Category Archives: economy

Explaining Away Competence

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A Krugman blog post got me thinking —

Everyone in the Republican Party knows that Reagan presided over an economy that has never been equaled, before or since. When I was on TV with Rand Paul, he confidently declared

When is the last time in our country we created millions of jobs? It was under Ronald Reagan …

Of course, it’s not true …

Krugman goes on to say there was better job growth during the Clinton years, and President Obama hasn’t done that badly, either. But it isn’t just Republicans who somehow think only Republicans understand the economy. Polls going way back show that The Average Voter thinks that Republicans are better on the economy (and defense, and taxes) than Democrats.

And why do so many people think that, when it demonstrably isn’t true (and it isn’t)? IMO because Republicans declare it to be so, loudly and often, and Dems don’t stand up to them about it.

Last year some Princeton economists came out with a study that showed a rather startling gap between Dem and GOP administrations in how the economy performed, going back to World War II.

“The U.S. economy not only grows faster, according to real GDP and other measures, during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rate, generates higher corporate profits and investment, and turns in higher stock market returns. Indeed, it outperforms under almost all standard macroeconomic metrics.”

As I said, this came out last year, and I don’t recall seeing it at the time. But the differences are not minor. There’s a bar graph at the link above showing substantial differences in economic growth between D and R administrations. But the two articles I found about this, one by Chris Matthews (the one linked above) and the other by Robert Samuelson, both go to great lengths to not give Dems credit for being better on the economy. Samuelson is particularly brilliant —

If Republican presidents were saddled with most recessions, their growth and job creation records would naturally be worse. And that’s what the Blinder-Watson study shows. Since the late 1940s, the economy has spent about 12 years in recession. But 10 of those 12 years occurred under Republican presidents; only two occurred under Democrats. On average, the economy spent slightly more than a year in recession for each Republican term and only three months for each Democratic term.

If only Republicans hadn’t been saddled with those damn recessions!

To be fair, Samuelson explains that Dems focus on job growth while Republicans focus on reducing inflation. But inflation hasn’t been a problem since the 1980s. What’s their excuse since?

Economic policies pleasurable in the present can be disastrous for the future — for example, the inflationary policies of the 1960s. Similarly, the policies that fed the economic booms of the 1990s and the early 2000s spawned overconfidence that fostered the financial crisis.

The financial crisis was caused by the Clinton boom, in other words. It’s always the Dems’ fault.

Stock Buybacks Are Strangling America

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Stuff worth pondering in an article by Nick Hanauer, “Stock Buybacks Are Killing the American Economy.”

As economic power has shifted from workers to owners over the past 40 years, corporate profit’s take of the U.S. economy has doubled—from an average of 6 percent of GDP during America’s post-war economic heyday to more than 12 percent today. Yet despite this extra $1 trillion a year in corporate profits, job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs. A $3.6 trillion budget shortfall has left many roads, bridges, dams, and other public infrastructure in disrepair. Federal spending on economically crucial research and development has plummeted 40%, from 1.25 percent of GDP in 1977 to only 0.75 percent today. Adjusted for inflation, public university tuition—once mostly covered by the states—has more than doubled over the past 30 years, burying recent graduates under $1.2 trillion in student debt. Many public schools and our police and fire departments are dangerously underfunded.

Where did all this money go?

The answer is as simple as it is surprising: Much of it went to stock buybacks—more than $6.9 trillion of them since 2004, according to data compiled by Mustafa Erdem Sakinç of The Academic-Industry Research Network. Over the past decade, the companies that make up the S&P 500 have spent an astounding 54 percent of profits on stock buybacks. Last year alone, U.S. corporations spent about $700 billion, or roughly 4 percent of GDP, to prop up their share prices by repurchasing their own stock.

The more I learn about stuff going on, the more I think we should give up trying to live in the 1 percent’s world and just go build ourselves cottages on the prairie somewhere. We takers, we undeserving poor, should be the ones who “go Galt.”

