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Does Income Inequality Matter to the Richest Americans?
Does income inequality matter to the richest Americans? Not very much. Here’s why. And it’s more than just greed-is-good; the rich will just get richer.
A study by economists at Washington University in St. Louis tells us stagnant income for the bottom 95 percent of wage earners makes it impossible for them to consume as they did in the years before the downturn. Consumer spending, some say, drives the U.S. economy, and is likely to continue to continue to dominate, as the decomposition of America’s industrial base dilutes old economy sales of appliances, cars, steel and the like. That should be bad news for the super-wealthy, us buying less stuff?
But that same study shows that while rising inequality reduced income growth for the bottom 95 percent of beginning around 1980, the group’s consumption growth did not fall proportionally at first. Instead, lower savings and hyper-available credit (remember Countrywide mortgages and usurous re-fi’s?) put the middle and bottom portions of our society on an unsustainable financial path which increased spending until it triggered the Great Recession. So, without surprise, consumption fell sharply in the recession, consistent with tighter borrowing constraints. Meanwhile, America’s the top earners’ wealth grew. The recession represented the largest redistribution of wealth in this century.
The gap between most Americans and those few who sit atop our economy continues to grow. For two decades after 1960, real incomes of the top five percent and the remaining 95 percent increased at almost the same rate, about four percent a year. But incomes diverged between 1980 and 2007, with those at the bottom seeing annual increases only half of that of those at the top.
This leaves the very real issue for the rich of who will buy all the stuff their big corporations make? But don’t worry. They’ve got it handled.
Taxpayer Subsidies to Big Corporations
Don’t worry about the big guys; they have figured out how to profit off poverty. Wal-Mart, Target and Kroger have made profits of $75.2 billion off food stamp purchases, even setting a new record in 2012.
And never mind how food stamps and other benefits are used by those same retailers to subsidize the low wages they pay their workers. Meanwhile, the same bill in Congress that would cut food stamps pays out farm subsidies to America’s billionaires, including Microsoft co-founder Paul Allen, Charles Schwab and S. Truett Cathy of Chick-fil-A.
The American Beverage Association, a lobby group that includes Coca-Cola, strongly opposes restricting soda purchases by food stamp recipients. Why? Recipients spend from $1.7 to $2.1 billion annually for sugar-sweetened beverages. While alcohol and other unhealthy items are restricted for purchase with stamps, soda stands available.
Government Defense Spending
About the only manufacturing-industrial sector of the American economy left prevailing over all foreign competition is defense. America buys its military hardware almost exclusively from domestic corporations (with a few crumbs tossed to allies like the UK and Israel) and fills the job ranks of the industry, contractors, and military with Americans.
In 2011, the U.S. government spent about $718 billion on defense, including arms sales and transfers to foreign governments. Hardware alone accounted for $128 billion. The total figure does not veterans benefits of $127 billion in 2011, or about 3.5 percent of the federal budget. America’s newest aircraft carrier cost $13 billion, not including development costs.
The Stock Market
The stock market (which set record highs in 2013) is a significant source of wealth in America. Indeed, what could be easier than placing money into an investment and, with no sweat or effort of one’s own, seeing it grow. A rising market lifts the national economy, and a rising tide lifts all boats.
The truth is closer to a rising tide lifts all yachts, as historian Morris Berman observed. Less than half of Americans own any stock at all. The wealthiest five percent of Americans meanwhile hold some 70 percent of all stock.
Bump the “top” group to the wealthiest ten percent of Americans and they own over 80 percent of all stock. At the same time, the lowest 90 percent own the leftover 20 percent.
So Don’t Worry about the Rich
These examples– and there are more– see tax write-offs, use of trusts to limit inheritance tax, offshore banking, large scale real estate (the top ten percent own about 40 percent of America’s land) show that income inequality is not a problem for the rich, and it is not a problem for America’s “economy” per se. The huge concentration of wealth in a small number of hands, and the methods by which those few acquire and maintain their wealth, means that the 99 percent of us edge closer and closer to playing no significant role in the economy anyway. We are becoming merely the collateral damage of income inequality.
Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.
