The Progressive Ensign

insights and analytics to build an economy that works for all

Saving Democracy: Economics – A Two Block Trade World – U.S. and China, Threatens World Peace

On Bloomberg TV, VMware CEO, Pat Gelsinger, observed that with escalation of the trade war he sees, “two separate trading blocks forming the United States and China, we want to be a player in both and will have to adjust,  our strategy, investments, supply chains and operations as a result.”  He sees both countries digging in for the foreseeable future.

The evolution of a two trading block global economy has a major impact on how businesses operate in the next five to ten years and integrated economies.  Those companies with major operations in China that ship products to the U.S. will continue to be adversely affected by U.S. tariffs on Chinese goods. Growing trade headwinds also face U.S. companies shipping goods to China. Besides tariffs, trade research shows Chinese importers will need to deal with U.S. non-tariff barriers that are the most stringent and time consuming. Recently, China has allowed the exchange rate for its currency to rise against the dollar effectively mitigating about 5 % of increasing tariff costs on U.S. imports.

Here is a list of industry sectors most impacted by the trade war with businesses exports and imports to China:

Sources: Census Bureau, Marketwatch – 6/27/19

Major software and electronics companies like Apple with $56b in sales making up 20% of total global revenue from China will continue to see declining sales. Apple, and other companies in the same shoes, will have to radically shift supply chain and sourcing for manufacturing.  CISCO, a global network systems manufacturer recently reported to shareholders a 25 % drop in sales of network products to both state owned and private corporations in China. Many American manufacturers’ source components and sub-assemblies from China and are shipped to the U.S. mainland for final manufacturing. These supply chains will have to change if they are to sustain profits. Caterpillar, in the transportation sector, recognizes 10 % of global revenue from China, and has experienced a significant drop in sales.  Tariffs have significantly reduced soybean exports to China by U.S. farmers to nearly zero. The Federal Reserve in Minneapolis reports farm bankruptcies have reached 2008 levels.  These are just a few examples. Each day the list of impacted industries and companies grows longer.

What does a two block trading world mean to our democracy?  The trade war seems to be here to stay. As such, we need to go to the strengths of our democratic government and our multilateral approach to global development to ensure peace.

  1. Tariff Alternatives – blanket tariffs as the present GOP Administration has implemented are driving up prices for consumers, created reduced sales for corporations and crated a world economic environment of confusion and uncertainty. Working with our alliance partners in the EU, Australia, Japan, South Korea and others to pressure China to change its laws related to intellectual property theft, state subsidized industries and unfair tariffs would be a far more effective approach than America trying to go at China alone. The U.S. needs to reach out to the free trade capitalist leaning economic entities that the government allows to operate – like entrepreneur owned and operated companies within China to build both economic and political links.
  • Trade Policy Consensus Development – Democrats and moderate GOP congressional members need to drive the national dialog instead of letting our POTUS use threatening, bullying and constantly flip-flopping tactics in trade discussions.  Reasonable well thought out policies built on consensus from both parties is crucial otherwise any agreement may not be ratified by Congress.
  • Federal Reserve Independence – our President has continued in a blitz of tweets to attack Chairman Jay Powell, and the Federal Reserve’s policies totally not respecting the independence of Fed to make decisions in what is in the best interests of the country.  POTUS wants the Fed to reduce interest rates to push the U.S. economy so he can continue his trade war with China. The political use of Federal Reserve powers never be implemented. Democrats and Republicans need to come to the defense of the Federal Reserve and push back on these attacks and ensure in every legislature way possible to ensure the Federal Reserve stays independent of politics.  Analysis by researchers shows that independent government central banks far better in both economy growth and recession cycles than politically motivated central banks. When central banks are focused on the long term health of the economy they may raise interest rates even when it may cause a reduction in GDP growth or recession to burst the bubble of low rates and speculation in risk assets.
  • Commit to a Just and Thriving World Economy – since the end of WWII, and the devastation it caused to people throughout the world, government leaders have been committed to ensuring that all countries are growing, have strong economies and support integrated economies.  It is a simple thesis: countries that are trading and growing together become more trusted partners, depend on each other for economic growth and thus are far less likely to see war as a mechanism for economic gain and power.  Certainly, countries like China have taken advantage of US trade policies, not ensuring worker protections, or protecting intellectual property rights.  We need trade policies that focus on these issues, using targeted trade tools not blanket massive tariffs applied at the whim of a tweet. The U.S. should support using the World Trade Organization which is a founding member, appoint staff left vacant right now, and adjudicate disputes in an hearing of a world agency to ensure trade justice. 
  • Integrate a One World Economy – by forcing a two block trading world, the U.S. and China will be forcing other major trading groups like the EU to choose sides. Other countries like Australia maybe become bridging countries between the two dueling economies for world economic power. This two block trend needs to be shifted into a one world view, where all economies are working together to solve economic problems.  To solve existential problems like global climate change will require all countries to cooperate, make joint sacrifices and innovate to ensure the existence of our planet 25 to 50 years from now.

Our democracy will thrive when we implement policies which our world allies and others see as just, providing equal opportunities for all businesses to thrive and ensure innovative solutions to world economic problems.

Saving Democracy: Economics – Corporate Stock Buybacks Imperil Corporate Viability

Goldman Sachs just completed an analysis of corporate payouts and found that dividend and stock buybacks were 103.8% of their free cash flow. Meaning that they were paying more out in cash than they had on hand!  Free cash flow has dropped to – 15 %, while debt is up 8 %.

Sources: Goldman Sachs, Marketwatch – 7/29/19
Sources: Goldman Sachs, Marketwatch – 7/29/19

This squeeze is unprecedented, it is the worst cash flow crisis since 1980, and is unsustainable.  Corporate executives have turned to extremely high borrowing levels to keep this financial merry-go-round going. While, turning to stock buybacks to hype the price of their stock and keep earnings per share high to the tune of $1.5 trillion by S & P 500 companies in the last year.

If sales and profits drop due to the trade war and consumer spending declines as it has in the last four months, corporations will default on their debt. A downward economic spiral will be triggered. 

Maybe this is another reason the Fed announced a cut in interest rates and shift to an ‘inflation averaging framework’.  JPMorgan recently commented to Marketwatch they believe Fed economists are shifting to a position of not worrying about inflation but instead on keeping money flowing to corporations at low interest rates possibly to zero.  By keeping rates super low the Fed is enabling executives to waste profits on stock buybacks to hype their pay and stock price. We need strong companies making investments in research, development, innovation, productivity improvements and raising wages for workers. When the economy works for all then democracy is strengthened.

The financial music will stop when sales and profits decline, an already desperate cash flow position becomes untenable putting company viability in doubt.  Looking out a year or two, we expect the Fed to come to the rescue after possible zero interest rates have panned out. Last March, former Fed Chair, Janet Yellen recommended that the Fed be authorized to purchase corporate stock and bonds to keep the economy going if a recession hits.

Saving Democracy: Technology – Does the Internet Serve or Undermine Our Democracy?

Technology is constantly pervasive in our lives.  Let’s think for a moment about how one incredibly pervasive technology has changed the way we live twenty four hours a day.  The Internet was built by the Defense Advanced Research Projects Agency (DARPA) contracting with universities and research centers to build a powerful internetworking protocol and network for the military research and communications beginning in 1969.  The network evolved with more research centers and government organizations using the system for communication and joint projects.  By the mid 1990s the Internet was opened to the public primarily for email, though soon websites and messaging systems were established.  Commercial common carriers were offered government contracts to provide more communication network support and services.  In 1993 the Internet provided 1 % of all two way communications, by 2000 51 % of all communications were over the Internet, then growth exploded to 97 % of all telecommunications information in 2007.  As recently as 25 years ago there were no companies like Facebook, Netflix, Google, Twitter, eHarmony, LinkedIn, Instagram, Amazon, et al. Yet, these companies were allowed to grow into behemoths largely unregulated with young entrepreneurs maximizing profits not focused on the public trust.

