According to a report of the Pew Center on the States (The Trillion Dollar Gap), the Kansas Public Employees Retirement System (KPERS) is in trouble – very serious trouble.  Why?  If you listen to the mainstream media, right-wing conservatives, so-called moderate Democrats (i.e., the Third Way), and various and sundry other sources, you would have to conclude that the cause of the state pension problems can be laid at the doorstep of those powerful, greedy, public employee unions.

However, “The unions as state budget busters hypothesis,” when considered in the light of objective research, can be easily falsified.  For instance, Appendix B of The Trillion Dollar Gap is a listing of state-by-state data in the following categories: (1)” percentage of accrued liabilities funded, “(2) “unfunded liability as a percentage of covered pay roll,” and (3) “percentage of actuarially required contribution made, 5-year average.”

If your eyes are glazing over after that bit of “in the weeds” jargon, please stick with me for a bit longer.  Kansas is shown to have funded 59% of accrued liabilities while New York has funded 107%.  This simply means that Kansas is really falling short in the amount of money it should be putting into its retirement system to meet the obligations it has toward its retirees while New York is doing quite well in that regard.

The point here is that states are in financial trouble when they have huge debt obligations they can’t meet.  The primary unfunded obligation facing states in trouble is in the area of pensions.  New York, a strong union state, is not in danger of defaulting on its pension bonds or reneging on the promises made, through legislation, to its retirees.  Conversely, Kansas, a quintessential right-to-work state, has a pension program, which, in order to survive, needs some real and immediate attention from its legislature.

“This is only two states,” you might say.  But, if one peruses Appendix B of the Pew Center report, one will note that there appears to be no correlation between union strength in a state (i.e. right-to-work versus non-right-to-work states) and the financial condition of state pension programs. On the three measures mentioned earlier, states were given grades by the Pew folks from 0 to 4, with 0 being the worst to 4 being the best.  Kansas and Illinois, for instance, received grades of 0, whereas New York and Ohio received grades of 4.  I find it interesting that the newly elected Republican governor of Ohio has vowed to bust public employee unions by convincing the legislature to declare them illegal.

Research into KPERS reveals that many long-running issues that have nothing to do with unions are responsible for the near bankruptcy of the system.  In a long conversation yesterday with an expert at the Kansas State Legislative Research Department, I learned that KPERS has been rendered unsound by a variety of factors, including, but not limited to, an incompetent actuary who, in the 1970s, led the legislature to believe benefits could be increased to a specific level but failed to indicate the adequate level of funding needed to meet the increased liabilities.

The legislature has not adequately increased the level of funding needed to keep the program sound.  Furthermore, in the 1990s, the legislature, the KPERS board, and investment advisors made a decision to invest money in Kansas business as a form of eco devo.   Not only did this strategy fail to earn a decent return, it caused losses in the amount of approximately $220 million dollars.

That quarter of a billion dollar loss, along with the 1 ½ billion dollar loss in the 2008 U.S./worldwide economic collapse, when added to the Kansas legislature’s failure to adequately fund the program, has placed the income of many Kansas retirees in jeopardy.  Furthermore, you can’t blame the unions for the mess at KPERS.  Rank and file union members did not make investment decisions; they did not bundle subprime mortgages into bonds and then give that toxic waste AAA ratings; and they did not produce an incompetent actuarial study.

I am told that there are 20 Legislative Post Audit Reports concerning the 1990s investments.  I plan to get my hands on them.  I also know some other people that know what has been going on and I plan to interview them. So stay tuned.  You will be reading more on this blog about KPERS and how the Brownback Administration and the Kansas Legislature plans to make whole the retirees who have paid into the system.  I do not intend to stand by and listen to the scapegoating of public employee unions that is becoming de rigueur these days.

The end of “don’t ask/don’t tell,” some help for “9-11,” responders, and the START treaty were bright spots in the otherwise miserable year of 2010.  These three very decent and overdue legislative actions suggest that Americans can be fair, empathetic, and generous – in spite of the potent, ideological, right-wing, meanness that has been so influential for at least the past three decades.

It is gratifying to see the beginning of the end of de jure discrimination against gay people.  No doubt, de facto discrimination in many forms will continue against gays, just as it has against African-Americans, women, the elderly and other groups.  Anti-gay acts have been, and will probably continue to be, particularly vicious and often violent.  The struggle against this form of hate will need to go on for some time.

