Games Billionaires Play

In case you've been off the grid for a few days and somehow missed it, everyone is reeling over these remarks by Secretary of Commerce Howard Lutnick:

“Let’s say Social Security didn’t send out their checks this month. My mother-in-law — who's 94 — she wouldn't call and complain. She just wouldn’t. She’d think something got messed up, and she’ll get it next month.

A fraudster always makes the loudest noise — screaming, yelling and complaining.”

Watch it on video if you don't believe me.

What's a lost month here or there between friends?

It didn't surprise me to find that someone who would suggest it was good sport to withhold Social Security payments just to see what happened is a billionaire.

According to The Street, Lutnick's net worth is between $2 billion and $4 billion.

The very fact that we can be so imprecise and assume it doesn't matter whether it's $2B or $4B is a big part of the problem, by the way.

“A billion here, a billion there, and pretty soon you're talking real money.”

  —Everett Dirksen

At the heart of this—if there can be said to be any heart in this situation at all—is the sad truth that for regular people, people just struggling to get by day to day and month to month, every dollar matters and no such lack of precision could possibly do anyone justice.

The Public Trust, or lack thereof

If you're so insulated from poverty that you start to either forget or just plain not care how hard it is for others of less means, you have no absolutely business being in any position of public trust.

It might not occur to you, dude, even if it's incredibly obvious to ordinary people hearing your remark, but your mother-in-law is probably able to be so cool because either social security is not her only source of money, or else she knows her daughter is married to someone who is mega-rich, so if she runs a little short, she has an obvious person she can call. We're not all so lucky, as it turns out.

Back in the real world

If I don't pay my credit card, does my bank shrug and say, “hey, maybe next month”? If the bank screams at me right away, is that proof it's defrauding me?

What are you smoking, Mr. Lutnick? Such willfully reckless incompetence should be literally criminal.

Folks on fixed income have monthly payments due now, not just “eventually.”

Any payment urgency is not about the character of any senior on Social Security, who typically has paid a lifetime to earn barely enough to survive on the tiny retirement income Social Security grudgingly affords them. It's all about the character of those they rent from and buy groceries from, and what they, these wealthy rent-takers, will do to society's most fragile members if they are not paid on time.

Last I checked, if I miss a single payment on my credit card, I don't even just get a penalty. They almost double my interest rate going forward.

Shame on you for suggesting there is no good reason for someone to insist their promised payment from the government actually be paid at the time promised. Are you trying to wreck the US Government's reputation for paying all its obligations. Social Security is not a gift. It is one of our society's most fundamental social contracts.

Turning the tables

If withholding what's due is your game, Mr. Oblivious Rich Guy, how about let's make it a serious felony to be unkind to or exploit folks who rely on the full faith and credit of the US government. Let's imprison bankers, landlords, and vendors who are ready to foreclose, add penalties, or raise costs or interest for the vulnerable.

Or, maybe…

Let's, you know, tentatively — just to see who cries foul or who says “hey, maybe next month” — deprive billionaires of all assets for a month or two, leaving them out in the world we live in with only the iffy hope of Social Security, just to see if they're comfortable with policies they seem to think so fair.

I bet the billionaires who cry loudest really are frauds.

 

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Author's Notes:

If you got value from this post, please “Share” it.

Also, if you enjoyed this piece, you might also find these posts by me to be of interest:

• Credit Cards: A Tax on “Being Poor”
  Why credit cards are a “private tax,” and thus double-taxation.
• Enough
  Why rich people have no business talking about the pain of taxation.
• Losing the War in a Quiet Room
  History and comparison of shareholder and stakeholder capitalism.

This essay grew from a thread I wrote on BlueSky. I have expanded and adjusted it to fit in this publication medium, where more space and better formatting is available.

The black & white image was produced by making 2 images in abacus.ai using Claude-Sonnet 3.7 and FLUX 1.1 [pro] Ultra, then post-processing to merge parts of each that I liked in Gimp.

The Overtime Loophole

Part 1 | Part 2 | Part 3

President Obama has been talking up the idea of raising the minimum wage. I would certainly support such a move. But until we require the minimum wage to always be a living wage, there's more work to do.

Author's Note: This is the last in a three-part series that began with Breaching the Social Contract and Lien Times for Startups.

“No one who works full-time
should have to live in poverty.”

—President Barack Obama
in his State of the Union speech, February, 2013

People are having trouble making ends meet. There are signs of it all around, but it's not always spoken about. It's embarrassing, after all, and something people often just endure rather than talk about out loud. But shame gave way to outrage recently, and shy silence to loud cries of incredulity, when when McDonald's published a “Sample Monthly Budget”  (see excerpt at right).

What caught they eye of many was the unabashed acknowledgement, right up front, that McDonald's knows they are not paying enough for a person to live on, and that of course their employees will need a second job. That their pay is not a living wage was no surprise to anyone, but that McDonald's was willing to so casually acknowledge that fact was quite striking.

Not only that, but also striking was that the sample budget doesn't even mention obvious costs like food, clothing, and gasoline. And though it mentions health care, it seems to think $20/month is enough. That's not even a full copay for a doctor visit on most plans, much less a payment for the plan itself.

Curiously, the McDonald's 2012 annual report speaks proudly of its employees as part of its McFamily, and of their jobs as “a career.” I asked the all-knowing web what the difference was between a job and a career, and it referred me to Yahoo, which offered lots of talk about careers being things you build, things you work toward, or something that doesn't just pay the bills but is a passion. Merriam Webster defines career as “a profession for which one trains and which is undertaken as a permanent calling.” Hmmm. A permanent calling that doesn't pay enough to live. What could possibly go wrong?

In fairness, though, we probably owe McDonald's a thank you for publishing this budget. It doesn't show them to be much different than I'd imagine many other employers to be. It's just unusually honest and invites public discussion with a new degree of specificity. We don't have to guess what they're thinking. They've spelled things out.

For example, what leapt out at when I saw this budget, was that it acknowledges an ugly reality of modern employment that everyone probably knows about, but that gets far too little open discussion: that Big Business has found a pretty reliable way around overtime laws.

In the McDonald's budget, it's plain that they expect employees to work additional hours to break even. That's the reason for the second job. But just as obviously, they're not offering to let their employee work those hours at McDonald's. Why?

Is it that they're not open that many hours a week? No, McDonald's has a lot of interest in being open late. Is it that they want their employees to be well rested? Well, obviously not. The budget says the company expects their employees will be working long hours, just not for them. So it's not about more hours to rest up.

Antitrust laws notwithstanding, I imagine what's really going on is something like this: Suppose I have a company where I want to employ 100 workers at very little money for 80 hours without overtime. And suppose you do, too. That would violate employment laws and maybe also make a mess of various corporate policies. So I get an idea. I call up my friend Donald, who has a business similar to mine, and we get together to brainstorm about this problem:

Donald has an idea: “How about I cut my workers to 40 hours a week and you do the same? Then I'll hire your 100 workers, also for 40 hours, and you can do the same for me. We'll each now have 200 workers instead of 100, each working at 40 hours instead of 80 hours. Presto. Problem solved: We each get what we want, 8000 hours of work a week, but with no messy overtime for the employees.”

I'm skeptical this is what's intended, but Donald is insistent: “Nonsense,” he says of my concerns, “if they didn't want us to do this, they'd pass a law against it. Instead, they've created an economic incentive for us to do this. Congress must know it happens, so since they don't make a law against it, they must want us to do it.”

“But this Congress doesn't want to pass any laws,” I reply, still not convinced.

“Not my problem,” Donald responds. “I can't be running my business based on made-up constraints that my competitors aren't shackled by. It wouldn't be a fair fight.”

“But what's fair about cheating workers out of overtime?”

Donald scowls at me. “First, it's not cheating. And second, they signed up voluntarily. They could have gone elsewhere if they didn't like the deal you were offering.

“Like where? To your company? You'll offer them the same rotten deal that you suggest I offer. What if everyone does that trick you're suggesting?”

I don't know if a conversation like that ever happened. It might have. If it did, I'm sure there are no records. But, conversation or not, it seems clear to me that the companies engaged in this practice know they are doing it.

If the reason people were taking second jobs was to reach for something extra—not something they need to live, but something nonessential—that might be okay. But the McDonald's budget is a clear admission that these companies know that they aren't paying any kind of living wage. A claim to the contrary wouldn't pass the laugh test.

Employees have no real choice but to work overtime to break even. And since they have to do the overtime with another company, they won't get overtime pay. That's called an externality: These companies get the benefit, and the cost is someone else's problem—the employee's, to be exact. If the companies were paying time-and-a-half for that overtime work, the employee wouldn't have to work as many hours for the same money, or the employee would make more money for working so many hours. That seems the clear intent of the overtime law, even if not the letter of it. But the companies have found a way around it.

So what's to be done? To get the discussion onto something concrete, I suggest a tax. There being no employer to collect the extra money from, I suggest the government can pay it—up to the level of a living wage. Then the government can tax the employers to recover the cost. In that way it's also “revenue neutral” and the anti-tax folks should have nothing to object to.

If a worker is paid so little that he must work 80 hours for two employers, he's due 40 hours of half-time pay because he was only paid a straight wage, not time-and-a-half. At tax time, he gets a credit for the half-time pay. The government then taxes the two employers for their share of the cost, based on the number of hours each employed the worker and how much they paid him below a living wage. For every hour they underpaid him, a bit of tax is held in reserve to cover the very likely situation that he'll file for overtime.

None of this keeps an employer from offering overtime work directly and honestly with their own company. That would avoid the tax. Or they can just pay a living wage. That would avoid the tax, too. I'm not suggesting a tax because I'm fixed on taxing people. It's just a tool of last resort to make sure employers can't find a legal loopholes to hide from what should be their responsibility.

Let businesses find another way to make their money than on the backs of employees. Let them offer good products and services at prices that more fairly incorporate all legitimate costs of those products and services rather than hiding those costs by pushing them onto workers and society.

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Author's Note: If you got value from this post, please “Share” it.

This third part of a 3-part series was originally published August 10, 2013 at Open Salon, where I wrote under my own name, Kent Pitman.

The other articles in this series are:
Breaching the Social Contract (part 1)
Lien Times for Startups (part 2)

Original graphic created from data obtained at motherjones.com.

Tags (from Open Salon): monthly budget, budget, necessities, essentials, paying enough, overtime, forced overtime, unpaid overtime, overtime law, antitrust, antitrust law, collusion, tax, poverty, jobs, employment, mcdonald's, sample monthly budget, loophole, overtime loophole, second job, another job, extra job, make ends meet, making ends meet, business, taxation, politics, social contract, minimum wage, living wage, externality

Lien Times for Startups

Part 1 | Part 2 | Part 3

Author’s Note: It became clear after writing this article and seeing some of the comments that my use of the word “startup” had been misinterpreted. I had not meant to imply anything so narrowly specific as Wikipedia attributes to this term, but rather to speak generally about any newly formed business, however owned, funded, or organized, that has not yet achieved its targeted, financially self-sustaining state. I'll thank you here in advance for respecting my intent and not getting side-tracked by my arguably poor choice of words.

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We hear all the time how with great risk should come great reward. It's used as a way of justifying the flow of dollars to the founders of a company after it succeeds. These courageous benefactors of society have put their heart and soul into the company at great personal risk to themselves and their families, and so when the profits come rolling in, they deserve to share handsomely in the spoils.

Well, isn't that also what the people living at less than a living wage are doing? In my recent article Breaching the Social Contract, I noted that since the minimum wage is not tied to a living wage, minimum wage workers run a daily personal deficit as they struggle to survive. There's risk in that as well. They've put themselves out to make the company successful. Shouldn't they share in those spoils, too?

I'd like to see all workers paid a living wage, not just a minimum wage, but when discussing that idea, I often hear the concern that companies might not be able to turn a profit if wages were required to be so “high.” Funny how seldom one hears that same concern as those same companies think about paying their CEOs millions. “Just a cost of doing business. We'll find a way—we'll have to,” they mutter with steadfast determination, just as our nation's best schools have taught them to do. No problem too difficult for American ingenuity—other than finding a way to treat our most vulnerable citizens with dignity, I mean.

But, okay, suppose we accept that as a premise for this discussion that we need to ease cash flow for startups. Founders of a company, even if they'll later be paid millions, often do take a lower salary in exchange for stock, so let's say it's acceptable for workers in the company to be paid a minimum wage that's below a living wage while the company is getting going.

Even so, the founders are getting delayed compensation for taking their lessened salary. Why not delayed compensation for workers who are taking less than a living wage? We could say that before a dime of profit can be enjoyed by a company's owners, all workers must be making a living wage. After all, if there is profit to be paid out, then by definition there is surplus. So no one can claim that there is no money available for paying a proper wage at last.

And since it's really obvious that employees earning below a living wage have been making the largest sacrifice, risking their very day-to-day survival, it seems to me they should have a priority claim on money that might otherwise be deemed surplus, or profit.

Traditionally, the founders of a company will negotiate profit-sharing details as they form a legal partnership arrangement, but lower-wage workers rarely have the kind of clout needed to participate in that, so they need force of government to require that they're treated equitably.

One way government could help would be to maintain not just an official minimum wage but an official living wage. Everyone would always have to pay at least the minimum wage, but the difference between the living wage and whatever lesser wage they were paying would become a sort of priority debt that the founders were accumulating as they brought their company toward profitability. They could continue to continue to carry this debt while the company got up and running, but all the while there would be a sort of lien against the future profits of the company by the workers who had worked at this startup rate.

It seems to me that the only businesses that would not be able to accept rules like this are ones that could never break even without an ongoing tax on their employees' very ability to survive. If that's how a company is profiting, such businesses shouldn't exist anyway. If the company is profiting in other ways, there's no reason all workers who contributed to that profit shouldn't share at least to the degree of having enough money to live. Once a company is alleging any form of profit, that doesn't seem an unreasonable demand.

And anyway, if the debt to the workers ends up being huge, it certainly calls into question the claim so often heard that all the risk was on the part of the founders. Workers who've made a major sacrifices certainly deserve not to be overlooked.

Think of the decision to pay workers below the living wage as coming with a cost—the requirement to make such people a kind of temporary partner. Or think of it like members of a cooperative, where special priority shares get purchased by working at these lower-than-reasonable wages, a variant of sweat equity. Using one of these ways of thinking, a low-wage worker might finally be able to see their sacrifice as investment, and the founders could feel better that they weren't exploiting their workers.

Of course, if a company continues to lose money, it might legitimately claim that it can only ever afford a minimum wage. Perhaps it would never be able to make good. But that's a risk the founders take as well. And it's unlikely anyone would form a company with the intent in mind of never making money. So everyone is motivated to make things work: The owners will still want to make money. They'll just have to do it on the basis of an honest surplus based on product or service value provided, without the externality of a subsidy imposed on employees too poor or otherwise disempowered to defend the importance of their own contribution.

The ultimate purpose of this would be to assure that a company had not just a moral but a legal responsibility, once profitable, to treat its workers fairly, paying them a living wage. It doesn't require that a company profit—that would require magic. But it just says that profit must never come at the expense of someone's living wage. And it acknowledges risk that has always been there but rarely if ever spoken of—the risk of the day-to-day survival of the company's least well-paid workers.

And, yes, it does occur to me that companies might do creative tricks involving bankruptcy or splitting the sale of assets and debts to wash themselves of this kind of lien. I think that could be legislated around. After all, no one thought it too complicated to write laws that keep human beings from eliminating their education debt. Where there's a will, there's a way. It's amazing how obstructionist the capitalists can be when they think they're about to lose an entitlement to free flow of cash at someone else's expense. But I think we as a society can do it anyway.

Don't worry. In spite of their protests, the capitalists won't find any particular set of rules so onerous that they lose interest in making money. And if they did, others would surely step forward to take their place. It'll just mean whoever's in the game will have to find different and more fair ways to make money. Nothing wrong with that.

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Author's Note: If you got value from this post, please “Share” it.

This second part of a 3-part series was originally published August 9, 2013 at Open Salon, where I wrote under my own name, Kent Pitman.

The other articles in this series are:
Breaching the Social Contract (part 1)
The Overtime Loophole (part 3)

Tags (from Open Salon): profit sharing, profit, cooperative, co-op, coop, partner, duress, inequality of bargaining, bargaining, deficit, unemployment, employment, jobs, cycle of poverty, poverty, penalty, punishment, reward, success, failure, entrepreneurship, entrepreneur, wealthy, poor, rich, inequity, investment, living wage, minimum wage, reward, risk, startup, social contract, politics

Tax Policy and the Dewey Decimal System

I’ve been thinking about the question of how to equitably distribute tax burden in society.

100’s  Philosophy
200’s  Myths & Religion
300’s  Social Science
400’s  Language
500’s  Science
600’s  Technology
700’s  Arts & Recreation
800’s  Literature
900’s  Geography & History

It may help you to know I'm a serious fan of the Dewey Decimal System not just for its ability to classify books in a library, but for the underlying philosophy that led to its categories. I don't even 100% agree with the categories that resulted—I just like the thought process Dewey went through in order to arrive at the categories.

Melvil Dewey conceived of an ordered series of questions that primitive man must have asked as he evolved socially, intellectually, and culturally from a cave dweller to a citizen of civilized society.

100’s  Who am I?
200’s  Who made me?
300’s  Who is the man in the next cave?
400’s  How can I make that man understand me?
500’s  How can I understand nature and the world about me?
600’s  How can I use what I know about nature?
700’s  How can I enjoy my leisure time?
800’s  How can I give my children a record of man’s historic deeds?
900’s  How can I leave a record for men of the future?

When trying to wrap my head around a conceptual space, particularly one that involves a series or evolution of steps, I sometimes find myself reaching for Dewey's list of questions to use as a kind of conceptual scaffolding while I try to devise something better to use. And that's what I found myself doing in this case.

One's economic life, it seems to me, follows a structurally similar evolutionary path to the one Dewey describes. Admittedly, some go to college and some don't. Some start families and some don't. So the details will differ. And even for the shared issues, we might each confront them in a different order. But that was true for Dewey's system, too. So use your imagination and you'll quickly see where I'm going.

We start life with our parents taking care of us, asking questions like this:

Hey, Mom, where‘s my lunch money?
How can I afford an iPod on my tiny allowance?
How am I ever going to afford college?
How can I get a job that pays enough for me to live on my own?

Finally we break free and set out on our own, struggling at first to become self-sufficient:

How can I afford an apartment?
How can I make enough money to buy groceries?
How can I afford to buy new clothes?
How can I pay for transportation to and from work?
How can I afford to pay my college loans?

It's a good feeling to get these items under control, but it's not enough. Yes, paying for the basics is good, but we're still at the point of being hand to mouth, with no margin for error. We still have to plan for contingencies. If we can't handle those, we're only kidding ourselves in our belief that we're self-sufficient:

Heat costs how much? How will I ever afford that?
Hey, my car broke down. I was supposed to budget for that?
How can I afford that medical treatment?
Wait a minute. I can't afford to be unemployed. What now?
While still repaying college loans, I have to re-educate myself?
What if I'm unable to work later in life?

If we're lucky, we do eventually rise above it, but often it takes a long time. Ideally, though, once the above items are mastered, we start to have surplus income and can finally turn our attention from needs to wants:

How can I repay those who have been helping me?
How can I make enough money to afford an iPhone?
How can I make enough money to afford cable TV?
How can I afford to go on a vacation?

At this same time, we may begin nesting:

How can I afford to buy a house?
Can I afford to have a family?
How can I afford to feed, clothe, and house my family?
How can I survive the loss of a job without putting my family at risk?
Can I assure my children go to college?

Or our world may expand in other ways:

How can I help my friends?
How can I afford to contribute to charities?
Can I employ others by by starting my own business?

My point here is to portray life as a continuum from helping ourselves to helping others. And finally now with that in mind I can make some of the points I wanted to make.

First, it should be obvious that the first and most important thing each of us can do to help society is to eliminate society's need to help us. If we are not self-sufficient, we cannot help others.

I mention this because I've sneakily omitted taxation from the above lists of questions. This is because I want to make a point about where taxation is appropriate. It seems obvious to me that presently we tax people before they are able to help themselves. And I just don't see the point of that.

Taxing lower income people delays the time in their lives at which they can be self-sufficient. It also introduces inefficiency into the system: The entire process of taxation expends societal energy that is simply lost productivity. Taxing our weakest members is silly since they'll just turn around and ask for the money back—and the process of getting that money back to them will use up some of the money. Our tax revenue should come only from genuine individual surpluses.

And by surplus I don't just mean that people should have a few dollars left in their paycheck to go to taxes. I mean that everyone should try to fill a savings account with $100,000 for emergencies. If they haven't got that, and most people don't, then they aren't ready for the kinds of major expenses life is sure to dish out—unemployment, illnesses, accidents, retirement. Once they've provided for those, then they can begin generating a surplus.

They should be filling that account before they get to the point where they are allowed to pay taxes. Paying taxes should be seen as a privilege, a status symbol, something people aspire to do as part of their personal growth.

Of course, that might not leave a lot of taxpayers. What a burden that will be on those who are able to take care of themselves. Darn. That's awful. We hear all the time about how the economic system is not a zero-sum game, and how it's possible for someone to get rich and for others to do well. Fine, let's see it played out.

If the wealthy want to be taxed less, they should arrange for society to enrich as many others as possible, in order to have friends who share the “burden” of taxation. If enough people make a decent enough wage to achieve a surplus, it won't be so lonely at the top. If instead the present trend continues, concentrating the wealth in an ever-shrinking portion of the population, those few wealthy should expect to pay a steep price for membership in that elite club, because the rest of us can't afford to help pay the taxes until we can afford to take care of ourselves.

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Click here for more information
about the Dewey Decimal System.

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Author's Note: Originally published February 17, 2009 at Open Salon, where I wrote under my own name, Kent Pitman.

Tags (from Open Salon): taxes open call, jobs, retraining, unemployment, illness, accident, rich, wealthy, wealth, low-income, poor, tax burden, wealth redistribution, income redistribution, medical emergencies, retirement, tuition, college, education, finances, politics