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 April 17, 2015 17:12 GMT

CONSUMER PRICES

WASHINGTON (AP) -- Rising gas prices in March led to a slight increase in inflation, a sign that some of the broader economic impact from cheaper oil is fading.

The Labor Department says the consumer price index rose 0.2 percent in March. Inflation moved at that same pace in February, which ended three straight monthly declines caused largely by falling oil and gasoline prices.

Gas prices remain about 33 percent lower than a year ago, but they bounced up 3.9 percent from February to March. Over the past 12 months, consumer prices have slumped 0.1 percent.

Outside food and energy, core prices also rose 0.2 percent in March. The cost of clothes, housing, cars, and medical care increased, while food and airfare decreased. Core prices have risen 1.8 percent in the past year.

LEADING INDICATORS

WASHINGTON (AP) -- An index designed to predict the future health of the economy slowly crept upward for the third straight month, a sign that the pace of growth has been weakening since the start of 2015.

The New York-based Conference Board says its index of leading indicators rose 0.2 percent in March, after gains of 0.1 percent in February and 0.2 percent in January.

Building permits were the weakest part of the index, while slowdowns in average working hours and new factory orders have also been in a drag over the past six months.

Conference Board economists say that the modest gains may be signaling a continued decline in growth over the coming months.

EARNS-GENERAL ELECTRIC

NEW YORK (AP) -- The industrial heart of General Electric, the company's new focus, posted lower revenue and earnings in the first quarter amid an enormous overall loss resulting from its recently-announced sale of most of the assets in its finance subsidiary.

Net income from the part of GE that the company will retain after the sale fell 5 percent to $3.1 billion, the company said Friday. Adjusted earnings per share fell 6 percent to 31 cents, a penny better than analysts polled by Zacks Investment Research expected, on average.

Revenue fell 12 percent to $29.4 billion, below the $34.4 billion analysts expected.

GE announced last week it would sell most of the assets in its GE Capital subsidiary, the latest and most dramatic move by the company to transform itself into a more focused industrial conglomerate that makes large, complicated equipment for other businesses.

Costs and charges associated with the sale totaling $14.1 billion pushed the company to an overall loss of $13.57 billion in the quarter, down from a profit of $3 billion during last year's first quarter. On a per-share basis, the company lost $1.35.

EARNS-REYNOLDS AMERICAN

WINSTON-SALEM, N.C. (AP) -- Reynolds American's first-quarter profit climbed, helped by increased cigarette prices. Its adjusted profit beat analysts' expectations.

The parent of the Camel and Pall Mall cigarette brands earned $389 million, or 73 cents per share, for the three months ended March 31. A year earlier it earned $363 million, or 67 cents per share.

Earnings, adjusted for non-recurring costs, were 86 cents per share.

Revenue amounted to $2.06 billion in the period.

Reynolds American Inc. still expects full-year adjusted earnings in the range of $3.65 to $3.80 per share. Analysts polled by FactSet predict earnings of $3.79 per share.

BLOOMBERG-TERMINALS DOWN

LONDON (AP) -- Bloomberg LP's trading terminals, which are used by most of the world's biggest financial firms, went down for a few hours today due to apparent technical problems, prompting the British government to postpone a planned 3 billion-pound ($4.4 billion) debt issue.

Users said the outage started as trading was getting in full swing around 8 a.m. in London.

By day's end in London, Bloomberg said its service had been "fully restored." In a statement, it said hardware and software failures in its network caused excessive volumes that led to customer disconnections as a result of the machines being overwhelmed.

Though the outage is an extremely rare phenomenon for the firm started by former New York mayor, Michael Bloomberg, in the early 1980s, it's likely to cause concern at the company.

Bloomberg has become the world's biggest financial information provider, overtaking rival Reuters.

JAPAN-US-TRADE

TOKYO (AP) -- Top Japan and U.S. trade officials plan to meet this weekend, seeking to close gaps over autos and farm trade before Prime Minister Shinzo Abe visits Washington later this month.

