« The Labor of the Harvest | Main | Question for someone who knows Russian history »

November 28, 2011

Comments

If I understand the majority view here, you included, it is fine to require a heavier regulatory load on a corporation than on an individual simply because of the corporate form. I am simply telling you that I don't buy into that. In this regard, the distinction is superficial.

How is it "superficial"? You fail to explain this. Again, you make the assertion that, while it's perfectly fair for a corporation to be treated as having certain attributes not identical to a natural person, we cannot e.g. place a heavier regulatory burden upon one than the other, because we must treat Statutory Americans the same as Uterine Americans... because, why, a Statutory American is made up of individual Uterine Americans! Or have you abandoned that tact, and just moved on to arguing that we must treat the two sorts of persons identically in terms of all burdens we place upon them, except when it's okay not to, because they're both people?

Really, we have plenty of different laws and regulations governing economic activity for natural and unnatural persons. Are you arguing we must streamline them all down to one standard? Shall, e.g., corporations be taxed at the individual rate? Or is it okay for this aspect of their economic activity to be *gasp* treated differently?

Also, let me just add that as someone who has spent his professional life since 2002 immersed in the Internal Revenue Code and the regulations and administrative guidance thereunder, I am intimately familiar with things like unintended consequences of rules, the substantive and administrative burden they impose on businesses, regulatory complexity, and the problem of unscrupulous "bureaucrats" (for lack of a better word).

Well said, Envy.

The corporate form of personhood is granted by the government acting on behalf of We The People in pursuit of shared social goals (insert goal here). The goals are chosen, discarded, and/or modified as part and parcel of the political process.

The regulation and taxing of said persons is the price they pay for the valuable attribute of limitted liability.

Since they are not 'real' persons, the assertion that closely regulating their behavior and taxing them to the max is an impingement on human freedom is a non sequitor.

It is a simple matter of negotiating the price (insert famous Churchill story here).

That's what participants do in a market economy. Full Stop (insert favorite Russellism here).

Nevertheless, there are good reasons not to let administrative rulings overturn/contradict what the law as passed by Congress and implemented in formal regulations provides.

Except it was the other way around. It was an administrative ruling that opened the door to the suit.

As far as cites go, replying to BP, I have no idea where one goes to find a compilation of agency abuses. But, ask me how many times I've had clients cited by OSHA on cases that were absolutely frivilous or how many times I've had clients get bombed by banking regulators--the answer is, and this is my personal experience, over a hundred in the last 10 years. I doubt that my clients are just exceedingly unlucky.

And, to round out the picture, a majority of the bureaucratic functionaries I've had to deal with in these situations are arrogant and stupid and intractable. Once you've had these experiences on a repeat basis, the glow of a an efficiently regulated economy dims considerably.

The deal with bureaucracies is that they are inefficient.

They're less than optimally responsive, they're frequently unable to deal with the relevant details of specific situations, and they're often populated by people whose primary motivation is to protect their own position and cover their own butt.

Public sector, private sector, same/same. There's nothing magic about the for-profit context that makes private bureaucracies any better than public ones.

Unfortunately, if you want something done in a consistent and systematic way on a large scale, a bureaucracy is probably your best bet.

"....over a hundred in the last 10 years."

As a commercial construction project manager, I am well aware of OSHA and how it rolls.

I'll stack the cost of a few hundred instances of bureaucratic arrogance against the hundreds of thousands of easily preventible workplace accidents any day. Any Time. Any Where.

Don't even go there.

Thx.

Look at McKinney's case, based his comment and my recollection, it seems that the FLSA says you have to pay overtime in the week it's worked. His client didn't. It's not like we're dealing with vague and/or particularly nuanced/complicated rules here, AFAICT.

Correct, it's not complicated, it's just that almost no one understands the FLSA and how it's been administratively extended. The intent of the law is to pay 1.5 X hours over forty worked in the same week. No problem there. Employers are not permitted to move OT hours to a week where the employee works less than 40 hours to avoid OT. No problem there. The intent of the law is to ensure that workers are paid OT for time over 40. That got bent somewhere along to way to a stupidly inflexible rule that says, as in my client's case, that paying more OT in one week and less OT in another week, so long as ALL OT owed is paid, to make everyone's life more manageable and predictable results in a one way windfall for the employee and a huge burden on a small employer. Note: small employer, and lack of compliance resources. FLSA is one of a many, many federal and state regs businesses have to live with. Any one rule standing alone is easy enough to comprehend. The problem lies in finding out what that one important rule is, among all of the other important rules that small and medium sized operations can't reasonably be expected to know about.

And, in any rational world, if the employer showed that in fact the money was paid and was paid in a systematic, objectively timely fashion, there would be no violation or, at a minimum, a warning and an opportunity to get it technically right going forward. But, regulations aren't written by people who have to live with them, nor, as was the case here, are they written in an intelligent, balanced fashion.

"It was an administrative ruling that opened the door to the suit."

Similarly, municipal building inspectors sometimes make a wrong call on the Building Code. Typically, you can't sue for their mistake. The responsibility of designing and constructing per code lies with the designer and the builder.

That is why they are called 'professionals'.

IMHO a firm with those crazy kind of work hour assignments for hourly workers should have known from the get go what the OT requirements were. The FLSA is not rocket science, and that's what good corporate attorneys are for.

I doubt that my clients are just exceedingly unlucky.

You're a lawyer. They wouldn't be your clients if they didn't have problems in the first place. When the regulators don't make life too hard on businesses, those businesses don't bother lawyering up. They're most likely to lawyer up when they think the case against them is bullsh1t. Your sampling method is statistically unsound.

That said, there are some serious jackoffs in the world. Some of them work for the government. It sucks when one of them manages to get their hooks in you.

IMHO a firm with those crazy kind of work hour assignments for hourly workers should have known from the get go what the OT requirements were. The FLSA is not rocket science, and that's what good corporate attorneys are for.

It's called an EMS for Emergency Medical Service. They work in shifts, staying at the station just like firefighters, where they nap, watch TV and whatnot when not making calls. They work 2 days a week out of six weeks and either stay home or work another job the other 5 days. Not a bad gig really.

My client had a letter from the DOL saying their program was fine. WTF else should they have done? See my comment above. Your kind of thinking is exactly the kind of indifference that business owners find infuriating.

And, the end story for my client's employees? For some bizarre reason, when they started getting paid per the strict application of FLSA regs, everybody got less. I was heartbroken.

You're a lawyer.

Correct.


They wouldn't be your clients if they didn't have problems in the first place.

Sometimes. I have plenty of cases that are total BS. The problem isn't something my client did, it's that my clients typically have deep pockets.

When the regulators don't make life too hard on businesses, those businesses don't bother lawyering up. They're most likely to lawyer up when they think the case against them is bullsh1t. Your sampling method is statistically unsound.

Your premise is flawed. OSHA and bank regulators, the kind my clients most frequently encounter, routinely take positions that are extreme and unsupported by law or the facts or both. They do this to sweat settlements and fines out of businesses. Whether my clients are uniquely unfortunate, I can't say. My sense is that if my clients experience routine chickenshot, it's not all that uncommon.

I'm trying to remember how this is relevant to the discussion of investment vs speculation.

Not that I'm looking to point any fingers as far as threadjacking goes, just curious about how we got here.

And, to round out the picture, a majority of the bureaucratic functionaries I've had to deal with in these situations are arrogant and stupid and intractable.

I'm glad Russell got to this first, because I was about to ask if this was supposed to be *in contrast* to the smiley helpful folks one finds in the average corporate customer service or HR department? We can start with Consumerist.com and work our way out from there if you need details.

(I also love the value judgements on attributes that, if one of your attorneys displayed them, you'd probably characterize as steadfast, hard-bargaining, and confident. Man, shoes sure do change feet a lot, don't they just?)

Yes, one of your clients apparently got a raw deal in one specific case. How we generalize out from that, I have no idea. But going by your standards, we dast not change or eliminate any regulations, because who knows what the unintended consequences might be?

"As far as I can tell, the options are (a) regulation, and (b) vigilante justice."

How about if the relevant agency rules on your case, you can't get sued when you comply with the ruling until X amount of time after the explicitly change it.

How about if the relevant agency rules on your case, you can't get sued when you comply with the ruling until X amount of time after the explicitly change it.

I agree, Sebastian. There are a lot of ways to make the system better. That doesn't mean we don't need regulations.

regulations aren't written by people who have to live with them, nor, as was the case here, are they written in an intelligent, balanced fashion.

Actually, sometimes regulations are written by industry, at least in part. When regulations are promulgated, there's a comment period and final rulemaking takes into account public comments, especially informed comments that add data. Wikipedia has a description of the system.

russell: As to how we got here from investment versus speculation, I think the conversation went from there to corporate structure and whether public corporations make decisions in order to benefit speculators or investors, from there to why Statutory Americans should or should not be as responsible for their decisions as Uterine Americans (thank you for those very descriptive terms, envy!), then to whether corporations should or should not be allowed to do whatever they want.