Although we saw some “socially liberal” progress in 2010, it was an economically conservative and miserable year for middle and low income Americans.  Earners and wealth holders in the top 10% can thank their lucky stars that the U.S. Congress and the Obama Administration have decided to maintain a favorable tax status for the wealthiest Americans at the expense of all other income classes.  

The $3.5 billion spent on lobbying congress did not come from median income, struggling households.  Consequently, Wall Street is back in business as usual.  The incestuous relationship between the financial services sector, the congress, and the Obama Administration along with various industrial-you-name-it complexes, such as the medical-industrial complex, present a very dark cloud on the horizon for the masses.  The Citizens United case and the massive corporate campaign spending it unleashed make that cloud ever so much darker.

The revolving door between congress, the administration, and Wall Street is spinning faster than ever.  A case in point is the recent move by Peter Orszag to Citigroup for some really big bucks in salary.  This happened after he helped engineer a $10 billion U.S. Treasury deal/benefit for Citigroup.

In fact, the perfect economic storm is shaping up and is headed right for the working classes.  As one who visited the staffs of several members of the President’s “deficit reduction commission,” I believe that things don’t look too good for the last remnants of the New Deal and the Great Society.  A seemingly liberal Democrat like Senator Durbin of Illinois is signaling that he is supportive of proposals that would reduce Social Security and Medicare benefits.  This is not surprising.  Of all the offices we visited, it seemed to me that his was the one where we were confronted with the vaguest, most platitudinous, and even mealy mouthed verbiage.

In the meantime, employment, pension funds, college opportunities, and economic opportunities in general are going south.  The states are in really sad shape.  Any stimulus derived from raiding the Social Security Trust Fund, as happened in the deal between the President and the Republicans, will be offset by failure to provide massive stimulus dollars to the states for infrastructure building and other forms of employment. 

Corporate profits are better than ever and the middle class situation is continuing to deteriorate.  If the working classes remain passive or locked in a heated political fight with each other (think Tea Party and us), then the corporate juggernaut will continue to roll over us.  On a positive note, however, I do believe that as economic conditions worsen, groups that are now shouting at each other will begin to discern the real culprits and will learn to talk to each other.  In fact, I have had some success with that lately.

According to some poll or other touted by Chris Mathews on Hardball, 69% of Democrats, 75% of Republicans, and 69% of respondents overall (whoever they were), supported the Obama tax deal with Republicans.  Well, why wouldn’t they?  The propaganda machine has been in high gear for the past week or so.  How many of these poll respondents have taken the time to really understand what’s in this awful deal and how it will affect them in the future?

As for me, I am disgusted.  This is about the last straw for me as an Obama supporter.  In fact, I don’t really see any point in supporting the Democratic Party.  Although there are some Democrats such as Jan Schakowsky, Sherrod Brown, and others for whom I have the utmost respect, the party as a whole has pretty much sold us out.  So I will support individual Democrats and Independents but don’t see any point in providing any resources to the party.

As best as I can discern, the tax deal as negotiated and as it will probably pass includes the following elements:

• Business Tax Extenders – a two-year extension of the research development and tax credits which were contained in the 2009 Stimulus Bill. Estimated Cost – $80 billion
• Business Expense Deduction – a provision that would permit any business to write on the entire cost of capital investments in one year rather then the current five. Estimated Cost – $146 billion.
• Extension of Refundable tax credit, child tax credits, and college tuition deduction. Estimated Cost – $21 Billion
• Reduction of Payroll Tax – a 2% reduction of payroll federal tax reductions for two years. Estimated Cost – $120 Billion
• Extension of Federal Unemployment Benefits – An extension of all four tiers of federal unemployment extensions through January 12, 2012 – Estimated Cost – $56 Billion
• Changes in Federal Estate Tax – A continuation of exception of federal tax on all estates up to $5 million. – Estimated Cost $64 Billion
• Adjustment to the minimum federal income tax to account for inflation – Estimated Cost $140 Billion
• Continuation of Bush Era tax cuts for two years for incomes of $250,000 and less. Estimated Cost – $280 Billion
• Continuation of Bush Era tax cuts for two years for incomes of over $250,000. Estimated Cost – $79 Billion

Does this look like a lopsided deal or what?  You add it up but while you do that keep a few things in mind. 

