INFOGRAPHIC: KEYNESIAN VS. AUSTRIAN ECONOMICS

Economics-Infographic

On September 18, 2014, Sean Arands writes in The Austrian Insider:

There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy.  The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well).

In order to get a full understanding of the two schools of economic thought, please refer to the infographic above.  Open the image in a new tab for a larger version.

If anyone feels I did a misrepresentation of either school, let me know!

The Federal Reserve System needs to be reformed to act as a purveyor of economic growth.

Most of the economic problems can be tied to the notion that exclusively “capital goods come into existence by [past] saving.”

Influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

http://theaustrianinsider.com/infographic-keynesian-vs-austrian-economics/

The Fed’s Credit Channel Is Broken And Its Bathtub Economics Has Failed

On September 23, 2014, David Stockman writes on Contra Corner:

Among the many evils of monetary central planning is the conceit that 12 members of the FOMC can tweak the performance of a $17 trillion economy on virtually a month to month basis—using the crude tools of interest rate pegging and word cloud emissions (i.e. “verbal guidance”). Read the FOMC meeting minutes or the actual transcripts (with a five-year release lag) and they sound like an economic weather report. Unlike the TV weatherman, however, our monetary politburo actually endeavors to change the economic climate for the period immediately ahead.

Accordingly, the Fed is pre-occupied with utterly transient and frequently revised-away monthly release data on retail sales, housing starts, auto production, business investment, employment and inflation. But its always about the latest ticks in the data—never about the larger patterns and the deeper longer-term trends. And of course that’s the essence of the Keynesian affliction. The denizens of the Eccles Building—-overwhelmingly academics and policy apparatchiks—-rarely venture into the real economic world, and, therefore, do believe that the US economy is just a giant bathtub that must the filled to the brim with “aggregate demand” and all will be well.

Filling the economic bathtub is accomplished through something called “monetary accommodation”, which essentially means credit expansion. That is, market capitalism left to its own devices is inherently suicidal—or at least a chronic underperformer. Households and businesses almost always spend too little and therefore need to be induced to become more exuberant in the shopping aisles and on the factory floor.

In this framework, the blunt instrument of artificially depressed interest rates is the natural policy tool of choice. If cautious households are saving too much for a rainy day or even their children’s education or their own retirement, why club them with ZIPR (zero interest rates); get them shopping until they drop. Likewise, if businessmen do not see the case for opening another store or buying a new lift truck for their warehouse (or expanding same), bribe them with cheap debt financing.

In short, the primary route of  monetary policy transmission for Keynesian central bankers is the credit expansion channel. Using that economic plumbing system they endeavor to goose aggregate demand and thereby fill the economic bathtub to its brim—otherwise know as potential output and full employment. Furthermore, by a Keynesian axiom—-known as the Phillips Curve trade-off between inflation and employment—there is no possibility of serious goods and services inflation until the tub is fall and all capital and labor resources are fully employed.

So the whole gig amounts to a simple mandate: Keep pumping aggregate demand through the credit channel until potential GDP is fully realized because, ipso facto, that means that the Fed Humphrey-Hawkins mandate of price stability and maximum employment have also been achieved.  So in effect, the Fed heads watch the ticks and blips of the “in-coming data” with such intensity because they believe their job will be done when the US economy finally reaches its brim.

This entire Keynesian bathtub model is nonsense, of course, not the least because the US economy is not a closed system, but functions in a rambunctious, open global economy where massive flows of trade, investment and finance impinge heavily on prices, costs, wages and productive asset returns, and therefore the daily behavior of millions of domestic workers, businesses, investors and financial intermediaries. So the Fed’s Keynesian model is fundamentally flawed—-a reality that perhaps explains its stubborn adherence to policies that do not achieve their stated macro-economic objectives, but fuel serial financial bubbles instead.

However, even apart from the fundamental flows of its basic economic model, the Keynesian pre-occupation with the economy’s mythical full-employment brim and the short-run business cyclical fluctuations related to it cause our monetary central planners to ignore the obvious. Namely, that the credit transmission channel is broken and done, and that the massive resort to money printing—especially since the dotcom bust in 2000—have been accompanied by sharply deteriorating economic trends.

Stated differently, the growth rate and general health of the US economy has drastically down-shifted during the last decade and one-half and now stands at only a fraction of its historic trends.  Specifically, real GDP grew at a 4.0% rate during the golden age of sound money and fiscal rectitude between 1950 and 1970. Then it dropped to about 3% during the next 30 years after Nixon defaulted on our Bretton Woods obligation to redeem the dollar in a constant weight of gold; and since the dotcom bust in 2000 when the Greenspan Fed went all out with printing press monetary expansion, real GDP growth has amounted to only 1.7% annually.  That is just 42% of its golden age rate, and in truth probably even worse if inflation were to be honestly measured by the government statistical mills.

Faltering growth, in turn, has meant job market deterioration and declining investment in productive assets. Indeed, during the last 175 months of intense economic weather watching the Fed has never once noticed that since the turn of the century breadwinner jobs have declined by 5%, real net investment in business plant and equipment is down by 20% and the median household income is not only sharply lower, but actually only at levels first achieved in 1989.

Breadwinner Economy Jobs- Click to enlarge

 

Real Business Investment - Click to enlarge

Needless to say, these failing trends in the fundamental measures of macroeconomic health occurred at a time when the Fed balance sheet virtually exploded, rising from $500 billion to nearly $4.5 trillion—or by 9X—during the same 14 year period. Yet it keep attempting to shove credit into the economy notwithstanding this self-evident failure because at the end of the day there is nothing else in its playbook. We have reached peak debt in both the household and business sector, meaning that the fed’s massive flood of liquidity never get out of the canyons of Wall Street.

In short, believing they are filling the macroeconomic bathtub, Janet Yellen and her merry band of Keynesian money printers are simply blowing chronic, giant, dangerous bubbles on Wall Street. If they are beginning to become fearful of a Wall Street hissy fit, perhaps they should look at the two charts below.

Easy money is always the wrong medicine, but most especially for an economy that is already and self-evidently saturated with too much debt.

 

Household Leverage Ratio - Click to enlarge

The Federal Reserve System needs to be reformed to act as a purveyor of economic growth.

Influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

http://davidstockmanscontracorner.com/the-feds-credit-channel-is-broken-and-its-bathtub-economics-has-failed/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday

Why Ordinary People Bear Economic Risks And Donald Trump Doesn’t

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On September 22, 2014, Robert Reich writes on Nation Of Change:

Thirty years ago, on its opening day in 1984, Donald Trump stood in a dark topcoat on the casino floor at Atlantic City’s Trump Plaza, celebrating his new investment as the finest building in Atlantic City and possibly the nation.

Last week, the Trump Plaza folded and the Trump Taj Mahal filed for bankruptcy, leaving some 1,000 employees without jobs.

Trump, meanwhile, was on Twitter claiming he had “nothing to do with Atlantic City,” and praising himself for his “great timing” in getting out of the investment.

In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble.

The laws protect them through limited liability and bankruptcy.

But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills, have no such protection. Jobs vanish, skills are suddenly irrelevant, and home values plummet.

They’re stuck with the mess.

Bankruptcy was designed so people could start over. But these days, the only ones starting over are big corporations, wealthy moguls, and Wall Street.

Corporations are even using bankruptcy to break contracts with their employees. When American Airlines went into bankruptcy three years ago, it voided its labor agreements and froze its employee pension plan.

After it emerged from bankruptcy last year and merged with U.S. Airways, America’s creditors were fully repaid, its shareholders came out richer than they went in, and its CEO got a severance package valued at $19.9 million.

But American’s former employees got shafted.

Wall Street doesn’t worry about failure, either. As you recall, the Street almost went belly up six years ago after risking hundreds of billions of dollars on bad bets.

A generous bailout from the federal government kept the bankers afloat. And since then, most of the denizens of the Street have come out just fine.

Yet more than 4 million American families have so far have lost their homes. They were caught in the downdraft of the Street’s gambling excesses.

They had no idea the housing bubble would burst, and didn’t read the fine print in the mortgages the bankers sold them.

But they weren’t allowed to declare bankruptcy and try to keep their homes.

When some members of Congress tried to amend the law to allow homeowners to use bankruptcy, the financial industry blocked the bill.

There’s no starting over for millions of people laden with student debt, either.

Student loan debt has more than doubled since 2006, from $509 billion to $1.3 trillion. It now accounts for 40 percent of all personal debt – more than credit card debts and auto loans.

But the bankruptcy law doesn’t cover student debts. The student loan industry made sure of that.

If former students can’t meet their payments, lenders can garnish their paychecks. (Some borrowers, still behind by the time they retire, have even found chunks taken out of their Social Security checks.)

The only way borrowers can reduce their student debt burdens is to prove in a separate lawsuit that repayment would impose an “undue hardship” on them and their dependents.

This is a stricter standard than bankruptcy courts apply to gamblers trying to reduce their gambling debts.

You might say those who can’t repay their student debts shouldn’t have borrowed in the first place. But they had no way of knowing just how bad the jobs market would become. Some didn’t know the diplomas they received from for-profit colleges weren’t worth the paper they were written on.

A better alternative would be to allow former students to use bankruptcy where the terms of the loans are clearly unreasonable (including double-digit interest rates, for example), or the loans were made to attend schools whose graduates have very low rates of employment after graduation.

Economies are risky. Some industries rise and others implode, like housing. Some places get richer, and others drop, like Atlantic City. Some people get new jobs that pay better, many lose their jobs or their wages.

The basic question is who should bear these risks. As long as the laws shield large investors while putting the risks on ordinary people, investors will continue to make big bets that deliver jackpots when they win but create losses for everyone else.

Average working people need more fresh starts. Big corporations, banks, and Donald Trump need fewer.

Yes, the playing field is tilted to benefit the rich. That’s a big reason why we need to reform the system to provide equal opportunity for EVERY citizen to become affluently wealthy.

But what always amazes me about Robert Reich, who writes extensively on economic inequality, is that while he addresses the statistics and unjust policies defining inequalities and consistently concludes that there is a policy failure, he NEVER points out that the reason that the RICH are RICH is that these people OWN wealth-creating, income-producing capital assets, and the other 80-plus percent of the population do not own.

Reich continues to think in terms of one-factor economics which is centered on a JOB as the ONLY means to earn income, or redistributive government programs that seek to provide a security net for those in absolute poverty, or those near-poverty due to job loss or other costly circumstances.

Reich, who is paid more than $200,000 for a single lecture as a professor at the University of California, Berkeley, is either “controlled” or is simply ignorant of the reality that the wealthy are rich because they OWN the non-human means of production executed by the formation and operation of corporations, all of which are essentially narrowly OWNED by an already wealthy ownership class, who controls America.

Never has Reich starkly pointed this reality out to his blog followers, nor has he ever advocated that EVERY citizen should be empowered with the equal opportunity to acquire personal ownership shares in FUTURE capital asset formation using the financial mechanism of insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments (the same financial mechanism used by the wealth ownership class to get richer and richer).

What’s up with Reich is endemic on the part of those who write in the national media, who teach in academia, and who run for political positions of policy-making. They either are totally ignorant of the realities of why there is economic inequality or they are “controlled” and censored from telling the truth.

50 Things About Millennials That Make Corporate America Sh*t Its Pants

bros

On September 16, 2014, Lauren Martin writes in Elite Daily:

In 2013, Joel Stein deemed Millennials the “ME Generation.” The TIME contributor called Generation-Y selfish, egotistical and lazy. He also noted, however, that we may just be the generation that will save us all.

Per usual, no one knows what to make of us. Our parents scorn us, then praise us. They lament over our technological dependency, then ask us to set up their iPads. They tell us we’re lazy, then ask us for a loan.

Our generation is an anomaly. We refuse to do things their way, so they call us entitled. We refuse to sit in cubicles, so they call us spoiled. We refuse to follow their plans, so they call us stubborn. What they are slowly realizing, however, is we’re not lazy, stubborn or entitled. We just refuse to accept things as they’re given to us.

We refuse to accept that life must be dictated by a job we hate. We refuse to go to work in suits and ties when we’re more productive in sneakers and graphic tees.

