All this talk about Democrats worrying over deficits in the midst of a recession (forget the GDP, FDR got the GDP going up by the end of 1933, and nobody claims the Great Depression ended the year he took office) is so crazy one scarcely knows where to begin. (The 1937/38 recession, perhaps?) And targeting Social Security and Medicare? So almost at random...
On Friday, I stumbled across an early October blog post by Stephen Levy--one of the leading experts on California's economy, particularly in terms of the role of government spending and investment. In it, he wrote:
Most current public pension and health care benefits were negotiated at a time when private sector pay and benefits were growing. In recent years many private sector employees have seen their pension and health benefits decline as companies went out of business or changed benefit arrangements. As a result, public employee retirement benefits now seem high in comparison to what is happening in the private sector.
In fact, it's not just public employee retirement benefits. Perhaps the main reason we have an "Entitlement Problem" is because private wages and benefits stopped growing for the bottom 90% of income earners about 30 years ago. (And even the next 9% hasn't done well by historic standards.) The lack of broadly-shared economic progress in the era of conservative Voodoo Economics is the great unspeakable truth of our times. And this great stagnation makes taxes, public employee benefits and social insurance--such as Social Security and Medicare--seem like much bigger factors than they would be if we still had the sort of broad economic prosperity that "socialists" like FDR and Harry Truman gave us, and which persisted until around 1973--as could readily be seen from the following pair of charts from my earlier diary, "The One Percent Economy--Part One: The What"
First, the "socialist" economy of the New Deal Party System Era (plus a few extra years of spillover):
Note how the slowest growth rates were from the top 1%.
Then, the economy we've had since Democratic dominance gave way to divided government:
Levy was trying to make a relatively modest point in trying to achieve a relatively modest goal of rationality and civility in dealing with the economy we've got. Me, I want to change that economy. But first, let's hear Levy out:
In Part One of this diary, I visually presented data showing that the bottom 99% of the American people, in terms of income, have barely seen any income growth since 1973--even with the 90th to the 99th decile of income earners included. Just taking those those earners from the 90th to the 95th and the 95th to the 99th decile, we find that their incomes grew significantly less they had during the 1945-1973 era. Here's a graph of the entire era, as a an overview reminder of what that diary showed:
The questions now is why. To answer that, I will turn to a paper co-authored by the later Hyman Minsky, the man who saw the current financial meltdown coming in 1986. Later on this weekend I'll be writing about his Financial Instabiity Hypothesis, but for now I just mention this work to whet your appetites, and give you the sense that we're talking about a really major dude here.
The paper is "Economic Insecurity and the Institutional Prerecquisites for Successful Capitalism" by Hyman P. Minsky and Charles J. Whalen, Working Paper No. 165 from the Levy Economics Institute of Bard College. To repeat what I said in Part One, I'm going to quote from paper at some length because it helps set up some other topics I'll be discussing this weekend--topics that I think are very important for understanding the economic crisis we're in, and why the measures being taken are so inadequate. Above all, it establishes the viewpoint that (a) finance matters enormously as a explicit sector of the economy, (b) a related point--money is an endogenous (internal) factor in the economy, not just an external counting device, (c) capitalism changes form over time, particularly forms of finance, and economic theory must change to reflect such changes, and (d) an ahistorical reduction of economics to eternal micro-level basics misses maters of fundamental importance.
We find that the average income for the middle 20% of households will likely decline by $2,456 in 2009, and by an additional $601 in 2010, for a total decline of $4,813 from 2007 to 2010. This is a decline in income of 9.3% for the typical household over these three years. Given the decline in income over the weak business cycle from 2000 to 2007, this means that after reaching an all-time peak in 2000, by 2010 real incomes for the typical household will likely have declined by $5,729, or 10.8% - truly a lost decade.
And here's one of her charts that Meteor Blades reproduced:
I advice everyone to go read her presentation. This are really going to get ugly before they get better. But I want to take a somewhat different focus for this diary, extending an analysis I did a couple of weeks ago, "Forget The Recession--Bush Economy Sucked BEFORE Then". I want to compare the 7-year and 8-year records with a view toward arguing that things have been economically lousy throughout the Bush years, and the media have been doing a terrible job of informing the American public all along. More charts, and very little text need to tell the story on the flip.