Getting back somewhat near to the original subject, J.W. Mason writes some really provocative and always good stuff at his site, The Slack Wire.

http://slackwire.blogspot.com/2011/11/capitalist-wants-exit.html> This one's for you, Doc.

Of course you are, because you will never have to personally deal with the impact of compliance and penalties for noncompliance.

As it happens I may very well be in that exact position as early as next year and sit on the opposite side of the table from a former colleague and have to deal with regulations I had an indirect hand in in crafting. Not financial regulations admittedly but those about toxic waste. It was not my personal choice to leave the position of the regulator*, so please do not claim that I probably tried to craft those regulations to profit me when changing sides. I will not become a lobbyist (although historian can not be 100% excluded if all else fails).

*fixed-term work contract not extended. The agency was short on money again and this is the favored lay-off method.

How about if the relevant agency rules on your case, you can't get sued when you comply with the ruling until X amount of time after the explicitly change it.

IMO that would be great. But as sapient points out, that's still regulation. Just less stupid regulation.

As to how we got here from investment versus speculation...

Thanks for the synopsis, sapient. I was just having a "Hey, wait a minute, weren't we talking about X...?" moment.

regulations aren't written by people who have to live with them

?????

I was just having a "Hey, wait a minute, weren't we talking about X...?" moment.

You're one step ahead of me. I forgot the original subject despite the title of the post. I guess the hamster in the wheel that keeps my mind going took a smoke break. That would also explain why he seems to get winded so easily. Now I'll go back to spinning around in circles and whistling tunelessly.

Before I do, though, I want to mention that I agree that there are both stupid regulations and stupid regulators. It's kind of a baby/bathwater thing as that goes, and it doesn't preclude the need for new regulations to address the new tricks people and corporations pull (or the old ones we decided to let them start pulling again - Glass/Steagall, anyone?). In any case, I'm sure there a plenty (plenty!) of existing regulations that we'd be better off eliminating, simplifying or improving.

MckT wrote:

"But, regulations aren't written by people who have to live with them ..."

Didn't we have a 200-comment thread a few months ago bemoaning the thorny thicket of regulatory capture?

The agency formerly known as the MMS (Minerals and Mines Management?) thought it had solved the problem of customer relations with the oil companies it regulated.

I can't remember now who was blowing whom, but somehow or other BP and others enjoyed too many happy endings until the unhappy ending in the Gulf.

From what I read, it seems many of the folks down there dealing with the aftermath of the Gulf spill can't decide for whom the jag offs -- the private sector jerkoffs or their gummint counterparts.

hstd wrote:

"That said, there are some serious jackoffs in the world, ..."

Yup. We live in an adversarial culture at all levels wherein steely-eyed jackoffery is the chosen tactic, and a celebrated one.

Jagoffs live many other places besides directly under Donald Trump's combed-in-three-directions toupee.

While I'm gratified that folks from all walks of life have been integrated into the executive ranks of business and government previously reserved for white male jackoffs, it is too bad that many of the new participants have had to adopt jackoffedness as well to get some business done.

Speaking of jagoffs (the Pittsburgh pronunciation and spelling, where "jagoff" is just about the only word you hear if you make the mistake of rolling down your car window in traffic), I caught Tea Party boy Rick Santelli on CNBC last week while visiting the 'Burgh, and in commenting on an effort to draft him for a run at the Presidency he declined the offer but said if he were to be elected he would serve one term and warned that EVERYTHING would be done his way and that's it.

Then the Jagoff In Chief folded his arms, thrust his lower jaw out and gazed somewhere off camera nodding his head in full agreement with himself just like another jagoff figure from history -- Benito Mussolini.

I'm sure Santelli's a nice guy and fun to drink with, which would make the fistfight we would have later all the more regrettable.

This digression is in the service of bringing the thread back around to what Santelli should confine his "reporting" to:
investment versus speculation.

So while in Pittsburgh, the editorial pages of the two local daily papers are filled with letters to the Editor from various lower-level and powerless jagoffs regarding three issues in the spotlight:

A. The jagoffs at Penn State.

B. The jagoffs at University of Pittsburgh Medical Center (even non-profits now put their jagoffs front and center these days in America), which is attempting to oust hundreds of thousands of locals insured by Highmark Blue Cross-Blue Shield from using their largely monopoly hospitals because of a dispute with the Highmark jagoffs.

C. Drilling for natural gas in the Marcellus Shale formation and the, uh, magnificent public relations provided by the drilling company jagoffs.

There was a letter to the Editor about the latter which caught my eye and I thought MckTexas would find amusing (sorry, I would link but I couldn't find it now that I'm back in Denver) from a local landowner who detailed her dealings with the land man jagoffs from various drilling companies -- in short -- after failing repeatedly to contact government officials who might give her some information (it seems jagoff Republican Governor Corbett has had all of the government jagoffs defunded so they must stand down from their jagoffery, thus giving private sector jagoffs the run of the State), she called one of the drilling companies to ask why their workers were trespassing on her land and setting explosives off adjacent to her land without so much as a phone call so they could be welcomed to the neighborhood and she got a call back from a very cheerful gentleman from Texas who assured her, oozing just the friendliest downhomedly bushwah, that, yes ma'am, they surely would keep her informed of all pending activity ON and around her property.

The very next day, say 14 hours later, she looks out her kitchen window on the farm and spots a group of men resting their jagoff butts against her back fence well inside her property line.

No warning, jagoffery being offered by surprise in fuckwad America these days at every turn.

Out she huffed to the backyard to ask the trespassers, some of whom wore shirts with oil drilling company logos, to please leave and the only thing she could get out of them was that they were from ..... Texas.

Then one of them shrugged his shoulders and said we no speaka de english and then they shut their pie holes for good before leaving slowly and nonchalantly.

The previous Texan on the phone who she could HEAR smiling like a realtor reptile as he lied with his eyes while his hands were busy working overtime through the phone lines couldn't be reached the next time around.

I've got to say that at least the jagoffs in the private sector offer arrogance, stupidity, and intractability with a Lone Star State wink and a smile as they slit you open and let your guts spill all over your shoes, unlike those humorless gummint-type jagoffs.

Funny thing, too, the jagoff Ayn Rand legislators and Governor elected in PA last year are trying to advance speaka de English-only and other severe anti-immigrant legislation in Pennsylvania, but I guess all manner of funny-talking Texans are welcome to have their way since mum is the one and only word.

I'm sure they are fully in favor of shotguns loaded with buckshot too, but nice moderate liberals like the lady in question never seem to take them up on it.

In closing, I'm always impressed by the sheer, unmitigated jagoffery of Texas politicians and business people who make it into the national spotlight, but Obsidian Wings seems only to attract the few nice people (they must keep their heads down at home) from Texas to post here.

;)

Sorry about the fully spelled out "F" word.

But, regulations aren't written by people who have to live with them, nor, as was the case here, are they written in an intelligent, balanced fashion.

So much to do, so little time. Yes, I agree, not as well written as it should have been. The intent here was "THESE regulations", meaning FLSA, aren't written by people who have to live with them. I went on to inartfully try to articulate that thought in the balance of the sentence and neglected to note the redundancy or make the right clarification.

I agree that many industries have input into regulations. There is an express provision for notice of rule making, input, etc. But, industry doesn't actually write the regulations, the agencies do. Some are more susceptible to industry capture than others, but that is a different problem.

I concede all points above noting my error.

Count's anecdote at 11:34 struck a familiar note. Trespassing by seismic exploration companies, known in the business as "doodle buggers", is, if not widespread, at least it's fairly common. That said, it is highly unlikely any level of gov't would be aware of whether the doodle buggers were exploring or where. The typical context of a trespass is that 90% of local landowners give consent and the rest don't. The DB's need to run a line from one consenting landowner to another but a nonconsenting landowner is in the way. They tend to just forge ahead. The nonconsenting landowners have a decent case, FWIW, but it's a civil action for trespass, not a regulatory violation AFAIK.

The DB's need to run a line from one consenting landowner to another but a nonconsenting landowner is in the way.

A line of what?

The nonconsenting landowners have a decent case, FWIW, but it's a civil action for trespass, not a regulatory violation AFAIK.

What's the landowner's case if doodle buggers are greeted with Count's buckshot?

I'd guess the "lines" are instrumentation lines to the geophones.

The lines, the one's I'm familiar with, are as Slarti indicates. They run out from a sensing device, are spiked every 50 feet or so and the spikes are driven into the ground. A charge is detonated, a device in the spike picks up a signal from the charge's resonating off of the underground formation resulting in a seismic picture. The technical stuff eludes me. I had a client who denied permission to enter, they entered when he was gone, left a wad of spiked cable on the property which became covered with grass and my client later stepped on a spike. Being diabetic, this produced a number of long term problems.

