Showing posts with label Personal Income. Show all posts
Showing posts with label Personal Income. Show all posts

Friday, December 6, 2013

Facebook's Future Plans for Data Collection Beyond Imagination

Facebook's dark plans for the future are given away in its patent applications.
December 4, 2013 | Alternet (via Counterpunch)

“No one knows who will live in this cage in the future, or whether at the end of this tremendous development, entirely new prophets will arise, or there will be a great rebirth of old ideas and ideals, or, if neither, mechanized petrification, embellished with a sort of convulsive self-importance. For of the fast stage of this cultural development, it might well be truly said: ‘Specialists without spirit, sensualists without heart; this nullity imagines that it has attained a level of civilization never before achieved.’”
—Max Weber, 1905

On November 12,  Facebook, Inc. filed its 178th patent application for a consumer profiling technique the company calls “inferring household income for users of a social networking system.”

“The amount of information gathered from users,” explain Facebook programmers Justin Voskuhl and Ramesh Vyaghrapuri in their patent application, “is staggering — information describing recent moves to a new city, graduations, births, engagements, marriages, and the like.” Facebook and other so-called tech companies have been warehousing all of this information since their respective inceptions. In Facebook’s case, its data vault includes information posted as early as 2004, when the site first went live. Now in a single month the amount of information forever recorded by Facebook —dinner plans, vacation destinations, emotional states, sexual activity, political views, etc.— far surpasses what was recorded during the company’s first several years of operation. And while no one outside of the company knows for certain, it is believed that Facebook has amassed one of the widest and deepest databases in history. Facebook has over 1,189,000,000 “monthly active users” around the world as of October 2013, providing considerable width of data. And Facebook has stored away trillions and trillions of missives and images, and logged other data about the lives of this billion plus statistical sample of humanity. Adjusting for bogus or duplicate accounts it all adds up to about 1/7th of humanity from which some kind of data has been recorded.

According to Facebook’s programmers like Voskuhl and Vyaghrapuri, of all the clever uses they have already applied this pile of data toward, Facebook has so far “lacked tools to synthesize this information about users for targeting advertisements based on their perceived income.” Now they have such a tool thanks to the retention and analysis of variable the company’s positivist specialists believe are correlated with income levels.

They’ll have many more tools within the next year to run similar predictions. Indeed, Facebook, Google, Yahoo, Twitter, and the hundreds of smaller tech lesser-known tech firms that now control the main portals of social, economic, and political life on the web (which is now to say everywhere as all economic and much social activity is made cyber) are only getting started. The Big Data analytics revolution has barely begun, and these firms are just beginning to tinker with rational-instrumental methods of predicting and manipulating human behavior.

There are few, if any, government regulations restricting their imaginations at this point. Indeed, the U.S. President himself is a true believer in Big Data; the brain of Obama’s election team was a now famous “cave” filled with young Ivy League men (and a few women) sucking up electioneering information and crunching demographic and consumer data to target individual voters with appeals timed to maximize the probability of a vote for the new Big Blue, not IBM, but the Democratic Party’s candidate of “Hope” and “Change.” The halls of power are enraptured by the potential of rational-instrumental methods paired with unprecedented access to data that describes the social lives of hundreds of millions.

Facebook’s intellectual property portfolio reads like cliff notes summarizing the aspirations of all corporations in capitalist modernity; to optimize efficiency in order to maximize profits and reduce or externalize risk. Unlike most other corporations, and unlike previous phases in the development of rational bureaucracies, Facebook and its tech peers have accumulated never before seen quantities of information about individuals and groups. Recent breakthroughs in networked computing make analysis of these gigantic data sets fast and cheap. Facebook’s patent holdings are just a taste of what’s arriving here and now.

The way you type, the rate, common mistakes, intervals between certain characters, is all unique, like your fingerprint, and there are already cyber robots that can identify you as you peck away at keys. Facebook has even patented methods of individual identification with obviously cybernetic overtones, where the machine becomes an appendage of the person. U.S. Patents 8,306,256, 8,472,662, and 8,503,718, all filed within the last year, allow Facebook’s web robots to identify a user based on the unique pixelation and other characteristics of their smartphone’s camera. Identification of the subject is the first step toward building a useful data set to file among the billion or so other user logs. Then comes analysis, then prediction, then efforts to influence a parting of money.
The way you type, the rate, common mistakes, intervals between certain characters, is all unique, like your fingerprint, and there are already cyber robots that can identify you as you peck away at keys.

Many Facebook patents pertain to advertising techniques that are designed and targeted, and continuously redesigned with ever-finer calibrations by robot programs, to be absorbed by the gazes of individuals as they scroll and swipe across their Facebook feeds, or on third party web sites.

Speaking of feeds, U.S. Patent 8,352,859, Facebook’s system for “Dynamically providing a feed of stories about a user of a social networking system” is used by the company to organize the constantly updated posts and activities inputted by a user’s “friends.” Of course embedded in this system are means of inserting advertisements. According to Facebook’s programmers, a user’s feeds are frequently injected with “a depiction of a product, a depiction of a logo, a display of a trademark, an inducement to buy a product, an inducement to buy a service, an inducement to invest, an offer for sale, a product description, trade promotion, a survey, a political message, an opinion, a public service announcement, news, a religious message, educational information, a coupon, entertainment, a file of data, an article, a book, a picture, travel information, and the like.” That’s a long list for sure, but what gets injected is more often than not whatever will boost revenues for Facebook.