Economy minister Akira Amari announced plans for the talks with U.S. Trade Representative Michael Froman late Friday.

The U.S. and Japan must agree on market-opening measures before the 12 countries involved can reach a long-delayed final accord on the U.S.-led Trans-Pacific Partnership, a Pacific Rim trade pact.

An agreement by U.S. lawmakers Thursday to propose legislation allowing President Barack Obama to negotiate trade accords for overall congressional review appeared to help move things along.

The plan for Cabinet-level talks suggests the two sides made progress this week on resolving differences over the pace and scale of market opening.

OBAMA-TRADE

WASHINGTON (AP) -- President Barack Obama says the politics of international trade have always been difficult, especially within the Democratic Party. But he says U.S. opposition to new trade agreements would give China a leg up in setting the rules for commerce.

Obama's seeking to reassure critics by saying deals with Asia and Europe would have enforceable labor and environmental protections.

Obama spoke at a news conference with Italian Prime Minister Matteo Renzi.

Top congressional lawmakers reached a deal Thursday to pave the way for the broadest trade policy pact in years. Under the agreement, Obama would be allowed to negotiate trade accords that Congress could approve or reject, but not change.

That authority would set the stage for Obama to complete a sweeping trade agreement with 11 Pacific nations.

CHINA-TIGHTER STOCK RULES

BEIJING (AP) -- China's securities regulator is tightening control over lending to small investors trading stocks.

The China Securities Regulatory Commission has banned a type of financing called an umbrella trust, tightened control over other financing and told brokerages to limit potential risks, the commission said in a statement Friday.

The statement cited comments by the commission's deputy chairman, Zhang Yujun, to a gathering of brokerage executives.

China's stock market has doubled over the past year as more small investors shift money into stocks. Tighter control over lending might reflect concerns that investors are taking on too much risk.

Zhang was cited as saying the commission plans to intensify inspection and law enforcement efforts.

GREECE-BAILOUT

ATHENS, Greece (AP) -- Greek officials say negotiators are to meet representatives of the country's creditors again on Saturday to "find common ground" in tortuous talks over the future of Greece's bailout.

Dependent on funds from two multi-billion euro bailouts since 2010, Greece is fast running out of cash. Negotiations with representatives of its creditors in other eurozone countries, the International Monetary Fund and the European Central Bank have not gone well, with the new left-wing government in Athens insisting their demands are too onerous.

For their part, the creditors insist the country must produce credible reforms before they unlock the final 7.2 billion euro installment. Without it, Greece could default on debts it must repay the IMF next month, and run out of cash to pay salaries and pensions.

OIL TRAINS-SAFETY

WASHINGTON (AP) -- Federal transportation officials say they're taking a series of steps to improve the safety of trains hauling crude oil and other flammable liquids, including an emergency order limiting train speeds to no more than 40 mph in "high impact" urban areas.

Among other steps announced Friday by the Department of Transportation is a warning to railroads to use the latest technology to check for flaws in train wheels.

Major freight railroads are already limiting oil trains to no more 40 mph in urban areas under a voluntary agreement, but the order makes that a requirement and extends it to trains carrying other flammable liquids like ethanol.

There have been dozens of fiery crashes over past decade involving trains hauling oil and ethanol in the U.S. and Canada.

FEDERAL LANDS-ROYALTIES

WASHINGTON (AP) -- The Obama administration is taking the first step toward a possible increase in the fees charged for oil and gas companies to drill on federal lands.

The Bureau of Land Management is seeking public comments on proposed regulations that would give the government more flexibility to set fees.

Government auditors have consistently questioned whether the public is getting a fair return from the 12.5 percent royalty now being charged.

Interior Secretary Sally Jewell says the current regulations have failed to keep pace with technological advances and market conditions.

A low royalty rate encourages oil and gas exploration, and any increase would likely raise protests from industry and others that it will lessen production and increase prices at the pump.

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