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'The Wealthy Will Save Us!'

There is much talk of an impending economic "recovery" these days. Over the past week, I've noticed a series of stories coming from sources as disparate as Simon Johnson over at Baseline Scenario, Tyler Durden at Zero Hedge, the LA Times and even Bloomberg that are all pretty much telling us the same thing, and it's best summed-up by Simon Johnson's post over at Baseline Scenario, today: "The Two-Track Economy."

The similarities of these stories--considering their varied sources--gives me great pause. To some degree, one could say I've had a bit of an awakening in the course of reading these pieces, or, at the very least, on a snarkier note, I'd call it "a lightbulb moment."

Yes! There will be a recovery...for a few of us. And, that is "the recovery" that others on this blog are referencing these days. I believe what's inferred in their words is: "Have no fear; the wealthy will save us!"

But, realistically, what are the odds of that really happening? (Heh. If you believe that, I've got a couple of bridges I'd like to sell you.)

Here's Johnson's clarity:


"The Two-Track Economy"
Simon Johnson
Baseline Scenario
August 20, 2009

...are we seeing the emergence of a two-track economy: one bouncing back in a relatively healthy fashion, and the other really struggling?

Think about this in terms of individuals and the households in which they live.  Some people have lost their jobs and are finding reemployment very difficult; many will exhaust their unemployment benefits soon.  Others find that what they owe on their mortgages far exceeds the value of their home.  And many find they have been cheated by financial products, particularly home loans and credit cards -- which is why we need effective consumer protection for finance, and in a hurry...

--SNIP--

...The overall numbers on outcomes by groups can get complicated (here's a partial guide), but the simple version is: the top 10% of people are going to do fine, the middle of the income distribution have been hard hit by overborrowing, and poorer people will continue to struggle with unstable jobs and low wages.

Can the richest people spend enough to power a recovery in overall GDP?  Perhaps, but is that really the kind of economy you want to live in?

Yes, Johnson talks of a recovery that will have absolutely miserable overtones for most of our society (i.e.: Main Street) for many, many years...perhaps even longer than that. But, the Wall Street folks (i.e.:  the upper class) will continue to hum along.

Two days earlier, along the same lines as today's post, Johnson wrote this on his blog: "United States Inequality In The Recovery Period." In it, Johnson went into even greater detail on this line of thought:


United States Inequality In The Recovery Period
Simon Johnson
Baseline Scenario
August 18, 2009

...There's a general assumption that, to whatever extent historically record-high inequality is present, it will almost certainly be gone post-recession. But what if it isn't? What if this recession, and the recovery, will cement inequality in the United States even further? From them:

Johnson then quotes a piece from the LA Times, ''The consumer isn't overleveraged -- the middle class is.'


'The consumer isn't overleveraged -- the middle class is'
Tom Petruno
Los Angeles Times
August 14, 2009

What's more, on the asset side, BofA Merrill says the middle-class has suffered more than the wealthy from the housing crash because middle-class families tended to rely more on their homes to build savings through rising equity. Also, the wealthy naturally had a much larger and more diverse portfolio of assets -- stocks, bonds, etc. -- which have mostly bounced back significantly this year.

And, more from Johnson...


There are a lot of moving parts going on with the interaction between the top percents and the middle class, inequality and collapse, but it isn't hard to see a story where the stock market picks up, housing is in decline for a decade, and we have a jobless recovery. I'm not sure how that would effect our quantitative measures of inequality, like the gini coefficient, but we could end up with much more inequality, and inequality that stings a lot harder than it did during the boom times.

Johnson then references a piece I must've read three times if I've read it once (and that was well before I read Johnson's piece tonight, too), from this past Saturday, by the folks over at--of all places--Zero Hedge. (NOTE: Johnson and Zero Hedge do not have a whole hell of a lot in common, politically.)


"A Detailed Look At The Stratified U.S. Consumer"
Tyler Durden
Zero Hedge
August 15, 2009

...It is probable that the dramatic increase in savings as disclosed previously, is an indication that at long last the richest 10% of America may be finally feeling the sting of a collapsing economy. Yet estimates demonstrate that even though on an absolute basis the wealthy are losing overall consumption power, the relative impact has hit the lower and middle classes the strongest yet again...

The main reason for this disproportionate loss of wealth has to do with the asset portfolio of the various consumer strata. A sobering observation is that while 90% of the population holds 50% or more of its assets in residential real estate, the Upper Class only has 25% of its assets in housing, holding the bulk of its assets in financial instruments and other business equity. This leads to two conclusions: while average house prices are still dropping countrywide, with some regions like the northeast, and the NY metro area in particular, still looking at roughly 40% in home net worth losses, 90% of the population will be feeling the impact of an economy still gripped in a recession for a long time due to the bulk of its assets deflating. The other observation is that only 10% of the population has truly benefited from the 50% market rise from the market's lows: those better known as the Upper class.

And to add insult to injury, the segment of housing that has been impacted most adversely in the current downturn, is lower and middle-priced housing: that traditionally occupied by the lower and middle classes. The double whammy joke of holding a greater proportion of net wealth in disproportionately more deflating assets is likely not lost on the lower and middle classes.

Yes, the wealthy aren't exactly going to have to worry about our "new normal," are they? (See: "America's bumpy journey to a new normal.")

Then again, the wealthy don't really have to worry too much about working or unemployment benefits vaporizing. (See "Weekly Unemployment Claims Increase, Workers Exhausting Extended Benefits.")

The wealthy don't have to worry about health insurance (See: 85% of the other diaries on this blog right now.)

The wealthy don't have to worry about things like foreclosures continuing to escalate, either. (See:  "MBA Forecasts Foreclosures to Peak At End of 2010.")

And, we all know the wealthy don't have to worry about those weekly paychecks, either, now do they? (See: "Why The Austrian, Keynesian, Marxist, Monetarist and Neo-Liberal Economists Are All Wrong.")


Why The Austrian, Keynesian, Marxist, Monetarist and Neo-Liberal Economists Are All Wrong
Served by Jesse of Le Café Américain
Naked Capitalism
August 20, 2009

US Personal Income has taken its worst annual decline since 1950.

This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal 'print and trickle down' approach. In the 1950's the solution was huge public works projects like the Interstate Highway System and of course the Korean War.

Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index.

The classic Austrian prescription is to allow prices to decline until the median wage becomes adequate. Given the risk of a deflationary wage-price spiral, which is desired by no one except for the cash rich, the political risks of such an approach are enormous...


Boldface type is diarist's emphasis.

So, I ask: Just who will benefit from a credit-less, revenue-less, jobless "recovery?" On what planet do these people that talk of a "recovery" in the next few months spend most of their time?

It sure doesn't look like this is a recovery in the Progressive Democratic sense of the word.