The advantage here, according to Facebook, is that “rather than having to initiate calls or emails to learn news of another user, a user of a social networking website may passively receive alerts to new postings by other users.” The web robot knows best. Sit back and relax and let sociality wash over you, passively. This is merely one of Facebook’s many “systems for tailoring connections between various users” so that these connections ripple with ads uncannily resonant with desires and needs revealed in the quietly observed flow of e-mails, texts, images, and clicks captured forever in dark inaccessible servers of Facebook, Google and the like. These communications services are free in order to control the freedom of data that might otherwise crash about randomly, generating few opportunities for sales.

Where this fails Facebook ratchets up the probability of influencing the user to behave as a predictable consumer. “Targeted advertisements often fail to earn a user’s trust in the advertised product,” explain Facebook’s programmers in U.S. Patent 8,527,344, filed in September of this year. “For example, the user may be skeptical of the claims made by the advertisement. Thus, targeted advertisements may not be very effective in selling an advertised product.” Facebook’s computer programmers who now profess mastery over sociological forces add that even celebrity endorsements are viewed with skepticism by the savvy citizen of the modulated Internet. They’re probably right.

Facebook’s solution is to mobilize its users as trusted advertisers in their own right. “Unlike advertisements, most users seek and read content generated by their friends within the social networking system; thus,” concludes Facebook’s mathematicians of human inducement, “advertisements generated by a friend of the user are more likely to catch the attention of the user, increasing the effectiveness of the advertisement.” That Facebook’s current So-And-So-likes-BrandX ads are often so clumsy and ineffective does not negate the qualitative shift in this model of advertising and the possibilities of un-freedom it evokes.

Forget iPhones and applications, the tech industry’s core consumer product is now advertising. Their essential practice is mass surveillance conducted in real time through continuous and multiple sensors that pass, for most people, entirely unnoticed. The autonomy and unpredictability of the individual —in Facebook’s language the individual is the “user”— is their fundamental business problem. Reducing autonomy via surveillance and predictive algorithms that can placate existing desires, and even stimulate and mold new desires is the tech industry’s reason for being. Selling their capacious surveillance and consumer stimulus capabilities to the highest bidder is the ultimate end.

Sounds too dystopian? Perhaps, and this is by no means the world we live in, not yet. It is, however, a tendency rooted in the tech economy. The advent of mobile, hand-held, wirelessly networked computers, called “smartphones,” is still so new that the technology, and its services feel like a parallel universe, a new layer of existence added upon our existing social relationships, business activities, and political affiliations. In many ways it feels liberating and often playful. Our devices can map geographic routes, identify places and things, provide information about almost anything in real time, respond to our voices, and replace our wallets. Who hasn’t consulted “Dr. Google” to answer a pressing question? Everyone and everything is seemingly within reach and there is a kind of freedom to this utility.

Most of Facebook’s “users” have only been registered on the web site since 2010, and so the quintessential social network feels new and fun, and although perhaps fraught with some privacy concerns, it does not altogether feel like a threat to the autonomy of the individual. To say it is, is a cliche sci-fi nightmare narrative of tech-bureaucracy, and we all tell one another that the reality is more complex.

Privacy continues, however, too be too narrowly conceptualized as a liberal right against incursions of government, and while the tech companies have certainly been involved in a good deal of old-fashioned mass surveillance for the sake of our federal Big Brother, there’s another means of dissolving privacy that is more fundamental to the goals of the tech companies and more threatening to social creativity and political freedom.

Georgetown University law professor Julie Cohen notes that pervasive surveillance is inimical to the spaces of privacy that are required for liberal democracy, but she adds importantly, that the surveillance and advertising strategies of the tech industry goes further.

“A society that permits the unchecked ascendancy of surveillance infrastructures, which dampen and modulate behavioral variability, cannot hope to maintain a vibrant tradition of cultural and technical innovation,” writes Cohen in a forthcoming Harvard Law Review article:
“Modulation” is Cohen’s term for the tech industry’s practice of using algorithms and other logical machine operations to mine an individual’s data so as to continuously personalize information streams. Facebook’s patents are largely techniques of modulation, as are Google’s and the rest of the industry leaders. Facebook conducts meticulous surveillance on users, collects their data, tracks their movements on the web, and feeds the individual specific content that is determined to best resonate with their desires, behaviors, and predicted future movements. The point is to perfect the form and function of the rational-instrumental bureaucracy as defined by Max Weber: to constantly ratchet up efficiency, calculability, predictability, and control. If they succeed in their own terms, the tech companies stand to create a feedback loop made perfectly to fit each an every one of us, an increasingly closed systems of personal development in which the great algorithms in the cloud endlessly tailor the psychological and social inputs of humans who lose the gift of randomness and irrationality.

“It is modulation, not privacy, that poses the greater threat to innovative practice. Regimes of pervasively distributed surveillance and modulation seek to mold individual preferences and behavior in ways that reduce the serendipity and the freedom to tinker on which innovation thrives.” 
Cohen has pointed out the obvious irony here, not that it’s easy to miss; the tech industry is uncritically labeled America’s hothouse of innovation, but it may in fact be killing innovation by disenchanting the world and locking inspiration in an cage.

If there were limits to the reach of the tech industry’s surveillance and stimuli strategies it would indeed be less worrisome. Only parts of our lives would be subject to this modulation, and it could therefore benefit us. But the industry aspires to totalitarian visions in which universal data sets are constantly mobilized to transform an individual’s interface with society, family, the economy, and other institutions. The tech industry’s luminaries are clear in their desire to observe and log everything, and use every “data point” to establish optimum efficiency in life as the pursuit of consumer happiness. Consumer happiness is, in turn, a step toward the rational pursuit of maximum corporate profit. We are told that the “Internet of things” is arriving, that soon every object will have embedded within it a computer that is networked to the sublime cloud, and that the physical environment will be made “smart” through the same strategy of modulation so that we might be made free not just in cyberspace, but also in the meatspace.

