary action, the FCC intended to shift benefits not from corporation to consumer, but from corporation to corporation.  There was never intended for any benefits to accrue to consumers via a reduction in statism.  The four million commenters that the FCC and net neutrality proponents brag about never comprehended that the net neutrality argument was nothing but a “bill and keep” argument from the 1990s hyped up on 21st century steroids.  Content providers like Netflix, Facebook, and Google wanted a net neutrality world built on non-payment of traffic fees to broadband operators.  Hence the argument for a “free and open” #internet.

Net neutrality?  Nothing but a shell game played by progressives.

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Netflix, Tumblr wanted 1995 not 1934

Internet Innovation Alliance’s Bruce Mehlman wrote an insightful blog post last Friday about the second thoughts companies like Netflix are having about the Federal Communications Commission’s decision to reclassify broadband services as plain old telephone service.  Netflix’s befuddlement over the FCC’s decision to use Title II to drop the regulatory hammer on the internet ecosystem has me wondering how much on the same page were these net neutrality proponents?  The push for net neutrality may be an example of how dysfunctional the left can be when it sells a narrative to multiple classes within its big tent and has the manage the disappointment that ironically occurs when it gets what it wants.

Netflix’s insistence that heavy Title II regulation was not a part of its end game has me wondering if progressives had really settled down on a definition of a “fair and open” internet.  The left apparently has not.  To Netflix and other Silicon Valley giants, fair and open appears to mean an internet where they can interconnect in a pre-1996 manner; under some bill and keep methodology with any type of technology they deemed appropriate regardless of a broadband provider’s discomfort.

To the end-users, the four million confused members of the masses, “fair and open” was a rallying cry of the democratic wish; that a fair internet will respect their rights to communicate with whatever website of their choice and move data equally to the end-user no matter the source of the content.

Narrative managers like Public Knowledge and Free Press were successful in conflating the two narratives but were probably inept in educating their supporters, like Tumblr‘s David Karp, as to the downside of using Title II as a mechanism for reconciling the two narratives.  Title II, Mr. Karp and the rest of his Silicon Valley cohorts should have been told that their content operations, particularly the agreements that they enter into to connect to broadband networks, were not guaranteed to escape fees for the exchange of data nor was privacy from prying consumer or competitor eyes or noninterference from the government going to be avoidable.

The FCC may find itself a big loser resulting from its participation in a disingenuous conflation of varying narratives.  It must now deliver on a basket of promises to the consumer as it answers complaints from an ill-informed electorate regarding every perceived slight in service practice and rate assessments.  It won’t be able to tell consumers or the markets that it never intended to regulate rates.  Consumers won’t stand for that because improving their consumer welfare calls for what they believe is a long-awaited initiative to regulate rates.

You wanted 1995?  You may have to settle for 1934.

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If the FCC is serious about regulating the #internet like a utility, then this is what it should do

The argument that access to the internet via broadband networks should be regulated like a public utility sends society the wrong message about how information moves along the internet and that it is okay to devalue information, data, content along certain interconnection points when indeed the opposite should be happening; that for the value added at these interconnection points, added value should be reflected in the price mechanism.  Access should not be priced at near zero on false premises of openness and privacy.

On the contrary, if the data consumer wants to keep the prying eyes of access providers or other data providers away from her activities, there should be an exchange of compensation that guarantees such activity won’t take place.  Rather than regulate the internet as a “public utility”, let the parties in data transactions enter into contracts that spell out each party’s rights.

Unlike an electric utility where the product, electricity, flows for the most part one way (we’ll ignore distributed energy for now), data, content, information flows two ways.  Electricity flows from an energy producer to an entity that coordinates the transmission of electricity flows to the distribution utilities that have been searching for the best price from the generators. Data, content, information flows at least two ways; from content creator/generator/aggregator to an end-user in response to the locational or other personal data the end-user provides to either her internet service provider or content provider.

