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      Time for Americans to Stand for a New Moral Core

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      in US Politics

      The broken US economy breeds inequality and insecurity. Here’s how to fix it | James K Galbraith

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      The broken US economy breeds inequality and insecurity. Here’s how to fix itJames K GalbraithOn one side, oceans of wealth and power. On the other, precarity and powerlessness. But we have the tools for reform Rising interest rates, a falling stock market, a seesaw in the price of gas, a high dollar and chaos in world finance – we see in all this, once again, the folly of trying to run the world’s largest economy through a central bank. It’s time to rethink the basics: what has happened in America? And what should be done?Adam Smith wrote: “Wealth, as Mr Hobbes says, is power.” Today in the United States we find islands of wealth and power on one side and an ocean of precarity and powerlessness, alongside poverty, on the other. This is a structural development over 50 years, the effect of politics and policies, but also of industrial change, globalization and new technologies, with intense regional, social, demographic and political implications.US mortgage rates climb to 6.7%, highest for 15 yearsRead moreFrom the 1930s to the 1970s America had a middle-class economy centered in the heartland, feeding and supplying the world with machinery and goods while drawing labor from the impoverished south to the thriving midwest – an economy of powerful trade unions and world-dominant corporations. This has become a bicoastal economy dominated by globalized finance, insurance and high-end services on one coast, and by information technology, aerospace and entertainment on the other.Finance and technology do not create many jobs, and the conduct of business in those sectors is rapacious and predatory, shading often into fraud. Some years ago we calculated the rise of income inequality measured between counties during the 1990s boom years, and found that half the increase was due to income gains in just five counties: Manhattan, Silicon Valley, Seattle. There have been other big gainers since, but the fact remains: the largest income and wealth gains in America have become highly concentrated in a few very specific places, sectors – and people.Yet practically all new jobs created in the past 30 years have been in services, and most of those in “stagnant services” – the profusion of restaurants, retail shops, hospitals and clinics, offices and entertainment venues, fueled by household incomes (and borrowings) exceeding requirements for material goods. Pay in these jobs is mediocre and employment is unstable. Families compensated by having two or more earners, each sometimes holding two or more jobs, where 50 years ago the norm was one earner with a steady job paying a living wage. Then Covid blasted the sector.For better or worse, we can’t go back: globalization and the digital revolution are irreversible facts of life. The June 2021 White House Review on the supply chain made this very clear, using semiconductors, rare earths, batteries and pharmaceuticals as examples. Our advanced sectors need world markets – including the Chinese market – as much as they need access to the world’s resources. US consumers benefit from imported goods and from the efficiencies of the information age.The question is: what do we do now? We can adjust, and build a fair and secure middle-class society, free of poverty and of oligarchy alike, with tools that are broadly familiar. These tools include:Expand social insuranceSocial security, Medicare, Medicaid, unemployment insurance and Snap already greatly reduce poverty, insecurity and hunger in America. They can be broadened and strengthened. If we can’t get Medicare for All, then drop the age of eligibility to 55 – that would cover a large part of the most vulnerable population and reduce in a stroke the burden of private health insurance on employers.Raise the minimum wageA federal minimum wage at $15 per hour would provide a raise to at least 20% of all working Americans. It would solve in a stroke the supposed problem of “labor shortage” – without hurting any employer relative to any other. Nor would it encourage immigration, since US workers would step up to take decently paid jobs.Implement a job guaranteeA federal job guarantee is well-prepared proposal that would eliminate involuntary unemployment, set a basic wage standard, and provide willing workers with continuous employment on useful projects, giving private employers a labor pool from which they can easily recruit the workers that they need.Stabilize energy prices and suppliesThe TVA and other agencies provide stable power under long-term contracts. Why should oil and gas be run by private equity on a boom-and-bust basis? Stabilize energy prices and supplies – with regulation, quotas, price controls (as in Germany right now), long-term contracts and public utilities – and many other problems would become much easier to solve.Build public services, infrastructure, and fight climate changeAnd do this while cutting military commitments and spending. The main job of infrastructure is to improve the quality of life, with clean water and air, good transport and communications, and – urgently – to change the resource mix so as to mitigate, so far as possible, global warming. We cannot meet these needs and at the same time devote our talents and resources to wars – the limits to that are clear after Afghanistan and Iraq. It is past time to end the illusion that the United States can or should run the world.Shift taxation toward land rentA great principle of classical economics was that taxes should encourage labor and enterprise while discouraging waste in both the public and private spheres. In the 1980s, taxes were shifted away from personal and corporate incomes and capital gains and toward payrolls and sales – and the unsurprising result was the rise of an oligarchy of hyper-wealthy persons. The remedy now is to tax these accumulations and the associated rents – land values, mineral rights, technology “quasi-rents” – so as to bring the new plutocrats back to earth. A stronger estate-and-gift tax can spur the transfer of great fortunes to foundations and non-profits, such as hospitals, universities and churches, while working to prevent the emergence of dynasties, financial and political.Reform banking before it’s too lateThe Glass-Steagall Act protected the middle class – the ordinary depositor at a commercial bank – from the speculative whims of the elites. Today big money is back in charge, despite the great financial crisis – and much of the American public as well as the larger world is sick of it. Perhaps the toughest, most necessary reform is to reduce debts including student debts, to shrink the banks, to restore effective regulation, to prosecute frauds, and to discipline finance to serve the public good. This will take the glamour out of being a banker – and the intoxicating power out of running the Federal Reserve.Is this program realistic? Perhaps not. But consider the path we’re on. What I propose is an alternative – to pitchforks, anarchy and civil war.
      James K Galbraith holds the Lloyd M Bentsen Jr chair in government/business relations at the Lyndon B Johnson School of Public Affairs at the University of Texas at Austin. In the 1970s, he drafted the monetary policy oversight provisions of the original version of the Humphrey-Hawkins Full Employment and Balanced Growth Act
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      Corporate greed, not wages, is behind inflation. It’s time for price controls | Robert Reich