Throughout the month of August, I responded to several Salon columns by Michael Lind--published on Tuesdays--the following weekend. This week, I responded to Lind's column the same day, in "[I Should Be] Looking For The Next FDR With Michael Lind". Out of that came a very clarifying comment by John Emerson that inspired me to write a followup diary this weekend. But as I started work on it, I realized that I first needed to finally correct a long-standing oversight, and discuss the importance of social science situationism, not to be confused with the revolutionary Situationist Internationale. The Situationist blog associated with The Project on Law and Mind Sciences at Harvard Law School explains:
There is a dominant conception of the human animal as a rational, or at least reasonable, preference-driven chooser, whose behavior reflects preferences, moderated by information processing and will, but little else.Laws, policies, and the most influential legal theories are premised on that same conception.Social psychology and related fields have discovered countless ways in which that conception is wrong."The situation" refers to causally significant features around us and within us that we do not notice or believe are relevant in explaining human behavior. "Situationism" is an approach that is deliberately attentive to the situation.
An important part of my core differences with Lind spring from a situationist perspective. I don't think that many people's basic attitudes have changed as much as he does, nor do I think that some of the actors he identifies are responsible for the changes he associates them with. Rather, I think that the political/economic situation has changed dramatically, and that we need to adopt political practices that take account of that changed situation, and seek to modify its impact.
One of the clearest ways to get a handle on that change is from the various presentations of changes in income and wealth concentration from the work of US Berkeley economist Emmanuel Saez. Here's an example:
It's my primary contention that people living in a highly income-polarized society--as we do today--will act in ways quite different from those living in a more income-equalized society, such as predominated during the Post WWII New Deal Era, and even into the 70s and early 80s. It's my second contention that while changes in attitudes and actions have taken place, and vast ideological structures have been erected, these are more reflections of a changing economic situation, and have substantially less to do with changes in core attitudes. It's my third contention that the neoliberal trap Obama is caught in--which Lind wrote about in the column I agreed with most--is itself a manifestation of old-style non-situationist thinking, which systematically misapprehends the foundations of human action. In short, the problem goes much deeper than the Team of Rubins.
We've got a black President-elect with sky-high approval numbers. We'll have a black family living in the White House, with two cute little girls. A good part of a generation will grow up thinking this is normal. So, racism's over, right?
Right.
In the real world, not so much. This week, I happened to catch a local radio interview with Dedrick Muhammad, author of a report, "40 Years Later: The Unrealized American Dream" that was released last April, 40 years after the death of Martin Luther King. It shows a mixed record. Yes, there is progress, but we are still far from being an equal society.
No surprise, really. Unless you get your news from the news media. Then it might be a bit of a shock. For example, the black college graduation rate has increased dramatically, by almost 400% since 1968--so fast the blacks will graduate at the same rate as whites in 2087. But income equality will take a bit longer.
Remember the song "In the Year 2525"? Well, twenty years after that, the black/white income gap will finally close to zero.
Daniel De Groot had a post yesterday suggesting more focus on economics issues. Coincidently, or maybe not, this is "economics week" for both the Obama and McCain camps.
Understanding where we are and how we got there is essential to the formulation of smart and effective solutions. The New York Times' Steven Greenhouse has recently written "The Big Squeeze: Tough Times for the American Worker," a book that distills much of what is wrong with our economic situation today. He discusses it at TPM Cafe, setting out what to me is the crux of what is wrong with today's economy:
In recent years, the statistics regarding income disparity in America have been startling. After-tax annual income for the bottom fifth of American households inched up just 6 percent from 1979 to 2005, according to the Congressional Budget Office. During that time, income for the middle fifth of households grew by a modest 21 percent, with much of that gain caused by women in many households working more hours. Over that same period, income for the top fifth of households jumped by an impressive 80 percent, while income for the top 1 percent more than tripled, soaring by 228 percent.