What's the landowner's case if doodle buggers are greeted with Count's buckshot?

Not good. Even for trespasser's, a land owner is under a duty not to willfully or intentionally inflict injury. Use of deadly force is restricted to defense of oneself or another or, for some damn reason, prevention of theft of property after dark (weird Texas law). There are other angles, the preceding is just the general picture.

"prevention of theft of property after dark (weird Texas law)."

I knew a woman who shot (and killed) a trespasser at night in her backyard, they didn't count it as self defense but did eventually let her off on this law. She was about 60 and lived by herself, and the trespasser was clearly up to no good. All this was in Killeen.

Not sure how odd that law is, she certainly shouldn't have been required to wait until he got to the house and attacked her to defend herself, and that is a bigger issue in the dark.

"prevention of theft of property after dark"

Which explains why most stealing in the United States occurs right out in the open in broad daylight.

Thus, banks and markets are only open during the sunshine. If they require the cover of darkness, why, they can trade securities and sell iffy mortgages overseas.

Sort of like horizontal drilling wherein mineral rights are tapped under the surface owners' property as the latter snooze.

Yes, the surface owners are offered pretty good money to participate but if the question is "what if I don't want to?", well, the perfectly legal answer is "well, we'll do it anyway from your neighbor's property."

I've nothing against developing the Marcellus or other resources and the jobs that come with, but some landowners are rightly concerned about water quality and other values, etc.

It's a rational tradeoff we are told. Yes, but do we know all that is being traded away so rationally in the land rush of irrationality.

Sorry, we can't wait to determine residual adverse effects, say the companies and the politicians working for them, and if we're lucky, we'll be out of here in ten to twenty years without a forwarding address when those fracking chemicals eventually start making your chickens molt every other week and your cows go cross-eyed, and the kids grow up a little listless and eyebrowless.

Just kidding. Mostly.

http://www.nakedcapitalism.com/2011/12/michael-hudson-debt-and-democracy-has-the-link-been-broken.html> We are not so unique in this regard. Turning over our country to the rentier class is certain social suicide.

some landowners are rightly concerned about water quality and other values, etc.

Some landowners do damned well to be concerned about all of the above.

Just kidding. Mostly.

Not me.

Here's a news flash for anyone living in the Marcellus shale area.

Mineral extraction companies will be very happy to f**k you over if that will make them money. They're not your friends, and don't forget it for a minute.

Cover your @ss.

Consider this a PSA.

Totally agree with your 11:22 p.m, russell.

Anyway, back to the original subject of this thread, I just finished The Big Short (I know, I'm behind). But I thought it was interesting how in the final chapter, the author recounts his luncheon with the Salomon Brothers former partner John Gutfreund, who saw the company go from a partnership to a private corporation, then was responsible for taking it public. Very, very relevant to this thread. That move was blamed (or seen as a portent) for much of the subsequent Wall Street debacle. If you haven't read it, all, you should. You would like it, russell (but you've already read it probably). You should read it, McKinney, since you seem to deny the significance of the statutory and regulatory structure which allowed and facilitated the running amok of the financial industry.

I'm actually the last one to read it, but I'm really glad I finally did.

Seed you property's borders with caltrops. That should keep the guys away but keep a sign ready, so nobody can claim not to have been warned. If they wear boots with steel or kevlar inlets then you'll have to resort to bear traps. And then there are those nice covered pits* filled with nasty (non-lethal) stuff. Better avoid landmines or area denial chemicals.
---
Btw, over here police indeed warns that most burglaries are now committed during daylight hours. A) people tend to be at work during the day while at night they are at home B) since everyone believes that burglars come at night suspicious activity during the day will often be overlooked.

*shoebox size not mineshafts.

All this was in Killeen.

Not sure how odd that law is, she certainly shouldn't have been required to wait until he got to the house and attacked her to defend herself, and that is a bigger issue in the dark. And, the fact that it was Killeen is telling. Relatively small Texas town with a strong, inherently conservative bent. The chances of convicting the woman for anything other than performing a public service were right around zero.

Probably not a "theft after dark" situation, but more of a reasonable fear of her life kind of deal.

Sort of like horizontal drilling wherein mineral rights are tapped under the surface owners' property as the latter snooze.

I am pretty sure slant hole drilling is illegal.

You should read it, McKinney, since you seem to deny the significance of the statutory and regulatory structure which allowed and facilitated the running amok of the financial industry.

Sapient, you are mistaken. What my comments above address is the implicit notion of many here that there is some presently missing and ill-defined regulatory scheme that can make people treat their employees more kindly in the compensation department and/or promote a more equitable distribution of company earnings. I think this is wishful thinking and the kind of thing, that if enacted, would cause much more harm than good.

Seed you property's borders with caltrops.

This is the obvious solution, of course. Alternatively, a blend of a dog, good locks, perimeter lighting and property insurance with your portable valuables photographed and inventoried is pretty much the best you can do. As you might imagine, many folks in Texas keep a gun handy and it is not too terribly uncommon, popular thinking aside, for a homeowner or shopkeeper to successfully put up a fight.

"I am pretty sure slant hole drilling is illegal."

I know it is in Texas, due to scandals in the middle of the last century.

My knowledge of this is thin (all of my knowledge is thin) but I think there is a distinction between (1) an operator slant-hole drilling into a another operator owner's leased mineral rights and stealing the resource ... and (2) owning mineral rights under someone else's surface property and paying an adjacent landowner to allow a pad to be constructed from where directional drilling to the legally acquired below-surface lease can be accomplished.

Now, if the surface owner owns the mineral rights under their property and refuses or is not recompensed for the exploitation, the scenario above would be illegal.

Shale formations by definition require directional/horizontal drilling because of the difficulty of negotiating the geological structures.

I also stayed in a Holiday Inn Express last night.

That drilling sound you hear is me undermining myself.

I am pretty sure slant hole drilling is illegal.

Directional drilling is not only common in natural gas extraction in the Marcellus Shale, it's the only way the field is viable.

I have no idea what infrastructure is in place to let local governments or property owners monitor whose property a directional well enters. I'm sure the company drilling well has a good idea, but I'm not sure what requirements there are for them to disclose that.

The regulatory environment here covers multiple states, counties, and towns. My general sense is that there is no organized or uniform set of regulations.

I'm happy to defer to some degree to Count's understanding of the law about this, because he's in CO, where this crap has been going on for several years now. But what's true in CO may not be true in OH, PA, WV, and NY.

A non-trivial number of people are dealing with water that they can no longer use, standing pools of toxic waste water from fracking extraction, and other ills of large-scale industrial production, in their backyard.

My understanding is that the going compensation rate for all of this is now something like $15K - $20K an acre, which is great money if you have lots of land and not much cash. But it's not so great if you find it hard to live in your own home anymore.

the implicit notion of many here that there is some presently missing and ill-defined regulatory scheme that can make people treat their employees more kindly in the compensation department and/or promote a more equitable distribution of company earnings. I think this is wishful thinking and the kind of thing, that if enacted, would cause much more harm than good.

As best I can tell, what the "many here" that you refer to are looking for is a restoration of laws and business practices that were common - the norm - during a period when this country was, in fact, extraordinarily prosperous. The undisputed economic heavyweight champion of the world.

So, when you claim "wishful thinking" and "more harm than good", I reply, sez you. The facts and the history are not on your side.

As far as the present-day state of the art, we are now looking at the expiration of a popular, broad-based middle class *tax holiday* -- the 2% FICA holiday -- because the Republicans in Congress cannot agree to fund it with a 3% increase in the marginal rate on earned income above one million dollars a year.

I will remind you that the payroll tax holiday was a long-time conservative proposal short-list favorite.

Nobody's talking about "more kindly". "Kindly" is so far off the table as to be a dim sentimental memory.

We are well into "f**k you, hippie" territory.

That sentiment cuts more than one way.

This is probably several ballparks away from the original topic, but since Marcellus Shale has come up, this is an interesting read.

If we want to dive further down the Marcellus rabbit hole, it's always worth noting that hydrofracturing chemicals, specifically, are exempted from regulation imposed by the Clean Water Act.

That is commonly known as the Halliburton loophole, because it was inserted into the law at the urging of then VP Dick Cheney.

There's also the seismic connection with fracking. It's not clear to me that scientists understand this very well.

But back to my own stream of consciousness about the financial industry, I thought this article was interesting on the subject of why the instigators of the financial meltdown aren't in jail.

"The important point here is that even the people who look like they've made their money from a business outside the financial industry -- the Bill Gates or Steve Jobs types -- really haven't. They've made their money from *stocks*, not from selling things or services."

I read a few exceptions to this but I want to firmly object to this characterization.

