The Grand Republican Strategy: We Win, You Pay!

On a recent trip to London, I got into a conversation with a wealthy oil and gas investor about climate change. He didn’t disagree we need to shift from fossil fuels to renewable energy, he said. His job is to make sure the lights in our homes still turn on while we make the transition.

Fair enough, I said. Would you support a carbon tax or a cap-and-trade program to speed up the transition?

“Sure,” he said, to my surprise, without hesitation. “As long as the revenue is spent on new technologies, and not given away to poor people.”

Ah. There’s always a catch.

At first, I thought it was a strange caveat, especially since we’d just got done talking about income inequality, an issue that he seemed quite concerned about. It wasn’t until I saw the Republican presidential hopefuls unveil their new economic plans that it all made sense:

I really want to do the right thing, he’s saying, as long as I don’t have to pay for it.

Carbon Tax BurdenThe reason for his concern, by the way, is that poor people have to spend a higher percentage of their income on oil and gas than rich people, so the burden of a carbon tax or a cap-and-trade program would fall the hardest on them. Many people think that’s unfair since (a) they’re already strapped for cash and (b) they’re not the ones profiting from all the carbon emissions. So progressive proposals usually include a rebate of some sort to ease their cost.

Our friend the oil-and-gas investor would rather give that money to — surprise, surprise — corporate America.

This, I realized, is the grand strategy of the new “reformocon” movement in the Republican party. No longer can a Republican run for president without admitting that the government must do something about our nation’s most pressing problems — but neither can he ask his friends in the One Percent to pay for it. Thus is born a new slogan: We win, you pay!

Mike Lee and Marco Rubio, two of the leading reformocons in the Senate, put this strategy to the test earlier this month when they released an ambitious tax plan centered around an expansion of the Child Tax Credit for middle-income households. Sounds great, right? Rather than cutting government spending for the middle class, these Republicans want to spend more. Heaven knows they could use it, after decades of dismal income growth. But who will pay for it?

Certainly not the rich. The Lee-Rubio plan eliminates taxes on investments, where they get most of their income, and it lowers the corporate tax rate and the income tax rate for the top bracket. Add it all up, and it turns out to be an enormous tax cut for the wealthiest Americans and barely any relief for everyone else.

Republican Budget CutsAnd what happens when all these tax cuts increase the budget deficit by $400 billion a year? Well, if recent history is any indicator, these same Republicans will scream “Crisis!” and demand spending cuts. If you’re wondering where those cuts will come from, look no further than the latest Republican budget, which gets two-thirds of its cuts from programs that help low- and moderate-income households. It scorches their budgets by 40 percent!

So, who will pay for the reformocons’ new plans? You know who.

No sooner had the ink dried on Marco Rubio’s deceptive debut than his presidential competitor Jeb Bush announced, in a speech about income inequality, that he would abolish the federal minimum wage.

Among the reformocon movement, Jeb Bush is not alone in this desire. You may wonder how they can expand the Child Tax Credit in one breath and abolish the minimum wage in the next, since the two policies are basically intended to help the same people?

It’s very simple really, once you understand the “we win, you pay” principle. Wages are paid by corporations. Tax credits are paid by…well, you just saw who, and it ain’t the corporations.

So, for the reformocons: Tax credits, good. Wages, bad.

The most egregious example of this strategy is our first official presidential candidate, Ted Cruz, who’s advocating a “flat tax,” charging the same rate to everyone, regardless of their income. For that to work, he’d have to raise taxes significantly on most Americans in order to cut them significantly for the richest Americans because the only way to raise the same amount of revenue is to find a rate somewhere in the middle of what the two groups pay now. It’s basic arithmetic.

But you never hear the reformocons talk about arithmetic in their speeches. They talk about inequality and upward mobility and the American middle class. They talk about all sorts of expensive new plans, and they never mention that there’s a catch.

They can’t mention the catch because it undermines the entire point of their reforms. If they win, you pay. And if you pay, they’re not helping you after all.

So, who are they helping? You know who.

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This op-ed was originally published in the Huffington Post.

No, Education Isn’t Enough to Get You Out of the Ghetto

Want to know how to get rich? Wilbur Ross has the answer: Go to school.

“Education is the way that people get out of the ghetto and into, if not the One Percent, something close to it,” said the billionaire investor in an interview earlier this year.

That’s it. So simple.

So simple, in fact, that you have to wonder: Why doesn’t everybody do it? Why don’t we all study our way into the One Percent?

Actually, many have tried. Over 73 million adults have a college degree in this country, but less than 2 million of them are members of the One Percent. Most earn less than a fifth of what they’d need to qualify for the One Percent.