Whereas the Internet of the late 1990s matured as an archipelago of innumerable disjointed and disconnected web sites and databases, today’s Internet is gripped by a handful of giant companies that observe much of the traffic and communications, and which deliver much of the information from an Android phone or laptop computer, to distant servers, and back. The future Internet being built by the tech giants —putting aside the Internet of things for the moment— is already well into its beta testing phase. It’s a seamlessly integrated quilt of web sites and apps that all absorb “user” data, everything from clicks and keywords to biometric voice identification and geolocation.

United States Patent 8,572,174, another of Facebook’s recent inventions, allows the company to personalize a web page outside of Facebook’s own system with content from Facebook’s databases. Facebook is selling what the company calls its “rich set of social information” to third party web sites in order to “provide personalized content for their users based on social information about those users that is maintained by, or otherwise accessible to, the social networking system.” Facebook’s users generated this rich social information, worth many billions of dollars as recent quarterly earnings of the company attest.

In this way the entire Internet becomes Facebook.
The totalitarian ambition here is obvious, and it can be read in the securities filings, patent applications, and other non-sanitized business documents crafted by the tech industry for the financial analysts who supply the capital for further so-called innovation. Everywhere you go on the web, with your phone or tablet, you’re a “user,” and your social network data will be mined every second by every application, site, and service to “enhance your experience,” as Facebook and others say. The tech industry’s leaders aim to expand this into the physical world, creating modulated advertising and environmental experiences as cameras and sensors track our movements.

Facebook and the rest of the tech industry fear autonomy and unpredictability.
The ultimate expression of these irrational variables that cannot be mined with algorithmic methods is absence from the networks of surveillance in which data is collected.

One of Facebook’s preventative measures is United States Patent 8,560,962, “promoting participation of low-activity users in social networking system.” This novel invention devised by programmers in Facebook’s Palo Alto and San Francisco offices involves a “process of inducing interactions,” that are meant to maximize the amount of “user-generated content” on Facebook by getting lapsed users to return, and stimulating all users to produce more and more data. User generated content is, after all, worth billions. Think twice before you hit “like” next time, or tap that conspicuously placed “share” button; a machine likely put that content and interaction before your eyes after a logical operation determined it to have the highest probability of tempting you to add to the data stream, thereby increasing corporate revenues.

Facebook’s patents on techniques of modulating “user” behavior are few compared to the real giants of the tech industry’s surveillance and influence agenda. Amazon, Microsoft, and of course Google hold some of the most fundamental patents using personal data to attempt to shape an individual’s behavior into predictable consumptive patterns. Smaller specialized firms like Choicestream and Gist Communications have filed dozens more applications for modulation techniques. The rate of this so-called innovation is rapidly telescoping.

Perhaps we do know who will live in the iron cage. It might very well be a cage made of our own user generated content, paradoxically ushering in a new era of possibilities in shopping convenience and the delivery of satisfactory experiences even while it eradicates many degrees of chance, and pain, and struggle (the motive forces of human progress) in a robot-powered quest to have us construct identities and relationships that yield to prediction and computer-generated suggestion. Defense of individual privacy and autonomy today is rightly motivated by the reach of an Orwellian security state (the NSA, FBI, CIA). This surveillance changes our behavior by chilling us, by telling us we are always being watched by authority. Authority thereby represses in us whatever might happen to be defined as “crime,” or any anti-social behavior at the moment. But what about the surveillance that does not seek to repress us, the watching computer eyes and ears that instead hope to stimulate a particular set of monetized behaviors in us with the intimate knowledge gained from our every online utterance, even our facial expressions and finger movements?

Friday, March 1, 2013

US Incomes plummet to worst in 20 years

RT: March 01, 2013


Americans spent slightly more of their money in January than the month before, the latest Commerce Department report shows, but the rate of income growth hit a 20-year low.

Yes, it was a good month for the US economy in terms of pumping money away on utilities like gas and electric. The Commerce Department said on Friday that consumer spending increased 0.2 percent compared with December — on par more or less with what most economists had predicted — and largely due to a surge in demand for utilities during the winter months. But while that statistic is being touted as a signal of the strengthening economy, other indicators suggest things are not as sound as they may seem.

Personal incomes plummeted in January, the new report adds, with that month’s drop of 3.6 percent being the most significant downward change since January 1993 when Pres. Bill Clinton was just beginning his first term in office. Coupled with a slight surge in spending, the latest news means Americans are largely spending more money than before while saving less.

The news comes only days after a study released by the website Bankrate.com found that barely half of Americans have more money in their savings account then they owe in credit card debt.

Yelena Shulyatyeva, an economist at BNP Paribas, New York, tells Reuters that this could be the start of something much more serious. "We expect a significant decrease in real consumer spending in the first half of the year," says Shulyatyeva. Additionally, the economist says this could mean some underwhelming news for the GDP this quarter.

Speaking to the Associated Press, BMO Capital Markets senior economist Jennifer Lee says that a slight hike in taxes starting on the first of the year is partially to blame for what could become a serious problem in the months to come. "The sting of higher taxes hit home at the start of the year. This will cool spending in the next few months before consumers adjust to higher rates."

James Marple, a senior economist at TD Economics, adds in a USA Today report that, given the latest changes in tax rates and spending cuts, growth during the first half of 2013 is unlikely to exceed a rate of 2 percent.

