First, a stunning landmark is reached. From the New York Times:
The American Middle Class Is No Longer the World’s Richest
The American middle class, long the most affluent in the world, has lost that distinction.
While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.
After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.
On of the key mechanisms of the collapse of the middle class from Mother Jones:
How Taxpayers Subsidize the Multi-Million Dollar Salaries of Restaurant CEOs
- Starbucks CEO Howard Schultz raked in $236 million in taxpayer-subsidized compensation over the past two years.
As the fight to raise the minimum wage has gained momentum, the restaurant industry has emerged as the biggest opponent. This is no surprise, since the industry claims the highest percentage of low-wage workers—60 percent—of any other business sector. Front-line fast-food workers earn so little money that about half of them rely on some form of public assistance, to the tune of about $7 billion a year. That hidden subsidy has helped boost restaurant industry profits to record highs. In 2013, the industry reaped $660 billion in profits, and it in turn channeled millions into backing efforts to block local governments from raising pay for low-wage workers and to keep the minimum wage for tipped workers at $2.13 an hour (exactly where it’s been for the past 22 years). But public assistance programs aren’t the only way taxpayers subsidize the restaurant industry.
A new report from the Institute for Policy Studies finds that the public has been contributing to excessive CEO compensation as well, helping to widen the gap between the lowest-paid workers and their bosses. Thanks to a loophole in the tax code, corporations are allowed to deduct unlimited amounts of money from their tax bills for executive compensation, so long as it comes in the form of stock options or “performance pay.” The loophole was the inadvertent result of an attempt by Congress to rein in CEO compensation by limiting the tax deduction for executive pay to $1 million a year. That law exempted pay that came in the form of stock options or performance pay. This loophole has proven lucrative for CEOs of all stripes, but it is particularly egregious in an industry that pays its workers so little that it is already heavily subsidized by taxpayers.
More from UC Berkeley’s Robert Reich:
Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs
Until the 1980s, corporate CEOs were paid, on average, 30 times what their typical worker was paid. Since then, CEO pay has skyrocketed to 280 times the pay of a typical worker; in big companies, to 354 times.
Meanwhile, over the same thirty-year time span the median American worker has seen no pay increase at all, adjusted for inflation. Even though the pay of male workers continues to outpace that of females, the typical male worker between the ages of 25 and 44 peaked in 1973 and has been dropping ever since. Since 2000, wages of the median male worker across all age brackets has dropped 10 percent, after inflation.
This growing divergence between CEO pay and that of the typical American worker isn’t just wildly unfair. It’s also bad for the economy. It means most workers these days lack the purchasing power to buy what the economy is capable of producing — contributing to the slowest recovery on record. Meanwhile, CEOs and other top executives use their fortunes to fuel speculative booms followed by busts.
Renting wombs to fertilized eggs from abroad via Quartz:
Wealthy Chinese are turning to American surrogates to birth their children
The familiar image of international surrogacy until now has mainly involved Americans and Europeans crossing the world to find women to birth their children. Now, wealthy Chinese couples are seeking surrogates in the US. The practice—a new version of Chinese “birth tourism”—offers a solution to rising infertility in China, a way around Chinese population controls, and even the added bonus of US citizenship for babies born in the States.
For years, pregnant Chinese women have come to the US, mainly to the West Coast, to give birth to baby US citizens who can, at the age of 21, sponsor their parents for green cards. In a new wrinkle, some are instead paying American women to carry their children—a way of getting citizenship as well as dealing with the fact that more Chinese couples are facing trouble having children. (Other surrogacy destinations for wealthy Chinese include Thailand, India, and Ukraine, but the US is still the favorite.)
Salon finds brown noses:
Welcome to Plutocrat-geddon! Obama and Thomas Friedman flatter our new billionaire overlords
- Forget inequality! Judging by the White House and the media, the real answer is sucking up to the wealthiest
Inequality is a burning topic among economists, especially since the release of Thomas Piketty’s recent book on the subject. Many are questioning whether this is a temporary period of runaway inequality, or whether we are on the verge of an irreversible collapse into extremes of wealth and poverty. (What would we call it? The Oligopolypse? Plutogeddon?)
But numbers alone don’t tell the full story. Culture, too, is adapting to this unequal world. We idealize the wealthy today in ways that would have been unthinkable decades ago.
With the children of today’s baby boomers scheduled to inherit $30 trillion in the next several decades, politicians and the press are hard at work flattering plutocrats of all ages by portraying them as paragons of wisdom.
