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Archive for the ‘Economics’ Category

Eat The Rich

In 2010 Midterm Elections, Economics, Message/Framing, Plutocracy, Politics on August 31, 2010 at 3:20 pm

Karoli of Crooks and Liars has a good post up this morning about the frightening policies the Republicans are openly boasting about implementing should they take control of Congress after the 2010 elections.

To date, various Republican candidates have endorsed Ayn Rand Fanboy a.k.a. Paul Ryan’s plan to eliminate Medicare, Medicaid, Social Security, and health care reform – all while giving the “deficit savings” to the top 1% in the form of tax cuts. Republican leaders have embraced Michele “Mad Hatter of the Tea Party” Bachmann’s plan to blanket 1600 Pennsylvania Ave. with subpoenas and motions to impeach. And just a couple of days ago, noted toe-sucker Dick Morris boasted that the Republicans will shut down the government over the next two years to block Obama at all costs. Here’s the video:

But these policies are not new. They have just become “mainstreamed” within the Republican ranks. And since they have been getting away with more and more reactionary and regressive policies over the past 30 years, they don’t feel they have to hide the true nature of them as much: they have already created a base that believes that these draconian policies are best for the country – even though they are not in the voters’ economic best interests.

So how did we get here?

Jane Mayer of The New Yorker has penned an excellent expose on the powerful forces behind both movement conservatism and the so-called Tea Party phenomenon. In the article, she pulls the mask off of billionaires David H. Koch and his brother, Charles, who are some of the most prominent behind-the-scenes sponsors of far-right doctrine – no taxes (on the wealthy), no government regulations, climate change denial, among many others.

In reading the article, it is clear that the Koch brothers have spent hundreds of millions of dollars to accomplish just one thing – protect their multi-billion dollar empire. But like most conservatives, they are at least smart enough to realize that these policies cannot be sold to the American public as is. They need to put lipstick on these pigs.

How else could they successfully sell the notion that global climate change is a farce or that smog was beneficial because it would help prevent more cases of skin cancer or that lower taxes on the wealthy and corporations will create jobs, among countless other canards?

They accomplish their selfish ends by whipping the masses into a frenzy about the evil government and its fascist communist socialist Clinton Hillary Obama Hitler Democratic leaders who want to steal your money in order to give it to your lazy neighbor down the street while forcing you to marry the gay man around the corner and throwing you out of work because the multi-billion corporations can’t possibly survive with any regulations.

The Republicans love to scream about “class warfare” in this country whenever anyone suggests leveling the economic playing field, raising taxes on the wealthy (so that they pay their fair share), or providing a social safety net for the unemployed, the elderly, or the infirm, but they are dead wrong about who is being laid siege.

It’s all of us, folks.

It is a war on the bottom 99-percent who have seen their standard of living continue to deteriorate over the last 30 years due to tax cuts for the wealthy that have drained the treasury; deregulation that has led to boom-bust laissez-faire capitalism; laws that have made it easier to ship jobs overseas; and a steady drumbeat of anti-government rhetoric solely designed to shred the social safety net and put that money back into the pockets of the richest 1%.  Here is a handy chart (h/t to Paul Rosenberg of Open Left). Pay particular attention to the pale yellow line.  It shows that the bottom 99 percent of all wage earners have seen almost no real growth in wages since 1973.

But this is nothing new.  As the masterful Frank Rich points out in his latest NY Times op-ed:

All three tycoons [David Koch, Charles Koch, and Rupert Murdoch] are the latest incarnation of what the historian Kim Phillips-Fein labeled “Invisible Hands” in her prescient 2009 book of that title: those corporate players who have financed the far right ever since the du Pont brothers spawned the American Liberty League in 1934 to bring down F.D.R. You can draw a straight line from the Liberty League’s crusade against the New Deal “socialism” of Social Security, the Securities and Exchange Commission and child labor laws to the John Birch Society-Barry Goldwater assault on J.F.K. and Medicare to the Koch-Murdoch-backed juggernaut against our “socialist” president.