The 2% payroll tax deductions refer to the 6.2% deduction from our paychecks for Social Security.  The employers will also get the 2% (but that isn’t mentioned).  This will cost the middle class down the road.  The now healthy Social Security Trust Fund will be depleted and a wonderful excuse for cutting benefits will be handed to right-wingers who hate Social Security.

Federal Unemployment Benefits will be continued for one year at a cost of $56 billion – a  onetime shot.  Compare that to the Bush Era Tax cuts which will cost $79 billion over two years.  Does anyone really believe they will now go away in two years?  We are looking at nearly a trillion dollars over the next ten years – plenty to make the Social Security Trust Fund sound into the foreseeable future.

The inheritance tax cuts are more obscene than the income tax cuts for the rich – if that is possible.  This will benefit a tiny upper-class group of Americans who would be exceedingly rich without it.  Again, it won’t go away.  Like the upper class income tax give-away, this will cost a trillion dollars over the next decade.

In the final analysis, the middle class will pay dearly for any goodies they receive in this package.  Just take the time to download the various deficit reduction proposals and take a look at who will take the cuts in benefits or will pay more for their health care or will pay more in sales taxes.  The rich will keep the goodies and the middle class will give them back.  Jan Schakowsky’s recommendations are an exception to this but no one in the mainstream is paying any attention to her.

My respect for Barack Obama has dissipated.  It has been dissipating since the beginning of his administration when he brought the Rubinomics team back, but when he brought Bill Clinton in to make his case, any respect that I had left went poof.

Tell Claire McCaskill That We Will Remember Her Vote

Congressman Moore:  (202) 225 2865

Senator Claire McCaskill (202) 224 6154

Emanuel Cleaver (202) 225 4535

Call the above Democrats in congress.  Tell all of your friends, colleagues, relatives and every soul mate you have to call – now!  I plan to be on the phone as soon as offices open up tomorrow.  Congressman Moore still has a vote.  Tell him to join the Democratic caucus in the House.  Tell Claire McCaskill that we will remember her vote in the next election.  Emanuel Cleaver is probably on our side, but call him anyway.  It is really important to flood these legislators’ offices with calls.

Our Fighting President

Well finally, we are seeing our president fight.  The only problem is that he is fighting with liberals and progressives.  He is accusing liberals in congress and his liberal/progressive base for being sanctimonious purists.  Perhaps, just perhaps, he is confusing sanctimony and purism with what has been lacking in him and blue dog/DLC Democrats – core values and principles.

So, here is what our “pragmatic” president has done in the past few weeks:

What did he manage to get in these negotiations?  He did manage to get a 13 month extension on unemployment for some of the unemployed.  That is good for the millions that will qualify for it but it will do nothing for millions and millions of unemployed who have been unemployed for years and years, and who could be put to work on public works projects (paid for with the $900,000,000 or $900 billion that will be lost with continued tax cuts for the rich).  Essentially, Republicans were willing to throw a bone to middle and low income Americans.

The deal President Obama has cut with the Republicans isn’t just bad; it isn’t just very bad; it is so ugly that it doesn’t even merit consideration by legislators – especially Democratic legislators.  The Republicans will be able to say that the tax cuts are Obama’s tax cuts and that the deficit is Obama’s deficit.  Losses to the currently healthy Social Security Trust Fund will be used by Republicans and many Democrats to justify benefits reductions.

When I see David Axelrod, Robert Gibbs, and Austan Goolsbee – Casper Milquetoasts all – on television with their limp justifications and tepid claims that this is “a pretty good deal – you know, the best we can get,” I feel myself getting queasy. And please spare me Larry Summers’s arrogant mug.  Hasn’t he been responsible for enough economic damage?

Brooks & Marcus on PBS: A Phony "Two Sides of the Issues Give and Take

Most everyone has heard by now that Simpson and Bowles were able to garner 11 votes for their set of deficit reduction recommendations.  They needed 14 votes from the 18 member commission.  Members on the “far right” and the “far left” (however those terms are defined) voted no and hence left Simpson and Bowles three votes short.

