The Fleecing of America

It’s hard to find the silver lining behind the American Economy any more for ordinary Americans. There is a platinum one, however, for the ultrarich. The difference in socioeconomic status and buying power have become so pronounced recently that it’s difficult to think about this as the same country that was once called the “land of opportunity”. There are several profound articles up today that point to the extreme differences in growing up in America now compared to growing up in America about 30 years ago. It’s so bad, that the FT’s article that I’m going to point you to says that you have a better chance of being upwardly mobile just about any where in Europe these days than in the United States. The excellent coverage of the developing nature of our corporate serf status here is covered by Edward Luce in “The Crisis of middle-class America”. While it profiles the struggles of two U.S. families, the statistics behind the stories tell us that their stories are not just anecdotal, they are today’s every family. There’s no hand-up these days. That is unless you are a Wall Street Executive, an American Politician, or some CEO or lawyer that gain from the every day plight of others, then the government stands ready to bail you out, go further into debt for you, and give you tax breaks that no one else enjoys.

The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.

The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.

Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.

We are becoming a deeply socioeconomically unequal country. You’ll read that many of these folks struggle because of medical insurance costs as well as stagnant earnings. No comfort knowing that what the Obama administration is calling success in its plan to reform health care turns more people over to be fleeced by these third party payers who look more to their bottom lines than their customers. The fleecing continues to appease the already rich.

In a similar vein, I was struck by Susie Madrak’s latest at C&L: “Retirement” You must be Kidding?” as she outlines how many workers are emptying out their personal retirement plans just to ‘stay afloat’. Staying afloat is the primary middle class activity these days. Every time a bubble bursts from the latest Wall Street fiasco, I joke to my students that I’ll die at the podium. Now, I don’t even know about that given the number of teachers and others in usually safe jobs out on the street these days. It could be the ice floes for me and many others if the cat food commission gets its way.

In the midst of all this bad economic news for the middle class, the political class is debating the extension of the Bush Tax Cuts for the bonus class. I consider this piece of legislation to be the hallmark of the New American Order. If you haven’t checked out WaPo and William G. Gale’s Five Myths about the Bush Tax Cuts, you should. It talks about some of the things we’ve talked about here. First is the idea that you’re going to stimulate the economy by giving people money that really don’t spend it. It will just get trapped in somebody’s balance sheet to use to arbitrage their way to paper profits. It won’t create jobs, customers for businesses, or physical capital that this country so desperately needs like better roads, airports, and infrastructure. It won’t help small businesses or lead to high growth. It will just continue the wealth transfer from the majority of people and the public good to the richest of the rich. Which leads me to the screeds that you will hear from the right wing and from those Dinocrats that now seem to make up the majority of our decision makers.

As Sen. Orrin Hatch (R-Utah) recently put it, allowing the cuts to lapse would amount to “a job-killing tax hike on small business during tough economic times.”

This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.

Even budget guru David Stockman of the Reagan travesty op-ed’ed this morning for the NYT with this comment.

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.

But all this even means nothing if you got a group of very confused an selfish people making the decisions. House Minority Leader John Boehner (R-OH) thinks he doesn’t need no stinkin’ economists or data to help him make decisions. I guess the voices in his head tell him what’s good for the rest of us. Good thing he was on Fox New Sunday where he’s joined by others who have their own and don’t care if others don’t. It’s not their concern after all. We don’t have jobs because we’re lazy not because they’ve all gone abroad or they’ve gone off to the black market where employers can hire undocumenteds and treat them like slaves.(One of the big things I’ve noticed down here since Katrina is the number of solid middle class jobs that were in the public sector that have now been farmed out to private companies. Part of their plan is to kill SEIU. A lot of they jobs they cover are now farmed out to private companies who are using undocumenteds. Here in New Orleans, we’ve lost the black middle classed and gained a Hispanic underclass.) So now there’s the memes that lazy Americans need entitlements and handouts, not the social insurance benefits for which we paid. Actually, Chris Wallace did bring up the incredible costs of extending the Bush tax cuts but only because fiscal conservatism is in vogue since the Democrats have both houses and the white house. Not like he cares or anything.

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If any one of them would listen, there are a number of economists with good suggestions on how to turn this situation around. Unfortunately, the offices of decision makers are filled with industry insiders and lobbyists in training. In fact, public service these days is just a way to get your ticket punched to the big bucks. It seems almost none of them is immune. However, like all Ponzi schemes, something happens, and it collapses.

Back to the FT article for this one.

Statistics only capture one slice of the problem. But it is the renowned Harvard economist, Larry Katz, who offers the most compelling analogy. “Think of the American economy as a large apartment block,” says the softly spoken professor. “A century ago – even 30 years ago – it was the object of envy. But in the last generation its character has changed. The penthouses at the top keep getting larger and larger. The apartments in the middle are feeling more and more squeezed and the basement has flooded. To round it off, the elevator is no longer working. That broken elevator is what gets people down the most.”

Unsurprisingly, a growing majority of Americans have been telling pollsters that they expect their children to be worse off than they are.

May wisdom beings bless the family that that stays afloat. The bonus class doesn’t need it for the government showers blessings on them