Why Donor Base Matters: Leeches vs. Producers

We all know that there are companies that produce things, like Apple and Google and Microsoft and GM, and there are people who work for them (represented by unions). These companies that produce things are who I’m calling the “producers”: tech and manufacturers and their employees. They are the representatives of our real economy, the ones who make up not only the workforce but the material nature of our everyday lives. Every building you work in, car you drive, road you drive on, and bit of technology that you use are produced by this group.

But I’d like to focus on a different component of our economy: the money handlers. These people take money from one group and distribute it to another. This group is commonly referred to as the FIRE sector: finance, insurance, and real estate. They don’t produce anything: they make all of their money by taking it out of the transaction somehow. They’re like someone who slices a piece of cake owned by one person and then serves it to someone else — all of their wealth consists of the amount of cake they can get to stick to their fingers during the transfer. The difference between the size of the piece of cake they initially collect and the size of the piece of cake that they eventually pass around is their profit: the bigger the cake starts out and the smaller it is when distributed always means more cake for them.

So insurance companies, for example, take your money in the form of premiums and then distribute it to doctors, medical facilities, and pharmaceutical companies in the form of negotiated payments for services. Insurance companies make their money — and they make billions upon billions of dollars every year — by collecting more money in premiums than they pay out in services. So they are motivated to charge premiums as high as the system can bear and pay for as few services as the system will allow. That is where their profit comes from.

The nature of the system motivates insurance companies to pay out very little, of course, and it’s well-known that insurance companies often deny payment not because denial of payment is justified, but because they save money that way: too many people will just pay the bill rather than fight the denial of payment. I worked for the American Arbitration Association briefly in late 1999, and I saw first hand how evil the insurance industry can be as the AAA was moderating a class action lawsuit against Prudential for predatory insurance practices.

That’s the thing with an industry that just sucks money out of a system without producing anything: it only cares about its own short term profitability because its only money comes from there. On the other hand, producers understand that they need educated employees, so they care about education. Producers know how much money they lose from sick workers, so they care about healthcare too. But insurance companies? They don’t benefit at all from an educated populace and don’t care about healthcare except for minimizing payment.

That same kind of thinking extends to the financial sector (in large part) and real estate: they just suck money out of a transaction between parties that are actually interested in and invested in the system as a whole — and I mean as a whole. All of our infrastructure, technology, healthcare, and education are needed by the producers to conduct their business. They may grumble about having to pay for it, but they still need it, and they know it.

So the FIRE sector is essentially a leech on our system that doesn’t benefit from the operations of the system itself. It just needs a host to suck on to stay fat and happy.

During his term in office, Bill Clinton helped deregulate the leeches. Some of the leeches working for Bill then got jobs in the financial sector, working for companies such as Goldman Sachs that were at the center of the 2008 financial crash — who then became major donors to Hillary’s budding Senate career. As we see, the problem is that a leech will just suck and suck and suck and suck until its host is dead, if it’s allowed to do so. It doesn’t matter that the leech will die when the host dies. Leeches are too stupid to understand that. They just want to get as fat and happy as they can as quickly as possible, so all they care about is an unrestricted blood flow.

And that is why we nearly had another worldwide Great Depression in 2008. The leeches ran wild.

So do you understand now why so many people are saying Bernie’s plans are impractical? Bernie’s plans cut out the leeches, and many times the leeches are funding economists and think tanks and even university economic departments.

Under our current system (let’s just look at health insurance), the money flows this way:

  1. Everyday people and businesses pay high premiums to insurance companies.
  2. Insurance companies collect these premiums, usually from employers (cost of administration plus MASSIVE PROFITS)
  3. Doctors, etc., receive payment for services from insurance companies.

Sanders’s plan would collect a 2.2% tax on individuals plus a 6.8% tax on businesses (in PLACE OF premiums) to support this cash flow instead:

  1. Everyday people and businesses pay a relatively low tax (compared to premiums — you are in the top 5% of the population at least if your premiums and the amount of your employer’s payment is more than 8.8% of your own salary).
  2. The federal government collects taxes (cost of administration only, but no profit)
  3. Doctors, etc., receive payment for services from the federal government.

That is why Bernie’s plan will help grow the economy. It will put more money into the pockets of people at the bottom and in their employers’ pockets. It will grow the economy from the bottom up. Obviously: because these are the people who spend their money within the system itself rather than hide it in overseas tax shelters.