Congress Knows: Survey Reveals The Real Value of the State Department
Since the government is shut down and thus there is no news to report except that the government is shut down, we’ll have to reach into the memory hole for something to talk about today. Ah, here’s one…
The House Appropriations Committee approved on July 24 an $8 billion cut for 2014 in the roughly $50 billion current international affairs (State and USAID) budget. That same day, the House authorized only a $5 billion reduction in the defense budget of over $600 billion.
The Department of State did not sit ideally by.
The employee association (AFSA for you State people still paying dues to them for this garbage) commissioned a guy who had already written a happy-talk book about State (“America’s Other Army,” give us a break) to interview all of 28 Congressional staffers about their attitudes toward Mother State. The author concluded: “an overwhelming majority (82%) described their experience with the Foreign Service and Department of State as ‘mostly positive.’ Respondents view Foreign Service members as dedicated, intelligent and patriotic public servants who make significant sacrifices…” Awesome. Sounds like an ad on Match.comThe author of the survey then went on ForeignPolicy.com to write a journalist-like article about his own work. Maybe Foreign Policy will next allow authors to review their own books? Sign me up, and hey, good luck with that paywall Foreign Policy.
About that Survey
That anyone at State paid for a survey that reached only 28 staffers out of the thousands on the Hill is in itself hilarious. There are approximately 11,692 personal staff, 2,492 committee staff, 274 leadership staff, 5,034 institutional staff, and 3,500 GAO employees, 747 CRS employees, and 232 CBO employees on the Hill. So basing anything on only 28 interviews is enough to make one wonder what FP.com’s journalistic standards are. Very sad.
Oh yes– the 28 were selected by the author himself, not randomly. About the only bone he throws is that they were half Democrat and half Republican, which itself makes no sense given the variation even within parties.
Here’s a taste if you don’t have the stomach to read the whole thing: One of the survey’s findings is supposedly that Congressional staffers feel that “Content about diplomacy and the Foreign Service should be included in the middle school and high school curriculum.” Sure, sure, squeeze that in between gym and drivers ed.
Congress Knows
The author’s broader argument, that basically Congress does not know what State does and thus undervalues, is funnier than his grasp of statistical methods.
Congress knows; they just think State does not do much of importance. Members and their staff travel regularly abroad, where they see State Department diplomats act as their tour guides and bag carriers. As a young diplomat in London, I was assigned to accompany so many Congressional spouses on shopping trips masquerading as official business that my colleagues called me “Ambassador to Harrod’s Department Store.” Meanwhile, a well-briefed Defense Congressional liaison sits on the gratis military-rpovided plane for every overseas Congressional visit as a respected peer, with hours in the air to score talking points. State handles the luggage on the ground as the Defense Liaison boards the limo to the hotel. Congress knows.
When Committees ask for quick answers from State, they get delays followed by verbatim content-free responses. Subpoenas had to be issued to get State people up to the Hill on Benghazi, and even the Secretary of State had a cascading series of “reasons” not to testify until her last days in office.
So Congress knows.
On the Hill
I worked as one (in 2006) of only two State Department Congressional liaisons to assist all members of both the House and Senate. State was the last Cabinet-level agency to open a liaison office on the Hill, and only then in 2001 (by contrast, the military has had people on the Hill since the early part of the 20th century.) We were the only Cabinet-level liaison office without a dedicated web site. I was not even issued a cell phone and was not given a Blackberry to respond to emails outside the office; staffers just left voice messages for me to pick up Monday morning if I was in the office.
We never gave briefings. State did not pay into a collective fund and so we could not reserve rooms ourselves for meetings. Instead, one of my official duties was to cajole interns on the Foreign Relations Committee to do it on our behalf. We were prohibited from doing any substantial interaction. Instead, 80 percent of the inquiries into my office were demands for visa and passport favors. Most of the other 20 percent were minor administrative things related to Congressional travel. In my year only one actual Member appeared in our office, to say a polite thank you for a U.S. visa facilitated for a well-to-do foreign friend. Congress knew just what we did.
Full disclosure: I was removed from the liaison job after I told staffers the truth about the 2006 Passport Crisis instead of passing on State’s wholly-false talking points. Refusing to lie to Congress is what gets you in trouble at State.