Just twenty-five years later just about everything in our daily life is changed, from task assistants like Siri, dating with eHarmony, finding a job via Linked In, searching for answers on Google, watching on demand movies in our homes via Netflix, sharing photos via Instagram and taking a picture on our smartphones and sharing it with our friends via Facebook.  Corporations embraced the Internet for new applications, channels of distribution, low cost communications, outsourcing of work remotely and low cost entry to new markets.

Along with all these applications, democracy pundits had visions of a more engaged electorate, citizen forums, exchanges of ideas, more facts based discussion, online referendums on key issues and more responsive government. It certainly has not worked out that way, corporations give hundreds of millions of dollars to congressmen and senators, there is certainly more dialog via blogs and websites in the millions – but do we see more heat than light? Plus, with technology gone wild; more fake videos (not the authentic video but edited words and pictures), more hate stories and posts from adversaries like Russia to influence our elections.  The lowest common denominator has certainly been hit with the present POTUS and Congress in place largely not responding to the people’s opinions due to corporate and special interest group lobbying and influence from campaign financing. For instance Pew Research completed a recent poll on climate change, the existential issue of our time, where 56% of all voters view protecting our environment as a top priority for the President and Congress.

Source: Pew Research Center – 4/19/19

Instead, we have an administration loosening targets for auto emissions to static levels, EPA rolling back fossil fuel emission standards and wilderness preserves being opened up to oil drilling.

We ask a fundamental question: is technology in the instance of the Internet serving the needs of democracy or undermining its very foundation?  We will also look in this series of Saving Democracy chapters on other technologies; automation and robots, AI and content platforms.  First, we look at the backbone of the Internet, its vast network built by the federal government, universities and research agencies and now being subverted by corporations.

Net Neutrality – Corporations Undermine the Common Good

Built by taxpayer money by DARPA  for military communications,  next universities and research centers, then open to the public and commercial enterprises. So, why do companies like AT & T, Verizon, and Comcast think they should control how Internet is offered to our people?  We paid for it, as it evolved the Internet was envisioned is new way to engage citizens in the political process and to level the playing field for new companies.

We certainly, have seen how innovation with a plethora of new services has emerged in the last 20 years, yet now a few giants run the content side: Google, Facebook, Netflix, Disney and the network side run by AT &T, Verizon, and Comcast.  As the content companies merge with networking companies we have huge companies deciding how to make more money from a network entity that is actually a public trust built by taxpayer money.

One way we see inequality growing is access to the Internet for many in poor, or rural  regions of the country is limited in speed and services.  Without Internet speedy Internet access or innovative services for universities, hospitals, and companies in these regions it is difficult for the working class to gain the skills to get a better job, or companies to compete with their high speed competitors.  Investment is declining in some regions of the Midwest and South due to poor Internet infrastructure which means fewer jobs for people living in the area.

Source: ISSR – 12/20/17

An analysis in December, 2017 by the ISSR shows that over 177 million Americans would be left without protection if the net neutrality policy were reversed.  Note all the light yellow regions of the country that have no broadband provider at all.  Orange and red regions have providers who have violated net neutrality rules. Without high speed Internet access these mostly rural regions are left to declining investment, fewer jobs and poorer health care.

Next Step:

The Internet backbone network is really a Common Good. It is a utility, not a platform for companies to make profits and take control of access, speed and content which was the original purpose in designing the Internet as a peer to peer protocol rather than hierarchical.

The present GOP administration installed a company lobbyist as chair of the FCC who immediately decided that the network neutrality doctrine of the Obama administration should be overturned, giving control to for profit entities to charge whatever they wanted for speedy access or content. It is as if we turned the interstate system of freeways over to GM, so GM could give special lanes to GM cars and the others would have to go in slower lanes.

No, we don’t see the Common Good being protected by a for profit doctrine, the profit policy just can’t do the job.  In July, 2018 when firefighters in the California Mendocino fire went over their mobile data plan limit, Verizon throttled their data transmission to 1/200 of the speed.  After the outrage over such predatory practices Verizon relented and will now offer all western state first responders standard data plans without throttling.  Why should they even be able to throttle?  If a user needs more data then just charge more over a certain limit – but throttling their network speed is coercive.

Network neutrality for all content, all websites, all messaging is the just doctrine for a Common Good like the Internet built with public funds.  An equal access Internet provides a critical column foundation for democracy to serve all the people not just the rich. The fact that corporations think they should be able to do whatever they want shows once again that corporations have control and power over the public interest.  Their position needs to shift to supporting the public interest as priority one, not profits. We need to have the common carriers see they have a public trust, and social responsibility in operating a public Internet utility.

Saving Democracy: The US Needs to Lead in Building Global Bridges Not Walls

(Saving Democracy Series:  this post focuses on how our POTUS has agreement by agreement ripped up the post WWII integrated global world that provided most of the people in the world with peace and prosperity that is unparalleled in history.  He has replaced peace with random acts of impulsiveness, doubt, uncertainty and threats which have caused major economic, cultural and societal damage to both emerging and developing countries.  A more dangerous world of nationalism along the lines of the 1930s is now emerging with all its possible horrible results.  First economic loss, then war. It is time to establish a new global order fair to labor and capital in a world order of respect, freedom of thought and speech with economic opportunities for all to establish global stability and peace.)

On July 2nd, the US Trade Representative announced possible $4b in new tariffs on the EU for subsidizing of Airbus, responding to Boeing concerns. Another episode of impulsive threats happened last May when POTUS threatened Mexico with a 10 % tariff on all imported goods if the flow of immigrants across the border did not stop by June 10th.  The action against Mexico threatened support for the just recently announced new trade treaty with Mexico – why sign a treaty when the US is just going to do whatever it wants. He backed down on the threat after the Mexican government made a commitment to redouble efforts at stopping the wave of immigrants from Central America. We can add these trade attacks to a long list of treaties, agreements or international organizations that our POTUS has taken the US out of (or renegotiated):

  1. Nuclear Arms Treaty – Russia
  2. Iran Nuclear Treaty – EU joint signators  
  3. Trans Pacific Partnership – TPP – with 10 emerging countries, Mexico, Canada and Japan
  4. NAFTA – replaced by two bilateral agreements under consideration by Congress
  5. UNESCO – UN cultural program
  6. UNHRC – UN Human Rights Council
  7. UNRWA – UN Refugee and Works Agency – supports 5M Palestinian refugees, when the US pulled out riots broke out for a week
  8. Paris Climate Treaty
  9. Global Arms Treaty
  10. G7 – developed countries council – POTUS wants Russia added back in, they were barred after annexing the Crimea
  11. Brexit – US has been cheering the UK leaving the EU, offering a ‘big agreement’ if the UK leaves the EU

POTUS has continued to bash NATO, a long standing military organization uniting Europe and the US against an aggressor. The constant undermining of the group opens a divide that adversaries may see as a crack to drive division and move ahead with probes or territorial gains.

The president has also focused on economic agreements – taking a unilateral approach around the provisions of the World Trade Organization and standing economic agreements on tariffs. He calls himself the ‘Tariff Man’ and has implemented with the acquiesce of Congress tariffs on allies like Canada & Mexico (new separate agreements under Congressional review), competitors like China, and cancelled a favorable import agreement for India.  Businesses are worried:

Source: Moody Analytics, The Wall Street Journal, The Daily Shot – 5/28/2019

Consumers have been hurt already in nine different product classes with increases in prices of over 10 %, as consumers or the importer pay the increase tariff on an imported goods including appliances (washer and dryer tariffs 12 months ago), furniture, bedding, floor coverings, auto parts, motorcycles, sport vehicles, housekeeping supplies and sewing equipment:

Sources: Department of Labor, Department of Commerce, Goldman Sachs, The Wall Street Journal, The Daily Shot – 5/13/19

The United States and China have been sparing since July 2018 in an escalating trade war, which seemed to be coming to a conclusion as recently as last April.  Then, the President announced in a tweet that China a reneged on commitments it had made and was ending negotiations.  The Chinese sent a delegation to try and restart negotiations but it was fruitless. For two months tensions escalated until a truce with a restart in negotiations was called as a result of a summit between President Trump and Chairman Xi at Osaka on June 29th.  The US relented on planned additional tariffs on all China imports up to $325b, and eased restrictions on Huawei sales by American companies in return for a vague promise by the Chinese to purchase more farm goods and to negotiate.