"At this pace, the unemployment will not improve and pressure will remain on the Federal Reserve to continue its asset purchase program,” Marple said.

Earlier in the week, an analysis conducted by MSCI Inc. concluded that current economy-saving policies enacted by Federal Reserve Chairman Ben Bernanke could cause the country’s central bank to lose half a trillion dollars during the next three years.

January’s 3.6 percent decline in income growth comes after an increase of 2.6 percent one month earlier, results that are typical given the holiday shopping season.

Wednesday, July 18, 2012

Nearly all of Congress refuses to release tax returns

By Eric W. Dolan - RAW Story
Wednesday, July 18, 2012
 
 
Democrats in Congress have called on Republican presidential candidate Mitt Romney to release more tax returns, but most of them have refused to release their own tax forms.

For three months, McClatchy requested the most recent tax returns from all 535 members of Congress, but only 13 Democrats and 3 Republicans shared their detailed tax information. The rest either refused to share their tax returns or ignored McClatchy’s request.

Members of Congress are required to file financial disclosure reports that list their major sources of earned and unearned income. However, the disclosure reports do not contain the same detail of information found in tax returns, omitting financial data such as spousal income.

Romney has repeatedly insisted that he would not release more than his 2010 and 2011 tax returns, even though his own father set a standard of releasing 12 years of returns.

“In the political environment that exists today, the opposition research of the Obama campaign is looking for anything they can use to distract from the failure of the president to reignite our economy,” Romney told the conservative National Review Online.

“I’m simply not enthusiastic about giving them hundreds or thousands of more pages to pick through, distort and lie about,” he added.

Monday, May 30, 2011

Why the Democratic Party Has Abandoned the Middle Class in Favor of the Rich

If politicians care almost exclusively about the concerns of the rich, it makes sense that over the past decades they've enacted policies that have ended up benefiting the rich.
By Kevin Drum, Mother Jones
Posted on May 30, 2011
The following article first appeared in Mother Jones.

In 2008, a liberal Democrat was elected president. Landslide votes gave Democrats huge congressional majorities. Eight years of war and scandal and George W. Bush had stigmatized the Republican Party almost beyond redemption. A global financial crisis had discredited the disciples of free-market fundamentalism, and Americans were ready for serious change.
Or so it seemed. But two years later, Wall Street is back to earning record profits, and conservatives are triumphant. To understand why this happened, it's not enough to examine polls and tea parties and the makeup of Barack Obama's economic team. You have to understand how we fell so short, and what we rightfully should have expected from Obama's election. And you have to understand two crucial things about American politics.

The first is this: Income inequality has grown dramatically since the mid-'70s—far more in the US than in most advanced countries—and the gap is only partly related to college grads outperforming high-school grads. Rather, the bulk of our growing inequality has been a product of skyrocketing incomes among the richest 1 percent and—even more dramatically—among the top 0.1 percent. It has, in other words, been CEOs and Wall Street traders at the very tippy-top who are hoovering up vast sums of money from everyone, even those who by ordinary standards are pretty well off.

Second, American politicians don't care much about voters with moderate incomes. Princeton political scientist Larry Bartels studied the voting behavior of US senators in the early '90s and discovered that they respond far more to the desires of high-income groups than to anyone else. By itself, that's not a surprise. He also found that Republicans don't respond at all to the desires of voters with modest incomes. Maybe that's not a surprise, either. But this should be: Bartels found that Democratic senators don't respond to the desires of these voters, either. At all.

It doesn't take a multivariate correlation to conclude that these two things are tightly related: If politicians care almost exclusively about the concerns of the rich, it makes sense that over the past decades they've enacted policies that have ended up benefiting the rich. And if you're not rich yourself, this is a problem. First and foremost, it's an economic problem because it's siphoned vast sums of money from the pockets of most Americans into those of the ultrawealthy. At the same time, relentless concentration of wealth and power among the rich is deeply corrosive in a democracy, and this makes it a profoundly political problem as well.

How did we get here? In the past, after all, liberal politicians did make it their business to advocate for the working and middle classes, and they worked that advocacy through the Democratic Party. But they largely stopped doing this in the '70s, leaving the interests of corporations and the wealthy nearly unopposed. The story of how this happened is the key to understanding why the Obama era lasted less than two years.

About a year ago, the Pew Research Center looked looked at the sources reporters used for stories on the economy. The White House and members of Congress were often quoted, of course. Business leaders. Academics. Ordinary citizens. If you're under 40, you may not notice anything amiss. Who else is missing, then? Well: "Representatives of organized labor unions," Pew found, "were sources in a mere 2% of all the economy stories studied."

It wasn't always this way. Union leaders like John L. Lewis, George Meany, and Walter Reuther were routine sources for reporters from the '30s through the '70s. And why not? They made news. The contracts they signed were templates for entire industries. They had the power to bring commerce to a halt. They raised living standards for millions, they made and broke presidents, and they formed the backbone of one of America's two great political parties.

They did far more than that, though. As historian Kim Phillips-Fein puts it, "The strength of unions in postwar America had a profound impact on all people who worked for a living, even those who did not belong to a union themselves." (Emphasis mine.) Wages went up, even at nonunion companies. Health benefits expanded, private pensions rose, and vacations became more common. It was unions that made the American economy work for the middle class, and it was their later decline that turned the economy upside-down and made it into a playground for the business and financial classes.