This is the equivalent to saying that people don't get paid for work, they just work the banking system to access their direct deposit paycheck.

Stocks and stock options as payment of potential future earnings for present work are the way most people get wealthy for the value they HAVE added. Selling your company for shares is how you capture the worth of years of value add.

These aren't examples of getting wealthy from the "financial" system, they are the best use of the capital generation role that Wall Street is supposed to perform.

an aside, The discussion of current shareholders as just speculators with no value add is also misleading in a macro sense.

Having liquid capital formation capability is the life blood of growth for most companies. For nonpublic companies that devolves to owners putting more money into the company, for public companies it means maintaining the ability to use stock as a currency to raise money or buy other companies. Having shareholders who believe that whatever dilution might happen through these money raises and purchases will be effectively used to add enough value to grow the value of their shares is critical to the health of most companies over time.

When they don't, they sel,l and luckily their is someone who will buy. If enough people don't, then the shares go to zero and the company has increasingly limited growth options and management gets replaced.

I won't go into the things I believe Wall Street should change (I did that a few threads back) but the idea that shareholders are nothing more than gamblers, or dupes, is just not correct.

This is getting fracking ridiculous. It's time for a speculative post on the necessity for the reform of corporate immunity from purposely abusive EPA regulations that have the unintended consequence of promoting the shooting of trespassers who engage in horizontal drilling in the dark.

This would be a good investment. ;)

Actually, this is what is getting ridiculous.

This thread's dead, so whatever. But it seems, somehow, relevant.

Zombie thread!

uuurrrggggllllluuuuuuhhhhhhh...

zombie nation

http://noahpinionblog.blogspot.com/2011/12/harrison-kreps-1978-power-of-irrational.html> So who is the bigger sucker? Buyers or Sellers?

As they say, where are all the customers' yachts?

If you want even out earning power in the U.S, you have to raise the 15% capital gains tax.

I can understand the argument about concentrating wealth. But, I don't get this sentence. Absent confiscation of principal, earning power simply isn't going to be evened out.

Even some of the 1% are Occupying the 1%:

http://www.washingtonmonthly.com/political-animal/2011_12/we_cannot_cut_our_way_to_great033925.php

Meanwhile, some who previously backed Obama and then abandoned him because of the Affordable Care law and then lost their health insurance in the Bush economy only to become mortally ill, have decided to re-Occupy their enthusiasm for the socialist Kenyan:

http://www.washingtonmonthly.com/

I guess it helps her re-ignited enthusiasm that the genocidal Republican filth, along with a few Democratic butchers, in the U.S. Congress and running in the Republican primary are trying their best to bankrupt and murder the woman.

Up with cancer. Up with expensive cancer.

How the 1% drive

(actually, the drivers are yakuza, but because no one, least of all innocent bystanders, were injured or killed, I thought I would pass it on since this thread is still lurching about)

I should have mentioned that the quote is from Russell's link. My bad.

I don't get this sentence. Absent confiscation of principal, earning power simply isn't going to be evened out.

There is no sane person who is arguing for making the earning power of everyone in the US equal. No one.

Different people do different things, derive their income from different sources, work more or less hard, are more or less skillful at what they do.

Everybody understands that. Everybody.

The most ambitious thing anyone is calling for is for public policy to be adjusted so that it is less blatantly skewed to the advantage of wealthy people.

Not because they hate wealthy people, or resent their good fortune, or want to stick it to the man. But because the imbalance between the wealth that is flowing to the wealthy, versus what flows to everyone else, is creating serious problems for everyone.

Everyone.

Plus, it is simply, plainly, and palpably unfair.

My suggestion to you is to eat the meat and spit out the bones. By which I mean, rather than seizing upon one sentence that you find impractical, perhaps focus on the overall point of the article.

I'm glad you understand the part about concentrating wealth. The tendency of the current capital gains tax regime to concentrate wealth is the overall point.

By which I mean, rather than seizing upon one sentence that you find impractical, perhaps focus on the overall point of the article.

But that's what we do here. All of us.

But because the imbalance between the wealth that is flowing to the wealthy, versus what flows to everyone else, is creating serious problems for everyone.

Like I said, I get the part about excessive concentration of wealth, but what specific problems arise from this? Current type problems? The deficit is a taxation issue, not a concentration issue, so I am missing the problem angle.

Plus, it is simply, plainly, and palpably unfair.

The tax rate or the concentration? I ask, because even if we taxed the Fortune 400 at 50%, no one else's earnings are going up noticeably, no it isn't as if we all get something we aren't currently getting. Wealth is still going to concentrate, even with an estate tax.

Put differently, suppose the top 1 percent paid 50% taxes and just made half again what they are making now--the concentration would be the same, there would just be more tax revenue. Would that be satisfactory?

The tendency of the current capital gains tax regime to concentrate wealth is the overall point.

Isn't the fix simply to put in brackets for higher levels of cap gain earnings, say a 15/20/25% bracket at 750,000/1,500,000/3,000,000 and call it a day, with a one time exception for sale of a closely held business?

what specific problems arise from this?

A lot of people work one or more jobs and are still poor.

Since we don't actually want our friends and neighbors to starve, or live in their cars or a cardboard box, or die from something stupidly treatable like pneumonia, we prop them up with one form or another of welfare.

Or, not.

In either case, it's not so great.

The tax rate or the concentration?

The concentration.

Because one one-thousandth of the population do not personally generate half of all of the wealth represented by the total capital gains created by the US economy.

Put differently...

No need to put differently.

Isn't the fix simply to put in brackets for higher levels of cap gain earnings

I'm not sure there is one single thing that is "the fix", but your suggestion seems generally reasonable, and would be helpful.

Isn't the fix simply....

To answer somewhat more completely:

Increasing the capital gains tax rate would improve the revenue picture for the feds, which would be helpful.

It would also mitigate, to some degree, the discrepancy in overall income distribution, which might be a useful outcome.

But what would be a more substantial 'fix', in my eyes, would be a more equitable distribution of wealth, up front, without mitigation by the tax regime.

Not redistribution, not mitigation of unequal distribution, but simply more equitable distribution.

That's my point of view.

But what would be a more substantial 'fix', in my eyes, would be a more equitable distribution of wealth, up front, without mitigation by the tax regime.

I think we've come full circle. I don't see how you make that happen without a problematic regulatory regime. I mean--leaving aside the question of the propriety of the gov't deciding how profits should be shared--how do you write a set of rules that will cover an economy the size of the US without making compliance a nightmare for all but the largest companies who can bear the cost?

I don't see how you make that happen without a problematic regulatory regime.

You would not need a problematic regulatory regime. You would need a different regulatory regime.

Look, there are any number of countries in the world which are similar to us in terms of their political and economic maturity and sophistication, but which do not manifest the extraordinary level of wealth and income disparity that we do.

There are a number of reasons for that. Public policy is a part of it. Not the only part, but part.

And in those places, people start businesses, employ people, make tons of money. The regulatory environments in those places don't stop people from being very successful, indeed.

In this country, we had a much different regulatory environment until fairly recently. The impulse to deregulate is something like 30 years old.

But people in this country started businesses, employed people, and made tons of money in that regulatory environment.

It's a matter of deciding what's important to you, and moving forward from there.

What we have decided is that facilitating the concentration of wealth is what's most valuable to us. People might not put it in quite those words, but those are the policies we have embraced, for at least the last generation.

I don't see how you make that happen without a problematic regulatory regime.

Well, what russell said, but also:

McKinney, I guess it's silly to keep saying this, expecting a response, but we already have a regulatory regime. The system of public corporations is a highly regulated and artificial system, but the regulations work in favor of the wealthy accumulating more wealth. (Privately held corporations are less so; partnerships are even less so; sole proprietorships are even less so. Corporations aren't just a group of freewheeling businesspeople doing their thing - they get advantageous treatment from government.) You find it "problematic" to change the system slightly to bring the wealth distribution more in balance. There are many ways to do such a thing that wouldn't be difficult to administer. For example: How about all employees sharing a stock bonus pool, rather than bonuses being for management only? How about bonuses being tied to performance? How about employee compensation bearing a reasonable relationship to management compensation? All of these things are very simple, and they're just examples. Whose nightmare is it to implement reforms? It's only a nightmare for people who want to continue the status quo.

Deregulation of the financial sector has increased the ability of some people to make lots and lots of money without making anything (at least not particularly useful for anything but making those people lots and lots of money) or facilitating the making of anything useful (repeat parenthetical). This can be reversed through legislation.

The ability to organize labor, in more useful ways to workers, could be increased by legislation.

Political power could be made less wealth based than it now is through legislation.

Funding for public goods that facilitate both business and the opportunities for people to climb the economic ladder, including early childhood and post-secondary education, could be increased through legislation. (Your capital gains tax suggestion would be a start, McKinney.)

