Looking at Income Inequality

Updated: Friday, May 16, 2014
Looking at Income Inequality story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - A surprise best-selling French author has stoked the fires of class warfare in the United States with the recent publication of his book "Capital in the 21st Century."

Tonight, in Tom's Corner, our Tom Van Howe says whether the book is right or wrong is irrelevant right now; its publication has people talking.

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The author's name is Thomas Piketty. And his premise is this: unless governments start using heavy taxes to break up large concentrations of wealth, our economy and the world's economy will become increasingly unbalanced, with only a few people inheriting massive fortunes.

And he says the only way to penetrate that socio-economic class would be to marry into it--because good old-fashioned hard work won't get you there.

The book has been pretty much kicked to the dirt by conservatives and hailed by liberals. I'm stuck in the middle because I struggled with economics in college.

But I'm not sure you need  a dollars-and-sense degree to get a sense that things aren't going well--that somehow the game is rigged; that the fix is in.

Take a look. The pay of the typical American worker peaked in 1978 and has been dropping ever since.

Since 2000, the wages of the median male worker across all age brackets has dropped 10 percent after inflation.

Compare that to what has happened to CEO's over that same period of time. According to former Labor Secretary Robert Reich, until about 1980, CEO's were paid, on average, 30 times what their typical worker was earning.

Since then, CEO pay has skyrocketed to roughly 300 times the pay of a typical worker.

Its good to be on top--not so good for those who are not.

And I can hear you say, 'Well, let's not pick on the job creators.'

But I can't find a single economist to say they're creating that many jobs.

What those CEO's are doing instead is taking their millions and investing it. Maybe hoarding it is a better word.

Maybe--just maybe--if they increased the pay of their workers, those same  workers would have more money in their pockets to buy more of the product they're making.

Kind of like Henry Ford, who doubled the pay of his workers to five dollars a day, so they'd be able to afford their own cars.

That would seem to be a good thing for the economy.

If a company can sell more of what is has to sell, it has reason to expand and hire more people. So customers are really the job creators.

Absent that, however, what do we do to level the paying field?

The french economist Piketty says we ought to start by taxing the hell out of the wealthy and then redistribute all that money to balance the scales.

But--to be real--that doesn't seem likely.

After all, our lawmakers, who rely on the monied classes for their political survival, aren't going to start gnawing on the hands that feed them. Can't see that happening next week.

How about the return of labor unions? To sit down and negotiate wages and benefits.

Well, unions are out of vogue right now, and while we do have the right to collectively bargain in this country, why don't you try organizing a union chapter where you work and see where that gets you.

The best idea I've heard so far is in a bill coming up for consideration in California.

It called Senate Bill 1372, and would set corporate tax rates according to the ratio of CEO pay to that of a typical worker.

The higher the ratio, the higher the tax. The lower the ratio the lower the tax.

All of a sudden, board members at 'Corporation A,' who set CEO pay, would have to start answering to stock holders who'd suddenly have a different set of questions.

I don't know if the Frenchman's book about capitalism is on target or not, but it has, indeed, set people to talking.

The elephant has left the building and we're talking about class warfare in this country as if it were a real thing.

And that's good--because it is.

In this corner...I'm Tom Van Howe.

Business News

Last Update on February 27, 2015 18:54 GMT

ECONOMY-GDP

WASHINGTON (AP) -- The U.S. economy slowed more sharply in the final three months of the year than previously believed, reflecting weaker business and a bigger trade deficit.

The Commerce Department said Friday that the economy as measured by the gross domestic product grew at an annual rate of 2.2 percent in the October-December quarter, less than the 2.6 percent first estimated last month. It marked a major slowdown from the third quarter, which had been the strongest growth in 11 years.

Economists remain optimistic that the slowdown will be only temporary. In fact, many forecast that growth will accelerate to above 3 percent in 2015, which would give the country the strongest economic growth in a decade.

CONSUMER SENTIMENT

WASHINGTON (AP) -- Harsh winter weather left U.S. consumers feeling a bit less confident this month, the University of Michigan says. But confidence levels still remain at the highest level in eight years.

The University of Michigan says its index of consumer sentiment slid to 95.4 in February from an 11-year high of 98.1 in January.

Earlier this week, the Conference Board, a business research group, said that its consumer confidence index fell a bit this month but remained at the highest levels since before the Great Recession began in late 2007.

PENDING HOME SALES

WASHINGTON (AP) -- The number of Americans signing contracts to buy homes rose at a healthy pace in January, a sign that home sales are poised to accelerate after a slow start to the year.

The National Association of Realtors says its seasonally adjusted pending home sales index increased 1.7 percent to 104.2 last month. December's figure was also revised higher to show a decline of only 1.5 percent, up from a previous drop of 3.7 percent.

The data point to a rebound in sales of existing homes in the coming months, particularly as the spring buying season gets underway. Measures of sales and construction fell last month.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

FIAT CHRYSLER-SUV RECALL

DETROIT (AP) -- Fiat Chrysler is adding more than 467,000 Dodge and Jeep SUVs worldwide to a recall from last year to fix a potential stalling problem.

The company says it's adding 2012 and 2013 Dodge Durangos and 2011 Jeep Grand Cherokees outside North America to a recall from September of last year. The Jeeps have diesel engines.

Chrysler says fuel pump relays can deform and cause the pumps to malfunction. That can cause unexpected stalling or prevent the engines from starting. The company doesn't know of any crashes or injuries from the problem.