Only the fat cats change — not their methods and not their pet bugaboos (taxes, corporate regulation, organized labor, and government “handouts” to the poor, unemployed, ill and elderly). Even the sources of their fortunes remain fairly constant. Koch Industries began with oil in the 1930s and now also spews an array of industrial products, from Dixie cups to Lycra, not unlike DuPont’s portfolio of paint and plastics. Sometimes the biological DNA persists as well. The Koch brothers’ father, Fred, was among the select group chosen to serve on the Birch Society’s top governing body. In a recorded 1963 speech that survives in a University of Michigan archive, he can be heard warning of “a takeover” of America in which Communists would “infiltrate the highest offices of government in the U.S. until the president is a Communist, unknown to the rest of us.” That rant could be delivered as is at any Tea Party rally today.

So how do we combat this? Unfortunately, it will take a sustained effort over decades (and without end) from progressive think-tanks, academia, and grassroots pressure to force our side of the aisle to toughen up and fight back against these powerful interests. And it won’t be easy due to the massive amounts of money and corporate infrastructure at their disposal. But the very future of our country is at stake. Do we give back all of the progressive gains we have made over the past century, or do we stop the forces of evil in their tracks, no matter what the cost?

But more important, we need an entirely new way of engaging with voters. It isn’t enough to point to the Republicans and say how evil and wrong-headed they are. We need to convince voters that our policies and ideas aren’t just right for the country but will benefit them personally.

One way to start is to say loudly and often that the corporations, bankers, Wall Street denizens, crony capitalists, and the wealthy billionaires who finance these right-wing think tanks and Astroturf movements are stealing from us.

They steal our jobs when they ship them overseas.

They steal our wages when they hoard profits and give huge bonuses to their CEOs.

They steal our money when they gamble with it at the Wall Street casinos.

They steal our power when they constantly foster deregulation and cater to corporate interests.

They steal our standard of living when they cut benefits (health care insurance, retirement plans, et al) and promise to slash Medicare, Medicaid, and privatize Social Security.

They steal our health and sometimes our lives when they gut government regulations on food, water, drugs, and workplace safety.

They steal the future of our planet when they deny global climate change and kill environmental policies – all in the name of more profits.

And they steal our dignity when they whip up xenophobic, racist, or homophobic sentiment in an effort to distract from their real agenda by dividing and marginalizing us.

Of course, not all corporations or wealthy individuals are evil, but those billionaires who manipulate the masses to force their selfish agenda on America are no better than thieves and robber barons. It’s not about what’s good for the country with them: it’s about what’s good for their corporate profits and their ability to amass wealth. Noted economist Dean Baker says it best in his recent article on The Huffington Post.

No progressive movement will make any progress until we understand the battle we are fighting. Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost — the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

If it’s a class war they want, then let’s storm the gates and eat the rich for a change.

-SF

UPDATE (09/02): I received an email today from progressive hero, Rep. Alan Grayson (D-FL), that openly attacks David Koch for his crackpot views and his insidious attempts to use his outrageous fortune and dirty political tricks to fool the electorate into supporting candidates who do not have their best interests at heart. Thank goodness for The New Yorker expose: it has put a face on the right-wing movement, making it easier for people to understand the villainy behind their wealthy, corporate, elitist agenda. It’s heartening to see our side using it to their advantage for a change. More of this, please!

Here is the text from Rep. Grayson’s email:

A couple of weeks ago, we suggested that Republican Dan Webster isn’t the real opponent in this campaign. He hasn’t been on the ballot in a quarter of a century. Dan Webster couldn’t beat a pair of fives with a full house.

I said that someone else would be the real opponent. Now we know who that is.

His name is David Koch. He has $17 billion. And he is spending $250,000 of that in attack ads against me this week.

Will you help us fight back against David Koch, by contributing $25 or $50 to our campaign? Every dollar counts.

David Koch is the owner of the second largest private company in America. He made his money the old-fashioned way: he inherited it. Incredibly, his father got rich helping to industrialize and arm the Soviet Union.