In the past, this money flowed through the broader economy in the form of higher wages or increased investments in plants and equipment. But today, these buybacks drain trillions of dollars of windfall profits out of the real economy and into a paper-asset bubble, inflating share prices while producing nothing of tangible value.

As with many other things, the rules that used to discourage this practice were changed during the Reagan Administration, and the finance guys get more and more brazen about it all the time.

But … but … but … Free Markets (Blessed Be They)! Most of the commenters seem to think Hanauer is some airhead socialist who doesn’t understand how real he-men run an economy.

A New Irish Uprising

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I’m always heartened when I hear about Celts acting up. So I read “The Irish Rebellion Over Water” by Fintan O’Toole with some interest. Background: the Irish economy crashed because a handful of greedy bankers had been playing Ireland like a slot machine, and they lost. And the Irish have been paying for the bankers’ sins with a gawdawful austerity program that conservatives have praised as the model all nations must follow.

According to conservatives, the Irish Recovery is the wonder of Europe. According to Fintan O’Toole — and Paul Krugman — it’s a fraud. O’Toole writes,

There is a deep sense of injustice at being turned into one of the most indebted nations on earth in order to rescue international bondholders who gambled on rogue Irish banks. There is the way the pain has been inflicted most deeply on the poorest people — the last four government budgets have been regressive, hitting those on the lowest incomes hardest. There is the bitterness of yet again having to export the country’s greatest asset: its talented, highly educated young people.

Above all, there’s the gap between the Irish story and the Irish experience. The story is upbeat — austerity works. The experience is rather different. The impressive G.D.P. figures are at least partly unreal, boosted by the accounting practices of Irish-based multinationals.

Unemployment remains very high, and the figures would be much worse if people were not emigrating. Household debt in Ireland is still the second highest in Europe relative to disposable incomes, which have not improved.

 O’Toole wrote earlier this year:

But Ireland has two economies: a global one dominated by American high-tech companies, and a domestic one in which most Irish workers have to make their living. The first is indeed booming. Not least because of those low corporate taxes, large global corporations find Dublin convivial for reasons other than its pubs and night life. …

… But home is where the heartache is: in the domestic economy outside the gated community of high-tech multinationals. Outside Dublin, property prices are still falling. Wages for most workers have dropped sharply. Unemployment remains very high at 12.8 percent — and that figure would be higher if not for emigration. There’s always been a simple way to measure how well Ireland is doing: Go to the ports and airports after the Christmas vacation and count the young people waving goodbye to their parents as they head off to the United States, Canada, Australia or Britain, where they have gone to find work and opportunity.

In wingnut lore, Ireland is the Official Proof That Keynes Was Wrong.  Spending cuts, not government intervention and investment, would get the economy growing again, and they’ve got numbers to prove it. They’ve always got numbers to prove whatever they want to believe; righties are brilliant in that regard. But these numbers are statistical illusions. Yes, Ireland has seen an increase in exports, but Krugman explains that “most — most!– of the export rise has come from pharma, which is very intensive in foreign-owned capital, and does very little for Irish incomes and employment.” And, as O’Toole says, the drop in unemployment is mostly because of emigration — educated young people especially are leaving Ireland in droves.

The Irish have thus far been fairly accepting of their government’s policies. But now they are rebelling over water. O’Toole:

In a recent Irish Times poll, 33 percent of people said they would refuse to pay the charges for domestic water when they become due in the spring (and less than half of those polled said they intended to pay). This is in spite of the government’s having already made huge concessions in the face of an earlier wave of protests by reducing the average effective charge to just 160 euros (about $200) a year per household, making Irish domestic water the cheapest in Europe. Compared with many of the other tax increases endured over six years, this seems too small a measure to have such large consequences.

But, O’Toole says, for the Irish this was a deprivation too far. Water? In western Ireland it typically rains 225 days of the year. Water falls from the sky in Ireland, copiously. And having lived with center-right governments for many years, polls show the electorate is turning Left.  Éireann go Brách.