We refuse to adhere to work schedules that don’t work. We refuse to allow the corporate culture to suffocate our creativity. We no longer see adulthood as the end of our childhood, but the beginning of something even more liberating.

We’re not going to hand our souls over to men in suits or women in pencil skirts. We’re not going to work for companies we don’t respect. We’re not going to wake up every morning dreading the 9-to-5. But we’re not going to sit back and sulk either.

We’re going to innovate. We’re going to change the game. We’re gonna show our parents, Corporate America and everyone else who refuse to take us seriously that we’re not lazy, entitled nor egotistical. In fact, we’re the kids who are going to take your jobs and throw them away.

Like that girl you can’t understand, Corporate America has gone from scorning us to fearing us. The bosses don’t understand why we’re not pleading to work with them, why we’re not wearing suits to interviews and why the hell we’re not trying to make a good impression on them.

They don’t understand why we’re not lining up after college for a spot on their factory lines. They don’t understand why we don’t want to make five figures under fluorescent lighting or why we’d rather be broke than bored.

They don’t understand why we’re not chasing them with our legs spread. Sorry Corporate America, we’re just not interested.

We gave you a shot, tried you out and decided you weren’t for us. We saw how you treated our parents, grandparents and the bottom percents and realized you weren’t that good of a guy.

Much like why our generation is full of more singles than any before, we’re just not willing to settle. We’re going to keep doing things our way, keep striving for that ideal life, even if it makes everyone else uncomfortable.

1. We play by our own rules.

2. We don’t take the first answer given to us.

3. We don’t care about getting into trouble.

4. We’re willing to work for nothing if it means being happy… Despite being in debt.

5. We know how to beat the system.

6. We’re always trying to change the game.

7. We have social media on our side.

8. We like a good fight.

9. We don’t care about the perks.

10. We hate that “old boys club” sh*t.

11. We’re not about climbing the ladder, we’re about circumventing it.

12. We ask for what we want rather than implying it.

13. We’re not afraid to quit if we don’t like what’s going on.

14. We’re not on that suit and tie.

15. We’d rather start work at 10 and finish at 10.

16. We’ve got youth on our side.

17. We don’t have a chip on our shoulders.

18. We know technology a hell of a lot better.

19. We’re more educated, by the book and the street.

20. We’re not interested in office politics.

21 . We have less to lose and everything to gain.

22. We don’t pursue the paycheck, we pursue the passion.

23. We have that “f*ck you” attitude.

24. We are trying to beat the system, not just work with it.

25. We don’t have to go to college to get ahead.

26. We’re getting married later and working younger.

27. We’re listening to our women.

28. We want freedom more than anything else.

29. We would rather die a slow death than sit in cubicles.

30. We know they need us more than we need them.

31. We distribute the news, not the other way around.

32. We don’t care as much about profit as we do the product.

33. We’re willing to listen to one another.

34. We understand whom we’re talking to.

35. We don’t do drug tests.

36. We’re open to any gender, sexual orientation and race.

37. We know what makes us happy.

38. We know what doesn’t make us happy.

39. We learned from our parents mistakes.

40. We’ve defined them, they haven’t defined us.

41. We’d rather travel and be poor than be rich and never see the world.

42. We don’t take life too seriously.

43. We understand we’re all going to die someday.

44. We’d rather have experiences than bank statements.

45. We refuse to hate what we do.

46. We know there’s always a better way.

47. We want careers, not jobs.

48. We have passion.

49. We have morals.

50. We have each other.

But will the Millennial Generation seek to empower EVERY citizen with the equal opportunity to acquire personal ownership shares in FUTURE capital asset formation using the financial mechanism of insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments (the same financial mechanism used by the wealth ownership class to get richer and richer)? Will the Millennial Generation Be Owned as are their parents, or will they OWN broadly as individual share owners the wealth-creating, income-producing capital assets of the FUTURE and build an economy that can support general affluence for EVERY citizen?

http://elitedaily.com/life/50-things-millennials-make-corporate-america-uncomfortable/758330/

Why Mandating Higher Minimum Wage Isn’t Best Way To Address Poverty

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On Labor Day, Mayor Eric Garcetti announced his proposal to raise the minimum wage in Los Angeles from the current $9 per hour to $13.25 in 2017. (Richard Vogel / AP)

On September 20, 2014, in an Op-Ed in the Los Angeles Times, Allen R. Sanderson writes:

Los Angeles Mayor Eric Garcetti and Chicago Mayor Rahm Emanuel, among other city and state officials across the country, have recently proposed raising the minimum wage well beyond the current state-mandated levels of $9 an hour in California and $8.25 in Illinois. And public opinion polls generally show widespread support for these actions.

At first blush, what’s not to like: Low-income workers could take home from $1,000 to $5,000 more a year, and in an era of increasing inequality of income and poverty rates that hover around 15% nationally, that is not an insignificant boost.

Yet this advocacy raises some troubling questions, among them whether it’s an appropriate government intervention in the free market. In general, except for temporary measures to prevent, say, price gouging in the aftermath of a unexpected disaster, we as a nation generally regard price controls as bad social and economic policy.

Instead, we allow businesses to charge whatever the market will bear and rely on competitive market forces to keep prices in line with costs. Thus, we don’t tell Nike what price to put on its sneakers or McDonald’s how much to charge for a Quarter Pounder. The presence of competitors for their products, along with reasonably informed consumers, keeps McDonald’s and Nike from marking up their burgers and shoes unconscionably. And in the 21st century, thanks to huge drops in the costs of communications and transportation, coupled with increased international competition, businesses arguably have less power over consumers than they have ever had.

The same pressures of competition also affect the other side of the market — that is, wages. Businesses are under pressure not to unilaterally cut wages, because workers, like customers, have alternatives; they can quit if an employer isn’t paying market rate and look for employment elsewhere. This very real threat keeps firms from reducing pay. Even without minimum wage laws, the interaction of supply and demand would conspire to keep wages about what they are today, based on workers’ experience, productivity and discipline.