This is not in any sense of the word good news.  Let’s just consider how it was handled on Jim Lehrer’s PBS Newshour conservative-liberal give and take segment (http://www.pbs.org/newshour/). There is a reason that neo-conservative David Brooks and the not very liberal Washington Post columnist Ruth Marcus were absolutely giddy about the 11 votes for the Simpson/Bowles plan. They expressed effusive praise for those commission members willing to “make the hard choices” (such as reduction in Medicare and Social Security) and believe that yesterday’s vote is a harbinger of future action.

Brooks and Marcus could more aptly be said to have had a conservative versus extremely conservative give and take.  It was, in their view, a surprise that 11 of the 18 members of the commission would actually support draconian Social Security and Medicare cuts.  It was also, in their view, a matter of time until Congress is willing to muster the courage to vote these recommendations into law. 

I find it very interesting that this conservative-liberal give and take included nothing about Simpson’s and Bowles’s recommended tax cuts for corporations and the wealthy as well as nothing about their recommended regressive tax increases for low and middle income classes.  This is why liberal support for public television puzzles me.  I will probably anger some liberals by saying this, but I believe PBS, like NPR, has become a propaganda outlet for the ruling class. Given that their underwriters include Bank of America, EXXON, the Kauffman Foundation, etc., I am not surprised that they don’t really present a progressive side of issues.

I must apologize to those liberals and progressives who don’t like to talk about “war,” and think that terms like “class warfare” are best left unsaid.  The fact of the matter is, however, that a class war is being waged on middle and lower income classes right now.  It has been going on for some time.  Perhaps, it would be a good idea for those who don’t think that we should call it “class war” to reflect on a few phenomena:

1. Wages and salaries have been stagnant for some time for all but the very high paid and very rich.
2. The cost of college has been outstripping inflation for the past thirty years and is becoming increasingly unaffordable for middle class families.
3. Twenty-five percent of the U.S. working-age population is either unemployed or underemployed while corporations and the financial services industry continue to reap record profits and pay obscene salaries and bonuses.
4. Young people are graduating from college with an inordinate level of college loan debt and with few prospects for all but the most menial employment.
5. Although she went to prison for saying it, Leona Helmsley was telling the truth when she said “We don’t pay the taxes, the little people pay the taxes.”
6. In 2009, corporate America spent $3 billion on lobbying the U.S. Congress and was able to lock up control of the U.S. government through a Supreme Court case entitled Citizens United.

The quality of life for the middle class is sinking.  Furthermore it will continue to sink and life will become increasingly difficult for everyone and every family below the wealthiest few percent.  The first step in fighting back is to recognize the truth; to come to grips with reality; to stop believing media propaganda; and to stop thinking that the Democrats and the Obama Administration will take up our cause unless we, en masse, begin to demand a change.

Call your PBS and NPR local stations and tell them you will not contribute any money to them until they begin to press the national NPR for fair and balanced news and analysis.  Demand that we hear the other side.  I have had several conversations with Patricia Cahill at KCUR and can tell you that she is a sensitive and open-minded manager and a generally all around good person.  She will pass your comments along to the national offices of NPR (she is also on the NPR board of directors).

Viciously Ageist Cartoon Accompanying James Surowiecki's Article in the New Yorker entitled "Greedy Geezer"

As a guest recently on Sharon Lockhart’s KKFI program “Every Woman,” I stated that the Washington elite’s current assault on Social Security and Medicare is reminiscent of an earlier successful attempt to reduce welfare benefits for poor mothers and children.  Both propaganda campaigns have entailed the promotion of narratives picked up and disseminated by the mainstream media.

Throughout the 1970s, neo-conservatives in think tanks and universities constructed and promoted a narrative of poor mothers needing public assistance as irresponsible, dependent, unmotivated, and inferior.  By 1980, a U.S. president was inspired by these ideologically right wing social scientists (e.g., Charles Murray, George Gilder, and Irving Kristol) to declare that “welfare queens are driving their Cadillacs to the welfare office to pick up their checks.”

Although that statement has been attributed to Ronald Reagan, a Republican, it was left to Bill Clinton, a Democrat, to dish out some tough love to poor women and their children.  His signature policy achievement is known, rather insultingly, as Temporary Aid to Needy Families (TANF).  Even more insultingly, the legislation authorizing TANF is the 1996 Personal Responsibility and Work Opportunity Reconciliation Act.  In its title, this legislation belittles, defames, and dehumanizes poor mothers.  Furthermore it has transformed public assistance for families with children from federal grants in aid to block grants, which places the fate of women in poverty in the hands of typically less empathetic and less resourced states.