When Stupid Is an End In Itself

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Of all the many signs the U.S. is no longer a great nation — big, still wealthy, powerful, conspicuous, yes, but not great — the fact that we can no longer organize ourselves to so much as fix the flippin’ bridges, never mind build new ones, stands out. Much of the nation’s greatness, and weatlh, came from doing big, splashy things — the transcontinental railroad; the Panama Canal, the Hoover Dam, the moon landing.  Some of these things were done primarily by government, and some by public and private partnership. For example, while the transcontinental railroad was built by private companies, those companies depended on government land grants and loans, and the route itself was laid out by government surveyors. If Washington hadn’t pushed it, it never would have been done.

Paul Krugman writes that infrastructure investment is precisely what the country needs, economically and otherwise. It would both boost the economy by getting more dollars into peoples’ pockets and, y’know, fix the bridges before they fall down. But because of current prevailing political ideology, no, we can’t.

And it’s all about ideology, an overwhelming hostility to government spending of any kind. This hostility began as an attack on social programs, especially those that aid the poor, but over time it has broadened into opposition to any kind of spending, no matter how necessary and no matter what the state of the economy.

We’ve reach point at which stupid is an end in itself.

You can get a sense of this ideology at work in some of the documents produced by House Republicans under the leadership of Paul Ryan, the chairman of the Budget Committee. For example, a 2011 manifesto titled “Spend Less, Owe Less, Grow the Economy” called for sharp spending cuts even in the face of high unemployment, and dismissed as “Keynesian” the notion that “decreasing government outlays for infrastructure lessens government investment.” (I thought that was just arithmetic, but what do I know?)

Here’s a crucial point —

Never mind that the economic models underlying such assertions have failed dramatically in practice, that the people who say such things have been predicting runaway inflation and soaring interest rates year after year and keep being wrong; these aren’t the kind of people who reconsider their views in the light of evidence. Never mind the obvious point that the private sector doesn’t and won’t supply most kinds of infrastructure, from local roads to sewer systems; such distinctions have been lost amid the chants of private sector good, government bad.

If you look closely at most of the prominent Republicans in Washington, one of the striking things about them is that their bios often reveal them to be the creatures they claim to hate — lifelong political / government apparatchiks.  Although they pride themselves on being friends to business, most of them have worked most of their lives in government and politics. I’m sure there must be some exceptions, but most have never actually run a company or so much as managed an assembly line. Paul Ryan is a good example; according to bios I have read, his only non-political private sector employment was a summer job for Oscar Meyer, during which he got to drive the weinermobile.

I can never tell how much they believe their own crap, but basically we’re dealing with people who are long on ideological theory and short on experience. Unfortunately, you can say the same thing for most of our Captains of Industry, most of whom have no idea how the products they are selling actually get made.

It’s like a perfect storm of derp. The people in charge of things, public and private, have no idea how stuff gets done and no idea what stuff needs to get done. And the country is at their capricious and greedy mercy.

And it hardly matters that the states that have put the “Spend Less, Owe Less, Grow the Economy” mantra into practice have had disastrous results. See, for example, “The Great Kansas Tea Party Disaster” by Mark Binelli:

“That word, “experiment,” has come to haunt Brownback as the data rolls in. The governor promised his “pro-growth tax policy” would act “like a shot of adrenaline in the heart of the Kansas economy,” but, instead, state revenues plummeted by nearly $700 million in a single fiscal year, both Moody’s and Standard & Poor’s downgraded the state’s credit rating, and job growth sagged behind all four of Kansas’ neighbors. Brownback wound up nixing a planned sales-tax cut to make up for some of the shortfall, but not before he’d enacted what his opponents call the largest cuts in education spending in the history of Kansas.