The highest-earning fifth of households received 51.6 percent of the nation's after-tax income in 2005, meaning that the income of the top fifth exceeded that of the bottom four-fifths. As for the top 1 percent of households, they received more after-tax income than the bottom 40 percent, according to the Congressional Budget Office. A study that Thomas Piketty and Emmanuel Saez did based on federal tax returns found that the top 1 percent of households, averaging $1.1 million in annual income, received nearly 22 percent of all reported income in 2005, up from 9 percent in 1980. That income shift helped create the greatest level of inequality since the Roaring Twenties.
As someone who grew up in the 1940s and 1950s, when the average CEO earned only 40 times the salary of his average worker, instead of over 300 times as it is today, this stalling of the economic escalator is one of the most dismaying aspects of modern America. Quoting Greenhouse again,
Lawrence Summers, the former Harvard president and Treasury Secretary, found that were it not for this increased inequality the bottom 80 percent of Americans would be doing considerably better. If the distribution of income today were the same as in 1979, Summers said, assuming the same level of economic growth since then, income of the bottom 80 percent of Americans would be about $670 billion more a year--or about $8,000 per family. For many households in the bottom half, this would mean a welcome 20 to 30 percent increase in income, perhaps the boost needed to avoid foreclosure.
The return to the class stratification of the Gilded Age is as much a betrayal of the American ideal of opportunity as George W. Bush's security state and executive overreach are a betrayal of the Founders' vision of a government of laws, checks and balances. It has not always been this way and it need not be in the future. How we got here is largely a combination of deregulation moves that allowed those with money to make ever more money through manipulated markets and subsidies while preaching the glories of the free market, and tax policies which allowed them to keep ever more of what they made. The history and politics are very ably set forth at length in this post by DHinMI yesterday at Daily Kos contrasting the New Deal/Great Society years with the Reagan/Bush years.
Rising income inequality is every bit as unsustainable as our excessive energy usage. It risks economic havoc as consumers are unable to continue buying goods and services, it risks political instability and it is morally wrong as an abuse of power and position by the strong and a betrayal of our ideals as a nation. We need to reverse the policies that got us here and try new solutions. Part of what makes us Democrats is a profound belief in the virtues of expanded opportunity and broad prosperity. Let us measure the proposals of the candidates against these principles.
The notion that history moves in cycles, or waves is an ancient one. In this diary set, I'm looking at the coinciding impact of two waves that are part of longterm cycles, as well as a third one indicative of global transformation that's been under way for several decades now These three waves all converge on this November's election, and in doing so, they confront a wall--the intensely fortified network of rightwing organizations and their "moderate" and "centrist" enablers.
The first part dealt with the roughly 32-40 year cycle of American Party Systems, the next part will deal with the recent wave of "post-materialist" values. This part deals with the rise and fall of successive world powers--Spain, Holland, Britain, and now us--described by former GOP uber-guru Kevin Phillips in Wealth and Democracy: A Political History of the American Rich.
John Edwards is starting to find his voice to pushback against the media narrative about him. Check out this clip:
On related notes, over at Fire Dog Lake, Christy provides a round-up of the Edwards Poverty tour. Also, I think Political Insider is right that Edwards should rephrase this line in a more Clintonian manner. When Bill Clinton fought back against the "character" slime sent in his direction, he said "if you stick with me, I'll stick with you until the last dog dies." Right now, Edwards is saying "[t]hey will never silence me." Probably rhetorically better for all Democrats who are attacked in this way to keep the focus on the voters, because these attacks are just as much an attack on those who support Clinton or Edwards as they are on whichever Democratic candidate is being frivolously slimed at any given moment
As for the substance of the Edwards claim that powerful forces are trying to silence him for talking about things like poverty and universal health care, just like the Clinton charge before it, I think there is some real truth to it. Frivolous character debates are damaging to progressives, because negative attacks increase polarization, focus on such matters tends to lower voter turnout, and when you are talking about things like swimsuits and haircuts you are not talking about issues like poverty and health care. In fact, reducing voter turnout and increasing political polarization are, in and of themselves, means by which conservatives have successfully pushed their agenda even when they do not win elections. Polarization in Congress tends to result in gridlock, meaning that government less capable of being active. Lower voter turnout, especially among lower income groups, means that members of Congress are less responsive to the needs of lower voter income groups. The resulting impact on income equity in the United States can be clearly documented:
