Taxing Dividends or Not

Taxing Dividends or Not

Recall the George W Bush era 2003 tax cuts came with a ten year expiration date, a necessary concession to get the additional votes for passage by Congress. If the expiration date passed without a legislative renewal, then the Personal Income Tax reverted to what it was right before the Bush tax cuts. Negotiations for renewal and adjustments began as the 2013 deadline approached, which created a position of enormous advantage for President Obama. All he had to do was let the thing expire and keep talking if he could not get the changes he wanted. If he had done that, one especially disgusting feature of the Bush tax cuts would have expired with it. The especially disgusting feature favored income earned from corporate dividends with lower tax rates that did not, and still do not, apply to wage income, or social security income or pension income.

A dollar of personal income provides a dollar of spending power without regard to its source or label. Taxing dividends less than wages has no financial advantage funding government, but it cuts tax rates in favor of those with stock portfolios rather the jobs with wages. It makes the federal personal income tax less progressive, or regressive – tax rates fall as incomes rise - and means those with the same income will pay different taxes depending on how they earn their income rather than how much.

In 2003, the first year of the Bush Tax cuts, the tax rate on general dividend income was capped at 15 percent. A worksheet – Qualified Dividends and Capital Gains Tax Worksheet-Line 41 - was added to the Form 1040 instructions with an algorithm that separated dividend income from other taxable income. Taxable income without the dividends was taxed at rates starting at 10 percent and rising to 35 percent for taxable income over $311,950, while dividend income was taxed at 15 percent, or 20 percent lower than the 35 percent applied to the highest personal income. Since the median family income in 2003 was $43,318, the 20 percent rate reduction applied for those with taxable income over $311,950, which means a large savings for the highest incomes. Many years of annual tax savings reinvested in the stock market year by year might be a tidy little nest egg. However, there is no reason to speculate how much it might be. It is not difficult to generate dollar amounts from the tax rate schedules and stock market returns for the years 2003 to 2022.

Suppose a married couple both in the teaching profession in 2003 had a typical median salaries providing a joint taxable income of $110,000.  In the first year a married couple with jobs paying a joint taxable income from wages of $110,000 would pay a federal personal income tax of $21,120. If our married couple had $10,000 of their $110,000 income as dividends their tax bill would drop $1,000 to $20,120 because their marginal tax rate dropped from 25 percent to 15 percent. In 2003 that $1,000 would have purchased just over 39 shares of Microsoft Corporation stock at $25.08 a share, the price on April 1, 2004. On April 1, 2022 the 39 shares had a value of $12,024.09. (1)

Since the tax cut on dividends continues to the present, suppose tax savings on $10,000 of dividends as part of a taxable income of $110,000 continued to be $1,000 a year for 15 years until 2017. For the remaining years after the Trump tax cuts the 15 percent marginal rate dropped to 12 percent leaving the tax savings at $700 a year. If our hypothetical couple continued purchasing shares each April they would add to their 39 shares from 2003. By doing so until April 2022 they would own 497 shares of Microsoft stock worth $153,397.83.

Suppose a married couple both in a professional occupation like law, engineering or medicine where median salaries of $125,000 in 2003 provide a joint taxable income of $125,000. In the first tax cut year 2003 a married couple with a joint taxable income from wages of $250,000 would pay a federal personal income tax of $63,945.17. If $25,000 of the $220,000 was dividend income the personal income tax for 2003 drops by $4,500.00 to $59,445.17. The $25,000 of dividend income presumes a stock portfolio of $1,000,000 and a 2.5 percent yield on dividends would be reasonable for a professional couple of forty years of age. If, as above, our wealthier couple continues to reinvest tax savings on $25,000 of dividend income year by year until 2021 they would own 2,186 shares of Microsoft stock worth $674,084.00: funds they would not have from wage income alone.

In 2003, the 2002 tax rates were lowered for personal income above $46,700, but excluding dividend income. The $46,700 was a little above the median family income at that time. The top rate was lowered from 38.6 percent to 35 percent, where it stayed until 2013. The top rate was 39.6 percent from 2013 until 2017 when the Trump tax cuts cut it to 37 percent. These rates apply to those with high taxable incomes: $311,950 and higher in 2003 up to $628,300 and higher in 2021. It is for these incomes that the tax savings for dividend income over such a long period as 2003 to 2022 can become enormous.

Married couples with personal income ranging above $628,300 can be expected to have a stock portfolio in six or seven figures. Interest rates on savings, CD’s and bonds at historically lows and the steady rise in the Standard and Poors or Dow Jones industrial index, guarantees the well-to-do were putting lots of financial capital into stocks. Dividend income during these years provided a secure and steady return even without considering capital gains, also taxed at the same favorable rate as dividends.

Suppose we figure the tax savings from taxable income of $700,000 and $100,000 of dividend income by assuming a $4,000,000 portfolio at 2.5 percent dividend and ignores any capital gains. The savings in the first year are $20,000 but dips below $17,000 in the later years as marginal rates dropped in the Trump years. Again if we have our hypothetical couple continue purchasing shares with their annual tax savings each April until 2022 they would own 9,871 shares of Microsoft stock worth $3,043,486.45.

Suppose though we talk about the very rich and start them out in 2003 with $2,500,000 in taxable income and $1,500,000 in dividend income. If all the $2.5 million of taxable income paid tax at the same tax rates as wages the personal income tax would be $850,206.50, but with $1,500,000 as dividends the personal income tax drops to $550,206.50, a savings of $300,000 dollars given the tax rate for dividends drops from 35 percent to 15 percent. In 2003 that $300,000 would have purchased just over 11,961 shares of Microsoft Corporation stock at $25.08 a share, the price on April 1, 2004. On April 1, 2021 the 11,961 shares had a value of $3,687,695.91. Again if we have our hypothetical couple continue purchasing shares with their annual dividend tax savings each April until 2021 they would own 148,018 shares of Microsoft stock worth $45,635,408.08.

Dividend tax savings and the advancing inequality they create have brought to America a new term: the Teardown. Tear is a verb with synonyms cut, split, lacerate, rip, sever, cleave, rend, shred or pull apart. In the new United States, the Teardown has become a noun that defines a house about to be demolished and replaced in the same space with another house between four and eight times bigger. In Arlington, Virginia in the 1950’s and 1960’s the Broyhill family built thousands of 1,400 to 1,800 square foot one story rambler and two story colonial homes. They were brick and block three bedroom homes with basements that included necessary plumbing and electricity to finished off, which many families did. In 2003 these homes would sell in the $350,000 range and by 2020 many of them sell for $1,000,000, but they are fast disappearing.

Drive or walk through north Arlington and there will be treeless squares of plowed ground along streets in every neighborhood where the day before there stood a Broyhill rambler, Broyhill colonial or other 1950’s brick and block home. Wealthier neighborhoods have become construction zones with mostly Hispanic crews coming to build 7,500 to 10,000 square foot mansions.  They generally have boxy shapes where the zoning permits an average four-corner height of forty feet. They have finished space in basements and typically three finished above ground floors with six and seven bedroom, six, six and a half baths and two or three car garages. Yard space shrinks but these homes always include elaborate driveways, walkways and landscaping on what space remains.

Some of the builders find a Teardown house for a client and some build for speculation. The replacement mansions sell quickly with little in the way of bargaining and the new owners soon contract with landscaping and housekeeping services to keep houses, lawns and gardens in glorious perfection. Other crews arrive with ladders and lifts to install elaborate holiday lighting or equipment for party events. These “transition” neighborhoods feature a steady stream of UPS, FedEx, and Amazon delivery vans with drivers who scurry up the walkways balancing the days pile of boxes. Lots of cardboard fills recycling tubs.

Arlington County government makes it convenient to study this new trend by graciously putting building and demolition permits in a downloadable text file for importing into an Excel spreadsheet. The files have application and approval dates, project address, and a description of the project along with contractor information. For a file with permit application dates from June 2019 until June 2021 I found 465 records from a filter containing DEMO for demolition and SFD for single family dwelling. Demolition valuations given in the file were typically $10 to $15 thousand.

The buyers of Arlington mansions tend to be empty nest couples moving into their mansions after the kids are gone. No one will ask them if two people need a six or seven bedroom house, it’s impolite and probably embarrassing among the always appearance conscious well to do. No one dares to say these people have too much money, there is no such thing among the well-to-do of the 21^st century.

In his 1946 autobiography national journalist and writer William Allen White wrote that the “decade which climaxed in 1912 was a time of tremendous change in our national life[.]  . . . “The people were questioning the way every rich man got his money.” . . . “Some way, into the hearts of the dominant middle class, of this country, had come a sense that their civilization needed recasting, that their government had fallen into the hands of self-seekers, that a new relation should be established between the haves and the have nots[.]” (2)

American politics no longer supports a constructive discussion of inequality and the well-to-do work to avoid and evade discussion of class, they prefer to advertise their class in silence from their mansions. William Allen White would have no trouble informing these new mansion dwellers they got rich and joined the upper class exploiting tax favors not usable by the working class. Mr. White would not regard their conspicuous consumption as a result of work in a meritocracy. No doubt some of them give a can of corn to the Thanksgiving food drive and donate to water conservation and the fair housing fund, but dividend tax breaks debase work and the people who work for a living. They ought to be smart enough to know the dangers of extreme inequality and take some responsibility for the country’s bitter and angry divisions and the peril it brings.

For the first ten years of Bush tax cuts the wealthy paid a rate of 15 percent on dividends instead of 35 percent at the highest marginal tax rate. While President Obama could have attacked the whole idea as an indefensible attack on working families, he did not. Instead he negotiated an increase of the marginal tax on dividends to 20 percent for 2013 taxable incomes over $450,000 while raising the highest tax bracket on taxable income from 35 to 39.6 percent. For my hypothetical couple with $2.5 million of taxable income and $1.5 million of dividend and capital gains, their tax savings dropped from $300,000 to $294,000. Apparently $6,000 of additional taxes on $2.5 million of taxable income passes for Democratic Party liberalism in 2013. 

(1) All dividend shares and values were, and can be, verified on spreadsheets

(2) William Allen White, The Autobiography of William Allen White,  (NY: The MacMillan & Co, 1946), p. 427-429

 

The Case of Cedar Point Nursery and Fowler Packing Co. v Hassid et. al.

 

The Case of Cedar Point Nursery and Fowler Packing Co. v Hassid et. al

In this case, now before the Supreme Court on a writ of certiorari, Cedar Point Nursery in Northern California does not want to give access to non-employee union organizers to walk across their farm property to speak to agricultural workers, mostly harvesting strawberries. The California Labor Relations Act from 1975, patterned after the National Labor Relations Act, has a regulation allowing access by two designated organizers to agricultural workers up to three times a day – one hour before or after work, another during lunch hour – with access limited to where employees “congregate.” Organizers may enter only for meeting and talking to employees about joining a union. They must give advance notice and wear a badge. Access is limited to no more than four 30 day periods that require advance written notice to the California Labor Board and the employer. All access rights end following a union election. The maximum total of 3 hours a day for a 120 days comes to 360 hours out of 8,760 yearly hours or just over 4 percent of a years’ time.

In the petition their claim reads “The question presented is whether the uncompensated appropriation of an easement that is limited in time effects a per se physical taking under the Fifth Amendment.” A number of irregularities appear immediately. Agricultural employers challenged the access regulation 45 years ago in state courts, which invoked the access rights the Supreme Court established in the 1956 case of National Labor Relations Board(NLRB) v, Babcock & Wilcox, 351 U.S. 105 (1956), which allowed limited access.

The present case started in Federal District Court with Cedar Point attorneys demanding an injunction to ban union access as a taking of property without just compensation. The district judge dismissed them while noting that Cedar Point made no attempt to explain or negotiate a solution to problems resulting from union access, nor identify damages even though an injunction normally requires evidence of irreparable damages. In the parlance of courts they did not “pursue their administrative remedies.” To get jurisdiction in a court a petitioner should be able to explain what they did to exhaust their efforts to find a remedy and settle out of court. In dismissing the case the Judge allowed them to return when they finished doing that. Instead Cedar Point attorneys filed a petition in the 9^th Circuit Court, which also dismissed the case. A petition to the entire 9^th circuit, en banc, was also dismissed.

In accepting the petition for a writ of certiorari the Supreme Court justices glossed over jurisdiction issues and allowed petitioners to convert an access right to an easement, but easements typically require a written and notarized document recorded with a deed just like any other interest in real estate. A property right of value needs a definition. However, the Cedar Point petition does not make reference to a written document or the easement rights it might entail, but just declares “all agree” the access regulations will be an easement right, which allows them to allege union access denies them the right to exclude people from their property and takes from them a valuable property right. Facts in the petition accept that in 45 years of enforcement union organizers have utilized the access rule only 62 times among more than 16,000 agricultural employers. Petitioners present no claim of money damages.

Corporate America has already challenged the right of unions to have organizers come onto their property. The 1956 case of NLRB v, Babcock & Wilcox already mentioned and the 1992 case of Lechmere. Inc v NLRB, 502 U.S. 527 (1992) makes the easement claim unnecessary to end access.  Petitioner claims the case to be a matter for the federal courts and the Supreme Court agreed by taking the case, but justices merely have to cite existing precedent to prevail in the case for Cedar Point.

The unnecessary switch from access to easement suggests that wealthy corporate interests pursued Cedar Point to be a vehicle for them to make broad claims for expanding corporate authority over property rights.  They want us to believe a grave constitutional question exists over a trifling issue of limited access to farm property for two people to distribute union literature. The case shows corporate America determined to halt governmental access to private property to enforce health, safety, environmental regulations and other regulations that might protect the larger society. Below I have reviewed the two relevant cases that help illustrate a Supreme Court from 1956 when justices took some responsibility to enforce the law without regard to persons, which judges take an oath to do. The change of judicial attitudes becomes apparent in the 1992 Lechmere case but the Supreme Court of today shows further decline just by taking this case. Judge for yourself.

In Babcock and Wilcox, a manufacturer of boilers, management cited their no distribution rule for refusing to allow a union organizer to distribute union literature on company-owned parking lots. The Justices dubbed the union organizer as a “non-employee.” The plant was isolated on a 100 acre fenced parcel and employees all drove to the plant, which made the sidewalk from the parking lot to the entrance gate the only safe and practicable way to contact employees. The NLRB treated the denial as an unfair labor practice violating section 8(a)(1) of the NLRA - interfering with employees right to organize a union under section 7. The Court of Appeals reversed because they could not find the NLRA provided for access to property where no employee was involved. The Supreme Court reversed the Appeals Court.

The justices ruled “an employer may validly post his property against non-employee distribution of union literature if reasonable efforts by the union through other available channels of communication will enable it to reach the employees with its message.”

The justices made clear union access would be allowed, or not, as a balance of rights: “Organization rights are granted to workers by the same authority, the National Government, that preserves property rights. Accommodation between the two must be obtained with as little destruction of one as is consistent with the maintenance of the other.”

The justices made it important that the restriction applied to non-employees: “No restriction may be placed on the employees' right to discuss self-organization among themselves unless the employer can demonstrate that a restriction is necessary to maintain production or discipline. But no such obligation is owed non-employee organizers. Their access to company property is governed by a different consideration.”

The justices decided the different consideration for non-employee union organizers resulted because “The right of self-organization depends in some measure on the ability of employees to learn the advantages of self-organization from others. Consequently, if the location of a plant and the living quarters of the employees place employees beyond the reach of reasonable union efforts to communicate with them, the employer must allow the union to approach his employees on his property.”

In the years after Babcock & Wilcox the justices left it to the NLRB to evaluate protected opportunities to make pro-union messages.  In 1966 in a ruling known as Excelsior Underwear the NLRB allowed an employer could provide union organizers with a list of names and addresses of employees in lieu of access as long as it came within 7 days after the Board has scheduled a certification election. In 1988 in a ruling known as Jeans Country the Board declared “In all access cases our essential concern will be the degree of impairment of the Section 7 right if access should be denied, as it balances against the degree of impairment of the private property if access should be granted.”

In Lechmere, Inc. v. NLRB, 502 U.S. 527 (1992) a divided Supreme Court made it all but impossible for union organizers to gain access to corporate property. In this case organizers of Local 919 of the United Food and Commercial Workers put an advertisement in a local newspaper announcing their intention to organize the 200 employees of Lechmere Stores. Later they put handbills on the windshields of cars parked in the employee section of Lechmere Store’s parking lot in Newington, Connecticut. Management enforced its long standing policy against solicitation on their property and demanded they leave and then removed the handbills. Shortly organizers moved to a “grassy strip” between the highway and the parking lot and attempted to get names and addresses of employees through license plates. They filed an unfair labor practice and the NLRB ordered Lechmere to allow the distribution of handbills and a U.S. Court of Appeals agreed. The Supreme Court reversed. Justice Thomas wrote the majority opinion, but three dissented.

Justice Thomas dropped a lead weight on the corporate side of the Babcock and Wilcox balancing test of accommodation between labor rights and property rights. In Babcock and Wilcox and in later Board rulings the NLRB was permitted to devise access practices. Justice Thomas declared that “While Babcock indicates that an employer may not always bar nonemployee union organizers from his property, his right to do so remains the general rule. To gain access, the union has the burden of showing that no other reasonable means of communicating its organizational message to the employees exists.” . . . “Babcock's teaching is straightforward: Section 7 simply does not protect nonemployee union organizers except in the rare case where ‘the inaccessibility of employees makes ineffective the reasonable attempts by nonemployees to communicate with them through the usual channels.' ”

Justice Thomas ignored the balance test as unimportant and claimed the use of the word “reasonable” in the Babcock and Wilcox ruling determined the rights of access, or not. He declared “So long as nonemployee union organizers have reasonable access to employees outside an employer's property, the requisite accommodation has taken place.” That should be the real Babcock test.

The three dissenters objected to Thomas ignoring the phrase “Accommodation between the two [employer and employees] must be obtained with as little destruction of one as is consistent with the maintenance of the other” and seizing on the word “reasonable” instead. They also objected to his abbreviating an important phrase from the end of the sentence he used as Babcock’s teaching. Thomas left off “the right to exclude from property has been required to yield to the extent needed to permit communication of information on the right to organize.”

In Lechmere, Justice Thomas went on to explain physical isolation such as an Alaska mining camp would be necessary before it could be “reasonable” to allow union organizers to engage in “trespassory” access. Justice Thomas made “The union's burden of establishing such isolation is, as we have explained, ‘a heavy one,’ and one not satisfied by mere conjecture or the expression of doubts concerning the effectiveness of nontrespassory means of communication.” Thomas suggested advertising, mailings, phone calls, home visits and as in this case with the grassy strip, signs, would all be effective, he claimed, although without mention of example experience with organizing a union. If nothing else the Thomas opinion makes a petty excuse to obstruct and delay union organizing that bluntly contradicts America’s national labor law that recall includes a written policy explicitly encouraging labor unions.

Unless the physical isolation of the Cedar Point and Fowler operation resembles an Alaska mining camp, then the present Supreme Court should have no difficulty removing the organizers from Cedar Point property and ending the case. Instead, the Supreme Court agreed to a petition for a writ of certiorari by accepting for review that access regulations can be, and should be, converted to taking real property.

I count 31 amicus briefs filed by identified corporate interests like the Chamber of Commerce of the United States, and policy institutes and associations like the Cato Institute funded by unidentified corporate interests. The 31 total includes amicus briefs from labor unions like United Food and Commercial Workers, and the AFL-CIO, along with non-profits and government agencies generally concerned about challenges to essential access to carry out legal mandates.

All the briefs take a super serious tone. The objectors need to be serious so as not to offend pretentious justices who demand to be taken seriously. In contrast the argument of petitioners, and the amicus briefs, that two designated people coming onto farm property at limited and designated times during a strawberry harvest solely as union organizers should be an unconstitutional taking of real property without compensation, is idiotic and preposterous on its face. As an outside objector I do not have to observe a false decorum.

Petitioners case distorts the English language and makes a mockery of the law and the Constitution. At least four justices voted to accept the case, which vote opens them to charges they would rather make law as legislators than settle a case between two parties as they are supposed to do. The Justices have debased and diminished themselves, the courts and the constitution by accepting this case, a Scam and a Sham.

Washington Metro and the Dismal Side of Privatization

Washington Metro and the Dismal Side of Privatization

The Washington Post ran a story November 13, 2019 about an area bus strike, which perfectly and transparently illustrates the dismal side of privatization. [Justin George and Luz Lazo, “Bus Strike in N. Va. Poised to Spread”] It turns out a French company named Transdev, received privatization contracts from the Washington Metropolitan Area Transit Authority, usually referred to as Metro, to run a bus garage and a second one to Fairfax County, Virginia to operate its Fairfax Connector bus service.

Wednesday, the day the story ran, was the 20th day of a strike of 120 garage workers at the Cinder Bed Road garage. Strikers are former Metrobus employees and members of the Amalgamated Transit Workers Union local 689 on strike in protest of wage and benefit cuts by Transdev. The Fairfax Connector bus drivers and members of Amalgamated Transit Workers local 1764 voted to authorize a strike against Transdev with a likely strike date of November 30, the date the current contract expires. The strike of garage workers has shut down 15 routes in Northern Virginia affecting 8,500 riders. A strike at the Fairfax Connector would leave 30,000 without service.

All are unhappy with Transdev pay scales set below Metro employees and with cuts in health care and benefits. Transdev defends their pay as competitive because they are able to fill their positions, but not because the pay is the same. They have further issued the usual company boilerplate claiming to be negotiating in “good faith.”

The Metro director in Fairfax encourages both sides to reach agreement, but sits on the sidelines refusing to be involved. A metro spokesman Dan Stessel excused any responsibility Metro might have telling the Washington Post “This is a labor dispute between the union and Transdev, not Metro, so while we are concerned about the impact the strike has had on our customers, we are not a party to the negotiations and are limited in the role we can play as an outside party.” This transparent and disgusting evasion reflects their failure to write and enforce protections into the contract. The Metro contract calls for Transdev to have a plant to operate the routes during strikes, which they have not done.

Then we learn Metro elected to outsource bus operations to Transdev for $89 million that saves them $15 million over five years by not paying Metro pensions and benefits. They actually admit the savings are from cuts to their workforce. Striking employees complain there is no annual pay scale and they have never had a raise. Health benefits have a $6,000 deductible.

Transdev can expect to pay the same amount for equipment and fuel as Metro. As well a privatization contract adds the cost of a second bureaucracy. Any savings in a privatization contract comes from cutting pay and benefits. Metro director Paul Weidefeld defended privatization: “And there’s lots of examples of things that are run by the private sector that are good. Doesn’t mean its always good.” He did not offer examples, but Metro would not be an example of “things that are good.”

Andy Puzder and the Pandemic Unemployed

 

Andy Puzder, Secretary of Labor drop out and former chief executive of CKE Restaurants, does not like the enhanced unemployed benefits. In a Washington Post op-ed piece [Unemployment benefits are causing a worker shortage” WP June 3, 2020] he claims the Pandemic Unemployment Assistance Program creates a shortage of labor because benefits are too high.

He cites the National Federation of Independent Business (NFIB) June Jobs Report that 32 percent of all owners reported job openings they could not fill. NFIB’s chief economist, William C. Dunkelberg, complains “generous unemployment benefits are making it harder for some firms to recall workers and fill open positions.” Puzder goes on to tell us “Virtually anyone in business will tell you that this $600 per week bonus is discouraging work.” He concludes “It isn’t complicated. If you pay people more to stay home than to work, fewer people will work.”

How true, but irrelevant because his comments only tell us what we already know: millions worked for less than $600 a week before the pandemic and people like Puzder earned millions exploiting them. He expects public policy to be a priority for corporate America and ignores the dangers of the pandemic entirely; it interferes with his privileges. Since $600 a week is $15 an hour for full time work, or $30,000 a year, he demands that public policy must continue to promote salaries so low they convert people into the working poor.

A Good American Family - A Review

David Maraniss, A Good American Family: The Red Scare and My Father, (NY: Simon & Shuster, 2019)

In A Good American Family: the Red Scare and My Father, journalist David Maraniss writes three intermixed narratives: a history of the 1950’s Red Scare mixed with a biography of his parents, Elliot and Mary Cummins Maraniss with their extended family, and a memoir of his own growing up in the 1950’s.

The book opens March 12, 1952 with 34 year old Elliott Maraniss at the witness table in Room 740 of a Federal building in Detroit for an inquisition before the House Un-American Activities Committee (HUAC). A paid government informer has identified everyone subpoenaed as a communist. Elliot Maraniss dabbled in left wing politics for a period at the University of Michigan in the 1930’s and after college into the 1940’s and joined a group of devotees of the Communist Party. Now his son wants to know if there is “an essential radical tradition in America” . . . “propelled by a desire not to destroy but to realize something better and fairer?” Or if not, what?
The book has 26 chapters but these are grouped into clusters of subtopics of four parts. Part one – Watching One Another - includes four chapters devoted entirely to historical material from the Red Scare - Chapter 2, 4, 5, 6 – where we meet Bereniece “Toby” Baldwin, the informer, the operation of HUAC and its Chair, Congressman John Stephens Wood, a soft spoken racist from Georgia. Then readers get the flavor of committee hearings with the inquisition of two uncooperative black men: Attorney George Crockett and a Baptist minister, Charles A. Hill.

In Chapter 3 readers meet Elliot Maraniss growing up in Brooklyn and attending Abraham Lincoln High School from 1932 to 1936. There he encountered some especially progressive educators and socially conscious liberals who introduced people like Baruch Spinoza and Willa Cather. Then in Chapter 7 readers meet Robert Cummins who will become Elliot Maraniss brother in law and David Maraniss’ uncle. The older Cummins went to the University of Michigan three years before Elliot; both worked on the Michigan Daily and shared political views.

Cummins and several of his U of M friends volunteered to serve in the Spanish Civil War and fought to protect an elected government in Spain from fascist Franco. Maraniss devotes chapters 8 and 9 to the Spanish civil war and the sacrifice and death of American volunteers that contrast with a transcript of the testimony of Cummins before the HUAC. Questions ooze with contempt for volunteers since the elected Spanish government carries the communist label.

Chapters 10-12 return to the Maraniss family history. The narrative includes Elliot’s time writing for the Michigan Daily and his term as editor; his meeting Mary Cummins and their marriage in 1939. Here Maraniss provides the HUAC transcript of Bereniece Baldwin citing Elliot Maraniss as a communist in testimony February 29, 1952. Readers learn some family consequences that include immediate firing from his copy desk job at the Detroit Times.

Part Two – In Time of War – covers Elliot’s enlistment in the army and four years of service in World War II. It describes his work as the commander of the 4482nd company, an otherwise all black unit doing repair and salvage for the Quartermaster Corps in the Pacific. The war service narrative includes two significant family letters, one written to his infant son Jimmy describing his views and hopes for him and the future of America.

The first three chapters of Part Three – Trials and Tribulations – return to Red Scare History. Maraniss narrates post war efforts to exploit the fear of communism to suppress dissent and free speech. These chapters include biographical material of members and staff of the House Un-American Activities Committee and some of the events that define the era like the 1949 trial at the Foley Square Courthouse in New York. Red Scare events give background for the appearance of Elliot Maraniss before the HUAC on March 12, 1952. The remainder of the book includes the transcript of the March 12 testimony, the prepared statement he was not allowed to read and related family woes that include the direct consequences of his firings. The consequences involved forced family moves from Detroit to New York to Ann Arbor to Cleveland back to Detroit to Bettendorf Iowa and to Madison Wisconsin over five years. The book finishes with a synopsis of the family’s lives after the last move to Madison, where readers learn life mostly returned to normal and people settled in to live productive and enjoyable lives.

The book makes a good story by itself. It flows along and reads easily and includes notes and a bibliography as an academic history would and which it sometimes resembles. Readers will also feel the personal importance of the narrative to the author, which at times sounds like a resolution of long unfocused thoughts and emotions.

Toward the end at Chapter 22 “A Good American Family” includes a three generation picture of the Cummins-Maraniss clan on the front steps of a house at 1402 Henry Street in Ann Arbor in 1950. For me the picture pulls together the stories in the book as a question: What does it mean to be a “A Good American Family?” Compare the family in the picture to your own or to some generic ideal.

The stories and details in the book repeatedly raise the question “What is patriotism?” The question comes up numerous times. One, in particular, was the testimony of the informer Berenice Baldwin and the relationship she had with her victims and elected officials. Beginning in 1943 the FBI paid her a generous salary to join the communist party in Detroit solely to systematically inform on others she met.

Over nine years she befriended many while attending their parties, baby showers and social events. Then in 1952 she appeared before the House Un-American Activities Committee to betray all of them knowing full well the hardship she would cause. Congressman Charles E. Potter, a disabled war veteran, thanked her for serving her country. He could think of no person “more worthy of a decoration for gallantry than you, Mrs. Baldwin.” Congressman Donald Jackson declared “The American people have no way of expressing directly to you their thanks.”

For them patriotism means obedience to their views delivered with authoritarian power not to be challenged. For others, patriots might believe a paid stool pigeon that betrays friends betrays the ideals the country was founded to sustain. In Good American Family readers will find plenty of opportunities to consider patriotism and what it means.

The Economic Crash from Covid-19

The Economic Crash from Covid-19

A $2 trillion Corvid-19 spending bill is now law, but Congress better hope Trump gets the money pumped into the spending stream fast. There are roughly 17 million working in the leisure and hospitality industry with about 12 million of them working in restaurants or related food services. There are 22 million more working in wholesale and retail trade. The brunt of the layoffs will fall on them and without enough money for people in these industries to keep up rent or house payments, car payments, groceries, utility bills the economy will collapse, disintegrate.

Congress wants the IRS to send $1,200 to each of the furloughed workers. For someone furloughed earning $62,400 a year, $1,200 is one weeks pay. While its better than unemployment compensation its a one time check to pay bills that keep coming.

Apparently, unemployment compensation that currently averages $300 a week gets bumped up to $600 a week in the new survival bill, although it only goes for 13 weeks. Converted to annual pay $600 amounts to a raise from $15,600 a year to $31,200, which will not maintain spending power for millions. It must be extended. Since the unemployment compensation has an operating bureaucracy it would be wise to let those furloughed from a job earning more than $31,200 to produce their last pay stub and send them their net pay as unemployment compensation. That gives a better chance of sustaining buying power and the flow of transactions. It will now apply to the self employed and gig workers, helping to boost spending.

Unless the money handed over to corporations finds its way back into the spending stream the business subsidies will do nothing to stem the immediate potential for decline. If they pay wages to prevent layoffs that would help, but corporations are notoriously slow putting capital back into the spending stream.

The final bill restricts corporate stock buybacks, executive pay and dividend payments, but those were put there to restrict opportunists from capitalizing on the Pandemic; they will do nothing to sustain the economy. The bill does not add anything for those living on Social Security, nor cancel student loan payments, nor pay the health care bills for the uninsured and so these do nothing to sustain the economy.

The disruption creates a netherworld for economic policy but the astonishingly quick action to provide $2 trillion by a normally battling Congress suggests they at least understand they have to do something to avoid a collapse. I can’t imagine this will go well. They will have to do more to support the working class or the economy will go into a steep recession/depression. Good luck to all!

Incompetents at the Fed

Trump and Incompetents on the Fed

Trump keeps telling us how great the economy is doing and how we should all take a bow to his great skill. Well, the economy is doing quite well under the circumstances, for which Federal Reserve Board Chair Jerome Powell and his fellow board members deserve the credit. Trump is just going along for the ride and deserves no credit whatsoever. His abusive comments dashed out on Twitter sound like his usual angry response to anyone who does not follow orders, but the abuse has not deterred Powell from acting in good faith.

By now it is hard to think the Trump base would object to anything he might do after what has already transpired, but if ruining the economy accounts at all, then he might want to question his latest scheme to take over monetary policy. His current nomination for Federal Reserve Board, a women named Judy Shelton, wants to return to a gold standard and eliminate deposit insurance.

As every good capitalist knows the value of money is determined by the supply of it relative to its demand for needed transactions. Obsessives like Ms. Shelton want money to be a supply of something they can pick up and store like gold, but gold is a commodity like cars, clothes and corn flakes, all subject to rising prices.

When money was gold, changes in its price rippled through the economy causing inflation or recession. A gold standard requires giving the public the opportunity to exchange currency for gold at a fixed price making it necessary for the government to stabilize the price of gold by holding large inventories to sell in a shortage, or buy in a surplus. Managing gold inventories was subject to the erratic success or failure of mining ventures and the erratic whim of hoarders and speculators.

If Ms. Shelton would ask herself how the U.S. Treasury could remain ready to exchange gold at a fixed price if the market price of gold goes up, she might notice a problem with a gold standard. If the market price of gold starts to rise there will be speculators to show up at the U.S. Treasury to exchange their currency for an ounce of gold at the fixed price. They will speculate the government will eventually run of gold by having to sell it and have to let the price rise to a new level. Then they can resell their gold at the higher market price.

The need to buy or sell gold to hold the price changes the money supply the same way open market operations change the money supply now, except the buying and selling of gold to keep its price stable cannot be timed to meet the needs of stabilizing the economy.

In 1933, the United States left the gold standard, announcing it would no longer convert dollars to gold at any price. Banks were allowed to designate other assets than gold as reserves, which make it easier to manage the money supply. Other countries followed and in 1971 the gold exchange standard for international payments ended by mutual agreement of the international community.

Using gold as money creates many problems that have to be solved, but has no benefits of any kind. It does not impose discipline because money is always a human decision. Humans decide what it is and how much of it there will be. The Republicans know this, but they are willing to pander to Trump and his conspiratorial base.

A few Republican Senators express worry with a crackpot on the Fed. The Washington Post from February 9, 2020 quoted an insider who says “I don’t think she belongs on the [Fed] Board, but it’s not going to be an apocalypse. She’s not going to change the direction of monetary policy.” Don’t be too sure. Others think Trump is positioning her to be Fed Chair when Powell’s term ends in early 2022.

Republicans have their own agenda and while they are not against a stable well managed economy, it is not first on their agenda for economic policy. Recall the Bush recession of 2008-2010 following the 1999 Banking deregulation, which provided the wealthy and well placed unlimited opportunities for speculation and financial gambling. If the incompetent Trump gets control of monetary policy, it will be much worse than that.