Many reports, including that from a consortium of global bankers says, "We've turned the corner, things are getting better."
The economic meltdown precipitated by not just unwise, but probably illegal risk-taking in mortgage creation - apparently seems to be abating. Apparently.
However, those of us who look at employment number, look at public AND private debt, and look at wages holistically instead agree with the assessment of OTHER prominent economists, when we say, "No, we're just getting worse more slowly."
We spent nearly a decade funding an economy on home equity - and when that bubble burst, the house of cards that was the US economy came crashing down. We have FAR too many low paying service sector jobs, and too damned few jobs actually producing anything. We have FAR too much of the profit pie going to only the owners - a virtual flip-flop of slices of profits from 20 years ago (where 75% of profits went to labor during the Reagan years) to where 38% now goes there.
If we don't fix this employment curve, we don't fix the wage curve, and the debt curve with it - we are NOT getting better, we are simply dying more slowly.
Eloquently expressed Pen. If there were to be any justificastion, imho, to the US government involvement with the auto companies, for example, it would be to recognize that they are a significant manufacturing industry in this country, as well as having major importance to our ability to service our military. I just don't see our armed forces driving around in foreign made military equipment. If the auto industrial giants were to go belly up, we would be looking at real nationalization, not simply a investment cash infusion, in the event of a serious military commitment - I am referring to something larger than the conflict we have had so far in Iraq and Afghanistan.
ReplyDeleteOn the domestic front those who are satisfied with seeing low paying jobs in the service sector fail to appreciate that our economy is consumer driven. Too much of our economy concentrated in the hands of very few, as has been the trend, and the whole is weaker. There can be a healthy profit, a healthy reward for good management at the top, and there can be unhealthy patterns of reward utterly disproportionate to the value of the executive function, and ultimately creating a top heavy, unsustainable economic situation. We had a stronger economy when we had a more vigorous and economically rewarded middle class. The argument that we should never tax the wealthy because it will have an adverse effect on investment is false. That this argument is sometimes advanced by people AGAINST their own interest, in the hope that they might someday inexplicably be rich but without realistic expectations of it, is just foolish. I would argue that there is greater opportunity for genuinely creating wealth when that disproportion is instead more balanced in the distribution of wealth. In other words, even the wealthy are in a healthier, more vigorous, growing, and sustainable economic environment when the middle class is less impoverished than has been the trend. Otherwise, they are just at the top of the tree that is about to fall over because the roots are rotten; that would mean they have a lot further to fall.
Penigma I would agree with your assessment of the economy. Although I think you neglect to point a finger at the governments part in the collapse that begins with FDR's creation of Fannie. That's not to say it's the primary reason. The economy was impacted by a combination of events that stem from government treading heavily on the economy in certain areas while going weak and limp in others. Insisting on giving mortgages to people that could never afford them to ignoring whistle blowers regarding Madoff, to the tech bubble burst, to the wars, to the oil speculators, and on and on and on. There is no ONE thing and trying to simplify it down to ONE thing will only lead to a prolonged recovery and history repeating itself.
ReplyDeleteDog Gone you I mean this sincerely, you're quasi rabid with your regard to anything not from the left. Please note that Bill Clinton has as much blame with this economy as does G.W. Bush. In fact I think that you could blame both parties equally. Redistributing wealth has never solved anything anywhere. I challenge you to site one historical example where wealth distribution have EVER been successful. You seem not to care or seem to conveniently forget that historically speaking it's YOUR party that has pushed hard for opening our markets up to foreign competition. You want to bring manufacturing jobs back to the US? There are only two ways you'll ever accomplish it. One is to charge tariffs on all foreign products and good that would be so high as to allow profitability for made in the USA products. American workers can't compete with foreign workers when it comes to wages unless you do that. The other mechanism you can use is to insist that the foreign countries where this production is taking place are obligated to meet the same safety, environmental and quality control standards we have in the USA. You must also force these foreign governments to become some sort of democracy. I really don't see the US ever being in a position it can force foreign nations into such a reality without first going to war either economically or with actual bombs.
