Michael Hiltzik

Academic economists have been warning for years that rising economic inequality in the United States is hampering economic growth and punching holes in the social fabric. (See, for example, Piketty and Saez.) But they’re only professors, after all, so it’s been easy for their views to be ignored by bankers and investment types.

Sounding a broader alarm, they observe that inequality “may also spur political instability….The affluent may exercise disproportionate influence on the political process, or the needs of the less affluent may grow so severe as to make additional cuts to fiscal stabilizers that operate automatically in a downturn politically unviable.” (Examples of such automatic programs are unemployment insurance and food stamps.)

The SP economists acknowledge that some income inequality is necessary in a growing economy, as a spur to innovation and entrepreneurship. But “at extreme levels, income inequality can harm sustained economic growth over long periods. The U.S. is approaching that threshold.” 

The SP brief is filled with hard statistics about the rise in inequality over recent years, including the post-2008 recovery–anemic for everyone except those at the top of the income scale. The economists endorse others’ findings  that funneling a disproportionate share of income to top earners suppresses growth because high-income households spend less of their income, so squeezing moderate- and low-income families forces them into debt and leaves them less to spend, placing sand in the economy’s gears.

They observe that income distribution has a stronger effect on the sustainability of economic growth (that is, less inequality fosters more growth) than any other factor, including national debt, political institutions and trade openness.

What to do about it? The SP economists argue forcibly that improving educational access is the key. If the U.S. work force increases its educational attainment at the level of 50 years ago, when it gained a year of education during the period 1960-1965, potential GDP would rise by $525 billion, a gain of 2.4% over five years. That defines the untapped potential in the American economy. 

They suggest, carefully, a “rebalancing” of the U.S. tax structure, including closing loopholes that chiefly benefit the rich; using tax revenues to finance public investment or spending on health and education, which disproportionately benefits the poor, will lead to “broadening the pathways for our future leaders, to the benefit of all.” The consequences of doing nothing are dire: at its current level, the income gap “threatens the stability of an economy still struggling to recover.”

Is this the harbinger of a new wisdom on Wall Street? That remains to be seen, but it’s the strongest acknowledgment to come from the financial sector yet. SP’s clientele should listen carefully, for as its economists conclude, income inequality is “not just a problem for the poor.”

Keep up to date with The Economy Hub by following @hiltzikm.

Copyright © 2014, Los Angeles Times

Executive Club: Occupy Wall Street still alive in Oregon

welsh jim 125x150 Executive Club: Occupy Wall Street still alive in OregonKeynote :Councilor Jim Welsh on Occupy Wall Street
Oregon Executive Club
Wed. Aug. 6th, 7:00pm
Portland Airport Shilo Inn – 11707 Northeast Airport Way
Bring a friend! ~~ $20 buffet option ~~ no host bar

Jim is a grocery store owner, a Nehalem city councilman, retired military communications analyst assigned to the NSA, family man with his wife,8 children and 16 grandchildren.

It was as a councilman that he first learned of the quiet Occupy Wall Street immigration to Nehalem. So he studied them. Then he talked to them.

And now he’s raising the alarm on Occupy Wall Street. That’s why he’s our speaker this month.

The Occupy Wall Street anarchist planners (isn’t that an oxymoron?) are in Nehalem.

Some names:

- Micah M. White, the conceptual father of OWS. PhD.Travels to Europe to organize Occupy-like protests. Brings back ideas developed there to make trouble here.
- Chiara Ricciardone, married to White. Organized Occupy Istanbul and got PM Erogan mad enough to ask that the US Ambassador (her father!) be recalled.
- Justin Wedes, one of the leaders of Zuccotti Square OWS.
- Priscilla Grim ran the OWS HQ in 2011. Collected so much money she had guards at her apartment.
- Justine Tunney is a self described transgender anarchist, and works for Google.
And the word is out: “Don’t give interviews!”

It’s time these Occupy Wall Street folks get some sunlight, isn’t it?
You really shouldn’t miss this Executive Club.

Join us Wednesday night.

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Occupy gathering offers discussions, performances at Southside Park

The Occupy movement’s takeover of a 1.5-acre tract of land owned by the University of California was touted as a model during the third day of the Occupy movement’s national gathering in Sacramento.

The discussion was one of many held Saturday at Southside Park during the gathering, the movement’s third annual national event. This year’s meeting started Thursday at the Capitol and has moved to several city locations. It is slated to end Monday. The gathering is the offshoot of the larger Occupy movement that started after Occupy Wall Street protests spread nationally about three years ago.

On Saturday, events included a performance of the San Francisco Mime Troupe, a meeting about the rights of the homeless and a gathering at the Capitol.

One of the Occupy movement’s more successful actions was the 2012 takeover of Gill Tract farmland in Albany. The onetime 100-acre farm is managed by the University of California. Proposed commercial development on that land has faced community resistance for more than 17 years.

On Earth Day 2012, Occupy the Farm and urban farm advocates broke locks to a gate at the tract farm and set up an encampment. UC Berkeley said the protesters damaged agricultural research and police removed the encampment a month later. Another encampment and protest followed in 2013. After being ousted by police, movement members returned to the site to plant seeds.

