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In New Jersey, as in many other states with conservative Republican Governors, the state civil service pension systems are under attack. A friend of mine, who has followed Governor Chris Christie’s rhetoric in the newspapers, commented about how reasonable this sounded since the system seems to be going broke. But the story of the pension system in New Jersey is more complicated that the current political sound bites. Let me tell you a true story about how civil service pensions came to be a target for public ridicule.
But things were changing in 1979 when I began my civil service career, even though I didn’t know it at the time. Big business had begun organizing politically and started spending big bucks on lobbying government for laws and regulations more favorable to business. Industry organizations were created to raise money and coordinate anti-union marketing campaigns. Ronald Reagan came into power in 1980 and set the tone for union bashing by crushing the air traffic controllers union. Private sector wages, which up to that time always rose in to proportion to increases in hourly GDP, were frozen and have remained frozen ever since. A fear campaign and actual business tactics based on globalization made jobs less secure. Private company pension systems were intentionally dismantled by big corporations to quarterly boost profits. Profit sharing arrangements took their place initially so workers had to invest in their company for their hope of retirement income. Then Wall Street saw all this money and wanted some action. They got congress to pass the IRA laws and all that pension money went to them.
Instead of real raises, businesses only offered cost of living adjustments, which keeps up with inflation but doesn’t share the extra wealth that the growing hourly GDP created for their employers. That extra wealth went to CEO’s and wealthy stockholders, beginning the cycle of great income disparity we have today. At the same time, Reagan cut the top marginal tax rate from 70% to 28%, a windfall for the rich and a huge loss of tax revenue that the rest of us had to bear.
So while the raises, salaries and benefits I received were always sub-par compared with the private sector during the first half of my career, declining private sector wages and benefits, rather than civil service raises or improved benefits, is the reason civil service looks so good today. In fact, civil service benefits have been steadily eroding for the last 15 years but this decline is slower than the collapse of private sector benefits. Civil service salaries also have barely budged in years and actually declined when you factor in inflation. But the assault on private sector salaries and benefits makes civil service look great by comparison only.
Know this, if corporate business interests had not conspired to suppress wages in America over the last 40 years the median income for a family of four today would be over $100,000/year. Instead it is shrinking and down to $51,000/year.
My point is that people in this country who work in the private sector have to fight back to regain a fair bite of the wealth they create for their employers. Workers need to re-organize and demand their fair share of our GDP. Rather than tearing away at civil servant pensions, people should be working to recreate what has been taken from them and use civil service as the framework and model to rebuild private sector retirement security.
There are particulars about why the pension system in New Jersey is in so much financial trouble. It isn’t because it is too generous. It is in trouble because when New Jersey was flush with money during Governor Christie Whitman’s (R) term she stopped making payments. She said she did this because the stock market was booming at that time. She said the pension system was way over-funded and didn’t need more cash. By the time she finished bankrupting the state with massive tax cuts and increased credit spending, Governor James Florio (D) didn’t have the revenue to pay into the state pension system during his entire term in office. This default model became a habit with subsequent Governors. Nothing, or only fractional amounts, were paid into the retirement system for the last 20 years. Governor Chris Christie (R) refused to put money into the system a few year back, when he had the money to pay, saying he didn’t want to put money into a broken system. This is crazy talk since it was the Executive branch that broke the system in the first place by doing exactly what he was doing.
The New Jersey State Pension system is, to a lesser extent, also in trouble because it has been abused for years by politicians bumping up the salaries of their political cronies just before retirement so they get huge pensions that they didn’t deserve or contribute towards. Politician’s take advantage of the way pensions are calculated to reward their buddies.
Republican’s increase our public debt by lowering taxes on the wealthy, raising corporate welfare and starting wars. If you are surprised by this bar graph then you then you need to shop around for a more reliable news source.
Corporate Welfare Grows to $154 Billion even in Midst of Major Government Cuts
Editor’s Note: Even as the federal government executes major cutbacks, it’s giving huge subsidies in the form of tax breaks to industry, a fact legislators rarely acknowledge. The Boston Globe recently published a thorough and eye-popping report detailing the nature and extent of these breaks. We think it’s a must-read.
By Pete Marovich
First published in the Boston Globe
WASHINGTON — Lobbying for special tax treatment produced a spectacular return for Whirlpool Corp., courtesy of Congress and those who pay the bills, the American taxpayers.
