American middle class crisis (Part 2)

Is Noam Chomsky correct about wealth inequality?

Me again. Finishing up what I started last week. If this is your first time here, subscribe now to ensure you never miss a life-changing update… or something like that. Life Intelligence comes out once a week, so it’s easy on your mailbox. And it’s free. Still…

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I find it challenging to stay informed of current events and still feel mentally healthy. If it wasn't for my dog, people on the street would think I am talking to myself.

Since I didn't get many likes, comments, or emails from readers, I must assume I ruined your week with Part 1 of this write-up. Sorry, this is about to get worse. I promise next week I'll write about something more uplifting, like insecure people who want your attention and like to create a crisis to get it. I mean anxious attachment style. Well, maybe. I'm still thinking about it.

So, back to the middle-class crisis, as explained by Neom Chomsky in this video. It's always the things in the middle that end up in crisis, like life in the middle or children in the middle. And I just learned that there's an inverse relationship between getting bigger in the middle (waist size) and gray matter volume in one's head. In addition to cardiovascular disease, people need to worry about dementia and how smart they are. Scientists are still noodling over the connections, but it shouldn't take a genius to figure out that eating an obesogenic diet doesn't improve life. In fact, it contributes greatly to individual depression and the mental health crisis of this country. Size matters, folks. If you need two seats on an airplane, you'll be less than comfortable stuffed in a single seat in Economy. I am not fat-shaming you. I am trying to scare you into size M, the middle between XS and XL).

Sorry, I digressed again.

Noam Chomsky – Principle 3 – Redesigning the Economy

NC: Since the 1970s there has been a concerned effort to shift the Economy in two respects. One – to increase the role of financial institutions, banks, investment firms, and so on, insurance companies. By 2007 right before the latest crash they had literally 40% of corporate profits, far beyond anything in the past…. you started getting a huge increase in the flows of speculative Capital, just astronomical increase, an enormous changes in the financial sector from traditional Banks to risky Investments, complex financial instruments, money manipulations and so on. (Two) The trade system was redesigned with the very specific purpose of pinning working people against each other, all over the world and what it's led to is a reduction in the share of income on the part of working people. It's been particularly striking in the United States but it's happening worldwide. It means that in American workers are in competition with the super exploited workers in China. Meanwhile highly paid professionals are protected they're not placed in competition with the rest of the world. Far from it. And of course capital is free to move, workers aren't free to move. Labor can't move but Capital can…. Going back to the classics like Adam Smith as he pointed out free circulation of labor is the foundation of any free trade system. But workers are pretty much stuck. The wealthy and the privileged are protected so you get obvious consequences.

I am unsure if the Economy was "redesigned", or we saw the unintended consequences of allowing opportunistic individuals, companies, and industries to take advantage of a low regulatory environment. I know they pushed for it, but still, that's just on the level of intent to make money, not necessarily on the level of a broader redesign of the Economy. I don't know how one or the other could be proven. I do know that American society benefited over the decades from cheap goods. At least, this is what it looks like at first glance.

There are unintended consequences of cheap goods, too. People spend more money on buying and then replacing cheap crap over and over again. As we all know, things just don't last long anymore. Planned obsolescence is a real thing. So, forget about repairs. Just get a new dishwasher and the latest smartphone.

It's not possible to produce cheap goods with high-paid labor. So, did consumer demand push companies overseas, or did companies go overseas to make themselves more competitive in the domestic market? This might be a chicken vs. egg question, but we know how it played out – Amazon, the ultimate call girl -  fast, cheap, and easy.

But for what it's worth, check out this table. It goes back to 2010. You can see who benefited greatly from the COVID giant money give-away!

Globalization has drastically transformed the financial sector. On the one hand, you've got increased cross-border investments, faster information sharing, and the rise of multinational corporations. The financial markets have become an interconnected web where a sneeze in one country can send ripples worldwide. And any company doing business in the US doesn't have to pay income taxes in the US because they don't "reside" in the US. It's magical if you are Google, Apple, or Amazon.

Various major financial institutions use offshore tax havens for tax optimization. It's important to note that specific information can be hard to come by because of confidentiality often associated with such practices. Some instances and controversies from the past include:

HSBC: The global banking giant HSBC faced allegations of helping clients set up accounts in offshore tax havens to evade taxes. The "Swiss Leaks" incident in 2015 revealed thousands of documents suggesting HSBC's Swiss subsidiary assisted clients in hiding assets and avoiding taxes.

UBS: Another big player in the financial world, was also embroiled in a controversy in the mid-2000s. The bank faced accusations of aiding tax evasion by U.S. clients through offshore accounts in Switzerland.

Panama Papers: The Panama Papers leak in 2016 exposed a vast number of documents from the Panamanian law firm Mossack Fonseca, revealing how numerous individuals and entities, including financial institutions, used offshore entities to potentially avoid taxes and hide assets.

