In The USA: the Next Revolution

[Dayuhan]

Banks were and still are setting aside 50%+ of their revenue for bonuses with a majority going to top management.

Source on that? Seems unlikely.

I really don't see anything that justifies such an increase.

How much of that is actual cash paid by the company, how much is stock options... and how are the stock options valued? n Break the actual cash component down and compare it to the overall company budget and it stops looking so big.

Neither executives nor workers are paid according to anyone's perceptions of how productive they are or how much they "deserve". A rather strange cult of the celebrity CEO has emerged, with companies competing to get "stars" whose record will impress the shareholders. It's almost like rock star or athlete pay in that sense. You've also got a trend of CEOs not lasting long... a few bad quarters and they get the sack, a few good quarters and they want to trade that "success" into a big package elsewhere... likely as a replacement for the guy who got the sack. Again, it's up to the boards of directors and the shareholders to change that, if indeed they want to. Not a terribly positive trend IMO but I really don't see what to do about it that wouldn't be worse.

I assure you I'm aware how the other half lives as I've spent quite a bit of time in East Africa. It is what it is. The American middle class cannot downsize to a Filipino standard of living, just like Filipinos wouldn't want to live like Somalis. Everyone wants to be upward mobile. Otherwise the CEO's would forgo the high pay, bonuses and everything that comes along with it and just live like their employees.

I didn't mean to compare the American middle class to Filipinos or Somalis, but to compare them to the American middle class of 30 years ago. Again, the change is only noticeable if you've been away a long time.

Of course Americans want to be upwardly mobile. I think the American habit of blaming the restrictions on their upward mobility on "wall street" generically, or on overpaid CEOs, or similar internal matters misses the point. The US walked out of WW2 with a staggering economic advantage. Every other industrial power in the world was shattered. Many powers and potential powers spent most of the next half-century either in the grip of a totally self-defeating economic system or being kicked around by the cold war. Americans didn't prosper because they were smarter or better or more efficient, they prospered because they had a huge head start.

The head start is gone. The rest of the world is in play, and they're hungry. That won't be changed by paying CEOs less or regulating banks more. It needs a retooling of American education and a completely new approach on all levels: that's on the part of small institutions and individuals and government as much as on the part of wall street and CEOs. Trying to lay the blame on the latter is satisfying (and advantageous to politicians who would rather have the electorate pissed off at wall street than at them) but it won't solve the problem.

[Presley Cannady]

A dollar invested does the country more good than a dollar turned over to the government, and keeping the dollar invested does a whole lot more than the extra $.20 or so that the government would get if it's held less than a year.

That's largely intuition born out of Protestant work ethic and a distrust of liquidity. Here's an example. A Bangledeshi farmer grows a perishable crop only Americans will eat. Let's say this crop has about a month shelf life, so it depreciates in value every day. This farmer needs to round up as many end consumers as possible to buy his crop as soon as possible. Who's better equipped to do that? Your farmer or the "investment flipper?"

[Presley Cannady]

The tax code is based on the political philosophy of trickle down economics, which in my "opinion" doesn't work, has never worked, nor will work.

With a 35 percent corporate tax rate, how do you figure?

[Presley Cannady]

Do you see no benefit to labor in rewarding medium and long term investment (the type more likely to create jobs) over day trading and flipping?

No, do you?

[Fuchs]

With a 35 percent corporate tax rate, how do you figure?

Afaik that's deductible from income tax and thus only relevant in considerations of foreign capital owners.

The U.S. tax code (and sadly, most tax codes) is full of loopholes and exceptions. The true tax payments are different than the nominal ones.
Much of the regressiveness comes from this, for lower middle class peopledon't afford advisors and cannot afford to exploit many loopholes.

[Dayuhan]

That's largely intuition born out of Protestant work ethic and a distrust of liquidity.

I confess to having a work ethic, and to not entirely trusting people to manage liquidity effectively.

Here's an example. A Bangledeshi farmer grows a perishable crop only Americans will eat. Let's say this crop has about a month shelf life, so it depreciates in value every day. This farmer needs to round up as many end consumers as possible to buy his crop as soon as possible. Who's better equipped to do that? Your farmer or the "investment flipper?"

Unless the Bangladeshi farmer's crop is valuable enough to air freight, which it's probably not unless it's illegal, he's stuffed from the start, given how long it would take him to get the stuff to market.

I see the point, but I didn't say that type of money movement shouldn't happen, only that it doesn't necessarily need to gety a tax break. If people make money on that sort of trade, fine... that's their income, let them pay income tax on it.

Whether or not the longer-term investment that the rule in question was designed to promote is actually superior is an open question. The point is that the rule was designed not to exploit labor but to create an incentive for a type of investment that whoever wrote the rule wanted to promote. Whether tax policy ought to be used for behaviour modification is still another question, but it is used that way and will probably continue to be used that way.

[Presley Cannady]

Afaik that's deductible from income tax and thus only relevant in considerations of foreign capital owners.