Koch lives in New York. He often attends the theater. As far as we know, he has never been to Orlando. But he wants to choose who represents Orlando in Congress. And it isn’t Alan Grayson.

For many years, David Koch was a member of the Libertarian Party. He serves on the board of directors of the right-wing Cato Institute. He is a reclusive billionaire whose political dirty tricks are exposed in the current issue of the New Yorker Magazine. The title of that New Yorker article is “Covert Operations: The billionaire brothers who are waging war against Obama.”

Why does David Koch support Dan Webster? Because Koch wants to cut Social Security. And so does Dan Webster.

David Koch is waging war on President Obama and on us. Will you help to launch our counterattack?

What it comes down to is this: who is going to choose our leaders? Us, or a crackpot billionaire like David Koch?

More on this tomorrow. In the meantime, if you can help, please do. Because if we don’t, then David Koch will buy the House, the Senate and, in 2012, the White House.

Truth,

Alan Grayson

The Unpaving of America

In Deficit Reduction, Economics, Infrastructure, Politics on August 11, 2010 at 3:21 pm

Let’s face it. Paved roads are cool. One doesn’t appreciate the smooth roll of rubber on tar until one has been off the beaten path where a paved road is but a luxury. Take Costa Rica. My wife, daughter and I fell in love with the Central American Switzerland a year and a half ago when we stumbled upon a sleepy beach town of fewer than 200 souls smack on the sand in the Guanacaste region (think Baja) of this beautiful country.

The only challenge in this sun-drenched slice of heaven is how difficult (read: painful) it is to get around. Suffice to say when you arrive at the rental car stand you have two choices:  4-wheel drive or hoof it. As you get within an hour of Playa Negra the roads are, well, challenging. In the rainy season they’re virtually impassable. Residents often hole up or leave in September and October because it’s like god left the sprinkler running and skipped town.

Here’s one of the roads we failed to tackle on our way to a day at the beach:


Fortunately, with the assistance of a dozen helpful Ticos we were hauled out of this jam… two hours later.

When we were visiting Playa Negra the first time, the town was abuzz because one of the biggest happenings in this small town’s history was happening that week. The new Presidente had made a pledge to pave the roads and make Guanacaste more accessible to boost tourism and travel in this stunning section of their country, and we were there to see it happen! During our week-long stay we literally saw the workers grate and pave the main road which originated in San Jose and now, meter by meter, was connecting Playa Negra to the capital and to it’s neighbors to the north.

I know this doesn’t sound like a big deal to you and me, but it’s huge. On our last visit earlier this year, the proprietors of the restaurant and bungalos where we stayed spoke of the remarkable business they were doing at their restaurant from people who could actually make the trip in less than an hour and not slip a disc in the process.

In America today we’re doing the opposite. We are unpaving roads. You heard me right. We are UNpaving roads. In the great states of Ohio, Michigan, Pennsylvania, Alabama, North Dakota and South Dakota roads are literally being unpaved and turned back into the gravel roads our great grandparents would have traveled back in the day when “I can’t drive fifty-five” wasn’t the title of a Sammy Hagar song — it was the limit of the internal combustion engine.

And it’s not just roads that are being downgraded. So is fire prevention, education and light. They’re literally turning the lights out in Georgia and removing streetlights in Arizona, Colorado, Massachusetts and California. They’ve started rolling blackouts of fire stations in Pennsylvania. And Hawaii is furloughing it’s schoolchildren by closing schools 17 Fridays this year.

How can this be happening in America? Two reasons I can think of. First, because of the very real shortfalls in local and state governments which has trickled down from the federal government’s lavish Bush tax cuts and foreign wars for oil. Second, because of the ginned up false fears from the right that government spending in all instances is bad. That government stimulus is Socialism. And that a government which creates jobs for its citizens is Fascist.

Would I rather live in Costa Rica than the United States? Probably not, even though the quality of life in Costa Rica is, in my opinion, superior in ways that are difficult to measure. But would I have ever thought that the roads would be better in Playa Negra than in parts of California? Not in a million years.