Dealers will install a new relay circuit. Chrysler says it will let customers know when they can schedule service.

The recall from last year covered 189,000 other Grand Cherokees and Durangos in the U.S.

GERMANY-EARNS-VOLKSWAGEN

FRANKFURT, Germany (AP) -- German automaker Volkswagen says after-tax profits rose 21 percent for last year, to 11.1 billion euros ($12.4 billion).

The maker of Volkswagen, Audi, Skoda and SEAT brand cars said Friday that it increased its profit margins during the year and proposed to increase its dividend to shareholders.

But it offered a cautious outlook for 2015, citing a "persistently challenging market environment." It said sales would increase by at least 4 percent, "depending on economic conditions." It said economic trends in Latin America and Eastern Europe could affect its commercial vehicles and power engineering businesses.

Sales revenue rose 2.8 percent last year to 202.5 billion euros. Volkswagen said it would raise its dividend to 4.80 euros per ordinary share, up from 4.00 euros in 2013.

GERMANY-GREECE

BERLIN (AP) -- Germany's Parliament has given its overwhelming approval to the four-month extension of Greece's financial bailout, despite unease over the new government in Athens.

Lawmakers voted 542-32 on Friday to back the bailout extension. There were 13 abstentions.

Finance Minister Wolfgang Schaeuble said ahead of the vote that "this is not about new billions for Greece, not about changing this program" and stressed that the goal is to complete Greece's existing bailout successfully.

Germany, a key creditor nation, has advocated unpopular spending cuts and insisted that aid must come with strings attached. Comments by Greek officials casting doubt on privatization deals and raising the possibility of further debt relief have irked some in Germany.

RUSSIA-UKRAINE-GAS

MOSCOW (AP) -- Ukrainian gas company Naftogaz says that it has paid $15 million for another month of Russian gas after fears escalated that Moscow could cut off supplies.

Interfax-Ukraine news agency quoted Naftogaz's executive, Andrei Kobolev, as saying that the company had paid for gas supplies from Russia for the month of March. Russia's Ministry of Energy Alexander Novak said Thursday morning that Russia had not yet received any payments.

Following a bruising dispute over prices and debt that raised fears of supply disruptions in Europe, Russia and Ukraine signed a deal in October requiring Kiev to pay in advance for gas shipments. President Vladimir Putin and other government officials warned earlier this week that Russia would cut off supplies to Ukraine by the end of the month barring further pre-payments.

UNITED STATES-CUBA

US, Cuba restart embassy talks; breakthrough seems unlikely

WASHINGTON (AP) -- The U.S. and Cuba are holding a second round of negotiations on restoring diplomatic relations after a half-century interruption. An immediate breakthrough appears unlikely.

Although the Obama administration wants embassies reopened by April's summit of North and South American leaders, the Cubans hope first to be removed from a U.S. terrorism blacklist.

Their status on that list prevents them banking and doing other basic business in the U.S. that they would need for their embassy here.

Washington is reviewing if its designation of Cuba as a terrorist state is outdated. It hasn't made a decision.

The one-day talks started Friday morning at the State Department. Roberta Jacobson, the department's senior Latin America diplomat, led the U.S. Across the table sat Josefina Vidal, Cuba's top diplomat for the United States.

SWITZERLAND-CLIMATE

STOCKHOLM (AP) -- Switzerland has become the first country to submit a pledge to the United Nations for a new global climate deal, vowing to cut its greenhouse gas emissions in half by 2030, compared to 1990 levels.

The Swiss government said Friday that at least 30 percent of the reduction would be achieved at home and the remainder through projects abroad.

The European Union, United States, China and Norway have also announced their intended targets but haven't formally submitted them to the U.N.

The new climate deal is supposed to be adopted at the end of the year at a conference in Paris. It would be the first time that all countries agree to take action to limit greenhouse gas emissions, which scientists say are warming the planet.

EBOLA TREATMENT STUDY

BETHESDA, Md. (AP) -- The U.S. and Liberian governments are starting the first formal patient testing of an experimental Ebola virus treatment that's been used on an emergency basis.

The drug, ZMapp, contains three genetically engineered proteins designed to home on a target on the surface of the deadly virus to stop the disease's progression. ZMapp, developed by San Diego-based Mapp Pharmaceuticals Inc., is "grown" in tobacco plants engineered to make large quantities of the virus-blocking proteins.

Adults and children in both countries, infected with Ebola or with suspected infection, will be included in the study.

The National Institute of Allergy and Infectious Diseases says half the participants will receive three ZMapp injections. The other half will get standard supportive treatment, including intravenous fluids and therapy to maintain blood pressure and sufficient oxygen intake.

OIL TRAIN SAFETY

WASHINGTON (AP) -- Fiery wrecks this month of trains hauling crude oil are intensifying pressure on the Obama administration to approve tougher standards for railroads and tank cars, despite industry complaints that it could cost billions and slow freight deliveries.

On Feb. 5, the Transportation Department sent the White House draft rules that would require stronger tank cars and make other safety improvements.

Nine days later a train hauling crude oil and petroleum distillates derailed and caught fire in Ontario, Canada. Less than 48 hours later, another oil train derailed and caught fire in West Virginia.

Brigham McCown was responsible for safe transportation of hazardous materials during President George W. Bush's administration. He says that the more incidents there are, the less willing the administration will be to listen to industry.

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