Technically, American labor began its ebb in the early '50s. But as late as 1970, private-sector union density was still more than 25 percent, and the absolute number of union members was at its highest point in history. American unions had plenty of problems, ranging from unremitting hostility in the South to unimaginative leadership almost everywhere else, but it wasn't until the rise of the New Left in the '60s that these problems began to metastasize.

The problems were political, not economic. Organized labor requires government support to thrive—things like the right to organize workplaces, rules that prevent retaliation against union leaders, and requirements that management negotiate in good faith—and in America, that support traditionally came from the Democratic Party. The relationship was symbiotic: Unions provided money and ground game campaign organization, and in return Democrats supported economic policies like minimum-wage laws and expanded health care that helped not just union members per se—since they'd already won good wages and benefits at the bargaining table—but the interests of the working and middle classes writ large.

But despite its roots in organized labor, the New Left wasn't much interested in all this. As the Port Huron Statement, the founding document of Students for a Democratic Society, famously noted, the students who formed the nucleus of the movement had been "bred in at least modest comfort." They were animated not by workplace safety or the cost of living, but first by civil rights and antiwar sentiment, and later by feminism, the sexual revolution, and environmentalism. They wore their hair long, they used drugs, and they were loathed by the mandarins of organized labor.

By the end of the '60s, the feeling was entirely mutual. New Left activists derided union bosses as just another tired bunch of white, establishment Cold War fossils, and as a result, the rupture of the Democratic Party that started in Chicago in 1968 became irrevocable in Miami Beach four years later. Labor leaders assumed that the hippies, who had been no match for either Richard Daley's cops or establishment control of the nominating rules, posed no real threat to their continued dominance of the party machinery. But precisely because it seemed impossible that this motley collection of shaggy kids, newly assertive women, and goo-goo academics could ever figure out how to wield real political power, the bosses simply weren't ready when it turned out they had miscalculated badly. Thus George Meany's surprise when he got his first look at the New York delegation at the 1972 Democratic convention. "What kind of delegation is this?" he sneered. "They've got six open fags and only three AFL-CIO people on that delegation!"

But that was just the start. New rules put in place in 1968 led by almost geometric progression to the nomination of George McGovern in 1972, and despite McGovern's sterling pro-labor credentials, the AFL-CIO refused to endorse him. Not only were labor bosses enraged that the hippies had thwarted the nomination of labor favorite Hubert Humphrey, but amnesty, acid, and abortion were simply too much for them. Besides, Richard Nixon had been sweet-talking them for four years, and though relations had recently become strained, he seemed not entirely unsympathetic to the labor cause. How bad could it be if he won reelection?

Plenty bad, it turned out—though not because of anything Nixon himself did. The real harm was the eventual disaffection of the Democratic Party from the labor cause. Two years after the debacle in Miami, Nixon was gone and Democrats won a landslide victory in the 1974 midterm election. But the newly minted members of Congress, among them former McGovern campaign manager Gary Hart, weren't especially loyal to big labor. They'd seen how labor had treated McGovern, despite his lifetime of support for their issues.

The results were catastrophic. Business groups, simultaneously alarmed at the expansion of federal regulations during the '60s and newly emboldened by the obvious fault lines on the left, started hiring lobbyists and launching political action committees at a torrid pace. At the same time, corporations began to realize that lobbying individually for their own parochial interests (steel, sugar, finance, etc.) wasn't enough: They needed to band together to push aggressively for a broadly pro-business legislative environment. In 1971, future Supreme Court justice Lewis Powell wrote his now-famous memo urging the business community to fight back: "Strength lies in organization," he wrote, and would rise and fall "through joint effort, and in the political power available only through united action and national organizations." Over the next few years, the Chamber of Commerce morphed into an aggressive and highly politicized advocate of business interests, conservative think tanks began to flourish, and more than 100 corporate CEOs banded together to found a pro-market supergroup, the Business Roundtable.

They didn't have to wait long for their first big success. By 1978, a chastened union movement had already given up on big-ticket legislation to make it easier to organize workplaces. But they still had every reason to think they could at least win passage of a modest package to bolster existing labor law and increase penalties for flouting rulings of the National Labor Relations Board. After all, a Democrat was president, and Democrats held 61 seats in the Senate. So they threw their support behind a compromise bill they thought the business community would accept with only a pro forma fight.

Instead, the Business Roundtable, the US Chamber of Commerce, and other business groups declared war. Organized labor fought back with all it had—but that was no longer enough: The bill failed in the Senate by two votes. It was, said right-wing Sen. Orrin Hatch (R-Utah), "a starting point for a new era of assertiveness by big business in Washington." Business historian Kim McQuaid put it more bluntly: 1978, he said, was "Waterloo" for unions.
Organized labor, already in trouble thanks to stagflation, globalization, and the decay of manufacturing, now went into a death spiral. That decline led to a decline in the power of the Democratic Party, which in turn led to fewer protections for unions. Rinse and repeat. By the time both sides realized what had happened, it was too late—union density had slumped below the point of no return.

Why does this matter? Big unions have plenty of pathologies of their own, after all, so maybe it's just as well that we're rid of them. Maybe. But in the real world, political parties need an institutional base. Parties need money. And parties need organizational muscle. The Republican Party gets the former from corporate sponsors and the latter from highly organized church-based groups. The Democratic Party, conversely, relied heavily on organized labor for both in the postwar era. So as unions increasingly withered beginning in the '70s, the Democratic Party turned to the only other source of money and influence available in large-enough quantities to replace big labor: the business community. The rise of neoliberalism in the '80s, given concrete form by the Democratic Leadership Council, was fundamentally an effort to make the party more friendly to business. After all, what choice did Democrats have? Without substantial support from labor or business, no modern party can thrive.

