If We Care About Inequality, We Must Confront Capital →

The owners of this wealth, or capital, capture around 30 percent of the income produced by the country every year. This income flows to them, not because they work for it, but merely because they own income-generating assets like real estate, equity, and debt. In 2015, total US capital income was around $4.8 trillion.
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It is worth emphasizing just how much income at the top of society comes from passive ownership of investments rather than from working. The top 0.01 percent of individuals in society have an average income of $28 million. Three-fourths of that income, or $21 million, came from capital in 2014.
If we want to get serious about creating a fair and egalitarian society, we must confront capital directly. Wage levels are important. Benefit levels are important. But getting those things right will not be enough so long as nearly one-third of the national income flows out passively to a handful of people at the top of society.
Current liberal efforts to tackle wealth inequality are woefully inadequate. Policies aimed at building the assets of low-income families, the typical approach to this issue, rarely succeed on their own terms and, even if they did succeed, would only be an insignificant drop in the bucket. For wealth and capital income to become more fairly distributed throughout society, the ownership of existing assets must be reordered towards that end.

Jubilee Year, anyone?

To My Fellow Plutocrats: You Can Cure Trumpism →

...A century ago, as communism and fascism threatened to overrun Europe, our nation struck a grand bargain: We plutocrats would continue to be tolerated—even celebrated—as long as broadly rising incomes meant that each new generation of Americans continued to do better than the last. But through the policies we championed in the corridors of power and through the longstanding social norms we violated in the corporate boardroom, we broke our end of that bargain....
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Many of my peers prefer to hide behind the enduring myth that today’s crisis of economic inequality and insecurity is the result of forces unleashed by unstoppable trends in technology and globalization. “It’s not my fault I have so much while others have so little,” we comfort ourselves, “it’s the economy.” That is nonsense. There’s no intrinsic reason why the social and political changes delivered by technological advances and globalization have to massively concentrate wealth in the hands of the few. We simply exploited changing circumstances to take advantage of people with less power than us. 
Over the last 40 years, corporate profits as a percentage of GDP have increased from about six percent to about 11 percent, while wages as a percentage of GDP have fallen by about the same amount. That represents about a trillion dollars a year that used to go to wages, but now goes to shareholders and executives. One trick we use to keep profits high and labor costs low is to refuse to schedule workers for the 30-plus hours a week they would need to qualify for benefits. Today, an astonishing 6.4 million involuntary part-time workers are denied the full-time work they seek in order to keep our profit margins high. You can call that “the market” or you can call that “stealing,” but from the point of view of a disgruntled worker it amounts to the same thing. How could they not be angry?
Another elite excuse for inequality is “education.” If everyone had a Harvard MBA, the argument goes, then we’d all be fine. Don’t get me wrong; the better educated our citizens, the better off we all will be. But someone is still going to need to clean the hotel rooms, flip the burgers, pour the coffee, assemble the cars, cut the hair, etc. But if that job doesn’t provide a decent and dignified life, then we have made little collective progress. And while it’s true that college graduates earn more on average than those without college degrees, wages for young college graduates have stagnated since 2000, with wages for young female graduates falling 6.8 percent. Churning out more college graduates can’t close the inequality gap if wages are stagnating or falling across the board.
 

