Dear Mr. Reich: Well done. I suggest you give Katie Porter a call and turn her loose with a white-board offensive strategy to get the word out. I smile every time I remember her dismantling the false argument by the drug companies that they needed gigantic profits to cover their R&D costs. It was always a lie, and still is. Keep up the good fight. Ellis Johnson M.D.
Hey Brian, you are right on both counts. We need Katie Porter and her white board and clear explanations and no-nonsense attitude and Al Franken and his cut through the garbage attitude. Dr. Reich got this going, now he needs some more allies to get the word out far and wide.
Dear Ms. Kemp: I have never seen a politician more prepared with facts when questioning a witness than Katie Porter. I think we should clone her and get rid of all the old white men in office. The world would be a much better place. Ellis Johnson M.D.
1000% Dr. Johnson!! I really hope Katie Porter keeps her seat. I'm in N. CA, but always contribute to her campaign, because we really need her to keep up the good fight and keep serving up logic!! It seems to be something so few politicians know how to do.
Oh Dr. Johnson, replacing the scared white men in power with Katie and her clones would be terrific. I think some other women and men have been watching her and taking notes. Maybe a new batch of Congressmembers will make it a point to be highly informed when asking questions and addressing the public. The January 6th Committee has also proven being well-prepared can be done well. We should be providing more of them with white boards.
I would vote for Katie Porter for president in a heartbeat! Can you imagine the good she could do with a Democratic House and Senate?
And that is not to dismiss all the good done by the Biden admin these past almost two years. Especially considering the Senate make-up right now, and Manchin and Sinema.
We need more people like Katie Porter: smart, decent and uber-prepared; she knows what it means to be a civil servant and representative of the People.
There’s far too many who have forgotten what that means, and more who just don’t care. They’re in it for themselves from the get-go.
Ellis, yes our world would be saner, smarter & more satisfied with Katie Porter clones! Others could be just as effective but they are just too lazy to do the research! The Senate needs to be gutted of old tired white guys & replaced by energized progressive young women! Our country would be so much better with a team of energetic young Democratic women & men in the Senate! Vote Blue whatever u do in 22!
Yep Dr. Johnson, we the people have been bamboozled for the past couple of years and now are finally waking up. Drug corporations made a fortune on COVID and most of the expenses were paid by our government, yet they still felt they had to gouge patients on their other drugs. That is just wrong and we the people need to curb their bad behavior.
Thank you for being a voice for alternative views of economic policy and for emphasizing the impacts our policies have on the economically disadvantaged.
I relish a spirited discussion with someone who strongly disagrees with me. It forces me to defend my position and reconfirm to myself that it’s correct, or consider whether I might be wrong and need to change my mind.
But those who can’t rise above a “Well you’re a poopy head and wrong!“ level just need to be quickly shown the door and forgotten.
Suzanne, our buddy Ted is a retired tractor salesman who is clearly a close-minded, anti-progressive twit. I don’t expect he’ll elaborate, because he knows his logic is no match for a man whose resumé includes a JD from Yale and 47 years of experience in economics and public policy.
Debrah, you nailed that guy. He claims he knows something he doesn't. How sad there are so many like him around. My guess is he won't do anything to increase his knowledge. Learning is supposed to be life-long, but the Fox type crowd just can't seem to manage it. I don't get it. There is so much out there to learn.
Ted may have a point if profits were not so high in that labor is less than an issue now than in the past. Our modern industry is more energy dependent than labor dependent. Energy prices have been going up faster than wages and salaries for the past 18 months and that has an effect. From the extraction of minerals or commodities to the possessing and packaging of goods. Add the higher costs for delivery because of higher fuels, and you have a recipe for inflation. The excess profits show that greed is now entering the game because 8% to 10% historical corporate profits are not enough. What is remarkable is that the stock market is going down while profits are going up and that is the FEDs fault for raising interest rates and scaring away investors, rather than fight, or acknowledge even, the rising energy costs and excess profits that have nothing to do with interest rates. If one wants to slow down an overheated economy, one just needs to raise wages to match the higher costs of energy by raising the minimum wage to a living wage and balance the federal deficit with higher corporate income taxes and personal income taxes on those that have the most disposable income to spend, the rich.
What stands-out for me from yours is “remarkable the stock market is going down while profits are going up”--which reminds me of playing with S and D curves in high school marketing class, students try to figure out the price of a concert-ticket (used to say movie tickets!) that maximizes revenue.
Q: Do you try to fill seats? But you’ve left “money on the table,” of willing-demand, people who would have paid a higher price to get in, but your price was too low and you sold out. Q: At what price, P, do people say, No, and stay away? Q: What can you get-away-with, where it takes the FEWEST sales to make just as much money as it would at a lower price, and with less costs, such as labour and materials?
