Saturday Reads

Good Morning!!

President Obama has left the country again. He was in Lisbon today for a NATO meeting, at which the organization agreed to build a missile shield, and they hope that Russia will go along with it too.

In general, senior NATO officials note a welcoming Russian tone under President Dmitri A. Medvedev to the idea of cooperation with NATO on missile defense and European security, and they also note the general silence of Mr. Putin, now prime minister.

On Saturday, Russia will be formally invited to take part in the missile defense system, especially with intelligence and radar sharing. Moscow has indicated that it is interested but has questions, and wants to ensure that the system is not aimed at countering Russian missiles.

The missile defense system approved Friday is different from the fixed-missile defense that President George W. Bush initiated and that proved controversial. The idea is to have a phased system of radars and antimissile missiles that would be less expensive than the Bush system. The NATO spokesman, James Appathurai, said the nearly $1.5 billion cost could be managed over 10 years.

Plenty of money for missile defense that probably won’t work, but nothing for the desperate long-term unemployed.

In one of his many bad decisions, President Obama invited Skeltor Alan Simpson back out of obscurity, and we may never get rid of him. With his latest pronouncement, he has moved way beyond inappropriate to sociopathic.

He predicted a government that approaches shutdown in April of next year.

“This is going to be beautiful politics – The brutal kind,” he told reporters in Washington at a forum put on by the Christian Science Monitor. “I love those,” he said, with a twinkle in his eye and a jokester tinge to his voice.

“The debt limit, when it comes in April or May, will prove who’s a hero and who’s a jerk and who’s a charlatan and who’s a faqir,” said Simpson. “And there it will be right there. Because they’re going to say, these new guys, some of them, and I’ve met a good deal of them and boy they’re sharp cookies,” he said, adding a message to new Congressmen.

“Compromise is not a filthy word,” said Simpson. “It doesn’t mean you’re a wimp when you learn to compromise. You either learn to compromise and legislate or go home – my personal view – anyway there they are and they’re going to say I will not vote for the debt limit extension until you cut this. Say, you can’t do that. you can’t possibly do that. well, then I’m not voting for it. and they’ll say well the government will close. Which they’ll say that’s what I came here for. Oh, I can’t wait. It’ll be something and I’ll be watching.”

You can watch it at the Christian Science Monitor site.

If only there really were a hell so Alan Simpson could spend eternity there.

Ezra Klein is thinking along the same lines as Simpson, but makes more of an effort to sound reasonable. He says Democrats should trade an extension of the Bush tax cuts to the rich for Republican votes to extend unemployment benefits and increase the debt ceiling when the time comes.

Ezra must have learned bargaining strategy from that great bipartisan choker compromiser Barack Obama.

Elsewhere in The Washington Post is the story of “one family’s plunge from the middle class into poverty.”

Walker used to make $100,000 a year as a nursing home executive until she lost her job a year and a half ago. Unable to find a new one, she shed her business suits and high heels and put on an apron and soft-soled shoes. This year, she and her daughter are living on $11,000: her unemployment benefits plus whatever she can earn selling home-cooked dinners for $10 apiece….

The Census Bureau recently reported that the poverty rate in the United States rose to 14.3 percent last year, the highest level in more than 50 years.

Texas and Florida saw the most people fall below the line. In Florida alone, 323,000 people became newly poor last year, bringing the state’s poverty total to 2.7 million.

The numbers tell another tale as well: Nationwide, in black households such as Walker’s, income plunged an average of 4.4 percent in 2009, almost three times the drop among whites. The number of blacks living below the official poverty line – $21,756 for a family of four – increased by 7 percent in just one year.

Alan Simpson and Erskine Bowles, co-chairs of the Catfood Commission, should be forced to read this article, memorize it, and then write on a blackboard 1,000 times, “I am a damn fool who knows nothing about economics.”

At Counterpunch, Alexander Cockburn thinks “it’s time for a real mutiny.”

So much for 2010 as the year of mutiny, when the American people rose up and said, “Enough! Throw the bums out!” As the dust finally clears after the midterm elections, and the bodies are hauled from the field of battle, guess what? It was all so predictable. The safest thing to be in 2010 was an incumbent.

Out of 435 seats, 351 incumbents will be returning to the House in January. In the Senate, out of 100 seats, 77 incumbents will return in January. As the libertarian Joel Hirschorn puts it, “Welcome back to the reality of America’s delusional democracy where career politicians will continue to foster a corrupt, inefficient and dysfunctional government because that is what the two-party plutocracy and its supporters want for their own selfish reasons.”

What will Dear Leader do next?

Already there are the omens of a steady stream of concessions by Obama to the right.

There’s hardly any countervailing pressure for him to do otherwise. The president has no fixed principles of political economy, and who is at his elbow in the White House? Not the Labor Secretary, Hilda Solis. Not that splendid radical Elizabeth Warren, whose Consumer Financial Protection Bureau the Republicans are already scheduling for destruction. Next to Obama is Treasury Secretary Tim Geithner, the bankers’ lapdog, whom the president holds in high esteem….

Two more years, of the same downward slide, courtesy of bipartisanship and “working together”? No way. Enough of dreary predictability. Let’s have a real mutiny against Obamian rightward drift. The time is not six months or a year down the road. The time is now.

But who will lead the charge?

Dakinikat turned me on to this article about Obama’s Asian trip: Asia After Obama, by Brahma Chellaney

Significantly, Obama restricted his tour to Asia’s leading democracies – India, Indonesia, Japan, and South Korea – which surround China and are central to managing its rise. Yet he spent all of last year assiduously courting the government in Beijing in the hope that he could make China a global partner on issues ranging from climate change to trade and financial regulation. The catchphrase coined by US Deputy Secretary of State James Steinberg in relation to China, “strategic reassurance,” actually signaled America’s intent to be more accommodating toward China’s ambitions.

Now, with his China strategy falling apart, Obama is seeking to do exactly what his predecessor attempted – to line up partners as an insurance policy in case China’s rising power slides into arrogance. Other players on the grand chessboard of Asian geopolitics also are seeking to formulate new equations, as they concurrently pursue strategies of hedging, balancing, and bandwagoning.

Once again, Obama plays the role of Bush III.

At Truthdig, I learned that David Sirota has found a new hero to replace his now tarnished idol Barack Obama. These days Sirota is bragging about hanging with cut rate Rolling Stone gonzo writer Matt Taibbi.

Sirota reminds me of that little dog Chester in the Looney Tunes cartoons–the one that idolizes the big bulldog Spike. Chester jumps around Butch, trying to get his attention, praising him, agreeing with him; and when Spike brushes him aside, he just keeps coming back for more. Sirota:

Over drinks in my living room, Taibbi and I pondered the financial Masters of the Universe and their maddening infallibility. I asked him why they never fear facing legal consequences. Do they believe they’re untouchable? Or do they know law enforcement won’t pursue them?

“They’re not afraid because other than Bernie Madoff, when was the last time someone on Wall Street faced any real punishment?” he responded. “Sure, a few go to jail once in a while, but they’re usually out in a few months and then on the speaking circuit. That’s not exactly a deterrent against bad behavior that’s making you millions.”

Deterrence—it’s the vaunted idea behind “tough on crime” sentences for violent offenses. Lock the door, throw away the key, and the theory says that heinous acts will be prevented.

Duh! I think Sirota wrote this piece just so everyone would know he’s pals with Taibbi.

Since it’s Saturday Morning….

What’s on your reading menu this morning?


This is a Democratic Adviser?

I have to admit to being with Digby on this one.   It’s getting more obvious to me that this Democratic Administration is going after our Social Security benefits with gusto.  You may recall that Peter Orzag was the Obama Budget Director and is now one of the major economic advisers to the President.  This contribution to the NYT is not the first flare to be fired, but it is a distinctly blinding one.

So, first Orzag admits that Social Security is not a federal deficit problem. You would think he’d end with that.  Social Security is an off budget program and it’s self funding and managing.  That’s the deal.  People pay for the benefits and they expect them.  It’s a third rail of politics and you’d think after Dubya’s adventures into handing the trust fund to Wall Street that would be all she wrote.  But, it’s not.  (Emphasis is mine on this.)

So it would be desirable to put the system on sounder financial footing. And that is precisely what the co-chairmen of President Obama’s bipartisan commission on reducing the national debt have bravely proposed to do. It’s too bad their proposal has been greeted with so much criticism, especially from progressives — who really should look at it as an opportunity to fix Social Security without privatizing it. Although the plan leans too much on future benefit reductions and not enough on revenue increases, it still offers a good starting point for reform.

The main flaw in the proposed Social Security plan is that it relies too little on revenue increases and too much on future benefit reductions. A reasonable objective would be a 50-50 balance between changes in benefits and changes in revenues. But the way to bring reform into better proportion is to adjust the components of this proposal, not to fundamentally remodel it.

Alrighty, so let’s first IGNORE the fact that the cat food commission had no real business sticking its nose into Social Security because it’s charter said it was to go after the Federal Deficit.  And, as Orzag has stated, Social Security is NO contributor to that deficit.

So, here’s where I agree with Digby.

I can hardly believe anyone of his stature could argue this nonsense. Orszag agrees that SS does not contribute to the long term deficit and yet is trying to convince us that that the Deficit Commission draft just put it on the table anyway, apparently out of a surfeit of progressive idealism. Huh? Moreover, he also thinks it makes sense to jump right on the third rail in American politics because it would be desirable” to do something about a potential future problem — when we are in the middle of an epic economic shitstorm with stubborn 10% unemployment and a banking and housing crisis that shows no sign of abating.

Is he ignorant of the fact that most people in this country are convinced — mainly because they’re being told it every single day by every politician, talking head and gasbag — that “entitlements” are destroying the economy and the future of the United States? The idea that social security cuts could buy the administration a chance for more stimulus is delusional.

Yup, delusional. And get this closer …

The White House has been handed a highly progressive reform plan for Social Security that could attract Republican support as well.

If this is progressive, I want to be known as something completely different.

This just seems to be the start of the swansong for the program.  BostonBoomer sent me this call for liberals to get on board with similar clarion calls today. It’s from USN and John Farrell.

Okay, my liberal friends. On Friday I explained why the proposals of the Simpson-Bowles commission should be welcomed, and put on the bargaining table by conservatives. Today I will argue, despite what Paul Krugman says, that there’s good stuff for liberals too.

Remember, first and foremost, that this is a starting point. You don’t have to buy into everything to keep the conversation going. And beware misinformation.

You know, this all seems to assume that we don’t have Democratic pols that make Faustian bargains with themselves before they even start dealing with the Republicans.  I have to admit that I’m with Krugman on this one too.

Right at the beginning of his administration, what Mr. Obama needed to do, above all, was fight for an economic plan commensurate with the scale of the crisis. Instead, he negotiated with himself before he ever got around to negotiating with Congress, proposing a plan that was clearly, grossly inadequate — then allowed that plan to be scaled back even further without protest. And the failure to act forcefully on the economy, more than anything else, accounts for the midterm “shellacking.”

You expect any one to fight for what’s right in Social Security given recent history like Krugman identifies?  I don’t. No hope or expectation of it at all.  After all, a major Presidential Advisor just call Allan Simpson brave instead of being labeled the crazy old coot he is.


Survival of the Richest

In the natural world, the weakest generally don’t survive unless they are part of a highly evolved species.  The lessons of basic evolution are fairly simple, you either develop something that gives you a competitive advantage over those who wish to make a meal of you, or you and your offspring have a very brief and brutal existence.

Humankind evolved into something beyond a herd animal by developing tools and social contracts. Through trade, language, and invention, our evolutionary history has shown that competitive advantage does not have to involve size, brute force, speed, or trickery like camouflage.   Dogs evolved into a smart and numerous population by being genetically flexible.  Indeed, the more advanced beings tend towards flexibility and social interaction.  Nurturing, passing on survival skills, specializing, and adapting are all important survival skills for more highly evolved beings.  Many natural scientists now study the importance of how these species treat their youngest and the oldest, since the young are portents of the future and the elderly are the libraries of past knowledge and skills. Specialization allows creatures other than those with superior brute force to be contributors.  We wouldn’t have The David or knowledge of Gravitational Singularity if we evolved on pure brute force.  Evolutionary Biology learns a lot about a species by the way it treats its weakest, its young, and its elderly.

What amazes me most about the Cat Food Commission report is that it is so Republican that you wonder if anyone Democratic had anything to do with its inception or results. But of course, it was chartered by a Democratic President and co-chaired by a Democratic man.  For a group of Darwin denying theists,  Republicans believe and adhere to survival of the fittest in the most strict terms and this report wreaks of that view.  The winners of the moment get all the spoils, even if this is a short-sighted and factually-challenged view of reality.  Their ‘masters of the universe’ comic book world is everything that nature does not reward in the extreme long run.  It is inflexible and relies on brute force.  Their reality gives a species a very short and brutal life in the scheme of things and assigns the animal the limited roles of predator and prey. To the Cat Food Commission, the  majority of us are mere prey.

The draft from that dreadful commission came out yesterday and you can read the entire thing here at the NYT.  We knew from the moment the Simpson theatrics began that nothing good was going to come out of this effort.  Simpson put Social Security on the agenda immediately which was completely outside a deficit commission’s sphere.  President Obama did nothing to reel them back.  Simpson only got more theatrical and ill-mannered.  The commission itself could only get worse.

The draft–which is all they can achieve at the moment–suggests upending the social and political contracts made between the US government and the people in ways that I would never have thought possible.  It’s as if every third rail of politics is put to a match.  It was announced as a draft with these big bold red letters that say Do Not Cite as if there’s any hope left that we’ll join the rest of the developed and industrialized nations in realizing that we can choose our priorities differently.  It is an announcement to the rest of the world that we, the American Empire, choose to be so exceptional that we’ll do so to our extinction.  The rest of you just go ahead and cooperate and share, while we ensure the survival of the few over the existence of the many.   No one makes Spock’s choice.  We all go down with the ship and  an Ayn Rand third finger salute.

I read this draft and realize how co-opted we are by conservative ideology just as we are co-opted by religion over reason.  This is a nation that would rather believe than realize. The thing reads like a Republican manifesto.  It contains spending cuts in nearly everything imaginable while still making that fairy tale suggestion that if we overhaul the tax system and lower marginal tax cuts, the wealth will just trickle on down.

One of the major suggestions is to revisit the huge tax break given to mortgage holders on their first and second homes.   While it is worthwhile to review the usefulness of this deduction as blank check, the commission questions its entire existence.  I’ve always wondered what the deal is with giving tax breaks for a second home or a boat.  I’ve also wondered why we should give a huge tax break to people living in McMansions.  However, for ordinary people, this deduction leads to wealth building and security.  Perhaps rather than tearing down the entire thing, they should’ve given some consideration to making it something akin to local homestead exemptions?  But, this would be too compassionate and probably too collectivist for our masters of the universe.  Why can’t they just allow destructibility up to say, the average national price of a home? No, no, because their views of the world say that only corporations get get deductions.  People have to make do with making do. Masters of the Universe don’t have to compete because they are special.  Special treatment for them is something other than a handout or a hand up.

It seems like the commission set out to make radical suggestions.  Maybe it’s to make some of the worst portions of it more palatable if they can’t get the entire thing pushed on to some willing Congressional sponsors?   Part of the problem we have now in our struggling economy is those balanced budget amendments passed by states allowing them to spend crazily when tax revenues are coming in–when government spending should be restrained–while telling states to adopt austere budgets when their economies need a government spending boost.  What’s with these inflexible spending quotas rather than adopting rules that reflect the state of the economy?

You can see some of this worst of this obsession with strict guidelines by reading some analysis by Ezra Klein at WAPO.  I can’t imagine how they’re going to deal with caps like this if we do have a serious national threat like an invading army at our borders. Right now, we’re spending way too much money drone bombing Bedouins in caves. Talk about your spending priorities.

The co-chairs freeze 2012’s discretionary spending at 2010’s levels — and then start cutting it back further. By 2015, they project discretionary spending will be more than $200 billion less than the president’s budget currently envisions. They raise taxes, but rather unexpectedly, cap the revenues the tax system can generate at 21 percent of GDP. They also offer a number of options for tax reform, including one that eliminates all tax expenditures (including the mortgage-interest deduction, the exclusion for employer-based health care, and more) and brings the top rate down to 26 percent. Social Security comes in for both benefit cuts and tax increases — though there are substantially more of the former than the latter. There are a number of Medicare reforms. The co-chairs project that the deficit will fall to 1.6 percent of GDP by 2020 if the recommendations are implemented. The vast majority of those savings come from cuts in spending. Tax increases are a relatively minor contributor.

The commission definitely overstepped its charter in many ways.  The biggest overstep was to make suggestions on Social Security, which technically isn’t part of the general budget and is funded and governed off-budget and supposedly away from political hacks.  The recommendations for Social Security are shocking.  Again, I have to say that Social Security is not an entitlement.  It is a benefit program that we pay for through working.  To see it perpetually treated as some kind of social welfare scheme appalls me.

Here are a few blurbs from Fox News on the proposals dealing with Social Security.  They seem most interested in it because they support tearing the program to shreds.  It’s demise has been the holy grail of the right wing of Republican Party since its inception during the New Deal.  For some reason, you can buy old age benefits from a insurance brokering shitmonger and it’s just all in a day’s work.  If you let the government offer a lower cost alternative,  it’s communism in our midst.

The co-chairmen of the panel appointed by President Obama to cut the U.S. deficit recommend raising the retirement age to 68. It is currently 67 years for retirees to receive full benefits. The panel leaders also propose reducing the annual cost-of-living increases in Social Security.

The increase to age 68 would be implemented by 2050 and then would increase again to 69 by 2075. A “hardship exception” would be provided for certain occupations where older retirement would be unrealistic.

This “hardship exception” is a divide and conquer strategy if I’ve ever seen one.  It pits those of us that rely on social security for retirement against each other.  I see nothing but a series of political fights erupting over this if any one dares bring it to the legislative floor.  It is telling the dogs to fight for the scraps on the floor rather than going for the banquet on their master’s table.

There are a few other things in that are within the scope of the commission’s charter.  Some of them seem tucked in there as an after thought rather than central to a serious discussion on what should be funded and what should be defunded.

According to a source who spoke to Fox News, the 18-member panel led by former Wyoming Republican Sen. Alan Simpson and former Clinton Chief of Staff Erskine Bowles, also may propose reducing the base rate on corporate taxes, phasing in spending cuts over time, reducing foreign aid by $4.6 billion, freezing federal salaries for three years and banning congressional earmarks. It is unclear how the commissioners would define a congressional earmark.

The proposal would also set a tough target for curbing the growth of Medicare. And it recommends looking at eliminating popular tax breaks, such as mortgage interest deduction. The plan also calls for cuts in farm subsidies and the Pentagon’s budget.

Let me just say this, foreign aid is less than 1 percent of our total budget outlay. It’s a pittance.  These kinds of things can only be seen in conservative dog whistle terms.  It makes me wonder exactly how far these folks are asking congress to go to appease Republicans because this can only be described as a plan tailor made for Republican talking points.

Again, I worry that something wasn’t done to narrow the scope of this motley crew way before this report came due.  It says something about the man in charge.  I’ll leave it to you to decide exactly what because my plan at this moment is to go further into the details and ferret out what remains of our country’s future.

And, just where are the Democratic politicians?  If you want some suggestions on this, just go read Black Agenda Report. Editor Bruce Dixon has his own theory.

The masters of corporate media proclaim that their raid on social security, is a done deal. “Entitlements,” their code word for Medicare, Medicaid and Social Security, will be cut in the lame duck session of Congress, with Democratic president Barack Obama taking the lead. Though the outlines of this raid have been clear for months, what passes for black America’s political leadership class have been silent. As far as we know, they have not been ordered to shut up. They have silenced themselves, in abject deference to the corporate black Democrat in the White House.

It took a Republican Richard Nixon to open relations with China in the seventies. It took Democrat Bill Clinton to impose draconian cuts in welfare and end college courses for prisoners in the nineties. And today, only a black Democratic president can sufficiently disarm Democrats, only a black Democrat can demobilize the black polity completely enough for the raid on “entitlements” to be successful.


A Jobless Horizon

Many economists are still forecasting a rather bleak jobless recovery in our future.  The latest outlook  from Macroadvisors (h/t to Mark Thoma & Economist’s View) suggests that we won’t see substantial job creation until the end of 2013.  This would be a full four years after the technical end of the recession.  That’s not good.

A jobless recovery is an unpleasant and stubborn thing.  Basically, the GDP of a country will grow which means the production of goods and services available to the economy increases, but that growth rate isn’t sufficient enough to create jobs.  This has all kinds of ramifications and none of them are pleasant.  In the past, we’ve trended towards decreasing employment in many sectors and there’s a lot of reasons for that.  First, we’ve improved processes through technology or consolidation of businesses which were typical of earlier points in time.  This continues but to a lesser extent.  Second, globalization has been an important factor–especially recently–as manufacturing and other industries seek outsourcing and other countries’ markets as a way to improve their bottom lines.  The interesting thing about the Macroadvisor forecast is that it indicates that the main source here is just plain slow growth. This is the most troubling because it’s usually the easiest thing for the government to correct by increasing its domestic demand.

Here are their main points:

  • The U.S. is in the midst of another “jobless recovery,” in the sense that employment gains have been meager relative to enormous job losses that occurred during 2008 and 2009.
  • We anticipate that job gains will continue at a moderate rate, and that the pre-recession peak in private nonfarm payroll employment won’t be reached until 2013, nearly 4 years after the recession ended.
  • This would be roughly comparable to the time it took to regain the pre-recession peak in employment following the 2001 recession, but approximately twice as long as the recovery in employment following the 1990–91 recession and approximately four times as long following recessions in 1970, 1973–75, and 1981–82.
  • The overwhelming factor contributing to the much more sluggish pace of job creation in recent recoveries is much slower growth of output.
  • In contrast, other factors — including productivity growth and changes in the workweek — have played only minor roles in accounting for slower growth of private nonfarm payrolls in recent recoveries.
  • The severity of the decline in employment during 2008 and 2009 is largely accounted for by the weakness in output during the recession, and not by anomalous behavior of productivity.

This is also troubling in other ways.  Some of it, as their analysis points out, seems to be due to an increasing trend in our economy.  In other words, this has become a pattern in the last three recoveries and it’s just progressively getting worse.   It is looks like we’ve reached a growth plateau.

Some of this is also because of the reasons pointed out above.  The U.S’s strongest periods of growth occurred during periods where other countries were not growing so quickly in terms of production.  If you think of the post World War 2 period–a time many folks consider the ‘golden age’ of the US–you should realize that we were one of the few intact industrialized nations left standing.  We were nearly the world’s sole supplier and every one else needed goods.  The last 60 years have been a story of the rest of the world developing its production capacity.  We are no longer the world’s company store.  Now, we have become the world’s biggest customer.

Another reason is the political climate that changed abruptly during the Reagan Revolution. We seem keen on supporting business who can go just about any where for workers and consumers now, but have no desire to prop up U.S. households.  Incomes have been down for some time.  Now, borrowing capacity is down.  While businesses can take their capital some place else, households are unlikely to do that.  We keep our labor some where in the U.S. and with the recent decline of our home values and ability to sell homes, we are almost limited to our current situations at the moment. U.S. Labor is not a very mobile factor.

At one point, government could be counted on to give some Keynesian tweaking by increasing its employment.  This still happened during the Reagan years by revitalizing the military capital. Think about all those new Navy ships.  This was less necessary during the Clinton years because of the boost to productivity and incomes from information technology plus the cold war peace dividend.  Now, all we see are state balanced budget amendments that force states to take recessionary actions during recessionary times and ignore spending prohibitions during good times. We also have such low taxes from the Dubya years, that any attempt to regain some traction there is going to be met with intense political ill will.  This imbalance–if anything–will get worse because the last two years and Democratic political capital were wasted on political efforts not associated with job creation.  We’re seeing meager attempts at tax incentives and those are likely to continue. This will not help the American household or create jobs for them.  Eventually, forces will be such that deficit reduction attempts will prevail and all bets will be off if job growth isn’t sufficient by then.

What does that mean for most of us?  Well, it means more stagnant incomes and downsized lives.  It means trying to avoid using credit and looking for ways to pad that rainy day fund.  It also means that it may take a very long time to find that job you really want and deserve.  You may have to move to get it and you may have to sell a home–if you have one–at a price that will put a hamper on your retirement plans.  And ah, you’re retirement days, with decreased income  and employment comes decreased contributions to both social security and related funds.  Something you should–if you can–try to offset.  Something, however, the government cannot offset without doing something to the programs.

One of the most troubling things of all of this is the likely decreased contributions to sustaining Social Security and Medicare from the decreased incomes and labor participation.  This–and political will to decimate the system–will make it highly unlikely that either program will make it through the next five years unscathed.  I can almost guarantee it given the Cat Food Commission’s goals and composition.  I can also foresee Wall Street attempting to get access to your funds to play speculation games.  This will make your return subject to market momentum and whims.

I think it’s more important for us to make our voices heard to government on all these issues or an erosion of middle class lifestyles will likely result.  This is where it’s also important to argue from a rational economic viewpoint rather than the anti-government hysterics of the tea party. Yes, we all agree that’s something amiss.  Yes, we can see that our dollars are going to the wrong people.  But the deal is this, if you continue to lose income and job standing, taxes are really irrelevant.  And this brings me back to the slow growth forecast above.  You see, we are a consumer economy, and of course our economy will grow slow if there are no jobs and no decent pay levels with which we can purchase things.

Again, corporations can buy things and people from any where and they can move at will. There are growing markets in China, India, and even Vietnam.  We, however, are pretty much stuck with situation.  And that is why every one needs to vote their interests and not their anger.


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