“Brownback hardly stands alone among the class of Republican governors who managed to get themselves elected four years ago as part of the anti-Obama Tea Party wave by peddling musty supply-side fallacies. In Ohio, Gov. John Kasich – whose press releases claim he’s wrought an “Ohio Miracle” – has presided over a shrinking economy, this past July being the 21st consecutive month in which the state’s job growth has lagged behind the national average. In Wisconsin, Gov. Scott Walker, whose union-busting inadvertently helped kick off the Occupy movement, cut taxes by roughly $2 billion – yet his promise to create 250,000 new private-sector jobs during his first term has fallen about 150,000 jobs short, and forecasters expect the state to face a $1.8 billion budgetary shortfall by mid-2017. A recent analysis by the Detroit Free Press, meanwhile, laid out how the tax policies of Gov. Rick Snyder, a wealthy entrepreneur who campaigned in Michigan as a nerdy technocrat, have resulted in businesses paying less ($1.7 billion less per year, to be exact), individuals paying more ($900 million per year) and – here’s the kicker – job growth slowing every year since Snyder’s cuts have been enacted.”

It will not matter that teabag economics crash and burn in the real world, because stupid has become an end in itself. Not taxing and not spending is an end in itself; that it sinks budgets and costs jobs does not matter.

And when the bridges begin to buckle, some Reince Priebus clone will trot out and say those bridges were built by Democrats and the fact that they finally collapsed after decades of neglect proves government doesn’t work.

Creatures of Myth

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Human behavior makes a lot more sense when you appreciate that none of us are entirely rational. In fact, I’d go so far to say that for most of us rational thinking accounts for very little of our views and opinions about anything. Most of us live inside any number of personal and collective myths that inform us who we are and how the world is supposed to work, and it can be damn near impossible to dispel the myths even with clear and irrefutable facts and data.

This has little to do with IQ, as it’s not at all unusual even for bright people to cling to beliefs that are measurably out of sorts with the real world. As I wrote in my book, to be a reasonably rational person you must first admit to your own irrationality. If you can’t do that, you will remain at the mercy of the various goblins, trolls and pixies in your head.

Paul Krugman — in my judgment, more rational than most people — has a blog post up now called Inflation, Septaphobia, and the Shock Doctrine in which he struggles to understand why allegedly Wise Men (and it is mostly men) guiding the world’s economies are such a pack of idiots.

The bad news from Europe is a reminder that the basic insight some of us have been trying to convey, mostly in vain, ever since 2008 remains valid: the great danger facing advanced economies is that governments and central banks will do too little, not too much. The risk of elevated inflation or fiscal difficulties is dwarfed by the risk of ending up trapped in a deflationary vortex. This view has been overwhelmingly supported by recent experience — if you acted on what they were saying on CNBC or the WSJ editorial page, you would have lost a lot of money. Yet the power of the hard money/fiscal austerity orthodoxy (yes, market monetarists want one without the other, but they have no constituency) remains immense. Why?

Well, that’s the question, isn’t it? Along with charts and graphs showing that the hard money/fiscal austerity orthodoxy is just plain wrong, Krugman speculates a bit about what kind of mythology is driving it. The word septaphobia means “fear of the seventies,” btw, referring to the fact that the 1970s were marked by inflation and were a bad time for investors. The Wise Men may be running hysterically from the ghosts of the 1970s — ghosts haunting their own heads — and ignoring the very different real-world beasts that are the cause of today’s economic problems.

Thomas Frank has an article up at Salon called The 1 percent’s long con: Jim Cramer, the Tea Party’s roots, and Wall Street’s demented, decades-long scheme. As the title suggests this is a lot about how the 1 percent manipulates the world to benefit themselves. But if you read between the lines a bit, this article is also about myths and the way Wall Street portrayed itself in the 1990s as the true friends of Everyman and as shamans of a kind of economic democracy that was more fair and egalitarian than governmental-type democracy.  This is an excerpt from a book, and while I don’t know where Frank goes with this next one suspects he discusses the self-delusions that gave us the financial meltdown of 2008. But it also suggests that the New Deal was still looming in the personal myths even of people too young to remember the FDR Administration.