The CEO Pay Machine: How Can We Stop It? →

The ratio of the pay of corporate chief executive officers (CEO) to ordinary workers has exploded in the last 40 years. It was a bit over 20 to 1 at the start of the 1970s, now it is well over 200 to 1, and in good years for CEOs, it can be more than 300 to 1. Steven Clifford’s book, The CEO Pay Machine (Blue Rider Press) is an effort to explain how this happened and what we can do about it.
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Clifford’s basic story is that the process that determines pay has become hopelessly corrupted. At the most basic level, the corporate boards that are supposed to represent shareholders and put a check on CEO pay have little interest in doing so. Clifford describes a process of whereby boards are captured by CEOs and other top management. Being a board member is a cushy job, typically paying well over $100,000 a year for around 150 hours of work a year, by Clifford’s calculation. With many boards paying $300,000 or $400,000 a year, the pay can be in the range of $3,000 an hour.
And, as Clifford notes, it is almost impossible to get fired from a board by shareholders. More than 99 percent of the directors who are nominated by the board for reappointment win their election. Furthermore, the boards are typically used to working with the CEOs. The CEOs and their staff are the ones who provide them with information. Often the CEO himself is a board member, usually the chair.
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Clifford dismisses the idea that CEOs are worth anything comparable to their current pay. He argues that the inequality created by bloated CEO pay is destructive both to the companies themselves and to democracy. I would add to Clifford’s list of complaints that excessive CEO pay contributes to a distorted pay structure throughout the economy. After all, if a moderately competent CEO of a mid-sized company can pocket $5 million a year, then certainly the president of a major university or non-profit foundation is worth at least $1 or $2 million. And more pay for these people means less for everyone else. That is how arithmetic works.
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Clifford cites several major studies indicating that pay is not closely correlated with returns. He notes that pay is often associated with a large element of luck, such as the CEO of an oil company getting a huge payout because the share price of the company surged along with world oil prices. Clifford also points out that CEOs are generally not especially mobile. They have firm-specific skills, so even a hugely talented CEO may not have a good second option if her current company won’t agree to a big raise.
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If the basic problem is a corrupt corporate governance structure, then the solution must involve reforming the governance structure. This means changing the incentives for directors and restructuring the voting process so that insiders do not tightly control it.
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The other issue is changing who gets to vote in shareholder elections. As it stands now, the fund managers that act as trustees for shares held in mutual funds often cast the majority of votes in shareholder elections. These managers have no direct interest in holding down the pay of CEOs. In many cases they have ongoing business relationships with CEOs who they count on to keep them informed of developments with the company...

She Was Convicted of Killing Her Mother. Prosecutors Withheld the Evidence That Would Have Freed Her. →

A horrifying case showing how much power prosecutors have determining the outcome of trials, and how we got here:

The Tennessee Supreme Court called Jones and Weirich’s failure to disclose Hammack’s note before trial a ‘‘flagrant violation’’ of Noura’s constitutional rights. The justices also overturned the verdict against Noura for another reason — Weirich’s closing exclamation in front of the jury demanding: ‘‘Just tell us where you were! That’s all we are asking, Noura!’’ The Constitution’s protection of the right to remain silent means that a defendant’s decision not to testify ‘‘should be considered off limits to any conscientious prosecutor,’’ the Tennessee justices wrote, so that the jury doesn’t view it as an implicit admission of guilt..
In the United States, defendants gained the right to see certain evidence in the government’s possession relatively recently, in the 1960s. Before that, our rules reflected their origin in early modern Britain, where people suspected of crimes were required to speak on their own behalf, without a lawyer. In 16th-­century trials, people suspected of crimes had no right in advance to learn of the evidence against them, or even the charges, because the element of surprise was deemed crucial to ascertaining the truth. The idea of ‘‘trial by ambush,’’ as it is called, persisted throughout the 18th century, even after the accused gained the presumption of innocence, the right to hire a lawyer and the right to remain silent. In 1792, the Lord Chief Justice in Britain rejected a defendant’s request to see the evidence against him in advance of trial, saying that such disclosure would ‘‘subvert the whole system of criminal law.’’
Over the next century, however, the British courts changed course, joining countries like Germany and France to require broad disclosure of the prosecution’s case before trial, including a full list of witnesses, a summary of how they would testify and other investigative material, like police and lab reports. The nascent justice system in the United States, by contrast, imported Britain’s earlier rules. Judges in this country emphasized that defendants might harm or intimidate witnesses if they knew they were planning to testify.
In March 1963, Justice William J. Brennan Jr., an Eisenhower appointee who became one of the era’s leading liberal jurists, criticized the American practice of keeping the prosecution’s case secret before trial in a major speech at Washington University’s law school. Brennan argued that it was ‘‘particularly ironic’’ that at the Nuremberg trials, conducted in the late 1940s to bring Nazi war criminals to justice, Soviet prosecutors protested the American rules of evidence as unfair to defendants. Isn’t denying access to the facts of the prosecution’s case ‘‘blind to the superlatively important public interest in the acquittal of the innocent?’’ Brennan asked.
Brennan’s speech was part of a sweeping argument for criminal-­justice reform. Led by Earl Warren, the consensus-­seeking California governor chosen as chief justice by Eisenhower, the court revolutionized the process the government must follow to convict someone of a crime. The Warren Court gave poor defendants the right to a free lawyer, barred police officers from coercing confessions and required them to inform defendants of their rights (the Miranda warning).
Two months after Brennan’s Washington University speech, defendants for the first time won a constitutional right to see some of the evidence in the state’s possession. The ruling came in Brady v. Maryland, a 1963 appeal by an Air Force veteran, John Leo Brady, who was sent to death row for murder. Brady’s lawyers argued that prosecutors should have disclosed that a co-­defendant had confessed to the killing. In response, the Warren Court decreed that before trial, prosecutors must turn over evidence that is ‘‘favorable’’ to the defense if it is ‘‘material either to guilt or to punishment.’’
The Brady ruling appeared to rebalance the scales between the defense and the prosecution, as British and European courts began doing a century and a half earlier. For years, however, little attention was paid to enforcing the Brady rule, in part because there was little proof it was being broken. Prosecutors decide what counts as ‘‘material’’ or ‘‘favorable’’ — in the heat of battle — while the judge and the defense have no way to see what they’re holding back. It’s as if prosecutors are tennis players calling their own lines when their opponents, and even the referee, can’t see the other side of the court...