So what have been the results of this punitive legislation? According to the Center on Budget & Policy Priorities, “Between 2000 and 2004, the number of children living in families with cash incomes below half the poverty line increased by 774,000” (see the full report at http://www.cbpp.org/cms/?fa=view&id=600).  Although employment rose amongst poor women immediately following implementation of TANF, they remained “poor or near-poor, often face significant work expenses and material hardships and see only modest income growth over time.”  Because TANF limits lifetime public assistance to five years and state welfare agencies became more anti-poor, jobless, single mothers who “do not receive cash assistance and who do not live with others who work or receive cash income support has increased.”

The elderly receiving Medicare and Social Security are now targeted for benefit reductions.  As happened in the case of poor women and children, an “elderly as a problem and a burden” narrative replete with metaphors, symbols, myths, and misinformation has been developing for decades.  Even liberal media such as the New York Times, the New Yorker, and NPR have been promoting and distributing this narrative, which subsumes a sub-narrative of “selfish old people” – especially Baby Boomers – overwhelming the medical system without any concern about the needs of younger people.

A case in point is an article by James Surowiecki entitled “Greedy Geezer?” which appeared in the New Yorker (http://www.newyorker.com/talk/financial/2010/11/22/101122ta_talk_surowiecki).  The article was preceded by the cartoon displayed at the beginning of this post.  The title is obviously a question to which the author’s answer can be summarized as “yes, of course.”  Through speculation, poor logic, lack of factual support, and over-generalization, Surowiecki reaches the conclusion that the 2010 mid-term election results were seniors “essentially saying ‘I’ve got mine – good luck getting yours.”  Perhaps this is the attitude of some seniors.  But it is not my attitude or the attitude of any seniors that I know, and I know a lot of seniors – both conservative and liberal seniors.

Ageism entails three basic elements: (1) stereotyping, (2) scapegoating, and (3) discrimination.  Stereotypes of the elderly as dependent, a burden, selfish, and greedy have been appearing with increasing regularity in the media.  Seniors are regularly scapegoated for budget deficits and national debt caused by a tax structure favoring the rich, several trillion dollars in war-related expenditures, bail outs of Wall Street moguls, and rip offs by the military, medical, financial, and agricultural complexes.

It is proposed that the elderly pay the price for incompetent and corrupt political leadership.  Deficit reduction commissions are springing up all over the place.  The commissions are discriminating against the elderly by recommending that the largest share of the cuts be aimed at senior programs while leaving the monied-elite untouched.

In his nonsensical rambling, Tom Friedman often claims that the earth is getting flatter (see e.g. The World is Flat).  What he means is that the internet has moved economic opportunity across the world’s population.  This is a rather delusional and distorted view of what is happening to the non-rich populations of the earth.  But in one sense, he is correct.  The American middle class is being flattened.

“Trickle down” economics has been, in reality, “trickle up” economics. As Robert Reich has indicated in his recent book Aftershock, in 2007, 24% of all income accrued to the wealthiest 1% of the U.S. population. That’s the worst maldistribution of wealth in this country since right before the beginning of the Great Depression. As recent as the late 1970s, the top 1% earned 9% of all income (page 6).

I recommend Nicholas Kristof’s recent New York Times column for a concise and readable explanation of current income and wealth inequality in the U.S. (“A Hedge Fund Republic?” November 18, 2010).  Citing figures published by the Economic Policy Institute, Kristof points out that “The top 1% of Americans owns 34 percent of America’s private net worth….”  The bottom 90% owns just 29%, which means that the top 10% owns 70%.

There are several macro-economic reasons for the redistribution of wealth in the past several decades.  Taxes are just one reason, but tax codes and the federal, state, and local tax systems in general have been drastically revised in favor of the highest earners and the wealthiest citizens.  The highest marginal income tax rate has been reduced from 70% to 36% while State and local sales taxes (due in large part to a loss of federal transfer dollars) have increased from a low of 2% to 3% in the late 1970s to 8% to 9%.  Consumers are also charged taxes on a variety of services provided by regulated industries such as telephone service. 