Yes, the political risks of the so-called recovery as it's being teed-up for us now...are enormous...

UPDATE (w/BREAKING NEWS):

And, here's another breaking story, relating to the loss of 59% of the pension fund equity investments over the past decade throughout our society.

The true extent of this downturn is just now coming to the surface, and it is going to play out for decades, IMHO...

...the equivalent of a double-deck headline over at Bloomberg right now...these losses relate to, perhaps, the lion's share of our middle class...this is a MUCH bigger story than it may, at first, appear...

"Pension Plans' Private-Equity Cash Depleted as Profits Shrink."


Pension Plans' Private-Equity Cash Depleted as Profits Shrink
By Jason Kelly and Jonathan Keehner

Aug. 20 (Bloomberg) -- U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.

The California Public Employees' Retirement System, the Washington State Investment Board and the Oregon Public Employees' Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven't reaped a paper gain from funds formed in the past seven years.

The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.

While some investors say they're confident the private- equity industry's traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms' books and prevented them from cashing out in public share sales.

Originally posted to http://www.dailykos.com/user/bobswern on Thu Aug 20, 2009 at 08:47 PM PDT.

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Comment Preferences

    •  As usual, a really fine essay from bobswern. (22+ / 0-)

      For these diaries I've taken to hitting the Recommend button even before reading, and then feeling even better about it after reading.

      Too bad that a diary posted at midnight won't get the attention it deserves.

      This is completely consistent with my own observations as a lawyer and small business owner in rural Maryland. Compared to some poor guy who is out of work, I'm doing pretty well. But I have most of my assets in residential real estate (two houses, one of which I use as an office). I'm getting squeezed so bad on so many fronts that I've had to lay off one employee and fear I can't keep the others through the year. So I sure don't feel any recovery.

      And despite my "status" as a lawyer and small business owner, I feel like I'm being ground into the dirt by the Financial Class. I have no retirement savings. I have health problems. I'm probably going to end up in the "lower class" despite decades of productive work.

      We need to go back to the income tax rates of the Eisenhower years.

      •  Hang in there bro. Your good heart will (5+ / 0-)

        get you thru.

        "Peace cannot be achieved by force. It can only be achieved by understanding" Albert Einstein

        by BigAlinWashSt on Thu Aug 20, 2009 at 09:40:32 PM PDT

        [ Parent ]

      •  Great comment. (13+ / 0-)

        And therein lies the rub. The "Financial Class" have everything working in their favor. The progressive income tax rates of the Eisenhower years were the great equalizer.

        Without it, the Financial Class wins every match. Historically, unquestionably, that has been the paradigm.

        To whom it may concern. Waterboarding is torture. Torture is illegal. Sincerely, A. No Brainer.

        by Pescadero Bill on Thu Aug 20, 2009 at 09:46:51 PM PDT

        [ Parent ]

        •  The problem is raising the taxes of the wealthy (1+ / 0-)
          Recommended by:
          kurt

          won't help mush at all in a downward spiral. The one area I disagree with Bob on is the amount of damage that has already been inflicted on the top percenters as well as the middle class.  Loss of jobs, ( yes, the very high paying ones here in Silicon Valley). The complete destruction of Venture Capital firms ( I know, so what? but, no jobs being created here anytime soon). Those firms, and any other private equity firms cannot count on any money form CALPERs or any other pension fund returning any time soon. So, another piece to add to the downward spiral. In addition the highest price homes are actually losing the most value. So while Jim Typical is underwater on his $300,000 house, Mr. and Mrs. V.P. have lost $1,000,000 on the their $3,000,000 home and can also no longer make the payments. They have already pulled Johnny out of the private school, what are you really left  to tax?

          The taxes should have been raised in the good years, there really is very little left to tax in the way of high incomes, except the Investment Bankers. Within a year or two, they will have no one left to sell their products to, and be losing their homes as well.

          My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

          by pvmuse on Thu Aug 20, 2009 at 11:36:53 PM PDT

          [ Parent ]

          •  If they don't have the very (6+ / 0-)

            high income, they won't have to pay the high marginal tax rate anyway. Lets put tax increases at the top end in place so the mistakes of Reagan, the two Bushes, Warren Harding, Calvin Coolidge and Hoover don't have to be repeated, yet again... Also, one of the reasons the financial elites went out of control was the ridiculous low tax rate on capital gains and dividends. Please explain to me why this type of income needs to be taxed at such a low rate relative to other forms of income, such as a paycheck?

            And, if they scream and holler about it, and leave the country, don't let the door hit them in the ass. Its not like most of the super wealthy elites have ordinary Americans welfare in mind anyway.

            I'm ok with the CEO of United Health Care losing 70 percent of his stock options to the Federal Government when he cashes them out. Rich is ok, but such obscene wealth should not be tolerated, especially when the bottom 90 percent of Americans incomes have been stagnant for the last 30 years or more.

            "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

            by NoMoreLies on Thu Aug 20, 2009 at 11:54:10 PM PDT

            [ Parent ]

            •  It shouldn't be taxed at a lower rate, let's go (2+ / 0-)
              Recommended by:
              farmerchuck, kurt

              ahead and raise them. But, it is really is  like closing the barn door after the horse is already out, and has run down the road.

              My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

              by pvmuse on Thu Aug 20, 2009 at 11:58:57 PM PDT

              [ Parent ]

          •  Well. (3+ / 0-)
            Recommended by:
            rincewind, NoMoreLies, kurt

            Can't really disagree b/c CA is one of the places where homes were wildly overinflated in value (two other places were NYC and South Florida...oh, I think maybe Vegas, too: not sure on that one).  And, yes, those are all places where there are lots of really rich people who might well be underwater right now on their mortgages.

            And I read the NYT...a lot of top-earning bankers & investment capitalists were fired over the past year.

            So: I cannot disagree with you about the downward spiral.  But I can't field a whole lot of sympathy for people who made more in a year than I will make in a lifetime...and who, even in the good years, didn't want to pay anything in taxes, if they could off-shore it.

            That's what the whole brouhaha over UBS and the end of Swiss banking secrecy was about (check yesterday's [Thursday's] NYT on UBS/Swiss banking for the link...it's hot here & I'm afraid my computer will crash if I go there).

            GOP: Turning the U.S. into a banana republic since 1980

            by Youffraita on Thu Aug 20, 2009 at 11:55:46 PM PDT

            [ Parent ]

        •  We do not live in the 1950s... (0+ / 0-)

          anymore we live in the global economy where the wealthy can move capital and themselves to other places under draconian taxation...

          In the 1950s we did not have a global economy and ease of moving people and capital anywhere in the world easily...

