Easy to forget

In the endless campaign to determine who shall lead us we may lose sight of some glaring realities. In particular, we forget just how unequal our society has become and the reasons for it. Whether Clinton or Trump wins, the underlying basics of American life suck for the Rest of Us.

gini index us since 1947

Well, Bill Moyers steps up to remind us of the problems and how we got here. He has history both within and outside government and his 80-plus years on the planet give him perspective that few can provide.

“We, the Plutocrats vs. We, the People.” Guess what? The Plutocrats prevail at the expense of “the People.” Moyers:

When I was a young man in Washington in the 1960s, most of the country’s growth accrued to the bottom 90 percent of households. From the end of World War II until the early 1970s, in fact, income grew at a slightly faster rate at the bottom and middle of American society than at the top. In 2009, economists Thomas Piketty and Emmanuel Saez explored decades of tax data and found that from 1950 through 1980 the average income of the bottom 90 percent of Americans had grown, from $17,719 to $30,941. That represented a 75 percent increase in 2008 dollars.

Since 1980, the economy has continued to grow impressively, but most of the benefits have migrated to the top. In these years, workers were more productive but received less of the wealth they were helping to create. In the late 1970s, the richest 1 percent received 9 percent of total income and held 19 percent of the nation’s wealth. The share of total income going to that 1 percent would then rise to more than 23 percent by 2007, while their share of total wealth would grow to 35 percent. And that was all before the economic meltdown of 2007-08.

But here’s the thing. Inequality grew rapidly not because of “globalization” or “automation.” Inequality is the direct consequence of deliberate policies enacted by Congress. Citing the work of Jacob Hacker and Paul Pierson, Moyers writes:

The winners bought off the gatekeepers, then gamed the system. And when the fix was in they turned our economy into a feast for the predators, “saddling Americans with greater debt, tearing new holes in the safety net and imposing broad financial risks on Americans as workers, investors and taxpayers.”

Regardless of who enters the Oval Office next January, the situation is unlikely to change. It’s the nature of capitalism and its compliant “gatekeepers.”

Not to be outdone

Yes, I excoriate Republicans, for many serious reasons. But I hasten to add that the modern Democratic Party is evil in its own ways, beginning in earnest with the presidency of Mr. Clinton. It really is corrupt, taking quid-pro-quo to an art form, an integral part of the new Democrat. Wall Street won. Everyone else can go suck on a lemon.

Bill Moyers picks up on Thomas Frank’s latest book, Listen, Liberal. Writing for the Huffington Post, Moyers says:

The lust for loot, which now defines the Democratic establishment, became pronounced in the Bill Clinton years, when the Clinton-friendly Democratic Leadership Council (DLC) abandoned its liberal roots and embraced “market-based solutions” that led to deregulation, tax breaks, and subsidies for the 1 percent. Seeking to fill coffers emptied by the loss of support from a declining labor movement, Democrats rushed into the arms of big business and crony capitalists.

No wonder Bernie Sanders is staying alive.

Egan stumbles

I generally appreciate Timothy Egan’s words, which I find eloquent and usually spot on. But he, like his New York Times colleague, Paul Krugman, has joined the bashing-of-Bernie brigade, dismissing him with agist epithets. Today’s column is just one example. He writes of Sanders:

The next highest concentration of voters seeking radical change is drawn to the shouted shibboleths of Senator Bernie Sanders, the 74-year-old socialist. Sanders is a sloganeer with authenticity. But a rant, no matter how dead-on, is not a governing blueprint. His answer, on a number of occasions, to complex issues has been “I haven’t thought about it a whole lot.” In many areas, he’s almost substance-free.

Bernie’s supporters would disagree. But I am mostly concerned with Egan’s ill-informed attempt to propel Hillary Clinton to victory. He proffers a “big idea”:

Consider the epic changes over the past century that brought lasting good to this country. Social Security and Medicare, allowing millions of Americans to live in dignity, were part one. The Civil Rights and Voting Rights Acts of the 1960s, which completed what Abraham Lincoln started with the 13th Amendment, were part two. Clean Air and Clean Water Acts, which made the nation’s cities breathable, waterways swimmable and the country more habitable for all living things, were part three. Clinton needs to fashion a part four, attacking inequality with an institutional uplift to the slipping middle class.