It's important to understand what happened here. Entire forests have been felled explaining why the working class abandoned the Democratic Party, but that's not the real story. It's true that Southern whites of all classes have increasingly voted Republican over the past 30 years. But working-class African Americans have been (and remain) among the most reliable Democratic voters, and as Larry Bartels has shown convincingly, outside the South the white working class has not dramatically changed its voting behavior over the past half-century. About 50 percent of these moderate-income whites vote for Democratic presidential candidates, and a bit more than half self-identify as Democrats. These numbers bounce up and down a bit (thus the "Reagan Democrat" phenomenon of the early '80s), but the overall trend has been virtually flat since 1948.

In other words, it's not that the working class has abandoned Democrats. It's just the opposite: The Democratic Party has largely abandoned the working class.

Here's why this is a big deal. Progressive change in the United States has always come in short, intense spurts: The Progressive Era lasted barely a decade at the national level, the New Deal saw virtually all of its legislative activity enacted within the space of six years between 1933 and 1938, and the frenzy of federal action associated with the '60s nearly all unfolded between 1964 and 1970. There have been exceptions, of course: The FDA was created in 1906, the GI Bill was passed in 1944, and the Americans with Disabilities Act was passed in 1990. And the courts have followed a schedule all their own. Still, one striking fact remains: Liberal reform is not a continuous movement powered by mere enthusiasm. Reform eras last only a short time and require extraordinarily intense levels of cultural and political energy to get started. And they require two other things to get started: a Democratic president and a Democratic Congress.

In 2008, fully four decades after our last burst of liberal change, we got that again. But instead of five or six tumultuous years, the surge of liberalism that started in 2008 lasted scarcely 18 months and produced only two legislative changes really worthy of note: health care reform and the repeal of Don't Ask, Don't Tell. By the summer of 2010 liberals were dispirited, political energy had been co-opted almost entirely by the tea party movement, and in November, Republicans won a crushing victory.

Why? The answer, I think, is that there simply wasn't an institutional base big enough to insist on the kinds of political choices that would have kept the momentum of 2008 alive. In the past, blue-collar workers largely took their cues on economic policy from meetings in union halls, and in turn, labor leaders gave them a voice in Washington.

This matters, as Jacob Hacker and Paul Pierson argue in one of last year's most important books, Winner-Take-All Politics, because politicians don't respond to the concerns of voters, they respond to the organized muscle of institutions that represent them. With labor in decline, both parties now respond strongly to the interests of the rich—whose institutional representation is deep and energetic—and barely at all to the interests of the working and middle classes.

This has produced three decades of commercial and financial deregulation that started during the administration of a Democrat, Jimmy Carter, gained steam throughout the Reagan era, and continued under Bill Clinton. There were a lot of ways America could have responded to the twin challenges of '70s-era stagflation and the globalization of finance, but the policies we chose almost invariably ignored the stagnating wages of the middle class and instead catered to the desires of the superrich: hefty tax cuts on both high incomes and capital gains. Deregulation of S&Ls (PDF) that led to extensive looting and billions in taxpayer losses.

Monetary policy focused excessively on inflation instead of employment levels. Tacit acceptance of asset bubbles as a way of maintaining high economic growth. An unwillingness to regulate financial derivatives that led to enormous Wall Street profits and contributed to the financial crisis of 2008. At nearly every turn, corporations and the financial industry used their institutional muscle to get what they wanted, while the working class sat by and watched, mostly unaware that any of this was even happening.

It's impossible to wind back the clock and see what would have happened if things had been different, but we can take a pretty good guess. Organized labor, for all its faults, acted as an effective countervailing power for decades, representing not just its own interests, but the interests of virtually the entire wage-earning class against the investor class. As veteran Washington Post reporter David Broder wrote a few years ago, labor in the postwar era "did not confine itself to bread-and-butter issues for its own members. It was at the forefront of battles for aid to education, civil rights, housing programs and a host of other social causes important to the whole community. And because it was muscular, it was heard and heeded." If unions had been as strong in the '80s and '90s as they were in the '50s and '60s, it's almost inconceivable that they would have sat by and accepted tax cuts and financial deregulation on the scale that we got. They would have demanded economic policies friendlier to middle-class interests, they would have pressed for the appointment of regulators less captured by the financial industry, and they would have had the muscle to get both.

And that means things would have been different during the first two years of the Obama era, too. Aside from the question of whether the crisis would have been so acute in the first place, a labor-oriented Democratic Party almost certainly would have demanded a bigger stimulus in 2009. It would have fought hard for "cramdown" legislation to help distressed homeowners, instead of caving in to the banks that wanted it killed. It would have resisted the reappointment of Ben Bernanke as Fed chairman. These and other choices would have helped the economic recovery and produced a surge of electoral energy far beyond Obama's first few months. And since elections are won and lost on economic performance, voter turnout, and legislative accomplishments, Democrats probably would have lost something like 10 or 20 seats last November, not 63. Instead of petering out after 18 months, the Obama era might still have several years to run.

This is, of course, pie in the sky. Organized labor has become a shell of its former self, and the working class doesn't have any institutional muscle in Washington. As a result, the Democratic Party no longer has much real connection to moderate-income voters. And that's hurt nearly everyone.