Capital gains taxes have been lowered from 25% to 15% since Ronald Reagan took office.  With an increasingly complicated tax code with loop holes that benefit only the wealthy, labor (payroll) has been heavily taxed while capital (capital gains) has increasingly escaped taxation.

The Simpson-Bowles recommendations and the Rivlin-Domenici recommendations for deficit/debt reduction would further flatten the progressive income tax structure and increase regressive sales taxes.  Both sets of recommendations would also increase Medicare and Medicaid payments for beneficiaries and lower Social Security benefits.  A freeze for three years in federal employee and military personnel pay is included in Simpson-Bowles.

Neither plan includes a fair inheritance tax, increase in the capital gains tax, or a financial transaction tax.  Jan Schakowsky’s plan would, amongst other things, do the following:

1. Tax capital gains and dividends as ordinary income.
2. Reform the estate tax with a progressive schedule of marginal tax rates.
3. Eliminate the deduction for business meals and entertainment.
4. Limit the deductibility of financial corporate debt interest payments.

She has recommended a host of other tax revisions that would reduce the deficit by hundreds of billions of dollars by 2015 without putting a heavier burden on middle and low income Americans.  This is the opposite of the other deficit reduction plans.

Jan Schakowsky: A Congress Woman Who Works for the People

Deficit reduction plans are coming from all directions – mostly from the right.  We have the Simpson-Bowles plan, the Rivlin-Domenici Plan, and one which I haven’t had time to thoroughly read yet, the Peterson Foundation-Pew Foundation Plan.  These plans relieve the upper classes of any responsibility and burden for the deficit but come down hard on the working classes.

One member, and only one member, of all of these commissions is a progressive with the best interests of the working folks in mind.  That person is U.S. Representative Jan Schakowsky. As a member of President Obama’s deficit reduction commission, she has, in an act of admirable courage, taken on the Washington elite by issuing her own deficit reduction plan. 

She lists the following guiding principles of her plan:

1. Achieve deficit reduction and stabilize debt without harming lower-income and middle-class families.
2. Create jobs and restore economic prosperity.
3. Make investments to keep America strong and competitive – and raise sufficient revenues to fund them.
4. Provide shared opportunity and reduce unprecedented income disparities.
5. Solve problems – don’t shift costs and burdens to families and businesses.

These principles are far different than anything you will find in the elitist plans coming out of right-wing foundations (e.g. Bipartisan Policy Center, Peter G. Peterson Foundation, etc.) or the President’s deficit reduction commission.  As opposed to raising taxes on the middle class and poor through regressive consumption taxes (in the other plans), she would raise capital gains taxes from the current 15% level to the same level as income taxes that everyone else pay.  In addition, she would eliminate many of the corporate tax breaks that encourage corporations to ship their factories and jobs out of the country.

Jan Schakowsky’s plan can be found at http://www.janschakowsky.org/; pdf at https://secure.mydccc.org/o/30047/images/Schakowsky%20Deficit%20Reduction%20Plan.pdf

Today, the masses were hit by the other half of a flying wedge.  Alice Rivlin, friend of and mouthpiece for the monied elite, and conservative former Senator Pete Domenici released a 140 page set of recommendations which are even worse than the set of “assaults” unleashed on the economic security of middle and lower income Americans by Alan Simpson and Erskine Bowles .  Like the Bowles and Simpson recommendations, the Rivlin and Domenici recommendations lower taxes for the rich, increase taxes for everyone else, and reduce Social Security and Medicare benefits.

Both sets of recommendations have an extensive number of reductions in retiree, civil service, military personnel pay and retirement benefits.  The Tallgrass Activitist will be explaining these over the next few weeks in detail  Such a large and obfuscated set of recommendations have been dumped out of these commissions in the past week, that a single blog post would be impractical.

What you won’t find in either set of recommendations is a call for the super-rich to carry their fair share of the burden.  Neither will you find a recommendation to legislate a single payer, universal health care system into existence.  Without that, health care costs will not be brought under control.  Instead, the power-elite representatives on these commission are calling for increased premiums and reduction in benefits.

All of the burden – and I mean all of it – is falling on “non-rich,” “non-power-elite-connected,” Americans.  Watch for details in the days and weeks ahead.