-       SH

H/T to Rachel’s eye-opening segment which is here:

The Warren Commission

In Economics, Great Recession, Politics on July 26, 2010 at 2:14 pm

The Donkey Edge was poised to make Treasury Secretary Timothy Geithner the subject of its latest “Profiles In Bedwetting” series, but a funny thing happened on the way to the computer. Geithner put on his Depends, made the rounds of the Sunday morning political talk shows, and supported rolling back the Bush-era tax cuts for the rich. While that has been the official administration position since Obama was a candidate, it was still welcome news.

But the biggest shock was his tacit endorsement of Elizabeth Warren to run the newly created Consumer Financial Protection Bureau (CFPB). Geithner praised Warren as “probably the most effective advocate for consumer protection.” After the bombshell reported by The Huffington Post last week that he was actively campaigning behind-the-scenes against her nomination, this turnaround may sound strangely fishy.

Geithner does right thing, escapes mockery

Interestingly enough, the White House seems to be closing ranks around her as of late.  Just today, Press Secretary Robert Gibbs told reporters that Warren was a “terrific candidate” to lead the CFPB and is “very confirmable” for the job. As Ryan Grim from The Huffington Post mentions in his article on Gibbs:

Establishing that Warren is confirmable is a crucial step toward her nomination.

So why is the White House suddenly laying the pipe for a possible Warren nomination?  Perhaps it may have something to do with the fact that progressive activists and labor unions have gathered over 170,000 signatures on petitions in support of Warren’s nomination over the past week.

And it’s not hard to see why. Warren spoke at Netroots, proving why she would make an excellent choice. She has been and will be a fierce advocate for the middle class, will fight for tougher consumer regulations, and will work tirelessly to end the current cycle of boom-bust economics that 30 years of failed conservative, supply-side theory has wrought.

Putting People First

Simply put, one can learn a lot about a person by the enemies they keep, and Elizabeth Warren has some very formidable enemies. She is opposed by Republicans in both the House and the Senate, as well as by Wall Street and financial lobbyists who rightly fear tighter regulations and more accountability.

CNN’S Political Ticker has more…

Warren, a Harvard professor and chair of the Congressional Oversight Panel of the Troubled Asset Relief Program (TARP), is an outspoken consumer advocate who originally proposed the idea for such a bureau.

[…]

Over the last two years, Warren has been a loud critic of the financial industry and the big banks, blasting what she calls their “tricks and traps” in obscuring the details of financial products.

Whoever gets the job will have enormous power shaping the future path of the agency and what it will regulate. That’s why Republicans who say they’d like to see a more “balanced” candidate are warning against “naming an activist to this position,” as Sen. Bob Corker, R-Tennessee has said.

Trust me, if Bob Corker is against her, then she must be doing something right.

And if there was one thing we learned at the Netroots Nation conference last week, it is that our movement is growing in numbers and influence. Even the right-wing sewer, Politico, has taken notice, publishing a piece this morning about the Netroots’ growing influence in Democratic politics. Here is an excerpt from Charles Mahtesian’s article:

In five years, the annual convention of progressive bloggers known as Netroots Nation has grown to become one of the premier events on the Democratic calendar.

It’s also turned into a leading event on the Democratic candidate circuit, a showcase of political talent and a prerequisite for aspiring politicians who are looking to catch the attention of some of the most important and influential voices on the left — and hopefully tap into the vein of Internet fundraising.

The halls of the Rio Hotel here in Sin City aren’t exactly choked with pols running for office. But it’s not uncommon to find candidates from some of the top races in the nation quietly huddling with bloggers and activists over coffee, holding small fundraisers or showing up at after-hours events where they can get acquainted with online activists who stand to have a powerful effect on their races by virtue of their blogging platforms and broad, politically-inclined readerships.