If unions had remained strong and Democrats had continued to vigorously press for more equitable economic policies, middle-class wages over the past three decades likely would have grown at about the same rate as the overall economy—just as they had in the postwar era. But they didn't, and that meant that every year, the money that would have gone to middle-class wage increases instead went somewhere else. This created a vast and steadily growing pool of money, and the chart below gives you an idea of its size. It shows how much money would have flowed to different groups if their incomes had grown at the same rate as the overall economy. The entire bottom 80 percent now loses a collective $743 billion each year, thanks to the cumulative effect of slow wage growth. Conversely, the top 1 percent gains $673 billion. That's a pretty close match. Basically, the money gained by the top 1 percent seems to have come almost entirely from the bottom 80 percent.

And what about those in the 80th to 99th percentile? They didn't score the huge payoffs of the superrich, but they did okay, basically keeping up with economic growth. Yet the skyrocketing costs of things like housing and higher education (PDF) make this less of a success story than it seems. And there's been a bigger cost as well: It turns out that today's upper-middle-class families lead a much more precarious existence than raw income figures suggest.

Jacob Hacker demonstrated this persuasively in The Great Risk Shift, which examined the ways in which financial risk has increasingly been moved from corporations and the government onto individuals. Income volatility, for example, has risen dramatically over the past 30 years. The odds of experiencing a 50 percent drop in family income have more than doubled since 1970, and this volatility has increased for both high school and college grads. At the same time, traditional pensions have almost completely disappeared, replaced by chronically underfunded 401(k) plans in which workers bear all the risk of stock market gains and losses. Home foreclosures are up (PDF), Americans are drowning in debt, jobs are less secure, and personal bankruptcies have soared (PDF). These developments have been disastrous for workers at all income levels.

This didn't all happen thanks to a sinister 30-year plan hatched in a smoke-filled room, and it can't be reined in merely by exposing it to the light. It's a story about power. It's about the loss of a countervailing power robust enough to stand up to the influence of business interests and the rich on equal terms. With that gone, the response to every new crisis and every new change in the economic landscape has inevitably pointed in the same direction. And after three decades, the cumulative effect of all those individual responses is an economy focused almost exclusively on the demands of business and finance. In theory, that's supposed to produce rapid economic growth that serves us all, and 30 years of free-market evangelism have convinced nearly everyone—even middle-class voters who keep getting the short end of the economic stick—that the policy preferences of the business community are good for everyone. But in practice, the benefits have gone almost entirely to the very wealthy.

It's not clear how this will get turned around. Unions, for better or worse, are history. Even union leaders don't believe they'll ever regain the power of their glory days. If private-sector union density increased from 7 percent to 10 percent, that would be considered a huge victory. But it wouldn't be anywhere near enough to restore the power of the working and middle classes.

And yet: The heart and soul of liberalism is economic egalitarianism. Without it, Wall Street will continue to extract ever vaster sums from the American economy, the middle class will continue to stagnate, and the left will continue to lack the powerful political and cultural energy necessary for a sustained period of liberal reform. For this to change, America needs a countervailing power as big, crude, and uncompromising as organized labor used to be.

But what?

Over the past 40 years, the American left has built an enormous institutional infrastructure dedicated to mobilizing money, votes, and public opinion on social issues, and this has paid off with huge strides in civil rights, feminism, gay rights, environmental policy, and more. But the past two years have demonstrated that that isn't enough. If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we've ignored for too long. Figuring out how to do that is the central task of the new decade.

Monday, April 18, 2011

Super Rich See Federal Taxes Drop Dramatically

Sunday, April 17, 2011 by Associated Press
by Stephen Ohlemacher

WASHINGTON – As millions of procrastinators scramble to meet Monday's tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.

The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.

President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.

In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.

More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.

Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."

Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.

Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.

"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.

Schoenberg said Hatch's suggestion misses the point.

"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"

The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.

The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.

The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.

In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.

About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.

"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."

Friday, January 7, 2011

Commerce Department Pulled $46.3 Billion In Personal Income Out Of Thin Air To "Prevent" Double Dip (by the books)

(See, when the books can be cooked this easily to make a recession "not" a recession, or perhaps making a depression "just" a recession--then it is just too easy for our benevolent rulers to be dishonest and this is becoming an institutional regularity: keeping 'we, the people' in the dark about the iceberg the USA Titanic hit 2 years ago--you know, it's just like the unemployment rate they peg at just at 9 1/2% when it's really at 20%. What do they care? None of this affects ANY of them directly, except for re-election prospects, but when you lose, you just become a high paid corporate lobbyist sticking it to the people just like you did as a legislator. Wheeee heee heee!--jef)

***

by Tyler Durden on 01/06/2011

It is a good thing that America has a functioning, objective and analytical media, otherwise we might need David Rosenberg to point out that one of the key factors for the avoidance of the "technical double dip" was a completely unexpected number fudge courtesy of the Commerce Department which, at the most crucial stage in the economy's conversion into a re-recession, miraculously "found" $46.3 billion in personal income that "the consumer thought wasn't there before." In other words, the government literally pulled a number out of thin air which created a relative sequential boost to the economy, even though it was just a non-recurring accounting adjustment to continuous numbers and should have been completely ignored! By then it was too late (very much in the same way that the BLS has had 44 out of 52 adverse data revisions after the data has been reported, when it is too late for its to impact asset prices): it set off a chain of events which resulted in a jump in ISM, diffusion and various other indices (not to mention the BLS endless data adjustment) which caused a last second avoidance of the double dip becoming official. Oh and the Fed's QE2 did not hurt either...

From David Rosenberg:

THE REAL CAUSE FOR THE RECENT EXUBERANCE

It may have been partly due to QE2 and partly due to the latest round of fiscal goodies, which gave sentiment a lift even though the change doesn’t fill people’s pockets until this quarter. And there is no doubt that the Europeans have managed to convince everyone that the debt problems are behind us ? that has helped out too in terms of underpinning confidence.