The abilities of people with money and resources to squeeze money out of those with less of both could be lessened through legislation and better safety nets.

A higher minimum wage could be enacted through legislation.

Subsidies for highly profitable industries could be reduced or eliminated through legislation.

Estate taxes and could be increased through legislation, as well as the elimination of loopholes.

All of these things would, even if very indirectly in some cases, reduce the systemic concentration of wealth and income over time.

What HSH and Russell said. Current incentives are skewed. For example, given the liquidity preference of the wealthy, a lower capital gains rate subsidizes a certain type of "investment"...i.e., stocks. And here we are right back where we started....are stocks investments or speculation? I'd aver that financial markets are a social construct that lever economic wealth and act to concentrate economic power within a relatively small elite.

Let us start from the beginning:
1. Absolute power corrupts absolutely.
2. Unconstrained absolute power is not a social good, and in the long run is socially destructive (history, which see).
2. Policies that skew incentives, encourage and/or grant economic rents act to promote the concentration of financial and/or economic wealth. This is not so good.
3. The concentration of wealth acts to concentrate political power.
4. Concentrated political power acts to reinforce and magnify the power of those who already have economic power.
5. Go to 1. above. Do not pass Go. Do not collect $200.
6. 2. above.

So when you say you don't 'understand' this, McKinney, you are reflectively hitting off your right side and a lot of your comments slice OB to the right.

That's stroke and distance, rule 27-1.

Take the crisis of the Euro. That idiot, David Brooks, celebrate the 'virtuous' Germans and castigates the profligate PIGs....standard wingnut morality play economics ("if you're poor, it's your fault").

Does he not realize that the GDR has very high taxes? Very powerful unions? An extensive social safety net? Relative economic equality? Higher social mobility than the US of A? An economy shaped by extensive state intervention to be an exporting powerhouse?

Is he simply a liar? Or deluded?

I vote for deluded liar.

Or maybe a liar who hopes to delude.

Well, maybe, too deluded to lie, except to himself; in other words, a true believer, who reads the lies of others and then deludes himself into believing them.

Also, the high-paying gigs to pontificate his bullsh*t.

Brooks plays both sides of the street in his grift, which has the slight advantage of being an elitist grift, unlike Palin's, Cain's, Perry's, Bachman's and Moe Lane's, not to mention Gingrich's pseudo-intellectual-Pol Pot-attends-the-Sorbonne glibness, in that he adores the virtuous incentives for we usual suspects of hard times, ie. unemployment, low wages, indebtedness, and misery, only for the poor and the middle class natch, but then falsely blames and deplores Barack Obama for creating those incentives so, in Brooks' mind, we can get back to the disincentives of good-paying jobs, medical insurance, and families staying together under the supposed wealth-creating policies of the Republican Party, which of course corrupt the poor and the middle class and lead them to un-virtuous America-destroying behavior, which must be vanquished, you guessed it, lower taxes on him.

I don't think Brooks should be killed during the coming violent revolution in this country, but ample pepper-spraying at close range seems a likely punishment

Does he not realize that the GDR has very high taxes?

I think you mean the FRG. I doubt that Brooks would be a fan of the GDR should it still be around. ;-)
I guess he also overlooked that the smaller partner (FDP) in the current ruling coalition went into a nosedive since it fully embraced GOP-like policies and has a good chance to miss the 5% mark in the next election (which is the treshold for the German parliament). One Bundesland (=state) now has a green Ministerpräsident (~governor) and Berlin almost got one too (we kept the red gay* one instead).

*btw, the head of the FDP who is also the foreign minister happens to be gay too. And to imagine Angela Merkel having sex is too much for a sane brain to bear ;-)

And to imagine Angela Merkel having sex is too much for a sane brain to bear ;-)

What about a nice shoulder rub?

For example, given the liquidity preference of the wealthy, a lower capital gains rate subsidizes a certain type of "investment"...i.e., stocks.

BP--are you sure about this? The people I know reasonably well who are really, really well off make their money in real estate, mostly commercial, which also features cap gains treatment if the property is held more than a year. Real estate, as you know, is not liquid.

financial markets are a social construct that lever economic wealth and act to concentrate economic power within a relatively small elite.

If that were the case, then the good old days often referred to here by others would never have existed since financial markets preceded them by many decades.

But, the good old days are only "good" in the rear view mirror. Back then, progressives made the same arguments about corporate wealth and greed I hear today. Really, there is nothing new in that regard.

If I were going to make a statement of this nature, I would say that a market economy is cyclical, analogous in many ways, and also congruent in many ways, with history. By definition, that means ebb and flow, up and down.

Static economies don't swing. They don't do much else either. Also, no country without a market economy has ever experienced a meaningful quality of life for the vast majority of its population. Power and wealth were always concentrated at the top.

The frequent comparisons here to Europe are interesting, mainly for their selectivity. For the most part, favorable comparisons usually end up pointing to Germany as the model. Bits and pieces of Sweden, England, France are held out from time to time as something to emulate, but, overall, the comparisons across the board for these countries is problematic.

I've spent a fair amount of time in England, France, Spain and Italy and some time in Sweden. One of the things I do when we travel is look at real estate prices. Americans of relatively modest means live in much larger apartments and far many more live in single family homes. Apartments here, at least in Texas where I've lived most of my life, routinely have playgrounds and swimming pools, even those serving the more modest income levels. Grocery prices are better, cars and gas are cheaper.

So, not all comparisons with Europe are favorable. And then you have cultural overlay and population size. In Sweden, for example, I had dinner with a half dozen insurance company executives. For Sweden, they would be considered conservatives. Yet, their views on the Swedish social contract made them look like Russell on a roll (smiley face goes here)--the consensus was that everyone was owed a minimum standard of living whether they chose to work or not. I couldn't tell you what the common level of consensus is in Germany for the basic social contract, but reason suggests it is not what it is here.

But, the main distinguishing features of the US vs any one country in Europe is, first, our size, both population and geography, and, second, our diversity. We have many subcultures, some with ethnic origins (Mexico being a good example), some regional, some of mixed genesis. You can't impose a one-size-fits-all set of complex rules to the extent progressives would like on country this size. Simply because something works, or seems to work, in one place doesn't mean it can work here.

1. Absolute power corrupts absolutely.
2. Unconstrained absolute power is not a social good, and in the long run is socially destructive (history, which see).
2. Policies that skew incentives, encourage and/or grant economic rents act to promote the concentration of financial and/or economic wealth. This is not so good.
3. The concentration of wealth acts to concentrate political power.
4. Concentrated political power acts to reinforce and magnify the power of those who already have economic power.

Yes, this is true. And, the two largest, highest body count examples of absolute concentration of power in recent history were the opposite of market economies. One has failed, the other is saving itself by moving to a market economy. With all of the attendant have and have-not problems associated therewith.

Rule 27-1 is a good one to remember. Also, it is good to remember that the white stakes are on the left side of the fairway as often as they are on the right.

Real socialism has never been done, McKTX. You'll know it when it succeeds.

Real socialism has never been done, McKTX. You'll know it when it succeeds.

I wish I'd said this.

You guys having been spending too much time watching the Muppets.

From Slart and McKinney, alternately, in the balcony:

That was wonderful!
Bravo!
I loved that!
Ah, that was great!
Well, it was pretty good.
Well, it wasn't bad...
Uh, there were parts of it that weren't very good though.
It could have been a lot better.
I didn't really like it.
It was pretty terrible.
It was bad.
It was awful!
It was terrible!
Take 'em away!
Bah, boo!
Boo!

You can't impose a one-size-fits-all set of complex rules to the extent progressives would like on country this size.

I will attempt to save sapient the effort of stating the obvious:

We *currently have* a set of complex rules, that apply, nationwide, to a country this size. We *currently operate* in a highly regulated environment.

The US *is not* an environment free of encumbering regulation. Not remotely.

Nor, in fact, would we want it to be. If you consider what an unregulated environment would actually look like, I'm sure you will agree.

The question is whether the outcomes that *our regulations* drive are desirable.

It's lovely that the average American lives in an apartment that is larger than the average Swede.

It sucks that something approaching 20% of the working population are either unemployed or underemployed. It sucks that the average duration of unemployment is the longest it has been in 70 years, if ever. It sucks that millions of people are bankrupt, losing their homes, have no health insurance or inadequate health insurance, are buried under debt loads they'll never escape from, and may never work in their chosen fields again, in their lives.

It sucks that the physical infrastructure of the US, built at great cost and no little sacrifice by generations of Americans, is decaying, and we won't spend the funds to repair or replace it.

It sucks that in an environment where the vast majority of folks are facing some kind of financial hardship, we can't agree that extremely wealthy people -- people whose earned incomes exceed one million dollars a year -- ought to contribute an additional three cents on the dollar on their income above one million, so that *every other person in the country who works for a living* can have another year or so of relief on their withholding.

