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Fair Share Campaign Financing

By Brian T. Lynch, MSW

RahmAndWilson

On April 21, 2018, the Chicago Tribune reported that Mayor Rahm Emanuel added $1.7 million to his campaign in a single day. The explanation that followed encapsulates what’s wrong with our campaign finance laws. As in other states, the Illinois campaign donation system is set up like a board game, specifically a corporate board game.

If you are an actual carbon based person in Illinois you cannot donate more than $5,600 to a political campaign, unless you own a business. If you own a business you can contribute twice that amount on behalf of your business. And if you register as a political action group you can donate nearly 10 times the individual contribution limit, up to $55,400. These campaign limits are entirely lifted if one candidate in a race decides to give their campaign $100,000 of their own money.

That’s what happened in Chicago. Emanuel’s Republican opponent, Willie Wilson, boosted his campaign with $100,000 of his own money. Twenty-four hours later the Mayor added a million dollars to his campaign from just three wealthy donors plus another $700,000 from other donors.

In the Citizen’s United decision the US Supreme Court said, in effect, that money is a form of free speech. This may be true in some intellectual perspective of the court, but if true in the real world, how can there be a $5,600 free speech limit on voters? How can there be any limits at all?

In our Republic we have this bedrock principle that says, “One person, One vote.” Everyone has an equal say in who represents their interests. Corporate governance operates on a different principle that says, “One share, One vote.” You get one vote with every share of the company you buy. The bigger your financial stake is, the greater your say is within the company. Wealthy shareholders like this system because their voting power is proportional to their financial power.

The concept of one person, one vote is an anathema to them in our democracy. They feel their greater financial stake in the economy should also entitle them to a greater political say in our government. This is why they have rigged the campaign finance system.

As a thought experiment, try imposing the “One person, One vote” principle to campaign financing. One person’s donation limit in Illinois is $5,600. That means one vote is equal to that amount or less, mostly less. Most voters don’t contribute to political campaigns. Even if they do, the individual donation limit may be well beyond their means. The median income for a family of four is close to $56,000 a year, so a maximum political donation would cost them 10% of their annual income. Even a 1% donation would be well beyond their means. One tenth of one percent of their income, or $56 dollars, might be feasible for most voters, and this amount is 100 times the current limit.

If you go with the “$5,600 limit equals one vote” rule, then being a business owner gives you three votes, one personal vote and two votes for your business. Join another business owner to form a political action committee you get eight votes, five votes for your half of the PAC, three for your business and one personal vote.

Then Willie Wilson upsets the apple cart in Chicago by donating $100k to his campaign. Now just three wealthy donors get a total of 180 votes or more for Mayor Emanuel’s campaign. The actual impact on how a candidate might responds to donors is enhanced by the fact that tens of thousands of voters contribute nothing. Additionally, because individual donor limits are 100 times what the average voter can afford, the impact of those three big donors in the mayor’s race is more like 180,000 votes. So, if you are Rahn Emanuel, who are you going to listen to?

Money is not free speech. Money is power.

If we agreed to pair the power of money to the power of the vote, then one voting share should have the same price tag for every eligible voter. It should not favor businesses or the wealthy as it does now in our corporate governance style of campaign finance. This also means only eligible voters should be able to donate; No PACs or businesses. If a businessman or organization wants to lobby for a special interest, they should lobby directly with the people to gain influence rather than lobbying our politicians. It would mean that fair share campaign finance limits would either be equal and affordable for everyone, or without donation limits but with maximum transparency so every voter can see exactly which candidates the big donors are buying.

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The Promise Makers of Wall Street

by Brian T. Lynch, MSW

Not long ago a dollar was backed by the promise that it could be exchanged for gold or silver. To back up that promise the US gold reserve was established at Fort Knox in Tennessee, for example.  The confidence of our people, and of the rest of the world, in our currency was far less certain than it is today.  The gold standard was perhaps a necessary step towards establishing the good faith of the US Government.

Look at a dollar bill and you will see that it is a Federal Reserve Note. Before the creation of the Federal Reserve Bank, many banks issued their own currency, or “bank notes”.  The worthiness of those bank notes wasn’t consistent. The Federal Reserve Bank standardized and stabilized our national currency. It’s important to remember that the word “note” is another word for an I.O.U.  A bank note is a promise that a coin or a paper document  can be exchanged for a stated amount of tangible value.

The important point for this discussion is that all currency is a form of debt. A U.S. Dollar is a government backed loan. Our trust in its worthiness has become an intrinsic faith in our government’s ability to guarantee its face value. (Which is why the Congressional Freedom Coalition’s talk of not raising the national debt ceiling is so dangerous.)

I recently saw “Junk” on Broadway. It is a play partially based on the story of Wall Street financier Michael Milken.  It is a cautionary tale of money and corruption. Milken’s new approach to finance made him a billion dollars over just four years in the 1980’s. He was like a god on Wall Street and all the normal rules didn’t seem to apply to him, until he got caught breaking the laws he ignored.

More than that, Junk is the story of the paradigm shift Milken pioneered in how modern bankers and business leaders have come to understand wealth and power.  It is a view of wealth that can be summed up by the slogan, “debt is an asset”.  Specifically, any financial instrument that reliably conveys the promise of value to another person or entity can be used as a form of currency. Government regulated Federal Reserve Notes are no longer central to the exchange of wealth.  Nor is any physical collateral or real estate necessary. It seems almost any promise of payment for money owed is sufficient to make financial transactions on Wall Street. These creative financial instruments often have cleaver name and deceptive structures. They are increasingly complex and difficult to understand or regulate. But they all have one thing in common, they are all based on debt. They all create wealth on a promise.

In  Milken’s case, he began with generating cash by selling very  high risk, but high yield bonds and then using those bonds as collateral to finance corporate takeovers. These “junk bonds” (as they are still called) were used like currency to finance “leveraged buyouts” of other businesses. Whole divisions within companies purchased in these buyouts often had to be chopped up and sold off to pay back these high interest bonds.

The charges brought against Milken were ordinary financial crimes, such as insider trading. But his creative financing lead to a whole new banking culture that upended how business was conducted around the world. It has lead to an economic environment where new methods for wealth extraction competes against more conventional methods of wealth creation on a global scale.

The growing methods and culture of wealth extraction transfers wealth but doesn’t create new wealth. It doesn’t grow or manufacture anything. It only creates more opportunities for the wealthy to grow richer while disadvantaging mid-sized businesses and manufacturers. It is one of the drivers leading us into the next gilded age, but it hard to see just where it is taking us. It is harder still to know what we can do make our economy work for everyone again.

 

Trump, the Marketer-in-Chief

by Brian T. Lynch, MSW

If anyone seriously thought that Donald Trump was running for President out of high mindedness, you can give it up now. He was running to elevate his brand and market the Presidency for personal gain.

How so?

Well, he just spent months on the campaign trail wearing a red cap with his campaign slogan, “Make America Great Again” on it. It became part of his campaign swag.

Every president in history, and any future president, would retire that cap and donate it to the Smithsonian Museum or feature it in their future presidential library. Not this guy. He fully intends to market the image and make a killing off of it. Expect to see some version of it for retail next Christmas while Donald Trump is sipping brandy in one of his Presidential palaces. Billionaires!

How much does this true-spirit-of-Christmas ornament go for this year?

It’s yours for just $149 dollars and no sense! This is the sort of change I never expected, the selling of the Presidency by the President-elect himself.

More than 45 million people, or 14.5% of all Americans, lived below the poverty line last year. I’m certain none of them can afford this overpriced campaign schlock. Perhaps the proceeds for this sale are going to fund food pantries or house the homeless over the holiday season?  Well, there is nothing mentioned in the advertising to suggest that.

Maybe this isn’t really being marketed by President-elect Donald Trump. Maybe his business isn’t really financially benefiting. Could it be that some other enterprising fool is cleaning up on his political success?

I thought of that, so I checked. According to the internet advertisement, the link to buy the “classic red MAGA hat” is DonaldTrump.com. It’s his Trump store. To be sure there wasn’t a mistake, I went to the Whois.com website and confirmed that the domain name is registered to THE TRUMP ORGANIZATION (see below).

So there it is! Get yours America! (If you can afford it.) Is this supposed to be our new normal? Do we really have a President who is a businessman for himself first and President for the people last? 

This Christmas you should grab a bottle of Trump wine and drown your sorrows, because no one at the highest reaches of government will be marketing you cares away. 

 

Making Corrupt Politics Illegal

by Brian T. Lynch, MSW

For most American’s, democracy is dead. A Princeton study found that if over 90% of us support a bill or policy idea in Congress, it has about a 30% chance of passing. BUT, if over 90% of us really hate a bill or policy idea in Congress… it has about a 30% chance of passing. Why? The system is corrupt. Our democracy is broken.

So here is a novel idea.Make corrupt political practices illegal. On the federal level alone the top 200 most politically active companies spend over $5.8 billion a year funding politicians (buying our democracy), often promising politicians high wage jobs after they leave office.  All of this allows the lobbyists to write the laws that congress actually passes, sometime without even reading the bills first. In exchange for all this political cash, these 200 politically active corporations receive over $4.4 trillion in favorable tax supports. That is equal to a 75,900% return on their political investments. It’s a racket and it’s all perfectly legal.

As the video below explains so well, that mean that 90% of everyone in the lower economic groups in America has “a minuscule, near zero, statistically insignificant.” influence over what laws our representatives pass in the Federal Congress.

Watch this video that explains the finding of a scholarly study out of Princeton. [Note: prior link was incorrect. This is the corrected link]

Copy and paste link to your browser: https://www.youtube.com/watch?v=5tu32CCA_Ig&spfreload=1

The creator of the above video have a possible solution which they explain in their second video, How to Fix Corruption in America. The fix is to make political corruption illegal though passage of a simple law. But getting anything passed in the Federal Congress to fix the way they do business now is impossible. So the strategy is to start by passing the law locally and then statewide so that federal representatives elected from these states aren’t already tainted by corrupt politics. Once enough states pass the anti-corruption law, there will be enough congress people from those states to pass a federal anti-corruption law.  Here below is the video:

Copy and paste link to your browser: https://www.youtube.com/watch?v=lhe286ky-9A

And so, like all politics, the solution to make our voice count once again is in our hands if we act locally while thinking globally. All politics is local. Let’s make local politics the place where we restore democracy in America.

If you are disturbed by these facts, please do your part in getting this information out to your friends across the internet. and get active locally to start turning things around. The level of political corruption is inversely proportional to the level of citizen involvement.

De-Cantoring Big Business

by Brian T. Lynch, MSW

EricCantorWallst

The defeat of Eric Cantor in his primary, and the article below, is instructive because it illuminates the growing populist enmity towards politicians who serve business interests over voter interests. This is at the heart of the growing rift in the Republican party. The GOP establishment serves the interests of Big business over all else and almost mockingly manipulate ordinary voter segments and the small business owners they claim as their base.

The beltway seems baffled by this, but the trend has been clear for some time. Putting people first in politics will be key to winning over the real voter base of both parties going forward. And peeling off small business owners by promoting specific policies that support them and level their playing field against corporate abuses is an essential element for Democrats. Democrats should be the champions of small community business leaders and ordinary citizens. They should be resist the growing corporate influence over government and our lives (without being overtly hostile).

Campaign funding should also be as populist and grass roots as possible, or at least have that as a prominent feature. People should be able to contribute small donations to their candidate’s campaign on line using their pay pal accounts, or they should be able to text a contribution on their smart phone. This not only sets the right tone, it takes action against the influence of big money in politics even if particular  campaign must still rely on big donors..  But note that in this race Eric Cantor outspent Brat by a  40 to 1 ratio.  The strength of Brats message overcame this huge spending advantage.

As I tweeted earlier today in reference to Cantor: In drawing democrat-proof districts the GOP created congressional district that are toxic to traditional conservative Republicans as well. And traditional conservative Republicans are virtually all big business Republicans. So there is a clear message here for all Democratic candidates. Stop cozening up with corporations and start representing real people.

If Democrats messaging can thread this needle they may be able to pick up disaffected moderate Republican votes while making it harder for radical right-wing Republican’s to vote for GOP supporter of ever more crony capitalism.

Here is a snip of the Nation’s article by John Nicols:

from The Nation

Breaking news and analysis of politics, the economy and activism.

Eric Cantor Defeated by a Conservative Who Rips Crony Capitalism

John Nichols on June 11, 2014 – 12:21 AM ET

 

http://www.thenation.com/blog/180189/eric-cantor-defeated-conservative-who-rips-crony-capitalism#

The DC-insider storyline about this being a great year for the Republican establishment is undergoing a rapid rewrite. For the first time since the post was formally established in 1899, a House majority leader has been defeated in a bid for renomination. And as political prognosticators, Republican stalwarts and savvy Democrats search for explanations, they are being forced to consider complexities they had not previously entertained — including the prospect of conservatives who are ready and willing to criticize big business.

Eric Cantor, the face of the GOP establishment, one of the party’s most prodigious fundraisers and the odds-on favorite to become the next speaker of the House, lost his Virginia Republican primary Tuesday to a challenger who promised, “I will fight to end crony capitalist programs that benefit the rich and powerful.”

 

Dave Brat, who defeated the number-two Republican in the House by a 56-44 margin, tore into big business almost as frequently as he did the incumbent. “I am running against Cantor because he does not represent the citizens of the 7th District, but rather large corporations seeking insider deals, crony bailouts and a constant supply of low-wage workers,” declared the challenger.

 

Image credit: www.businessinsider.com

Our Chronic Wage Stagnation, Symptoms and Treatments

by Brian T. Lynch, MSW

Decades of frozen wages relative to our expanding wealth is the root cause of many economic problems. More people falling into poverty, a shrinking middle class, declining retirement savings, increased welfare spending, higher unemployment, more aid to working families, declining government tax revenues, diminished funding for Social Security and Medicare, a sluggish economy (despite a record high stock market), slow job growth and heighten social tensions along the traditional fault lines of race, ethnicity and gender are among the many issues influenced by decades of wage stagnation.

Beginning in the late1970’s most American workers received only cost of living adjustments in their paychecks while their real earnings gradually diminished each year. Employers increased hourly wages to keep pace with inflation, but they suddenly stopped raising wages to reward workers for their productivity. Earned income has declined for most Americans as a percentage of our gross domestic product (GDP) This amounts to a dramatic and intentional redistribution of new wealth over the last 40 years. Nearly all this new wealth has gone to the rich and powerful.

The visual evidence of wage stagnation relative to hourly GDP is apparent in one powerful graph (below). You may have this it before.

hourly GDP vs Wage graph

 

SYMPTOMS

The effects of wage stagnation on our economy have been gradual and cumulative. Its impacts don’t raise red flags from one year to the next, but the cumulative effects are obvious. The trending rise in income inequality, for example, was missed entirely for 25 years, and then it still took another decade for it to catch the public’s attention.

According to USDA data on the real historical GDP and growth rates[i], the U.S. economy grew by $368 trillion between 1976 and 2013. That is a 109.4% rise in national wealth, more than a doubling of the national economy. Almost none of that wealth was shared with wage earners. If hourly wages continued to grow in proportion to hourly GDP, as it had for decades prior to the mid-70’s, the current median family income today would be close to $100,000 a year instead of the current $51,017 per year.[ii]

Think about that for a moment, and about all the implications for wage based taxes and payroll deductions. For simplicity sake, let’s say wages would have double if the workforce received productivity raises. That would significantly reduce the number of families currently eligible for taxpayer subsidies such as SNAP (food stamps), housing assistance, daycare and the like. At the same time the workforce would be generating much more income tax revenue.

Consider next the impact wage stagnation has had on payroll deductions. Social Security and Medicare premiums have not financially benefited from the growing economy. Double current wages and you double current revenues for these programs as well. Moreover, the economy has grown at an annual rate of 2.9% since 1976. If Social Security and Medicare had benefited from this new annual wealth, the effect on current revenue projections would be profound. We would not be looking at a projected shortfall any time in the future.

The impact of wage stagnation on consumer spending is perhaps the most insidious problem. While worker wages have stagnated, the production of goods and services has grown. How is that possible? Some of this production is sold in foreign markets, but domestic markets are still primary. And it is here where economic theories have done a disservice.

A generation of economists and business leaders have treated consumers and workers as if they were not one and the same. This has fractured how we look at the economy and given rise to the notion that labor is just another business commodity. It disguises the fact that labors wages fuel consumer spending. Wages help drive the whole economy while wage stagnation reduces consumption over time.

To overcome this effect we have seen the need for mother’s to enter the workforce in mass, and for banks to invent credit cards to bolster consumer spending. These and other creative measures can no longer forestall the decline in worker spending. So while the financial markets ride the tide of America’s growing wealth, the fortunes of those who have been cut off from that new wealth continue to slip beneath the waves.

As for social tensions among different racial, ethnic and gender groups, the effect of stagnant wages relative to the nation’s growing wealth creates a lifeboat mentality and zero sum thinking. For the first time in many generations parents are worried that their children will have less in life than they had. When the whole pie is shrinking a bigger slice by one person means a smaller piece for others. This thinking exists because for over 95% of wage earners the economic pie hasn’t grown in 40 years.

TREATMENTS

You may not be ready to accept chronic wage stagnation as “the syndrome” underlying our economic woes, but it’s also true from my experience that having solutions (or “treatment options”) at hand often makes it easier to identifying the problems they resolve. With that in mind, I want to offer some solutions to America’s low wage conundrum.

One direct approach to raising worker wages is the one currently being discussed in the public dialogue, raising the minimum wage. This benefits the lowest paid workers and also puts pressure on employers to increase pay for other lower wage earners. The current target of $10.10 per hour would still leave many families at or below the poverty line. Workers making the new minimum wage would still be eligible for some public assistance for the working poor. While passing a minimum wage law is at least possible, this option is not a systemic solution to wage stagnation. Even index the minimum wage to inflation would not compensate for declining wages relative to GDP growth.

Another direct approach to ending wage stagnation is to pass a living wage law. This would set the minimum wage at a level that would allow everyone working full-time to be financial independent from government assistance, including subsidized health care. A living wage law could be indexed to the local cost of living where a person is employed. This is idea because it takes into account local economic conditions which are determined by market forces rather than government edict. But passing a living wage law in the current political climate is unlikely.

There are other ways of encouraging wage growth that don’t involve direct wage regulation. One idea would require the federal government to recoup, through business income tax rebates, the cost of taxpayer supported aid to working families from profitable businesses that pay employees less than a living wage. Employee wages are easily identified through individual tax returns. Eligibility for taxpayer supported subsidies are relatively easy to estimate as well, so recouping public funding to support a company’s workforce is a practical possibility. A portion of the recovered money could be paid into Social Security and Medicare to make up for lost revenue due to substandard wages.

A welfare cost recovery plan could gain popular support given the growing public resentment towards taxpayer funded social programs. At least 40% of all full-time employees in America currently require some form of taxpayer assistance to financially survive. More importantly, this plan places the burden of supporting the workforce back on profitable businesses where the responsibility lies.

Another solution has been suggested by former US Labor Secretary, Robert Reich, and others. They support proposed legislation, SB 1372, that sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break. Those with high ratios get a tax increase. This would effectively index worker wages to CEO compensation in a carrot and stick approach to corporate taxes. The details and merits of this approach is outlined elsewhere.[iii]

Do U.S. businesses have the financial capacity to offer higher wages to their workers? I would like to answer that question with another graph that you may also have seen before.

Credit: Blue Point Trading http://www.blue-point-trading.com/blue-point-trading-market-view-june-07-2012

There is a clock ticking somewhere in the background on this issue. There is a point somewhere in the future where it will be too late to fix wage stagnation through the normal democratic processes. History has proven this to be true. We are not at that point now, but we are past the point treating wage stagnation earnestly.

______________________________________________________

[i] Link: Real Historical Gross Domestic Product (GDP)

[ii] As of 2013 the median family income of $51,017 x GDP growth of 109.4% = $104,796 per year

[iii]  Link: Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs

The Worthy and Unworthy Rich

By Brian T. Lynch, MSW

How should sensible people respond to divisive attacks on the poor and vulnerable? Should we begin making similar distinctions between the worthy and unworthy rich? Should we affirm those who earned their great wealth and provide social benefit but rescind all advantages given to those who use their inherited wealth to squeeze the people and their government for still more?

It should be obvious that social polarity is not between Democrat and Republican, or between liberal and conservative, but rather where it has always derived, between rich and poor.

http://aattp.org/gop-senate-candidate-republicans-must-turn-poor-against-each-other-video/#comment-190804


GOP Senate Candidate: Republicans Must Turn Poor against Each Other (Video)



Watch N.C. House Speaker Thom Tillis explain: .What we have to do is find a way to divide and conquer the people who are on assistance,” 

Tillis said. “We have to show respect for that woman who has cerebral palsy and had no choice, in her condition, that needs help and that we should help. And we need to get those folks to look down at these people who choose to get into a condition that makes them dependent on the government and say at some point, ‘You’re on your own. We may end up taking care of those babies, but we’re not going to take care of you.’ And we’ve got to start having that serious discussion.”

 ATTP.ORG