Students “had a feel” for a correct price--and asking them, “Why that price?” was an invitation to argue about personal-values, willingness to pay, the-value-of-work, premium pricing for snob-appeal, or a price that SUGGESTS durable quality.
Sellers can only ever charge a price that “the market” of potential purchasers is willing to pay, and so then, “who” is your market, what are character-attributes of your target-market of people who buy? Are YOU marketing only to “rich” people? Answer: Well, if I have to get outa bed in the morning, I’m only doing it while this idea is more profitable to me than some alternate idea ...
Which is why PRICE CONTROLS don’t work. “Hm, legislated constraints on price-I-can-charge means, I’m better-off doing something else.” For example, instead of housing, converting to warehousing, or instead of farming and honey bees, the land is worth more sooner as a garbage dump.
Prices are willingness of both sides to agree on a price. When too few producers have too much power (there are no alternative options for consumers), then public opinion counts in the struggle to determine “what is fair” and what to do about it--exposing the guts of the contents of “black-box” decisions on pricing, is one strategy, so public opinion smites the thieves with shame (except they don’t care, those sniff and say, “Let them eat cake”).
But so then you have workers, aka consumers, who can ask for a bigger slice of the pie (profits) as their due, and you have government (community, society) taxes, because society makes success possible, so “taxes that supports society that makes success possible,” including taxing income in the hands of workers who can afford to pay income tax, not just need the supports--but, too, taxing corporate profits before distribution of profits to shareholders that pay tax--but at a lower rate, in order to encourage them to invest in corporations that pay income tax, and hire workers that also pay taxes ... In summary? Pay labour and management equitable and not low or excessive wages and salaries AND pay taxes, even as a disincentive against ripping consumers, workers, and society off.
“But taxes remove the incentive to produce, hire, and sell,” nah. It’s just a matter of leaving money-on-the-table for society, that makes success possible.
“Price” agreement is meant to be a win-win, where both parties, buyer and seller, are happy. And they are most happy with the system that supports them, when taxes are included in price and cost, as foundation for people.
Taxes on property, sales or per-capita will discourage production but taxes on NET profits being non-indexed but only flat will only encourage higher productivity, higher employment and even higher wages to improve productivity of a workforce, but can be abused when setting prices,
When working overtime put me in a higher tax bracket, I would turn down the overtime work because I made less rather than more per hour. When my tax bracket was not in question, I would jump at the chance to earn more because I was not penalized for doing so. I made more and the government collected more but there was no penalty for higher productivity. This is the argument for a flat tax rather than a graduated income tax. Before they initiated the 15% jumping to 25% bracket jump, the federal taxes only went up 2% per bracket and not 10% with the brackets closer together and not $40,000.00, $80,000.00 and $200,000.00 apart.
In the past, almost everything went up in price because of inflation in costs and not because of shortages. Baby formula shortages, toilet paper shelves empty among other items, increased demand and companies saw they could raise prices on items deemed "necessities" even though they do not cost more to manufacture. Create a shortage, then keep raising prices until the public reduces its demand on them then level off and stay at that higher price level and take the profits to the bank.
Corporate profits are taxed as a flat tax so the more they gouge, the more both the company and the taxman profits from the gouging. The profits of corporations drive up dividends and improves the price-earning index (PE) and stock go up. But not this time because, even with stock buy backs, the prices are still dropping, but corporate salaries and bonuses are hitting record levels. So instead of the owners profiting, (the stockholders) it is the management of those companies that are getting rich. My question is, why are the stockholders letting the companies, they invest in, do this? It is because everyone uses the "proxy form" and gives their rights away to control them. Holding companies and mutual funds don't care about their customers as long as they get their percentage of "holdings" rather than a percentage of the "gains they earn" for their customers, so they do not go to meeting of the companies they own to vote the shares they own but just send in their "Proxy" to let someone else vote for them and these are people that are on the boards of many different companies, vote the managements will, rather than the stockholders best interests. Granted, Covid-19 meeting restrictions moved many to proxies that normally sent representative of their own in the past, and that could be why they boards saw a free hand to push profits and management wages over stockholder's value.
If one wants to fix this, making a rule that the highest management wage can only be 50 times that of the lowest wage workers, management will then raise the workers' wages so they could also get a pay raise. Today management makes 400 times what their lowest workforce employee makes and is going even higher with bonuses. The link is to net profits rather than wages and that is also hurting stockholders, pensioners and the rank-and-file workers. Unregulated, the system is broken for everybody but the corporate managers.
Yeah, some sort of rule. Rules used to be stuff like a conscience, like you could only show your face in the community if you paid fair wages, donated to hospitals and worked on the hoard for charities, but now, billionaires don’t care, and people (aka workers, consumers) see billionaires as rockstars, heroic, they are SO good at making money, worshipped, like sports or pop culture celebrities. People admire those, protect their right to gouge (“others are just jealous,” yeah, right), even though it goes against their own self interest. “HE’s rich because YOU’re poor.” “So? HE works hard! And you’re just jealous!” Yikes, eh?
