SPLIT TOPIC: American society: the poor the unemployed

I agree that taxes pay for the infrastructure of a functioning society. BUT as President Obama noted in his

State of the Union message, we now operate in a global economy and must compete with ALL nations, where wages and taxes are much cheaper than are possible in the US.

As CTK pointed out, corporate profits are taxed 2X, at the local and Federal level through corporate tax and through income taxes on dividends.

In the global economy, when taxes are too high, wages are uncompetitive and labor skills sets are available in a cheaper venues. The outsourcing phenomena which started as early as the 1960s. Low skilled jobs are the first to go. NY is already among the states with the highest wages/taxes/cost of living, and has already experienced a

loss of businesses and individuals (& the jobs & taxes that go with them). Is anything actually manufactured in the "garment center"? Were you aware that law firms outsource document review to Mumbai and have relocated senior associates (not partners) to oversee these operations?

Further proof: 2010 Census - NY lost Representatives in the House of Representatives, as well as lower tax

revenue due to the exodus.

Further government regulation increases the cost of doing

business, providing more incentive to move jobs outside of the country. BTW, wages in meat processing plants were higher for this unskilled labor, because of the unpleasantness of the work, before those jobs were taken by illegal workers willing to work for far less.

The bubble/bust in housing & the economy was largely a result of bad laws & regulations, not lack of regulation. If laws mandating banks to make mortgage loans to individuals who did not have the means to own a

home. Greed by the bankers was accompanied by unrealistic expectation of home ownership and irresponsible borrowing by individuals who, but for these laws & regulations, never would have received loans to purchase homes in the

past, because they couldn’t afford them. Government policy distorted the free market with disastrous results. As was stated before, home ownership is a privilege, not a necessity.

Homeowner correctly points out that the “Robber Barons” established many charitable institutions and foundations

benefiting the masses. However, their fortunes were largely made before the introduction of the Income Tax. Today’s wealthy must do so while paying igh taxes, with only partial tax deductions.

Natty - I do not think CTK is mad because he thinks people aren’t trying and/or are making the wrong decisions. I believe his frustration is that people are not taking RESPONSIBILITY for not trying or for making the wrong decisions.

For every person that tries, there is no guarantee of success - but does this warrant not taking the risk of trying at all?

One of my closest friends (and her sister) were regularly mocked for acting/speaking white - Oreo was the common name back then. Who had the last laugh? Both are professionals making well into the six figures. Was the risk of trying and the ridicule they faced worth it? IMO, damn straight.

There are many variables that can waylay even the best thought out plans (the old adage, we plan, God laughs comes to mind) but to not try for fear of failure is the worst possible excuse. Why do you think those trying are ridiculed? Could it be possible that jealousy is a factor? Misery loves company after all.

If you believe that being rich and successful and getting out of the hood is never gonna happen, it never will. You are absolutely correct in pointing out that having a lot of people who think there is no point in trying leads to HUGE problems.

IMO one of the primary problems with education in NYC stems from the teachers union - tenure, unsustainable pension and salary provisions, etc. Teachers who cannot educate (or have lost the drive to do so) cannot be fired. New teachers (with new ideas and ambition) cannot be hired. Salaries are not tied to performance. Part A of the problem. Part B - the emphasis on learning within the home.

Busing and integration was effected in the 1960s where children were "swapped" out of neighborhoods. Net result - kids who were very tired from a long ride TO/FROM school and had to deal with the prejudices of the "local" students. If the teacher at school A was just as unmotivated as the teacher at school B, integration did not accomplish anything. Charter schools appear to be somewhat of a solution - bot notice how the teachers union is vehemently opposed to this concept?

Domino you touched on reasons for the housing bubble, however you ignored what turned a bubble into one of the biggest financial crises in the history of the world.

Today’s wealthy must do so while paying igh taxes, with only partial tax deductions.

Actually by 20th century standards, the wealthy's taxes are at some of the lowest rates they've ever been.

BTW, wages in meat processing plants were higher for this unskilled labor, because of the unpleasantness of the work, before those jobs were taken by illegal workers willing to work for far less.

Wages were also higher when workers were unionized. Good luck trying to get the workers unionized now so that they'd have a chance at livable wages and reasonable workplace safety.

But maybe the almighty unfettered free market will just take care of that?

Further government regulation increases the cost of doing

business, providing more incentive to move jobs outside of the country.

There are a lot of other factors that you're conveniently ignoring. We have the most expensive least efficient health care system of any developed country in the world. It is actually one of the single biggest obstacles to American companies competing in the global marketplace.

BG - are you referring to the mortgage backed securities or derivatives? The underlying cause of all of the above: greed and sense of entitlement by numerous factions.

You also refer to taxation - there was no income tax prior to this past century. What possible measurement could we use to compare to ZERO?

I agree that wages were also higher when workers were unionized - however - if wages are allocated to exorbitant union dues what is the net result to the worker? You indicate that getting the workers unionized would result in liveable wages and workplace safety - my argument is that getting unions in has resulted in the flight of corporation to other global locations. IMO unions are no longer proponents of the union members but of their own bloated bureaucracies and underfunded pension plans. Do you honestly believe that a liveable wage for an assembly line worker at the Detroit Ford plant is $45/hour?

Government regulation may increase the cost of doing business but no more than unions. If workplace safety falls under government regulation - say OSHA - What additional impact does a union have?

I do not have sufficient facts to compare the healthcare systems in Europe (or Canada) to ours. But I have never heard of any person on Medicare denied a hip replacement or being put on a waiting list - yet this is commonplace in the UK.

booklaw said:

Pity the wealthy, whose diligent efforts to emulate the great robber barons are frustrated by those nasty taxes! How terribly unfair it is!