Now I know some of you are thinking that big corporations (both leeches and producers) shelter their money too, and they do. But saving money on health insurance premiums benefits small businesses that keep their money here in the US, in the system. Small business accounts for almost 50% of all workers and 60% of job growth since the 2008 crash. The money saved under Sanders’s plans for health insurance and education will benefit a significant number of Americans who live and work in this country and spend their money within its borders. It will help their employers too, because small businesses pay higher premiums (think about that logic for awhile: who benefits from it?). Yes, it will grow the economy.

Education works the same way. The cost of college isn’t just tuition, fees, and room and board. It’s tuition, fees, room and board, and interest on student loan debt (i.e., leech profits).

Just as our health insurance is being run to benefit the insurance leeches, education is being run to benefit banking leeches.

We need the leeches, don’t get me wrong. Health insurance allows us to distribute the risk of serious injury or illness. Loans allow us to buy cars and houses before we’ve had time to save for them, which would be virtually impossible for most of us before retirement. But, the federal government can do the same thing just as well, and we certainly don’t need the leeches running things, because we’ve already seen what leeches do when they have their way. Remember the 2008 financial crash.

Now, the leeches have been supporting the Clintons, including Hillary, and the producers have been supporting Sanders. I’m talking about lifetime donor base. Bernie has every right to make videos like these, and to give speeches like these:

And that’s why I don’t think it’s all that great that Hillary has been raising so much money for downticket Democrats: she’s selling out the whole party to the leeches.

Here’s an overview. Let me start with Bernie Sanders’s donor base. Of his top twenty lifetime donors,

  • 15 are unions. They represent the working and middle class. Producers.
  • 3 are in the tech sector, including Google (his top donor), Microsoft, and Apple. They represent people who actually produce stuff rather than just shift money around. Producers.
  • 1 is the UC system, and educators are well represented on this list in unions as well. Producers.
  • 1 are the trial lawyers, which has for a long time been supporters of the Democratic Party. Service industry.

Now let’s compare that to Hillary Clinton’s top twenty lifetime donors:

  • Her top donor is Emily’s list, an organization working for women’s rights. That’s admirable. Service industry.
  • 2 of her top donors are the UC system and Harvard University. Like the trial lawyers, they have traditionally given to the Democratic Party. Service industry.
  • 2 are major media corporations: Time Warner and 21st Century Fox, the owner of Fox News of all things. Keep in mind that six umbrella corporations control 90% of American media and you’ll understand why news coverage has been so pathetically biased in favor of Hillary Clinton. Producers? Service industry? A little of both?
  • There are 8 large, international, very specific law firms on Clinton’s top 20 list: DLA Piper; Skadden, Arps et al; Kirkland & Ellis; Paul, Weiss et al; Greenburg Traurig LLP; Sullivan & Cromwell; Akin, Gump et al; Ernest & Young (large, multinational audit firm). I have not had the time to research each one specifically, but most of them seem involved in representing the interests of multinational corporations around the world. Trial lawyers as a group don’t appear in the top 20. Leech support.
  • There is 1 manufacturing company: Corning, Inc. Producer.
  • There is 1 entertainment company: National Amusements, Inc. Producer.
  • There are 5 firms from the financial sector, four of them very high on the list: Citigroup, Inc.; Goldman Sachs; J.P. Morgan Chase & Co.;  Lehman Brothers; and Morgan Stanley. Nothing but leeches.
  • And, of course, there are no unions. Workers aren’t represented here.

It’s that last group of five that is the most problematic, but of course we should see the law firms as folded into these and the media giants. As you know, in 2008 the world experienced the largest financial crash in history since the Great Depression. The U.S. Senate’s “Levin–Coburn Report concluded that the crisis was the result of ‘high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.'”

Bottom line: Wall Street caused the crash. But who do we mean by “Wall Street”?