One thing stockholders and board of directors agree on is maximizing company profits. Allowing certain interested people to cast votes on behalf of less-interested investors doesn’t mean they don’t have one thing in common—profit motive. They all want to enjoy the highest price and profit they can get from consumers of their products (construction materials, paint, goods, or services, whatever you sell), end-users as the final consumers pay it all.
Proxy voting by people who attend on behalf of shareholders that choose not to attend is to favour stockholders. Their MONEY and not their possible but non existent corporate-vision or opinions is their contribution.
The owners decide what the managers get paid. The owners are making a lot. The owners are rewarding their executives for doing such a great job of creating profits by raising prices—for no other reason except they can. Costs didn’t go up nearly as fast as prices on their products did. Owners are happy, executives too are happy, paid to “find” more profit by sourcing cheapest products and charging best they can, squeezing their suppliers for best price for inputs (including labour), and squeezing consumers and end-users to pay as much as they will.
Disagree. The proxy holders decide what the managers get paid not the shareholders in most corporations. The proxy holders are rewarding their executives for doing such a great job of creating profits by raising prices because they have to vote up or down on a legislated amount submitted them. Very rarely are motions on compensation put on the floor that have not been already written into the agenda. The rest of the paragraph i agree with.
The gouging being done by corporations does not go equitably to taxes and communities where it us needed. The higher prices are profit and the general complaint is that corporations get tax-breaks, to acknowledge the risks they take, investor’s shareholder-income is taxed at a lower rate too, acknowledging risk in investing, even though huge profits, thanks to market conditions during covid—but workers don’t get raises in pay, or tax advantages—unless they have some savings, invested in income-generating investments, taxed at a lower rate than their employment income. Profit gouging goes to their pockets of savings. Corporations get breaks and avoid taxes (is the general complaint).
“Create a shortage” you mean slow down on production, yes. Or don’t expand production even though demand increases. It is not worth your while to build a new plant to produce more (at great cost), if you can just continue to produce at this level, and charge more. Yes.
Costs ARE shortages. One doesn’t say “Inflation was on costs, not on shortages.” Reason for a cost increase is scarcity, difficulty in accessing, additional costs of building a whole new plant to produce more, ie costs, shortages, increasing supply comes at a cost.
Maybe, but lack of competition in the marketplace also creates shortages when customers do not have a choice of one product over another. Take it or leave it for necessities is no choice.
When you worked overtime to earn a higher hourly rate, there was no penalty, but there was no penalty at a higher tax bracket either—you did not pay more in taxes than you earned.
A higher tax on that amount over the lower bracket does not mean you earn less. You pay a higher rate only on the amount above the lower bracket, not on your whole pay. And you still do not pay more taxes than you earn at the higher rate.
This is true if we were not so tired and stretched to out physical limits after 40 hours and then asked to work more hours. We called this "Blood Money" in heavy construction. Remember Federal and State income taxes are indexed and Sate Disability, FICA, Union Dues and any other deductions were also by percentage so where the lower tax bracket let you keep 65% of your gross, the high tax bracket let you keep only 50% of your gross. The payroll deduction tables, used by contractors, really took a bite out of one's paycheck even if you got some of it all back 8 to 16 months later in tax refunds.
I did not say higher taxes. I just said "Flat Taxes" that stay the same from the first dollar earned to the last dollar earned being an equal rate will not discourage a company from making more of its product, hiring more people and even paying higher wages to get those people if they have special skills the company needs.
People who present this kind of slam on a view that has been researched by someone of Dr. Reich’s stature. without a supporting argument with facts doesn’t really fit here. It’s a discussion among people who are well read and educated. I was offended by your snide remark.
Oh Ted, and you know Dr. Reich is wrong, how? You guys do seem to throw a lot of "they're wrong" around but rarely even try to explain your position. That is typical.
I build houses up in Ulster County NY, an area I understand you are familiar with. Two years ago I moved my company to an 'open book' policy, where my clients have visibility into everything via an app. They see my true costs, when they go up, AND down. DO I make a windfall profit like my competitors? Nope, but I have seriously dedicated clients and I sleep really well at night....
Inflation is caused by an increase in wages or taxes and the reflected increase in prices. The wages have been flat so where is the inflation coming from? Increased prices. And is that because the labor costs more to make the goods? NO! Is it from higher taxes? NO! is it because of higher energy costs? Maybe some of it is. But mostly, it is from extra profits that we can see in the bookkeeping of companies pointing out their huge profits. Remember the Nixon Wage and Price freeze? We ended up with "Stagflation" where the economy could not grow, and no one was hiring.