By investing just $1.8 million over two years in payments for Washington lobbyists, Whirlpool secured the renewal of lucrative energy tax credits for making high-efficiency appliances that it estimates will be worth a combined $120 million for 2012 and 2013. Such breaks have helped the company keep its total tax expenses below zero in recent years.
The return on that lobbying investment: about 6,700 percent.
These are the sort of returns that have attracted growing swarms of corporate tax lobbyists to the Capitol over the last decade — the sorts of payoffs typically reserved for gamblers and gold miners. Even as Congress says it is digging for every penny of savings, lobbyists are anything but sequestered; they are ratcheting up their efforts to protect and even increase their clients’ tax breaks. [snip] http://reclaimdemocracy.org/corporate-welfare-tax-breaks-subsidies/
Here is how the rise of corporate welfare looks in my state of New Jersey, and note in particular how it has grown under Gov. Chris Christie:
Regardless of what you have been lead to believe about the evils of unions, there is no question that organized labor is responsible for creatiing the middle class and the good life as we know it today. But all that is in decline as anti-union sentiment grew in response to organized business interests in the 1070’s. I say this because I don’t see anyone else point out these facts. Here is another graphic view of how middle class income has declined in lock step with union membership over the years. Also, you will see that the savings in employee wages have gone directlty to the top 1% creating the huge income and wealth disparity we have today. Check it out:
It is clear to me, at least, that the heart of our economic woes is due to 40 years of wage suppression. This results in a declining middle class, a growing number of people falling into poverty, a decline in federal income tax revenue and an added burden on government to support a growing number of poor, working poor and unemployed Americans. You can’t separate chronically lower wages from our declining consumer spending. Regardless of what the economists say, if people don’t have money to spend the economy slows down and jobs disappear. Stocks are doing so well because so much of our financial sector is based on even more depressed foreign labor, yes, but also on depressed wages here at home.
If corporations what to stimulate consumer spending here, and make America attractive to foreign investors, they need to raise wages. They won’t do that because they personally benefit, financially, by keeping labor costs down. Their corporations benefit from the artificially cheap US labor pool created by government aid to the working poor for housing assistance, WIC, food stamps, daycare, etc. And then these bastards making all the money have the nerve to pit us against each other by promoting the lie that the working poor are somehow less worthy, or that they are stealing from us. If corporate leaders don’t see the light then the only alternative is for the work force to re-organize itself and demand higher wages.
Imagine owning a small manufacturing business with 25 happy employees. After paying overhead , suppliers, employees, benefits and your Potter’s Bank business loan you have just enough to get by.
One day your suppliers find they can’t get raw materials because of artifical shortages and price spikes caused by futures speculators that work at bank. The suppliers they need to borrow money to pay for higher priced raw materials, at least until they can adjust with worker layoff and cutbacks. Potter’s Bank charges them higher interest rates because now they’re “risky” borrowers.
Your suppliers must pass along their higher costs to you, so now its your turn to cut wages, benefits and hours. Your employees grumble and can’t keep up with the workload. Production stalls, but also sales start to drop because all the affected workers are also your customers.
One day you discover you can’t pay the bank loan, so you go to Potter’s Bank to renegotiate terms. Potter tells you what he has been telling everyone:
“You’re a credit risk! Your workers make too much and the cost of their benefits is rising. Cut benefits, cut wages, layoff some of those lazy workers and you will be more efficient. Only then will I loan you the money you need. Do as I ask or Ill raise your interest rates further or foreclose on your business.”
This is the austerity trap. Bankers use their leverage to play both ends against the middle forcing both businesses and governments to be more labor efficient. It squeezes more production out of fewer workers for lower wages and benefits. It also suppresses consumption because fewer consumers are employed and those who work have less income or job security. It doesn’t matter if austerity is imposed on businesses or the public sector, the effects are the same.
Imposing austerity is like digging a hole in the economy, the more you dig the deeper the hole. It is good for bankers but bad for workers. It increases corporate profits but reduces personal incomes (except for the very rich). It shrinks the size of government but reduces support to the poor and unemployed people it creates. What ever hurts workers hurts consumers which suppresses consumption and depresses the economy, which then hurts more workers in a literally vicious cycle.
Making debt reduction a priority during a recession, rather than creating jobs and putting money back into the hands of consumers, is austerity. As the article below points out with a graph, shutting down the government and causing the government sequester to lower government spending at this time has hurt recovery. It is the wrong prescription.