It's not.

[Presley Cannady]

I confess to having a work ethic...

Didn't say work ethic. Said Protestant work ethic.

...and to not entirely trusting people to manage liquidity effectively.

Which is why you probably shouldn't get into the commodity trade.

Unless the Bangladeshi farmer's crop is valuable enough to air freight, which it's probably not unless it's illegal, he's stuffed from the start, given how long it would take him to get the stuff to market.

Which is why he seeks out a buyer who can sign a futures contract with a fulfillment date within reason. That buyer then turns around and sells the contract to someone else until it ends up in the hands of someone with...say...refrigeration units that can take delivery within the shelf-life.

I see the point, but I didn't say that type of money movement shouldn't happen, only that it doesn't necessarily need to gety a tax break.

What tax break? This is a transaction tax. Comparing it to an income tax is like comparing apples and oranges. Do you think it makes sense to ponder "why I have to pay 30 percent federal income tax when Johnny only has to pay 6 percent payroll?"

In any case, transaction volume is inversely proportional to its attendant costs--if you want more trade, you reduce transaction taxes. If you want less, you increase them. Why you would want less is beyond me.

[motorfirebox]

You'd think so, but it generally doesn't work out that way. When you work out the actual money paid to the very small number of executives, per company, cutting it by half or two thirds would give you but a drop in the bucket. The actual impact on the Company's balance sheet or operations would be pretty minimal.

I don't think the money saved from reducing executive pay is the point. The point is to realign pay with output. An executive who runs his corporation into the ground and costs hundreds of thousands of jobs should not get a bonus. Reducing the pay of an executive who fails that badly is not a goal in and of itself, it's a means to disincentivize that sort of failure and to incentivize, or reincentivize, success.

[slapout9]

Link to last nights 60 minutes interview of Jack Abramoff and how Rich People Infilltrate and Subvert the US Government....like the man says they own it!

http://www.cbsnews.com/video/watch/?...in;cbsCarousel

[Ken White]

And this differs from every other nation and era just how?

[Dayuhan]

If I had to choose among having the country owned by the tea party, the OWS protestors, and the rich... I think I'd go for the rich. Least of 3 evils. t least they've a clue how it works.

I don't think the money saved from reducing executive pay is the point. The point is to realign pay with output. An executive who runs his corporation into the ground and costs hundreds of thousands of jobs should not get a bonus. Reducing the pay of an executive who fails that badly is not a goal in and of itself, it's a means to disincentivize that sort of failure and to incentivize, or reincentivize, success.

An executive that cost hundreds of thousands of jobs? Where do you find one of those.

Who do you want to do the realigning? The government? We're talking about a miniscule minority of corporations anyway, so your overall impact on the economy is likely to be close to zero. Of course if you buy into the nonsense that "the banks" caused the crisis, it might look like there's sense in it... but lots of things look sensible if you buy into nonsense. They just don't seem to work out sensibly in practice.

Hasn't it ever struck you how eager politicians are to ride a bubble, cultivate it, urge its expansion, take credit for the pleasures of the upside... think of the Clintonites boasting of their balanced budget, the low unemployment, the soaring stock market, or the Bushies and their record home ownership rates... then when the bubble bursts it's all somebody else's fault? Doesn't that tell you something?

[Fuchs]

And this differs from every other nation and era just how?

Ken, the world isn't everywhere alike, nor everytime.

Many countries have had phases in which the influence of the upper class got thoroughly demolished (even though usually it was either rebuilt or a new upper class created).

There are also countries in which the rich haven't so much influence even in normal times.
I don't claim that the rich have no above-average influence in these countries, but they certainly don't "own" the government/state in Switzerland or Scandinavian countries.

[Fuchs]

An executive that cost hundreds of thousands of jobs? Where do you find one of those.

I'd look at Goldman Sachs.

There are plenty CEOs who wasted ten thousands of good jobs, too.

[Ken White]

Ken, the world isn't everywhere alike, nor everytime.

Why wasn't I told? Just 'cause I'm pushing 80 and have been in more Countries for longer periods than many, I can't be expected to know everything...

Sheesh.

No kidding. No, of course not. Each nation is different and the way they tax and spend certainly can and does vary. Obviously era transitions engender changes in mores and attitudes -- BUT -- essentially, in most countries most of the time in recorded History, the wealthy have controlled much that governments do. That's all I said.

Many countries have had phases in which the influence of the upper class got thoroughly demolished (even though usually it was either rebuilt or a new upper class created).

Thank you for making my point. That is certainly true of the US where the most recent such cycle taking the ultra wealthy down a peg or two started in the teens of the 20th Century, gained increased impetus in the 1930s, accelerated until in the late 1950s, there existed a larger and more prosperous middle class than anyone had seen before. The discontent of the late 1960s started a change and then when those ultra selfish Bay Boomers reached the zenith of their generational power, they had dismantled most of the laws and regulations that bread and sustained that middle class and the 1990s accelerated the (cyclical) rise of the more wealthy to again more blatantly manipulate the handles of power. Most of the rest of the world followed suit, Europe trailing by about five to ten years (today's 'austerity' and bailouts, anyone...), Asia by a bit more but that cycle was effectively mirrored worldwide, acknowledging that some countries were wiser than others in cycle management.