Mr. Dijeau, please note that the energy companies have been making record profits for the last few years. Most would say excessive profits. So a windfall profits tax is what's needed (since we seemingly will never get them to pay proper income taxes). anyway, if the small businesses (who I believe employ a substantial number of workers in this country) are being squeezed by higher energy costs, look to those who are making rapacious profits.
Big corporations raking in record profits. The media shouting, "inflation"...... "looming recession". Hmmm, let's look at the timing of this... before the midterms. Unfortunately, a vast number of voters place blame on the president and current administration for any economic downturns. And media messaging supports this (even liberal media). Which party do corporations and deep pocket executives generally want in power?!?! Ahh, therein lies an incentive for big corporations to continue to raise prices. They would LOVE to see the legislators back in power who will continue to give them tax breaks and open wider loopholes. Voters who feel this crunch will blame those currently in power. Doesn't the Fed see this?? Is their only course of action to raise interest rates?? Do they even see the big picture; a major CAUSE of the inflation?? (Me? NOT an economist, and I realize I've addressed one cause-effect. But, c'mon folks. Let's see this manipulation for what it is.)
Nancy Massar ; Consider the source of the manipulation in the media. ; Who owns the media? the very wealthy. They do not want to be taxed regulated or restricted in any way. They want the 'workers' to pay for infrastructure and schools etc. along with their lavish lifestyle. "Lets blame Biden and the Democrats for 'inflation'."
Laurie. The burn is well off folk would take away social security and medicare to save themselves 1.5% in additional tax. That reasoning just leaves me cold.
Hard for me to think reporters are not aware of the forces behind inflation. The information is in front of them and drilling down is their area of expertise. The Fed sees this from a Republican viewpoint. The one gift from trump that since 2016 is the realization government is not always by folks who have the national interest at heart. Somehow I missed this in the first 69 years of life which included sixteen years of schooling. I have regrets and question the likes of Ted Cruz and wonder if he feels he gave life his best.
Changing the language is key. I noticed the media shift from talking about "price hikes" and "consumer price index", to calling it all "inflation" when Dems came into power and passed the first infrastructure package. It was a deliberate move by corporate media to link government with price hikes by calling it inflation. The Fed's blindness to this is astonishing. Thanks for the term "profit-price-inflation".
Thank you Robert for helping a humble ol' Union tradesman become much more enlightened and educated about what truly is going on here. I follow you regularly now. And thank you also for bringing these realities to us, or at least me, in laymans terms.
No one ever truly hears you. I had the good fortune to hear you (and shake your hand!) in Nov 2008 at a speech you gave to the bank I worked for, plus our clients. You said very clearly “Don’t fire your people.” And….immediately thereafter, the bank fired most of us (commercial real estate lenders). I have followed your public thinking ever since.
I hope Congress hears you, but I’m not holding my breath.
Thank you for always telling the truth, regardless.
(PS: I had to go back to school in my mid-40’s, move to CA, and create an entirely new career for myself. )
Deluged with reporters! That is great news. The downer is these reporters have somehow missed your many columns in Substack and more surprisingly those in The Guardian.
Thank you Dr. Reich for all you do. Sadly, I listened to a segment on MSNBC this afternoon discussing the economy and there was no indication that your message had gotten through, at least to their guest expert, who portrayed a bleak future of multiple rate increases and probable recession. I am far from being an economist, and your message is so clear and understandable and simple that even I get it...I can only imagine your constant frustration. Please keep doing what you do--this week, we seem to be in a phase where the adults in the room are making themselves heard with regard to the rule of law; perhaps your rule of economics will finally be heard and given a fair chance.
Thanks for the clear explanation. Thank you a thousand times for all the work you do on our behalf!
Dear Mr. Reich: Well done. I suggest you give Katie Porter a call and turn her loose with a white-board offensive strategy to get the word out. I smile every time I remember her dismantling the false argument by the drug companies that they needed gigantic profits to cover their R&D costs. It was always a lie, and still is. Keep up the good fight. Ellis Johnson M.D.
Yes, I'd really like to see Katie Porter expand on this. Makes me miss Al Franken who could really cut thru the bs.
Hey Brian, you are right on both counts. We need Katie Porter and her white board and clear explanations and no-nonsense attitude and Al Franken and his cut through the garbage attitude. Dr. Reich got this going, now he needs some more allies to get the word out far and wide.
Isn’t she the best!! My favorite was seeing her questioning Jamie Dimon about CEO pay disparity.
Dear Ms. Kemp: I have never seen a politician more prepared with facts when questioning a witness than Katie Porter. I think we should clone her and get rid of all the old white men in office. The world would be a much better place. Ellis Johnson M.D.
1000% Dr. Johnson!! I really hope Katie Porter keeps her seat. I'm in N. CA, but always contribute to her campaign, because we really need her to keep up the good fight and keep serving up logic!! It seems to be something so few politicians know how to do.