Paradise Papers: In 2017, the Paradise Papers leak shed light on the financial affairs of many high-profile individuals and companies, including financial institutions. These leaks showed how companies often used offshore jurisdictions to legally minimize their tax obligations.

Meanwhile, "stuck workers" can't take advantage of globalization in the same way as businesses can. The folks in Detroit who used to make cars are not moving to Korea or Japan to make cars. They are going on unemployment. But at least those unemployment checks go a long way at the Dollar Store.

The decline of unions doesn't help either. Or does it? There are two sides to this argument, too. On one hand, unions fight for worker's rights, increases in compensation, and better working conditions. On the other, they make labor more expensive to employers and motivate them to outsource it, whenever possible. Whenever NOT possible, consumers pay a higher price for goods and services to compensate for the higher wages and better working conditions. It's a three-way tug of war in which everyone wants their cake and to eat it, too. Companies benefit from "worker insecurity" as people compete for work and are afraid to unionize, which, in turn, keeps wages from rising.

Principle 4 – Shifting of the Burden

NC: "When you are moving to international plutonomy – a small percentage of the population that's gathering increasing wealth… what about the rest, well there's a term coming into use for them, too. They're called the precariot - precarious proletariat, the working people of the world who live increasingly precarious lives.

During the period of great growth of the Economy - 50s and 60s, taxes on the wealthy were far higher. Corporate taxes were much higher, tax on dividends were much higher. Simply taxes on wealth were much higher. The tax system has been redesigned so that the taxes that are paid by the very wealthy are reduced and correspondingly the tax burden and the rest of the population increased.

Pew Research says we are all paying less taxes than we used to, but things get really interesting at the top of the income brackets. See below. The table shows data for individual "adjusted gross income." It means some deductions have already been applied.

"Taken as a whole, the federal income tax is progressive, meaning that those with higher incomes pay at higher rates. But the system's progressivity tends to break down at the very uppermost income levels." (Pew Research)

"The IRS collected $1.66 trillion in individual income taxes in 2020 (excluding the $78.6 billion in negative tax liabilities referred to earlier). Close to 54% of that sum came from taxpayers with AGIs between $100,000 and $1 million – a group that accounted for just under a fifth of all returns filed (31.3 million), and about 30% of all taxable returns (31 million).

At the very top of the income ladder, only 0.02% of all returns filed in 2020 showed AGIs of $10 million or more, but those taxpayers collectively paid $210.2 billion in taxes after refundable tax credits, or 12.6% of total individual income tax collections.

At the other end of the income scale, tens of millions of Americans owed little or no federal income tax, especially after factoring in the effects of refundable tax credits, such as the child and earned-income credits."

But Individual taxes are just one piece of the puzzle. Corporations pay taxes, too. Or at least they should. Look at the table below. You will see how individuals support corporations. The orange line represents corporate taxation and its decline over time.

So, maybe Neom Chomsky needs to look at these tables. He's kind of right, but also kind of a drama queen. If you are in the lower tax brackets, your income is low, you get some credits and probably an annual tax refund. It's those guys with AGI of $100,000 - $1 million that get penalized for trying to cross over from broke-ass to Boaz.

If you want to read the full Pew Research report on Who pays, and doesn't pay, federal taxes in the US, go HERE.

The Noam Chomsky documentary continues with a discussion on regulations, clearly a controversial topic I cannot condense into a paragraph. Neom Chomsky is big on regulation. He believes regulation was responsible for the "Golden Age" progress of the 50s and 60s. He's big on the 50s and 60s. Limerence?

But I get it. Back then, the government wasn't as much in the pockets of businesses as it is today. Coming out of WWII, everyone was happy to be alive and hadn't turned into a voracious consumer yet. Houses were places to sleep, eat, and raise kids, not commodities. Those were the days of cheap gas, loud car engines, sideburns, soda shops, drive-in movies, and conical bras. Who doesn't love conical bras?

Principle 7- Engineering Elections

This is worth thinking about. His point is that the concentration of wealth yields concentration of power. It makes sense. If politicians rely on mega donors to run their campaigns, they must be accountable to these mega donors. Businesses and industries buy favors in the form of "donations and contributions."

NC: The 14th amendment has a provision that says no person's rights can be infringed without due process of law. The intent clearly was to protect freed slaves…I don't think it was ever been used for freed slaves if ever marginally. Almost immediately it was used for businesses corporations. Their rights can't be infringed without due process of law. So they gradually they became persons under the law…

In the 1970s the courts decided that money is a form of speech. Buckley vs. Valeo which says that the right of free speech of Corporations, they can spend as much money they want, it can't be curtailed. Take a look at what that means. It means that corporations which anyway have been pretty much buying elections are now free to do it with virtually no constraint. That's a tremendous attack on the residue of democracy.

Yep… All you need is money. And lobbyists. Money pays for campaigning and political advertising to shape public opinion so we can elect the representatives who will serve not us but those who paid for the propaganda. Lobbyists hammer in the details. Thus, wealth buys power in a roundabout way but it does.