Clearly Egan has not read Thomas Frank’s latest book, Listen, Liberal. There he would discover that the Clinton’s deliberately shunned the working class, which is most of us, after all. They did so to curry favor with Wall Street elites, to demonstrate their “Very Serious” crud, and to pre-empt Republican ideology, which has always blamed the victims while promoting or executing policies that make more of them.

Frank cites several Clinton White House initiatives that made lives worse for the Rest of Us. These include: ending of welfare-as-we-know it; NAFTA, which encouraged, if not enabled, corporations to shut down U.S. plants and move operations to cheap-labor Mexico; and wholesale deregulation of the financial sector, leading almost inevitably to the Great Recession, from which most Americans have yet to recover.

We will recall the Bush-versus-Gore debates about Social Security and “lock boxes.” Both presidential candidates vowed to protect the program, one way or another. Of course, G.W. Bush, as president, would try to do the opposite: throw the elderly under the bus by tying their retirements to Wall Street and its malevolent misadventures.

Well, guess what? Bill Clinton did his best to accomplish what G.W. couldn’t. In brief, America’s elderly were saved by a blow job. Here’s Frank:

The two leaders [Newt Gingrich and Bill Clinton] knew this [privatizing Social Security] would mean building “a new center/right political coalition” to get the deed done, because many Democrats could be counted on to oppose the deal. Indeed, … on numerous issues “the president was closer to Gingrich than he was to the leadership of his own party,” a description that could have been accurately applied to each of Clinton’s great accomplishments—NAFTA, welfare reform, and bank deregulation, all of them made into law by cooperation between the Democratic president and the Republicans in Congress.

The schedule on which the two men agreed went as follows: Clinton would start hinting at the privatization proposal in January 1998. Various groups would then spend the year conducting a Social Security “dialogue” whose conclusions can be easily guessed. Incredibly, the two leaders would somehow contrive to “keep the issue off the table in the 1998 congressional elections,” and then get it enacted during the lame-duck session in December 1998, when nobody could hold either of them responsible.

Clinton actually went through with the first step in the plan, demanding in his 1998 State of the Union address that Congress use the federal surplus to “save Social Security first,” a vague but noble-sounding demand that appears to have been his way of opening the privatization discussion. As it happened, Social Security was already safe—safe from Clinton, that is—thanks to a certain Oval Office dalliance. The week before his speech, the media frenzy over Monica Lewinsky had begun, and it was all polarization and impeachment after that.

The day of the speech itself, Hillary Clinton went on TV and accused a “vast right-wing conspiracy” of coming together in an effort to bring her husband down. This was true enough as regards the sex scandal, but the conspiracy that really mattered was the one between her husband and his putative right-wing rival, Newt Gingrich.

Here’s why the D.C. pundits came to love Bill Clinton: He almost did it. He almost achieved that great coalescence of the professional and business classes.

Frank refers to Hillary as her presidential husband’s principal advisor. I would not expect her to abandon Bill Clinton’s successful efforts to morph the Democratic Party from labor’s advocate to Wall Street’s sycophant. Hillary does not make $300,000 speeches to financial firms to make life better for the poor and middle classes.

So, I see no way in heaven or hell that President Hillary Clinton will arrest the increase in inequality, which is at its highest level ever. That’s not what she and her husband are about.

It’s all about the ducats.

A banker for Bernie

Writing for The Guardian, Asher Edelman a Wall Street economist:

The recession of 2007-2016, and the persistent transfer of wealth from the 80% to the 1% is, mostly the result of banking irresponsibility precipitated by the repeal of the Glass-Steagall Act in 1999. The law separated commercial banking (responsible for gathering and conservatively lending out funds) from investment banking (more speculative activities).

A new culture emerged that rewarded bankers for return on equity rather than sound lending practices. The wild west of risk-taking, staked on depositors’ money, became the best sport in town. Why not? If management won, they got rich. When they lost, the taxpayer took on the responsibility. If that sounds like a good wager, it was (and is).

The only problem is what happens when the music ends. Debt-to-capital ratios for investment banking functions rose from 12:1 to 30:1. Options on derivatives on other derivatives increased that leverage many fold. Self-regulation became the rule and, lo and behold, in 2008: crash. America and the world were nailed by a fastball from which the bottom 80% of the American population has yet to recover.

Remarkably, today the derivatives positions held by the large banks approach 10 times those of 2007-2008. In four banks alone, they exceed the GDP of the entire world. This is the interesting consequence when unchecked risk management rests in bankers’ hands.