Soon after, the movement switched its focus and sought an agreement with the University of California to use the Gill Tract land. In that agreement, a small portion of 20 acres was set aside for education, research and community use, with oversight by UC Berkeley professor of agroecology Miguel Altieri.

In an op-ed last year to the Daily Californian, Altieri wrote that he believes the project “represents a golden opportunity for all within the university, including the newly created Berkeley Sustainable Food Systems Institute.”

The agreement presently involves a 1.5-acre plot at the Gill Tract farm. Commercial development is slated for 20 remaining undeveloped acres of the Gill Tract land.

“It’s not a lot, but we are building on that,” said Effie Rawlings, a UC Berkeley graduate who was involved in the 1.5-acre takeover.

She hopes the Occupy movement will inspire other encampments, protests and agreements wherever a community resists development of farmland.

“When people ask me how they can help, we tell them to take more land, and ‘talk to your neighbors,’” Rawlings said.

On Saturday, Occupy the Farm passed out baskets filled with crookneck zucchini to those in attendance to show what is being grown on the Gill Tract farm.

“This effort was a success in the sense that we now have an open community project,” Rawlings said. “Where once we had confrontation and had to break locks, we now have a relationship and access.”

Call The Bee’s Edward Ortiz, (916) 321-1071. Follow him on Twitter @edwardortiz.

Occupying the Throne: Justine Tunney, Neoreactionaries, and the New 1%

How do you go from far-left socialist to far-right monarchist in three years?

How do you go from, in 2011, marching in self-declared solidarity with the “99 Percent” holding a banner saying “Give Class War A Chance” to, in 2014, tweeting that liberalism is “Truly one of the worst ideas ever,” calling for a return to aristocracy with techies as the aristocrats and saying the solution to the unemployment crisis is to bring back chattel slavery?

You wouldn’t think it was possible. But Google software engineer Justine Tunney did exactly that.

Most people who’ve heard Justine Tunney’s name at all know her from one of the brief, embarrassing post-Occupy debacles that thrust Occupy Wall Street back in the news this year. As a leader in “Tech Ops” for Occupy, she’d created the @OccupyWallSt Twitter account and OccupyWallSt.org website. In February 2014 she made headlines by unexpectedly reactivating these dormant assets and changing all the passwords on them, hijacking them as a platform for her to broadcast her personal grievances. She blasted LSE professor David Graeber for stealing credit for Occupy—a bold attack, for someone literally tweeting in the first person as @OccupyWallSt. She accused the Occupy movement as a whole of emotionally abusing her for the past three years and of being rampantly transphobic (Tunney is transgender).

Then it got weirder. Tunney’s rants shifted from being against the Occupy movement as a failure of left-wing activism to being against the Left itself. She posted a Storify claiming that the tech industry, as a whole, were “the true progressives” and that the Left were actually “reactionaries” because of negative news stories coming out criticizing the Bay Area tech elite.

As someone who doesn’t know Tunney but had been tangentially involved with the Occupiers in DC, I found her emergence surprising, but not shocking. “Leaderless” activist movements have a tendency to attract self-appointed leaders, and anyone who’s been to a highly activist college like Swarthmore is familiar with the cloud of drama that tends to follow self-appointed leaders.

But I didn’t really get hooked into this story until, in April, she tweeted “Read Mencius Moldbug.”

For the unenlightened, “Mencius Moldbug” is the pen name of Curtis Yarvin, an Internet denizen who created a faux-intellectual movement that stands against modernity in all its forms—based openly on the crankish writings of Julius Evola, 20th century Italian author of Revolt Against the Modern World who was too right-wing for Mussolini. Yarvin earnestly believed that the best thing for the human race was the abolition of democracy and egalitarianism and the reinstatement of social hierarchy.

He wrote about this at very great length, becoming a darling of various Internet personalities—mostly white, mostly male, mostly tech geeks—with a chip on their shoulder against one facet of the modern world or another. Bound together by a common understanding that the superior should rule over the inferior and the concept of equal rights is a mistake, these guys call themselves “neoreactionaries,” and the erstwhile “co-founder of Occupy Wall Street” has apparently found them a warmer home than the Left.

I’ve known who Moldbug was since he was just starting his career of intellectual trolling, showing up as a gadfly on the blog of one of my intellectual heroes, my former professor Tim Burke, to bravely defend South African apartheid against its detractors, just to give you an idea.

I’ve known about the “neoreactionaries” a lot longer, before they were given that name—back when they were just teenagers on the Internet, like me, furious that there were people less intelligent than us who dared tell us what to do.

I never bought into the ideology fully, but I understand its appeal. The vast majority of nerds don’t take it as far as neoreactionaries and decide every single thing about the pre-modern world—hereditary aristocracy, racism, sexism, the whole shebang—needs to come back.

Mostly what you get is people who vaguely identify as “libertarians” who dislike “political correctness” and being forced to pay taxes. And the vast majority of annoying Slashdot libertarians who campaigned for Ron Paul and against Obamacare have no idea who Moldbug is, and the ones who are aware of him tend to be decent enough to get turned off once the defenses of white supremacism begin.