Sources: The Peterson Institute, for International Economics, BBC, The Wall Street Journal, The Daily Shot – 5/15/19

The Chinese have dug in for a long haul, threatening to cut rare earth shipments to the US and curtail further purchase of US Treasury bonds, with additional $60 B in tariffs at 25 %. We must remember the Chinese form of capitalism is really not ‘state based capitalism’ as the financial media likes to label in a benign way. The China economy is really ‘authoritarianism cloaked in capitalism’.  This is a mixed economy of state based industries subsidized with some free capital sectors kept in place by central planning. A key aspect of the this cloaking activity is the lack of transparency about who actually owns a Chinese company. In addition, the China Central Bank (PBOC) and sovereign wealth fund own about $200 B in US stocks providing insights and investment control. The Chinese government has deployed Orwellian digital surveillance to keep the people loyal to the state and not thinking or speaking freely. Internet news and social media sties are heavily censored by the state. That’s not democratic based capitalism. Another twist in the relationship with China, is Wall Street leaders have been instrumental in assisting the Chinese government in gaining approval to join the WTO years ago, and still make billions of dollars from fees and investments. The recent Chinese overture to open financial markets maybe a way for the Chinese to win over Wall Street and blunt the trade war of the GOP administration. The Trump Trade war with China is a failure, because it misses the true character of authoritarian government and economics how it uses the economy and capitalism to placate the masses to increase state control. Central government loyalty is the prime directive. Trust is missing between the people and the state – yet the people give up freedom for money when we here the Hong Kong protesters who vandalized the legislature building in late June criticized by mainlanders with comments like ‘they need to quit protesting and get a good job and buy things’. This is a bargain with manipulative leaders resulting in an unhappy ending, as people’s hearts and minds are imprisoned for money, the benefits with be fleeting and the costs dear.

Farmers in the Midwest, growing soybeans have seen their market collapse, other crops like corn, sorghum, wheat have seen huge price drops as China stopped buying from US suppliers. As soybean prices have fallen farm income has dropped almost 20 % and Midwest bankruptcies of farmers have risen above levels seen in the Great Recession.

Sources: Bloomberg, The Wall Street Journal, The Daily Shot – 7/15/18
Sources: The Federal Reserve Bank – Minneapolis, US Courts – 11/28/18

Since last fall when this Federal Reserve report was filed, bankruptcies have continued to increase at an accelerated rate, as farmers cannot get loans from banks to buy seed when prices are so low. The Administration has promised subsidies to farmers totaling $16bn yet the president of Soybean Farmers Association says he has not been able to see Agriculture Secretary Perdue or any of the subsidy money nor farmers in his group. Many farmers believe that when the money does come from the government it will not be enough and not replace the contracts for farm goos lost to Brazil, Russia and other countries.

Next Steps:

World War II was catastrophe for the world, millions of people killed, whole societies wiped out, along with an aftermath of starvation and depressed economies.  World leaders did not want to see a repeat of the WWII disaster.  They knew if they built a set of world-wide agreements and regional organizations to sustain and enforce those agreements there might be a better chance to prevent war from happening again.  The United Nations was founded in October of 1945 in San Francisco to provide a forum for discussion and implementation of world community building programs. The NATO alliance was founded by 29 countries who were WWII allies by approving the North Atlantic Treaty in Washington in April, 1949.  Economic disputes were to be settled by adhering to the General Agreement on Trade and Tariffs approved by over 100 countries in 1948. The World Trade Organization charted in 1994 succeeded GATT, headquartered in Geneva, Switzerland. Thus, many treaties and organizations were founded by most developed countries and many emerging countries to give economic, cultural and governmental support toward building a world community.  Presidents from both parties through the years since WWII have supported the uniting of diverse people around the globe so they all have a piece of the economic pie and security.

Now, our POTUS seems to think that ripping up global treaties and organizations, undermining them, and going it alone will somehow be better for the US.  Maybe things will get better for a few companies or sectors for a little while. However the trade deficit continues to trend worse since the January 2017 term of POTUS to the highest deficit ever with $55 bn last May,

Source: Department of Commerce,, Federal Reserve of St.Louis, Marketwatch – 7/2/19

Some soybean contracts have returned, yet the US still imports more from Europe, Mexico and Canada than we export, the tariff war is just making the deficit worse.   Already, we have seen with retaliatory tariffs from China, threats of reunification to take Taiwan – as a national publication likened to Lincoln unifying the United States. Today countries are going after their own goals spiraling downward into economic wars and eventually military action.  The lessons of the Great Depression, the Smoot-Hawley Tariff Act, harsh reparations on Germany and nationalism (rising today in a hideous way) led to WWII. When other countries see the US leader of the free world embrace ‘America First’ ambitions, why should they sit back and let America get ahead, the fight is on.  We should work with the capitalism elements and businesses in the China that are largely free of state control, building bridges to them, empowering them so country leaders see that the only path to lasting prosperity is when the people’s minds are free to innovate and create.

Yes, it is true, there were unbalanced agreements, the US did lose jobs to overseas countries, and maybe a few emerging countries took advantage the US.  But, we need to be thinking about helping people build their economies, or they will want a piece of the economic pie by force from the US. Job safeguards for American workers should be in place in all agreements, and fair levees and access to markets, protection of intellectual property, yet we need to work within the world order to make structural changes supported by all countries.

Saving Democracy: Elect the President by Popular Vote

(Saving Democracy Series:  this post focuses on how unfair, and undemocratic the minority vote of a President can be. Two ideas are summarized on how to reform the Electoral College which are most often proposed by scholars and political leaders, electors allocated by congressional districts or, The National Popular Vote Interstate Compact)

With the kickoff of 2020 presidential campaigns by 23 democratic candidates and one GOP president, we are reminded of how our democracy failed to elect the popularly voted candidate, Hillary Clinton in the last presidency contest.   The 2016 presidential election results were: Donald Trump receiving 290 electoral votes to Hillary Clinton’s 228, yet she won the popular vote by almost 3 million votes.  That event continues to cause protests, fear, anxiety and sense of injustice across the country.  The Electoral College was developed by the foundering fathers as a way to make the Office of the President a powerful branch of government, not beholding to the majority of representatives in Congress. They developed a state based election system where presidential electors were allocated by state for each senator and congressional representative.  Including the 2016 election, there has been 6 times in U.S. history that a president was elected who did not receive the most popular votes.  A minority elected president is viewed by many people as illegitimate. While the minority candidate has been constitutionally elected, the candidate does not have the majority mandate necessary to execute the responsibilities of the office outlined in the Constitution.

This author asked his mother when he turned 18 years old, ‘how do you vote for President?’ she replied, ‘I think of the President like a child with a hammer, how much damage can he do, so I vote for the least damage.”  Our POTUS 45 must have listened to her as he is hammering away at a variety of democratic institutions, alliances and principles.

Why do we have the Electoral College anyway? The founding fathers had just come from a monarchy based government, so they did not want to repeat a system of a proclaimed leader (everyone wanted George Washington to be President at the time) with the leader appointing the next in succession.  Another approach under consideration was to have a national leader based on representational majority in Parliament.  Yet, they believed in balancing the powers of Congress and the Executive branch.  Plus, the founders were looking for a way to motivate the President for good behavior by allowing a second term.  If the President were elected by Congress it would have to be for one term, or he would become a tool of the majority in Congress. They did not want a direct popular vote because they were concerned that a national constituency could not be developed with so many regions and states likely to have favorite son candidates. James Madison, Constitution Convention recorder and leader, was looking for a compromise because southern states felt they would lose out in a national constituency with blacks being 3/5 of a citizen to vote.  So, a compromise was established to have a set of electors voted on by the people in each state based on popular vote. These electors that would then vote in a separate Electoral College vote in December with ballots read in a session of Congress.  If there was a tie 269 – 269 of electors between candidates, then Congress would vote on who would become President.  In our history there have been 5 Presidents who have not won the popular vote but have won by electors. 