Why A Trump Pivot Might Backfire →

Trump’s problem is that there aren’t many voters who could plausibly be persuaded to join the Trump train, at least not on short notice. Not only are Trump’s disapproval ratings high — about 58 percent of the country now disapproves of Trump’s job performance, the highest figure of his presidency to date — but also most of the voters who disapprove of him do so strongly.
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So Trump has every incentive to play the long game. If he were to really and truly pivot and sustain that new course, perhaps some of the 47 percent of voters who are currently in the “strongly disapprove” camp would eventually become reluctant supporters, after stopping in the “somewhat disapprove” category along the way.
But if Trump is looking for a short-term fix, a pivot probably won’t work. A sloppy attempt at a pivot — in which Trump loses conservative support faster than he gains support from moderates — could turn into one of his nightmare scenarios from the list of possible presidencies we imagined in February:...
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I’m not sure we’re on this path yet. But there are some signs of it. The recent downtick in Trump’s approval ratings — after a couple of months when his numbers were steady — coincides with a period where Trump is getting more scrutiny, both from Republicans in Congress and from the conservative media. These are measured steps — it’s not like Republicans have begun impeachment proceedings or Sean Hannity has abandoned Trump. But in his time as president so far, Trump has found more ways to lose supporters than to gain them.

WaPo Columnist Thomas Heath Would Have Recommended Buying Into Nasdaq at 4,000 in 2000 →

If you're thinking about investing in stocks, don't forget the truism, that it's not enough to "buy low", you also have to be able to "sell high."

Dean Baker:

Thomas Heath used his column to give readers some incredibly bad investment advice. The piece titled, "a first lesson on the stock market: don't run from a good sale," told readers that the recent dip in the market makes this a good time to buy stock. This makes no sense.
Whether or not it is a good time to buy stocks depends on the price of stock relative to the fundamentals of the market. This means current price to earnings ratios and the prospect for future earnings growth. Current price to earnings ratios, at well over 20 to 1 by most measures, are high by historic standards. Most economists are not projecting especially good profit growth in the years ahead, but a big tax cut may allow shareholders to keep a larger portion of their gains, which would make stock more valuable.
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The moral of this story is that if the price of an over-valued asset falls, it is less over-valued, but a drop in price does not mean that the asset is under-valued. An investment advice column should show a little clearer thinking on this issue.