And so on, and so on, and so on, and so on, and so on.

But yeah, our apartments are larger than the average Swede's.

You get the life you choose. As individuals, and as a nation.

We have chosen to prefer to encourage the accumulation of extreme concentrations of wealth in a few hands, as opposed to the broad well being of the nation as a whole.

That is what we have chosen, not least because the way that we go about "choosing" things like this has been corrupted to an almost absurd degree by the flow of the giant pools of private wealth that our policies help create.

That is what we have chosen, and that is what we have.

I've spent a fair amount of time in England, France, Spain and Italy and some time in Sweden. One of the things I do when we travel is look at real estate prices. Americans of relatively modest means live in much larger apartments and far many more live in single family homes. Apartments here, at least in Texas where I've lived most of my life, routinely have playgrounds and swimming pools, even those serving the more modest income levels. [...]

So, not all comparisons with Europe are favorable.

This is point, while true, is painfully misleading, as it at best passingly and dismissively addresses the foremost factor driving the above: the EU is cramming a population roughly ~166% of the US into a land area less than half the US's size. Looking at real estate through an economic lens while suggesting differences in population distribution and geography are secondary renders the comparison more-or-less useless. That real estate in various western European countries does not compare favorably with real estate in a random spot in the US is cherry picking. To put it mildly. It's not some glorious superiority of the US economy that makes real estate cheaper, it's that there's a lot more space per person over here.

We *currently have* a set of complex rules, that apply, nationwide, to a country this size. We *currently operate* in a highly regulated environment.

Well, yes and no. There are degrees and extents of complexity. What we have isn't, apparently serving so well, but is the problem too much or too little or enforcement, or something else entirely or all of the above. My point is the massive size and heterogeneity of US commerce defies the kind of solutions being advanced here. We aren't talking minimum wage or parts per million of X element per Y gallons of water, we are talking about a regulatory regime that would, going forward, mandate a different class of compensation for, I assume, everyone in the private sector.

That the economy is in a recession is tangential to the discussion, but it makes my point about cycles. They aren't going away, as bad as they are. I am unsure how the regime being proposed would fix the recession--force companies to hire, to expand and to pay per a preset formula? In the end, a regulation without a sanction is toothless.

This is point, while true, is painfully misleading

Not misleading at all, and the fact that apartments and homes are more plentiful and cheaper here because we have more area to build on is beside the point. If you want to compare quality of life, how someone lives everyday is part of that comparison. Cars, gasoline and groceries are a part of life here and there. They are cheaper here. That's a big deal.

Cars, gasoline and groceries are a part of life here and there. They are cheaper here. That's a big deal.

So is the fact that you need a car to do almost anything in much of this country, but it's a big, bad deal, rather than a good one. Quality of life, indeed.

So is the fact that you need a car to do almost anything in much of this country, but it's a big, bad deal, rather than a good one. Quality of life, indeed.

Subjective judgment. If most people prefer maximum personal mobility, and if they are able to have it, you say that is 'a big, bad deal'?

we are talking about a regulatory regime that would, going forward, mandate a different class of compensation for, I assume, everyone in the private sector.

???????

I'm not really seeing anything like this, in anybody's comments.

The only thing *remotely* like this might be hairshirt's comment about a higher minimum wage.

Which, since the minimum wage is currently at its lowest value in real dollars since 1950, can hardly be called a radical proposal.

What exactly do you think people are calling for?

Cars, gasoline and groceries are a part of life here and there. They are cheaper here.

And yet, Europeans drive and eat. They drive nice cars, actually, and eat quite well.

If you want to argue from everyday quality of life, you need to include more than point-of-sale cost of cars and groceries.

Among other things, we pay for our "cheaper" cars and groceries in lots of other kinds of coin.

A topic for another day, no doubt.

Nobody expects the US to be a carbon copy of Europe. The point of citing European examples is simply to demonstrate that it's possible to have a healthy and productive economy while also having a more equitable distribution of wealth and income.

Can it be done? Yes, it can. People do it.

We don't.

We aren't talking minimum wage or parts per million of X element per Y gallons of water, we are talking about a regulatory regime that would, going forward, mandate a different class of compensation for, I assume, everyone in the private sector.

I'm talking about minimum wage, among other things. On the rest of the above, I have no idea what you're on about, McK.

I am unsure how the regime being proposed would fix the recession--force companies to hire, to expand and to pay per a preset formula?

I don't see anyone talking about "fixing" the recession or preventing all future recessions. People seem to be talking about extreme and harmful disparities in wealth and income, which may contribute to the depth and frequency of the business cycle. And no one is talking about making everyone exactly equal, either. Some degree of inequality is unavoidable and likely healthy.

You guys having been spending too much time watching the Muppets.

If Muppets had not been, Yoda there also would not. Explain that, you must.

That the economy is in a recession is tangential to the discussion, but it makes my point about cycles. They aren't going away, as bad as they are.

Slightly tangential to the discussion, perhaps, but this recession is not part of a "cycle." There may be some cyclical elements, but mostly it is a result of the financial industry meltdown, largely caused by insufficient regulation and oversight of the financial industry, an industry that was engaged in fraudulent practices (not to mention legal malpractice) on a massive scale. And they were able to pull it off, and get away with it for the most part, because of their wealth and power over the political system.

On the rest of the above, I have no idea what you're on about, McK.

I'm in the same boat.

Explain that, you must.

What I've never understood is why Yoda sounds Amish, but he doesn't have a beard.

On the rest of the above, I have no idea what you're on about, McK.

Sorry for not being clear. Regulations that call for an objective, empirical result: parts per million of X, time and a half for hours over forty, what have you, are like traffic laws, minimum liability insurance requirements and tax brackets. The standard is clear, compliance follows or not, and the penalty follows the 'not' part. What you are talking about isn't subject to a clear, objective standard, just some kind of desirable end result. Even if, and perhaps especially if, you simply instituted some kind of mandatory salary ratio from top to bottom and applied that to every enterprise in the country, such a system would never work.

And no one is talking about making everyone exactly equal, either.

No, I realize that. Just 'a lot more equal than is currently the case.' It's relatively easy to describe a preferred outcome. But, when that preferred outcome is a income distribution that approximates Sweden or Germanny, imposed on an economy the size of the US--and leaving aside the potential, if not certainty, for oppression, recession, capital flight etc--it just won't work. The regime would be too complex, enforcement would be a nightmare, and trying to make it work could easily be far more destructive than what we have today. My take is that it would almost, absolutely be more destructive, but I don't have a cite, so I'll limit to being IMHO.

And they were able to pull it off, and get away with it for the most part, because of their wealth and power over the political system.

They were able to get away with it because the whole damn country was complicit. Who was surprised to find out that loans were being made that almost certainly couldn't be repaid? People were talking about the Real Estate Bust for several years before it happened. And on the regulatory side, I'm pretty sure the regs you complain about were gamed into the system by the very largest players. Which is another problem with regulations of this particular nature: they get bent by the very largest players, often in a way that perversely produces a competitive advantage over smaller operations.

Finally, cycles have multiple causes: The Great Depression had several discrete causes, ditto the Dot Com Boom and Bust. They can cause faster than expected growth and deeper than expected recession.

Who was surprised to find out that loans were being made that almost certainly couldn't be repaid?

It wasn't just that there were loans made that couldn't be repaid. It's that the loans were bundled into securities, then sliced and diced into more securities, that were given AAA ratings by ratings companies paid by the banks. The loan defaults might have been foreseeable. The hiding of the risk, the double dealing of the securities - that was seen by the perpetrators, and that's what caused the meltdown.

What you are talking about isn't subject to a clear, objective standard, just some kind of desirable end result. Even if, and perhaps especially if, you simply instituted some kind of mandatory salary ratio from top to bottom and applied that to every enterprise in the country, such a system would never work.

Not everything I'm talking about is regulation, per se. Improving, for instance, education or public health or national infrastructure, has diffuse and broad economic benefits, whether it requires empoyers to X or not. Having publicly provided or funded options for, say, child care allows people to work rather than being on welfare.

What I'm talking about is providing public goods that give people from the middle class on down more ability to live productive lives, as opposed to taking such away because we can't afford to raise taxes on the relatively few people who are accumulating more and more of our national income and wealth.

What I'm also talking about are simple laws or regulations that disallow deceptive, opague and onerous interest schemes, fees, surcharges and what have you that are used to take money out of the pockets of resource-constrained people and put it into the pockets of resource-rich people and corporations - be they used by banks, pay-day lenders, rent-to-own enterprises, shady landlords, car dealerships or whatever.

What I'm talking about is not throwing the labor-organizing baby out with the bathwater.

Hell, I could throw in drug laws that put non-violent poor people and minorities into jails, completely fncking up families and their finances.