But every social trend has its extremist leading edge. Most libertarians I know are not racists, but libertarian icon Ron Paul certainly had more than his fair share of pandering to racists when building his political base, and the pot-smoking free-love libertarians of Silicon Valley are often unaware how reactionary their political bedfellows are.

Every time a community springs up supposedly based only on mocking the “excesses” of “Tumblr activists,” the moderates who are in it just to make fun of the feminists or anti-racists who are “actually crazy” find themselves joined by “redpillers” (i.e. men’s rights activists) and advocates of “human biodiversity” (a coy euphemism for scientific racism and eugenics).

Living in the modern world is hard. Trying to be a decent person in a diverse, pluralistic society takes work, and there will inevitably be missteps along the way. All of us across the political spectrum believe that democracy has problems, the government has problems, “political correctness” has problems. But even in its most innocent form, as comedian Stewart Lee brilliantly observes, a dislike of “political correctness” and the modern world can take you to some very ugly places very fast—the past was, as only some of us have the privilege of forgetting, a very ugly place.

And the convergence of MRAs angry at feminism and HBD advocates angry at immigration and diversity and libertarians angry at the undeserving poor leeching off of their wealth, the dark heart of the seedy underbelly of the Internet, now has a face and a name. They gleefully call themselves the Dark Enlightenment and give themselves names cribbed from Lovecraftian monsters and revel in adopting as doctrine everything the modern world calls evil.

It’s obnoxious Internet troll contrarianism taken to the nth degree, and it’d be funny if it weren’t scary. It’d be easy to ignore them if the multi-tentacled octopus of the movement didn’t claim as its own the ex-CTO of Business Insider, if their talking points didn’t show up in speeches at Valley “startup schools,” if the men’s rights agenda they champion didn’t end up leading to the occasional mass murder.

And then there’s Justine Tunney, “co-founder of Occupy,” proud Google employee and self-declared defender of the tech elite.

Tunney does not just flirt with neoreactionary ideology, the way self-congratulatory “open-minded iconoclasts” like me did in high school and college. She goes full throttle in her embrace of it, doubles down on it, rejects every “politically correct” rejection of sexism or racism or classism that define the modern world.

She makes bold statements that IQ, law-abiding or -breaking tendencies and political alignment are all genetically determined. That Silicon Valley is moving away from capitalism toward feudalism, with tech CEOs as feudal lords, and this is a good thing. And, in the biggest headline-maker, she submitted a Change.org petition that President Obama should step down and appoint Eric Schmidt as unelected CEO of America, because Google is clearly better run than the government.

On some level, yes, this is just one individual story of crankery. Like many young activists, Tunney took on an unpaid volunteer role in a movement she thought would change the world, got burned out and upset with her fellow activists, and ended up spitefully turning on everything she once stood for. Like many outsized Internet personalities, she thrives on negative attention and is probably intentionally exaggerating her beliefs for clicks.

But Justine Tunney is not just an isolated anomaly. She’s the leading, crankish edge of a broad cultural trend. Justine Tunney is a troll, sure, and she’s not successful enough an example of her class to have lawyers and PR people to tell her to shut up. What that means is she’s willing to express, out loud and in public, what a lot of techies privately think.

“Mencius Moldbug” slowed down the writing to a trickle and returned to relative obscurity in 2013. Most people have never heard of him or his movement, including apparently the editors at Valleywag and Daily Dot when they speculated that Justine Tunney might just be doing Onion-esque satire.

But much like Ayn Rand’s Objectivism was a weird college cult among reactionary anti-hippies in the 1960s only to end up dictating the policy of the Federal Reserve, the neoreactionaries have more influence than we’d like to think.

Peter Thiel, co-founder of PayPal, wrote a famous 2009 essay bemoaning women’s suffrage and saying “I no longer believe freedom and democracy are compatible.” Valley VC Tim Draper, right now, is demanding that the state of California be broken up into six states, so Silicon Valley won’t have to share a government or tax revenue with poor non-techies. And every day we hear another story about a tech company deciding rules don’t apply to them, whether it’s Airbnb and zoning rules or Apple and Google and wage-fixing rules or Aereo and FCC rules.

Nerds tend to talk a big game about standing up for the underdog but, I’m sorry to say, don’t seem to really want a leveling of society, a removal of hierarchies. They bristle against hierarchies of physical strength, of inherited capital, and of “popularity”—but only because those get in the way of a hierarchy of book smarts and technical skill, which is the right and proper hierarchy. The creepy nerd fantasy that remains alive and well in today’s Age of the Nerd Triumphant is not of making peace with the popular kids but taking their throne.

In Tunney’s case, the early warning sign was in January 2014, just before the big Twitter hijacking debacle, when she wrote a blog rant blasting fellow Occupier Justin Wedes for saying that Facebook should be paying dividends to its users—who create all of its actual content, and hence its value—and that they didn’t made them parasitic the same way financiers are on productive companies.

Calling capitalist ownership parasitism is an extreme position, perhaps, but one common enough among Occupiers. What drove Tunney nuts wasn’t the claim that capitalists were parasites but the application of this argument to tech companies. She starts with “This is a very problematic argument to make because it dismisses the labor of software engineers such as myself. Tread carefully if you go there, because you’ll be treading on my pride as a worker,” then goes on to blast Wall Street at length for being monsters and evil but in the same breath defend Mark Zuckerberg as being in a completely different category from the bad kind of capitalist.