The same is true of postgraduate degrees. Approximately 38 million adults have a master’s, professional, or doctoral degree, and over 37 million of them earn less than the One Percent. Most aren’t even close. To be a member of the One Percent, you have to earn more than $393,000 a year. The average PhD grad earns less than $93,000.

Declining Wages for College GraduatesAnd it’s getting worse. New college graduates entering the workforce today are earning wages 5 percent lower, after adjusting for inflation, than their predecessors earned a decade earlier. Over half of them can’t find full-time work, and half of the ones who do get a job aren’t using their degrees. Even law school grads only have 50/50 odds of finding full-time legal jobs. As a result, college graduates are this nation’s fastest-growing group of food stamp recipients.

That’s a far cry from the lucrative lifestyle that Wilbur Ross promised them.

It’s not hard to see why Ross would make this mistake. The average member of the One Percent is more educated than the average member of the 99 Percent. Ross looks around at his fellow One Percenters and sees their education and assumes that’s how they got there. It’s like the old joke about the guy who was born on third base and assumed he’d hit a triple.

Ross’s own life is a classic example. His father was a graduate of Yale, one of the most elite universities in the world. He sent his son to the college preparatory Xavier High School in Manhattan, where the current annual tuition is $14,450. From there, Ross went to — surprise, surprise — Yale, where his faculty adviser got him his first summer job on Wall Street.

Contrast that story with the childhood that most Americans experience.

The divergence starts before they even set foot in a classroom. By the age of 3, low-income children hear 30 million fewer words than their wealthier peers. Kids whose parents can afford to send them to high-performing preschools are more likely to graduate from high school, half as likely to get arrested, and almost three times more likely to own a home in adulthood.

If they overcome those odds, lower-income children attend schools that have lower education ratings, and they spend less time in those schools because they have to work or take care of family members. They also miss more days because they’re more likely to be sick.

It’s a myth that lower-income parents spend less time exploring school options or engaging their kids in home-learning activities. Contrary to what Wilbur Ross may tell you, low-income parents are just as committed to their kids’ education as their wealthier counterparts, according to studies of thousands of families across America. The problem is, they are less able to navigate the educational system because they are less informed. They also have less money to spend — and the gap in money spent on “enrichment activities” has been growing for the past four decades.

Shift in Financial AidThese problems become painfully clear when it comes time to apply to college. Most high-achieving, low-income students don’t even apply to elite universities like Yale because they don’t know how. No one encourages them. No one shows them how to pay for it. They see high tuition costs — and financial aid that has been going more and more to wealthy students in recent years — and they opt for lower-rated schools instead. If you take a rich kid and a poor kid with equally high achievements and test scores in high school, the rich kid is twice as likely to attend an elite university, simply because he comes from a wealthier family.

And even if the average American child manages to overcome all of these obstacles, they still face daunting odds to reach the hallowed One Percent. According to the Pew Economic Mobility Project, “rich kids without a college degree are 2.5 times more likely to end up rich than poor kids who do graduate from college.” It turns out that education isn’t a silver bullet after all.

Wilbur Ross is right about one thing, though. “I think the right focus would be how do you help the lower classes elevate themselves,” he said in the same interview. “And I think what’s disappointing with all the rhetoric, they’re not doing anything to fix the educational system.”

It is possible to give all Americans the same opportunities that young Wilbur Ross enjoyed. We can pay for all children to attend preschool. We can create home visitation programs that read to kids at an early age and help parents create a healthy environment for them. We can raise the minimum wage and create more jobs for parents so their kids don’t have to skip school to pay the bills. We can equalize funding for public schools between rich and poor school districts so all students have the same level of quality education. We can return to the days when Pell grants and other financial aid allowed kids to go to the college of their choice without onerous student loans. And once they’re in the workforce, we can invest in the kind of research and development that puts those advanced degrees to use.

But every one of those solutions requires Wilbur Ross and his fellow One Percenters to share a little of their good fortune with the 99 Percent. The only question is, do they really want to be a part of the solution? Or is “education” their scapegoat for an unjust inequality of opportunity that they are content to enjoy as long as it benefits them?

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This op-ed was originally published in the Huffington Post.

Guess Who Tried to Prevent the VA Crisis — and Who Stood in Their Way!

The Three Trillion Dollar War

Linda Bilmes and Joseph Stiglitz predicted the VA scandal.

Back in 2008, the eminent researchers — one a professor at the Harvard Kennedy School, the other a Nobel laureate in economics — published a book called The Three Trillion Dollar War, where they argued that most Americans were drastically underestimating the cost of the Iraq War. They didn’t specifically describe the events that have unfolded in recent weeks, but they did point out the enormous burden that would be placed on the VA system as veterans returned from Iraq — a burden that we were not preparing for.

And that was before the surge in Afghanistan.

Upon taking the oath of office, Barack Obama tripled U.S. troop levels in Afghanistan, sending over 60,000 troops into combat. Only now, five years later, have troop levels reverted to the level they were at when he took office. So you can add 60,000 troops for five years on top of the costs projected by Bilmes and Stiglitz — projections that were verified and replicated by the Joint Economic Committee of Congress, as well as Nobel laureate Lawrence Klein, the father of modern economic forecasting.

And yet, Congress refused to boost the VA budget.

For years, discretionary funding for the VA health care system had been growing at approximately 6 percent per year, slightly less than health care costs for the average American family, making it the most cost-efficient system in the country. Meanwhile, it ranked at the top of quality rankings, better than all its private competitors, year after year. It was the best medical care system in America.

That is, until the troops came home.

“Republicans beat back a Democratic attempt to provide almost $2 billion in additional health care funding for veterans,” reported the Washington Post in 2005, “rejecting claims that Department of Veterans Affairs hospitals are in crisis.”

The following year, Bilmes told ABC News, “In 2004, the VA had a backlog of 400,000 cases. Last year it was 500,000 cases. Now the backlog is 600,000 cases. That’s just in two years. And the big wave of returning Iraqi veterans has not even hit yet.”

And yet, the VA budget kept growing by 6 percent per year, as if the war didn’t exist at all.

As if that wasn’t a big enough problem… “Proposed cuts in Department of Veterans Affairs spending on major construction and non-recurring maintenance threaten to derail efforts to update the department’s aging infrastructure,” reported the Washington Post in 2012. And so, Democratic Senator Patty Murray led the charge to boost the VA’s construction funding, only to have it beat down by Republicans.

Later that year, Paul Ryan, the Republican chair of the House Budget Committee, released the party’s annual budget proposal. Had it become law, the VA would’ve sustained billions of dollars in budget cuts, forcing smaller facilities to shut down in rural areas.

So it wasn’t surprising to Senator Murray when allegations surfaced of VA hospitals lying about the number of veterans on their waiting lists because they didn’t want the world to know that they were unable to give their patients lifesaving treatments. “In an environment where everybody is told, ‘Keep the cost down. Don’t tell me anything costs more.’ — it creates a culture out there for people to cook the books,” she said in a recent interview.

Who would’ve ever thought, after years of relentless cost-cutting in the halls of Washington, that the federal government actually spends our money on important stuff? Who would’ve thought that wars cost money, and tax cuts cost money, and maintaining our infrastructure costs money? Not the Republicans, that’s for sure. While the Bush administration plunged us into two wars and cut taxes on the rich, who were already taking a bigger piece of the pie than they had since the Roaring Twenties, Republicans in Congress were blocking every Democratic attempt to give the VA the funding they needed to give our veterans the medical care they were promised. And then, when the Obama administration tried to correct this funding crisis, Republicans responded by proposing deeper spending cuts.

Let this be a warning to every politician and every voter who thinks we can cut our way to prosperity: Those dollar figures represent real services that the government provides to real people. Every cut has a cost, and not just in money. In lives.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

How the One Percent Is Stealing Your Money in the Stock Market

What happens when you buy shares on the stock exchange? Probably not what you expect. The moment you click “buy” on your broker’s website, you think that the computer sends your order to the exchange with the cheapest seller, thus finding you the best available deal. You think that the broker has your best interest at heart. They are, after all, working for you. You are paying them a commission. And you are living in America, the land of “everyday low prices.”

But you have been misled.

You are not the only one competing for the broker’s attention. Every exchange wants their business. There are multiple exchanges — the New York Stock Exchange, Nasdaq, BATS, Direct Edge, and a handful of others — and almost every stock trades on all of them. So your broker can find a seller for the shares you want to buy on any one of them. Some of them charge the broker a fee for using their exchange, and some of them, like BATS, actually pay the broker. If you were the broker, where would you want to do business?

The only problem is, the exchange that the broker wants to use may not have enough shares to fill your entire order. So you may want to buy 1,000 shares at $30 apiece, and the New York Stock Exchange may have a seller who’s offering 1,000 shares at $30 apiece, but instead your broker goes to BATS, where they get a kickback. This is a problem because BATS only has 100 shares to sell. By the time your broker goes to another exchange to fill the rest of the order, the other traders in the market have seen your first transaction, and they’re guessing that you’re coming back for more, and so they buy shares on the other exchanges before you get there, and they sell them to you at a higher price. These guys are called “high-frequency traders,” and they’ve rigged the market so they see what happens a fraction of a second before the rest of us. Maybe you got 100 shares for $30, but the next 100 cost you $31, and the 100 after that cost $32. It’s as if you walked into Wal-Mart, saw hot dogs for $3 apiece, and by the time you got to the register, they changed the price to $4, and it was too late for you to put them back.