And there were incredible prizes to be won as long as the bubble continued to swell, as long as the fiction of Wall Street as an alternative to democratic government became more and more plausible. Maybe the Glass-Steagall act could finally be repealed; maybe the SEC could finally be grounded; maybe antitrust could finally be halted. And, most enticingly of all, maybe Social Security could finally be “privatized” in accordance with the right-wing fantasy of long standing. True, it would be a staggering historical reversal for Democrats to consider such a scheme, but actually seeing it through would require an even more substantial change of image on Wall Street’s part. The financiers would have to convince the nation that they were worthy of the charge, that they were as public-minded and as considerate of the little fellow as Franklin Roosevelt himself had been. Although one mutual fund company actually attempted this directly—showing footage of FDR signing the Social Security Act in 1935 and proclaiming, “Today, we’re picking up where he left off”—most chose a warmer, vaguer route, showing us heroic tableaux of hardy midwesterners buying and holding amidst the Nebraska corn, of World War II vets day-trading from their suburban rec-rooms, of athletes talking like insiders, of church ladies phoning in their questions for the commentator on CNBC; of mom and pop posting their very own fire-breathing defenses of Microsoft on the boards at Raging Bull. This was a boom driven by democracy itself, a boom of infinite possibilities, a boom that could never end.

We can always debate how much of this the Captains of Finance actually believed themselves, and how much of it was PR, but I think the financial crisis showed us they really were not behaving rationally at all. They became convinced they were immortal; that bullets would not kill them; that whatever they did was blessed because they were doing it. Greed was driving a lot of this myth, of course. I don’t doubt those who survived the meltdown still believe this, and why wouldn’t they? The government protects them from having to face their own mortality.

More to the point, as Krugman says, sometimes these myths actually are not supporting their own long-term financial health in any rational way.

And this crew of mostly Asuras are ultimately the ones responsible for the fiscal austerity orthodoxy, possibly because in their mythical world somebody should suffer for the setbacks of the 2000s, but it shouldn’t have to be them.

Postscript — one more thing — whenever I cite Krugman for anything I can count on somebody, somewhere, snorting at me that Krugman is an idiot and Krugman is always wrong. But if pushed, such people can never explain coherently what he has been wrong about. Push harder, and it becomes clear that Krugman is “wrong” because he disagrees with the orthodoxies and the myths, not because what he writes is frequently proven untrue. It isn’t, actually.

Why Nothing Will Change

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Going back to my post of a couple of days ago, on the S&P report on income inequality — There have been some more reactions to this. Basically, from the Left we’re hearing “Duh. What we said.” And from the Right it’s “[denial].” So, as usual, people believe what they want to believe, facts be damned.

One progressive reaction is at The Daily Beast, of all places, by Monica Potts, titled “The Big, Long, 30-Year Conservative Lie.” Potts concludes [emphasis added]:

Closing the gap by lifting low-income families out of poverty could do more to help the economy than any number of tax credits for “job creators” might, which is what Hanauer argued in Politico. And the S&P report puts more support in his corner.

On the question of what to do, there is widespread agreement on boosting educational attainment and increasing salaries at the bottom end. Policymakers have had a lot of time to think about how to help the middle class, since real wages began declining in the mid-1970s. Many of the problems of inequality have policy solutions ready to go, spelled out in a white paper stuffed in someone’s desk drawer. Why has it taken so long to think about addressing it? Was the political might of the right so overwhelming that they couldn’t speak up until people like Hanauer saw, as he warned in his essay, that the pitchforks would be coming for them?

The answer to Potts’s questions are in the several hundred comments, the bulk of which read like this one:

You can lead a horse to water, but you can’t make him drink. Similarly, we can provide opportunity, but you can’t make folks take advantage. So instead you have massive government welfare programs designed to redistribute the earnings of hard-workers to those who prefer the outcome be guaranteed for them with zero effort.. This way, we try to even outcomes. Maybe the inequality gap is growing because, when government incents folks to avail themselves of government largesse, folks lose ambition. Meanwhile, ambitious workers keep earning, and the gap grows.