Sustaining inequality

The chart below comes via OECD. I have selected the U.S. (red), Sweden (green), and Denmark (purple). The OECD average in each metric is labeled blue.

Screen Shot 2016-04-11 at 9.28.27 AM

The typical measure of inequality is the Gini Coefficient, or Index. The higher the ratio, the higher the level of inequality. You’ll note that U.S. inequality significantly exceeds the OECD average and far exceeds inequality levels in both Sweden and Denmark. The same contrasts appear in the other two measures. The last metric represents the ratio of the top 10 percent of household income to the bottom 10 percent. Again, the U.S. is the severe outlier.

Inequality in the U.S. is on the rise, reaching its highest levels since just before the Great Depression.

gini index us since 1947

The OECD recently published In It Together, the third book in a series, about inequality. The authors conclude that inequality retards economic growth, suppresses social mobility, and wastes human capital.

This is hardly news to those who have been paying attention. But despite countless books and essays and reports telling us how bad things are, inequality continues to rise. How much higher and for how long can the trend continue?

It seems to me that U.S. inequality is now thoroughly embedded in both the economy and the political system, the result of a vicious cycle in which economic power begets political power, which begets further economic power, ad infinitum. In other words, it may be nearly impossible to disrupt the trend, notwithstanding calls for revolution to the contrary. Our ancestors revolted once, but current generations seem unable to muster the political will to do so again. And it would likely require a revolution, rather than an evolution, to disrupt the vicious cycle.

Money, we should understand, sides with the reactionaries. For every progressive gain in this country, and there have been several (e.g., Social Security, Medicare), conservatives have countered in systematic efforts to chisel away the achievements. Now that corporations are persons and dollars know no bounds, reactionaries have the upper hand. That’s certainly true among the states, where conservatives now dominate.

Suppose, however, that the continued accumulation of wealth in the hands of a few, which is good in the near term for the rich, creates an inherent instability. If inequality retards economic growth, for example, or foments further discord among the rabble, there will be diminishing returns for even the wealthy. Yes, they will continue to extract almost all of the output from the economy (as Piketty informed us), but it will be an economy that produces far below its capacity as it gradually shrinks.

real gdp to August 2014

Can those who have created and so far sustained such a system unwind it? Can Wall Street be the solution rather than the problem? Of course not.

Yet, we must also acknowledge that Congress, the best that money can buy, cannot regulate or legislate a saner alternative. After all, its members depend on Wall Street and corporations for their livelihood. They’re part of the vicious cycle.

The remaining option is self-destruction. If the economic-political system cannot resolve its own instability, it will reach a crisis point. Then, and perhaps only then, will the Rest of Us prosper. Ugly scenario, I admit.

But Americans are ignorant of history and immune to its lessons. Few anticipated the Great Crash, and those who did hardly mattered. When it hit, jarring sensibilities and shaking foundations, America was ill-prepared to face the consequences. So, it endured decades of misery and pessimism, coping in fits and starts until WWII. In war’s aftermath, the country enjoyed relative prosperity on the strength of financial regulations and economic and social safeguards. The halcyon days didn’t last long; reactionaries were too keen on dismantling the New Deal and the economic achievements it enabled. The rich weren’t rich enough and the poor too few. That had to change. And so it did.

I began this post with international comparisons. There is a reason for this. America need not reinvent the wheel. There are countries that do it better, much better in fact. The challenge is to get from where we are, and are trending further, to where we need to go. I would prefer a path that does not require a crisis. But I see neither revolution nor evolution in the cards.

It’s a blind march to probable oblivion.

Do you even deserve to live?

Reading the articles on the work-requirement facet of the welfare law boils the blood, if you happen to care about others. Consider this Crosscut piece by Drew Atkins. He writes:

Under new requirements, individuals are now limited to three months of food assistance in any three-year period, unless they work 80 hours a month, or participate in a sufficient number of trainings and volunteer programs. These requirements apply to adults between 18 and 49 who do not have disabilities or dependents.

These requirements have been on hold since 2009, due to the widespread and persistent unemployment following Wall Street’s crash. The boost in food stamp benefits has been attributed, in-part, to preventing poverty and homelessness rates from skyrocketing.