ReplyDeleteEither of these choice will lead to horrible results. Do I really need to explain how either of these choices will bring about war, famine, disease? Your belief that the government should have some stake in private industry is absurd. Do you not understand that the government as a part owner of GM and Chrysler is now in direct competition with Ford? How is this even remotely a fair proposition for Ford to be in? A independent well run business that did not seek Federal assistance, that during the worst of it was still able to make money is now competing with the government. Oh that makes a lot of sense. Every time Ford pays taxes it is now funding it's competition. This concept that some how we'll need them to supply the war machinery is simplistic at best. No military in the world comes even close to rivaling our own on a toe to toe basis. Last stat I read sited that if you added up all the worlds military budgets it still doesn't even get close to ours. It would take quite a long time before any foreign government would even get close to producing the military might we flex.
The only moment in time our middle class was so prosperous was a direct result in our monopoly on the industrial countries of the world. We, humanity, had destroyed during the second world war nearly every industrial countries infrastructure apart from ours, Canada's, and Australia's. Europe and Asia were wastelands. We benefited only because we were relatively untouched. If you look back at any moment in time prior to the late 40's and 50's you won't find a strong middle class. Yet taxes where extreme during those periods of time. You mystify me with claims of some shangrila that simply never existed.
I must lately admit I'm stunned to read your post Dog Gone. For someone as ardently liberal as yourself (not a critique of your beliefs) you have taken a very contrary stance to those believes. You're statement clearly shows you seem to be in favor of monopolies (government or otherwise) and a strong desire to either nation build or wreck havoc on foreign soil. While I would agree this is the true historical Democrat party ideals of the past it is not the current Democrat party.
Pointing a finger at a Federal home loan guarantee program designed to deal with problems in the Depression, which now is 70 years plus old, seems rather moot.
ReplyDeleteLook, we flat-lined wages starting in the early 80's. We agreed that organizing our economy around stock prices was the 'right' thing, thinking the 'ownership society' approach would lift all boats. It didn't and it failed.
I agree oil speculators, tech bubble burst, etc.. are issues, but are they symptoms or causes?
I believe they are symptoms, you believe they are causes (I think).
We chose to not address the underlying disparity in wages and profit split because it's not palatable to ownership, and we've been conditioned (propoganized?) to accept any such disucssions are 'socialism' or even worse 'communism' when they are no such thing. We used to split profits 75% to labor, now it's below 40% - yet our economy was MUCH healthier when it was 75%.
We moved manufacturing offshore, then technology, and wages were depressed. People couldn't afford health insurance and education, so they took out home equity loans.
Scapegoating the average american as somehow 'too stupid' or too irresponsible to handle money, is pretty condescending indeed. Perhaps it's equally fair (and I surely think so) to say that leadership (by this I mean corporate leadership) was too stupid to recognize they were cutting of their noses to spite their face by getting rid of the jobs which paid people enough to buy their products.
Lastly, NO ONE credible feels CRA or any other program drove or required banks to give loans on anything like a meaningful scale, to low income or poor credit risk customers. At worst CRA was purchased by high risk taking banks (like Bear Stearns) to package into derivatives - that was dumb, but it wasn't CRA that was the problem, it was greedy, stupid product managers at those banks.
Jas,
ReplyDeleteI didn't read anything in Dog Gone's comments relating to redistribution of wealth. Even if she so intended, its not possible in the US today. In fact, there IS a redistribution of wealth going on, but its not what you appear to fear: its the wealthy getting wealthier and the middle class and the poor getting poorer.