Why is this a problem?  The popular will of the people is thwarted.   A major issue is that the Electoral College is not one person – one vote as identified in our Constitution for a representative democracy.  A vote in California with 55 electoral votes and 8,458,000 citizen votes means that one electoral vote represents 153,781 citizens.  In Wyoming, with 3 electoral votes and 230,197 citizen votes means that one electoral vote equals 76,732 citizen votes. A voter in Wyoming enjoys twice as powerful citizen/electoral vote than a citizen in California. The balance of power in the Electoral College swings to mostly sparsely populated inland states deciding who our president will be.  In the 2016 election inequitable voting power certainly is evident looking at an electoral map (right click on image to enlarge):

Source: Wikipedia – December – 2016

Voting power inequity creates great frustration and anger. In the days after the November 2016 election, there were protests in 37 cities across the country against the president elect due to the injustice of the non-popular vote. All our representative government functions are based on majority vote from local city councils to state legislatures and the US Congress.  It only makes sense to have a popular vote for president in the modern era. With growing economic inequality and divisive politics particularly between inland and coastal people a fair vote for president would go a long way toward building a united country.

Next steps:

Why not just have a direct popular vote?  This would be a good solution except that the Constitution needs to be changed in a two-step process by creating an amendment followed by ratification. The US Congress can create an amendment by a two-thirds vote of the House and Senate or two thirds of the state legislatures.  The proposed amendment then must be ratified by three-fourths of the state legislatures in a time frame approved by Congress.  This is a long and difficult process as 11,539 amendments have been introduced in Congress since 1789 and 27 have become part of the US Constitution.

How about apportioning electors by congressional district?  We already portion congressional districts by population which is updated each decade by the Census Bureau.  The congressional district approach provides some equity for citizen to elector representation – though it will not fix the inequality completely due to the two senate electors. Maine and Nebraska apportion their electors by congressional districts today, with their two senatorial electors representing a statewide vote.  The congressional districting approach would be fair and take care of 80 % of the vote inequity issue. Plus, candidates would need to focus their campaigning on congressional districts not the whole state for a winner take all result. For example, California rarely sees presidential candidates from either party for the presidential race because it has gone for the Democratic candidate in the last 6 elections.  Candidates would benefit by campaigning in key congressional districts in even majority states to gain support of electors by congressional districts which may not vote with the majority of the voters on many issues or candidates.

The best approach would be to have congressional districts mapped by an independent commission as California does to ensure that the district is open to diverse political viewpoints. By establishing congressional districts as the key representative unit with fair boundaries for inclusion of multiple points of view we might see more dialog at the local level.  The increased dialog will induce more consensus building and possibly break the grasp of incumbents who are re-elected 93 % of the time.  State legislatures can decide on their manner of apportioning electors – so we could build a national census to have the states enact changes by the 2024 election.

Professors Akhil and Vikram Amar propose a National Popular Vote Interstate Compact.  Whereby, states legislatures would agree to vote their electors for the winner of the popular vote.  This compact would take effect when at least 270 electoral votes would be in the Compact.  To date fifteen state legislatures have ratified this Compact, swing and inland statues are reluctant to make the switch because they may lose some of their power in electing the next president. Yet, an analysis of advantages to either party are even when viewed over elections back to 1880. Both major parties back the Compact with former senators and congressman on a steering committee supporting the legislation in state houses. Both approaches: congressional district electors or the Popular Vote Interstate Compact are fair to both major parties and third party candidates.

Source: Wikipedia – April – 2019

A way to get the reform of the Electoral College off of dead inertia would be to file a suit in federal court seeking a finding that the present system violates one man – one vote provision of the Constitution, thereby forcing the states to redistribute their electors by another method preferably by congressional district with independent commission mapping or Compact.  Persuading additional states to pass the Compact law where legislation is pending like New Mexico, Arizona, Oregon, Minnesota, Wisconsin, Kansas, Georgia, South Carolina, North Carolina, New Hampshire and Maine would gain the necessary 270 electoral votes for the Compact to take legal effect.

Saving Democracy: Why Wages Have Declined for 20 Years, Labor Needs Equal Role With Capital

(Saving Democracy Series:  this post focuses on what factors are causing labor to lose it rightful position as an equal partner with capital in the US economy and concludes with ideas on how to bring labor back into an equal role; from new institutions like a Federal Reserve for Labor, to corporate law reform, ending stock buybacks, and training with a powerful apprenticeship program)

Labor has been viewed as a cost for hundreds of years. Somehow the early accountants working for Middle Age Venetian families invented double entry accounting systems with debits and credits, These accountants called credited assets like money, land and equipment while labor was a debit labeled as an expense. Labor is viewed as an expense to this day because the owner-entrepreneur has to pay employees to work – in effect ‘renting labor’..  Workers have had the ‘cost’ yoke around their necks ever since.  Yet, are employees really a cost?  The staff are the ones doing the work, creating the product or service and solving the problems – money does not create the product or service only people do. CEOs are often heard to say that employees ‘are our most important asset’ but then treats them like second class citizens in making policies for the company, gaining a fair share of the profits or enjoying job hours flexibility. Today, Wall Street applauds wages being stagnant for the 80 % while profits go up while wealth accumulates for The Elite.

Over the past 20 years in particular, workers have seen their ‘economic position’ continue to deteriorate.  Labor sovereignty continues to decline on multiple fronts: wages, benefits, standard of living, job negotiating clout, choice of companies and the constant sword of Diogenes held over their job by automation.  For example over the past fifteen years wages for workers have been stagnating.  However, this declining wage trend is not new, it has been happening since the early 1980s, when President Reagan took office and ‘trickle down economics’ was promised as a way to give workers a fair share of the economic pie.  Workers have lost their wage share of business sector income ever since.

Sources: The Federal Reserve Bank – St. Louis, The Wall Street Journal, The Daily Shot – 5/3/19

Labor’s share of business sector income has dropped by 15 % since 1950.  While, this labor share statistic uses wage employment data and estimates for self- employment, some observers think the decline is largely due under estimates of the size of the ‘gig economy’.  However, separate wage data supports the declining wage trend:

Source: Global Technical Analysis – 5/3/19

When real wages calculated after inflation are allocated across all employed workers the decline is most apparent, a 34 % decrease since 1983.  The softening wage trend is not getting better, Bankrate surveyed 1,000 workers last year and found that only 27 % received a wage increase.

Why have wages continued to fall the past 50 plus years?  There are multiple factors combining to put workers at the lowest point of wage negotiating power in recent times.  Automation is one of the prime reasons for the loss in wage bargaining power.

Sources: FiveThirtyEight, The Federal Reserve, Bureau of Labor Statistics – 3/2016

Almost 5 million manufacturing jobs have disappeared since 2000, yet over the past 9 years factories have been coming back to the US by increasing employment by 5 %, but with far fewer workers. Yet, the US is taking the No. 2 position in worldwide manufacturing output with a 20 % increase in output

The reduction of manufacturing jobs in the US, automation has been a key factor weakening the worker wage bargaining position. A recent Ball State University study found that over 88 % of lost manufacturing jobs were due to automation and productivity increases not offshoring.

Automation started decades ago, as IT applications deployed in offices and manufacturing plants in the 1970s and 80s displaced thousands of workers performing repetitive manual tasks such as data gathering and reporting, answering phone calls, editing and copying documents, sending and receiving status reports, manufacturing reporting and others that were easily automated by software.  By 1995, the Internet began to impact the workplace, networking software applications so that jobs once requiring local support or data could be performed overseas for far less.  In Silicon Valley, an entry level software engineer would be paid $65 – 75 @hr., while an engineer in India was paid $20 @hr. or less. Thus, most business processes for ‘non-core’ functions like accounting, IT, customer support and benefits processing were moved offshore to reduce costs by 50 – 75 %.

