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Quote of the Day - 10.16.08
QUOTE OF THE DAY....From Joe Klein:
Ronald Reagan used to say that the most frightening nine words in the English language were "I'm from the government and I'm here to help." That is no longer true. This year, the most frightening eight words are "I'm John McCain and I approved this message."
Actually, that's just the best prepackaged zinger from the linked post. The most genuinely penetrating piece of wordsmithing was this:
We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.
That's a very good metaphor. Personally, I'm not very interested in income redistribution. I'm interested in getting the distribution right in the first place. For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, and this trend has been even more pronounced over the past eight years. This has created an enormous pool of extra money that's been — yes — strip mined and redirected to the rich, and fixing this is Barack Obama's biggest and longest-term challenge. If we restore the normal growth of middle class wages, it provides a sustainable consumer base for the entire economy; it reduces the demand for endless credit card debt; it brings down income inequality naturally; and it goes a long way toward keeping the financial sector under control and reining in Wall Street salaries without putting in place a bunch of artificial (and probably fruitless) regulations.
And that's just for starters. Stop the strip mining and economic vigor will follow. It's at the core of everything.
For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, creating an enormous pool of extra money that's been ? yes ? strip mined and redirected to the rich. Fixing this is Barack Obama's biggest and longest-term challenge.
Um, just how was this accomplished?
Offshoring. Free trade (not fair trade.)
What exactly does Obama plan on doing about this?
Um, just how was this accomplished?
From Reihan Salam at The Atlantic:
"Real income matters less than quality of life. And for the last two decades, a delicate Consumption Compromise has tamped down economic discontent among working-class voters by driving down the cost of living?we've been living in the era of cheap food, cheap gas, cheap credit, and, of course, cheap Chinese-made goods. . ."
. . . At the same time, the democratization of finance allowed consumption smoothing?spend tomorrow's money today?and the quality of consumer goods improved. Granted, this was small solace, but it gave a large number of Americans the sense that they were making economic progress."
For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, creating an enormous pool of extra money that's been ? yes ? strip mined and redirected to the rich. Fixing this is Barack Obama's biggest and longest-term challenge.
Um, just how was this accomplished?
Offshoring. Free trade (not fair trade.)
What exactly does Obama plan on doing about this?
Um, just how was this accomplished?
From Reihan Salam at The Atlantic:
"Real income matters less than quality of life. And for the last two decades, a delicate Consumption Compromise has tamped down economic discontent among working-class voters by driving down the cost of living?we've been living in the era of cheap food, cheap gas, cheap credit, and, of course, cheap Chinese-made goods. . ."
. . . At the same time, the democratization of finance allowed consumption smoothing?spend tomorrow's money today?and the quality of consumer goods improved. Granted, this was small solace, but it gave a large number of Americans the sense that they were making economic progress."
"it provides a sustainable consumer base for the entire economy; it reduces the demand for endless credit card debt; it brings down income inequality naturally"
And when all of this happens, conservatives will say that we are finally seeing the benefits of Bush's tax cuts.
Remember Clinton's economy . . . Reagan's tax cuts!
Fixing this is Barack Obama's biggest and longest-term challenge
But Kevin, I just got an email that says Obama is a socialist, anti-American, traitorous, Muslim, Arab, terrorist. Or something like that.
Kevin Drum: Stop the strip mining and economic vigor will follow. It's at the core of everything.
That's nice, but without concrete ideas about how to change it it's just a platitude.
Also think of all of those tax breaks for wealthy Americans made possible by the current surplus in the Social Security fund. Talk about strip mining the middle class.
Yes.
The New Deal redistribution of wealth to the poorest and oldest significantly helped to create America's huge middle class because the recipients spent all of the redistributed money on consumer goods, which multiplied into decent middle class incomes. Raising the minimum wage does not appear to help people with middle class incomes, but it does because minimum wage earners spend almost all of their incomes on goods and services, much of which finds its way to middle class incomes. Leaving out the poor in any political economy means a reduction in the middle class.
For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, creating an enormous pool of extra money that's been yes strip mined and redirected to the rich. Fixing this is Barack Obama's biggest and longest-term challenge.
Um, just how was this accomplished?