Her seat is a tough one. Based on her stellar performance as a congresswoman, she definitely merits keeping it, but it won't be easy.
me too.
Oh Dr. Johnson, replacing the scared white men in power with Katie and her clones would be terrific. I think some other women and men have been watching her and taking notes. Maybe a new batch of Congressmembers will make it a point to be highly informed when asking questions and addressing the public. The January 6th Committee has also proven being well-prepared can be done well. We should be providing more of them with white boards.
Not ALL of the old white men in office, just most of them. And there are a few white Republican women I would like to see gone as well.
I would vote for Katie Porter for president in a heartbeat! Can you imagine the good she could do with a Democratic House and Senate?
And that is not to dismiss all the good done by the Biden admin these past almost two years. Especially considering the Senate make-up right now, and Manchin and Sinema.
We need more people like Katie Porter: smart, decent and uber-prepared; she knows what it means to be a civil servant and representative of the People.
There’s far too many who have forgotten what that means, and more who just don’t care. They’re in it for themselves from the get-go.
Ellis, yes our world would be saner, smarter & more satisfied with Katie Porter clones! Others could be just as effective but they are just too lazy to do the research! The Senate needs to be gutted of old tired white guys & replaced by energized progressive young women! Our country would be so much better with a team of energetic young Democratic women & men in the Senate! Vote Blue whatever u do in 22!
Katie is a ROCK STAR! love Love LOVE watching her grill those guys!
Actually, Dr. Reich himself is quite skillful at getting messages out with whiteboard.
Yep Dr. Johnson, we the people have been bamboozled for the past couple of years and now are finally waking up. Drug corporations made a fortune on COVID and most of the expenses were paid by our government, yet they still felt they had to gouge patients on their other drugs. That is just wrong and we the people need to curb their bad behavior.
Keep at 'em !
Thank you for being a voice for alternative views of economic policy and for emphasizing the impacts our policies have on the economically disadvantaged.
I have always relished good arguments, but this forum is not for ad hominem attacks.
Thank you.
I relish a spirited discussion with someone who strongly disagrees with me. It forces me to defend my position and reconfirm to myself that it’s correct, or consider whether I might be wrong and need to change my mind.
But those who can’t rise above a “Well you’re a poopy head and wrong!“ level just need to be quickly shown the door and forgotten.
Dr Reich, A famous man once said “the difference between stupidity and genius, is genius has limits. “ Albert Einstein
Why? It's a bummer to read a slam without any back-up.
Suzanne, our buddy Ted is a retired tractor salesman who is clearly a close-minded, anti-progressive twit. I don’t expect he’ll elaborate, because he knows his logic is no match for a man whose resumé includes a JD from Yale and 47 years of experience in economics and public policy.
Debrah, you nailed that guy. He claims he knows something he doesn't. How sad there are so many like him around. My guess is he won't do anything to increase his knowledge. Learning is supposed to be life-long, but the Fox type crowd just can't seem to manage it. I don't get it. There is so much out there to learn.
Exactly! If I don't learn 2-3 new things a day I feel like the day was a waste.
Thank you for writing what I was thinking.
“Reich’s view is plain wrong.”
Gosh, Ted Gambogi, you’ve completely convinced me with the force of your detailed arguments.
Ted may have a point if profits were not so high in that labor is less than an issue now than in the past. Our modern industry is more energy dependent than labor dependent. Energy prices have been going up faster than wages and salaries for the past 18 months and that has an effect. From the extraction of minerals or commodities to the possessing and packaging of goods. Add the higher costs for delivery because of higher fuels, and you have a recipe for inflation. The excess profits show that greed is now entering the game because 8% to 10% historical corporate profits are not enough. What is remarkable is that the stock market is going down while profits are going up and that is the FEDs fault for raising interest rates and scaring away investors, rather than fight, or acknowledge even, the rising energy costs and excess profits that have nothing to do with interest rates. If one wants to slow down an overheated economy, one just needs to raise wages to match the higher costs of energy by raising the minimum wage to a living wage and balance the federal deficit with higher corporate income taxes and personal income taxes on those that have the most disposable income to spend, the rich.
What stands-out for me from yours is “remarkable the stock market is going down while profits are going up”--which reminds me of playing with S and D curves in high school marketing class, students try to figure out the price of a concert-ticket (used to say movie tickets!) that maximizes revenue.
Q: Do you try to fill seats? But you’ve left “money on the table,” of willing-demand, people who would have paid a higher price to get in, but your price was too low and you sold out. Q: At what price, P, do people say, No, and stay away? Q: What can you get-away-with, where it takes the FEWEST sales to make just as much money as it would at a lower price, and with less costs, such as labour and materials?
Students “had a feel” for a correct price--and asking them, “Why that price?” was an invitation to argue about personal-values, willingness to pay, the-value-of-work, premium pricing for snob-appeal, or a price that SUGGESTS durable quality.