But the two thousand activists who met in Las Vegas last week can’t do it alone. It takes all of us to fight the good fight. Although not a politician, Elizabeth Warren must be confirmed as the first head of CFPB because she will put her stamp on the agency, setting the tone for years to come. And we want someone in there who will fight for us for a change.

It will take enormous and sustained grassroots pressure to do it, but signing this petition from our friends at the Progressive Change Campaign Committee (PCCC) is a good first step.

-SF

Taking Care Of The Lesser People

In Deficit Reduction, Economics, Social Security on July 17, 2010 at 5:35 pm

There’s a new meme that has gripped official Washington over the past few months. I’ve got a fever, and the only prescription… is more deficit reduction.

More Deficit Reduction

But instead of ringing a cowbell, our Very Serious Leaders are trying to lead us to slaughter, using this deficit “crisis” to justify their ultimate goal of shredding the social safety net. Naomi Klein talked about this in her seminal book, The Shock Doctrine, and it seems her theory of disaster capitalism has infected current inside-the-beltway thinking when it comes to Social Security.

We are already starting to see the signs of a trumped-up crisis, fed by lies and misinformation about Social Security’s current “insolvency.” We are told that Social Security is now running at a deficit, that it won’t be around when those currently paying in retire, and that skyrocketing life expectancy rates have put a burden on the system, among many others.

But now for something completely different: the truth.

Zombie Lie #1: Skyrocketing Life Expectancy Rates Burdening The System

Nancy Altman has a beautiful takedown of this right-wing, zombie lie in her book, “The Battle For Social Security: From FDR’s Vision To Bush’s Gamble” (h/t to Susan Gardner of DailyKos):

For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching age 65 live thereafter. Here the numbers are not as dramatic. In 1940, men who survived to age 65 had a remaining life expectancy of 12.7 years. Today, a 65-year-old man can expect to live not quite three years longer than he might have in 1940, or 15.3 years beyond reaching age 65. For women, the comparable numbers are 14.7 years beyond age 65 in 1940; 19.6 years in 1990.

Zombie Lie #2: Social Security Is Running At A Deficit

While the traditional media is falling all over itself to report that Social Security will run at a deficit starting this year, this stat only takes into consideration the primary deficit due to depressed payroll taxes because of almost 10-percent unemployment. It fails to include the interest payments that the Social Security Trust Fund continues to earn. Here’s a handy chart from the Center on Budget and Policy Priorities (CBPP):


Those who tout Social Security’s impending doom (any day now… really… I’m not kidding… we’re completely screwed) conveniently forget that Social Security is currently running trillions in surplus. According to the CBO, old age and disability trust funds are projected to grow from $2.5 trillion in 2009 to $3.8 trillion in 2020.  Here’s another handy chart:

Zombie Lie #3: Social Security Won’t Be Around When I Retire

The Social Security Trust Fund is not estimated to run out of money until 2037, and even then tax income would allow payment of about 75% of benefits through 2083.  Kathy Ruffing of CBPP has more:

  • In 2009, the combined Old-Age, Survivors, and Disability Insurance Trust Funds — commonly known as Social Security — ran a surplus of $137 billion, meaning that the trust funds’ income (from taxes and interest) exceeded their spending (for benefits and administration) by that amount.
  • The Congressional Budget Office (CBO) expects the surplus to slip to $91 billion in 2010 before rising again — reaching $137 billion in 2015.
  • The Office of Management and Budget (OMB) echoes CBO’s projections for the next two years and expects a more robust recovery in the system’s finances thereafter.

Certainly, there are ways to ensure Social Security remains solvent well into the rest of this century, but the fixes to the system do not need to be draconian. Noted economist Monique Morrissey of the Economics Policy Institute explains (emphasis mine):

Poll after poll has shown that voters are willing to pay higher taxes to preserve and strengthen Social Security. But most of the gap can be closed without raising taxes on ordinary workers—just those with earnings above the taxable earnings cap of $106,800.

For example, gradually restoring the cap to again cover 90% of earnings for workers, and eliminating it altogether on employer side, would be enough to shrink the long-term deficit by 69%, while still preserving the link between these workers’ contributions and the benefits they receive.