There are also countries in which the rich haven't so much influence even in normal times.

Also true -- however, as we both know that has not always been the case and it is subject to change as you say -- "(even though usually it was either rebuilt or a new upper class created)." Everything goes in cycles...

I don't claim that the rich have no above-average influence in these countries, but they certainly don't "own" the government/state in Switzerland or Scandinavian countries.

If I were you, I would not bet the Farm on that. It's a matter of degree of ownership -- and perception. In those nations -- and others -- discretion is far more highly valued than it is in the US. We Yankees are rather gauche -- and that's a big part of the perception problem...

[Bill Moore]

Posted by Presley Cannady,

Quote:
Originally Posted by Bill Moore
The tax code is based on the political philosophy of trickle down economics, which in my "opinion" doesn't work, has never worked, nor will work.

With a 35 percent corporate tax rate, how do you figure?

Presley I'm not sure what your angle here is so I'll address it from two different angles and hopefully touch upon your point.

Trickle down economics assumes the rich will create more jobs and distribute the wealth for the betterment of society without the interference of government. It assumes that man is basically good, but reality (in my view) doesn't support this. It is a philosophy that runs in opposition to human nature. This isn't an attack against the rich, especially those who are self made and add value to society, but against the financial system manipulaters who use a wide variety of means that add no value to acquire more and more cash.

A 35% corporate tax rate (which I happen to disagree with and agree with the bi-partisan discussions to reduce it to make our corporations competitive again) is a government led effort to redistribute the wealth, which is not trickle down economics.

Our current economic problems seem to be based largely on less than ethical behavior. Assuming I'm correct (and I remain open to be convinced I'm not) that means the so called center of gravity is human behavior and the way to address destructive behavior is through deterrence implemented through regulation enforcment, which failed to happen prior to the crisis. This cure, just like many medications, has undesirable side effects also such as stiffling growth. Longer term it would be nice if the financial sector would police itself, but I don't remain optimistic that will happen.

[motorfirebox]

If I had to choose among having the country owned by the tea party, the OWS protestors, and the rich... I think I'd go for the rich. Least of 3 evils. t least they've a clue how it works.

I don't think I'd pick any of them. As much as I support OWS, there are large parts of the movement that go way too far. I wouldn't pick the Tea Party because I have a number of Mexican friends and because I think it's pretty silly to pay down your debts when you can't put food on the table. And I wouldn't pick the rich because I'm not particularly pleased with the job they've been doing thus far. If I absolutely had to choose... I suppose I'd go with OWS, mainly because I side with them on social issues. I think OWS is in the right place, directing anger at the right people, but I have doubts that any good solution is going to come from the movement directly.

An executive that cost hundreds of thousands of jobs? Where do you find one of those.

With almost 8 million jobs lost to the crisis, I don't think you'd have to look very hard.

Who do you want to do the realigning? The government? We're talking about a miniscule minority of corporations anyway, so your overall impact on the economy is likely to be close to zero. Of course if you buy into the nonsense that "the banks" caused the crisis, it might look like there's sense in it... but lots of things look sensible if you buy into nonsense. They just don't seem to work out sensibly in practice.

Of course I buy into the idea that the corporations who offered loans they knew would not be repaid, then lied about the value of those loans in order to sell them to investors, caused the crisis. I honestly didn't think that was up for debate.

Hasn't it ever struck you how eager politicians are to ride a bubble, cultivate it, urge its expansion, take credit for the pleasures of the upside... think of the Clintonites boasting of their balanced budget, the low unemployment, the soaring stock market, or the Bushies and their record home ownership rates... then when the bubble bursts it's all somebody else's fault? Doesn't that tell you something?

It tells me we need to vote out incumbents on both sides of the aisle. Beyond that, I don't really see anything to choose from between the behavior of politicians and the behavior of corporate officers.

[Presley Cannady]

Presley I'm not sure what your angle here is so I'll address it from two different angles and hopefully touch upon your point.

You know, you'd get to the point a lot faster if you didn't assume you had something to teach me.

A 35% corporate tax rate (which I happen to disagree with and agree with the bi-partisan discussions to reduce it to make our corporations competitive again) is a government led effort to redistribute the wealth, which is not trickle down economics.

So how do you figure our tax code is based on "trickle down economics?"

[Presley Cannady]

An executive who runs his corporation into the ground and costs hundreds of thousands of jobs should not get a bonus.

Why not? It's the company's money. And why should a bunch of crappy workers get a cut?

[motorfirebox]

Edit: never mind. I don't see the point in engaging with such an obvious troll.