          Obama - Change I still believe in

          by dvogel001 on Fri Aug 21, 2009 at 05:05:45 AM PDT

          [ Parent ]

      •  There are scores of millions in the same.... (10+ / 0-)

        ...situation as both you and myself...it's actually much more horrendous than most realize...and the story's just beginning to get out now, as in this evening's breaking (and truly awful) economic news regarding pensions, and losses of 59% of the equity invested for a good portion of our middle class, too...

        "Pension Plans’ Private-Equity Cash Depleted as Profits Shrink."

        Pension Plans’ Private-Equity Cash Depleted as Profits Shrink
        By Jason Kelly and Jonathan Keehner

        Aug. 20 (Bloomberg) -- U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.

        The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years.

        The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.

        While some investors say they’re confident the private- equity industry’s traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms’ books and prevented them from cashing out in public share sales.

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Thu Aug 20, 2009 at 09:51:56 PM PDT

        [ Parent ]

    •  Higher inequality (4+ / 0-)
      Recommended by:
      rincewind, NoMoreLies, JanL, JG in MD

      There is indeed a significant risk that the outcome of this crisis will be a higher level of inequality in the American society (and other countries as well). Absent a radical overhaul of the way wealth is shared and redistributed, this is highly likely.

      As I said in my diary The American middle-class overwhelming debt burden:

      Given the size of the problem facing the vast majority of the American households and particularly the middle-class, only a massive redistribution from the uber-wealthy to the middle and lower income categories will provide a sustainable solution. This means:

      - ending the current system that allows the financial sector to grab the biggest part of the wealth created

      - a major overhaul of the wage system towards a better sharing of the created wealth

      - a bold reform introducing a strong redistributive tax policy.

      Will the Obama administration be able (let alone willing) to implement a bold enough reform to help the middle and lower income classes to get out of their economic situation? Unless they do so, the US will most probably be facing many years of very slow growth and high unemployment until these categories have gotten rid of their debt.

    •  Rich are getting hit too (3+ / 0-)
      Recommended by:
      NoMoreLies, nchristine, pvmuse

      The difference is the middle class has much less resources from which to draw to stave off the impending implosion.  

      However, don't mistake that for the rich doing well.  Many are overextended as well.  Thing is they have a 'better relationship' with banks for example so the banks are much more willing to work with them.  They have more liquidity so they can sell off at a loss some assets real quick to fend off a foreclosure or loss somewhere else, in other words shift money from one area to another.  They have more connections so when they lose a job at financial firm X, they can parlay their experience to land a job with financial firm Y.  

      They're playing a waiting game.  The problem is if they wait too long they too will lose everything.    

      Now there are many rich people who are circling like vultures and are swooping in to make a kill here and there.  I think the recent upswing in the Stock Market is an example of that.  Once they sensed bottom was hit, they started pumping money into Wall Street.  They're no longer putting their money into Real Estate.  Real Estate at the upper reaches is completely dead.  The Stock Market is much more liquid and they can more easily move money to capitalize on deals.  That's the dynamic that's being played out right now.    

      But for every rich person who is doing well there's one who is seeing their real estate investments tank.  Especially the commercial investments where many are losing leases left and right and along with it half their value.  Commercial properties unlike residential work on short term loans.  Many of these investors are leveraged to the hilt but haven't had to pay the piper yet because their 5 yr loans aren't up yet.  The hope is when they are the market will have rebounded.  Hence the waiting game.  Only this could well be a game they will lose which means that when they fall they don't just lose their house but many properties, like dominos.

      That wave hasn't hit yet but when it does you can be certain it will hit them harder.  We're not out of this mess by a long shot and it's working it's way up the fod chain.  First the sub primes and lower classes, then the Alt A loans and middle class
      on up to the upper class.

      This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

      by DisNoir36 on Fri Aug 21, 2009 at 06:01:16 AM PDT

      [ Parent ]

  •  A massive transfer of wealth (15+ / 0-)

    from the former middle class and the poor to the rich is ongoing.

    "The military industrial complex not only controls our government, lock, stock and barrel, but they control our culture." - Mike Gravel

    by Wilberforce on Thu Aug 20, 2009 at 09:06:53 PM PDT

    •  And must be stopped. (6+ / 0-)

      But I'm not holding my breath.

      •  It can't be stopped without (1+ / 0-)
        Recommended by:
        bobswern

        abolishing the Federal Reserve and the IMF, at least for the US.  For England it would mean the Bank of England, the Netherlands, the Bank of whateverthefuck, etc.

        "Peace cannot be achieved by force. It can only be achieved by understanding" Albert Einstein

        by BigAlinWashSt on Thu Aug 20, 2009 at 09:36:47 PM PDT

        [ Parent ]

        •  it can't be stopped (10+ / 0-)

          without reintroducing 1933-1980 style top marginal tax rates north of 70 percent for incomes over 2 million/year, and taxing capital gains at ordinary income rates. Heck, tax worthless financial instruments, such as derivatives, at an even higher rate. That kind of crap is no better than gambling on the ponies, at the casino, or buying a Powerball ticket.

          "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

          by NoMoreLies on Thu Aug 20, 2009 at 10:13:28 PM PDT

          [ Parent ]

          •  If I'm reading them correctly (10+ / 0-)

            (and it's quite true that I might not be) most of the writers on the economy that I respect indicate that the high tax rates...on the rich, on windfall profits, etc....encouraged them to plunge much of their profits into further investment, resulting in long-term profitability goals.

            Lower tax rates encourage short-term thinking.

            For society as a whole the long-term considerations are much better.

            GOP: Turning the U.S. into a banana republic since 1980

            by Youffraita on Thu Aug 20, 2009 at 11:07:34 PM PDT

            [ Parent ]

          •  You cannot raise marginal tax rates... (1+ / 0-)
            Recommended by:
            pvmuse

            back to over 70% anymore...we have a global economy and those incomes and profits of the wealthy would just move to lower tax places in the world and run their businesses from there in a global economy...the business and personal taxation has to be relatively similar to other countries in the world...the highest tax rates top out around 40% not including provincial (state) taxes...so you might be able to push to 45%...

            As for taxing financial instruments...that would just move that trading off-shore as well...better solution is to have risk based capital requirements....

            Obama - Change I still believe in

            by dvogel001 on Fri Aug 21, 2009 at 05:11:17 AM PDT

            [ Parent ]

            •  I say, let them leave, don't let the door (0+ / 0-)

              hit them in the ass. Tax rates in the entire EU and Canada are already that high for the top income earners, especially when you factor in provincial and value added taxes. Where are these people going to flee to? Third world anarcho-capitalist cesspool economies? The US has lower taxes than most developed countries, especially at the top end. Has our low tax haven for the wealthy created broad benefits? Its time for them to give it back. At least 50% top marginal rate. Many European nations pay 50 to 60% top marginal personal taxes, so your assertion that there is a global 40% ceiling is dead wrong.