  • Citigroup, Inc., Hillary Clinton’s no. 2 biggest donor: Massive recipient of federal bailout money after the 2008 crash. The people who were the architects of loosening regulations in the late 1990s under Bill Clinton, Robert Rubin and Charles Prince, later found themselves on Citigroup’s board of directors pushing it toward the risky practices that led to its insolvency.
  • Goldman Sachs, Hillary Clinton’s no. 4 largest donor: Profited from the financial collapse and was later fined $550 million by the SEC.
  • J.P. Morgan Chase & Co.: Hillary Clinton’s no. 5 largest donor, which has been involved in a long list of controversies. It was fined $88 million by the Office of Foreign Assets Control in 2012 and was investigated by the Department of Justice for its role in the 2008 financial scandal, which found in preliminary investigations that it violated federal securities laws. The SEC has also been investigating this firm, which is also implicated in the Bernie Madoff scandal.
  • Morgan Stanley: Hillary Clinton’s no. 6 largest donor. This firm also has a long list of actions against it, with the Federal Reserve announcing a Consent Order against the firm on April 3, 2012 for “‘a pattern of misconduct and negligence in residential mortgage loan servicing and foreclosure processing.’ The consent order requires the firm to review foreclosure proceedings conducted by the firm. The firm will also be responsible for monetary sanctions.”
  • Lehman Brothers: Hillary Clinton’s no. 18 largest donor, this firm is now bankrupt and was found guilty of major financial malfeasance in the 2008 financial scandal, for reasons that included gimmicky bookkeeping.

Four of Clinton’s top six donors and a fifth in her top twenty are implicated in the 2008 financial crash and guilty of massive and destructive financial malfeasance. It’s not just that she’s taking Wall St. money. It’s that she’s taking Wall St. money from its biggest criminals. The Clinton campaign is being supported by large donors: 100 donors alone had contributed $195 million to Clinton’s campaign as of February 2016 while the Sanders campaign has been supported by over 5 million contributors — the largest donor base in history — who have averaged gifts of $27 each.

While the middle class is being squeezed, the largest transfer of wealth in history has been taking place, and it is primarily benefitting the top 1%.

Bill Clinton doesn’t take this at all seriously. He doesn’t take the damage caused worldwide by his policies and donors seriously. He recently, glibly said Sanders supporters believe we should “Shoot every third person on Wall St.”

When he said that, some people who have been paying attention thought, “No, every one of them should be shot,” while others thought, “Yes, and jail the other two.”

There is rampant, destructive criminality at the heart of the Clintons’ donor base, and everyone who observes it has a right to be concerned. Dismissing it just makes it worse. That’s been a common pattern within pro-Hillary discourse: to diminish the negative effects of these measurably destructive policies.

Please, NY voters: vote for producers and not for leeches. In other words, vote for yourself. The leeches have caused enough damage.

And in homage to our current political environment, a video:

NaPoWriMo: Day 9

"And did those feet..."
Guest poet: William Blake

And did those feet in ancient time,
Walk upon England's mountains green:
And was the holy Lamb of God,
On England's pleasant pastures seen!

And did the Countenance Divine,
Shine forth upon our clouded hills?
And was Jerusalem builded here,
Among these dark Satanic Mills?

Bring me my Bow of burning gold;
Bring me my Arrows of desire:
Bring me my Spear: O clouds unfold!
Bring me my Chariot of fire!

I will not cease from Mental Fight,
Nor shall my Sword sleep in my hand:
Till we have built Jerusalem,
In England's green & pleasant Land

Great Commentary on the Charlie Hebdo Tragedy

The following video is commentary on the Charlie Hebdo shootings by John Ficarra, editor of Mad Magazine. To me, the most important thing that he said is that whenever Mad Magazine criticized Jerry Falwell or the Roman Catholic Church it assumed a shared set of values: that the worst that would happen is a stern letter from a lawyer (which they love getting). He never feared violent retribution.

I think that’s very important. We don’t critique or satirize things that we hate. We critique them because we want them to be better, because we believe that they should be better than they are — that the people who are the objects of our critique are one of us, so we expect that they should act like it. 

Yes, the Pope is right, people get irrationally angry when you criticize their wives or their mothers or their religion. That comparison is interesting to me, as it seems to assume the immediate emotional reaction is deeply personal and so somewhat unthinking. But all but the criminally insane manage their anger enough to restrain from even wanting to kill anyone over such criticisms, much less actually carrying out a murder.

I think it’s fair to say that most Charlie Hebdo images are satire in poor taste at best, and simply pointless and in poor taste at worst. Freedom of expression means that we have the right to say so. But freedom of expression also means that writers and illustrators have the right to be tasteless if they so choose without fear of violent retribution. Violence as a response is off the table even while we debate the social value of such humor.