Congress knows.
Hagiography
One issue the State Department just can’t get past is the need for realistic self-criticism. They just can’t do it. State instead runs a large “public diplomacy” operation at taxpayer expense in large part to promote itself, and spends tremendous energy on telling itself what a fine job it is doing.
As for reality, Congress expresses itself (yeah I know, for better or worse) in what it funds and what it does not. So the author of all this tripe may wish to take a pause from his defacto job as State Department stenographer and admit: Congress votes against State because indeed Congress knows exactly what they get for their money: America’s Concierge Abroad.
Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.
Book Review: State Versus Defense
Stephen Glain’s new book, State vs. Defense: The Battle to Define America’s Empire, is a brilliant, sober, sad and important biography of the Department of State since World War II. The choice of word here–biography–is significant, in that instead of a simple history of State, Glain traces its decline in old age as America’s foreign policy is increasingly made and carried out by the Pentagon. This does not bode well for America. Mini review: Be afraid.
McCarthy: Beginning of the End
Though not casual reading, State vs. Defense: The Battle to Define America’s Empire
The damage done to the State Department by McCarthy’s attacks [and the destruction of State’s China hands like Service, Davis and Vincent] was irreparable. Those who did pursue diplomatic careers would find a culture of caution that impaired lateral thinking. (McCarthy’s) real legacy is the diminution of the Department of State into the intellectually inert and politically impotent agency that it is today. p.76
Limping into Vietnam, Glain shows how State never reached Presidents Johnson and Nixon, and instead allowed itself to be a forgotten extension of the military because it could never break free from its own bureaucratic in-the-box conception of international relations:
A 1972 RAND study scolded US diplomats for not doing enough to prevent the militarization of Washington’s pacification efforts in Vietnam. “The State Department,” the study said, “did not often deviate from its concept of normal diplomatic dealings with Saigon, not even when the government was falling apart. Similarly, State… made little effort to assert control over our military on political grounds… State’s concept of institution building in Vietnam turned largely on encouragement of American democratic forms, a kind of mirror-imagining which proved hard to apply to the conditions of Vietnam. p. 233
Jesse Helms and George W. Finish the Job
Despite the sparring between State and Defense over what to do in the Balkans in the 1990’s, which showed some hope for diplomacy, it was the one-two punch of Jesse Helms’ decimating State’s budget from his perch on the Senate Foreign Relations Committee, followed by the almost complete militarization of everything after 9/11, that effectively ended State as a significant Washington player.
No one outside of official Washington can appreciate how much 9/11 altered the way the US Government thinks about itself. The shock of an attack on the US changed the posture of the government from one of at times satisfied with passivity in its more distant foreign affairs to one demanding constant action.
The shock was because 9/11 was not supposed to happen, again. Everything about the US government was as of 9/10 still configured around the mistakes made concerning Pearl Harbor. My favorite CIA Station Chief kept, framed, in his guest toilet, a copy of a cable sent by the US Embassy in Tokyo on December 7, 1941 (the attack took place December 8 Japan time) claiming war was far off. He maintained that from that December morning forward the purpose of the U.S. government was to make sure Pearl Harbor never happened again. Then it did.
On 9/12, every part of the U.S. government, with a special emphasis on those who worked abroad (State, CIA, DOD, et al), was to shift was a passive mode of listening and reporting to an action mode. The President would probably have preferred that each Federal worker go out and strangle a terrorist personally, but if that was not possible everyone was to find a way to go to war. The intelligence agencies, whose 1960s and 70s comical attempts at assassinations and dirty tricks were so well documented in the Church Hearings, suddenly saw the sharp, sudden end of the debate on whether they were to conduct clandestine or sort of clandestine ops or not. State froze like a deer in the headlights, and almost lost the one action-oriented bureau in the agency, the visa office, to the new Department of Homeland Security.