The requirements are being re-imposed due to perceptions that employment rates have sufficiently recovered in parts of the country. Federal waivers have been sought and granted for areas whose employment numbers remain low, which is why only certain segments of Washington are effected [sic].

sic] [However, this year Republicans in the State Senate attempted to forbid any part of Washington from seeking a waiver, regardless of how few jobs were in them. Many thousands more people would lose food assistance under the bill —  SB 5776 — which has been reintroduced in two consecutive sessions and four special sessions.

You see, the damn Republicans are busy again screwing the 47 Percent. It must be in their DNA to blame the victim. The virtues of compassion and empathy encounter a solid brick wall when trying to enter conservative hearts and minds.

That said, we remind ourselves that it was William Jefferson Clinton who boasted that he had ended “welfare as we know it,” championing then signing a draconian piece of congressional legislation that essentially criminalized being poor. But the Clintons have never been in league with the Rest of Us, preferring the baubles and trinkets of the elite, a class to which they have always aspired.

In a country founded on rights, why do so many Americans abhor the letter and intent of the Universal Declaration of Human Rights, adopted by the United Nations in 1948 and ratified by dozens of countries, including the United States? Take Article 1 of the document. It reads:

All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.

Or take Article 25:

(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.

The Declaration, by the way, has the force of international law. But we are Americans. We get to do what we want, even ignore stuff to which we once agreed. And the thing we evidently want to do at the moment is kick people when they are down. Oh, and ape the rich, if we can.

Three charts and a “rigged system”

As an addendum to a previous post, I include three charts from an essay by Martin Wolf in the Financial Times. He favors a stronger Keynesian response to our economic doldrums than Congress or the White House proposes. Indeed, the Republican-controlled Senate and House cling to the mistaken belief that deficits are the problem, along with the usual suspects—viz., Those People dependent on government largesse.

Screen Shot 2016-03-28 at 8.50.47 AM

We live in an era of negative interest rates. Firms and large investors are actually paying the federal government to park their cash. The second graph above shows the glut of capital, dollars that are being hoarded rather than invested in productive activities. Meanwhile, central governments have tightened belts, the antithesis to Keynesian prescriptions. We see this pronounced in the Eurozone.

The next chart shows U.S. real GDP and federal government investment and spending, expressed as percentage change from preceding period (quarters).

 

real gdp and federal spending from 2012 to 2015, inclusive

Investors save rather than spend because they know that demand is too low to support increased production of goods and services. Wages for the many have stagnated or declined, while incomes of the few explode. Idle cash, mountains of it, against unemployment and underemployment yields a toxic yet fertile soil for the likes of both Trump and Sanders, the former a faux populist, the latter a very genuine article.

Donald Trump has won the support of disaffected white workers who used to toil at blue-collar jobs but have now been displaced by “immigrants” or “globalization.” Hitler’s Jews have become Trump’s Mexicans.

And Republicans have succeeded in undermining Americans’ support for unions, which in more sophisticated countries provide bargaining power to workers and a countervailing force to excessive capitalism such as practiced in the U.S. Here’s Paul Krugman in his NY Times column this morning:

…As a member of the European Union, Denmark is subject to the same global trade agreements as we are — and while it doesn’t have a free-trade agreement with Mexico, there are plenty of low-wage workers in eastern and southern Europe. Yet Denmark has much lower inequality than we do. Why?

Part of the answer is that workers in Denmark, two-thirds of whom are unionized, still have a lot of bargaining power. If U.S. corporations were able to use the threat of imports to smash unions, it was only because our political environment supported union-busting. Even Canada, right next door, has seen nothing like the union collapse that took place here.

Krugman adds that Denmark provides a stronger social safety net than our miserly Congress deigns for the Rest of Us. Republicans, again, deride those in need rather than helping them.

As part of the conservative assault on the Rest of Us demonizing anything public stands out. But it seems obvious that if we are to overcome our economic doldrums, we need more public and less private. We need more government spending on transportation infrastructure, education, environmental protection, and, yes, a stronger social safety net. The last thing we need is to put even more money into the pockets of the very rich, who will simply sit on it. The wealthy do us no good.

When Republicans counter with fear-mongering debts and deficits, what they are really saying is “screw you.” Besides, if you are a “loser,” it’s your own damn fault.

Sanders knows that “the system is rigged.” The evidence clearly supports this view. Remarkable, though, how the extremely wealthy succeeded in convincing so many Americans that the solution for what ails them is further rigging.