In a World Without Austerity…
By Adam Hersh | October 4, 2013
Thanks to the federal government shutdown, there is an absence of new U.S. job market data for September 2013. Let’s take a moment to imagine the kind of economy we might see in the United States today had we not just lived through three years of fiercely divisive politicking for fiscal austerity—sharp cuts to public services and investments, as well as cuts to taxes on America’s wealthiest people.
If federal and state governments had not adopted policies of fiscal austerity, today’s jobs report from the Department of Labor would likely be telling us, as shown in Figure 1:
- U.S. employers added more than 260,000 jobs in September.
- The unemployment rate for September fell below 6 percent.
- Since December 2010, the U.S. economy has added more than 8.2 million new jobs—or 2.4 million more than have actually been added.
Below is another graphic that speaks for itself. Not only does paying higher wages improve the US economy and the lives of every citizen, it also makes good business sense.
I have written extensively on wage history and the case for a living wage, wealth distribution in America, our global business competitiveness, the dangers of our growing wealth inequality, and many other issues effecting middle and working class Americans, including and post on class warfare.
In a Labor Day message from former Secretary of Labor, Robert Reich, he, ” breaks down what it’ll take for workers to get a fair share in this economy — including big, profitable corporations like McDonald’s and Walmart to pony up and finally pay fair wages.
There is a petition that you can sign if you click on the above link. Please consider it your Labor Day obligation to those who struggled and even died to give you the benefits we still have today.
Labor Day. For much of the world this is a day of reflection to honor the martyrs who stood up to wealthy capitalists in the fight for dignified employment, the eight-hour workday and the five-day work week. It is a day to honor those who sacrificed their lives so that we might be home in time to eat dinner with our families and to have Saturday’s off to watch our children play baseball or soccer. It is a reminder that many of the blessings we take for granted today came at a terrible price. If we forget how we got these benefits they will slowly erode over time and history will reap itself.
Much of the world celebrates Labor Day not in August, but in May. Have you ever wondered why? Would you be surprised to learn that labor celebrations around the world commemorate events that took place in Chicago in 1816? Students of history will recognize this as the Haymarket, or May Day Massacre. Below is one account from the Encyclopedia of Chicago History via Wikipedia. http://www.encyclopedia.chicagohistory.org/pages/571.html
|Haymarket and May DayLABOR UNREST, 1886 (MAP)
On May 1, 1886, Chicago unionists, reformers, socialists,anarchists, and ordinary workers combined to make the city the center of the national movement for an eight-hour day. Between April 25 and May 4, workers attended scores of meetings and paraded through the streets at least 19 times. On Saturday, May 1, 35,000 workers walked off their jobs. Tens of thousands more, both skilled and unskilled, joined them on May 3 and 4. Crowds traveled from workplace to workplace urging fellow workers to strike. Many now adopted the radical demand of eight hours’ work for ten hours’ pay. Police clashed with strikers at least a dozen times, three with shootings.
At the McCormick reaper plant, a long-simmering strike erupted in violence on May 3, and police fired at strikers, killing at least two. Anarchists called a protest meeting at the West Randolph Street Haymarket, advertising it in inflammatory leaflets, one of which called for “Revenge!”
The crowd gathered on the evening of May 4 on Des Plaines Street, just north of Randolph, was peaceful, and Mayor Carter H. Harrison, who attended, instructedpolice not to disturb the meeting. But when one speaker urged the dwindling crowd to “throttle” the law, 176 officers under Inspector John Bonfield marched to the meeting and ordered it to disperse.
Then someone hurled a bomb at the police, killing one officer instantly. Police drew guns, firing wildly. Sixty officers were injured, and eight died; an undetermined number of the crowd were killed or wounded.
The Haymarket bomb seemed to confirm the worst fears of business leaders and others anxious about the growing labor movement and radical influence in it. Mayor Harrison quickly banned meetings and processions. Police made picketing impossible and suppressed the radical press. Chicago newspapers publicized unsubstantiated police theories of anarchist conspiracies, and they published attacks on the foreign-born and calls for revenge, matching the anarchists in inflammatory language. The violence demoralized strikers, and only a few well-organized strikes continued.