Yep. The wealthy have TRILLIONS sheltered in overseas tax free accounts and there are some who still say the wealthy deserve more of your money:

http://videocafe.crooksandliars.com/heather/conason-offshore-tax-havens-bailed-out-companies-costing-economy

I would just like to respond (again), to the notion that somehow government policies were responsible for the housing bubble. Unless by policies you mean regulation that was too lax. I agree with that (and also interest rates were too low). Of course, lax regulation was due to heavy lobbying from Wall St. I'm just cutting and pasting a previous post I wrote under a different thread. The link is http://www.brooklynian.com/forum/brooklyn-politics/what-should-obama-do-wsod. See below:

The community reinvestment act was in no way responsible for the largest housing bubble on record. No, for that we can blame the confluence of low interest rates (the fed kept rates too low for too long), excess savings (primarily from Asia) seeking attractive returns in the low yield environment , a poor incentive system by a sales driven Wall Street, and poor oversight by a regulatory system with too few resources. The housing bubble started as a sub-prime bubble, and that market was lit up in the private sector (Fannie and Freddie entered the game much later, when their market share was eroding). It is highly implausible the community reinvestment act, passed in 1977, fueled such a fire. Certainly the 2007 modifications to that act were implemented a minimum of 2 years after the bubble began to seriously inflate.

And while the blame can be spread around, the private sector was willfully negligent in its behavior. They set up the origination machinery, with sick incentives to promote sales right now. In other words, the banks (Merrill, Lehman, Bear Stearns, Deutsche Bank, etc) set up a cottage industry with which it could transact at “arms length.” This limited (theoretically) the banks oversight of this industry, giving them cover for their culpability.

Every mortgage backed bond sold yielded millions in fees. So there was a huge, huge incentive to pump out more. And [this added] pressure on the mortgage brokers to bring new mortgages to this market [to securitize into more bonds]. Again, this was the private sector, not Fannie or Freddie.

Of course, there is much government culpability. I can point to the Greenspan Fed, which ignored its duty to regulate the banks fraudulent loan machine (and it was just that, fraudulent), the Clinton Admin, which lobbied against the oversight of derivatives (specifically credit default swaps), and the Bush Admin, which basically ignored all fiscal and regulatory sanity. Of these, the Bush Admin was by far the most egregious. Putting the wrong people in charge (for example, Chris Cox at the SEC), lowering taxes too much, increasing spending too much (drug care coverage for Medicare), putting blind faith in markets without adequately assessing how incentives might work against constituents (example, the supposed self-regulatory interests of food and pharma companies—this hypothesis flies in the face of all economic common sense). He didn’t get it all wrong. He was ahead of the curve on our need to modify social security entitlements, but he failed in his endeavor to make meaningful (or, for that matter, any) change. These are facts that can be substantiated by credible media like the WSJ, NY Times, Crains, The Interest Rate Observer, The Economist, NPR, Bloomberg, and other content providers.

Of course the solution isn't "pay CEO's less". The federal government should not be able to control the wages of employees in private companies.

But perhaps if there were more thoughtul federal regulations in place, so as to have more appropriate oversight when it comes to hedging, deriviaties, CDO's, etc. (i.e., the more dangerous investment schemes - in general being done with other often unaware investors' money), and more strengthened laws regarding how much an investment bank can invest vs. how much cash it has to keep on hand (i.e., not allowing them to only keep $1 on hand for every $40 they invest), then perhaps those CEO salaries, and, more importantly, bonuses, would not be so stratospheric. Particularly at the expense of their customers.

Plus for CEOs and most financial employees, FWEIW, pay was almost completely tied to performance, which is NOT the case for most people

Is this a joke? By this logic half the financial industry should have been paid $0.00 in 2008 but something tells me the bonuses came anyway, they just weren't as big as usual.

Executive pay has skyrocketed in the past few decades, meanwhile hourly wages have been stagnant or fallen for decades, especially minimum wage.

The distribution of wealth may not be changing dramatically, but who is benefiting from increased production and efficiency sure is a one-way street.

BG is certainly right about pay for performance in the finance industry. It's a joke. The vast majority of the time it's not based on the right metrics. Even by their own standards of shoddy metrics, most still fail, but they move the goal posts. This happens far, far too much. If pay for performance were real, I suspect finance pay would fall by perhaps 50% (just a hunch).

Relates to Water Ice's posts: http://news.yahoo.com/s/ap/20110127/ap_on_bi_ge/us_financial_crisis_inquiry

Talk about people getting something they don't deserve.

While low wage pressures mean inflation is subdued, the concern is that unless households start seeing better wage gains, consumer spending will not strengthen enough to give the overall economy a boost.

Funny how that works. Society needs *everyone* to be doing well, not just those CEOs and upper class people who "earn" it.

Yup, $13 billion is correct, not $3 billion.

As an aside (and not to continue piling on Goldman Sachs, but it is easy), an example of our corporate tax laws being utterly usesless - in 2008, the year that Goldman paid approximately $10 billion in compensation & bonsuses to its employees, and as it was receiving the $13 billion payout from AIG - which don't forget was essentially money generated from our taxes, how much did Goldman pay in its own tax filing?

$14 million. Yup, an "m", not a "b".

In fact , a Government Accountabilty Office (non-partisan) report determined that from 1998 - 2005, roughly 2/3 of ALL corporations operating on US soil PAID NO TAXES AT ALL: http://www.gao.gov/new.items/d08957.pdf

Which I guess means we should all thank GS for that $14 million tax bounty.

The nation's wealth inequality gap is, at this point, built into the infrastructure of our federal government. Though we can all cite examples of lazy people bilking the welfare system, I do not think the the systematic financial problems we facve have much to do with this or that poor person not earning their keep or making their own way in life.