This is the story of Flash Boys, the latest blockbuster book by Michael Lewis, the writer who brought you The Blind Side and Moneyball. Like his previous books, this story is true, and Lewis has the interviews to prove it.

Cost of Wall StreetThis stuff is no better than the traders who manipulated the market with inside information and collusion tactics in the 1920s. Back then, that kind of behavior wasn’t illegal, just like high-frequency trading isn’t illegal today. Back then, it took a Congressional investigation to show the public how the wealthiest among them were defrauding the masses, lying about the investments they were selling and reaping a handsome bonus before it all came crashing down. Today, all it takes is an intrepid reporter with an Internet connection, but the revelation is the same: The market is rigged, and the public has been lied to about the investments they’re making.

Flash Boys is part of a larger story. It is only one of many ways that the richest among us have been siphoning an increasing share of wealth from the masses since at least the early 1980s, if not earlier. It is confirmation of the argument I made in my book Letter to the One Percent, that the “financialization” of America has not been beneficial to most of us, that on the contrary it has taken advantage of our ignorance and our weakness, and that the economic troubles that plague our land — everything from slow growth to low savings to frequent crises — will not stop until the balance of power shifts away from the plutocrats who prey on average Americans like you.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

Does Obamacare Infringe on Our Liberty? Or Does It Give Us Even More Freedom?

What right does the government have to make you buy health insurance?

That’s the question that riles Obamacare critics the most. It’s not the premiums or the website or the dropped coverage. It’s the infringement on their liberty.

Does Government Threaten Our Freedom?You hear it all the time: “This is a free country!” That’s what everybody says. But what do they really mean? Do they know what freedom is?

It seems obvious at first. Freedom is lack of coercion. Therefore, anything the government makes you do infringes on your freedom.

But there are different types of coercion, and the government isn’t the only one doing the coercing.

Let’s say that you want your daughter to attend the best school in America. But you can’t afford the tuition. Do you really have freedom of choice? If you choose the school you want, they won’t let you through the front door. If you force your way in, they’ll arrest you.

So you “choose” a more affordable school. You wanted a better school, but they forced you to settle for a different one. Sounds like coercion to me.

Let’s consider another example. You want to retire at the age of 65. You’ve worked hard throughout your entire adult life. Unfortunately, wages haven’t risen, and the bills kept piling up. You saved as much as you could, but it’s only enough to live off for a couple years. Oh, and one more thing: Social Security and Medicare don’t exist.

If you “choose” to retire, you’ll go broke. You’ll go without preventive health care. Your chances of dying early will increase significantly.

So you have a choice: Keep working or die young.

In this case, you actually have less freedom because the government is less involved. Without Social Security and Medicare, you do not have the freedom to choose a long, healthy retirement.

Freedom requires more than the absence of laws and taxes. True freedom of choice requires the capability to make that choice — and the free market doesn’t always give us that capability.

Jobs are scarce. Most of us don’t have the freedom to work anywhere we want. We take what we can get. For many of us, that means working at a company that doesn’t pay for our health insurance. So we “choose” to buy insurance on the individual market.

Before Obamacare, the individual market charged really low rates to healthy people and really high rates to sick people. So the people who needed insurance the most couldn’t afford it. They didn’t have the capability — and therefore the freedom — to buy it.

Obamacare outlaws that kind of discrimination. It requires insurers to charge the same rates to healthy and sick people alike, and that means that healthy people will have to pay higher rates. Some of them won’t want to, so they’ll stop buying insurance. When they drop out, they leave behind the sicker people who are most costly to insure, forcing insurers to raise rates even more. It’s a vicious cycle, a “death spiral,” that results in almost everyone being priced out of the market.

Virtually no one will have the freedom to buy health insurance on the individual market.

And that’s why we have an individual mandate. If the healthy people don’t drop out, there’s no death spiral, and the insurance remains affordable for the people who need it the most.

The government gives them a freedom that the free market cannot. It gives them the capability to purchase health insurance.

If we choose not to buy insurance, we pay a penalty. As Supreme Court Chief Justice John Roberts has written, “it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income.” Those taxes pay for our roads and Army and Navy and Social Security and Medicare — and those things give us the freedom to live a life that we often take for granted. Without those taxes, without those government-funded investments, we could not call ourselves a free country.

In the same way, without Obamacare, without the government making us buy health insurance, we would be condemning millions of Americans to lives without health care. We would be restricting their freedom. And what right do we have to do that?

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.