In addition, major corporations have been outsourcing non-core services to US contracting companies to the detriment of worker’s pay security or benefits.  For example, in Silicon Valley starting in the 1980s until present – many core IT functions were outsourced with ‘facilities management’ agreements, where IT workers are fired, and rehired by outsourcing companies at 30 – 40 % less in salary with no benefits or health insurance. The workers were faced with no good choice – look for another job or take a pay and benefits cut for the job they had before.  In the Bay Area,  H1-B visas are often used to keep wages low by offering a worker from India 40 % of the local prevailing wage for a software engineer. The present GOP Administration has significantly reduced H1-B visas by a ratio 1 accepted of every 4 applications the lowest rate in 10 years.

Automation investments continue as software firms develop applications that automate many business activities previously thought to be difficult to automate:

Source: McKinsey Global Institute – 2/28/17

Jobs requiring skills from sensory perception fine motor activity or navigation are going to be automated over the next 30 – 50 years. All this investment in automation results in less competition for employers to find employees to do the work they need – a machine will do it.  The machine shows up on time, requires no vacation, is not absent, and does not sue the company for management miscues.  Plus, the added benefit is in well implemented automation projects costs are driven down, profits up so executives see their compensation increase.

Corporate Oligopoly

Another way corporations limit worker job options is by merging with other companies and then laying off workers in the newly combined firm.  Since 1997 the average market share for the top four firms in most of 893 industry sectors has increased from 26 % to 34 %.  For a tenth of these sectors where the top four firms have 33 % to 66 % market share their revenues have increased by 37 %!

Sources: Census Bureau, The Economist – 3/2016

The antitrust section of the Department of Justice has been asleep the past two decades. In the airline industry, there are now 4 airlines that own 80 % of the business.  In finance, just 5 banks have   50 % of $15 trillion in total assets. In the information search sector – the top 4 companies have 98.5 % of the search industry market. The wireless communications industry is dominated by the top 4 companies control 94.7 % of the market between them – Verizon, AT &T, Sprint and T-Mobile. In the tire manufacturing sector, the 4 top firms dominate the US market with a total market share of 90.1 %.  In 2012, entertainment, media and distribution markets were concentrated in 6 conglomerates with a total of 90 % market share. In 1983, 90 % of entertainment and related markets was distributed over 50 corporations, this chart sho concentration in the fastest growing streaming markets:

Sources: The Wall Street Journal, The Daily Shot – 4/22/19

The advertising industry has consolidated into a two Internet behemoths – Google (Alphabet) has nearly 50 % market share and Facebook with 16 %:

Caption: Bloomberg, Zenith Media, The Wall Street Journal, The Daily Shot – 9/25/17

From 1997 to 2017, the number of publicly listed corporations has declined by 50 % overall.  Fewer corporations for job candidates translates into fewer corporations offering good paying jobs with high quality benefits. Plus, an analysis of corporate concentration in the five year period of 2007  to 2012  in the services sector, found that where corporations control markets and reduce the number of workers to support sales wages are likely to decline.

Sources: The Wall Street Journal, The Daily Shot – 6/27/17
Sources: David Autor, Professor oF Economics, MIT et al, The Wall Street Journal, The Daily Shot – 7/23/19

Gig Economy

The ‘gig economy’ of freelancing and independent contractors has ballooned to about one-third of our workforce or 56 million workers in 2016 according to the McKinsey Global Institute.  A survey by Gallup indicates the types of gig jobs; full-time gig job, part-time gig job, two part-time gig jobs, one traditional job and one gig, or where the first job is a gig and the second job is a traditional job for 36 % of the the total workforce:

Sources: Gallup, The Wall Street Journal, The Daily Shot – 9/5/19

Workers in the bottom 80 % in income have seen their wages actually decline over the past 10 years. So, it is no surprise middle class workers need to hold at least two jobs to maintain their standard of living.  The number of workers holding multiple jobs has skyrocketed in the past few years to the highest level since 2008 (note the recessions at the peaks of multiple jobs).

Sources: Deutsche Ban, The Wall Street Journal, The Daily Shot – 9/5/19

When major corporations experience a slowdown in sales, as has occurred in the last quarter, temporary and gig workers are the first to be laid off or see their contracts cut back along with rates.

The growth of ‘shared economy’ companies like Uber, Lyft, Lime, Airbnb, VRBO and many others have provided these gig workers new flexible income opportunities without the financial safety net of traditional employer jobs.  Gig economy workers often have limited or no access to worker’s compensation, unemployment insurance, 401K retirement plans, disability insurance or health insurance. Independent workers are required to pay both the worker and company portion of Social Security taxes and worker portion of Medicare each year on their income. In the Gig Economy, 33 % of our national workforce is not organized into a union or any bargaining unit. These contract workers are at the mercy of corporations or businesses that set the terms of a work contract, and if there is a problem they quickly find another contractor with no obligation to the contract worker. Uber, and Lyft dominate the ride sharing market, pushing out taxi cab firms, car companies and shuttle businesses – many with full time employees including benefits.  While the cost of rides maybe going down for the passenger, workers are seeing their wages held steady or reduced (Uber reduced driver share of fares by 20 % a year ago) with estimates of an hourly wage ranging between $8.55 to $10.00 per/hr by Stanford researcher, Stephen Zoepf. Drivers receive no compensation for gas costs, auto depreciation, car insurance, Medicare and Social Security – paying both personal and self employment, car repairs and or financial protections. Uber and Lyft receive fees ranging from 25% to 39 % of fare totals. Drivers do receive tips. Financial protection for gig economy workers is in the infant stage, where companies are holding off any meaningful changes until class action suits are brought against them. Last March, Uber settled a suit filed by drivers from California and Massachusetts to be declared employees. The suit settled for $20 million to the drivers, without changing their employment status which stays independent yet they will be given more transparency on driver deactivation and a chance to purchase shares in Uber’s  coming IPO.

Source: Marketwatch.com

Uber’s public stock offering demonstrates the gross inequality of income and wealth, as the drivers are providing the service, yet only a few drivers were offered stock options and the founders made billions of dollars from the public offering. The IPO is a good microcosm of how the Silicon Valley economy works rewarding a few while others providing the services or making products gain very little compensation in comparison.

Productivity

In 2018, Goldman Sachs estimates S & P 500 corporations will spend over $1 trillion in stock buybacks, and they forecast a similar figure for 2019.  None of these funds are being invested in the business to develop new technology, processes, training or systems to increase productivity or cut costs. Business executives are using stock buybacks to goose the price of their stock artificially adding to their compensation packages and the stock returns of shareholders most of which are in the top 1 % in income. Essentially, management is robbing workers of increases in future wages due to the nearsighted allocation of funds to take care of them themselves and pander to the wealthy.

When productivity is anemic, offering wage increases to workers cuts into profits.  Executives are compensated well based on hitting profit targets, so wage increases are not going to happen other than low inflation level 1 – 2 % increases. Over the past nineteen years manufacturing productivity has dropped from 8.0 % to 1.0 % this past year. 

Source: Bureau of Labor Statistics – 5/2/19

Most of our economy is services based, and productivity improvements in the services sector have been slow in coming compared to the goods based sector. For example in social assistance, education, and healthcare there has actually been a reduction in productivity by about 9% since the 1980s.  Plus, hiring has centered on our services sectors so productivity increases are likely to be limited into the future. Our fastest growing sectors in the economy are among the least productive.  Artificial intelligence and software services may change this trend, but the results are still to be seen.

Sources: Brookings Institution, The Wall Street Journal – 10/30/16

Job changes are the lowest in the least productive services sectors, indicating work to be done to automate or implement productivity systems in these services sectors.

Sources: The Brookings Institution, The Wall Street Journal – 10/30/16

Executive Pay

Today, executive compensation at S & P 500 corporations is on average 300 times the average pay of their workers! Senior management enjoys a combination of high salaries, executive healthcare, house low cost loans, stock options and bonuses for achieving earnings targets (hyped by stock buybacks).  In 1975 CEO pay to mean employee pay was 25:1, in 1995 112: 1 and in 2017 312:1.