Facebook, Google, Amazon and every other creepy company busy turning you into a data point to sell to advertisers—these are, in her words, “the greatest problem solvers in human history,” and to even compare them to those other kinds of rich people is base slander.

This solves the grand mystery, why someone who had such a closeted admiration for hierarchy and power would be a founding member of Occupy in the first place. Tunney was never against the one percent—she just thought that the one percent were the wrong people. The problem was they were tie-wearing investment banker fratboys and didn’t deserve to be on top. Just like in her view government fat cats and Hollywood celebrities and snooty academics don’t deserve to be on top. But tech geeks, with their superhuman ability to manipulate ones and zeroes, do.

This is why, as one of those young millennial whippersnappers who nonetheless identifies with the Old Left more than my own generation, I distrust the message we keep getting about the democratizing power of the Internet and New Media, about how progressive the Millennial Generation is.

I distrust my fellow young nerds. I distrust techies when they bear gifts.

Sure, electronic tools can be used to good ends. So can tools within the financial markets. It’s not any individual tool that’s a problem—it’s that the tools are all part of a deeply hierarchical system. And the people at the top of that system end up thinking they inherently deserve to be there, that they’re better than the rest of us.

There’s one tweet that’s particularly telling from Tunney:

Well, being unpopular because you’re short, or not physically attractive, or a different gender or skin color than people expect—that’s bad. That’s something I agree we should fight against.

Being unpopular because, say, you lock everyone else out of a communal online account because you feel you own it because you set it up? Being unpopular for using your cleverness to skirt regulations and skim huge profits off of other people’s work and other people’s resources? Being unpopular for being a selfish jerk who hurts other people and doesn’t care because you think your technical skill entitles you to immunity from social repercussions?

That’s a whole other kind of unpopularity.

It may be too late for Justine Tunney. But for the rest of us nerds trying to be decent people, that’s a lesson we desperately need to learn.

Occupy activists flock to Sacramento for national meeting

They gathered Thursday under a stand of redwoods near the steps of the state Capitol, a modest mix of young people and the graying veterans of the progressive and protest movements. They came to Sacramento, in the words of one, to reclaim the public square.

Three years after Occupy Wall Street and the larger Occupy movement sprang into the national consciousness with rallies across the country and calls for economic justice, foot soldiers of the grass-roots movement are arriving in Sacramento for the third annual Occupy National Gathering. Previous gatherings were in Kalamazoo, Mich., and Philadelphia.

“All of our grievances are connected,” said Nikohl Vandel of Palm Springs, who is advocating to close the Diablo Canyon nuclear power plant in San Luis Obispo County.

Activists from across the country and as far away as Europe and Australia are meeting in the capital city over the next three days – a rally is planned Saturday at Sacramento’s Southside Park – to mobilize, strategize, share ideas and take the temperature of a movement that has seemingly faded from the limelight of its heady early days.

“Being an activist can be a lonely adventure sometimes. This shows you’re not alone,” said Patricia Shore, who traveled from Philadelphia for the gathering. “We’ve got a lot to learn. We were naive before. This is the bedrock of our country, to be able to do this.”

Three years ago, Sacramento’s Cesar Chavez Plaza was but one site of what then was a growing movement. Hundreds of protesters there took to the streets and to bank buildings with a grab bag of causes, but many railed against wealthy individuals and powerful corporations – the “1 percenters” who Occupiers said wielded financial and political might.

Outrage at Wall Street and growing corporate control birthed the movement, but as demonstrations spread to other cities, including Los Angeles, Oakland and Philadelphia, issues and agendas mutated alongside: Joblessness and homelessness, health care and economic insecurity, among others.

When the movement was at full steam, Occupy activists made their biggest splash locally in protests at UC Davis. The campus became a flash point in November 2011 when students were pepper-sprayed by campus police during an Occupy-style protest of rising tuition rates.

“There was a fluorescence there,” said James Van Orden, 52, a longtime activist from Virginia, of the early Occupy movement. “But you get (intimidated), arrested. A lot of us went back to the underground.” Gatherings like Sacramento’s, he said, help to “maintain and protect Occupy.”

Charlotte Glode, 75, of Roseville, was attracted “to this spontaneous movement called Occupy” at its beginning in 2011. On Thursday, she wore a straw fedora dotted with buttons that read “Occupy Wall Street,” and “U.S. Department of Peace,” a happy warrior for the cause.

But she had plenty of time for soul-searching about her movement, how it should change and what it should look like in the future. Many of the faces in the crowd were older. Nearly all were white. The gathering, per custom, was leaderless by design.

“We’re too white,” said Glode. “I want to see Asians, kids, black people. … We keep calling Occupy dead, but it keeps popping up. But we’re not attracting change-makers. People aren’t curious about what we’re doing. Maybe the problem is that we’re so broad – people don’t know what we stand for.”

One local government scholar was surprised there was a still a movement to protect.