Anyway, thank you, John Ficarra, for a thoughtful response to a horrible situation, and my condolences and sympathy go out to the friends and families of those so unjustly killed in France.

Understanding Election Cycles

Combined--Control_of_the_U.S._House_of_Representatives_-_Control_of_the_U.S._SenateI would like us to think about the most recent election in terms of election history over the last 50 years or so.

From about the Korean War to the Reagan years we had a Democratically controlled Congress with the presidency alternating between Democrats and Republicans. We should note that this period was a period of massive economic growth, which on the downside also gave us the Vietnam War (and with it the start of the current national debt) and Watergate.

Then from about 1983 to 1989 the GOP controlled the Senate and the White House while the Democratic Party controlled the House.

From 1989-93 the Democratic Party again controlled Congress while the GOP controlled the White House.

For two years, 95-97, the Democratic Party controlled both houses of Congress and the White House, but then after that, control of Congress switched to the GOP while the Democrats controlled the White House (this is under Bill Clinton).

And then for four years — George W. Bush — we had GOP control of both houses of Congress and the White House (2005-2009).

The Democratic Party took control of both houses of Congress for the next four years, and for two years the Democratic Party controlled Congress and the White House (first two years of Obama’s presidency).

So it is, I think by now, very predictably swinging the other way again. The GOP is regaining control of Congress. If the pattern holds the GOP will hold both houses of Congress and the White House for the first two years of the next President’s tenure, and then will lose it to the Democrats after that. I’m unsure who the Republicans are going to run, or if they even have a viable candidate, so the White House may be a toss-up in 2016 regardless of election history.

So I’d like us to think about the most recent election in terms of recent history. It’s not a major upset. It’s just part of a predictable pattern. And it’s hardly a “mandate” either, since we had the lowest voter turnout in 72 years for this most recent election. I’m unsure what the Democratic Party was doing: I was very aware of their fundraising efforts but (at least here in Ohio) didn’t see or hear a lot of campaigning. Perhaps they expected to lose and are just gearing up for the Presidential year election. I don’t know. I think we had a slightly mobilized GOP voter base and a demoralized and unmotivated Democratic Party voter base.

The most recent election is bad news in a lot of ways, though. The current GOP is unrecognizable to GOP leadership in the 1990s. In the 1990s, the GOP attempted to govern responsibly and minimally, but it did attempt to govern. It even tried to transfer to an opposition president the line-item veto, which would cut pork barrel spending, and to institute term limits while it was in power, so the GOP was willing to limit its own terms in office.

For the last six years, the GOP seems to have become anti-government on principle, except for inflating our already bloated defense budget — but not on actual defense, or supporting our troops, but on defense contractor profits. In the education sector, what you can expect from the GOP are major cuts to education and, even worse, deregulation, which will not promote “innovation” in higher ed, or make schools better, but will just allow the proliferation of predatory practices.

Regardless of the pattern, the next two years are important, and the next Presidential election is meaningful. The lesson that we should learn either way is this: if you don’t like how things are going, get out and vote.

In the meantime, let the buyer beware in higher ed.

Yes there are good economists: Ha-Joon Chang author of “23 Things They Don’t Tell You About Capitalism”

You might want to read this one…

Punkonomics (@DearBalak)

Check out Ha-Joon Chang’s RSA talk about his “23 Things They Don’t Tell You About Capitalism.”  It’s an excellent book that manages to be entertaining while preserving analytical depth and should be read by anybody interested in economics:http://www.youtube.com/watch?v=whVf5tuVbus

Ha-Joon Chang: Economics Is A Political Argument

Posted: 04/09/2014 3:51 pm EDT Updated: 04/10/2014 2:59 pm EDT

http://www.huffingtonpost.com/2014/04/09/ha-joon-chang-economics_n_5120030.html

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Ha-Joon Chang teaches economics at Cambridge University. He is the author of “23 Things They Don’t Tell You About Capitalism.” His new book,“Economics: The User’s Guide,” will be released on May 1, 2014 in the U.K. He spoke recently with The WorldPost South Korea editor and former Oxford Union President Seung-Yoon Lee.

Seung-Yoon Lee: You have said that “economics is a political argument,” that you cannot really separate economics from politics. Even the concept of “free market” is determined by politics. “What is free” is determined by society and…

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