Sources: Adam Grant, Professor at Wharton, Compustat, Bureau of Labor Statistics – 9/27/18

Note the ratio of CEO to worker pay soars in the 1990s as a result of the the de-regulation, trickle-down and stock buyback allowance policy of the Reagan – Bush administrations. Extreme executive compensation is taking wages from workers who would otherwise receive their fair share wage. Corporations have committed over $1 trillion to stock buybacks, according to Goldman Sachs in 2018 which only go to increase their stock compensation plans and the top 1 % who own most stocks.  That trillion dollars could be better allocated to increasing worker wages so the economy works for the 80 % in income.

Worker Compensation

One aspect of worker compensation that has increased by 12 % since 2006 is total worker compensation in the form of benefits.  While wages have increased by just 4 % in the same period.  Paid leave, health and other benefits have grown faster than wages, except in a few months. Wages as a percentage of total compensation have dropped from 70 % in 2006 to 68.3 % in 2017.

Sources: Labor Department, The Wall Street Journal – 6/9/19

The health component is somewhat misleading, while corporations have seen increased costs for medical coverage, they have reduced those costs by moving the majority of cost increases over to employees.  Corporations have done this by increasing the deductibles covered, reducing the number of plans and increasing premiums.  Worker households are caught in a cash squeeze by having to pay more for the health care coverage they had previously while corporations are holding their costs in line with inflation or slightly more.

Federal minimum wage laws are not keeping up even with inflation. Some states are making up the difference, by requiring higher minimum wages than the federal minimum wage (dark blue, blue and light blue).  Other states offer the same minimum wage (yellow) and yet in the South many states don’t have any (dark grey) wage minimum laws with others (light grey) below federal minimum wage rates like Georgia and Wyoming. Note many foreign car manufacturers have deployed plants in no minimum wage states like Tennessee, Alabama and South Carolina.

Sources: National Conference of State Legislators, Bloomberg, Quick Take – 2018

Job Market Automation

LinkedIn was designed for corporate recruiters with the features and services they wanted to speed the recruiting process.  The edge to recruiters is obvious in the design of the service. For example job seekers cannot have multiple resumes or experience sets styled toward different jobs.  Unless the candidate – user is adept at settings updates to profiles are immediately sent out to all people in their network.  Recruiters have dashboards with filtered candidate lists around search preferences and locations.  The majority of LinkedIn’s revenue is from the corporate recruiting market – candidates are promoted to meet the needs of recruiters.  The use of LinkedIn, Monster, Indeed and other Internet job search services create and sustain a powerful recruiting edge for corporations.  Businesses can identify hundreds of high quality resumes and candidates quickly from all over the world in just a few hours or less. 

Source: Zety.com – 4/7/19

Resume scanning programs (recruiting bots)  further refine the candidate list, filtering content by keywords, phrases or other text targets.  Candidates are left with the challenge of figuring out what keyword ‘hits’ the bot is looking for and entering them into their resume so their resume will have the most ‘hits’ and rise to the top of the list of 250 plus candidates. Job seeking workers try to promote their job skills and experience with workers via social media sites, but are caught between being too public in their search with their boss finding out, or tipping off other candidates to the job they are seeking. Employers use their vast recruiting power in salary negotiations (‘we can always go to plenty of other qualified candidates’) and even after hiring keep all those candidate resumes online to fill the position if the new worker does not meet expectations. Only executives get promoted by an executive recruiter paid by corporate HR departments for find the right executive for an open position, once again the executives get a powerful edge over all other workers.

HR departments often hide behind Internet screens, offer no phone contact numbers and provide few ways for candidates to follow up with key staff.  Often, the trend now is to interview a candidate and not get back to them after the interview if they aren’t interested – sending a de facto message of ‘if we were interested we would send you a message or call’. Without an inside contact, a candidate is left to be a cog in the corporate recruiting machine.

Unions

When the manufacturing sector had the majority of American jobs, union power in representing employees was paramount. Unions are still a key bargaining entity for public employees, nurses and teachers. U

Fifty years ago 33 % of all US workers were members of a union, by 2015 membership had declined to just 10 % – a greater than 66 % decline.  The decline was quite pronounced in ‘right to work’ states in many in inland regions and the South:

Source: NPR – 2/23/19 Percentage of Workers – in Unions 2014

Unions played a crucial role in working to raise wages, benefits and ensure that people worked in safe conditions. Due to automation and offshoring the manufacturing sector has lost millions of jobs, thus unions and their role will need to evolve to the new services technology based economy.

In summary, workers are faced with a daunting set of economic forces holding their wages down – diminished bargaining units, the juggernaut of automation, stock buybacks instead of wage increases, fewer jobs at merged corporations, temporary jobs in the gig economy, reduced productivity, exorbitant executive pay and corporate control of job markets.

To make our democracy work, labor needs take an equal place in our government, corporate and social structure with capital.  Democracy = capital + labor where capital and labor have an equal political, economic and societal position.

Next Steps:

Federal Reserve Bank of Labor – the Federal Reserve system of Governors represents the nation’s largest banks with the President appointing each Governor.  The system has worked well for the banking system to manage financial crisis’s  and interest rates.  The business community and national policy makers await a continuing stream of reports and the Beige book on the status of business throughout the 12 regions with baited breath. The Federal Reserve made up of 12 governors from regional banks, do not represent workers, or really have the tools, levers or policy role to solve labor problems. The Fed’s real mission is to ensure that banks stay viable and the financial system is sound. Yet, Congress charted the Fed with a dual role of keeping inflation in check and supporting full employment. Using the unemployment rate as an indicator of labor’s health is a mistake. The number does not include the millions of workers who have quit looking for work, those without the skills, or those possible workers who are suffering in the drug epidemic because of despair in part from lack of work. The miss match between the millions unemployed vs job openings is a huge challenge and needs to be undertaken by an organization lead by executives from labor focused organizations.

Source: The Wall Street Journal – October 18, 2018

Labor needs an equal organization to represent labor at the table with capital. The new organization would advocate, collect research, and make decisions to promote the welfare of workers, improve wages and lead efforts to fill U.S. job openings.  The mission of the Federal Reserve Bank of Labor (FRBL) is to ensure the United States has the most competitive, up to date skills in a labor force to fill all positions that US corporations have open. In short, the FRBL is in charge of the Labor Bank. The Federal Reserve of Labor would match the 12 regions of the Fed, would be composed of 12 Governors selected by the President from academia, corporate human resources, unions, government worker groups and worker rights group leaders to guide labor policy and programs for the country.  The Governors would meet monthly, setting minimum wage rates by state in the country, review the results of labor statistics, write a Lavender report on the status of labor in each region, with a focus on putting unemployed workers who are seeking work back into the labor force and target an increase in the national labor force participation rate.  The Governors establish interest rates and the size of allocated loans from a bank of $100 billion in labor development loans which are allocated to corporations, NGOs, Unions, universities and others to drive the development of the labor force. The Governors establish the Federal Minimum Severance rates by industry sector state, executive, manager and worker. A minimum severance rate is the proportion of salary received in severance for example 3 months salary.  The FRBL board drives research into issues like why so many workers are still unemployed even with the unemployment rate being at a 50 year low, and why wages have stagnated over the past 20 years. The FRBL is charged with upgrading our labor indicators to assist policymakers in what is really happening to our labor force by industry, job type, racial group. The Governors are chartered to establish a labor force set of goals that are updated by month to measure the results of labor force development, both qualitative and quantitative. Labor experts in the Fed would move to the FRBL, coordinate surveys and research with Census and Labor departments.  The Federal Bank of Labor Governors meet quarterly with the Fed Governors to coordinate capital and labor development plans and programs. Regional FRBL and Fed Governors meet monthly to coordinate regional programs.