Sellers can only ever charge a price that “the market” of potential purchasers is willing to pay, and so then, “who” is your market, what are character-attributes of your target-market of people who buy? Are YOU marketing only to “rich” people? Answer: Well, if I have to get outa bed in the morning, I’m only doing it while this idea is more profitable to me than some alternate idea ...
Which is why PRICE CONTROLS don’t work. “Hm, legislated constraints on price-I-can-charge means, I’m better-off doing something else.” For example, instead of housing, converting to warehousing, or instead of farming and honey bees, the land is worth more sooner as a garbage dump.
Prices are willingness of both sides to agree on a price. When too few producers have too much power (there are no alternative options for consumers), then public opinion counts in the struggle to determine “what is fair” and what to do about it--exposing the guts of the contents of “black-box” decisions on pricing, is one strategy, so public opinion smites the thieves with shame (except they don’t care, those sniff and say, “Let them eat cake”).
But so then you have workers, aka consumers, who can ask for a bigger slice of the pie (profits) as their due, and you have government (community, society) taxes, because society makes success possible, so “taxes that supports society that makes success possible,” including taxing income in the hands of workers who can afford to pay income tax, not just need the supports--but, too, taxing corporate profits before distribution of profits to shareholders that pay tax--but at a lower rate, in order to encourage them to invest in corporations that pay income tax, and hire workers that also pay taxes ... In summary? Pay labour and management equitable and not low or excessive wages and salaries AND pay taxes, even as a disincentive against ripping consumers, workers, and society off.
“But taxes remove the incentive to produce, hire, and sell,” nah. It’s just a matter of leaving money-on-the-table for society, that makes success possible.
“Price” agreement is meant to be a win-win, where both parties, buyer and seller, are happy. And they are most happy with the system that supports them, when taxes are included in price and cost, as foundation for people.
Taxes on property, sales or per-capita will discourage production but taxes on NET profits being non-indexed but only flat will only encourage higher productivity, higher employment and even higher wages to improve productivity of a workforce, but can be abused when setting prices,
When working overtime put me in a higher tax bracket, I would turn down the overtime work because I made less rather than more per hour. When my tax bracket was not in question, I would jump at the chance to earn more because I was not penalized for doing so. I made more and the government collected more but there was no penalty for higher productivity. This is the argument for a flat tax rather than a graduated income tax. Before they initiated the 15% jumping to 25% bracket jump, the federal taxes only went up 2% per bracket and not 10% with the brackets closer together and not $40,000.00, $80,000.00 and $200,000.00 apart.
In the past, almost everything went up in price because of inflation in costs and not because of shortages. Baby formula shortages, toilet paper shelves empty among other items, increased demand and companies saw they could raise prices on items deemed "necessities" even though they do not cost more to manufacture. Create a shortage, then keep raising prices until the public reduces its demand on them then level off and stay at that higher price level and take the profits to the bank.
Corporate profits are taxed as a flat tax so the more they gouge, the more both the company and the taxman profits from the gouging. The profits of corporations drive up dividends and improves the price-earning index (PE) and stock go up. But not this time because, even with stock buy backs, the prices are still dropping, but corporate salaries and bonuses are hitting record levels. So instead of the owners profiting, (the stockholders) it is the management of those companies that are getting rich. My question is, why are the stockholders letting the companies, they invest in, do this? It is because everyone uses the "proxy form" and gives their rights away to control them. Holding companies and mutual funds don't care about their customers as long as they get their percentage of "holdings" rather than a percentage of the "gains they earn" for their customers, so they do not go to meeting of the companies they own to vote the shares they own but just send in their "Proxy" to let someone else vote for them and these are people that are on the boards of many different companies, vote the managements will, rather than the stockholders best interests. Granted, Covid-19 meeting restrictions moved many to proxies that normally sent representative of their own in the past, and that could be why they boards saw a free hand to push profits and management wages over stockholder's value.
If one wants to fix this, making a rule that the highest management wage can only be 50 times that of the lowest wage workers, management will then raise the workers' wages so they could also get a pay raise. Today management makes 400 times what their lowest workforce employee makes and is going even higher with bonuses. The link is to net profits rather than wages and that is also hurting stockholders, pensioners and the rank-and-file workers. Unregulated, the system is broken for everybody but the corporate managers.
Yeah, some sort of rule. Rules used to be stuff like a conscience, like you could only show your face in the community if you paid fair wages, donated to hospitals and worked on the hoard for charities, but now, billionaires don’t care, and people (aka workers, consumers) see billionaires as rockstars, heroic, they are SO good at making money, worshipped, like sports or pop culture celebrities. People admire those, protect their right to gouge (“others are just jealous,” yeah, right), even though it goes against their own self interest. “HE’s rich because YOU’re poor.” “So? HE works hard! And you’re just jealous!” Yikes, eh?
