Posts tagged economics

This is the dynastic form of wealth French economist Thomas Piketty warns about. It’s been the major source of wealth in Europe for centuries. It’s about to become the major source in America – unless, that is, we do something about it.

Democrats' & Obama's Pyrrhic Victories

Those really don’t mean anything until you fix income inequality. Democrats seem too interested in generating victories and wins and statistics that look good, you know, the little victories, then putting them in a context toward the big win. They don’t have the integrity to remind people that these factoids could be pieces to fix a larger problem.

We are told, for example, that conservatives are against big government and high spending. Yet even as Republican governors and state legislatures block the expansion of Medicaid, the G.O.P. angrily denounces modest cost-saving measures for Medicare. How can this contradiction be explained? Well, what do many Medicaid recipients look like — and I’m talking about the color of their skin, not the content of their character — and how does that compare with the typical Medicare beneficiary? Mystery solved.

Or we’re told that conservatives, the Tea Party in particular, oppose handouts because they believe in personal responsibility, in a society in which people must bear the consequences of their actions. Yet it’s hard to find angry Tea Party denunciations of huge Wall Street bailouts, of huge bonuses paid to executives who were saved from disaster by government backing and guarantees. Instead, all the movement’s passion, starting with Rick Santelli’s famous rant on CNBC, has been directed against any hint of financial relief for low-income borrowers. And what is it about these borrowers that makes them such targets of ire? You know the answer.

One odd consequence of our still-racialized politics is that conservatives are still, in effect, mobilizing against the bums on welfare even though both the bums and the welfare are long gone or never existed. Mr. Santelli’s fury was directed against mortgage relief that never actually happened. Right-wingers rage against tales of food stamp abuse that almost always turn out to be false or at least greatly exaggerated. And Mr. Ryan’s black-men-don’t-want-to-work theory of poverty is decades out of date.

In the 1970s it was still possible to claim in good faith that there was plenty of opportunity in America, and that poverty persisted only because of cultural breakdown among African-Americans. Back then, after all, blue-collar jobs still paid well, and unemployment was low. The reality was that opportunity was much more limited than affluent Americans imagined; as the sociologist William Julius Wilson has documented, the flight of industry from urban centers meant that minority workers literally couldn’t get to those good jobs, and the supposed cultural causes of poverty were actually effects of that lack of opportunity. Still, you could understand why many observers failed to see this.

But over the past 40 years good jobs for ordinary workers have disappeared, not just from inner cities but everywhere: adjusted for inflation, wages have fallen for 60 percent of working American men. And as economic opportunity has shriveled for half the population, many behaviors that used to be held up as demonstrations of black cultural breakdown — the breakdown of marriage, drug abuse, and so on — have spread among working-class whites too.

These awkward facts have not, however, penetrated the world of conservative ideology. Earlier this month the House Budget Committee, under Mr. Ryan’s direction, released a 205-page report on the alleged failure of the War on Poverty. What does the report have to say about the impact of falling real wages? It never mentions the subject at all.

And since conservatives can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America, they’re left with nothing but that old-time dog whistle. Mr. Ryan wasn’t being inarticulate — he said what he said because it’s all that he’s got.

First and foremost, we have shifted the income tax burden in this country down. And understand that the share of income that people in the middle class and the upper middle class are paying is higher now than it was in the early ’60s, while for people at the very top it’s much lower. That means people can’t save, they can’t invest.

Secondly, we have completely eviscerated unions. Only about 7 percent of private production workers are in unions now, compared to in the mid 30s 40 years ago when we were much healthier economically. (All of our competitors, our major economic competitors are highly unionized. In Germany, executives have unions.) And that’s allowed companies to push down wages.

And then deindustrialization, closing our factories and sending them to China, has cost us the equivalent of every job of every kind in greater metropolitan Philadelphia. Two-point-eight million jobs—that’s just the jobs we lost to China. Then there’s Mexico and Vietnam and a lot of other places.

So we’ve been pursuing policies that have made the global-level capitalists very wealthy, and we’ve been doing so by doing terrible damage to the rest of the country.

David Cay Johnston answering What federal policies are most responsible for the income and wealth gap, in your opinion? in Obama’s Address Fails to Look at Roots of Income Inequality
Eighty seven percent (87%) of people in City Heights buy food and clothing outside the supermarket and big box stores according to a new study commissioned by the City Heights Community Development Corporation and the Ford Foundation. They are consumers engaged in the “informal economy” and most of them are low income and need to use the resources of the informal marketplace to survive.

Over 70% of the respondents had incomes below $1500 a month. Car repairs, clothes, food, personal grooming, electronics, home furnishings, maintenance and repairs were just a few of the types of informal business thriving throughout the neighborhood. While some resident groups oppose the informal economy the survey showed that about 91% of survey respondents agree that the informal economy is an important part of their community. 65.3 % of the respondents purchase food from a push cart vendor from time to time. 83.5% agree that it is useful to them and their families for financial survival.

According to Elana Cruz, the Director of the La Maestra Micro Credit program “the informal economy thrives in immigrant and low income communities because people need it to survive. It is the great motivator and a necessity.”

Not only do residents consume in the informal economy they actively work there. 94.2% said they were interested in owning their own business and growing their small informal business into a “formal business”. They are budding entrepreneurs.
Every $5 in new SNAP benefits generates a total of $9.20 in community spending.
(The 2 Aug 13) release of the July unemployment numbers is a case in point. “Today’s employment report provides further confirmation that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” the White House blog proclaimed, noting the headline unemployment number had fallen from 7.6 to 7.4%.

However, about half of the rather meager 162,000 jobs created were in the low-wage areas of retail, leisure, travel and dining, and just under two-thirds of the new positions were part-time. It’s an ongoing trend. More than three-quarters of jobs created this year were less than full-time work, according to an analysis by the Associated Press.

Lowly pay scales are also part of our post-2008 reality. As Pat Garofolo reminded me, the National Employment Law Project reported in 2011 that the majority of jobs lost during the Great Recession paid between $13.53 and $20.66 an hour. The majority of their replacements, however, offer pay between $7.51 and $13.52 per hour.

These are the sorts of jobs that not only don’t replace previous salaries, they all too frequently leave workers dependent on government and social service programs, ranging from food stamps to Medicare.

Run tell that to Democrats who crow about Obama’s economic recovery. Remind them that it’s not a chocolate / vanilla problem: it has to do with the political duopoly, it has to do with systemic flaws in our political system and their illiteracy about Keynesian economics.

Obama is rumored to be considering nominating former White House Economic Adviser Larry Summers to replace Ben Bernanke as chairman of the Federal Reserve.

Uygur noted that Summers had pushed to deregulate the banking industry during his time in the Clinton administration, where he served as Deputy Secretary of the Treasury and later Secretary of the Treasury. Summers supported the successful repeal of a key provision of the 1933 Glass-Steagall Act, removing barriers between commercial banks, investment banks, insurance companies and securities firms.

Though the deregulation of Wall Street lead to an financial collapse in 2008, Summers has said he wouldn’t do much different in retrospect.

Again, there is no one at CNBC who really cares if your investment gets wiped out by Goldman Sachs (again)

Individual income tax payments have been rising fast since the economy began to recover, even though wages have hardly budged. But the same isn’t true for taxes for most corporations.

For the vast majority of America’s 5.8 million corporations, profits soared in 2010 — up 53 percent compared to 2009 — when the recession official ended at mid-year. Despite skyrocketing profits, however, their corporate income tax bills actually shrank by $1.9 billion, or 2.6 percent.