The data end-user or consumer pays her broadband provider for access to the internet and may also an online entity for access to their content which may be located behind a paywall.  In most cases the information the end-user seeks is offered by content providers free of charge.  But if a public utility model is followed for participants in the data markets then consumers have been underpaying for their search activities and their bills should be adjusted upward to capture the major costs a utility incurs when delivering service.

A consumer’s utility rate includes the cost of generating electricity; transmitting electricity; and distributing electricity to its final stop.  The utility consumer may also pay environmental compliance costs, nuclear construction costs recovery, a municipal franchise fee, and sales tax.

Broadband fees are another matter. What sticks out when you look at your broadband bill is that none of your fees and charges are related to the generation, transmission, or distribution of data, content, information.  For broadband access you may pay state and local taxes and that’s it.

So while a utility’s rate reflects activities impacting the movement of product that end-users want to purchase, electricity, broadband rates, while reflecting the cost of access, include nothing else, not even the cost of generating and transmitting data, content, information. If progressive advocates for public utility-style regulation of internet access want their argument to have validity they will have to accept that along with the additional regulatory burdens they propose via Title II, customers should expect bills that capture all the costs involved in generating and sending their data, content, information to them.  Broadband providers should pay every content provider that the broadband subscriber chooses as a source of data, content, information, and broadband providers should turn around and pass on these costs to the consumer so that her bills reflect these choices.

The benefits from such an approach is that it would give the markets a much more accurate view of which content providers are providing end-users with the most value.  The net neutrality debate would end because consumers would choose content they value the most as a result of rates that reflect the cost of getting a near infinitesimal amount of data to the end-user.

That is, off course, if the FCC is really serious about regulating the internet like a utility.

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Scott Walker’s union busting is necessary for a freer individual and better unions

If the progressives best argument against Scott Walker’s support for legislation that would prohibit non-union workers from having to pay union fees is that his move his motivated by the 2016 election, then they don’t have much of an argument.  Today the Republican governor of Wisconsin signed a right-to-work bill into law.  The law prevents organized labor from assessing union fees on non-union members.

Unions and their progressive supporters are up in arms claiming that Mr. Walker is motivated to support the legislation in order to further establish his conservative bona fides with Republicans should he pursue the GOP nomination for president.  Progressives are also concerned that by reducing an underwriting stream for unions, collective bargaining may find itself heading faster toward dodo bird status.

For the individual taking an entrepreneurial approach to his labor, right to work laws reduce the cost constraints she faces when delivering labor in exchange for compensation.  Why should she have to reduce the amount of her take home pay in order to subsidize a mechanism that acts as a bottleneck to hiring labor?  Union demands result in increased labor costs for employers and this has a negative impact on labor. Why? Because is the cost of employing human resources gets too high, employers will opt for more technology, especially technology that needs less himan resources to operate it.

In addition, Mr. Walker’s actions help to expand the pool of available labor.  Resource expansion should be one of the primary goals of government and by making it less costly for labor to come to the market and sell its services to employers, Mr. Walker’s actions helps government meet that obligation and brings value to all society instead of a limited set of progressive self interests.

We also have to stop living in the past when it comes to the role of labor unions.  They have been living on vapor, riding a glorious past filled with triumphs that brought better working conditions to the workplace.

But that was yesterday.  Thanks to advocacy by unions and other groups, today we have laws and rules that govern an employer’s obligation to provide a safe physical working environment for employees.  There are laws and regulations defining minimum wage for private sector and government employees, record keeping, and child labor.

If unions want to continue playing a significant role for labor in society, it should change its business model.  Rather than trying to play economic bottleneck in the labor market, it should change its business model to that of a clearinghouse of information on how labor can better prepare itself for the work demands of the 21st century.  The labor markets are changing.  Producers and capital are demanding a flexible labor force that is more freelance or entrepreneurial as employers attempt to further lessen their labor costs.  Laws won’t be the final undoing of labor unions.  It will be their inability to adjust and stay relevant in a changing world.

Posted in Economy, labor, Political Economy | Tagged | 4 Comments