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Looking at Income Inequality

Updated: Friday, May 16, 2014
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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 August 28, 2015 17:24 GMT

FED-RATES

WASHINGTON (AP) -- Federal Reserve Vice Chairman Stanley Fischer says that incoming economic data and market developments will likely determine whether the Fed boosts interest rates in September.

Fischer says that before the recent turbulence in financial markets, there was a "pretty strong case" for starting to hike rates in September. But he adds that the Fed is watching how events unfold following the surprise announcement by the Chinese that they plan to devalue their currency.

Fischer says that central bank officials have not made a decision yet on whether to raise rates but would be closely following data such as next week's jobs report and market moves before the Sept. 16-17 meeting.

Fischer said the plan is still to move rates up very slowly and gradually.

CONSUMER SPENDING

WASHINGTON (AP) -- U.S. consumers increased their spending by a moderate amount in July, while income growth was propelled by the largest jump in wages and salaries in eight months.

The Commerce Department says spending rose 0.3 percent in July, helped by a big jump in purchases of big-ticket items such as cars. June's result was revised up to a matching 0.3 percent gain.

Incomes increased 0.4 percent. The key category of wages and salaries rose 0.5 percent, the biggest advance since last November.

The report indicates that consumer spending, which accounts for 70 percent of economic activity, got off to a good start in the third quarter. Economists believe the economy will be fueled in the second half of this year by solid income and spending gains.

CONSUMER SENTIMENT

WASHINGTON (AP) -- Plummeting stock prices have taken a toll on U.S. consumer confidence, though there are signs the setback may be temporary.

The University of Michigan says its consumer sentiment index fell to 91.9 this month from 93.1 in July. The index is still up 11.4 percent from a year ago.

The figures provide an early read of the impact on consumers from the 1,900 point drop in the Dow Jones industrial average over six days through Tuesday. Stock prices have since recovered some of those losses.

The University of Michigan surveys consumers throughout the month and so some of the responses were tallied as the stock market plunged.

Even so, the survey also found that Americans remain confident about the U.S. economy and their personal finances.

FACEBOOK-ONE BILLION A DAY

NEW YORK (AP) -- You, your mom, your grandma and elementary school buddy Lawrence might have been some of the billion people who logged in to Facebook on Monday -- the first time that has happened in a single day. That's right, one billion people, or one-seventh of the Earth's population.

It was a big symbolic milestone for the world's biggest online social network, which boasts nearly 1.5 billion users who log in at least once a month. CEO Mark Zuckerberg marked the occasion with a Facebook post.

Most of the billion people who logged in on Monday were outside the U.S. and Canada. Of Facebook's overall users, more than 83 percent come from other countries. This is also where Facebook's next billions of users will likely come from as it grows.

CHEATING WEBSITE-CEO

NEW YORK (AP) -- The CEO of adultery website Ashley Madison is stepping down in the wake of the massive breach of the company's computer systems and outing of millions of its members.

Avid Life Media Inc., Ashley Madison's parent company, says Noel Biderman's departure was a mutual decision and in the best interest of the company.

Hackers originally breached Avid Life's systems in July and then posted the information online a month later after the company didn't comply with their demands to shut down.

Ashley Madison, whose slogan is "Life is short. Have an affair," purports to have nearly 40 million members.

GOP 2016-TRUMP-TAXES

WASHINGTON (AP) -- Republican presidential candidate Donald Trump is promising to offer a plan within a month to overhaul the tax system, calling himself "king of the tax code."

He's been hinting at such a plan recently, saying that wealthy Americans should pay more.

In a phone-in interview Friday on MSNBC's "Morning Joe" show, Trump says, "I know the hedge fund guys. ... These guys don't really build anything. They shuffle papers back and forth."

Trump says he'll unveil a plan to simplify the tax code and eliminate some deductions, asserting "nobody knows the tax code better than I do."

Trump says hedge fund managers are big supporters of Democrat Hillary Rodham Clinton and GOP rival Jeb Bush and adds, "I will have a plan."

He says hedge fund managers won't be happy.

PENTAGON-TECHNOLOGY

NEWPORT BEACH, Calif. (AP) -- Defense Secretary Ash Carter is announcing that the Pentagon will fund a new venture to develop cutting-edge electronics and sensors that can flex and stretch and could be built into clothing or the skins of ships and aircraft.

The high-tech investment could lead to wearable health monitors that could be built into military uniforms or used to assist the elderly. Or it could foster thin, bendable sensors that could be tucked into cracks or crevices on weapons, ships or bridges where bulky wiring could never fit. The sensors could telegraph structural problems or trigger repair alerts.

Carter plans to lay out the details for the newly created high-tech innovation institute in a speech Friday in California's Silicon Valley.

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