The power and importance of the economic vote!

There are many types of voting.  We are typically focused on the political vote where we go into the booth and cast a ballot.  That is important!   It truly is.  However, we must never forget the other types of voting that we engage in much more frequently, and which are equally important.  In fact, for as long as money from corporations and the uber-wealthy can play an unlimited role, then other types of voting are more important.

Our economic vote is the most important.  Ask yourself this question.  Where do the corporations get the money to influence the campaigns and the elections the way that they do?  They get it from us.

We have some fundamental realities to deal with.  Most of us are frequently faced with a situation where a choice must be made and the deciding factor is “Which can I afford?”.  This is our economic need potentially outweighing our principles.

Another issue is that it is often difficult for the average consumer to identify where their dollars are going.  Who are they going to be supporting when they buy this particular item?  However, it is important to be as aware as possible.

Let’s take a few real examples.  From those examples, we can extrapolate out.  And, let me be clear, though it should be by now.  I support buying from small businesses whenever possible, but the same principles apply.  If you know that a small business or its owner violates the principles that you support, then you have the responsibility to shop elsewhere.  As an individual, you’re unlikely to make much impact on your own.  However, if we all do this, then the power of the group boycott comes into play and the impact can be quite large!  (Look for examples throughout history at the Montgomery Bus Boycott that really launched the Civil rights movement of the 50s & 60s, or the Grape Boycott of the 60s and 70s. or others.)

The Koch Brothers , David and Charles, are well known ultra right wing activists.  They are ridiculously wealthy having fortunes tied to manufacturing, trading, and investments.  Their primary activism has been in funding the astroturf Tea Party movement, PACs and in funding SuperPACs.  But, how would one, as an individual consumer, avoid contributing to them?  A lot of their products are industrial products and very hard to trace.  However, their paper products and a few other products are more readily identifiable and therefore avoidable.  You can easily vote with your dollars and keep some of your dollars out of their pockets, and thus start to defund some of their activities.  So, what products do the Koch brothers continue to make their billions off at the retail level?  Some very well known names.  Brands like AngelSoft, Quilted Northern, Brawnie and Dixie, for example.  A longer list can be found here.

Chick-Fil-A with those oh so yummy, and yet, really unhealthy original chicken sandwiches.  Personally, I can’t shop there.  I refuse to support a business which is so openly bigoted.  I do not have an issue with them being true to their Christian founding and thus choosing to not be open on Sundays.  I found that frustrating a few times since I really wanted a sandwich or their nuggets, but I could respect that choice.  However, upon learning that they openly discriminate against gays, I must choose to vote economically against them, by not giving them my dollars.

Zynga Games makes a lot of games that are very popular.  Even some that look like they might be fun to play with my friends.  And, they’re free!  w00t!  They’ve developed almost every game on Facebook these days, haven’t they?  Castleville, Cityville, Farmville, and their latest big hit Words with Friends.  I enjoy Scrabble ®.  However, because I find the business practices of Zynga to be offensive, I won’t play any of their games.  Why?  Because, when trying to build their business up, in order to attract and retain talent, they gave stock out in lieu of better pay.  Then, when preparing to go public, they demanded that stock back and threatened to fire the employees if they failed to comply.  Because, they didn’t want to create a “Google chef” situation.  I find that to be a deplorable example of greed and an unacceptable abuse of their employees, and will not support them in any way.  Particularly, when if I am going to play games, there are many free alternatives.

These are just some examples.  It is important though to be aware of who and what we are supporting with our dollars.  Pay attention to the companies where you shop.  Always shop locally when possible.  Always avoid the mega-super big box stores when possible!  Always share information with others to make sure that they know about the evils of the businesses that you’re aware of, so that they too can stop contributing to the madness.

The contrary is true also.  When you find out about businesses that are exhibiting the kinds of policies that you expect from a business, then take your dollars there, and spread the word.  We must use our economic vote and social networking as a tool to change the world in which we live.

We have to get the money out of politics, and we have to act directly to achieve that.  However, we have to act indirectly to achieve that also.  This is one of those ways.

Whatever others do, be the change you want to see in the world.

Abe Lincoln paid $1,296 in income taxes in 1864

Fact: The average top marginal tax rate in the US since the institution of the Federal Income Tax in 1913 through 2011 is 59.4%.