Are estate taxes so incredibly complex to administer? Or minimum wage laws? Or more progressive taxes on investment income? Or eliminating unproductive subsidies? (Would that be a simplification?)

What's so hard about any of this, other than the fact that there are monied interests and bought-off politicians in opposition to it?

Who was surprised to find out that loans were being made that almost certainly couldn't be repaid?

Alan Greenspan

Everyone knows that Dr. Pangloss is not the good guy in Candide, right?

That the economy is in a recession is tangential to the discussion, but it makes my point about cycles. They aren't going away, as bad as they are.

The trend in wealth concentration, wage stagnation, and income inequality is going on some 40 years now. It has nothing to do with the boom/bust cycle.

Subjective judgment. If most people prefer maximum personal mobility, and if they are able to have it, you say that is 'a big, bad deal'?

You speak as if needing a car to do anything outside of the densest urban centers in America is just a state of nature or an outcome of millions of individual personal preferences, rather than the result of very particular urban planning and zoning laws. Why are you so unable to step outside your own paradigms?

I've actually LIVED in Europe, and people there like "maximum personal mobility" too (whatever the hell that's supposed to mean). They can achieve it using some pretty remarkable public transportation infrastructures, and when they absolutely need cars, they rent them. Last time I spent an extended amount of time in Germany (a month), I used a car exactly twice.

And yes, I would say that planning everything in the US around cheap gas prices, ubiquitous car ownership, low-density development, and poor fuel efficiency is, actually, a "big, bad problem." It's a whole bunch of big, bad problems tied together, in fact.

Let's raise fuel taxes to what they are in Europe and then see how people feel about our current transportation and development strategies. I bet investment in rail and buses, and living closer to urban centers, will suddenly -- miraculously!!! -- become a lot more attractive.

The hiding of the risk, the double dealing of the securities - that was seen by the perpetrators, and that's what caused the meltdown.

I thought it was a butt load of people going into default, unserviced mortgages and thus, no real asset behind the security. That, and no solvent responding party on the credit default swaps.

What's so hard about any of this, other than the fact that there are monied interests and bought-off politicians in opposition to it?

Well, except none of it relates to the topic at hand, which is income and wealth inequality. What I infer from your list of particulars is that higher taxes converted to these items would materially change people's lives. I could debate some of these points, or point out that we have a huge national debt and huge state and city debts and new spending probably isn't in the cards, so it seems to me to be pretty much a moot point.

If the issue is simply higher taxes on the uber wealthy to fund more programs, then the issue is not income and wealth disparity, except perhaps as a by-product of lower taxes.

I thought it was a butt load of people going into default, unserviced mortgages and thus, no real asset behind the security.

When that kind of risk is made apparent on the books, the transactions don't fly. It was the fact that the risk was hidden in the bundled securities that the lending became so profitable.

Not misleading at all, and the fact that apartments and homes are more plentiful and cheaper here because we have more area to build on is beside the point.

Not beside the point at all. If you wish to compare the effects of regulatory regimes in terms of how they affect quality of living, you need to make an apples-to-apples comparison, or at least account for why one apple has a rind and a higher acid content. So... a little reductio ad absurdum to drive your point into the ground. Note that the following includes unsourced assumptions, but they'll not be overly controversial, methinks.

Let us assume New York County, New York has a more rigid regulatory scheme as pertains to building, maintaining, selling, etc. real estate (and higher real estate prices, and smaller average dwelling sizes), than Lake and Peninsula Borough, Alaska. By the logic you outlined above, we can meaningfully conclude from this that the regulatory scheme of New York County compares unfavorably to that of Lake and Peninsula Borough, as judged by the quality of life of the inhabitants (because more and cheaper real estate => better QoL), and therefore, for any random county, the Alaskan regulatory scheme for real estate is preferable to that of New York. The fact that the geography and population density of the two are not the same is beside the point.

[Wiki links for the two counties removed to try to stay out of the spam filter when re-posting this comment.]

Explain that, you must.

No time. No time. Must search for real socialism. I'll know it when I see it.

the potential, if not certainty, for oppression, recession, capital flight

Oppression? Raising taxes on rich people is oppression? Capital flight? From the biggest, deepest, most transparent (mostly) capital market by orders of magnitude in the entire world? Seriously?

You're hyperventilating.

Here. Try these and call me in the morning:

1. A small tax on financial market(s)transactions.
2. Drastically reform our patent law.
3. Lower the value of the dollar to encourage exports and domestic production.
4. Absent health care reform....allow folks to participate in the healthcare programs of other countries.
5. Subject those who are currently protected from the winds of foreign competition to, well, competition. Isn't competition a good thing? Why do we restrict it so for doctors, accountants, professors, and lawyers?
6. Re-level the playing field as between unions and management...or even tilt it in favor of organized labor.
7. Corporate governance reform.

These are just a few ideas. I see no burdensome regulatory regime as a result.

SOCIALISMiny!!

The http://www.lakeandpen.com/index.asp?Type=B_BASIC&SEC={890F8C3D-8322-4D6D-8DD0-1FA110B78653}> Planning Commission is a seven-member board appointed by the Mayor and confirmed by the Assembly. The Planning Commission is involved in subjects such as capital improvements, land use regulations, and overall physical and economic development of the Borough and its communities. Its primary responsibilities include the implementation of the Borough's Comprehensive Economic Development Strategy, Coastal Management Plan, Subdivision regulations, and Development Permit regulations.

Socialism. It's everywhere. Feel you the Force does!*

*and here I thought Yoda was a particularly odious Soviet apparatchek.

What I infer from your list of particulars is that higher taxes converted to these items would materially change people's lives.

That a very selective reading. I do advocate higher taxes on very high incomes to fund public goods that benefit people at all income levels, directly or indirectly. But I don't see how raising the minimum wage requires taxation, or ending subsidies, or easing drug laws, or strengthening laws that favor labor organizing. And estate taxes very much address wealth disparities.

I guess I have to try harder.

If you wish to compare the effects of regulatory regimes in terms of how they affect quality of living, you need to make an apples-to-apples comparison, or at least account for why one apple has a rind and a higher acid content.

I wasn't comparing the effects of the risk of regulatory schemes, I was comparing, as is often done here, wealth/income differences between Europe and the US and pointing out, validly, that even if people make less here (I'm not sure that's the case), they live as well or better than their counterparts, and even those who are somewhat better off, in Europe.

Oppression? Raising taxes on rich people is oppression? Capital flight? From the biggest, deepest, most transparent (mostly) capital market by orders of magnitude in the entire world? Seriously?

Context, BP. I was speaking directly to a regulatory scheme that would mandate reducing income disparity to match Germany or Sweden.

On the rest, I'll call you right now. I don't like transaction taxes because they are regressive and have to be taken at point of sale. You can't accumulate and only pay a tax after X number of transactions. I have no idea what you mean by drastically changing patent law. I sort of get what you mean on 3 and the remaining are too vague for me to comment on with any degree of specificity.

But I don't see how raising the minimum wage requires taxation, or ending subsidies, or easing drug laws, or strengthening laws that favor labor organizing.

I agree, these are not tax related. My bad.

I was speaking directly to a regulatory scheme that would mandate reducing income disparity to match Germany or Sweden.

Who has proposed such a scheme?

AFAIK Sweden and Germany don't even have schemes that mandate some specific level of income disparity.

"Mandated levels of income disparity" is a pure strawman. I suspect you know that.

There are a variety of reasons why income disparity has increased in this country over the last 30 to 40 years. They include:

Changes to the tax code.
Increased opportunities for offshoring less-skilled labor.
Extremely high compensation in C-level corporate management.
Deregulation of the financial industry.
General economic disruption caused by speculative bubbles, see also the immediately preceding item.

Possible things we could do at the public level to mitigate it could include:

Mild increases to the progressivity of the tax code. Realistically, this would basically mean letting the Bush cuts expire, as intended.

Provide incentives to employers to not use offshore labor.

Basic and obvious reforms to corporate governance so that C level dudes don't write each others' compensation packages.

Re-introduce obvious, sane regulation of the financial industry to limit the risks they can take with other people's money. Enforce existing laws so that people who make themselves rich by LYING TO OTHER PEOPLE go to jail.

If that particular set of causes and fixes doesn't float your boat, suggest some of your own.

But the levels of inequality that we are seeing are actually harmful to the US as a society. They're corrosive to any sense of basic fairness, and given the free and easy access to the political process that we have granted private money, they distort our political life in harmful ways.

This isn't obscure stuff, we just have to decide whether it's important to us to address it, or not.

So far I'm not seeing a lot of traction happening.