I personally was opposed to any government intervention to assist GM and Chrysler. Unfortunately, the people to blame for the problems at GM and Chrysler were a combination of people: auto industry executives from 20 to 30 years ago, politicians of BOTH parties, and other corporate executives who gave the American people what they wanted: big, expensive, gas-guzzling cars, because gasoline was relatively inexpensive. When the price of gasoline shot up to over $4.00 per gallon, combined with the beginning of the housing bubble bursting, it was the straw the broke the camel's back: no one at that point was buying cars, especially not those that got 12 to 15 MPG. (Yes, I'm aware that gasoline in Europe is generally much more expensive than in the US)
GM and Chrysler had problems because they were making cars that no one wanted to buy. However, the converse is that the price of them failing was incredible damage to our economy. Although I'm not cold or heartless, (contrary to popular belief), I think that such damage would have probably been overcome. The danger though, was when they failed, our economy was almost at the breaking point, which could have triggered a depression, not just a deep recession.
Your assertion that the US can't bring back manufacturing jobs without resorting to war is without merit. You did identify one way that we can make sure that the manufacturing jobs don't get further outsourced: we can require that all such goods manufactured overseas comply with US safety standards at the factories, that they comply with US labor standards, etc. We have the legal means to do so, we just don't have the political will do exercise it. (I might note that establishing these legal requirements does NOT mean we have to insist on democracy in those countries, just that in order to sell us products made there, that they comply with US regulations regarding wages, safety, etc.)
Those who complain about the Democratic party's historical ideal in nation building should not do so when we are still recovering from the disastrous attempt at nation building in Iraq. While the wisdom of engaging in nation building is a topic for some more research and another article perhaps, I think that we on a whole would have been much more successful if the nation building attempt had not been done by an incredibly incompetent, arrogant and criminal administration.
If you watched some of the Senate hearings with GMs CEO they were making cars people wanted. The could not keep big V8 pickups and SUVs on the lot.Americans like big cars, until gas hit $4 a gallon. I think what Jas is refering to though is when DG talked about taxing the wealthy. Right now the top 10% by income already pay about 70% of the money taken in by taxes, at what point will they stop wanting to support most of the government themselves and just stop making money and live off what they already have? Why do you think so many British rock stars moved to New York? A lot of it was the British 70% tax rate on the highest incomes compared to our 28%. The thing that seems to not ever be said is the tax yr after a tax cut the total revenues for the government go up. It happened when Kennedy cut taxes, Reagan, Bush, Clinton, and Bush. Is it because people earn more or do the really wealthy hide less from the IRS? Who knows, who cares, the net effect is the government takes in more money and budget deficits go down if they don't just spend the excess. I agree that the wage differnce between top and bottom is way to big now, my dad worked for Chevron as an engineer and the CEO made roughly 10 times what he did. I work as a computer engineer(same type job, differnt systems)and I know that the CEO got a bonus last yr that was a little over 600 times my salary. Is he worth 60 times what the CEO of Chevron was in the 70s? doubt it. Could he live really well on 10 or even 20 times what I make? Most likely except he is used to the 600 times. Something needs to be done but more taxes will not solve the problem and could quite possibly make it worse.
ReplyDeletePenigma IF you know your history (no offense I had to do some reading too) it's quite easy to like a depression era program to today's economic issues. I suggest that a discussion regarding Fannie and it's negative impact would dovetail nicely into any comparison with a government run health care program competing with private programs. Fannie was created by FDR, "privatized" under strict government regulations by LBJ, given a brother Freddie by Carter so that Fannie had competition, and both were steadily forced to acquire more and more risky debt by each successive government including G.W. Bush. This "ownership" society you mention is part and parcel with this very concept of the poor owning a home. The idea is commendable but unpractical. How many times did G.W. or Clinton beat the drum about how great it was that home ownership was up. I won't argue with you regarding the recent past, meaning the last 10 years. To do so is rather pointless, especially in regards to economic trends which take decades to develop. If you want to look at just the last ten years OK I agree the middle class has been getting squeezed. Overall though this is not true. The middle class has been steadily growing. There have been bumps in the road along the way but there has been a reduction of overall poverty, and an increase in the middle and upper classes. In fact, globally it's estimated that 50% of the worlds population has made it to middle class mostly do to emerging markets brought about by the horrible awful plan shipping manufacturing jobs overseas. http://www.economist.com/specialreports/displaystory.cfm?story_id=13063298
ReplyDeleteI challenge you to provide proof that the middle class has been in decline for more than a decade. You can't because it hasn't been.