Raising or eliminating the cap on taxable earnings is appropriate because almost all the earnings growth (and the growth in life expectancy) in recent years has been at the top.

So why the sudden rush to slash Social Security benefits? Our old friend, Paul Krugman, has an answer:

There has always been a sense in which [Republican] voodoo economics was a cover story for the real doctrine, which was “starve the beast”: slash revenue with tax cuts, then demand spending cuts to close the resulting budget gap. The point is that starve the beast basically amounts to deliberately creating a fiscal crisis, in the belief that the crisis can be used to push through unpopular policies, like dismantling Social Security.

So let me get this straight, Republicans ran up huge deficits by cutting taxes for the very wealthy, waging two wars in Iraq and Afghanistan, and drove the financial system to the brink of ruin through their deregulation mania. And now the middle class, the working class, and the elderly need to foot the bill? Perhaps this is what Alan Simpson was referring to when he was talking about “taking care of the lesser people.”

We have been told that Social Security is “the third rail of American politics,” but if politicians of either party use lies, misinformation, and a trumped-up crisis to justify slashing this very important and beneficial program, then perhaps they deserve to be electrocuted (politically speaking). Unfortunately, I fear that this political “electrocution” Obama and the rest of his Democratic followers face will be largely self-inflicted, once again by their zeal to prove their conservative bonafides.

-SF

UPDATE: The Trustees of the Social Security and Medicare trust funds released their annual report on August 5th. It shows that Social Security will remain solvent through 2037, at which time “…tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084.”

In terms of Medicare, the report finds (emphasis mine):

The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act” or ACA). Despite lower near-term revenues resulting from the economic recession, the Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year…

UPDATE 2: Our friends at CBPP are also reporting that Social Security keeps approximately 20 million Americans out of poverty, including 1.1 million children. But who cares? It’s much more fun to invent a crisis so that we can privatize Social Security and use the money to gamble at the casinos on Wall Street. Right?

Beck U 2: Hope (In The Name Of Wealth)

In Economics, Idiocracy, Message/Framing, Propaganda on July 15, 2010 at 11:46 am

The pseudo-intellectual beatings continue

First rule of Beck U: you do not learn at Beck U. Second rule of Beck U: you do NOT learn at Beck U. Third rule of Beck U: even if you yell “stop,” the pseudo-intellectual beating continues.

Last night’s faux intellectual was David Buckner, adjunct assistant professor of psychology and education at the Teachers’ College of Columbia University. Now I’m sure Mr. Buckner is an excellent instructor in his field of expertise, teaching courses in “Functions of Organizations” and “Special Topics in Organizational Psychology,” but when it comes to economics, Buckner’s visual aids and real-life examples make the “Dick and Jane” books look like “War and Peace.”

But what can you expect when passing out on the Glenn Beck’s show is your biggest claim to fame (no doubt from the overwhelming stench of the bullshit Beck was peddling).

Last night’s “lesson” started with a rambling seven-minute diatribe (I swear to God, it was seven minutes) about a horrible experience he once had with a gate agent in a busy airport terminal. The punchline of the story seemed to be that we needed to ask ourselves the “why” and not the “how” to get to our “purpose” in life.

The lesson I learned was that the persnickety Buckner would make a horrible traveling partner.

At the ten-minute mark, Buckner finally launched into his kindergarten-esque lecture on economics (pitched to the intellectual level of the average Beck viewer). Terms such as prosperity, profit, efficiency, investment, and corruption were thrown around without much context, meaning, or thought.

Buckner also kept referring to the “rules of the playground” throughout the lecture. But there was no explanation of the “why” or the “purpose.” So, I thought I would help Buckner out.

The school bullies (Republicans) constantly frighten (fear-monger) the other children (the middle and working class) with threats and lies (socialized medicine, the free market is self-correcting, the wealth will trickle down… I could go on) in order to steal their lunch money (tax cuts for the wealthy) so that they can spend it on candy (yachts, mansions, hookers and blow).