Offshoring. Free trade (not fair trade.)
What exactly does Obama plan on doing about this?
jerry: What exactly does Obama plan on doing about this?
For starters, his economic advisers include Robert Rubin and Larry Summers, some of the "free traders" that helped get us into this mess.
Oh, and while we're discussing the shenanigans of Clinton's economic crew, here's a good article on how Rubin, Summers and Greenspan helped squash any real regulation of the derivatives that also helped get us into the current financial mess.
jerry: What exactly does Obama plan on doing about this?
Free cat nibblies for all, I hope.
Interesting link, Alex, thanks. No surprise to find Michael Greenberger worked directly for Born. He's been outstanding in his interviews with Terri Gross and by the crew at This American Life. (One of the three shows of NPR worth keeping.)
Inkblot, if by free cat nibblies you mean the rotten flesh dropping off the corpse of the middle class, you may get what you wish. (We know you cats ain't picky.)
Um, just how was this accomplished?
From Reihan Salam at The Atlantic:
"Real income matters less than quality of life. And for the last two decades, a delicate Consumption Compromise has tamped down economic discontent among working-class voters by driving down the cost of livingwe've been living in the era of cheap food, cheap gas, cheap credit, and, of course, cheap Chinese-made goods. . ."
. . . At the same time, the democratization of finance allowed consumption smoothingspend tomorrow's money todayand the quality of consumer goods improved. Granted, this was small solace, but it gave a large number of Americans the sense that they were making economic progress."
Actually, I'm not sure that is true.
We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.
There is a whole industry from "Blue Hippo" to used cars with shark loans to Pay Day loans that says there is a class warfare against the poor. I don't like that Obama never mentions the poor - but he never does.
Oh, and lets not even start with "car title" loans.
I sure am glad intelligent, well educated people have discovered this simple truth. The not so well off have known it since Reagan did his thing. Remember what happened to the air traffic controllers union?
I should not have forgotten the H1-B Visa program. Any surprise to discover massive fraud there?
http://www.sunjournal.com/story/286930-3/National/Fraud_plagues_work_vis...
What's Obama's position on the H1-B Visa program? IIRC, Bill Gates loves H1-B Visas and regularly calls for even more. (So too, I suspect with Larry Ellison.)
jerry: I should not have forgotten the H1-B Visa program.
You're obviously a xenophobe, if not an outright bigot. Why else would you have any problem with a guest worker program that seeks to alleviate a non-existent labor shortage? Who you gonna believe, some mumbo-jumbo labor statistics from bureaucracies like the BLS, or people with no vested interest like Bill Gates and Larry Ellison?
BTW, ever look at Norman Matloff's stuff?
http://heather.cs.ucdavis.edu/Archive/
From the file ObamaOnOffshoring.txt:
"Obama has supported raising the H-1B cap, as has Sen. John McCain"
Another bought and paid for "Democrat".
You're obviously a xenophobe, if not an outright bigot.
Yeah, I've been called that before, often by people who also call me a "concern troll" because I ask the wrong questions of the wrong politician....
"Obama has supported raising the H-1B cap, as has Sen. John McCain"
Another bought and paid for "Democrat".
I'm not surprised, I was pretty sure Bill Gates and much of Silicon Valley are Obama supporters.
I don't expect much change in this administration regarding trade or labor issues. Not with the way they excoriated Paul Krugman during the primary. (Krugman seems to have mellowed a great deal on trade.)
I've long thought that one price amongst many of sponsoring H1-B Visas should be a requirement that a company have an HR rep at every site who can accept walk-in candidates and create immediate interviews with hiring managers. That's not terribly different from how companies handled applications before the age of scanned resumes.
"For three decades we've artificially kept middle class wage increases far below the growth rate of the economy"
Note: "wages". Not "total compensation".
The central premise of Kevin's post is a big fat lie and he knows it.
We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.
It's vivid, and an apt analogy, but it's a mixed metaphor. Strip mining is not traditionally a tactic used in battle, after all.
Kevin wrote "Personally, I'm not very interested in income redistribution."
Personally I am. I'm also in favor of perp walks for the CEOs of finance companies that invested in all those mortgage backed securities and proceeded to bankrucpt their companies while walking all with hundreds of millions of dollars in compensation.