In addition to building the FRBL these policy initiatives need to be implemented or similar:

  1. Place Workers on Boards – as Germany has so effectively setup, engaging management with required representation of workers on Boards, through Worker Councils or Unions if so voted by the majority of workers.
  2. End Outsourcing – corporations would pay 50 % tax on each job moved overseas making the move costly, encouraging corporations to move jobs to low cost or inland areas of the US, or innovation economic zones (special tax geographies) and to invest in worker training to receive training tax credits.
  3. End Low Cost H1-B Visas – the practice of importing inexpensive labor to drive down wages in US markets would be ended
  4. Focus Repatriated Funds on Labor – profits parked in banks overseas are invested in productivity programs, increasing wages of workers (not executives), reducing costs or innovation research. Stock buybacks or dividends would be prohibited
  5. End Stock buybacks – these funds are totally wasted, mislead investors on earnings reports and only serve to increase compensation for executives and shareholders. These funds are better allocated to increase worker wages or increase productivity so workers can receive higher wage increases
  6. Breakup Oligopolies – breakup market concentrations in key sectors: information technology, banks and financial services, health insurers, airlines, hospitals and clinics, entertainment, media and distribution and others as deemed in the public interest
  7. Balance Job Market Process– require companies over 100 employees to offer information on their website for contacts, phone numbers, job listings with identified contacts, and to let the candidate know the status of his consideration, and candidate introductions held monthly for F2F communication
  8. Balance Worker and Executive Pay– Empower Work Councils and labor representatives on Boards to approve all executive pay packages. Work Councils in industry sectors would meet and decide on executive to worker ratios of average salary to enable all companies to remain competitive within an industry yet require labor approval. End golden parachute packages by taxing 50 % of every dollar received above $1 million. Severance packages for workers would have to be in proportion to the highest executive package ie, executive receives a minimum of  X dollars in proportion to total salary then a worker receives the same portion with a minimum of 50 % of their yearly salary or the Federal Minimum Severance Rate whichever is greater
  9. Fund Worker Training related to Robots and Increase Wages – for each robot employed, the corporation would be required to offer training, skills development for the displaced worker to find a comparable job within the company or outside. Where automation software or technology is deployed 10 % of the realized cost benefit would be used to raise the wages of all workers in the company.  Tax deductions of up to a 50 % credit would be offered on the cost of training and development programs.  For individual workers, if they pay for career development training they would be able to deduct the full cost of their investment in themselves from their taxes.            
  10. Fund Education and Apprenticeship Programs – Representative Ro Khanna has introduced an idea to fund a 21st century Morrell (1862 Land Grant) Act that would grant to 50 rural and urban universities funds to establish a United States Technology Institute where students would gain technology skills needed in a technology based economy.  In addition, our country needs a stem winding apprenticeship program patterned after the German model to bring skills needed for today’s manufacturing without a college degree.  The program would be given the same prestige and recognition as college programs, companies would pay the same wages, benefits and compensation for skills achieved in this program as any college skills program.
  11. Pool Stock at Public Offering to Workers – all drivers at firms like Lyft and Uber, and workers at other new corporations should be able to receive compensation for their hard work in providing service or building a product. While, some key workers receive stock options with a strike price below the IPO price, we propose that all workers receive stock shares in a pool at the time of IPO, they can cash out or keep the stock then they receive a reward as well as founders (workers should not be forced to hold shares longer than management). Stock pool shares can be awarded based on service years, performance ratings or other recognition approach that is objective and fair to all workers. After all, isn’t it worth it to founders to build a workforce that is loyal and excited about the company, by letting go of even 10 % of their billion dollar stock reward or $100 million to workers?

Saving Democracy: Congressional Representative Districts Drawn By Independent Commission

(Editor Note: This is the third post in a series on renewing the institutions of our federal government and democracy to ensure that it will endure. Looking at trends today with data, analysis of the present situation and recommendations for changes. Todays post focuses congressional districts being set by an independent commission not legislators. )

Sources: North Carolina General Assembly, Kontretykieta.com – NC Redistricting 2016

The next census count of the population of 50 states is to be completed in 2020, with states losing population or gaining population being forced to redistrict their Congressional Representative districts.  Southern and Western states like North Carolina, Texas, Florida, Virginia, California, Oregon, Arizona, and Colorado are likely to gain seats.  Northeastern and Midwestern states like Pennsylvania, New York, Rhode Island, Ohio, Michigan, Illinois, and Minnesota plus Alabama and West Virginia are likely to lose seats.

The redistricting process must be completed by the time ballots are printed for the 2022 election. Only 6 states use independent commissions of equal representation of each party and varying numbers of independent non-partisan members. The other 44 states use some form of state legislature approved redistricting. The legislatures are given the power to establish congressional districts by the Constitution.

Source: Wikipedia – 4/1/19

Does it really make sense to have the foxes running the hen house?  All states have partisan legislative bodies (except Nebraska), the majority party ensures that they can dominate the next congressional election by gerrymandering the state district map.   Legislators should not be deciding who voters vote for, voters should be making that decision.  In North Carolina, General Assembly Republican, Rep. David Lewis said, “I think electing Republicans is better than electing Democrats,” of a map plan passed by the legislature in 2016. When voters went to the polls that fall, 10 GOP representatives won seats, while only 3 Democrats were elected yet the GOP only won 53 % of the popular vote  Now this redistricting issue is before the Supreme Court to be decided later this year. Other states have been in and out of federal courts including Maryland and Wisconsin for redistricting violations based on party affiliation. State legislatures have a long undemocratic history of creating poll taxes for ethnic groups they didn’t like or discriminating against minorities by placing them in loaded districts away from their logical geographic location.

Let’s safeguard from partisanship the most important of democratic institutions – voting, by ensuring that voters will be located in diverse districts from all political points of view.  Congress needs to pass a law requiring all states to institute Independent Commissions to draw congressional district maps.   Maybe if we had more representative districts candidates would offer more compromising positions, so when they go to Congress they might just learn to work together and do what’s best for the people not corporations or the Elite.

Millennials Left Out of the Economic Boom

Image: fee.org

Millennials have seen the lowest level of GDP growth of three major generations since WWII.  Baby Boomers, Gen X enjoyed GDP growth rates of between 30 – 40 % in the ten years after they turned 18 years old.  While, Millennials experienced half those GDP growth rates .

Sources: Commerce Department, The Washington Post – 3/15/19

To gain entrance to good jobs, Millennials became the most educated cohort in America’s history – yet at a price.  Student debt is at an all-time high of $1.5 trillion. This debt level has caused at least 400,000 potential young buyers of homes to be left out of the housing market in 2014, according to Federal Reserve economists.  One reason students needed to take on such massive debt loads is states for the past 30 years have been drawing down their financial support of college education by between 60 – 50 %.  Universities were left no choice to fill the funding gap except by raising tuition. 

We have documented in previous posts that real wages for the 80 % in income group have been basically stagnant for the last 30 years.  As the nation’s top 20 % gains 90 %  of the income and wealth gains since the Great Recession, Millennials have been further challenged to keep up, particularly if they have no college education living in inner cities and Midwest rural regions.  The hallowing out of manufacturing in the Midwest and South has produced low wage, low benefit, limited future jobs for young people. Add the slow Internet infrastructure and lower quality healthcare makes the future look dim.  Is it any wonder that the Heartland has the highest opioid death rate in the country?

Millennials feel their lack of an economic future in other ways, delaying marriage by 8  to 10 years and having children 5 – 6 years later than other generations.

Next Steps:

A whole generation has been missing out on the benefits of the fastest growing wealth generation economy in the world.  As income and wealth goes to the top 10 % to the highest level of concentrated wealth since 1929, the education services that make for a broad based pluralistic economy have fewer student slots and extremely high tuition.  Corporate and wealthy individual taxes are at the lowest levels in 50 years.  Our higher education system is turning into a grinder for people of modest means, carrying a heavy burden of debt for young people to begin their careers and families.