“I thought it had died out,” said California State University, Sacramento, professor Kimberly Nalder, who started the Project for an Informed Electorate on the campus.

Occupy and the issues it raised “resonated with a lot of people who were committed to the movement,” Nalder said. “But the longevity of a movement requires structure. I’m surprised they’re organizing some sort of gathering at all. What’s the old saying? ‘That’s so 2011?’ 

William Underbaggage, a Lakota Sioux environmental activist, implored the 50 or so gathered Thursday to “start the conversation. We’re the students everyone has waited for – to continue to talk about what Occupy started for. When we stand up and speak, we have to be courageous.”

Katharine Dawn said she is taking that message back to New South Wales, Australia. Dawn, 57, grew up in Washington state, but she has been an educator, care worker and activist in New South Wales for the past 40 years. In September, she is leading a direct democracy event inspired by the Occupy movement stateside.

“A lot of us have given up on talking with corporations and governments,” Dawn said. But, she said, “the people have established a platform of solidarity and the fire’s still burning. It’s burning fierce.”


Call The Bee’s Darrell Smith, (916) 321-1040.

• Read more articles by Darrell Smith

To keep grads solvent, take the middleman out of student loans

Occupy Wall Street demonstrators participating in a street-theater production wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York

The mounting student debt crisis could cause serious economic damage to the United States. Rising college costs and declining financial aid at both state and federal levels have significantly contributed to the problem. A good deal of responsibility, however, belongs to the financial institutions that service federal student loans, according to a new report.

Millions of students use loans underwritten by the Treasury Department and granted by the Department of Education to help make college a reality. Once the loan is approved, however, borrowers usually deal with third-party servicers — and that’s where the trouble often begins.

In 2010, the Education Department expanded its Direct Loan Program and contracted many for-profit financial institutions to service and administer the loans. Complaints to the department’s Office of Federal Student Aid jumped significantly.

The Consumer Financial Protection Bureau has documented a wide range of complaints, including payments not showing up in payment histories; processing errors that maximize late fees and penalties; misinformation on how payments are applied to multiple loans; misplaced paperwork that results in missed deadlines, and poor customer service that denies borrowers vital information about flexible repayment options.

Borrowers also complain that servicers often make debt management more complicated instead of helping them manage their debt. Servicers, however, are at fault for far more, according to the new report by Eric Fink, associate professor of law at Elon University, and Roland Zullo, an assistant research scientist at the University of Michigan.

Thousands of college students and faculty march at the State Capitol in SacramentoTheir study shows that servicing firms are playing a major role in the huge increase in student-loan defaults and delinquencies — because the companies have neglected their responsibility to counsel borrowers with distressed loans. By complicating the process and providing misinformation about repayment options, many servicers make paying off student debt an incredibly difficult process.

Since Education Department contracts cap the total revenue a servicer can make on each account, many companies seek higher profits by trying to cut other costs. The result is often a reduced customer-service staff and overall decline in service.

Yet these financial institutions do not shoulder all the blame. The report also blames the Education Department for not providing appropriate oversight and allowing servicers to take on new loans they cannot manage efficiently. Though the department periodically reviews each contractor, the companies are all guaranteed to receive some proportion of new accounts — essentially undermining any demands for performance improvements.

Moreover, because contractors are assessed against each other — rather than against independent standards — the entire floor is lowered with no consequence or penalty for poor performance.

Education Secretary Arne Duncan has recently agreed to conduct an internal investigation of his department’s servicers. But other government agencies have already looked into this — and the results were troubling. The Federal Deposit Insurance Corporation and the Justice Department both investigated one of the largest student-loan servicers, Sallie Mae (as well as Navient, formerly a division of Sallie Mae). The companies were found to be overcharging active-duty soldiers  on their federal student loans. The investigation resulted in a large settlement from both companies.

This helps demonstrate the Education Department’s failure to oversee its contractors effectively. Several senators have also called on the Office of Federal Student Aid to address complaints about Sallie Mae. Senator Tom Harkin (D-Iowa), for example, charges that the servicers are being treated as though they’re “too big to fail.”

To rein in servicers, policymakers should move contract monitoring to the Consumer Financial Protection Bureau. It has no stake in the servicers’ performance.

uspo-texasAnother way to overhaul the program is to cut out the middle man. Administration of the loans could be taken on fully by the federal government and moved to a government agency better equipped to handle it, with a mandate to insist on responsible servicing rather than revenue maximization. In their report, Fink and Zullo recommend moving oversight to the Treasury Department, the Internal Revenue Service or the United States Postal Service.

Their suggestion dovetails with the Postal Service inspector general’s recent comments about expanding into nonbanking financial services, particularly for people underserved by existing banks and other financial institutions.

The agency is logistically well-positioned for loan servicing with its vast network of offices, many on college and university campuses. It has the personnel and infrastructure to assist borrowers with financial transactions.  Unlike current servicers, the Postal Service could offer face-to-face counselors. In addition, the Post Office is already more trusted than banks.

Combating student-loan debt will require reform on many fronts — including tackling college affordability. There are clear, actionable steps, however, that can be taken immediately to ease borrowers’ debt burdens and lessen the resulting drag on our economy.

One crucial missing ingredient, however, is the political will to stop this crisis from getting even worse.

 

PHOTO (TOP): Occupy Wall Street demonstrators participating in a street-theater production wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York, April 25, 2012. REUTERS/Andrew Burton

PHOTO (INSERT 1): Thousands of college students and faculty march at the State Capitol in Sacramento, California, March 14, 2011. REUTERS/Max Whittaker

PHOTO (INSERT 2): U.S. Post Office and Court House in Larado, Texas. Courtesy of LIBRARY OF CONGRESS

How Executive-Compensation Methods Relate to Shareholder Return

Companies that consistently deliver strong shareholder return tend to do a lot of things better than the also-rans. Could one of them be the way they compensate their executives? Probably, but at the least such enterprises pay differently — and sometimes in surprising ways, according to a new Towers Watson report.

This Occupy Wall Street protester in 2011 reflects strong societal sentiment on executive compensation.

This Occupy Wall Street protester in 2011 reflects strong societal sentiment on executive compensation.

The consulting firm examined the executive-compensation programs at 50 companies with the most sustained and consistent outperformance in total shareholder return versus the SP Composite 1500 over the past 15 years.

The outperforming companies “take a range of approaches to differentiate their executive-compensation programs, sometimes in ways that many observers, including proxy advisory firms, would view unfavorably,” Towers Watson wrote in its report.

In addition to proxy advisors, the report could provide food for thought for regulators and investors, which, according to Towers Watson, often have “quite narrow or rigid” views on what constitutes appropriate executive compensation.

At the outperforming companies:

Stock options play a prominent role in long-term incentive (LTI) programs. The overall corporate trend is toward adopting LTI plans, but at high-performing companies, stock options represent about 50% more of the typical LTI mix than is found in the broader market.

“This is one of the most surprising findings,” says Todd Lippincott, North America executive compensation leader at Towers Watson. “Stock options are often singled out as a symbol of short-term management thinking. It’s interesting that companies that actually sustained performance over time have embraced them.”

Target compensation is at the market median, but actual pay is consistently above the median. The median target for total direct compensation was quite similar for high performers and the overall SP 1500, adjusted for company size. But at the former, median actual realizable pay significantly exceeded that of the latter — by 43% among large companies and 28% among small ones. Greater upsides in annual bonuses and LTI plans drove that result. The finding suggests that effective program design can ensure appropriate rewards for high performance. Correspondingly, it raises questions as to whether targeting above-median pay is a prudent practice.

Compensation designs evolve as companies grow and mature. The study reinforced the importance of considering a company’s development stage when determining appropriate executive compensation design. For example, early in their life cycle, high performers used fewer annual incentive plan metrics (often one or two measures) but added metrics as they grew. Similarly, high performers used fewer LTI vehicles earlier in their life cycles — often only one — and added vehicles as they grew. “Often, we see commentary about pay that doesn’t consider the company’s development stage,” says Lippincott.

The findings also suggest, though, that high-performing companies with revenue of $500 million to $2 billion are more likely than their similarly sized competitors to retain the less-complex incentive practices associated with early-stage companies. “In short, they keep it simple and focus on a few key goals,” Lippincott says.

CEOs are a relative bargain. For CEOs, annualized realizable pay as a percentage of a company’s market capitalization — the “sharing rate” — was significantly lower among CEOs at high-performing companies. In short, such companies deliver high value to their top leaders at a significantly lower relative cost to shareholders.

“Beyond reinforcing the notion that pay and performance appear to be well aligned in high-performing companies, our analysis reinforces the value of examining sharing rates,” Towers Watson wrote. “Today, many compensation analyses focus on absolute levels of pay and/or percentile rankings of pay and performance, which can provide helpful insights. However, sharing-rate analyses can provide a clearer picture of the return on a company’s investment in executive compensation.”

Photo: Flickr user David Shankbone, CC BY 2.0. The image was unaltered from the original.

Related

Occupy Movement’s Third Annual National Gathering July 31 – August 4


The US news media currently ignores most events and protests associated with the Occupy Wall Street movement.

Activists from across the nation will be gathering in Sacramento,
California on July 31st, to prove that the campaign which started in New
York City in 2011 is still an effective, inspired movement to promote
social, economic and environmental justice.

Occupiers will be joining together to celebrate their long term
mission to push for political change. They plan to network with other US
and foreign activists, and they say they will continue to educate
themselves on a wide range of issues affecting the United States and the
world.

The Occupy movement has gone international, with active groups on
every continent except Antarctica. From Paris to Melbourne, people are
demonstrating against the status quo and calling for a more conscious
and compassionate global culture.

Previous national conferences were held in St Louis and Philadelphia.
This year many of the same themes will be explored, including the
injustices caused by economic inequality, the prevalence of
government/corporate corruption, the problem of student debt, new
attacks on the rights of indigenous peoples, and the dangers of fossil
fuels and their impact on global climate change.

These are only a few of the topics that will be discussed during Nat Gat 2014 (http://natgat2014.net http://interoccupy.net/…).

Workshops and forums will be held by activists from Move to Amend and Code Pink.
http://interoccupy.net/…
(http://movetoamend.org http://codepink.org.)

Other activities will include anti-racism training, and panel
discussions on Native American sovereignty, labor issues, and
immigrant/refugee rights.

Nat Gat 2014 organizers are planning workshops on the following topics:

1) A Homeless Bill of Rights; 2) Proposed Robin Hood Tax; 3) The
National Fight Against Home Foreclosures; 4) Campaigns For Media Reform;
5) How To Do Video Livestreaming; and 7) Jesus As A Radical Economic
Activist.

Participants also plan to present a film screening, create political
street theater, and stage a musical memorial. They will also sponsor a
spoken word/poetry event.

Nat Gat 2014 has its own Youtube channel. There will be an online
component to the conference which will allow for interactivity with
people following the proceedings on the world wide web.

On August 1st Occupy activists in Sacramento will participate in a protest rally against home foreclosures.

Most mainstream political consultants and media pundits in the US
were critical the original Occupy Wall Street movement. They claimed
that OWS had been rendered ineffective due to the activists’ refusal to
form an organized political party during national elections.

Surprisingly, activists in Detroit have now put out a call for Occupy
movement candidates to run for local political office. This group calls
itself the After Party.

The After Party are also promoting the idea of holding local
community forums to address many of the same issues that will be
addressed at the Occupy National Gathering in Sacramento. (http://afterpartyusa.org).

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Hong Kong’s CEO Signs Up for Trouble

Leung Chun-ying‘s next signature could be a politically-costly one, for both Hong Kong and for China.

Few in the city of 7.2 million imagined that Beijing’s hand-picked chief executive would take their side as China clamps down on pro-democracy forces. Certainly not the estimated 500,000 Hong Kongers who joined a July 1 protest against encroachments on the former British colony’s hard-won freedoms. Still, Leung’s decision to sign a petition against the city’s version of “Occupy Wall Street” is as odd as it is gratuitous — and may further fan tensions in a place already close to tinderbox territory.

Ostensibly, Leung’s signature is aimed at averting mass sit-ins in the city’s financial district. Some business leaders worry “Occupy Central” protests could dampen commerce and growth in a city whose main business is doing business. But is it appropriate for the leader of Asia’s 12th biggest economy to sign what is in effect a political petition? With a swipe of his pen, Leung is effectively signing away any hope the pro-democracy movement has of playing a role in public discourse.

By further dividing a society already on edge, Leung is breathing fresh life into Occupy Central, which until last month seemed to have lost much of its urgency. The desire to pick Leung’s replacement as CEO is only one of the driving forces behind the movement, others being stagnant living standards, skyrocketing housing costs and growing inequality. The group first sprung up in late 2011, when activists set up camp at the iconic HSBC headquarters building.

In the years since, the movement lost focus and notoriety. That was until last month, when Beijing dropped a political bomb on Hong Kong: a white paper laying out tighter controls over the city’s people and government. The ham-handed document labeled Hong Kongers reluctant to embrace China’s Communist leadership “confused or lopsided.” Beijing contends that only a Chinese “patriot” can serve as Hong Kong CEO.

That prompted a massive online democracy referendum signed by nearly 800,000 city residents and the July 1 march (and, more recently, a counter petition against pro-democracy forces). Since then, protest leaders have pledged even bigger demonstrations if Beijing doesn’t back off. And now as Leung does his patriotic bit, he’s tossing fresh fuel onto an already spreading fire.

Even more surprising, key elements of the private sector also are bowing to China — including the Big Four audit firms. Hong Kong’s transparent, first-world banking system and rule of law have made it China’s “green zone.” That reputation won’t last much longer if Beijing succeeds in muddying Hong Kong’s business-disclosure rules and chips away at regulators’ independence from Communist Party bigwigs looking to hide their ill-gotten millions. China is always a difficult balancing act for Western companies (just ask Microsoft, which says it’s being probed by regulators there). Still, it’s chilling to see the Hong Kong affiliates of Deloitte, Ernst Young, KPMG and PricewaterhouseCoopers oppose an Occupy Central movement fighting, at least indirectly, for their continued independence.

The big worry now is that Leung will pressure Hong Kong’s 160,000 civil servants to sign, too. “Of course there would be pressure,” Democratic Party leader Emily Lau Wai-hing told the South China Morning Post. Leung, she said, “can sign it as he likes, but please don’t politicize the civil service.” While Leung denies any such intention, activists worry about a behind-the-scenes effort to force government workers to oppose Occupy Central in order to keep their jobs.

In his efforts to be a good company man for China Inc., Leung may only be fueling the kind of social unrest in Hong Kong that Beijing wants to avoid. If protests swell, it will be too late for China’s leaders to claim they never signed up for this.

To contact the author of this article: William Pesek at wpesek@bloomberg.net

To contact the editor responsible for this article: Nisid Hajari at nhajari@bloomberg.net

Buddy, Can You Paradigm? Occupy’s National Gathering 2014 Meets Sacramento

They’re baaaaaaaack.

Actually, they never left, and to prove it Occupy Wall Street stalwarts are launching the movement’s third national gathering (NatGat3) this coming July 31 through August 3 in Sacramento, California. The first in what has become an annual event was preceded by a July 4 celebration in Philadelphia in 2012 and a second in Kalamazoo, Michigan in 2013.