I think raising the tax on Capital gains to 35% is entirely fair, and raising the income tax to 40% on incomes over $2 million. And to 50% for incomes over $100 million. Taxes were even higher in the 50s but it never stopped anyone from getting rich.
i don't think the remedy matches the scale of the problem. how much money will taxing the rich get you? we need trillions to replace the credit and housing bubble. and if the rich are engaged in the sort of profitless, unproductive, and destabilizing activities that they've been in of late, the economy will still be having major problems.
Gives a whole new meaning to the GOP call to "mine, baby, mine," huh?
Personally, I'm not very interested in income redistribution. I'm interested in getting the distribution right in the first place.
Too bad the former -- that you're not very interested in -- largely determines the latter.
One job -- any 40 hour a week job -- should provide enough income to sustain a family of four, buy a house, have a car, and take a couple of weeks off every year. How's that for a baseline? It's been decades since we've seen it, but it can be done. That's how you create a middle class.
For three decades we've artificially kept middle class wage increases far below the growth rate of the economy .... If we restore the normal growth of middle class wages, it provides a sustainable consumer base for the entire economy
Kevin, do you know why middle class wage increases have lagged inflation and GDP growth? Do you know what to do about it? I don't think most economists think they know the answers to these questions. Some of your commenters seem to think free trade is the cause of the problem. Do you think that?
Also, as "a" points out above, total compensation is a more honest thing to compare with GDP and inflation, since workers presumably get something out of their health and retirement benefits. You can get the data from the BLS! I think that data would tell a similar story, but you should still try to use the right numbers.
I notice that neither Kevin nor anyone else here on this "liberal" blog (Mother freaking Jones, fer crissakes) cares to mention the role of collective bargaining and unions in allowing the working class to keep more of the wealth they've generated for the folks running our economy. Perhaps we'd like to revisit the all-out war we've waged on unions through Congress and the NLRB (in one view, for the last 30 years, or since Taft-Hartley, looking back longer). That would answer some of Kevin's concerns about distributing wealth properly in the first place rather than redistributing it through taxation and other government actions. Just a thought.
Kevin,
What your graphic clearly shows and begs the question: where is the trickle-down effect? I mean really, where is it? The graphic succinctly puts to rest that entire line of tripe. I thought the propaganda went: with such a steadily rising GDP line, such progress would offer benefits -- I assumed mainly in the form of wages -- that would likewise trickle-down and lift all boats.... If there's no observable effect on wages (flat line), then what items apart from wage comprises said benefits trickled down....?
(Obama should be showing this graphic ala Perot)
What I would like to see is a comparison of the wealth generated through the growth of the GDP and the accumulated federal debt since 2002 (around $5 trillion).
We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.
No, that was "class murder". Its not "class warfare" until the other side fights back.
Kevin Drum: Stop the strip mining and economic vigor will follow. It's at the core of everything.
That's nice, but without concrete ideas about how to change it it's just a platitude.
Concrete ideas for reducing the strip mining of the poor, working poor, working class, and middle class, and (in recent years) even most of the rest of the upper class by the narrow slice of megacapitalists at the top of the upper class:
1. Eliminate preferential taxation of capital gains and inheritances: tax them as income to the people receiving them (not, in the case of inheritance, the estate of the deceased, regardless of the size of the estate). Preferential taxation of capital doesn't encourage investment, it rewards those who already have surplus income to invest, makes it harder for workers to develop that surplus, and (because it increases the tax burden on workers) makes labor more expensive, and therefore depresses employment. Note: don't do this so as to increase revenue, when you do it, cut income tax rates to keep it revenue neutral in the short-term (that is, before any effect it has in changing the distribution of taxable income). To account for the fact that long-term capital gains are earned over a period of years without unfairness in a progressive tax system (and to also provide more fairness to workers with volatile non-capital income flows), allow recognition of income in advance of realization, and in certain cases (including, especially, inheritance) allow income to be spread out, for tax purposes, over a period of several years after it occurs.