George W. Bush administration is particularly singled out by Glain as having forced the air out of State. Reminding readers how the early days of Iraq occupation were run not by skilled Arabists from the State Department, but by recent college grads from the Bush campaigns, Glain writes:
American militarism came about the same way that free societies succumb to authoritarian rule: with a leadership that rewards sycophants and the like-minded, co-opts the ambitious and punishes those in dissent. p. 381
In 1950 State had 7710 diplomats abroad. In 2001, they had only 7158. The world had changed around the Department (personnel figures from Career Diplomacy, by Harry Kopp and Charles Gillespie, Second Edition).
Rise of the Combatant Commands
Roughly the last quarter of Glain’s book covers the post-9/11 period. His key contention is that the vacuum in foreign relations has been largely filled by the military combatant commanders, the men who head CENTCOM, SOCOM and the rest:
The combatant commands are already the putative epicenters for security, diplomatic, humanitarian and commercial affairs in their regions. Local leaders receive them as powerful heads of state, with motorcades, honor guards and ceremonial feats. Their radiance obscures everything in its midst, including the authority of US ambassadors. p. 350
Glain’s point is worth quoting at length:
This yawning asymmetry is fueled by more than budgets and resources [though the Pentagon-State spending ration is 12:1, p. 405], however. Unlike ambassadors, whose responsibility is confined to a single country or city-state, the writ of a combatant commander is hemispheric in scope. His authority covers some of the world’s most strategic resources and waterways and he has some of the most talented people in the federal government working for him.
While his civilian counterpart is mired in such parochial concerns as bilateral trade disputes and visa matters, a combatant commander’s horizon is unlimited. “When we spoke, we had more clout,” according to Anthony Zinni. “There’s a mismatch in our stature. Ambassadors don’t have regional perspectives. You see the interdependence and interaction in the region when you have regional responsibility. If you’re in a given country, you don’t see beyond its borders because that is not your mission.” p. 351
With stature as defacto leaders abroad, the combatant commanders also stripped State of its already meager resources. In particular, Glain focuses on the non-battle to move foreign military assistance money out of State’s hands, and dump it into the Pentagon’s coffers:
Section 1206 funding: for the first time since president Kennedy signed the Foreign Assistance Act of 1961, the US military would fund such activity directly from its own accounts, bypassing the State Department. Conspicuously absent from the debate over Section 1206 was Condoleezza Rice, America’s secretary of state. To no avail, Senator Patrick Leahy, implored Rice not to relinquish such vital funding authority as requested by the Pentagon… Legislative aides involved in the debate were staggered by Rice’s passivity. p. 399
Secretary of State Hillary Clinton’s mantric utterance of the “3Ds”–defense, diplomacy and development–suggests at least passive acceptance of such a lopsided collusion. p. 404
The End
In 1940, the U.S. place in the world was simple. Diplomacy was Euro-centric, and the State Department was a collection of gentlemen committed to proper discourse. As World War II broke out, State had just 840 diplomats stationed abroad. The world that emerged from that war still played the old game, albeit with some different players. State participated in the overall mad growth of the U.S. government, and by 1950 had 7710 diplomats assigned outside the U.S. New countries emerged, power shifted, colonies disappeared, and State blithely sat back and reported on it all. Millions of pages of reports on everything under the sun were written, likely billions of pages. You can see contemporary reports on WikiLeaks, or delve into the historical pile, where State is currently declassifying and publishing things from the Carter administration.
Glain offers no prescription for a Department of State resurgence, ending his biography with the institution at near death. State vs. Defense: The Battle to Define America’s Empire
US relations with the world, and increasingly America’s security policy at home, have become thoroughly and all but irreparably militarized. The culprits are not the nation’s military leaders… but civilian elites who have seen to it that the nation is engaged in a self-perpetuating cycle of low grade conflict… They have convinced a plurality of citizens that their best guarantee of security is not peace but war. p. 407
Despite the fanatic growth in size of government under the Bush administration, State remained a sidelined player. With 7158 employees stationed abroad in 2001, by 2010 the number had only grown to 8199, diplomats supplemented by civil servants and others on “excursion” tours abroad.
History can be quite naughty, and State may yet be handed another chance at transformation before slipping away to become not much more than America’s concierge abroad, arranging hotel rooms for Congressional delegations and aiding tourists with lost passports. But that is unlikely, leaving the military as America’s representative abroad. Be afraid.
Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.
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