William Underbaggage, Oglala Lakota native and spokesperson for the Indigenous Environmental Network, will inaugurate the four-day event with a sunrise blessing on Thursday, July 31. This will set in motion a kaleidoscope of activity ranging from speakers corners, custom workshops, the customary “general assembly,” marches, teach-in’s, panel discussions, a Debtor’s Assembly, and a Know-Your-Rights presentation by the National Lawyer’s Guild.

Speaking of Know Your Rights – How Will Sacramento’s Use its Police?

This is not a casual question, and it is an ever-present fear on the part of Occupiers whenever they schedule themselves to show up in large numbers. History shows that intimidation, beatings and arrests follow. For a movement that is remarkable in its use of restraint and in how it follows the Martin Luther King path of non-violent resistance, it is one also remarkable in the amount of force used against them.

That force, and accompanying official overreach, is not standing up to court scrutiny. Not that this is much solace to the hapless Occupiers involved, but it does show that the courts – to the dismay (and expense) of city and state enforcement arms – agree with those who exercise the constitution’s promise of the right of free assembly.

The City of New York recently agreed to part with nearly $600,000 to resolve a lawsuit involving Occupy Wall Street participants falsely arrested by the police for walking on a sidewalk in the East Village on New Year’s Day 2012. Only last year, the city agreed to pay $230,000 as compensation for the loss or destruction of books from the Occupy Wall Street library. One Occupy group, Global Revolution, was also paid $75,000 for lost computer equipment stemming from that same period.

And, it isn’t over in that city, as a class-action claim involving the arrests of some 700 people surrounded and “kettled” while they marched on the Brooklyn Bridge roadway is still wending its way through the court.

Arrests and compensation for those arrests are a little-reported story across the U.S.

In Atlanta, a judge dropped cases against eight occupiers – one of them Democratic State Senator Vincent Fort – because “officers could not identify them.”

In Philadelphia, the City of Brotherly Love, every one of 31 Occupy Philadelphia protestors was acquitted of all charges – obstruction of a highway, failure to disperse and conspiracy. This is being heralded by a number of activist groups as to its important implications for the right and importance of freedom of speech.

In Berkeley, California earlier this year, injured Occupy Cal protestors successfully snared UC-Berkeley Administrators as defendants in a lawsuit centered on police brutality and violation of free speech rights.

Governor Nikki Haley and South Carolina officials, a court mandated, can be sued by Occupiers arrested for living on the S.C. State House grounds. “State grounds are not meant to be used as a public toilet and campground,” a charge disputed by occupiers.

Has a Gauntlet been Thrown Down on Governor Brown’s Desk?

What will it be? Will the governor set in motion an expected parade of arrests for presumed violations of ordinances that are being designed, more and more, to limit when, where and how an American citizen can peacefully protest? Or, will the man once called “Governor Moonbeam” because of his hippy-leftist contemplative nature, be able to reach back in time to reconnect with the younger man who once championed personal freedom?

California’s won’t be the first state capital put to the test (and called on) for how occupiers and protestors are treated. Boise, the Capital city of Idaho, tore down Occupy tents to disperse and restrict their presence in a police action called “Operation De-occupy Boise.”

The U.S. District Court in that state had this to say by way of warning:

Occupy Boise’s tent city is a political protest of income inequality. As such, it is expressive conduct protected by the First Amendment. The State has the authority to regulate expressive conduct and can require reasonable time and place restrictions that are content neutral…

(it continues) … If the State enforces a law in a manner that targets certain speech for restriction because of its content – especially when the target is political speech in a public forum – it will be taken to task. When a restriction is content-based, the State bears an “extraordinarily heavy burden” of showing that the law or its enforcement is the least restrictive means to further a compelling State interest.

The courts and streets are not the only battlegrounds in which Occupy has to fight for recognition and support. In Occupy’s experience, the local press is often complicit in showing Occupy in a accusatory and negative light – if it is ever mentioned at all.

In an article in the Sacramento News Review called “Rising Up, Again: Occupy, 99Rise and activism’s big comeback,” reporter Nick Miller praised the 99Rise activist group for being “leadership based” and compared Occupy as lacking in that. Inexplicably, he asserts that “Unlike Occupy, (the) 99er protests (were) non-violent.”

What sort of message is that to send to the community? Does he have proof that the local Occupy Sacramento group threatens cops, throws bottles, and writes graffiti on Capital bathroom walls? This puts Occupy in the role of having to defend a baseless charge and put itself in the position of antagonizing the press and setting itself up for further criticism.

Enough about Fears – Where’s the Fun?

The four day celebration of Occupy’s ever-evolving life and vitality will open with a ceremony conducted by native American William Underbaggage. It will end on Sunday, August 3, with a San Francisco Mime Troupe non-verbally extolling the virtues of the NSA and a final General Assembly.

Everything in between is designed to further the spirit that came from Zuccoti Park the fall and winter of 2011. Need more details? They can be found here, as well as on the NatGat3 Facebook pages.

Let’s wish Occupy an arrest-free vacation in warm, welcoming California.