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      Corporate greed, not wages, is behind inflation. It’s time for price controlsRobert ReichCorporations are using rising costs as an excuse to increase their prices even higher, resulting in record profits. We need limited price controls to break this cycle On Wednesday, policymakers at the Federal Reserve – America’s central bank – continued their battle against inflation with a third straight supersize interest-rate increase. And they warned that they’re not done. They’ll continue to raise borrowing costs until inflation is tamed.They assume that the underlying economic problem is a tight labor market, causing wages to rise – and prices to rise in response. And they believe interest rate increases are necessary to slow this wage-price inflation.This is dead wrong.Wage increases have not even kept up with inflation. Most workers’ paychecks are shrinking in terms of real purchasing power. Rather than causing inflation, wages are actually reducing inflationary pressures.The underlying economic problem is profit-price inflation. It’s caused by corporations raising their prices above their increasing costs.Corporations are using those increasing costs – of materials, components and labor – as excuses to increase their prices even higher, resulting in bigger profits. This is why corporate profits are close to levels not seen in over half a century.Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.Why are grocery prices through the roof? Because just four companies control 85% of meat and poultry processing. Just one corporation sets the price for most of the nation’s seed corn. And two giant firms dominate consumer staples.All are raising prices and increasing profits because they can.Big pharma, comprising five giants, is causing drug prices to soar.The airline industry has gone from 12 carriers in 1980 to just four today, all rapidly raising ticket prices.Wall Street has consolidated into five giant banks, raking in record profits on the spreads between the interest they pay on deposits and what they charge on loans.Broadband is dominated by three giant cable companies, all raising their prices.Automobile dealers are enjoying record profits as they raise the retail prices of automobiles.Gas prices have started to drop but big oil still has the power to raise prices at the pump far higher than the costs of crude.And so on.This is why Congress and the administration need to take direct action against profit-price inflation, rather than rely solely on the Fed to raise interest rates and put the burden of fighting inflation on average working people who are not responsible for it.Bold antitrust enforcement is essential. Even the credible threat of antitrust enforcement can deter corporations from raising prices higher than their costs.A windfall profits tax could also be helpful. This would be a temporary tax on price increases exceeding the producer price index’s costs of producing consumer goods.Price controls should be a backstop. The current inflation, emerging from the pandemic, is analogous to the inflation after the second world war when economists advocated temporary price controls to buy time to overcome supply bottlenecks and prevent corporate profiteering.Limited price controls should be considered now, for the same reasons.The inflation we are now experiencing is not due to wage gains from excessive worker power. It is due to profit gains from excessive corporate power.It’s profits, not wages, that need to be controlled.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
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      in US Politics