Agree.
One thing stockholders and board of directors agree on is maximizing company profits. Allowing certain interested people to cast votes on behalf of less-interested investors doesn’t mean they don’t have one thing in common—profit motive. They all want to enjoy the highest price and profit they can get from consumers of their products (construction materials, paint, goods, or services, whatever you sell), end-users as the final consumers pay it all.
Agree.
Proxy voting by people who attend on behalf of shareholders that choose not to attend is to favour stockholders. Their MONEY and not their possible but non existent corporate-vision or opinions is their contribution.
Disagree. Shareholders wave their rights with a proxy and hope for the best.
The owners decide what the managers get paid. The owners are making a lot. The owners are rewarding their executives for doing such a great job of creating profits by raising prices—for no other reason except they can. Costs didn’t go up nearly as fast as prices on their products did. Owners are happy, executives too are happy, paid to “find” more profit by sourcing cheapest products and charging best they can, squeezing their suppliers for best price for inputs (including labour), and squeezing consumers and end-users to pay as much as they will.
Disagree. The proxy holders decide what the managers get paid not the shareholders in most corporations. The proxy holders are rewarding their executives for doing such a great job of creating profits by raising prices because they have to vote up or down on a legislated amount submitted them. Very rarely are motions on compensation put on the floor that have not been already written into the agenda. The rest of the paragraph i agree with.
The gouging being done by corporations does not go equitably to taxes and communities where it us needed. The higher prices are profit and the general complaint is that corporations get tax-breaks, to acknowledge the risks they take, investor’s shareholder-income is taxed at a lower rate too, acknowledging risk in investing, even though huge profits, thanks to market conditions during covid—but workers don’t get raises in pay, or tax advantages—unless they have some savings, invested in income-generating investments, taxed at a lower rate than their employment income. Profit gouging goes to their pockets of savings. Corporations get breaks and avoid taxes (is the general complaint).
Agreed.
“Create a shortage” you mean slow down on production, yes. Or don’t expand production even though demand increases. It is not worth your while to build a new plant to produce more (at great cost), if you can just continue to produce at this level, and charge more. Yes.
Exactly.
Costs ARE shortages. One doesn’t say “Inflation was on costs, not on shortages.” Reason for a cost increase is scarcity, difficulty in accessing, additional costs of building a whole new plant to produce more, ie costs, shortages, increasing supply comes at a cost.
Maybe, but lack of competition in the marketplace also creates shortages when customers do not have a choice of one product over another. Take it or leave it for necessities is no choice.
When you worked overtime to earn a higher hourly rate, there was no penalty, but there was no penalty at a higher tax bracket either—you did not pay more in taxes than you earned.
A higher tax on that amount over the lower bracket does not mean you earn less. You pay a higher rate only on the amount above the lower bracket, not on your whole pay. And you still do not pay more taxes than you earn at the higher rate.
This is true if we were not so tired and stretched to out physical limits after 40 hours and then asked to work more hours. We called this "Blood Money" in heavy construction. Remember Federal and State income taxes are indexed and Sate Disability, FICA, Union Dues and any other deductions were also by percentage so where the lower tax bracket let you keep 65% of your gross, the high tax bracket let you keep only 50% of your gross. The payroll deduction tables, used by contractors, really took a bite out of one's paycheck even if you got some of it all back 8 to 16 months later in tax refunds.
“Higher taxes on NET profit will encourage productivity”?? No, or I mean, taxes don’t encourage productivity, profit does.
I did not say higher taxes. I just said "Flat Taxes" that stay the same from the first dollar earned to the last dollar earned being an equal rate will not discourage a company from making more of its product, hiring more people and even paying higher wages to get those people if they have special skills the company needs.
People who present this kind of slam on a view that has been researched by someone of Dr. Reich’s stature. without a supporting argument with facts doesn’t really fit here. It’s a discussion among people who are well read and educated. I was offended by your snide remark.
Oh Ted, and you know Dr. Reich is wrong, how? You guys do seem to throw a lot of "they're wrong" around but rarely even try to explain your position. That is typical.
Not surprising. It’s all the trolls have.
Ted Gambogi ; please explain.
Plainly his newsletter though...
= D
Maybe better to not feed the troll?
We all know what trolls eat, BS. ;-)
I build houses up in Ulster County NY, an area I understand you are familiar with. Two years ago I moved my company to an 'open book' policy, where my clients have visibility into everything via an app. They see my true costs, when they go up, AND down. DO I make a windfall profit like my competitors? Nope, but I have seriously dedicated clients and I sleep really well at night....
Let’s call it what it is…GREED-FLATION
Thanks for speaking the truth, it’s not easy these days.
Really Ted?! He has over 40 years of experience in economics and public policy. What are your credentials?