              "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

              by NoMoreLies on Fri Aug 21, 2009 at 12:37:31 PM PDT

              [ Parent ]

              •  Only by about 5% maybe 10%... (0+ / 0-)

                if you look at the higher tax countries...many are lower including lovely Ireland...

                And if you put the tax rate back to 39.6% (the Obama proposal) you would be equal or higher than most of the industrial world...

                There are virtually no countries over 50%...and you cannot count provincial and VAT taxes unless you count US State Income and Sales Taxes...

                Hey if I was making $20 Million I would just live anywhere and run the business from there...

                The fact is our tax rates are not that low...they are just about average...

                http://www.nytimes.com/...

                He has sold a 10-passenger Cessna jet and now flies coach. This week his oceanfront estate in Hawaii sold for $1.5 million, with only a handful of bidders at the auction. He plans to spend much of his time in Belize, in part because of more favorable taxes there.

                Yes that would really suck...having to live in Belize...sun, scuba diving, and lower taxes...lets chase the rest of the wealthy out of the country too.../snark

                Obama - Change I still believe in

                by dvogel001 on Fri Aug 21, 2009 at 01:51:17 PM PDT

                [ Parent ]

                •  Hogwash, (0+ / 0-)

                  The 39.6 percent Federal top marginal tax rate that everybody crows about the Rich having to pay is not the reality. They dont actually pay that, percentage-wise. That tax rate only applies to personal wages, salaries, and oddball income such as gambling proceeds and some other esoteric categories. What they actually pay in federal taxes is close to 17 percent of their income for the richest of the rich, the Forbes 400. That is because the vast majority of their wealth is derived through income on investments, which is taxed at the ridiculously low rate of 15%, not on wages and salaries. I'd be willing to forgo a steep increase in top marginal rates if capital gains were taxed at the same rate as wages. Low capital gains tax rates only distort the market in favor of a parasitical financial industry and worthless endeavors such as derivatives.

                  As for the CEO of United Health Care, let Belize have him. Other than his vast riches employing a few servants, mouthpieces and fixers, his presence here, as has the industry he is running, have provided little of value for ordinary Americans, and in fact have provided detrimental value to a lot of people. I say good riddance to the greed heads.

                  "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                  by NoMoreLies on Fri Aug 21, 2009 at 04:09:08 PM PDT

                  [ Parent ]

                  •  You can say that about any country... (0+ / 0-)

                    that nobody pays the real top rate...so hogwash back to you...either we use the rates in the tables or we provide real evidence...

                    Obama - Change I still believe in

                    by dvogel001 on Fri Aug 21, 2009 at 04:48:00 PM PDT

                    [ Parent ]

                    •  15% capital gains tax rate is right out of (0+ / 0-)

                      the US tax code; it applies to long term gains. The maximum for short-term gains is still lower than that for wages and salaries at 28 percent versus 35 percent. from Wikipedia

                      As for the richest paying an effective tax rate of 17 percent, here's your evidence from Forbes.

                      I don't think these sources are disputable. I stand by my assertion that capital gains and extreme income are undertaxed in this country. The US tax code is regressive. And, I have not yet mentioned the regressive FICA tax that applies only to payrolls and is capped at $102,000. Bust the cap and get rid of the "social security crisis".

                      "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                      by NoMoreLies on Fri Aug 21, 2009 at 05:26:34 PM PDT

                      [ Parent ]

                      •  So lets compare apples to apples... (0+ / 0-)

                        Japan has virtually no capital gains tax for instance...the problem is you tax capital gains at too high a rate then businesses start to move out of the country...

                        And busting the cap on SS does not eliminate the SS issue...it is just a bandaid...

                        But gotta go...I am an accountant...I will be back with additional evidence rather than quoting a rag like Forbes...they do not know taxes and accounting...

                        Obama - Change I still believe in

                        by dvogel001 on Fri Aug 21, 2009 at 05:44:41 PM PDT

                        [ Parent ]

                        •  There is a difference between (0+ / 0-)

                          sucking out profits for mega salaries and personal stock options or for derivatives and credit default swaps and other species of financial funny money, and plowing gains back into a company for its long term health. As you are aware, if you re-invest the gains into productive capital infrastructure, and gainful salaries for employees, you apply it against the companies tax liability.

                          As for the derivatives and other funny financial instruments, I see no reason not to treat them any different under the tax code than lottery or casino winnings.

                          "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                          by NoMoreLies on Fri Aug 21, 2009 at 06:46:24 PM PDT

                          [ Parent ]

    •  The massive transfer of wealth has been ongoing (5+ / 0-)

      since Reagan

  •  I agree. (15+ / 0-)

    The middle class and the poor are getting the worst of the recession. Various bailouts have made whole a lot of the rich that caused our current crisis.
    A middle class is a fairly recent innovation in today's sense of the word. It wasn't that long ago that sharecropper's worked the land for subsistence and industrial workers "owed their soul" to the company store like in Tennessee Ernie Ford's "16 tons". I remember a story my Dad told me about the Kirby lumber company. Workers were told not to hurt the mule because the company would have to buy another if anything happened to the mule but it was OK if the man got hurt because all they had to do was hire another man. I hope those times aren't coming back.

    •  Not sure they ever really left (6+ / 0-)

      A VP of a company I once worked for had a favorite saying he used as often as possible, always with more than a hint of malice:

      "No one is irreplaceable."

      He was dead serious, and made sure everyone knew it.

      @mataliandy on twitter

      by mataliandy on Thu Aug 20, 2009 at 10:35:14 PM PDT

      [ Parent ]

      •  that is congruent with (6+ / 0-)

        Thom Hartmann's assertion that many top corporate managers have two characteristics, sociopathology and the technical ability to run a company. They have no concern or empathy with other people.

        "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

        by NoMoreLies on Thu Aug 20, 2009 at 10:57:15 PM PDT

        [ Parent ]

        •  I'd like to read that. Do you (0+ / 0-)

          have a link, by any chance?  It sounds fascinating.

          GOP: Turning the U.S. into a banana republic since 1980

          by Youffraita on Thu Aug 20, 2009 at 11:02:27 PM PDT

          [ Parent ]

          •  I heard it on his podcast, several days ago (1+ / 0-)
            Recommended by:
            Youffraita

            check on his website.

            "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

            by NoMoreLies on Thu Aug 20, 2009 at 11:09:58 PM PDT

            [ Parent ]

          •  Also, you might (1+ / 0-)
            Recommended by:
            Youffraita

            be interested in his book, Threshold. I think he has a discussion about pathologies of corporate leaders in that book, but I cannot be completely sure about that. It is on my to read list.