The Fight for Health Care Has Always Been About Civil Rights →

Echoes of the past:

Even as members of the MCHR listened to King’s speech in Chicago, the AMA was digging their heels in against the prospect of integrating the expanding Medicare and Medicaid programs. Using the successful, red-baiting cudgel of “socialized medicine,” and armed with the first major political advertising firm, the AMA, health-care industry organizations, and their conservative allies had already defeated a 1947 proposal from President Truman to create a true national health-care plan. Although they could not stop the remnants of that plan from eventually becoming Medicare and Medicaid, that coalition was able to obstruct further progress towards coverage for “able-bodied” adults and the creation of a coherent universal guarantee to care. They might not have known it at the time, but for those activists in 1966, health care had already become a dead end.
After King’s death in 1968, and the disintegration of the civil-rights movement, opposition from the AMA-led coalition would stymy the last organized effort from the MCHR to create and pass a single-payer bill. That failure also cemented the basic composition of American health-care: a patchwork dominated by private employer-based insurance, where non-elderly people who couldn’t afford or didn’t have such offers, and didn’t fall into narrow special Medicaid eligibility groups were largely left out. And it’s no coincidence or secret that those left out were more likely than not to be people of color.

It’s time to save the internet — again →

FCC chairman Ajit Pai is fond of saying that “the internet was not broken in 2015” when he argues for repeal of our nation’s net neutrality rules. This is particularly funny to me, because in 2014 I literally wrote an article called “The internet is fucked.”
Why was it fucked? Because the free and open internet was in danger of becoming tightly controlled by giant telecom corporations that were already doing things like blocking apps and services from phones and excusing their own services from data caps. Because the lack of competition in the internet access market let these companies act like predatory monopolies. And because our government lacked the will or clarity to just say what everyone already knows: internet access is a utility.
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If Ajit Pai and the other critics of net neutrality were out there promising that rolling back Title II would somehow result in every American having 20 choices of ISPs all engaged in vigorous competition, I’d be cheering them on. We’ve already seen what a tiny amount of competition can do in the wireless market: T-Mobile wandered up to the line of violating net neutrality by zero-rating various services, Verizon and AT&T responded in kind, and eventually the arms race ended up in all four major wireless providers offering unlimited data plans — effectively zero-rating everything and offering consumers something that looks an awful lot like net neutrality. It turns out the American people want net neutrality, and when they speak through the market, they get it.
That’s with just four major competitors in the wireless market, and Pai refuses to say whether he thinks that number should remain at four or get smaller by some combination of T-Mobile and Sprint. Of course. Because his north star isn’t healthy consumer outcomes, it’s healthy corporate outcomes. Rolling back Title II is a massive corporate handout that will line the pockets of Comcast and AT&T, while doing nothing for the average American.
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This is just a fact: the United States has a stunningly uncompetitive market for wired internet access. Fifty-one percent of Americans only have one choice of broadband provider, according to the FCC’s own 2016 data. Thirty-eight percent of Americans only have two choices. Add it up, and 89 percent of Americans have but one or two options for broadband, and one of them is often much slower than the other. This is not a situation ripe for fierce competition and lower prices.
In fact, the lack of broadband competition means that Americans pay more for slower internet access than in most other developed nations. We are not in the top 10 when it comes to average speeds. We are not in the top 10 when it comes to lowest prices. You can argue that the geography of the United States is such that covering the entire country with fiber is difficult, or that Europeans actually pay more because of VAT. At the end of the day, however, the question is simple: why don’t people in New York, San Francisco, and Chicago have more options for faster, cheaper internet than Seoul or London?
Outside big cities, the situation is dire: The Wall Street Journal just ran a lengthy, excellent piece about the many rural Americans who still only have dial-up internet access, locking them out of the modern economy. “Rural broadband, we need that quite honestly more than we need roads and bridges in many of the counties I represent,” said Austin Scott, a Republican congressman from Georgia...