Pengima you said:
“We use to split profits 75% to labor, now it's below 40% - yet our economy was MUCH healthier when it was 75%”.
Please site references to both the period you're discussing and some authority to support it. Otherwise your statement is baseless.
Who chooses not to discuss wages and profit split? American workers can negotiate their wages and have been doing so successfully for about a century. Would you prefer a system like they have in many European countries where the government dictates what a wage should be from job to job. Let me tell you that removes ALL possibility of the individual having the ability to negotiate their wages based on their experience and skill sets. It doesn't matter if you speak 5 languages if you're a secretary you get paid as a secretary that speaks 1 language. There is no discussion.
I challenge you to site where I scapegoat American workers in my posting.
Actually, again I question your knowledge of the subject, the VERY basic sense of the CRA program ties a banks lending practices to low-income individuals to it's future growth and expansion. If you'd really like to get into it I'd be happy to discuss this point at length. CRA is a direct cause which contributed to the economic problems we are undergoing now. NOT the single cause.
Lastly, show some evidence of flat lined wages please. I don't know about you but my wages have out paced inflation as has the growing middle class.
ToE no offense but did you read Dog Gones post? She said:
ReplyDelete"I would argue that there is greater opportunity for genuinely creating wealth when that disproportion is instead more balanced in the distribution of wealth."
Does it get more specific than that?
Again as I asked Penigma to do please site some authority and proof that the middle class is getting poorer and the wealthy are getting wealthier. That number of poor is growing while the number of rich is diminishing. Also, please make sure that example you site uses data that samples from more than 1 ten year period.
I'm not opposed to some sort of intervention to prevent the complete collapse of GM and Chrysler. Bankruptcy potentially could've been one solution as well. However, I'm completely opposed and can't see how ANY good comes out of the US government OWNING a % of ANY company. One of the PRIMARY rules when founding the EU was ending government ownership in businesses and ending government monopolies. As most liberals like to use our European friends as examples of how to live I would like to as well. Obama in OWNING a business is LEFT of socialist Europe on this subject. The Socialists are running away from government ownership and as they are old hats in the socialist game maybe we should take note of it.
I agree waging war to force our ideals on another country is not optimal. Thanks for pointing out that it's not the ONLY method I brought up. However, maybe you missed my point as it was lengthy post(sorry for that). Please note I mention waging economic war as an option. It is ONE method though and has been used by both liberals and conservatives throughout our nearly 250 years of history. Without the application of either military or economic forces you'll never move a foreign entity to do as you see fit. If one intends to move a foreign country towards wage parity with it's own domestic labor force a middle class MUST be created if your example is the US vs. the world. A middle class DOES require some form of democracy to be effective. One can not expect to create a true middle class without some movement towards democratic principles. Without middle class demands upon a given economy then wages will never raise and therefore always remain depressed and thus never arrive at a comparable level to a US wage for similar work and negating the savings of foreign manufacturing. I'm sure you can think of a number of historical examples. I don't think you can find one that proves the opposite but I'd be happy to review one you consider valid.
As far as nation building is concerned I for one do not support it nor have I ever. I would agree with you that nation building is a fools errand and has NEVER been truly successfully accomplished since WWII. That is primarily because the hostile countries (primarily Italy, Germany, and Japan) had been first decimated and purged. Later attempts Vietnam, Korea, the Balkans (all of which carried out by Democrats) and Iraq (the first Republican attempt) were spectacular failures principally because of the lack of will to FIRST utter destroy our enemy THEN build.
Jas,
ReplyDeletePlease provide proof that the rich ARENT getting vastly richer while the middle-class shrinks.
Real income per hour worked (on average) has fallen 13% since 1975 - when adjusted for age, meaning, we as a workforce have aged, and would based on experience, make more. In that same period, productivity increased 50%.