Police arrested hundreds of people, but never determined the identity of the bomb thrower. Amidst public clamor for revenge, however, eight anarchists, including prominent speakers and writers, were tried for murder. The partisan Judge Joseph E. Gary conducted the trial, and all 12 jurors acknowledged prejudice against the defendants. Lacking credible evidence that the defendants threw the bomb or organized the bomb throwing, prosecutors focused on their writings and speeches. The jury, instructed to adopt a conspiracy theory without legal precedent, convicted all eight. Seven were sentenced to death. The trial is now considered one of the worst miscarriages of justice in American history.
Many Americans were outraged at the verdicts, but legal appeals failed. Two death sentences were commuted, but on November 11, 1887, four defendants were hanged in the Cook County jail; one committed suicide. Hundreds of thousands turned out for the funeral procession of the five dead men. In 1893, Governor John Peter Altgeld granted the three imprisoned defendants absolute pardon, citing the lack of evidence against them and the unfairness of the trial.
Inspired by the American movement for a shorter workday, socialists and unionists around the world began celebrating May 1, or “May Day,” as an international workers’ holiday. In the twentieth century, the Soviet Union and other Communist countries officially adopted it. The Haymarket tragedy is remembered throughout the world in speeches, murals, and monuments. American observance was strongest in the decade before World War I. During the Cold War, many Americans saw May Day as a Communist holiday, and President Eisenhower proclaimed May 1 as “Loyalty Day” in 1955. Interest in Haymarket revived somewhat in the 1980s.
A monument commemorating the “Haymarket martyrs” was erected in Waldheim Cemetery in 1893. In 1889 a statue honoring the dead police was erected in the Haymarket. Toppled by student radicals in 1969 and 1970, it was moved to the Chicago Police Academy.
Since Reagan in 1980’s Tax Rates for the wealth were cut in half and capital gains tax (where most make their money) was cut in half again. http://j.mp/ZFFQHB
Wages and GDP rose together until wages were suppressed in the 70’s, otherwise median income today would be greater than $100K instead of $51K http://j.mp/14MoT67
A majority of American’s don’t make enough money to support a robust economy because a handful of us have more money than they can spend. http://j.mp/16E3zOT
Current US policy is creating permanent income inequality. Income mobility is shrinking as income caste system forms. http://t.co/nK5uFGyCaG
We know what victory looks like in Class Warfare. It’s the formation of an income caste system where birth determines your level of success. http://j.mp/Y1HwQP
Obama’s proposed raise in min. wage from $7.20 to $9/hr would mean a person working 40hr/week at min. wage would still be below poverty line. http://j.mp/10DwY7V
If the minimum wage was raised to $18/hour the Federal Government could eliminate almost all aid to the working poor, saving tons of money. http://j.mp/10DVrLn
Every tax dollar paid to assist the working poor is a tax subsidy providing their employer a federally funded labor discount. http://j.mp/16Bml7r
God! When are we going to wake up?
The business of quick and dirty layoffs has become a familiar feature in our culture. One recent example involved a journalist who worked at a large news organization. He was new to the company so he gratefully accepted the friendship of a well respected senior reporter. One Friday morning his mentor emailed him about a story idea and ended it by writing, “I’ll see you at the 10 AM meeting.” This prompted the following email exchange:
“What meeting? I didn’t get the email.”
“I’ll forward it do you.”
Then a short time later: “Forget the email. This meeting isn’t for you. Don’t come to this meeting!”
This is how the newsroom learned that day of the layoffs. Many senior journalists were let go along with a few younger reporters to avoid the appearance of age discrimination. As these “redundant” employees filed from the meeting they were handed garbage bags for their personal effects and accompanied to their desks by hired chaperones. It was all over in an hour.
Coolly calculated business decisions and pitiless firings toss employees off company books and onto government unemployment rolls somewhere in this country nearly every week. No notices, no outplacement services, no severance pay and no extended benefits are required. In many cases there is no effort to treat employees with the dignity or respect they deserve.
Apart from union contracts or employment agreements, American companies have no legal obligations to citizens being fired. They need not assume any responsibility for the impact it has on an employee, their family or their community. The only business costs of any significance are the premiums companies pay for government unemployment insurance. This easy, low cost ability to fire workers is called “workforce efficiency” and the U.S. is among the most efficient in the world. We ranks 12th out of 144 nations according to the study on global business competitiveness .
In most other advanced nations there are laws requiring companies to provide loyal employees with advanced layoff notices, severance pay and other benefits. These structural costs for downsizing may make businesses a little less competitive, but it brings significant benefits. It helps maintain a stable workforce and postpones government funded assistance to severed employees while they look for jobs. Requiring larger companies to provide mandatory severance benefits helps the nations absorb minor bumps in the economy without adding to problems by throwing people out of work at the first sigh of trouble. It also happens to be a humane way for citizens to treat one another.
Here in this country we treat our labor force as if it were a commodity to be bought and discarded at will. In the end, big business lets taxpayers foot most of the costs for unemployment benefits and supplemental welfare services for people out of work. At the same time the pro-business lobby pushes Congress for business tax breaks and budget cuts in the programs that help the workers they leave behind. Isn’t it time we stopped bowing to the pro-business lobby and stand up for the American worker?
Do Business Friendly Policies Reduce Poverty?. A look at the numbers.
I came across a 1963 tax return the other day that belonged to a 63-year-old, self-employed tradesman named Edward. For context, that was the year John F. Kennedy was assassinated. Historically speaking, it wasn’t that long ago. In 1963 Edward’s income was $6,806. He paid $933 in income tax plus $259 in self-employment tax for a total of $1,192 dollars.
My own father was a Sears repairman and my mother a bookkeeper back then. Together they made around $5,000 and paid about $1,020 in taxes. But what struck me most about Edward’s income tax return were the rate tables for that year. The top income listed was only $400,000. The tax on that was a whopping $313,640 while income over that amount was taxed at a rate of 91% . Did the rich really pay that much more back then? (Imagine the stir today if we called for a return to the 1963 tax rate.)
It’s hard to put this into perspective because inflation rose by over 700% since then. What wondered what these numbers would look like in today’s dollars? How does the tax rates today compare with the tax rates back then?
The Inflation Adjustment
When we adjust for inflation, Edward made $ 50,247 in todays dollars and paid $8,800 in taxes. He paid $1,912 in self-employment taxes and $6,888 in income taxes (a 13.7% income tax rate, close to what Presidential candidate Mitt Romney paid in 2010).
My parents, with two children, made $ 36,956 in today’s dollars, and paid $ 7,531 in taxes (a 20% income tax rate).
Someone making only $700 then would make $4,988 in today’s dollars and pay about $28.50 in taxes (a 0.6% income tax rate).
The guy who made $400,000 in 1963 was making $2,850,405 in today’s dollars. He paid $2,235,003 in taxes (a 78% tax rate). That sounds like a lot, yet it seems the rich in American some how always seem to getting richer.
(Bureau of Labor Statistics Inflation Calculator at: http://www.bls.gov/data/inflation_calculator.htm)
The Tax Rate Adjustment
Today, someone making $4,988 is taxed at 10% , or $49.88, That’s $16.88 more than in 1963.
Both Edward, and my parents would be taxed at 15% today. Edward would also pay a 15.3% self-employment tax for a total of $14,087. That’s an increase of $5,287 from the ‘63 tax rates. Edward would pay slightly lower income taxes, $6,384 vs. $6,888, but self-employment taxes rose dramatically. Since 1963, Edward’s self-employment tax jumped from $1,912 to $7,703. So much for helping the small business man.
My folks would have to paid $5,344 in taxes at today’s rate, or $1,924 less than the 1963 rate. That’s surprising. We keep hearing how high our taxes are, yet we are paying less now than we did 46 years ago.
The top income tax rate today is 35%. President Obama wants to raise the top marginal income tax rate on salaries and other ordinary income from 35 percent to 39.6 percent by letting the extended temporary Bush tax cuts expire at year-end. The income tax rates on millionaires has already been cut in half for some. Someone making $2,850,405 pays $997,642 in taxes at today’s rates. That is $1,237,361 less than they would pay at the 1963 rate.
(US 2010 tax rates: http://taxes.about.com/od/preparingyourtaxes/a/tax-rates_2.htm)
So what’s the point?
America is still a very wealthy nation. There is plenty of wealth. We can afford to be a much better country than we are. When the income tax code was first implemented in 1913 it was intended to tax only people who were financial well off. Adjusted for inflation, the bottom rate at which a person had to start paying income taxes was about $100,000 in today’s dollars. It was because the income tax rates weren’t indexed to inflation that income taxes eventually reached the middle and lower income households. Our financial crisis has a lot to do with the decline of income taxes for the richest Americans. We are asking those who have benefited most from this great American system to pay a tiny fraction more. It is hard to see how so much resistance to this small ask is justified. What’s all the fuss?