Tuesday, March 25, 2014

Tuesday Morning Links

This and that for your Tuesday reading.

- Paul Krugman expands on the Republicans' insistence on privileging inherited wealth over individual work:
(N)ot only don’t most Americans own businesses, but business income, and income from capital in general, is increasingly concentrated in the hands of a few people. In 1979 the top 1 percent of households accounted for 17 percent of business income; by 2007 the same group was getting 43 percent of business income, and 75 percent of capital gains. Yet this small elite gets all of the G.O.P.’s love, and most of its policy attention.

Why is this happening? Well, bear in mind that both Koch brothers are numbered among the 10 wealthiest Americans, and so are four Walmart heirs. Great wealth buys great political influence — and not just through campaign contributions. Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.

As I’ve already suggested, the results can sometimes seem comical. The important point to remember, however, is that the people inside the bubble have a lot of power, which they wield on behalf of their patrons. And the drift toward oligarchy continues.
- And David Cay Johnston similarly recognizes that a thoroughly corrupted political system has led to trickle-up economics:
When an economy grows at 1 percent annually but investment returns are 5 percent, the already wealthy need to reinvest only a fifth of their gains for their fortunes to grow at the same rate as the overall economy. The rest can be spent on a sumptuous lifestyle.

Since by definition the very rich do not need to consume 80 percent of their incomes — the portion by which investment returns exceed the growth of the economy in Piketty’s model — they can reinvest most of their annual gains in the market.  Over time this accumulating capital will snowball.

The official American income numbers, crunched by Piketty and his sometime colleague Emmanuel Saez, show that in the 21st century wealth and income increases are almost all taking place among the tiniest sliver of the wealthiest and highest-earning. This trend emerged in the mid-1970s, accelerated under Reaganism and took off like a rocket after the tax cuts and anti-regulatory policies of the George W. Bush administration.
Piketty shows that whether capital is taxed or not, inequality will grow under current policies because savings from current wages and salaries cannot grow as much as returns to existing riches.

The process of accumulating “becomes more rapid and inegalitarian as the return on capital rises and the [overall economic] growth rate falls,” Piketty writes.

“Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy,” he writes, “it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).”
- Meanwhile, Teresa Tritch takes up the cause of entrepreneurial government. And CBC reports that health care is just one of many areas where we figure to get far more for our investment through the public sector than through for-profit allocation mechanisms:
About 60 per cent of Canadians are covered by private health insurance for health-care services such as prescription drugs, health-care economists say. Most are insured through their employers, with for-profit firms dominating the industry, said study author Michael Law of the Centre for Health Services and Policy Research at the University of British Columbia in Vancouver.

"When we looked across the for-profit insurers in Canada over the past 20 years, for the plans that are typically bought by individuals and small- or medium-sized employers, there was a pretty dramatic change in the gap between the premiums people paid in and the benefits that got paid back to them," Law said in an interview.

"Whereas Canadians were paying in a dollar and getting 92 cents back in 1991, they were paying a dollar and getting 74 cents in 2011."

Canadians need to realize those costs are ultimately passed on to them directly in higher premiums or indirectly as lower wages, Law stressed.
- Finally, Josh Eidelson offers an inside look at Walmart's treatment of its workers - with both managers and rank-and-file employees alike looking to have plenty to gain from an increase in legal protection against employer abuses.

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