Regarding companies having "free speech" as designated by the Supreme Court:

NC: It's an incredible decisions and it puts the country in a position where business power is greatly extended beyond what it always was. This is part of that vicious cycle. The Supreme Court Justices are put in by reactionary presidents who get in there because they're funded by business. That's the way the cycle works. 

In Principle 8 - Organized Labor

He sees the role of Organized Labor to keep in check what he calls "corporate tyranny."

NC: A major reason for the concentrated, almost fanatic attack on unions on organized labor as they are a democratizing force that provides a barrier that defends workers' rights but also popular rights generally. That interferes with the prerogatives and power of those who own and manage the society."

What do you think?

Here's what Starbucks is doing to prevent workers from unionizing.

"Starbucks has figured out an ingenious plan to get around labor law, which is: break so many labor laws so fast that the National Labor Relations Board simply can't keep up in enforcing the law," said Jaz Brisack, a fired barista who worked at the first company-run Starbucks – the Elmwood Avenue store in Buffalo – where workers voted in favor of unionizing."

"Starbucks has taken a scorched-earth policy to target union leaders and union stores for retaliation," said Richard Bensinger, an adviser to the Starbucks' unionization drive. "Starbucks is starving out union supporters. They're cutting their hours and starving the stores by cutting staff. They're starving the unionized workers by not giving them credit card tips. They're doing everything they can at union stores to be as nasty as they can to undermine the union, to say to non-union workers, "Look what's happening there.' In some cases, they're even closing unionized stores, like in Ithaca."

Principle 9 – Manufacture of consent

Yep, he did write a book called Manufacturing Consent: The Political Economy of Mass Media. Letting you know in case you need some reading material.

NC: …It was understood and expressed that you have to control them (people) by control of beliefs and attitudes. One of the best ways to control people in terms of attitudes is what the great political Economist Thurston Veblin called "fabricating consumers." If you can fabricate wants, make obtaining things that are just about within your reach the essence of life, they're going to be trapped into becoming consumers…. You find this doctrine all through progressive intellectual thought, like Walter Lippmann, the major progressive intellectual of the 20th century. He wrote famous progressive essays on democracy in which his view was exactly that. "The public must be put in their place," so that the responsible men can make decisions without interference from the "bewildered herd… They're to be spectators, not participants. Then you get a properly functioning democracy, straight back to Madison and on to Powell's Memorandum, and so on. And the advertising industry just exploded with this as its goal… fabricating consumers."

The point is to create uninformed consumers who will make irrational choices. That's what advertising is all about. And when the same institutions' PR system runs elections, they do it the same way. They want to create an uninformed electorate which will make irrational choices, often against their own interests." 

And that's something we should all keep in mind watching the next election cycle In the context of Trump supporters, a few examples come to mind:

Healthcare: If you are uninsured, have no college degree, are non-Hispanic black or white, or Hispanic, if you earn between $13,590 and $54,360 as an individual, or between $27,750 and $111,000 for a family of four, you will benefit from Obamacare (ACA). Trump supporters who fall into these categories and relied on the Affordable Care Act for their healthcare coverage supported efforts to repeal or undermine it. This could be seen as voting against their own access to affordable healthcare.

Social Safety Nets: Policies like Medicaid and food assistance programs were a lifeline for some Trump supporters, but they voted against them anyway. It's like cutting off a branch while sitting on it.

Environmental Regulations: Trump's administration rolled back various environmental regulations that aimed to address climate change and pollution. In regions affected by environmental issues (Florida and Texas???), people supporting policies that weaken such regulations make me feel less compassionate. Sorry. Deal with the hurricanes, fires, and freezes… Do you plan on FEMA to help you? Really?

Spending their money on Trump's legal defense. Trump supporters donating to the Save America PAC are not saving America. They are helping Donald Trump to pay is mounting legal fees, upwards of $40 million now. Many supporters can't afford to donate to his highness, supposedly one of the richest men in America. Meanwhile, Trump has spent almost none of his own money on this fiasco. The practice itself raises ethical questions, according to the New York Times.

Let's see what the new election cycle brings. I can't wait!

NC: …About 70 percent of the population has no way of influencing policy.. And the population knows it. What it's led to is a population that's angry and frustrated, hates institutions, but it's not acting constructively to try to respond to this. There is popular mobilization and activism but in very self-destructive directions taking the form of unfocused anger attacks on one another, and on vulnerable targets. That's what happens in cases like these. It is corrosive of social relations but that's the point. The point is to make people hate and fear each other, and look out only for themselves, and don't do anything for anyone else."

That's depressing. His predictions for an ugly society based on every-men-for-himself principles and mistrust in institutions are not something I hope he's right about. The bottom line is, whether you like him or not, he makes some interesting points to think about. From my perspective, he sounds more “correct” now than he did 15 years ago, looking at the challenges we live with today.

I didn’t do all 10 principles and I skipped through some interesting parts. If you have the time, watch the video.

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