But perhaps I missed Buckner’s point.

Buckner then spent the last ten minutes riffing on planned versus market economies and how any government “investment in America” has no value (why do conservatives hate America so much?), creates monopolies that can’t compete in the global marketplace, and results in a transfer of wealth that creates a loss of control, freedom, and efficiency. In short, hope = purpose = wealth creation.  Yeah, I’m confused, too.

Of course, I could go on and on about the transfer of wealth from the middle and working class to the rich over the past 30 years or the corporate monopolies that have been created through deregulation or the loss of control over our democracy due to corporate money in politics, but I think I’ll let the gang from Monty Python explain how government investment works with their brilliant “What Have The Romans Done” scene from Life of Brian.  Simply insert the word “government” for “Romans” and enjoy.

-SF

UPDATE: Here are the other installments from my time at the “U”: Beck U, Beck 3, Beck 4, and Beck 5.

Please, Sir, I Want Some More

In Deficit Reduction, Economics, Great Recession, Politics on July 12, 2010 at 1:09 pm

Still waiting for the wealth to trickle down

Yesterday, The Huffington Post reported that the world’s wealthiest individuals are hoarding an estimated $10 trillion in cash (yes, that’s trillion with a “t”) and that the investment firms that love them are falling all over themselves trying to capture that loot.

Of course, this report came as a complete shock, since I know that any day now that cash will come trickling down to me and my fellow 99-percenters, just like the supply-siders told us it would (under Hoover, under Reagan, and under the two Bushes).

I mean, with the top one percent of wage-earners reaping 24 percent of total income in this country, surely they would loose the purse strings and start hiring workers to help end this jobless recovery. That’s what happens when you give the richest in the country a tax break. It stimulates the economy, creates jobs, and puts money in everyone’s pockets, right?

Chuck Marr of the Center on Budget and Policy Priorities (CBPP) reported in February of this year that:

  • A Congressional Budget Office analysis issued this month makes clear that extending the tax cuts for high-income households would be the least effective of all spending and tax options that CBO examined for boosting the weak economy and creating jobs. It comes in dead last.
  • The sounder policy would be to let the high-income tax cuts expire on schedule and to temporarily use the savings for tax or spending measures that would lead to more jobs and economic growth in the next year or two. For example, a job creation tax credit for businesses — small and large — and additional money to help states avoid additional layoffs would be a more effective use of funds.
  • If the goal is both to shore up the economy in the short term and to address unsustainable long-term deficits and debt, then allowing the high-income tax cuts to expire and using the savings for effective stimulus in the short term and deficit reduction after that would represent the soundest course.

What a buzz kill. Thanks, Chuck.

I’d rather listen to Very Serious People like Erskine Bowles and Alan Simpson, the new heads of President Obama’s national debt commission, tell me that the national debt is “like a cancer… destroy[ing] the country from within.”

And what were the causes of this cancer the ballooning deficit again?

So what this chart from CBPP tells me is that two big ways to help curb the deficit are:

  1. Eliminate the Bush-era tax cuts for the wealthy; at least returning to the Clinton-era highest tax rate of 39%
  2. Get the hell out of Iraq and Afghanistan with no asterisks (and by asterisks I mean, residual forces)

But wasn’t Senator Jon Kyl, Republican of Arizona, on my teevee this weekend, telling me that the Bush tax cuts for the wealthy need to be extended, even though they would add an estimated $678 billion to the deficit over the next 10 years?

Of course, he and his fellow Republicans have it all figured out. Cut benefits to the middle and working class; deny unemployment benefits during the worst economic downturn since the Great Depression; cut Medicare, Medicaid, and Social Security benefits and raise the retirement age to 70; and repeal the newly passed health care reform bill that the CBO estimates will cut the deficit by $1.3 trillion over 20 years.

It sounds so logical that even some Democrats are jumping on the Good Ship Deficit Reduction.  Screw the economy and batten down the hatches! We’ve got a deficit to kill.