Fact: The average top marginal tax rate from 1913 through 1989 was 66%.

Fact: The average top marginal tax rate from 1990 though 2011 is 36.3%.¹

Already we can start to see a problem.  Let’s look closer at these numbers though.  (The income tax did not, as many believe, actually start in 1913 with the passage of the 16^th Amendment.  The first personal income tax in the US was in 1861.)

Yeah, President Abraham Lincoln paid $1,296 in income taxes in 1864.  That’s a copy of the record.  5th line down.

I don’t really care to get into a full history of the personal income tax in America though.  The bottom line is that if we want government services, such as roads, protections, Social Security, Medicare, Veterans services, etc then they have to be paid for.  We long ago left the world where those services can be paid for by tariffs.  A sales tax is a regressive tax that disproportionately impacts the lower income side of the economy.  It cannot be used as the sole funding mechanism for the services that we demand from our shared society.  It could be considered as part of a total taxation system, but even that is not a progressive or fair system.

The income tax rate has varied through the years.  As it should.  When the needs have been higher, the rate has gone up.  With one noticeable exception.  The last 30 years or so, beginning with Reagan, though it really kicked into high gear with Bush the Elder.

From 1913 to 1915, the top rate was 7% then it doubled to 15% in 1916, then jumped up to 67% in 1917 and peaked at 77% in 1918-19.  hmmm … Oh, yeah.  World War I.

It started to come down, slowly as we continued to deal with the debt we had over the next few years until it was back down to 25% in 1925.  Wall Street Crashed in 1929 and eventually, in order to rebuild the economy, the Revenue Act of 1932 raised the top rate to 63%.  With the New Deal, it was raised to 79% to fund the recovery.

Along comes World War II, and the top rate peaks at 94% in 1945!  The Korean war during the 1950s kept it hovering around 91-92%.

It was lowered under Johnson to 77% and then to 70% from 1964 on.  In 1982, the top rate was lowered to 50% where it stayed until ’87.  A brief dip down to 28% from 1988 to 1990 back up to 39.6% under Clinton.  Oh, yeah.  That was when we were projected to have budget surpluses, if you’ll recall.

Now, here’s where the real stupidity hits.  9/11, two wars, and the top marginal tax rate drops!!  It drops to 35%.  Which doesn’t seem like much until you consider that no one is actually paying this top rate.  Mitt Romney, for example, made $21.7 million in 2010 and paid just 13.9% in taxes.  Warren Buffet, in 2010, made $62,855,038 and paid just 17.4% in taxes.  This is largely due to two factors that are not available to most of us.  One, the deductions which are available for charitable giving and so forth make a huge impact.  Two, investment income is taxed at a much lower rate than labor income.

Correlation is not causation, of course, but the economy has tended to do the best when taxes on unearned income were high. Economic growth was great during the 1950s, when dividends were taxed at very high levels and capital gains rates were 25 percent, much higher than they are now. Since 2003, tax rates on unearned income have been at their lowest levels ever, and economic growth has been sluggish.

I am not advocating war here.  I abhor war.  I wish I lived in a world with out it.  I don’t live in that world.  The point though is that in the past we paid for the wars that we were in.  When we needed to rebuild the economy, we paid for it.  We raised taxes.  We didn’t build up the massive and devastating debt that we have now.  We didn’t pretend that higher taxes were devastating to the economy.  Clearly they aren’t.  Look at how we grew through these times.  We didn’t shy away from having the wealthy paying their fair share.  Those who benefited the most from our shared society, our shared growth, have the most to return to our shared recovery, and, in return, will get the most from the shared recovery.  That is how the society works.

So, while there is certainly bloat in the system and efficiency to be found, we need to return to a more reasonable tax rate on the upper end of the income spectrum.  Neither the Democrat nor the Republican wing of the One twoo party is truly arguing for this.  Given our current debt and the bail outs for the wealthy that we recently made, that rate is probably in the neighborhood of 75%.  We need to remove most if not all of the loopholes that have been implemented in the system that allow for the avoidance of taxes by the uberwealthy.  It was the existence of these very loopholes which led to the creation of the Alternative Minimum tax, which was a good idea, but fails to achieve its purpose because it, like so many things, was not updated.