2. Subject all (not just wage) personal income to Social Security and Medicare taxes (removing the cap on SS contributions while removing the benefit cap and replacing it with diminishing marginal benefit beyond the current cap) -- making all that income also relevant in the calculation of SS and Medicare benefits, (part of the "income is income" approach above, extends the retirement security safety net
3. Set corporate income taxes at the maximum marginal rate for personal income taxes, but let corporations subject to US corporate income tax, with a majority vote of their stockholders, distribute a pro-rata (by equity share) share of their income, for tax purpose [not the actual money], to stockholders who are natural persons that are US citizens or legal permanent residents. For those corporations that have elected such tax distribution either from their inception or, if not, from at least a set period of years prior to the current tax year (say, three), also eliminate the taxation of those dividends paid to individual natural persons that are US citizens or legal permanent residents. This, in effect, reduces taxes on corporations to variable degree based on the extent their stock is directly held by moderately (or less) wealthy individuals, which creates an incentive for the broader distribution of capital.
"a" says:
"Note: "wages". Not "total compensation".
"The central premise of Kevin's post is a big fat lie and he knows it."
Because people on that median line have more "total compensation than just wages?" Like what, exactly? Benefits, health care benefits particularly have been shrinking, not rising? So what else do you claim makes Kevin's point a "lie." Strong language you ought to have to back up.
Klein: "We have had 30 years of class warfare, in which the wealthy strip-mined the middle class."
Drum: "That's a very good metaphor."
Actually, it's a terrible metaphor. It's a mixed metaphor, rather jarring, if you ask me. Warfare and strip mining are two entirely different things.
The point is a point worth making. But it's just not a good metaphor.
scott --
God, do you read Kevin's blog much? To the extent he's to the "left" much at all it's because he's pro-labor. I think there's a question what can be done to help labor, but if you follow Kevin's posting, you'll see that he is consistently on labor's side.
America's huge middle class came about because of wealth transfers. Rural electrification, land grant state universities, Social Security, welfare, food stamps, GI Bill, the interstate, etc. cumulatively are responsible for generating middle class lifestyles and incomes. The good middle class jobs in health care have a large portion of their incomes paid from revenues earned from Medicaid, Medicare and state medical welfare systems. Remove those transfers and lose those jobs.
Absent social spending and wealth transfers, the US middle class would never have become as large and powerful as it was. It is that power that the wealthy feared and why they have been assaulting the middle class to strip it away.
No screamin' gorilla shit, Kevin. If you look at the Census Bureau data for hh income growth, you notice that the top and bottom of the income distribution have actually done better than the middle (not a whole lot better, for the bottom - but hey, it's better than a poke in the a** with Dick Cheney's wanker.) You're right - fix this and things will get better, and faster.
I don't like that Obama never mentions the poor - but he never does.
One miracle at a time.
Two dozen years ago it took Saint Ronnie to remind America that some poor people were worthy and hard working. Not sure if it's cos Reagan was on public assistance as a child, or if it was calculated politics. The point is, he had to give at least lip service to it to differentiate the good poor from the shiftless (and overwhelmingly fictional) welfare queens.
Nowadays, if you're poor, it's your own damn fault. "Hard working" is the first adjective attached to rich people--see all the Joe the Plumber crap--as a matter of self-defense.
Nowadays it's class warfare to tell people that 6½ years of recovery did nothing for them.
Income redistribution? How about just giving us back the tax rates of the '90s? The rich didn't suffer then, IIRC.
The country's wealth has been shifting towards the uber-rich faster and faster and I suspect there are people earning $250K who could say their incomes haven't kept up with their productivity.
You need to look at where the increased GDP is going and how those people are getting it.
I suspect, in the end, you will see it's Wall Street's financial industry growth which accounts for nearly ALL of this country's growth in the last 30 years and a mere handful of people are getting ALL of that.
The rest of us? We're not getting strip-mined. We're not getting anything. We're just treading water, waiting to see if credit card debt drowns us.
Uncle Jeffy,
Actually, the Census Bureau data shows virtually no change in household income distribution between 2002 and 2007. The middle fifth of households were getting just as large a share in 2007 as they did in 2002, 14.8%.
During Bill Clinton's presidency, by the way, the income share going to the middle fifth of households fell from 15.1% to 14.6%, while the income share going to the top fifth of households increased from 48.9% to 50.1%.