But maybe the Republicans’ brand of trickle-down economics is actually working: the casinos are hiring again! Wall Street firms have added about 2,000 jobs since February, and hundreds more are on the way.

I can’t wait for the waterfall of wealth to cascade down on me.

-SF

Keeping Up With The Joneses

In Economics, Inequality, Krugman, Politics on July 5, 2010 at 10:18 am

Even though NFL training camps open in a week, I am not referring to Jerry Jones the megalomaniacal owner of the Dallas Cowboys — because who could possibly keep up with the owner of the “worlds largest strip club”? I’m talking about keeping up with your peeps, your peers, your frenemies and the fiscal turmoil that brought you (and by you, I mean me) to tears.

Go back to 2004 and remember how cool you felt reminiscing about last night’s “Even Stevphen” skit on “The Daily Show” which you Tivoed because you were too busy showing off your 164MG thumb drive and struggling to stay on the Atkins diet with a wedge of brie mocking you. Your façade of cool cracks, and you pick up your dirty martini realizing that you are not like the others at your table. You look to your left: homeowner. You look to your right: homeowner. You look at yourself: renter. You look deeper: loser.

Cut to last week, Paul Krugman speaking in Luxemborg about the direct link between income inequality and financial crises. Turns out the two greatest crises in American history have, not coincidentally, begun during the two greatest periods of income inequality in US history – 1929 and 2008.

Image: Paul Krugman

Pretty cool, right. Well, if you’re in the top 1% it sure is. See, in America we’ve gone from the top 1% owning 8% of our nation’s wealth  to the top 1% owning over 18% of that wealth in less time than it takes to go from “Norma Rae” to “Knight and Day”.

Back to the cold harsh reality of 2004. You feel lousy, unloved and alone in the world because you’ve missed the boat, you’re not a valued member of society, you’re not a trusted member of the most important American fraternity there is because you’re not a homeowner. So, you decide to put all you’ve got into the search for the perfect house (and by “perfect” I mean any house you can afford that’s not on the shoulder of the 405) because it’s California real estate, baby, and like Daddy Warbucks it doesn’t have to worry who it steps on on the way up because it ain’t never coming back down.

Cut to six months later when, drenched in flop sweat, you sit in front of a banker and sign a loan for $952,000. For those of you keeping score at home that’s almost One Million Dollars, and this to a guy (and by a guy, I mean me) who had never made even a third of that amount in his nearly 40 years on this earth up to the moment his pen hit that paper.

If enough of us are given this glorious opportunity to indenture ourselves for the rest of our lives, this is what happens. Watch the green line.

Image: Paul Krugman

Oh, shit. That’s household debt. See we’re like lemmings, so many of us. And Mr. Krugman, while no lemming himself, said that before 2008 he only mentioned the fact of this income inequality but did not conclude that there was a causal connection between income inequality and economic downturns. Turns out he’s changed his mind. Nice timing, Krugman. This is information I could have used YESTERDAY! (And by “yesterday” I mean 6 years ago.)

Krugman concludes quoting a guy named Frank (and by Frank I don’t know who the hell he’s talking about because I wasn’t actually in Luxemborg, but he sounds smart:)

“The wealthy are spending more now because they have more money. But their spending has led others to spend more as well, including middle-income families. If the real incomes of middle-class families have grown only slightly, how have they financed this additional consumption? In part by working longer hours, but mainly by saving less and borrowing more.”

Now, multiply my situation by tens of millions of us who, like all good addicts, had enablers: The Fed (who provided loose credit); The Mortgage Brokers (the predators who participated in fraudulent lending practices); The Banks (who funded the bender); and The Casino’s unabashed mortgage-backed security and CDO insanity (which to begin to understand I had to read Michael Lewis’ “The Big Short”.)

When you do this you realize we all fucked ourselves royally. (And by royally I mean we’re renters again. And by renters I mean losers. And by losers I mean me.)

- SH

(h/t Mr. Krugman and thank you for the slides from your speech which can be found here.)

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