Never mind that this entire line of argument was directly demolished in the S&P report. At this point, the Right cannot change.They’ve spent more than 30 years brainwashing Americans to believe what the commenter above believes — poor people are just lazy government moochers, and anyone can get rich if they just work hard enough, and if we can just cut taxes for job creators a bit more everything will be fine. And this is what the Republican base wants to hear, facts be damned. Any Republican who even gives off the appearance of being soft on moochers is asking to be primaried by some foaming-at-the-mouth bagger.

And, of course, much of their support is coming from the infrastructure of  “think tanks” and astroturf organizations funded by a relative handful of right-wing family trusts like the Koch Boys and the Lynde and Harry Bradley Foundation, many of which can be traced back to the old John Birch Society. But these are the people with the money bags and the influence. So …

The best Republican politicians can do is make speeches laced with buzzwords that suggest they understand the problem while proposing policies that wouldn’t actually fix it. Paul Ryan is particularly good at this, or at least, he’s gotten away with it so far.

Paul Krugman also hopes people pay attention to the S&P report.  He points out that the factors that cause an economy to grow or shrink are not as simple as just moving dollars around, robbing Peter to pay Paul. Programs like food stamps that provide nutrition support for poor children lead to healthier poor children and a more productive workforce in the long run, for example.

Not that anyone on the Right gives a hoo-haw about healthier poor children. Even the “this benefits you too” arguments fall flat because they require comprehending complex dynamic influences on economic growth, and a standard characteristic of righties is that they are stuck in simplistic and rigidly literal thinking. You might as well explain physics to a toaster, in other words. So ten thousand S&P reports won’t change anything.

Related: Timothy Egan writes about wildfires in Washington State: “People who hate government most are the loudest voices demanding government action to save their homes.”

Smart foresters had been warning for years that climate change, drought and stress would lead to bigger, longer, hotter wildfires. They offered remedies, some costly, some symbolic. We did nothing. We chose to wait until the fires were burning down our homes, and then demanded instant relief.

As a nation, we have lost the ability to actually do anything about anything, except to attempt to put out fires.

The nation that built an interstate highway system, and cleaned up its filthiest rivers and most gasp-inducing air, has become openly hostile to long-term investment or problem-solving, says Paul Roberts in “The Impulse Society — America in the Age of Instant Gratification,” a cautionary tale to be published next month.

“We can make great plasma screens and seat warmers and teeth whiteners and apps that will guide you, turn by turn, to the nearest edgy martini bar,” writes Roberts. “But when it comes to, say, dealing with climate change, or reforming the financial system, or fixing health care, or some other large-scale problem out in the real world, we have little idea where to start.”

And they can’t change, because tribal loyalty to ideology — which I write about in the book — trumps actual evidence and reasoning. Apparently even watching their own homes burn doesn’t wake people up to realizing why there’s a fire.

Even Big Business Sees the Problem of Income Inequality

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I’m no economist. What I know about economics I got from a long-ago econ 101 college course I don’t actually remember, except that I know I took it, and reading Paul Krugman’s column. But it just makes intuitive sense to me that widespread income inequality chokes off economic growth. When a growing percentage of the population is just squeaking by, or not even that, then a growing percentage of people are not spending money on new consumer products, or taking vacations, or leaving money in the bank in the form of IRAs or money market funds or anything else.

And when an increasing amount of a nation’s wealth is hoarded by a relative handful of the mega-rich, those hoarded dollars are not necessarily ever going to be spent within the home country. They could be spent elsewhere, or just kept hoarded. So this sort of situation naturally leads to fewer and fewer dollars in circulation within the country in question. By extension this leads to fewer and fewer jobs as demand drops for goods and services fewer people can afford. And I don’t care if you call that Keynesianism for something else. It makes plain sense, and I’ve ever heard a persuasive argument against it.

Now Standard & Poor’s has issued a report called “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” To which I say, duh.