The argument made in some quarters is that raising wages has little downside for businesses. Higher pay, the theory goes, would allow them to attract higher-quality workers and make even higher profits. But such hypotheses ring hollow. If a well-oiled corporation such as McDonald’s or Nike could make more money by paying out more in wages to higher-skilled employees, they would have already made that conversion. And even if it were true, the current crop of workers would inevitably lose their jobs as firms substituted more productive employees.

And the fact remains that far from taking advantage of their employees, most businesses pay most workers more than the minimum. Electricians, junior accountants, chefs, store managers, to name only a few, are all paid well over the minimum wage, as are most workers in America.

Why? If firms have so much market power, and they’re looking to maximize profits, why does anyone make more than the legal minimum? Because the value of the contributions higher-paid employees make to their employers justifies their pay.

Mandating above-market wages for workers whose contributions aren’t as valuable can have unintended consequences. Affected firms might well consider substituting machines for workers whenever possible, or relocating to a more welcoming environment. The lure of Indiana and Wisconsin for Illinois firms, or Nevada and Texas for California-based companies, could prove irresistible. Moreover, families might choose to shop, recreate or retire in nearby communities with more favorable prices and tax systems.

But the chief argument against this new trend in cities and states of mandating a higher minimum wage is that it’s not the best way to achieve the goal of pulling hardworking people out of poverty.

In the short run there are more efficient, less intrusive avenues to improve the economic lot of unskilled workers in this country. Tweaks to the federal government’s Earned Income Tax Credit program would be one way to put more money into the pockets of those who need it. Longer term, the goal should be to improve human capital prospects for those at the bottom of the economic ladder, ensuring that all people have opportunities to develop the skills and knowledge that will make them worth far more than the current wage rate or poverty standard. That would be a happy outcome not only for low-wage workers but for businesses, for families and for the larger economy.

University of Chicago economics teacher Allen Sanderson dishes out some straight talk on the false promise of hiking wages (as in a job), but fails to address the most efficient solution to improve the lot of America’s majority dependent on JOBS and/or redistributive welfare assistance put on taxpayers. Sanderson focuses on JOBS, particularly “ensuring that all people have opportunity to develop the skills and knowledge that will make them worth far more than the current wage rate or poverty standard.”

Sanderson needs to realize that earning an income, and thus the ability to be a viable “customer with money” in an economy, is not limited to being a worker and having a job that pays wages. It can also mean that an income can be earned by contributing to the economy’s productive sector one’s tools, machines, super-automation, robotics, digital computerized operations or what economist define as productive capital owned by individuals. This is the REAL key to wealth-building and a life of affluence. As a teacher of economics, Sanderson should know that capital asset OWNERS earn the bulk of the income generated in a growth economy.

I agree with Sanderson analysis that the raising the minimum wage solution to closing the income gap is not the most efficient solution. I also believe that such a policy would necessarily add to the costs of food and other necessities for poor and middle income Americans and would increase the outsourcing of jobs when higher labor costs are added to U.S.-produced goods and services.

A better, far more efficient and just solution would be to enact the Capital Homestead Act ( http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/). Capital Homesteading would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs (with the “opportunity to develop the skills and knowledge that will make them worth far more than the current wage rate or poverty standard”) , finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from the already wealthy ownership class over their existing assets. The wage system is the cancer. The ownership system is the answer to address the problem Sanderson addresses and wants to solve.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What Sanderson should be teaching and advocating is how to put America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. The Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post athttp://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change athttp://www.nationofchange.org/platform-unite-america-party-1402409962and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://www.latimes.com/opinion/op-ed/la-oe-sanderson-minimum-wage-20140921-story.html

Census Data On Poverty Show Results Of Economic Policy Gone Wrong

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People line up with carts during a food giveaway for the needy in Firebaugh, Calif. (Justin Sullivan, Getty Images)

On September 20, 2014, Michael Hiltzik writes in the Los Angeles Times:

The headline number in last week’s release of Census Bureau data on poverty was pretty good. It was widely noted that the rate dropped significantly for the first time since 2006, with especially sharp declines among children and Latino families.

A peek under the hood, however, reveals the dismal realities of the modern U.S. economy. Other than the population over 65 and under 18, wages and economic mobility are frozen solid. The national safety net is barely keeping up with need. And years of austerity politics — cutoffs of unemployment benefits, premature termination of low-income assistance programs, resistance in some regions to bringing healthcare coverage to low-income residents via Medicaid — have kept millions of Americans mired in near-poverty or in economic stagnation.

The median household income of $51,939 last year was almost identical to the figure for 2012, but 8% lower than it was for 2007, just before the Great Recession, and 8.7% lower than its peak of $56,895, reached in 1999.

This is what a massive failure of government economic policy looks like.

It represents the abandonment of the American middle class in favor of the wealthy, and with future economic growth hanging in the balance. It prompts Jared Bernstein, a fellow at the Center on Budget and Policy Priorities and former chief economist for Vice President Joe Biden, to ask “why, for so many households, economic growth has become a spectator sport.”

According to the Census Bureau’s annual statistical report, “Income and Poverty in the United States,” the answer has much to do with income inequality. In recent months, alarm over the disproportionate flow of wealth to the upper reaches of the income curve has been sounded by economic analysts at Standard & Poor’s. The census statistics underscore the steepness of the trend: From 1990 through 2013, the median income of the lowest 20% of income earners fell from $12,381 to $11,651, or 5.9%, in inflation-adjusted terms. The median income of the top 20% rose from $150,553 to $185,206, a gain of 23%, and that of the top 5% rose from $239,739 to $322.343, a gain of 34.5%.

In that period the share of all income collected by the top 5% rose from 18.5% to 22.2%; that of the lowest fifth fell from 3.8% to 3.2%, maintaining just the merest finger hold on America’s bounty. To the extent U.S. households have been able to move even slightly up the income ladder or avoid being pushed down a few rungs, it appears to be the result of the rise in two-income couples and an increase in the earnings of women.

The median annual earnings of men employed full-time and year-round have scarcely budged from about $50,000 since about 1972. Those of women have risen from about $29,000 to $39,000. If there’s good news in these dreary numbers, it’s that the ratio of women’s earnings to men’s has risen from about 60% in the early 1970s to 78% now.