The number one issue for Millennials is student debt.  We need as a country to deal with this problem.  Students did not withdraw support for state colleges and universities, taxpayers and state governments did withdraw financial support with huge consequences for our young people and our economy. There have been a variety of proposals to reduce student debt including, forgiving debt completely, or forgiving debt for service to the country (as a proposal we made in a post to focus on investing in our Midwest communities), require corporations to provide more training for employees, and corporate support of a national apprenticeship program at a funding level and quality of Germany’s apprentice program for non – college careers.

The key is we need to end the bickering between conservatives, independents and liberals and take on the economic challenge of huge debt that our young people have today.  Certainly, these people need to take responsibility for their own economic future, but we who created the present economy of winners and losers need to do better by our young people or when they gain positions of economic power we may not like the economic system they setup.

Saving Democracy: Make Voting Rights, Systems Uniform For All 50 States

(Editor Note: This is the second post in a series on renewing the institutions of our federal government and democracy to ensure that it will endure. Looking at trends today with data, analysis of the present situation and recommendations for changes. Todays post focuses voting rights being made universal for all states without state manipulation of the voting process or access for all eligible voters.)

Photo: mashable.com

Over the past ten years 23 states have passed laws to restrict voter rights.  Some states of have instituted cumbersome identification procedures, cut down pre-election day times to vote, added restrictions on mail in ballots, taken voters off the rolls for political reasons, and made voter registration more difficult.

Source: The Brennan Center for Justice – 3/5/19

Automatic Voter Registration (AVR) is a concept gaining momentum in many states, the Brennan Justice Center for Justice outlines their proposal in this way:

First, AVR makes voter registration “opt-out” instead of “opt-in”— eligible citizens who interact with government agencies are registered to vote or have their existing registration information updated, unless they affirmatively decline. Again, the voter can opt-out; it is not compulsory registration. Second, those agencies transfer voter registration information electronically to election officials instead of using paper registration forms. These common-sense reforms increase registration rates, clean up the voter rolls, and save states money.”

The plan would automatically use registration information at a state agency for eligible voters to be registered to vote: for example, when 18 year old goes to the DMV for a driver’s license their registration information would electronically be sent to the Secretary of State and their name added onto the voting rolls where they live. Citizen interactions with other state agencies where registration is required would follow a similar procedure.

The House of Representatives has just passed HR 1, a comprehensive voting rights act making voting registration, rights, procedures, identification, pre-election day voting, public funding of candidates, tax returns by candidates for President and Vice – President, election day a federal holiday and other innovations to bring our voting process into the modern age, here is a summary of the bill from the House website:

This bill addresses voter access, election integrity, election security, political spending, and ethics for the three branches of government.

Specifically, the bill expands voter registration and voting access, makes Election Day a federal holiday, and limits removing voters from voter rolls (and automatic voter registration).

“The bill provides for states to establish independent, nonpartisan redistricting commissions.

The bill also sets forth provisions related to election security, including sharing intelligence information with state election officials, protecting the security of the voter rolls, supporting states in securing their election systems, developing a national strategy to protect the security and integrity of U.S. democratic institutions, establishing in the legislative branch the National Commission to Protect United States Democratic Institutions, and other provisions to improve the cybersecurity of election systems.

This bill addresses campaign spending, including by expanding the ban on foreign nationals contributing to or spending on elections; expanding disclosure rules pertaining to organizations spending money during elections, campaign advertisements, and online platforms; and revising disclaimer requirements for political advertising.

This bill establishes an alternative campaign funding system for certain federal offices. The system involves federal matching of small contributions for qualified candidates.

This bill sets forth provisions related to ethics in all three branches of government. Specifically, the bill requires a code of ethics for federal judges and justices, prohibits Members of the House from serving on the board of a for-profit entity, expands enforcement of regulations governing foreign agents, and establishes additional conflict-of-interest and ethics provisions for federal employees and the White House.

The bill also requires candidates for President and Vice President to submit 10 years of tax returns.”

Senate Majority Leader McConnell, denounced HR1 as a ‘power grab’, which seems dismissive of a way to effectively bring our voting processes into the modern age and make voting more democratic rather than manipulated by a controlling party in the state to enhance the turnout of their voters over others in elections. 

It is about time we had universal voting rights, processes and programs across all our states to ensure that voting is accessible by all citizens regardless of ethnicity, race, religion, or wealth.

Our next post: will focus on congressional districting, crucial to fair elections.

(In a series: on key topics for renewal of our democracy; voting rights, corporate power and reform, Electoral College reform, congressional district reform, Congressional reform (not three presidents) (campaign finance reform), using the Internet and high tech (AI is a common good) to strengthen democracy, innovative government program implementation using Silicon Valley model, support of the Press (our Fourth Estate), educational reform, ethical government service, finance and stock market reform, land and home ownership, environmental stewardship, citizenship and service, civil discourse (choose our words), using evidence to pass laws and create policy, and our global leadership role.)

Saving Democracy: Renewing Our Government Infrastructure v2.0P

Source: editorials.voa.gov

“We can’t have an economy that works for all if we don’t have a democracy that works for all.” TPE, Editor, Patrick Hill

By returning political power to the people then economic opportunities can be once again be made available to all.   Why is this reform and rebuilding effort important? Because the people don’t trust their government.  If citizens don’t trust their democratic institutions to do the right things for them, they will turn to demagogues who use hate, fear, divisiveness, pride, and power to weld control over the people to gain wealth and power for themselves. Here is a poll from NPR/Marist on the trust people have in various forms of U.S. government:

Sources: NPR, Marist – 1/17/18

Congress comes in dead last of all the major institutions, with the Military first and the Supreme Court second (though as the court becomes more politicized this level of trust may change). The Presidency under our present POTUS has not helped in terms of trust, since he was not elected by the majority of people falling almost 3 million votes short and then proceeded with policies that only appeal to his minority base. People inherently believe the majority person or policy should win. In our 2016 presidency election the majority candidate did not win, so the majority opinions are not represented in the Executive branch. The Executive branch starts out with a lack of support, trust or mandate to govern. Our government by the people for the people and of the people can only survive if people have trust in their government. What is even worse is the level of confidence Americans have in their government to handle international or domestic problems has dropped significantly:

Source: Gallup – 1/31/19

One month after the 9/11 tragedy the American public rallied around their government and leaders to provide protection and bring the perpetrators to justice.  Since 2001, the confidence the public has in their government to handle problems has declined to a 18 year low.

One reason trust is so low is the government actually does not represent the people when it comes to passing laws in accordance with citizen opinions, needs and condition.  Professors Martin Gilens, at Princeton, and Benjamin Page, at Northwestern examined thousands of opinion poll surveys from 1981 to 2002, and grouped them based on the top 10 % in income versus the bottom 90 %.  Then, they reviewed 1779 policy proposals versus the opinion surveys and found the elite saw 76 % of their opinions reflected while the general public only 3%.  Special interest groups gained 56 % of their positions reflected in policies. It is little wonder that the general public is frustrated with their federal government.

Democrats, Republicans, and Independents need to step back a moment, or a year and think about our democracy first and their policies second.  The most salient aspect of politics since the 1980s is the ascendency of corporations, the wealthy and special interest groups gaining and sustaining power in Washington supported by both major parties. At the same time wages for the working class and 80 % in income have basically stagnated on a real wage basis. Our government needs to work for everyone: conservative, liberal, immigrant, native born, poor or wealthy.  We need more government processes focused on building consensus rather than the predominant government, Internet and media processes fanning the flames of division. Division is freezing our ability to move ahead and even look ahead 10, 20 or 30 years to solve problems before they become too immense to solve without great loss of life or economic damage. The fact that we cannot seem to make the right legislative, corporate decisions or encourage environmental sound citizen behaviors to save our planet is evidence enough of the breakdown of our democracy to solve real problems. Are these problems solvable? Yes, but only if we work together bringing the genius of our diverse people to focus in effective ways to solve those existential issues we face. There are so many narratives that are disconnected, people talking past each other. We need to connect the narratives and arrive a one narrative that the majority of Americans can support on each major issue.

Our next post: will focus on voting, the heart of our democracy.

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