Inflation is caused by an increase in wages or taxes and the reflected increase in prices. The wages have been flat so where is the inflation coming from? Increased prices. And is that because the labor costs more to make the goods? NO! Is it from higher taxes? NO! is it because of higher energy costs? Maybe some of it is. But mostly, it is from extra profits that we can see in the bookkeeping of companies pointing out their huge profits. Remember the Nixon Wage and Price freeze? We ended up with "Stagflation" where the economy could not grow, and no one was hiring.
Mr. Dijeau, please note that the energy companies have been making record profits for the last few years. Most would say excessive profits. So a windfall profits tax is what's needed (since we seemingly will never get them to pay proper income taxes). anyway, if the small businesses (who I believe employ a substantial number of workers in this country) are being squeezed by higher energy costs, look to those who are making rapacious profits.
I read that article this morning and wanted to scream at the Fed “ the cause of inflation IS NOT A NAIL, QUIT TRYING TO FIX IT WITH A HAMMER”.
Do these people ever have an original thought?
Kudos to you, Dr Reich, that’s a shred of good news among the dire predictions about the outcome of the midterm elections.
Big corporations raking in record profits. The media shouting, "inflation"...... "looming recession". Hmmm, let's look at the timing of this... before the midterms. Unfortunately, a vast number of voters place blame on the president and current administration for any economic downturns. And media messaging supports this (even liberal media). Which party do corporations and deep pocket executives generally want in power?!?! Ahh, therein lies an incentive for big corporations to continue to raise prices. They would LOVE to see the legislators back in power who will continue to give them tax breaks and open wider loopholes. Voters who feel this crunch will blame those currently in power. Doesn't the Fed see this?? Is their only course of action to raise interest rates?? Do they even see the big picture; a major CAUSE of the inflation?? (Me? NOT an economist, and I realize I've addressed one cause-effect. But, c'mon folks. Let's see this manipulation for what it is.)
Nancy Massar ; Consider the source of the manipulation in the media. ; Who owns the media? the very wealthy. They do not want to be taxed regulated or restricted in any way. They want the 'workers' to pay for infrastructure and schools etc. along with their lavish lifestyle. "Lets blame Biden and the Democrats for 'inflation'."
Laurie. The burn is well off folk would take away social security and medicare to save themselves 1.5% in additional tax. That reasoning just leaves me cold.
They tax social security as it is. I don't think that is helpful, since the income it was taken from was taxed already.
Hard for me to think reporters are not aware of the forces behind inflation. The information is in front of them and drilling down is their area of expertise. The Fed sees this from a Republican viewpoint. The one gift from trump that since 2016 is the realization government is not always by folks who have the national interest at heart. Somehow I missed this in the first 69 years of life which included sixteen years of schooling. I have regrets and question the likes of Ted Cruz and wonder if he feels he gave life his best.
Changing the language is key. I noticed the media shift from talking about "price hikes" and "consumer price index", to calling it all "inflation" when Dems came into power and passed the first infrastructure package. It was a deliberate move by corporate media to link government with price hikes by calling it inflation. The Fed's blindness to this is astonishing. Thanks for the term "profit-price-inflation".
Thank you Robert for helping a humble ol' Union tradesman become much more enlightened and educated about what truly is going on here. I follow you regularly now. And thank you also for bringing these realities to us, or at least me, in laymans terms.
No one ever truly hears you. I had the good fortune to hear you (and shake your hand!) in Nov 2008 at a speech you gave to the bank I worked for, plus our clients. You said very clearly “Don’t fire your people.” And….immediately thereafter, the bank fired most of us (commercial real estate lenders). I have followed your public thinking ever since.
I hope Congress hears you, but I’m not holding my breath.
Thank you for always telling the truth, regardless.
(PS: I had to go back to school in my mid-40’s, move to CA, and create an entirely new career for myself. )
Deluged with reporters! That is great news. The downer is these reporters have somehow missed your many columns in Substack and more surprisingly those in The Guardian.
Thank you Dr. Reich for all you do. Sadly, I listened to a segment on MSNBC this afternoon discussing the economy and there was no indication that your message had gotten through, at least to their guest expert, who portrayed a bleak future of multiple rate increases and probable recession. I am far from being an economist, and your message is so clear and understandable and simple that even I get it...I can only imagine your constant frustration. Please keep doing what you do--this week, we seem to be in a phase where the adults in the room are making themselves heard with regard to the rule of law; perhaps your rule of economics will finally be heard and given a fair chance.
Is a copy of your testimony/ filing with the Committee available?
Available online at https://www.youtube.com/watch?v=TRWIvEw-Qq4&ab_channel=OversightCommittee
RR about 17.00: a/k/a https://www.congress.gov/committees/video/house-oversight-and-reform/hsgo00
Thanks difny!
Thanks MT!
Thanks!!! Was just about to go digging..
So many people to convince of this...I'm trying with family and friends!! Good luck to you good sir!