      Democrats will struggle to keep control of Congress in midterms, expert says

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      Democrats will struggle to keep control of Congress in midterms, expert saysRay Fair’s latest analysis suggests Democrats will get 46.7% of the national vote – and he usually comes within 3% of the final tally Since 1978 Ray Fair, ​​professor of Economics at Yale University, has been using economic data to predict US election outcomes. His bare-boned, strictly by the numbers approach has a fairly impressive record, usually coming within 3% of the final tally.Sadly for Democrats – if Fair’s on track again this time – the Biden administration will struggle to keep control of Congress in November’s crucial midterm elections.Elections are noisy events and this year’s is no different. Recent polling suggests Joe Biden is on a roll, reclaiming some of the ground he lost earlier in his presidency. The Democrats have passed major legislation. There has been a surge in women registering to vote after the supreme court overturned Roe v Wade. Abortion rights drove voters to the polls in deep-red Kansas. Gas prices, if not overall inflation, are falling. In the meantime, Donald Trump and the candidates he has backed are dominating the headlines and helping Democrats’ poll numbers.But if Fair is right, we can largely set aside the personalities and the issues: the economy is the signal behind the noise and Biden is still in trouble.Using data going back to 1916 Fair’s latest analysis suggests that Democrats will get 46.7% of the national vote in November – down from the 51.3% in 2020 when Biden defeated Donald Trump and took control of the House and a slim majority in the Senate.Fair’s model looks at the national picture, he doesn’t dig down to state battles and won’t be drawn into more granular prognostications. But given the gloomy economic picture in recent months, his prediction is unlikely to improve before November and suggests a loss in the House and a very tough fight to keep control of the Senate.When Fair’s last prediction was published in July, the Democrats’ share of the vote had fallen from 48.99% in October “due to two fewer strong growth quarters and slightly higher inflation”. The economic malaise has only deepened since then.“This prediction is based on business as usual,” said Fair. “It’s based on estimations back to 1918, a 100-plus years of data. In that period what seems to matter, election after election, is inflation, output, growth and the penalty you get for being the incumbent party in the White House.”Fair will update his model before the election and given its economic focus, Biden’s percentages are unlikely to improve. Inflation remains close to a 40-year high – soaring prices are now costing the average American household an extra $717 a month. The US economy has shrunk for two consecutive quarters, a sign taken by many as a harbinger of recession. Interest rates are rising at their sharpest pace since the 1990s as the Federal Reserve fights to tamp down price rises.The strength of the economic headwinds Biden faces are apparent even in his improving poll numbers. About 69% of Americans think the nation’s economy is getting worse – the highest percentage since 2008 – according to a recent ABC News/Washington Post poll.Fair doesn’t think elections are only about the economy. “This is not a perfect story, there’s room for other stories in each election,” he said. Given the equations narrow, economic focus he said it was “reasonable” that people were now looking at what other factors might impact the Democratic vote share in the midterms.One factor that may have skewed his results in the past, and could do again, is Donald Trump. In 2016 Fair’s model predicted Hillary Clinton would beat Trump. She did win 2.9m more votes than Trump, securing 48.2% of the vote to Trump’s 46.1%. But she lost in the electoral college.This time too Trump could be a factor, although he is difficult to measure. “There are many reasons why the Democrats may do better. Certainly Trump could be one of them,” said Fair.But history – or at least the history that Fair measures – suggests for all the recent positive polling, the Democrats face an uphill struggle this November.“How large is the error I make on average? It’s about 3 percentage points. If the prediction is 47 that would get you up to 50. So it’s a long shot that the Democrats would get more than half,” he said.TopicsUS politicsUS economyEconomicsJoe BidenDonald TrumpnewsReuse this content More

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      Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflation

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      Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflationThird outsized rate increase in a row as central bank struggles to fight runaway inflation, increasing the cost of everything The Federal Reserve announced another sharp hike in interest rates on Wednesday as the central bank struggles to rein in runaway inflation.The Fed raised its benchmark interest rate by 0.75 percentage points, the third such outsized rate increase in a row, bringing the Fed rate to 3%-3.25% and increasing the cost of everything from credit card debt and mortgages to company financing.The central bank signaled more raises to come, predicting rates would reach 4.4% by the end of the year and not start coming down until 2024. The Fed expects the rate rises to hit the job market – raising unemployment from 3.7% to 4.4% next year – housing prices and to lower economic growth.“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” the Fed chair, Jerome Powell, said. “We have always understood that restoring price stability while achieving a relatively modest increase in unemployment and a soft landing would be very challenging. And we don’t know. No one knows whether this process will lead to a recession or if so, how significant that recession would be.”Central bankers around the world are raising rates sharply as they too attempt to tackle the cost of living crisis. This week the Bank of England is expected to announce its largest rate rise in 25 years. The European Central Bank raised interest rates across the eurozone by a record margin earlier this month.The Fed initially dismissed rising inflation, arguing it was a “transitory” phase triggered by the pandemic and supply chain issues. But as prices escalated the Fed announced a series of aggressive moves in the hopes of bringing prices back under control.Until recently Powell had said he hoped that the economy could achieve what he called a “soft landing” – a slowdown that would bring costs down but not lead to a spike in unemployment and a recession.Speaking at a congressional hearing on Wednesday, some of the US’s top bankers said it was too early to tell how rate rises would impact the economy. “I think there’s a chance, not a big change, a small chance, of a soft landing,” said Jamie Dimon, chief executive of JPMorgan Chase.“There’s a chance of a mild recession, a chance of a hard recession. And because of the war in Ukraine and the uncertainty in global energy and food supply, there’s a chance that it could be worse. I think policymakers should be prepared for the worst, so we take the right actions if and when that happens,” he said.Raising rates makes borrowing more expensive which should reduce spending and lower prices. But the policy is a blunt instrument and rate rises take time to filter through to the wider economy. So far the Fed’s rate rises have not had a significant impact.The US jobs market remains robust, with unemployment still close to a 50-year low, consumer spending rose last month and inflation remained stubbornly high in August, 8.3% higher than a year ago.There are, however, some signs of a slowdown. Existing home sales fell in August for the seventh consecutive month, according to the National Association of Realtors. Sales were 19.9% lower than in August 2021 and are now at their lowest level since they briefly stalled during the height of the pandemic in 2020. And large employers including BestBuy, Ford and Walmart have announced layoffs or hiring freezes.TopicsFederal ReserveUS economyBank of EnglandInflationEconomicsEuropean Central BankUS politicsnewsReuse this content More

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      The EU Faces Major Challenges This Autumn

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      America’s Critical Challenges Pose Serious Risks to Its Future

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      How Aging America Is Driving Consumer Inertia

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More