Another assault on the potential middle class from the New York Times:
Student Loans Can Suddenly Come Due When Co-Signers Die, a Report Finds
For students who borrow on the private market to pay for school, the death of a parent can come with an unexpected, added blow, a federal watchdog warns. Even borrowers who have good payment records can face sudden demands for full, early repayment of those loans, and can be forced into default.
Most people who take out loans to pay for school have minimal income or credit history, so if they borrow from banks or other private lenders, they need co-signers — usually parents or other relatives. Borrowing from the federal government, the largest source of student loans, rarely requires a co-signer.
The problem, described in a report released Tuesday by the Consumer Financial Protection Bureau, arises from a little-noticed provision in private loan contracts: If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower’s record is spotless. If the loan is not repaid, it is declared to be in default, doing damage to a borrower’s credit record that can take years to repair.
And a warning to labor from the London Daily Mail:
The future of factories? Swarm of super-fast robotic ‘ANTS’ powered by magnets can independently climb walls and even build
- The army of robo-ants can move at around 13.7 inches (35cm) a second
- This is equivalent to a human running at just under the speed of sound
- Each ant can be individually controlled using magnets on a circuit board
- Swarm has already built a tower 30cm (11.8 inches) high from carbon rods
Business Insider sounds the alarm:
DAVID EINHORN: ‘We Are Witnessing Our Second Tech Bubble In 15 Years’
Hedge-fund manager David Einhorn, who runs Greenlight Capital, says we’re seeing another tech bubble, CNBC reported, citing his fund’s quarterly investor letter.
“Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it,” Einhorn wrote in the letter (PDF) posted online by @Levered_Hawkeye.
Clicking away your rights from the Christian Science Monitor:
General Mills drops arbitration clause, but such contracts are ‘pervasive’
Consumer advocates warn that clicking ‘I agree’ to online contracts can crimp buyers’ legal rights, if a contract requires arbitration and nixes class-action lawsuits. The practice is spreading, though General Mills encountered a backlash.
When consumers click “I agree” to online contracts, two things can happen: They may give up their right to pursue a class action lawsuit if something goes wrong, and they can seek damages only through arbitration, an out-of-court legal process that many experts say weighs against the harmed consumer.
From the Los Angeles Times. Another landmark:
Supreme Court upholds Michigan ban on affirmative action
The Supreme Court upheld Michigan’s ban on the use of racial affirmative action in its state universities Tuesday, ruling that voters are entitled to decide the issue.
The 6-2 decision clears away constitutional challenges to the state bans on affirmative action, which began in California in 1996.
Justice Anthony Kennedy, speaking for the majority, said the democratic process can decide such issues. “This case is not about how the debate about racial preferences should be resolved,” he said. “It is about who may resolve it. There is no authority in the Constitution of the United States or in this court’s precedents for the judiciary to set aside Michigan laws that commit this policy determination to the voters.”
Kochs go Latino, via Reuters:
Conservative Koch-backed group uses soft touch in recruiting U.S. Hispanics
The conservative advocacy groups backed by the billionaire brothers Charles and David Koch are known mostly for spending millions of dollars to pelt Democratic candidates with negative television ads.
But this year, one Koch-backed group is using a softer touch to try to win over part of the nation’s booming Hispanic population, which has overwhelmingly backed Democrats in recent elections. The group, known as The Libre Initiative, is sponsoring English classes, driver’s license workshops and other social programs to try to build relationships with Hispanic voters in cities from Arizona to Florida – even as the group targets Democratic lawmakers with hard-edged TV ads.
Taking a cue from liberal groups that have been active in Hispanic neighborhoods for decades, Libre says it aims to use these events to build support for small-government ideas in communities that typically support big-government ideals.
From NPR, a reminder from Mother Nature:
California’s Drought Ripples Through Businesses, Then To Schools
Nearly half of the country’s fruits, nuts and vegetables come from California, a state that is drying up. , the entire state is considered “abnormally dry,” and two-thirds of California is in “extreme” to “exceptional” drought conditions.
Earlier this year, many farmers in California found out that they would get no irrigation water from state or federal water projects. Recent rains have helped a little. On Friday, government officials said there was enough water to give a little more to some of the region’s farmers — 5 percent of the annual allocation, instead of the nothing they were getting.
Economists say it’s too early to accurately predict the drought’s effect on jobs, but it’s likely as many as 20,000 will be lost.
That might not sound like a lot, but many of those workers are already living paycheck to paycheck in communities that depend on that work.
Via the National Drought Monitor, the current state of affairs in California, ranging from lightest [abnormally dry] to darkest [exceptional drought]:
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