Neil Irwin writes,

I asked Beth Ann Bovino, the chief U.S. economist at S.&P., why she and her colleagues took on this topic. “We spend a lot of time trying to think about what’s the economic outlook and what to expect ahead,” she said. “What disturbs me about this recovery — which has been the weakest in 50 years — is how feeble it has been, and we’ve been asking what are the reasons behind it.” She added: “One of the reasons that could explain this pace of very slow growth is higher income inequality. And that also might explain what happened that led up to the great recession.”

“From my research and some of the analysis I saw from others, when you have extreme levels of inequality, it can hurt the economy,” she said.

Because the affluent tend to save more of what they earn rather than spend it, as more and more of the nation’s income goes to people at the top income brackets, there isn’t enough demand for goods and services to maintain strong growth, and attempts to bridge that gap with debt feed a boom-bust cycle of crises, the report argues. High inequality can feed on itself, as the wealthy use their resources to influence the political system toward policies that help maintain that advantage, like low tax rates on high incomes and low estate taxes, and underinvestment in education and infrastructure.

Duh, S&P. I’m glad you came out and said this, but it’s rather pathetic that it needs to be said. As for the hoarding mega-rich, there’s an old fable about a goose and golden eggs they might want to review and reflect upon. I would add that there is nothing inherently “pro-business” in government policies that favor the wealthy. In the long run, encouraging inequality is anti-business.

See also “U.S. policymakers gird for rash of corporate expatriations.”

Rotting From Within

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Anna Bernasek writes in the New York Times that the typical American household is worth a third less than it did ten years ago.

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially. …

…For households at the median level of net worth, much of the damage has occurred since the start of the last recession in 2007. Until then, net worth had been rising for the typical household, although at a slower pace than for households in higher wealth brackets. But much of the gain for many typical households came from the rising value of their homes. Exclude that housing wealth and the picture is worse: Median net worth began to decline even earlier.

“The housing bubble basically hid a trend of declining financial wealth at the median that began in 2001,” said Fabian T. Pfeffer, the University of Michigan professor who is lead author of the Russell Sage Foundation study.

Hm, who became President in 2001? Wait, it’ll come to me.

Meanwhile, the Dumbest Man on the Internet links to this article under the Headline “OBAMANOMICS IN ACTION: Typical US Household Worth One-Third Less Than Under Bush.” And he wasn’t the only rightie who commented without bothering to read the article. The Derp: It burns.

It doesn’t surprise me that this particular decline began in 2001. I remember looking at the incoming Bush Administration and fearing the nation was doomed. And I also remember the headlines were full of bad news about the economy before September 11. The financial crisis of 2008 (who was President then, do you remember?) accelerated the decline, of course.

Via Digby, see What caused the wealth gap?

David Atkins presents the Four Responses to Record Inequality. In brief:

  1. “There is a broad recognition within the progressive left that the wheels are increasingly coming off the train that propelled the 20th century economic model.”
  2. “Those in the neoliberal/center-left camp do believe that modern inequality is a problem, but that this too shall pass and we can trudge along as usual after a recovery. . . . This is delusional thinking, but extremely commonplace—particularly among wealthier liberals.”
  3. “Then you have the center-right. They take rational market theory as an article of faith, believing with religious fervor that if the labor and capital markets are allowed to act unimpeded, then both labor and capital will find a comfortable, fair and balanced price. No amount of evidence can convince them that both human life and dignity are priced incredibly cheap on the open market, or that that late 19th century was not, in fact, the model of a moral or economically functional society.”
  4. “Finally, there is the far right. These are the True Believers: the ones who not only buy into the center-right line, but also the raw Objectivism of Ayn Rand and Fox News … In this view, the only inequality that matters to them is redistributive taxation to ‘others’ in society.”

As much as we may crab about the far right, it’s really the centrists, left and right, that are in the way of addressing this crisis. They’re the ones who dominate news media and who have the real power in Washington. Progressives have little power or voice.

Bitcoin Bust?

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I have never understood bitcoins and why they aren’t Monopoly money that people choose to take seriously, because why. But then, I could argue that “real” money is no different. Finance is an elaborate fantasy, as far as I’m concerned. It affects us only because we’ve all agreed to play along.