The numbers point us to the question: Can government really move the needle? Conservatives often hunt for a moral component in poverty — if poor people could only take more responsibility for their lives, they argue, things would get much better. That’s the notion lying at the heart of the “opportunity grant” proposal that House Budget Committee Chairman Paul D. Ryan (R-Wis.) floated in July.

Low-income families seeking government relief would sign a “contract outlining specific and measurable benchmarks for success” — finding and keeping a job, say, or staying off drugs (Ryan didn’t go into details). There would be unspecified incentives for exceeding the benchmarks and sanctions for failing, as though what people need to extricate themselves from poverty is a carrot and a stick.

The Census Bureau findings don’t paint the same picture of the poor. Chronic poverty is relatively rare, the bureau found. Only about 3.5% of the population was living in poverty throughout the entire 36-month span from 2009 through 2011. But 31.6% had “at least one spell of poverty lasting 2 or more months.” That implies a population struggling to get ahead, and being regularly knocked down by economic circumstance, such as a dearth of jobs or the arrival of unexpected and devastating expenses.

Critics have asserted that the official poverty rate overstates the condition because it doesn’t account for public assistance. In response, the Census Bureau a few years ago brought forth an alternative estimate, known as the Supplemental Poverty Measure. The bureau incorporated not only non-cash government transfers — food stamps, housing assistance and heating subsidies — but also expenses such as income and payroll taxes, child care and other job-related spending, and out-of-pocket medical costs.

The results suggested that poverty rates had fallen faster since the 1960s than anyone had expected. But they also showed that poverty has been greater in recent years than the conventional measure indicates — the official poverty rate in 2012 was 15%, the SPM rate was 16%, according to the most recent data available. In other words, the social safety net still is struggling to keep up with need.

The SPM is especially useful in helping us gauge the impact of specific threads of the safety net. The data show that Social Security is the single most powerful anti-poverty program in America — if its benefits were eliminated, the rate would have risen in 2012 from the SPM’s 16% to 24.5%. Among those 65 and older, in a world without Social Security the SPM poverty rate would have risen from 14.8% to a Depression-level 54.7%.

Think about that the next time you hear a well-fed fellow at a conservative think tank assert that cutting Social Security retirement benefits is just what the country needs.

Also striking is the effect of relieving the poor of the burden of medical expenses. The SPM shows that eliminating medical out-of-pocket expenses reduces the poverty rate from 16% to 12.6%. That’s important, of course, because it’s the goal of the Affordable Care Act.

The Census Bureau’s latest figures on health insurance coverage, also released last week, don’t account fully for 2014 Affordable Care Act enrollments because they only run up to the first weeks of 2014. But from what we know already about the significant drop in the number of uninsured, the act may be second only to Social Security in its effect on poverty.

Yet there are policymakers in Washington who still want to roll back the Affordable Care Act and cut Social Security benefits. They don’t see how foolish it was to cut unemployment insurance and reduce stimulus spending. The Census Bureau has documented the results of federal policies gone wrong, but the rest of Washington doesn’t seem to be listening.

What always amazes me about Los Angeles Times columnist Michael Hiltzik , who writes extensively on economic inequality, is that while he addresses the inequalities based on reported statistics and consistently concludes that there is a policy failure, he NEVER points out that the reason that the “median income of the top 20% rose from $150,553 to $185,206, a gain of 23%, and that of the top 5% rose from $239,739 to $322.343, a gain of 34.5%” is that these people OWN wealth-creating, income-producing capital assets, and the other 80-plus percent of the population do not own.

Hiltzik continues to think in terms of one-factor economics which is centered a JOB as the ONLY means to earn income, or redistributive government programs that seek to provide a security net for those in absolute poverty, or those near-poverty due to job loss or other costly circumstances.

Hiltzik is either “controlled” or is simple ignorant of the reality that the wealthy are rich because they OWN the non-human means of production executed by the formation and operation of corporations, all of which are essentially narrowly OWNED by an already wealthy ownership class, who controls America.

Never has Hiltzik starkly pointed this reality out to his readers, nor has he ever advocated that EVERY citizen should be empowered with  the equal opportunity to acquire personal ownership shares in FUTURE capital asset formation using the financial mechanism of insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments (the same financial mechanism used by the wealth ownership class to get richer and richer).

What’s up with Hiltzik is endemic on the part of those who write in the national media, who teach in academia, and who run for political positions of policy-making. They either are totally ignorant of the realities of why there is economic inequality or they are “controlled” and censored from telling the truth.

This is why it is so critical that America wake-up and support the open platform of the Unite America Party, published by The Huffington Post athttp://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change athttp://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-20140921-column.html#page=1

A Wealthy Capitalist On Why Money Doesn’t Trickle Down

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On September 9, 2014, Nick Hanauer writes in Yes Magazine:

The fundamental law of capitalism is: When workers have more money, businesses have more customers. Which makes middle-class consumers—not rich businesspeople—the true job creators. A thriving middle class isn’t a consequence of growth—which is what the trickle-down advocates would tell you. A thriving middle class is the source of growth and prosperity in capitalist economies.

Our economy has changed, lest you think that the minimum wage is for teenagers. The average age of a fast-food worker is 28. And minimum wage jobs aren’t confined to a small corner of the economy. By 2040, it is estimated that 48 percent of all American jobs will be low-wage service jobs. We need to reckon with this. What will our economy be like when it’s dominated by low paying service jobs? What proportion of the population do we want to live on food stamps? 50 percent? Does this matter? Should we care?

Businesspeople tell me they cannot afford higher wages. Not true. They can adjust to all sorts of higher costs. The minimum wage is much higher here in Seattle than in Alabama, and McDonald’s thrives in both places. Businesses adjust to higher costs, even when they say they can’t.

Our economy can be safe and effective only if it is governed by rules. Some capitalists actually don’t care about other people, their communities, or the future. Their behavior, if left unchecked, has a massive effect on everyone else. When Wal-Mart or McDonald’s or any other guy like me pays workers the minimum wage, that’s our way of saying, “I would pay you less, except then I’d go to prison.”

Which brings us to the civic dimension of what the campaign to raise the minimum wage to $15 is really about. We’re undeniably becoming a more unequal society—in incomes and in opportunity. The danger is that economic inequality always begets political inequality, which always begets more economic inequality. Low-wage workers stuck on a path to poverty are not only weak customers; they’re also anemic taxpayers, absent citizens, and inattentive neighbors.

Economic prosperity doesn’t trickle down, and neither does civic prosperity. Both are middle-out phenomena. When workers earn enough from one job to live on, they are far more likely to be contributors to civic prosperity—in your community. Parents who need only one job, not two or three to get by, can be available to help their kids with homework and keep them out of trouble—in your school. They can look out for you and your neighbors, volunteer, and contribute—in your school and church. Our prosperity does not all come home in our paycheck. Living in a community of people who are paid enough to contribute to your community, rather than require its help, may be more important than your salary. Prosperity and poverty are like viruses. They infect us all—for good or ill.

An economic arrangement that pays a Wall Street worker tens of millions of dollars per year to do high-frequency trading and pays just tens of thousands to workers who grow or serve our food, build our homes, educate our children, or risk their lives to protect us isn’t an expression of the true value or economic necessity of these jobs. It simply reflects a difference in bargaining power and status.

Inclusive economies always outperform and outlast plutocracies. That’s why investments in the middle class work, and tax breaks for the rich don’t. The oldest and most important conflict in human societies is the battle over the concentration of wealth and power. Those at the top will forever tell those at the bottom that our respective positions are righteous and good for all. Historically we called that divine right. Today we have trickle-down economics.

The trickle-down explanation for economic growth holds that the richer the rich get, the better our economy does. But it also clearly implies that if the poor get poorer, that must be good for our economy. Nonsense.

Some of the people who benefit most from that explanation are desperate for you to believe this is the only way a capitalist economy can work. At the end of the day, raising the minimum wage to $15 isn’t about just rejecting their version of capitalism. It’s about replacing it with one that works for every American.

Nick Hanauer needs to realize that earning an income, and thus the ability to be a viable “customer with money” in an economy, is not limited to being a worker and having a job that pays wages. It can also mean that an income can be earned by contributing to the economy’s productive sector one tools, machines, super-automation, robotics, digital computerized operations or what economist define as productive capital owned by individuals. This is the REAL ket to wealth-building and a life of affluence. Hanauer should know this because he is a capital asset OWNER, from which is earns his multiple millions of dollars.

There is nothing new in this latest contribution to addressing economic inequality and advocating for a minimum wage increase, because he is not willing to acknowledge the reason for his own financial success.

Here is my comment on the piece that appeared in Politico a few months ago:

Norman Kurland and  my colleagues and I at the Center for Economic and Social Justice (www.cesj.org) as well as the Unite America Party see Nick Hanauer’s solution (raising the minimum wage) to closing the income gap would necessarily add to the costs of food and other necessities for poor and middle income Americans and would increase the outsourcing of jobs when higher labor costs are added to U.S.-produced goods and services.  The Capital Homestead Act ( http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ ) would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs, finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from billionaires such as Nick Hanauer over their existing assets.  Remember the wage system is the cancer.  The ownership system is the answer to address the problem Hanauer wants to solve.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What Hanauer, other billioinaries, the Democrats and Republicans and all third party leaders need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://www.yesmagazine.org/issues/the-end-of-poverty/wealthy-capitalist-nick-hanauer-on-why-money-doesn-t-trickle-down#.VB4lPfhyJ7Q.facebook

Inequality, Nick Hanauer And The Patriot’s Moral Code

Nick Hanauer

On September 17, 2014, Timothy J. Barnett writes on The Huffington Post:

The July/August 2014 issue of Politico Magazine sports a special report decrying excessive economic inequality, written by plutocrat extraordinare, Nick Hanauer. Living in the north Seattle metro area, and riding high after realizing his stake in the 2007 sale of aQuantive to Microsoft, Hanauer styles himself “a proud and unapologetic capitalist”; albeit an atypical one. As to the particulars of his financial assent from a considerable head start (his family owns a national pillow-manufacturing business), a February 2014 Seattle Times article reveals Hanauer as an entrepreneurial businessman with a progressive social conscience and a renegade venture capitalist’s understanding of economics.

Nick Hanauer’s preferred financial model is what he and his intellectual collaborator, Eric Liu (a former speechwriter for President Clinton) call “middle-out” economics. As explained in their 2008 book, The True Patriot, “middle-out economics” (their coined term) refers to an approach to economic policy based upon the conviction that national prosperity is far more dependent upon the financial capacity of middle-class consumers than the trickle-down investment contributions of the wealthy. Whatever one makes of the theory, it is difficult to make light of what the authors call the “Patriot’s Moral Code,” available at the True Patriot Network site.

In the Patriot’s Moral Code, freedom from sacrifice is cowardice, freedom from stewardship is exploitation, and freedom from compassion is cruelty. Purportedly, true patriots “measure our nation’s progress by whether every citizen has a fair shot to advance on the basis of talent and merit, and by the degree to which we promote the common success of all our citizens.” Viewed from this perspective, real opportunity on a level playing field combined with merit (deservedness) is the core of economic justice.

Writing to other ‘zillionaires’ who are thriving “beyond the dreams of any plutocrats in history,” Hanauer argues that the problem is not reasonable inequality (which may beneficially motivate people to press for success), but ethically inexplicable inequality. Wielding the provocative metaphor that “pitchforks are coming for plutocrats” unless wealth is distributed more broadly, Hanauer urges his “fellow filthy rich” to wake-up and exercise constructive policy leadership before the U.S. becomes a police state to keep social unrest at bay.

Nick Hanauer’s message is part of the mainstreaming of calls for workable political means to address and mitigate growing economic inequality. Widely noted voices making similar calls from various platforms include Pope Francis (Bishop of Rome), U.S. President Barack Obama, Lawrence Summers (former President of Harvard University), Joseph Stiglitz (a Nobel Prize winning American economist), and Thomas Piketty (a best-selling French economist).

Everywhere one turns, respected opinion leaders are articulating concerns about growing economic inequality. Why, then, has there been so little concerted political effort to corral the growing inequality problem? Is the American party and campaign system broken, as some astute observers believe? Could real and constructive change come if a billionaire patrician would step up and do the right thing?

There is no shortage of proffered answers to inequality dilemmas. The diagnostic diversity includes everything from soup to nuts, with alleged solutions ranging across a wide spectrum. Highly variant opinion works to dampen citizen movements and stymie town hall initiatives. Even the language of the debate is up for grabs, as explained by scholars Adam Arvidsson and Nicolai Peitersen in their recent Columbia University Press book, The Ethical Economy: Rebuilding Value after the Crisis. In short, if the democratic process cannot remotely approach a consensus as to the root causes of economic inequality, the prospect for sound ameliorative adjustments is even more implausible. The alternative is crisis-stimulated policy making in which the working man’s ox gets gored by Wall Street’s bull.

Robert Reich, a U.S. Secretary of Labor under President Bill Clinton, is working hard to counter economic inequality. Leveraging several polemic books and a sobering docu-drama entitled Inequality for All, Reich spotlights wealth distribution trends for young adults. Enjoying a prominent role in the presentation, Nick Hanauer is portrayed almost as a paternalistic protector of the public interest — the patrimony of his own well-heeled family notwithstanding. By the end of the feature, Hanauer looks less like a “proud and unapologetic capitalist” than a patron saint of the working man. But a post-movie reality check is in order. Based on other sources, the CEO of Hanauer’s pillow manufacturing company contends that the company’s $11 an hour average hourly worker pay at its pillow-making plants in several American states cannot be replaced by a considerably higher pay scale without risking insolvency.

Here is my comment on the piece that appeared in Politico:

Norman Kurland and  my colleagues and I at the Center for Economic and Social Justice (www.cesj.org) as well as the Unite America Party see Nick Hanauer’s solution (raising the minimum wage) to closing the income gap would necessarily add to the costs of food and other necessities for poor and middle income Americans and would increase the outsourcing of jobs when higher labor costs are added to U.S.-produced goods and services.  The Capital Homestead Act ( http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ ) would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs, finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from billionaires such as Nick Hanauer over their existing assets.  Remember the wage system is the cancer.  The ownership system is the answer to address the problem Hanauer wants to solve.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What Hanauer, other billioinaries, the Democrats and Republicans and all third party leaders need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

A Drop-Off In Start-Ups: Where Are All The Entrepreneurs?

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Christina Marshall dreams of launching a clothing company for full-figured women. (Andrew A. Nelles / Chicago Tribune)

On September 7, 2014, Walter Hamilton writes in the Los Angeles Times:

For years, Christina Marshall was convinced she would start her own company.

She studied entrepreneurship at USC’s business school with the hope of launching a clothing company for full-figured women. But after graduating two years ago, the 31-year-old chose a more conventional career as a brand manager at Kraft Foods in Chicago.

“It felt like the timing wasn’t exactly right,” Marshall said. “As much as I wanted to be an entrepreneur, I knew I needed a backup plan.”

The image of the U.S. as bursting with entrepreneurial zeal, it turns out, is more myth than reality. In truth, the rate at which new companies are being formed has fallen steadily for more than three decades.

The decline has occurred nationwide — even in Silicon Valley. Business creation there is still high compared with most of the country, but it’s down markedly from the past, according to the Brookings Institution.

“The first reaction of everyone who sees this is they can’t believe it, especially anyone from California,” said Bob Litan, a senior fellow at Brookings. “It’s down everywhere. In every locale. In every industry.”

The number of start-ups has fallen nearly 28% from 1977 to 2011, according to the Census Bureau. By other measures — as a share of all businesses or relative to the size of the working-age population — it has fallen in half.

Many factors appear to be contributing to the trend, including increased risk aversion among workers, shifts in government regulation and a consolidation in corporate America that has left many industries dominated by a handful of behemoths.

The drop has been sharpest among the millennial generation, which is grappling with heavy student debt and a frustrating job market, according to research by Robert Fairlie, an economist at UC Santa Cruz.

People ages 20 to 34 created 22.7% of all new companies last year, down from 34.8% in 1996.

“The popular image of every millennial starting a company, like every popular stereotype, is overblown,” said Dane Stangler, research director at the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit.

Falling entrepreneurship is bad for the economy. It means fewer jobs being created and a reduction in innovation that is essential to economic growth and rising living standards.

“When you see the kind of drop-off in starting up new businesses we’ve seen, that’s going to have a really large effect on the employment numbers,” said Barry Lynn, senior fellow at the New America Foundation.

Some experts said the picture isn’t as bleak as the numbers suggest.

Enrollment in college entrepreneurship programs is strong, and some surveys show many millennials plan to start businesses eventually.

Marshall, for one, still dreams of starting a business, but probably when she can meet such challenges as the upfront costs and the need to support her family.

“I still feel like it’s a calling I need to fulfill and I’m not completely satisfied,” she said.

Some experts said government statistics fail to capture all of the entrepreneurial activity. They think business formation has picked up as the economy has improved in the last two years.

“Everybody I know is working on an app or a start-up of some type,” said David Belasco, co-director of the Lloyd Greif Center for Entrepreneurial Studies at USC’s Marshall School of Business.

“I went to dinner last night and three people leaned over and said, ‘Here’s what I’m working on,’ and gave me demos of their products in the restaurant,” he said.

The prime age for entrepreneurship is late 30s to early 40s, suggesting that a burst of activity may lie ahead as the huge millennial generation reaches that age range.

“Maybe we’re just in this demographic lull,” Stangler said. “Maybe we’re looking at another boom in five to 10 years.”

For baby boomers, business formation has accelerated. People ages 55 to 64 started 23.4% of new companies in 2013, up from 14.3% in 1996, according to Fairlie. Part of that stems from some older workers going out on their own after being laid off and unable to find suitable work.

“Seniors understand that if they’re out of work their chances of getting a job again are abysmal, absolutely abysmal,” said Elizabeth Isele, president of Senior Entrepreneurship Works, a nonprofit that helps older workers launch companies.

Still, a range of data underscores the decrease in entrepreneurial activity.

Measured relative to the size of the working-age population, the number of start-ups dropped 53% from 1977 to 2010, according to the New America Foundation.

The Census Bureau has found that only 8.2% of U.S. companies in 2011 were start-ups, defined as less than a year old, down from 16.5% in 1977.

Entrepreneurial zest has fallen even in Silicon Valley.

From 2009 to 2011, about 8% of companies in the San Francisco and San Jose areas were start-ups, according to Brookings. While that’s higher than in most regions of the country, each rate was roughly half the level of 1978 to 1980.

There is no consensus about the precise causes of falling entrepreneurship, but experts cite several factors.

Government policies, such as weakened enforcement of antitrust laws starting in the Reagan administration, have spurred industrial consolidation that has resulted in the emergence of older and larger companies, experts said.

For example, businesses in existence for 16 years or more constituted 34% of all companies in 2011, up from 23% in 1992, according to Brookings. They employ 72% of the private-sector workforce, up from 60%.

Potential start-ups are wary of taking on giant rivals, said Lina Khan, a fellow at the New America Foundation.

“You don’t really see newcomers saying, ‘Let me open a bookstore to compete with Amazon or an independent pharmacy to compete with CVS,'” Khan said.

Some experts said entrepreneurship has been hurt by a societal tilt toward risk aversion brought on partly by a sluggish job market and high student debt.

Those factors coaxed Anna Baxter to opt against an entrepreneurial path after graduating from UCLA’s Anderson School of Management last year.

Baxter, 36, won a prestigious award at Anderson for co-founding a company that rents gowns for bridesmaids. The company got venture capital funding and had encouraging prospects.

But Baxter took a job at tech giant Adobe Systems Inc. to help pay $110,000 in student loans. Her co-founder, who stuck with the company, had no debt, Baxter said.

“A lot of my classmates upon graduation didn’t have jobs. Having a secure job with a really good salary was something to be considered carefully,” Baxter said. “I definitely went down the path in my head of ‘OK, what happens if this fails in six months? How hard is it going to be for me to find a job?'”

The lure of stability also appealed to Marshall.

The Georgia native went to business school at USC to learn how to start a business. She said she got positive feedback on her designs for upscale clothes for full-figured women.

But her plans were thrown off by the untimely deaths of several relatives, as well as by the need to support her fiance and his 9-year-old son.

“It made me take a step back and think whether I was ready to embrace the instability of being an entrepreneur right away,” Marshall said. “To really dive in head first is at least a couple more years down the road.”

To be a successful entrepreneurship there needs to be two conditions: a void in the market for a product or service and “customers with money” who are expected to buy the product or service.

America is a society that is blinded by a narrow focus on JOB CREATION and oblivious to the economics of reality. The reality is that we are increasingly a nation of wage slaves, welfare slaves and charity slaves with declining “customers with money.” Americans are over-burdened with non-self -liquidating consumer credit that is virtually impossible to escape from when one is entirely dependent on a JOB as their ONLY means of earning an income.

All the while the reality is that tectonic shifts in the technologies of production will continue (and at an exponential rate) to destroy jobs and devalue the worth of labor with the result that there will be fewer and fewer “customers with money” to support start-up entrepreneurship.  The obvious impact of tectonic shifts in the technologies of production is that increased productiveness is the result of the technological infusion of advanced tools, machines, super-automation, robotics, digital computerization, etc., all of which destroy jobs and devalue the worth of labor.

In a growth economy in which the focus is on broadening the ownership of wealth-creating, income-producing capital assets that are the engine driving productiveness, Americans would over time derive the bulk of their income earnings from owning, not laboring, in the form of dividend earnings fully paid out by the large corporations who are producing most of the products and services needed and wanted by consumers. As their dividend second incomes increase, in-debted Americans will be able to pay off their consumer loans and become ideal “customers with money,” who will then be in a position to support quality products and services thought up and brought to market by small entrepreneurs. As these entrepreneurs’ business become financially viable and successful they too will be able to grow further with issuing and selling new stock to their loyal customers and the general public. Their customers and the general public need to be empowered to acquire the new shares using insured, interest-free capital credit loans repayable with pre-tax future earnings of the investments––unlike consumer credit which is not self-liquidating and requires a separate income source for repayment.

As our nation leaves behind an anemic growth and embarks on a path to prosperity, opportunity and economic justice our economy’s growth should easily exceed double digit results, thus creating even stronger “customers with money” and a foundation on which entrepreneurs can thrive.

http://www.latimes.com/business/la-fi-entrepreneurs-20140907-story.html#page=1

Export Bank Debate Puts Jobs In Jeopardy

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Lamsco West is among the Boeing suppliers concerned about the fate of the federal Export-Import Bank. Above, workers at Lamsco’s Santa Clarita factory. (Kirk McKoy / Los Angeles Times)

On September 6, 2014, Jim Puzzanghera writes in the Los Angeles Times:

Thousands of jobs in Southern California and across the nation could be in jeopardy as politicians wrangle over the fate of an obscure, 80-year-old federal agency that helps U.S. companies sell their products overseas.

The Export-Import Bank has come under attack by conservative critics, including new House Majority Leader Kevin McCarthy (R-Bakersfield). They argue that it dispenses unneeded corporate welfare to large multinational firms — particularly Boeing Co.

As Congress gets back to work next week, advocates for the bank will have little time to persuade fellow lawmakers to reauthorize the bank’s charter: It’s set to expire Sept. 30.

Supporters point out that the bank is fulfilling its mission to create and sustain U.S. jobs by financing sales of U.S. goods to foreign buyers. They note that it has helped thousands of small and mid-size manufacturers throughout the country by providing loans, guarantees, insurance and other aid to those buyers.

Boeing, however, is the focal point of attack for conservatives. That’s because it is the nation’s largest single exporter and biggest beneficiary of the bank’s loans and other aid.

Boeing plays an outsized role in the U.S. economy. Its production of large commercial jetliners is so important that a good or bad month by the company alone can cause a major swing in the Commerce Department’s report on orders for long-lasting durable goods.

The aerospace giant and its supporters note that Boeing funneled $48 billion in business last year to 15,600 U.S. suppliers, including about 3,300 in California.

Those companies, such as Lamsco West, a small Santa Clarita aerospace supplier, face a hit to their business if Boeing’s exports fall off.