            "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

            by NoMoreLies on Thu Aug 20, 2009 at 11:13:26 PM PDT

            [ Parent ]

            •  Thanks. I will try his website... (0+ / 0-)

              how is he as a writer?  One of the compelling things about Krugman is that he is able to explain things in clear English (even though he can be wonky as hell when writing for other economists.  Damn, but I would have loved to have been a student of his).

              GOP: Turning the U.S. into a banana republic since 1980

              by Youffraita on Thu Aug 20, 2009 at 11:22:02 PM PDT

              [ Parent ]

              •  If you have a decent computer (2+ / 0-)
                Recommended by:
                Youffraita, princesspat

                and high speed  internet you can download podcasts of Hartmanns radio shows free from either iTunes or his web site directly. They are usually very good,and he gets a good variety of guests, including many he disagrees with. The discussions are entertaining, and he speaks and explains things very clearly.

                "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                by NoMoreLies on Thu Aug 20, 2009 at 11:32:02 PM PDT

                [ Parent ]

                •  My computer is good (0+ / 0-)

                  and fast & I have DSL...but something needs to be fixed in it & I'm not sure what, so I have to be very careful, especially now, when it's so hot.  So, podcasts & YTs are basically out of the question.  (I read a lot, but really miss gaming & watching vids & listening to music streaming on-line.)

                  GOP: Turning the U.S. into a banana republic since 1980

                  by Youffraita on Fri Aug 21, 2009 at 12:04:22 AM PDT

                  [ Parent ]

                  •  If you have to (0+ / 0-)

                    most libraries now have computers with high speed internet, and you can download big files there and put them on a flash drive. Heck, you can get a cheapo 4 gig mp3 player for under 50 bucks or an iPod shuffle and put the files on there. All the libraries I have gone to allow you to hook up a device to the USB port to pull off files.

                    About a year before my mom died, she got a new computer (she had undiagnosed terminal cancer, but thats another story) and wanted free word processing software. I went to her public library and downloaded open office to a flash drive and put it on her computer since she had dial up only.

                    "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                    by NoMoreLies on Fri Aug 21, 2009 at 12:14:29 AM PDT

                    [ Parent ]

                    •  You won't be able to use the iPod at the library (1+ / 0-)
                      Recommended by:
                      NoMoreLies

                      as most libraries don't let you install software, and you have to use iTunes (or some other iPod specific software that can fake it) to put music on an iPod.  A basic mp3 player is much better if you want to be able to just drag and drop music files, including podcasts.

                      •  You can use the iPod (0+ / 0-)

                        if you enable "disk use".

                        Then it works as a virtual harddrive and you can drag files to it without having to run iTunes.

                        "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

                        by NoMoreLies on Fri Aug 21, 2009 at 08:20:51 PM PDT

                        [ Parent ]

    •  I think this is somewhat of (3+ / 0-)
      Recommended by:
      mcc777c2, greengemini, polar bear

      a misnomer...

      A middle class is a fairly recent innovation in today's sense of the word.

      Consider Bushman's From Puritan to Yankee's discussion regarding the 17th century New England town. The towns were basically corporate partnerships in which most of the people living in the town were part owners of the corporation. In order to become a free holder in the town typically a fee was required usually around 50 shillings. To give an idea of what that represented, a typical laborer was paid 2 shillings for a days work. Upon acceptance a new townsman would be granted a substantial plot of land with which to farm and would be eligible for future distributions of land indefinitely.

      The town government was corporative and responsive to the needs of the townsmen and people worked together to efficiently maximize benefits. For instance, the town would typically fence a portion of the land for joint grazing of cattle and would appoint an individual to make sure that people are keeping their portion of the fence in good repair. People kept the fruits of what they earned and were able to trade outside of the town as the moved beyond the subsistence state.

      As we moved into the 18th century equality began to decline but then after the revolutionary war and opening of the west we have another period of higher equality.

      The freeing of the slaves after the civil war could be seen as an increase in in equality though that time perhaps due to the ferocity of the civil war it doesn't appear as though we achieved as high a level of equality as after the revolutionary war and after ww2. Of courses the most recent peak of inequality occurred in the 20's into the 30's with a peak of equality in the 50's.

      We have moved in and out of periods of maximum in equality and maximum inequality. Now as in the 1930's we have reached a peak of inequality and I think we will begin to move in the other direction.

      •  In all those examples it could be argued (2+ / 0-)
        Recommended by:
        NoMoreLies, scotths

        that it was the government, or governing bodies at the time that were assuring that equality.

        The government takes a portion of the wealth as it is created and redistributes it in the form of investment in local economies.

        The problem we're facing these days is that the government has been investing it in select sectors (the MIC for example) that make some rich and offer very little in return to local economies.

        Government working to actually invest long-term in local economies is key. And it will have to be done somewhat ruthlessly in order for it to work. I'm thinking penalties in the form of tariffs on outsourcing corporations, the dissolution of financial schemes that are merely poker games for the rich, and progressive taxation.

        No more Mr. Niceguy. You live in this country, you get wealthy in this country, you invest in this country.

        To whom it may concern. Waterboarding is torture. Torture is illegal. Sincerely, A. No Brainer.

        by Pescadero Bill on Fri Aug 21, 2009 at 07:34:19 AM PDT

        [ Parent ]

        •  I agree.. (2+ / 0-)
          Recommended by:
          Pescadero Bill, NoMoreLies

          A key point in the first example is that the towns were given the land on which they farmed. Thus, they had no mortgage or other such indebtedness to start life. Perhaps todays version as we now require knowledge more than land would be eliminating or minimizing the loans we require young people to take in order to obtain needed education.

          I think the estate tax needs a new name. The conservatives get to call it the death tax, why don't we get in the act? Perhaps something like "Intergenerational Opportunity Enhancement Tax" focusing on providing for future generations the same set of conditions under which the individual was able to obtain great wealth. This notes that a given individual succeeded because of many peoples' actions in the past developing new science and technology upon which this individuals accomplishments stand. The money will make sure that the country remains strong, scientific advancement continues, and future entrepreneurs grow up in a world in which they can explore their ideas and bring them to fruition.

  •  OK, (1+ / 0-)
    Recommended by:
    greengemini

    What is wrong with deflation?

    What is wrong with an economy where people are encouraged to save?

    In deflation if people need things they buy them,  and if they do not need things they don't buy them.

    Why should we have an economy that requires people  to buy more than they need or can afford?

    •  There are many good books and people with... (8+ / 0-)

      ...common sense that could (and have) spend a lifetime answering this question.

      What's wrong with deflation? Ummm...starvation, death, the veritable crushing of the hopes and dreams of 99% of society...other than that, "deflation's good for you," as you seem to concur.

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Thu Aug 20, 2009 at 09:26:11 PM PDT

      [ Parent ]

      •  Inflation was the norm throughout (0+ / 0-)

        the 18th century so that statement is not even close to accurate.

      •  But actually not all deflation is bad. (3+ / 0-)
        Recommended by:
        steve04, NoMoreLies, greengemini

        It is only a depressing phenomenon when wages continue to fall.

        Some of the deflation that results from overcapacity can actually allow more goods to be purchased by those with lower incomes.

        If it becomes to intrenched, it can often lead to a downward spiral, as people postpone buying with the thought that prices will be lower later. Thus sometimes, but not always leading to more layoffs.

        This has been the problem in Japan for the last 20 years. Yet we have had periods in the past where flat prices, or slight deflation, have actually allowed more people to have a better standard of living.

        The period of deflation we are now experiencing will last until the monetary stimulus finally is recycled back into the system. The velocity of money has slowed for the time being because banks are not being the conduit they recently were, and instead are using reserves to rebuild their own balance sheets.

        Inflation is always a monetary event. With the amount that central banks around the world have printed we will likely have a hyper inflationary period once this brief deflation is over.

        Individuals should use this period to reduce debt and purchase only those items they truly need.

        My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

        by pvmuse on Thu Aug 20, 2009 at 10:55:13 PM PDT

        [ Parent ]

        •  How do you use the word, printed? (1+ / 0-)
          Recommended by:
          greengemini

          Has the US really printed physical money?  The way I understand it, most of it has been accomplished by expanding the fed's balance sheet.  If the economy recovers to he point where hyperinflation is a danger, almost by definition the fed will be in a position to sell assets back into the market and reduce its balance sheet, thus taking real $$ back out of the supply.  So far the fed is doing a good job managing the money supply vs money velocity to keep inflation/deflation quite moderate, considering the massive financial upheaval underway.

          No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

          by steve04 on Thu Aug 20, 2009 at 11:00:55 PM PDT

          [ Parent ]

          •  They actually have never removed the stimulus (2+ / 0-)
            Recommended by:
            steve04, NoMoreLies

            successfully once it has been added. Think of the malinvestment that occurred with the Y2K funds, they blew up into the tech bubble, when it collapsed new liquidity was added that found its way into overpriced homes. Instead of expanding the balance sheets of businesses or homeowners, the balance sheet of the largest investment banks and the Fed is now being expanded, there will be no removing it, regardless of what they say. If we had really wanted to clean up this mess, we would have allowed all the excess to have been worked off through asset write downs and bank failures. We could have protected only people with extensive transfer payments until this process was complete. There is actually no way out now but a massive devaluation of the dollar. This has been slowly occurring for years, but the sharp adjustments we shortly face will probably only be covered up by a massive war of some type.

            If you can ever think of a situation where the Fed ( or any central bank for that matter) removed liquidity successfully, please let me know. Actually, the Government bank  to watch right now is China, the amount they are printing ( or expanding their balance sheet by, take your pick) dwarfs what we are doing. Since we are all globally connected though the consequences will be felt though out the world.

            My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

            by pvmuse on Thu Aug 20, 2009 at 11:18:24 PM PDT

            [ Parent ]

            •  Well, there are a few things they can do (0+ / 0-)

              There have been a lot of give-aways, and that money has flown the coop, but as far as:

              1. treasuries bought by the fed with funny money: treasury already spent the money into circulation, when the Fed sells the treasuries to regular investors, money will come out of circulation and close the funny money loop, right?
              1. bank assets: if they reinstate mark to market, or split the baby, they will remove liquidity and constrain capital lending at banks, who all seem to be playing fast and loose a the moment with the Fed's blessing.

              There are probably other mechanisms I'm not thinking of whereby the Fed can pull money back out of the system.  

              No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

              by steve04 on Thu Aug 20, 2009 at 11:46:52 PM PDT

              [ Parent ]

              •  "When the Fed sells the treasuries to regular (0+ / 0-)

                investors, the money will come out of circulation and close the funny money loop, right?

                Well, no. This is when those dollars actually start their malinvestment process in the real economy. If they are sold instead to banks, as most are, the same process occurs, each dollar is magnified and increased with continuing velocity. Where did they leave the system?

                My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

                by pvmuse on Thu Aug 20, 2009 at 11:55:50 PM PDT

                [ Parent ]

                •  The $ entered the system when the Fed bought them (0+ / 0-)

                  The treasury spent or will shortly spend money equivalent to the T-bills it issued.  Many of those are being bought by the Fed.  When it did that, it converted inaccessible bank reserves at the Fed into money in circulation, replacing it with T-bills on its balance sheet.  If it later sells the t-bills to banks and individuals, money from general circulation is used to pay for those, and the fed returns the money to the inaccessible bank reserves held at the fed.  Do I have this totally wrong?

                  No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                  by steve04 on Fri Aug 21, 2009 at 10:50:07 AM PDT

                  [ Parent ]

                •  Take a look at this chart (0+ / 0-)

                  All the handwringing over t-bill purchases is now perfectly in context for me--the Fed sold off T-bills beginning in March of 2008, and its recent purchases haven't even yet gotten it back to the status quo level of where it should be to provide monetary supply flexibility to fight or encourage inflation.

                  http://blogs.wsj.com/...

                  No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                  by steve04 on Fri Aug 21, 2009 at 10:52:15 AM PDT

                  [ Parent ]

            •  Oh, and totally agree on China (0+ / 0-)

              China scares me right now.  They blew their wad of stimulus, and they aren't really sure what the hell they've done.  On the one hand, they have hungry masses who will riot if they can't afford food and shelter; on the other hand, with demographics where the working age population will plateau in 2030 but population will still be growing due to increasing life expectancy, they can't afford to mess up growth and investment.

              The volatility in the Shanghai index shocks me.  I read something about the volume of stocks traded by individuals rather than the typical western model of professional money managers, who may not all be great, but at least resist half of the impulse to run with the herd.

              No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

              by steve04 on Thu Aug 20, 2009 at 11:49:57 PM PDT

              [ Parent ]

        •  There is nothing wrong with an economy where (0+ / 0-)

          people are encouraged to postpone buying decisions.

          In fact from an environmentally sustainable point of view it is mandatory.

    •  That's when the rich buy up all the (3+ / 0-)
      Recommended by:
      Pescadero Bill, NoMoreLies, bobswern

      assets of the poor and continue their transfer of wealth.  

      "Peace cannot be achieved by force. It can only be achieved by understanding" Albert Einstein

      by BigAlinWashSt on Thu Aug 20, 2009 at 09:32:51 PM PDT

      [ Parent ]

      •  The banks just steal your money outright (2+ / 0-)
        Recommended by:
        greengemini, BigAlinWashSt

        with inflation.

        It seems the only real prayer the middle class has is to save some money but then we have inflation to steal it from them.

      •  What do you mean? (1+ / 0-)
        Recommended by:
        greengemini

        a) the poor don't really have assets, by definition
        b) deflation means that assets are worth less $$, or cost less $$, however you want to say it.  You don't want to hold physical assets during a deflationary period, you want cash, because every day that goes by it's worth more.

        No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

        by steve04 on Thu Aug 20, 2009 at 10:50:50 PM PDT

        [ Parent ]

    •  The paradox of thrift (0+ / 0-)

      What makes sense at an individual level is not necessary good at a collective level. It's named the Paradox of thrift. If everybody saves more, consumption decreases, production and investment follow, consequently, the economy shrinks and unemployment skyrockets.

      Also, deflation makes people suspend spending because they wait for prices to go down, thus freezing markets and production.

    •  A little deflation.... (1+ / 0-)
      Recommended by:
      NoMoreLies

      is fine...massive deflation would start another great depression...

      Little as in like less than 2% per year...

      Obama - Change I still believe in

      by dvogel001 on Fri Aug 21, 2009 at 05:12:35 AM PDT

      [ Parent ]

  •  I'm thinking there will be a growing job market (6+ / 0-)

    for man servants (get your head out of the gutter I'm referring to butlers).

    In fact, many of the large parcels of land in and around silicon valley were and are being bought up by either land trusts supported by wealthy donors, or by wealthy people directly who then hire locals to be grounds keepers.

    It's odd to witness America turning into 19th century Great Britain.

    To whom it may concern. Waterboarding is torture. Torture is illegal. Sincerely, A. No Brainer.

    by Pescadero Bill on Thu Aug 20, 2009 at 09:34:37 PM PDT

  •  Where the two economies connect (5+ / 0-)
    Recommended by:
    rincewind, NoMoreLies, kurt, HCKAD, bobswern

    is in the need for businesses to be profitable. For privately owned businesses, because the owners and their families get a disproportionate share of the profits. For publicly traded companies, because their stock valuation is largely based on staying profitable and holding out the hope that they can increase their profits.

    The troubles we have gotten into come from the fact that the business owners and stockholders have been looking for bigger and bigger returns ever since the inflation shock of the mid 1970s. There were two ways to go about it, but the two were in conflict. The first was to reduce expenses, initially through automation, then through renewed union-busting and extorting tax breaks from state and local governments, then through outsourcing and offshoring jobs. The biggest consequence being fewer jobs, job insecurity, wage growth that lagged inflation, shrinking employee benefits, etc. The second way was to increase sales volume and market share, which meant getting more people to buy the products being produced. Since people with insecure jobs and little or no growth in compensation were unlikely to buy more based on that, the solution to the conflicting needs was to substitute debt and illusory wealth based on asset bubbles to keep the level of consumption up. And here we are today! ;-)

    Actually that oversimplifies because there have been whole classes of consumer products created that didn't exist in 1973, and these have helped us stay afloat. For example, there were no PCs in 1973, in 1984 they went for about $4000 and were very primitive, in 1995 they were more like $2000 and getting much more capable, and now they're around $900 and very sophisticated. So product innovation and improvement (and the cost cutting measures detailed above) allowed countertrend industries and markets to flourish. The question is what new industries can continue to buck the overall trend enough to have a significant effect on the economy?  And without new industries and markets, where will the jobs and income come from that will keep customers spending and allow businesses to meet their sales and market share goals? I have a hard time seeing what the answers to those last two questions could be.

  •  This discussion about the evils of deflation and (2+ / 0-)
    Recommended by:
    steve04, bobswern

    inflation is hard to ignore. People with loads of debt and salaries/wages that will at least somewhat increase with inflation do not want to see deflation.

    People living off of savings and fixed incomes (many times retirees) see inflation as their worst enemy.

    Some times there is no policy/situation that is advantageous for everyone, so either granny or upside-down home owners are going to be thrown under the bus for the good of the rest of the country.

    I voted with my feet. Good Bye and Good Luck America!!

    by shann on Thu Aug 20, 2009 at 09:56:02 PM PDT

    •  What "rest of the country" is that? Wall St.? n/t (1+ / 0-)
      Recommended by:
      NoMoreLies

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Thu Aug 20, 2009 at 10:10:13 PM PDT

      [ Parent ]

      •  Too late, Wall St. has already won, we have lost. (1+ / 0-)
        Recommended by:
        NoMoreLies

        The issue at hand is who has to suffer a bit extra to keep the economy going. Here is a hint, it is not going to be the top couple of percent, they already have theirs and are not about to give it up.

        I voted with my feet. Good Bye and Good Luck America!!

        by shann on Thu Aug 20, 2009 at 10:33:01 PM PDT

        [ Parent ]

    •  There's a middle way (1+ / 0-)
      Recommended by:
      greengemini

      The massive monetary supply increase has been in part aimed at avoiding massive deflation.  So far, it's working, as we're within 2% of 0, + or - as far as I know.  At least this way, people bear responsibility for their own decisions, rather than having massive inflation or deflation ruin or save them.

      It seems to me that the best thing to do if massive deflation or inflation are possibilities is to save up cash.  In a deflationary situation, you'll come out on top.  In an inflationary situation, your money will be worth less, but at least you have money to lose, which is better than the alternative.

      No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

      by steve04 on Thu Aug 20, 2009 at 10:56:58 PM PDT

      [ Parent ]

  •  I commented on another diary (6+ / 0-)

    about the primacy of the FIRE sector at the expense of the productive economy as a contributor to the collapse of the real economy and a driving force towards the evisceration of the middle class. That, along with our warped tax code and other elements of our top down class warfare has been instrumental in this economic crisis. Cheap credit could not wallpaper over it forever. Now that thats gone, consider the bottom 90% pwnd. Realistically, what we should call Reaganomics is the Screw Deal, to contrast it with the New Deal, of which large portions have been rolled back.

    At least the robber barons 100-120 years presided over companies with workers that made stuff. The current ones cannot even do that.

    "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

    by NoMoreLies on Thu Aug 20, 2009 at 10:24:27 PM PDT

  •  The two-track economy has, of course ... (14+ / 0-)

    ...been with us for a long, long time. But it's getting worse now as we approach Third World rich-poor ratios.

    Here's an excerpt from my FP diary that will appear Friday morning:

    Face it.  Nobody knows for certain what’s going to happen.

    What is known for certain on the employment front is that we’re still losing jobs in the hundreds of thousands each month. Some of the out of work who were lucky enough to have had unemployment benefits have now exhausted them. Some are no longer counted in the statistics because they’ve become discouraged and stopped looking for a job. Some are stuck in part-time jobs because they can’t find full-time work. Altogether that’s around 30 million unemployed and underemployed Americans.

    What is also known for certain is that many of these people are spending down their savings, seeing their unemployment benefits exhausted (or never having had any to begin with) and facing foreclosure even though their mortgages were not subprime. For them, despite the conventional wisdom heard daily throughout the media, the worst is yet to come.

    And something else is certain. During Bill Clinton’s eight years in office, the economy created an average of 222,000 new jobs each month, a record. It would take 30 consecutive months like those on Clinton’s watch to replace the 6.7 million jobs officially lost so far since the Great Recession began in December 2007.

    Assuming we were to start that climb in October and keep at it steadily – a most optimistic view – we won’t again reach the numbers of Americans who were employed in December 2007 until April 2012. That’s 52 months. The longest previous time to return to peak job numbers came after the 2001 recession, 47 months.

    To reiterate: This is the optimistic view, which obviously isn't shared by the above-cited forecasters interviewed by the Federal Reserve Bank of Philadelphia. They don't see net job losses ending for a year. If they're right, it could be 60 months before the previous job peak is reached.

    None of this takes into account the discouraged workers or the estimated 127,000 additional jobs needed each month to keep up with population growth. Nor does it say anything about the quality of jobs or stagnant wages. Nor, obviously, of the fact that from the time jobs returned to their previous peak after the 2001 recession, it was less than three years before the next recession began.  

    Some people would be better off not reading diaries they comment on, since they already have all the answers.

    by Meteor Blades on Thu Aug 20, 2009 at 10:41:29 PM PDT

    •  Yes, welcome to the "new normal..." n/t (3+ / 0-)
      Recommended by:
      NoMoreLies, Youffraita, polar bear

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Thu Aug 20, 2009 at 10:45:46 PM PDT

      [ Parent ]

    •  I'd like to read the entire diary, sooo (2+ / 0-)
      Recommended by:
      RiaD, polar bear

      what's "FP?"

      Thanks!

    •  Actually even 60 months is pretty (3+ / 0-)

      optimistic, given the fact that we will continue to reduce debt during this period of time, and that will slow the recovery even further. It is more likely that we continue down for another couple of years, since the Fed has been notoriously wrong with their forecasts, and the recovery once it comes will be in fits and starts. I actually feel the income disparity this diary discusses will close considerably during this time. Not only will incomes be taxed at higher rates, but many people will forego investing in the securities market, shrinking the very mechanism that has actually created wealth in a disportionate way.

      My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

      by pvmuse on Thu Aug 20, 2009 at 11:03:33 PM PDT

      [ Parent ]

    •  Which is why we need to roll back (5+ / 0-)

      Bush's tax cuts, Reagan's tax cuts, and tax financial instrument gains and dividends at ordinary income rates, cut the military budget by 30-50 percent, eliminate subsidies for fossil fuels, and use 60 percent of the new or redirected revenue for a new crash Green WPA which would include green infrastructure such as rail transport, renewable and other green energy, and sustainable building stock which would include both retrofits and new buildings, along with watershed restoration, grants for local ecological restoration, and local food production. Use 10% to jumpstart the new healthcare program, another 10 to bail out distressed homeowners, and the remaining 20% would be used to pay down the debt so we can quit wasting money paying interest to rich folks and foreign countries.

      "There's a bailout coming, but it's not for me, it's for all the creeps watching the ticker on TV"-Neil Young

      by NoMoreLies on Thu Aug 20, 2009 at 11:08:15 PM PDT

      [ Parent ]

      •  This is tangential but, (6+ / 0-)

        I think, relevant: There have been a couple of good diaries lately about taking abandoned properties & turning them into public gardens, growing vegetables to feed everyone & to sell: one was about the mayor of Warren, PA, and his efforts, but similar things are happening elsewhere, too.

        If your town is dying, why not literally green it up with hoop houses & sell the veggies to Pittsburgh restaurants?  Or organize volunteers to do the planting, but let anyone come by and take what they can use?

        GOP: Turning the U.S. into a banana republic since 1980

        by Youffraita on Thu Aug 20, 2009 at 11:15:44 PM PDT

        [ Parent ]

      •  You cannot go to 70%+ marginal... (1+ / 0-)
        Recommended by:
        pvmuse

        tax rates under a global economy...capital and wealth would just leave the country because companies can operate anywhere now and people with wealth can just take their money and estates and live anywhere...

        Obama - Change I still believe in

        by dvogel001 on Fri Aug 21, 2009 at 05:17:38 AM PDT

        [ Parent ]

  •  A credit driven consumption based (1+ / 0-)
    Recommended by:
    NoMoreLies

    economy inevitably drives wealth upwards in ALL parts of the economic cycle: bust, boom, crash, recovery, whatever...  This effect widens the gap between rich and poor.  If the consuming sector of the economy, ie, the poor and middle class, see no expansion of credit and a decline in net worth, then consumption drops.  And with it the economy.  We've been on a non sustainable course, which will not correct unless we change to a command economy (communism anyone? -- No thanks), wealth flows move downwards (socialism, taxation, or an incredible and heretofore never experienced outburst of ginormous charity from the wealthy), or the arrival of new, non-labor related cost savings in multiple sectors (healthcare reform, technology).

    Or that's how it seems to me, at least.

  •  We know that phony growth was inevitable. (1+ / 0-)
    Recommended by:
    NoMoreLies

    When they rewrite the accounting rules and pump trillions of fiat dollars into the economy, it wasn't going to "improve" the numbers?

    This is the same strategy Bush used following the 2001 recession.

    It was wrong then, and it is wrong now.

    The proper economic policy would be very unpopular with our juvenile public.

    The Bill of Rights is universal.

    by Paul Goodman on Fri Aug 21, 2009 at 03:12:18 AM PDT

  •  Now I do not wholly disagree with your... (0+ / 0-)

    diary and perhaps that is the big difference between the diarist and the people at DKos saying...hey there is really a recovery around the corner...

    So in the end both DKos camps are correct...there is an economic recovery beginning and yes it will be unfair to some groups of people in this country for sometime...

    Peace...

    Obama - Change I still believe in

    by dvogel001 on Fri Aug 21, 2009 at 05:03:57 AM PDT

  •  Short version: (1+ / 0-)
    Recommended by:
    NoMoreLies

    We're still a nation of haves and have-nots, and it's getting worse.

    Thanks for this excellent diary!

    In 1971, Don McLean wrote about the day the music died. On 17 July 2009, the news died. RIP Walter Cronkite.

    by SciMathGuy on Fri Aug 21, 2009 at 08:30:41 AM PDT

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