Since the topic touches Germany, let me add a few morsels.
The relationship of Germans to cars is similar to that of USians to firearms. Regulate at your own political peril. Freie Fahrt für freie Bürger!
The reunification created for a time a situation similar to the disparities found in the US. What still worked in the fomer GDR got destroyed systematically by companies form the FRG with considerable help from consevative politicians. Wages in large parts of Eastern Germany are still lower than for comparable jobs in Western Germany. Until quite recently public employees East officially got only a certain percentage of the legally fixed amount for the same work as public employees West due to lower living expenses. Directly after reunification there was a really scandalous policy for Beamte (civil servants. that's a special class over here with certain privilegies and duties). West-Beamte who got posted to the East got EXTRA money (Buschzulage = wilderness bonus) because of the 'hardship' to have to live there (while their 'native' Eastern colleagues got LESS than standard). That had to be changed rather quickly to avoid real trouble in the ranks.
Germany has no official minimum wage (it is currently under discussion to introduce it). The main reason is that unions are still well organized (transregionally and to a degree uniting former smaller unions for several professions) and thus can bargain from a similar positiom of strength as the employers. That way threats to just move a factory from one corner of the country to another do not usually work since the union in both places will be the same.
---
As an aside, a few of the unions have grown so big that they show similar behaviour to the corporations. Employees of unions don't have a union themselves and are often treated accordingly, i.e. badly.
---
I'd say the German system is working but could not be easily exported or further expanded. It was able to cover the differences between North and South (who changed their position of economic strength at some time during the Cold War with Texas..eh..Bavaria becoming rich after being a poorhouse for decades while once properous Northern Germany declined) and managed to absorb the former GDR but just barely.

If you control for the deregulation of the financial industry I wonder if there is much income disparity trend left. Because back to the investment vs. speculation concept it is frankly astonishing how many of the very tippy top earners are in finance. (And I don't mean Gates or Jobs self-investment either).

Tx,

Context? Izza't what you call hyperventilating dyspepsia?

Item 1: They have this tax in England. The London securities market is quite vibrant.

2-5. Read Dean Baker's "Beat The Press" blog for two weeks, and you'll get an intro or link to these ideas.

6. Vague? Have you not heard of Card Check? Have you not heard of Taft-Hartley? How 'bout we repeal it?

Call and raise.

If you control for the deregulation of the financial industry I wonder if there is much income disparity trend left.

My understanding is that there are a couple of dynamics involved, one of which is *definitely* very large increases in earnings at the very highest percentiles. So, the more elite financial professionals and C-level executives at large corporations, mostly.

But in addition to that, real wages from the middle on down are also basically flat or maybe slightly negative for the last couple of decades.

Added to that are the real impoverishment of the folks who have lost jobs since '08 and have never been able to either get a job since, or get a job at a comparable rate of pay.

I'm sure that this is all fascinating, but my concentration, none too strong at the moment anyway, got derailed at:

an apartment that is larger than the average Swede

And somehow never got back on track. My loss, I'm sure.

If you control for the deregulation of the financial industry I wonder if there is much income disparity trend left.

If you throw in tilting the playing field against labor organizations, our high dollar policy, the reluctance of the Federal Reserve to take its mandate to promote full employment seriously, deregulation of other industries (trucking, airlines, etc.), tax giveaways for the already rich, so-called "free trade" deals, and the promotion of protectionism for favored classes, why yes, I'd wonder the same thing.

Your average Swede is open to time-sharing.

The larger Swedes can be subdivided.

The very small Swedes, so tiny you can hardly see them, tend to live alone, despite being r-roomy in the hips.

I understand squatters are now inhabiting formerly very expensive and high square-footage residential real estate in Texas, even legally in some cases.

Apparently, in Texas, the Community Reinvestment Act incented even wealthy people to leverage beyond their means and then move to Sweden to escape oppression.

If that particular set of causes and fixes doesn't float your boat, suggest some of your own.

Happy to: first, quit fixating on the income/wealth disparity thing and keep in mind the progressive view is a minority view, as is the libertarian. Also, as an operating premise, be open to the notion that, historically, other than defense, the left has a poor record of cutting gov't spending. Finally, the deficit is a big issue for most people. Maybe not Krugman and his followers, but most others. Offering to cut in the out years in exchange for tax increases and stimulative spending in the near term is not a credible offer.

Against this background, and in this order, more or less:

1. cap spending for the next two years at current levels, with congress free to reallocate within the capped budget as it sees fit. This is actually possible, IF there was a president who would veto any budget that failed to comply. So, I capitalized "if" for a reason.

2. drop the employee side of FICA for people making less than a combined income of 150K for two years and phase back over the next two out years. This is stimulative, hopefully, and also relieves business of having to give pay raises for these two years. Essentially, business can budget labor costs for two years.

3. lower the corporate tax rate to 15% AND legislate an opt in/opt out regime for US companies that hide their revenue overseas through transfer pricing and other dodges. For companies that opt in, their products from overseas come into the country duty free. For these companies, all income earned overseas is deemed earned in the US with a tax credit for taxes actually paid overseas. For opt outs, a duty is imposed equivalent to the 15% income tax. Make enforcement so unpleasant that it's easier to opt in.

4. Reinstate the Clinton rates on income over 250K per couple, but apply to deficit/debt reduction only.

5. Deem 80% of executive income "earned" in the year the benefit is conferred. Allowed deferred stock options up to 20% of compensation package, on the theory that it gives execs an incentive to cause long term enhanced performance.

6. change the holding period for exec comp stocks to 3 years for cap gain treatment.

7. progressively tax cap gains in 5% increments at 750K/1.5mm/3mm rates.

8. estate tax of 40% on liquid portions of estates in excess of 25mm, and 20% on land, fixtures and capital. Gray areas created by accounting voodoo are presumptively liquid. Make overcoming the presumption difficult.

9. make "controlling officers" strictly liable, i.e. no "knowing" or "intentional" scienter requirement, for material mistatements in public filings, disregarding titles and the corporate form. Jail time for bad actors. As a subset, simply SEC filings so that they can be read, as to their material issues, in one sitting by a reasonably well educated lay person.

10. targeted regulation of non-standard securities with capitalization requirements and jail for book-cookers.

After that, it's 'everybody go to work and look mainly to themselves for getting by in this imperfect world.'

quit fixating on the income/wealth disparity thing and keep in mind the progressive view is a minority view

I'm not sure it's your place to tell me what to "fixate on". It's not your place to tell me what to think is important, or what to be concerned about.

That said, it is, however, abundantly clear to me that my point of view is not the majority point of view. I've come to terms with it.

Also, as an operating premise, be open to the notion that, historically, other than defense, the left has a poor record of cutting gov't spending.

Nobody, and I do mean nobody, has a good record of cutting government spending.

Nobody. Check the numbers.

Finally, the deficit is a big issue for most people.

It is for me as well.

I'm not looking to expand any kind of government program. I want people to get paid more for the work they do, because their work is what creates wealth.

That's pretty much 100% of my point of view on any topic having to do with political economy, in this country, at this time.

People who do the thing that folks pay for should get more of the money. Period.

That doesn't require any kind of weird governmental regime. More than anything else, it's a ground level cultural thing. It's just not one we have.

Here in the US we place inordinate value on the accumulation of wealth. I think that's f**ked up, by which I mean corrosively antisocial and destructive of democratic and/or republican self-governance. And those are just the pragmatic aspects.

All of the above is obviously my personal point of view, and reflects my personal values, just like the idea that no impediment should be placed in the way of folks who want to get as filthy stinking rich as they like is yours, and reflects yours.

I'm not asking you to 'quit fixating' on your point of view. It wouldn't occur to me to do so.

I'm just articulating mine.

I focus on the disparity of wealth and income in this country because I believe it is harmful, to all of us. This is not some weird idea that I've pulled out of my butt, the historical record is more than on my side.

I'm not sure it's your place to tell me what to "fixate on". It's not your place to tell me what to think is important, or what to be concerned about.

Russell, I wasn't directing that point to you specifically. You asked for my thoughts on the general subject of how to fix things. I think the recurring themes on the progressive left are misplaced and don't lead to practical solutions. As I've been told here, many times by many commenters, my POV is wrong, usually wrong in a big way. But, those general comments are simply the background for what I think could be done.

I focus on the disparity of wealth and income in this country because I believe it is harmful, to all of us. This is not some weird idea that I've pulled out of my butt, the historical record is more than on my side.

It may very well be harmful. The problems is, a direct fix is both unattainable, as a practical matter, and could very possibly be far worse than the ill. A strong centrist candidate could get a number of things done that are, conceptually, capable of implementation.

There are those on the conservative side who fixate on somewhat analogous concerns, e.g. the number of African American children growing up in single family homes. The problem/solution range of thoughts is pretty broad and often draconian. For my part, like income inequality, only indirect methods will mitigate the issue, and even then it's a function of time. A lot of time, depending on the problem.

So, to close this out, I wasn't personalizing the discussion. I was attempting to frame the premises on which a solution could be built.

The comments to this entry are closed.

Blog powered by Typepad