The real kicker was the fact that personal income was revised up $46.3 billion in the second quarter. This was huge (?) the Commerce Department found $46.3 billion for the consumer that it thought wasn’t there before. This made the difference between income being up at nearly a 6% annual rate that quarter and 3%. The newly found income carried some important spending momentum with it into the third quarter and this was really big in terms of influencing people’s perceptions of how the economy was performing. When double-dip risks were at their peak, it was when Q3 GDP was released initially and it showed a mere 1.6% annual growth rate, which was even weaker than the 1.7% print in Q2 (which was less than half the growth rate of Q1). Then Q3 GDP was revised up to 2% and then all the way to 2.6% and that is all she wrote as far as the double dip for 2010 was concerned. And it now looks like we are going to see something closer to 3.5% for Q4. So what happened was that consumers had more income than was thought previously and while (like the payroll tax cut for Q1) this is really just a LEVEL shift in earnings, there is an initial thrust to growth rates, at least for a few months. This is essentially the reason why, along with perhaps a moderate wealth effect from the stock market runup, the holiday shopping season surprised to the upside.

This is a nice story. It explains why we were wrong on the Q3/Q4 double-dip scenario, but going forward, this income revision and its impact on spending can be considered yesterday’s story. As we said, there is the current payroll tax effect, but this will be contained to the first quarter and the one thing history teaches us is that tax cuts that are temporary in nature carry with them virtually no multiplier impact into the future. Look for Q2 of this year ? and likely Q3 as well ? to turn out to be as disappointing for the market, as was the case for these exact same quarters in 2010. In other words, look for a repeat except this time around we don’t have a Fed and a Congress that is going to pull another rabbit out of the hat during the summer and fall.

Oh yes, we would be remiss if we did not mention the fact that this overbought equity market has already priced in this “bullish” first quarter scenario. What it hasn’t yet discounted are the hurdles that lie ahead in the second and third quarters of the year.

And with that down, here is why Rosenberg rightfully anticipates that the endless data fudging will soon end, resulting in the long overdue final correction to GDP.
CAN WE SEE 4% GDP GROWTH FOR Q1? YES, BUT LOOK FOR AIR POCKETS THEREAFTER

This is not a forecast as much as something that should be on the radar screen. Nor should this be considered a change in our fundamental view for 2011 as a whole — as a year of overall disappointment on the macro front. Be that as it may, the probability of a much stronger Q1 economic outcome has risen very recently.
Yes, you read that right. But why would that come as a surprise? We had near 4% GDP growth in the first quarter of last year (the consensus was little more than 2.5% going into that quarter) and by summer everyone was still talking about a double-dip recession and the stock market was beginning to price one in. Remember that the consumer is going to be on the receiving end of a $30 billion gift in Q1 from the payroll tax cut (the only impact on “growth” is this quarter). At the same time, we are leaving the fourth quarter with more momentum, particularly on the consumer side, than we had been expecting previously.

The points below show what it would take to get 4% GDP growth for Q1 — believe it or not, it is not a stretch to get there. With consumer spending at 3.5% (perhaps even higher), it doesn’t take much. The consensus right now is less than 3% (taken a month ago), but I would expect to see it revised up very shortly:
  •  Consumer spending 3.5% (the impact of the payroll tax cut)
  •  Residential investment 2% (the monthly construction spending numbers have risen modestly off the lows)
  •  Non-residential spending 5% (the architectural billing index is consistent with this)
  •  Capex 10% (still solid but moderating as the latest core orders data are predicting)
  •  Net exports swing from $470 billion to $460 billion (net addition of 0.4%)
  •  Inventories from $73 billion to $68 billion (drag of 0.2%)
  •  Government 1.5%
Even if government is flat, the number for Q1 would still be 3.7% seasonally adjusted annual rate.

What is important is what happens in the second and third quarter when we see the U.S. economy hitting an important air pocket. In Q2, there is a loss of fiscal support at the margin. Moreover, we will be deeper into this renewed leg of the downturn of home prices, with negative implications for the household wealth effect, confidence, and spending. We will be seeing the peak impact from the runup in energy prices too. The inventory cycle has pretty well run its course as well (it was responsible for half of the GDP growth in 2010). It would also likely be prudent to assume that some risk aversion will resurface from the renewal of European debt concerns in March after the Irish elections (if the opposition party wins, expect the EU deal to be renegotiated and the debt to be restructured, and if that happens, look for other countries to follow suit). Of course, we have the debt-ceiling issue to contend with in March-April and the GOP are dangling $100 billion of spending cuts in front of the White House in order to get a deal done. This is not last year’s lame duck Congress. And this doesn’t add to uncertainty and possible disappointment in the second and third quarter?

The Fed is not going to be able to embark on more balance sheet expansion unless things were to get really ugly given the new Congressional oversight and the longer list of “hawks” that are FOMC voters ? this comes to a head in June and remember what happened last year when Mr. Market hit a pothole as the Fed contemplated its elusive exit strategy. It would be irresponsible to ignore these risks.

All we know about Q4 is that we should see a decent pickup in capital spending ahead of the end of the bonus depreciation allowance, which will merely create another problem for 2012 but the story here is (i) consumer-led first quarter, followed by (ii) air pockets in both Q2 and Q3, and then (iii) a capex-led fourth quarter. Moreover, a 2012 recession cannot be ruled out. In fact, elections are great years to have recessions: 1960, 1970, 1980, 2000 and 2008! How about that Mr. Potter?