In that same period, the distribution of profits during periods of economic recovery went from labor getting 75% of profits to labor getting 38%.
During that same period the number of people who would be defined as 'billionaires' went from 13 in 1968 to 147 - more than 8 times as many as at ANY other point in the 20th century.
During that same period the US saw the number of females working grow from roughly 30% in full time employment to above 80% - which SHOULD have resulted in greater incomes, but of course didn't as the wage pressure of such additional workers was to lower wages - so do you argue they are in fact higher?
As far as redistribution goes - in 1975 the wealthiest Americans owned roughly 75% of the propery in the US, by 2000, they owned 92% (if we're talking about the richest 5%). Meaning, there was a VAST redistribution of wealth upward.
Warren Buffet said, "Of course there is class warfare, and the rich have won."
Could it be any more clear than that?
K-Rod, you're perfectly capable of doing the research yourself. However, here is a link to research indicating the numbers in 2007, when the economy was relatively healthy. Numbers for 2008 aren't available yet.
ReplyDeletehttp://www.taxfoundation.org/news/show/250.html
KR,
ReplyDeleteThe top 10% of earners pay about 50% of the taxes, of course, that means they also have 50% (plus) of the income, the same can be said of the top 5%, who pay 33#.
What we've lost in this equation is that in 1981, the top income brackets contributed about 25% - and today it's 50%, but taxes were HALVED - what does that mean?? It means they MAKE 4 times what they made in 1981. So, I'm not exactly going to cry tears here - they make 4 times as much, but pay half of what they'd HAVE paid then..
In fact, it is likely this very fact that made it more attractive to those at the top to keep more of the profits (rather than share) because they COULD reasonably keep more - and this hasn't resulted in some sort of rising tide of wealth - other than the richest of americans, Americans make slightly more (if you use purely inflationary statitistics), slightly less, if you use inflation plus some unaccounted for costs like energy, or considerably less on average, if you adjust for the relative contribution that an older workforce generally makes more money.
Penigma, admittedly I don't know you from Adam but you begin your rebuttal with:
ReplyDelete“Jas,
Please provide proof that the rich ARENT getting vastly richer while the middle-class shrinks.”
that's a tad childish. Sort of the thing I'd expect from the playground. I'm sorry but you've failed to provide some authoritative proof of your claims. All I'm asking is that you back up your data. Am I really asking for anything more than what you all have asked of K-Rod to do in regards to the uninsured discussion? Heck, I can claim the moon is made of cheese but till I go there and bring you back a piece of it I don't have a leg to stand on.
Site your data and I'd be happy to either: 1) agree that you're right and I'm wrong; or 2) present a counter point with sited references. I also question whether you read my post or just scanned it because I ACTUALLY did provide a link to an article that discussed the growing global middle class.
Oh, and P.S. Please distinguish between WEALTH and INCOME. Some of you have been mixing the two and they are VERY different. If you don't know the difference go brush up on your economics.
Penigma,
ReplyDeleteThis statement is flawed and false:
"The top 10% of earners pay about 50% of the taxes, of course, that means they also have 50% (plus) of the income, the same can be said of the top 5%, who pay 33#."
Maybe you meant something different? Top 10% doesn't pay 50% of the taxes because they earn 50% of the income.
Even ToE's link in the post above yours show's you're incorrect. According to the link the top 10% pay 71.22% of the taxes and earn 48.05% of the AGI. Here's a big hint as to why you're mistaken....AGI = Adjusted Gross Income which is VERY different than Income.
ToE no rebuttal? Does your silence signify agreement ;-)
ReplyDeleteJas:
ReplyDeleteAnd no, my silence doesn't mean agreement. It means I as preoccupied with other things and didn't have the blog emailing comments to me so I could see that you had responded.
When we are having this discussion, a growing GLOBAL middle class is not only confusing, its misdirection. It doesn't matter if the middle class is growing in India and China, because that middle class isn't in the US dealing with US taxation issues.