I take it bitcoins have a libertarian appeal, in that they aren’t subject to awful government regulation or taxes. But then, aren’t these the same people who want to return to the gold standard? Whatever.

Apparently hackers have been draining a major bitcoin site for months and redirecting millions of actual dollars’ worth of the whatever they are, amounting to 6 percent of all the bitcoins in the world. So lots of people have lost a ton of money, or “money.” Because they are unregulated, they are also unprotected.

Paul Krugman:

Bitcoin was, of course, created in part to cater to libertarian dreams — to provide a way to store your wealth where governments can’t steal it through taxation or currency debasement.

And it’s true! Thanks to Bitcoin, you can instead have your wealth stolen by private hackers.

D’oh!

The Austrian-school-bots at Reason think this is just a minor setback for bitcoins. And if enough of them think that way, it probably is, because it’s all Tinkerbelle. Bitcoins will live as long as there are those who believe.

Do They Think We Have Amnesia?

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Apparently the Republicans are rallying behind the argument that Lyndon Johnson’s War on Poverty failed, so it’s time to give them a turn at running the government.

Seriously.

WASHINGTON — Senator Marco Rubio says the American dream has become “unattainable.” Senator Mike Lee says reforming government benefits programs should be the country’s “first priority.” And Representative Paul D. Ryan says the government safety net has “failed miserably.”

Fifty years after President Lyndon B. Johnson declared a war on poverty, the message from Republicans in Congress is that the government has foundered in its efforts to address the problem.

“While we have programs in place that help deal with the pain of poverty, they don’t deal with the structural problems,” Mr. Rubio of Florida said in an interview.

And who caused those “structural problems,” toots? Answer me that! Whose economic/governing philosophy has dominated Washington and federal policy since, oh, about 1980 or so (and arguably earlier)?

Mindful of polls that show many Americans see them as detached from or indifferent to the hardships faced by the people most affected by the recession and slow recovery, Republicans have begun to speak publicly on the issue of poverty and to propose their own, more market-based solutions.

In other words, the same crap that got us into this mess.

But at the same time that the party is shifting its focus to poverty, many Republicans are pushing for deep cuts to food assistance programs and unemployment insurance, while 11 million Americans are jobless and poverty rates remain elevated in the wake of the recession.

One way to reduce poverty is to starve the impoverished, I give you that. It worked pretty well in Ireland awhile back.

Un-bee-lee-vah-bull.

But you know the Republican establishment is nervous when they bring in the empathy coaches.

House Republican leaders sent a memo this week to the entire GOP conference with talking points designed to help rank-and-file Republicans show compassion for the unemployed and explain the Republican position on unemployment benefits. In the memo, which was obtained by The Washington Post, House Republicans are urged to be empathetic toward the unemployed and understand how unemployment is a “personal crisis” for individuals and families. The memo also asks Republicans to reiterate that the House will give “proper consideration” to an extension of long-term insurance as long as Democrats are willing to support spending or regulatory reforms.

Of course,

Last year they tried to empathy coach Republican politicians about women, and I can’t see that it helped. But why are they so worried now? Joan Walsh writes,

Maybe because of polls like the one just completed by Hart Research (on behalf of the National Employment Law Project). Surveying likely 2014 midterm voters the pollsters found they overwhelmingly supported extended benefits 55 to 34 percent. Significantly, key Republican groups like seniors and white non-college educated voters were among the most supportive; white women, a swing group that leaned to the GOP in 2012, support maintaining the benefits 53-33 percent.

And by some non-coincidence, many Washington politicians who are most adamantly against extending benefits are from states with the highest number of jobless constituents. Funny how that works, huh?

Unfortunately for them, Paul Ryan spilled the beans last month when he declared he wanted to end jobless benefits so that people would be compelled to go out and find a job. But the average American is at least a few shades brighter than Ryan — hell, there could be varieties of dieffenbachia that are brighter than Ryan — and understand that it’s a bit tricky to go out and get a job when there are no bleeping jobs to get.