We need to also look at the capital gains rates and other unearned income tax rates.  We’ll tackle that soon.  Suffice it to say for now, that the same holds true.  The periods of most solid growth and lowest debt in our country’s history have not been the periods of lowest taxation.  This is a myth that has the veneer of truth only because the conservative marketing machine has been so effective.  The facts speak for themselves.

¹ – Calculations made from raw data.  Raw data available from The Tax Foundation.

P2P Finance FTW

As many will recall, there was a push to move your money from banks to credit unions last November 5^th.  What was called Bank Transfer Day.  It was, and is, a good idea for a host of reasons that I am not going to get into here.  Suffice it to say that I supported it, and if you didn’t do so then, it is never too late!  By some accounts Bank Transfer Day was quite successful.  The question is, as with so many in our short attention span culture , one of continued success.

However, another way that we can help ourselves in the financial realm is through microfinancing, and particularly peer-to-peer lending. Make no mistake about it.  Finance and politics are inextricably linked for as long as we are living in a capitalist system.  The only questions we have in that regard is how and to what extent.  Do we continue to maintain the course of the last 40 years until we sink or do we alter course now while we might still save the ship?

You may have heard of the Grameem Bank.  In short, it dates back to 1976 when Professor Muhammad Yunus started a system whereby very small loans were made without collateral to the very poor.  His reasoning was that their skills were under-utilized and under-valued.  Through these loans, they would be able to survive and even lift themselves into better circumstances.  (There is much more, including some criticism to know about the history and theory, of course.  You could read more about it using this as a jumping off point.)

The Grameem Bank was the modern beginning to a system that actually goes back hundreds if not thousands of years.  Since then, a number of other organizations have spread the same concept around the world.  Essentially making credit available to people living in a capital driven society to whom that credit would not otherwise be available.  Professor Yundus is a perfect example of finding a way to use the system against itself.  Instead of seeing the problems and throwing his hands up, then walking away, or only providing support and not also providing rehabilitation, he found a way to tweak the system to provide both.

And, the kicker is that he did so using the social structure he was in so that those borrowers are also committed shareholders.  Just like in the credit union model.

Okay, so, what’s the point?

The point is that this is, I believe, another way that we can and should be helping ourselves for the future as well.  “What?”  Yes.  Through microfinancing as a way of investing for the future.  The individual investments, financially speaking, can be small and the returns can be on par with mutual fund averages.  However, the social investment ratio is higher.

If you have been reading along for a while you may recall that in December I posted about “Empower United” .  I thought that they, too, might be part of the way forward.  However, as I wrote, I believe they are just more of the same.  Their marketing materials are high on promoting social values, but that’s gimmick.

Microinvesting via peer-to-peer lending is a particularly good option for the younger generation to get involved in.  A small amount put in now, and done consistently, even a small return will add up through time.  However, even for those of us in our 30s and 40s with expected lifetimes, if we did this now, it could have a fair return, and with the social investment component, it is well worth it!

In a nutshell, here’s how it works.  You choose to invest small amounts of money, as little as $25, for example.  You select which loan to invest in.  The service you are working through will then actually make that loan and handle all of the collection activities, etc.  There are obviously more complexities, right?  Sure.

So, let’s say someone wants to borrow $10,000.  The facilitator bundles each investor together to reach that level.  However, not every loan will be funded.  Because they are investments, people have to actively choose to invest in that particular loan.  As such, if time runs out, that loan might not be made.

Now, there’s obviously the other side of the coin.  The borrower.  Who is borrowing from these microfinance groups?  Typically in the US the borrowers are people who for one reason or another either cannot qualify for a typical loan from a bank or would rather not go to a bank.  This does not necessarily mean that they are a poor credit risk.  Many of the loans in the US are for debt consolidation, for example.

I am focusing on the US, but know that there are similar options around the world.  One of the reasons I am focusing on the US is because the other options I found around the world, you actually had to live in those countries, and since I don’t, I didn’t fully investigate them.  I am aware of the following 4 options available to residents of the US.

Option 1 – Kiva

Kiva is charity only.  There is nothing wrong with this.  In fact, I recommend it.  But, as an investment strategy it has one huge flaw.  There is no financial return on investment.  Still, it is a good system.  It works exactly the same way.  You can select from a variety of loans around the world.  You will have information about the location, person, the need, and the sponsoring organization.  If you are investing a small amount, your loan will likely be used to back fill a loan that has already been made.  As payments come back in, they’re credited to your account.  Eventually, you can choose to be repaid or you can choose to reloan your money out so that it can continue to help others.  Kiva does ask for donations to continue funding their operations.

Option 2 – LendingClub

We bring you a more efficient model.

By allowing our members to directly invest in and borrow from each other, we avoid the cost and complexity of the banking system and pass the savings on to you. Both sides can win: better rates to borrowers and better returns to investors. It’s that simple.

LendingClub is the oldest peer-to-peer lending.  It first appeared in 2008, and appears to have been going strong since.

Option 3 – Prosper

Peer-to-Peer Lending Means Everyone Prospers

Prosper is the market leader in peer-to-peer lending—a popular alternative to traditional loans and investing options. We cut out the middleman to connect people who need money with those who have money to invest…so everyone prospers!

Prosper started in 2006 as an Ebay style loan auction site, but in 2010 changed to a peer-to-peer lending and also seems to have gone strong ever since.

Both LendingClub and Prosper list loans only in the US.  There is really very little difference between the two of them.  Both appear to be solid services, as far as they go.  Both report roughly the same returns, financially speaking.

The one thing that I do not like and that for now there is no getting around is that both Prosper and LendingClub are affiliated with Web Bank.  Now, Web Bank is, as far as I know right now, not the worst of the bunch.

Option 4 – microplace

microplace has the highest social investment ratio, but the lowest financial return.  Still, starting early, and/or including it as part of an overall investment portfolio, it is excellent!  What they say about themselves is:

unleash your portfolio’s potential

Imagine a world in which you couldn’t get cash from an ATM, use a credit card to buy a sandwich or to get insurance to cover medical emergencies. Daily life would become much more difficult without the financial tools most of us take for granted. Unfortunately, 40% of the world lives in poverty with no access to such resources for managing their financial lives.*

You can help change that. Use your portfolio to finance a project that enables the working poor to move from subsistence-level living to managing their money– all it takes is access to basic financial resources. You get to invest in something you believe in while making your money back with interest!

*source: Portfolios of the Poor Jonathan Morduch, Daryl Collins, Stuart Rutherford, Orlanda Ruthven

Again, you invest small amounts, and the payments trickle back in.  Unlike Prosper and LendingClub which boast average returns around 10% and claim riskier possibilities of returns higher than that, microplace returns are projected at 0.5 to 3.5% level.  Also, unlike Prosper and LendingClub, these are all outside of the US.  Again, though, this should not be seen as strikes against microplace.  Only factors to consider in building a balanced approach to a socially responsible and diverse investment approach.

If we are serious about Bank Transfer Day, and we are serious about taking back our country from the tyranny of wealth that has developed, and we are not yet ready for a radical revolution, then we have to be looking for ways to take control of the system to the masses.  This is, I believe, one step in that direction in terms of the financial system.

Let us not forget it wasn’t just banks, but also investment firms, and specifically the removal of Glass-Stegall allowing the blurring of the line between the two that was perhaps the largest single contributing factor to the financial crisis we found ourselves domestically over the last 5 years.  That was the end result of policies of the last 40 years, of course, but nonetheless, it should not be forgotten.  Peer-to-peer lending takes some of the money out of the hands of these same investment firms from both sides.

Necessary disclaimer:  I am not now, nor have I ever been a financial expert or advisor.  This is my opinion based on my research and my opinion.  I stand by it, however, you must make your own decisions.  Should you choose to act, understand that these ARE investments and therefore come with some risk.  The amount of risk varies depending on the specific investment made.

Montana Supreme Court Upholds State’s Century-Old Ban on Corporate Money in Elections

In what will really be a rare move on my part, I am posting this story without much comment from me, except to say, BRAVO Montana Supreme Court!

DATE: December 30, 2011

MONTANA SUPREME COURT UPHOLDS STATE’S CENTURY-OLD BAN ON CORPORATE MONEY IN ELECTIONS

RULING SETS UP FIRST DIRECT CHALLENGE TO US SUPREME COURT’S
JANUARY 2010 DECISION IN CITIZENS UNITED v. FEC

‘A Huge Victory for Democracy’

HELENA, MONTANA — The Montana Supreme Court today upheld Montana’s century-old ban on corporate political expenditures in state elections. The Court’s 5-2 ruling sets up the first direct challenge to the US Supreme Court’s January 2010 decision in Citizens United v. FEC, which equated corporations with people under the First Amendment and swept away longstanding precedent that had barred corporate expenditures in federal elections. Montana’s 1912 Corrupt Practices Act came under legal attack following the Citizens United decision, and Montana Attorney General Steve Bullock has vigorously defended the state’s law in the Montana courts, leading to today’s state supreme court ruling.

Click above to read the full story as reported by FreeSpeechForthePeople.org.  There are links to the actual decision and other relevant documents at the bottom of their story.

Again, bravo Montana Supreme Court!

The problem with Empower United

On 12/22, @99_film tweeted:

Is this what being co-opted looks like? http://dld.bz/a8Dfg WSJ reports on launch of Empower United, a social enterprise for the #99percent

Which lead me to investigate, Empower United (http://www.empowerunited.com/).  I started going through all of the promotional material on the site, then hit something that threw me, and stopped.  I sent an e-mail using their feedback link.  To my surprise, I got a response from Patrick Higgins, Co-Founder and Co-CEO of Empower United.  As a result, I finished going through the website, and I stand by my original decision.

I am not sure that I agree with Audrey Ewell & Aaron Aites assessment that it is an attempt to co-opt the movement.  I am, however, convinced that it is one of two things.  Either it is a group of wanna be 1%s who see an opportunity and are trying to co-opt on the OWS movement, or they are sincere, but do not really get it.

I was going through the plan, and it was all sounding pretty okay.  Take advantage of the system.  Use it against itself.  I’m not necessarily opposed to that in the short term.  Still pretty light on the details.  Basically, combining all of the various MyPoints, rewards, Groupon, LivingSocial, type deals out there into one mass plan.  A sort of massive S&H Green stamps organized for the benefit of “the 99%” (only with a stated goal of a starting point of 1,000,000 people).  They’re going to make it free for members and charge companies $50 per employee to join.  In other words, get companies to pay $50 per employee for access to market.  Then, I got to point 5.  And, I stopped.  Cold.

Wait!  What?  Capital One?  Bank of America?  The same Capital One that received $3.56 Billion in bail out funds?  The same Bank of America that received $20 Billion in bailout funds?  Insert screeching halt sound effects here!  uhm, no.  That’s when I hit the Feedback link and sent them some.  I said to them:

You had me intrigued, though admittedly skeptical. I was wondering and never did see the answer whether you would be taking a cut off the top, or if you would be taking an equal share or how that would work. But, I was following along to see how this was going to work.

You lost me at Services point 5. You want to get in bed with the likes of Bank of America? And you think this is the answer for the 99%? Have you been paying attention?

All of what I read sounded like a viable way to move forward. Take back the system from the “too big to fail’ group, which I am in favor of. But, you apparently think that the way to do that is to get in to bed with them?

It was at that point that I am walking away. If you decide you want to do these things without glomping onto the people who caused the crisis, but still saving the system, then count me in. Otherwise, I see you as part of problem, rather than any part of the solution.

Now, at this point, I honestly had no expectation that I would hear anything more from them.  I figured my Empower United experience was done.  I was surprised when I received the aforementioned response from Patrick Higgins.  His response, in full:

Dear Mr.  ████████,
We at Empower United appreciate your feedback regarding the vision of our company. I write to address some of the concerns you expressed in your email. First, all individuals that handle the day to day work at Empower United will be paid on salary. The salaries of all senior management will be strictly controlled by an outside auditor to make sure that no member of Empower United is in line for a “Golden Parachute”. I would ask you to review the section in our business plan titled Transparency for a full explanation.
Secondly, regarding your concern about the use of the co-branded credit and debit cards. In our business it will be imperative that we keep track of the transactions of our members so their accounts are properly credited. We anticipate difficulty in being able to follow cash transactions. In the early stages of this business it will be necessary to work with the credit card industry to accomplish this task. Please look at long term goal number 8 in the services section regarding Banking, but in the early stages we are going to have to rely on existing infrastructure.
Finally, I want to stress to you that this business model will give all U.S. consumers a seat at the table with all other corporations at no cost to the consumer.
Respectfully

Patrick B. Higgins

Co-Founder and Co-CEO
Empower United