The kids will be rich, unless Peter Peterson’s kids take their money

from Dean Baker

The Wall Street crew has been in high gear trying to convince the public that our children’s well-being is going to be threatened by their parents’ and grandparents’ Social Security. This story would be laughable except that it is endlessly repeated by people in positions of power and responsibility. For this reason it is worth going over the basic numbers yet again so that everyone knows that the people making these assertions are either ignorant or dishonest.

The basic point is that the economy gets more productive through time. This has been true for hundreds of years and no one has any good stories as to why it should not continue to be true long into the future.

Our measures of productivity growth are not very good for the years prior to World War II, but according to the Bureau of Labor Statistics in the 65 years since 1947 productivity growth has averaged 2.2 percent annually. There have been periods of more and less rapid growth.

In not Of?

from Peter Radford

Today’s New York Times has a reminder of the damage the crisis has done to the economy, and, more importantly, to enduring attitudes towards opportunity. The article summarizes the results of a survey conducted by Rutgers University.

The main thrust of the article is that this crisis was both deep and broad enough to involve almost eighty percent of the population in one way or another. Unemployment and its awful effects were that widely felt. People’s lives were often ruined permanently. The entire trajectory of some people’s lives will be changed forever. The damage is incredible. The downdraft from Wall Street’s extraordinary greed driven stupidity caught almost all Americans and has left enormous psychological as well as material scars.

Yet we still have not dealt with the causes and have not undertaken strong remedial action.

Why not?

In the USA when income grows, who gains? 1976 – 2008 (chart)

from David Ruccio

source

That’s right: 100 percent to the top 10 percent and zero for everyone else.

World map comparing income inequality in the USA to other countries

Source : http://www.theatlantic.com/international/archive/2011/09/map-us-ranks-near-bottom-on-income-inequality/245315/

Global map of income inequality

Source : http://www.theatlantic.com/international/archive/2011/09/map-us-ranks-near-bottom-on-income-inequality/245315/

Percent of income earned by top 0.1 percent of taxpayers – 6 countries – chart

from David Ruccio

Percent of Income Earned by Top 0.1 Percent of Taxpayers

source (missing years reflect lack of current data)

Raising the minimum wage is cheap and easy

from Dean Baker

There are some policies that are pretty much no-brainers. We all agree that the Food and Drug Administration should keep dangerous drugs off the market. We all agree that the government should provide police and fire protection. And, we pretty much all agree that workers should be able to count on at least some minimal pay for a day’s work.

The minimum wage is non-controversial. The vast majority of people across the political spectrum support the minimum wage. In fact, one of the big accomplishments of the Gingrich Congress in 1996 was a 22 percent increase in the minimum wage. The only real issue is how high it should be. There are good reasons for believing that the minimum wage should be considerably higher than it is today.

United States of low wages

from David Ruccio

The bogus case against the minimum wage hike

from Dean Baker

Eight states and one city (San Francisco) raised their minimum wage this week, providing a pay raise to just over 1 million workers. In the face of this good news, the opponents of the minimum wage are warning of serious job loss. They are likely to be proved wrong, yet again.

A simple Econ 101 story argues that a higher minimum wage will lead to fewer jobs for teenagers and other workers at the bottom rungs of the labor market. However, at this point a large body of research shows that increases in the minimum wage at the national, state and even local levels have not cost jobs. That may sound counterintuitive; after all, economists always say that when the price rises, demand falls. This should mean that with a higher minimum wage, employers will want fewer workers.

The real story, however, is somewhat more complex. Employers not only care about the wages they pay, they also care about workers’ productivity, and the rise in the pay by itself may cause workers to be more productive. 

David Brooks is projecting his self indulgence again

from Dean Baker

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

” Today, the country is middle-aged but self-indulgent. Bad habits have accumulated.”

For the most part the column is a confused diatribe against the Obama administration’s economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers:

The Supercommittee should go really big and turn against The One Percent

from Dean Baker

It looks the supercommittee is about to throw in the towel. Since the potential deals that had been discussed would have meant large cuts to Social Security, Medicare and other programs that the 99 percent depend upon, we should all be thankful.

In the world of the 1 percent that the supercommittee types inhabit, the big villains in the U.S. economy are not the rich who are pulling down an ever-larger share of national income, but rather the country’s older workers. 

Crash Tax: Reparations to the 99%

from Edward Fullbrook

With the continuing fallout from the Global Financial Collapse and the global upsurge of real democratic sentiments, support seems to be growing for a Tobin or financial transactions tax.  Yesterday AlterNet stated the case for it as follows.  

Wall Street caused the crash. It caused devastating unemployment. It exacerbated deficit problems in the United States, Greece, Ireland, Portugal, Spain and Italy. If the market hadn’t crashed, sustained higher tax revenues would have prevented these difficulties from intensifying.
……. 
The crash tax is, essentially, a sales tax on financial transactions. The middle class pays sales tax on all the stuff it purchases. There should be no special exceptions. The 1 percent should be paying sales tax on the purchase of risky derivatives and on bets that derivatives will fail. This is equity. This is simple fairness. 

Gathering Clouds – Poverty, Banking, and Debt Limits

from Peter Radford

This is a once in a lifetime moment. Fortunately. None of us want to live through a repeat of the turmoil currently roiling the world economy. With that portentous statement out of the way, let’s consider the chaos around us.

Last Friday we read a breathless article in the New York Times pointing out that US poverty levels are not as bad as the official statistics indicate. The entire thrust of the article was an attempt to be upbeat. Heaven knows we all need it after the battering of the last three years. The article, unfortunately, made a very bad point. In fact it missed the point altogether. 

Take down letter from Citigroup

from John Schmitt

I’ve just received my second Digital Millenium Copyright Act take-down letter. As before, the letter is from the Kilpatrick Townsend, Attorneys At Law, and, as before, the letter is on behalf of their client, Citigroup.

The one percent turns class war into generational war

from Dean Baker

Major news outlets like the Washington Post and National Public Radio constantly bombard us with news pieces on the budget deficit. Invariably these stories focus on the cost of “entitlements,” which most of us know as Medicare, Medicaid and Social Security. The story pounded home in these pieces – often explicitly – is that these programs, that primarily benefit the elderly, are creating the basis for a generational war between the young and the old.

Supercommittee of the One Percent Won’t Even Think of Taxing Wall Street

from Dean Baker

If anyone still questioned who owns Washington, the congressional supercommittee charged with reducing projected deficits by $1.2 trillion seems determined to end any doubts. According to press accounts, both the Republicans and Democrats on the committee support a plan to reduce average Social Security benefits by 3 percent.

While whacking our parents and grandparents with a big cut in Social Security benefits apparently draws bipartisan support, the supercommittee will not even score a plan to tax Wall Street financial speculation. 

Plutonomy update: “middle-class serfdom”

from Edward Fullbrook

The middle classes, including nearly all economists, continue to prefer not to talk about plutonomy nor even admit its existence.  But among themselves the hyper rich are not so inhibited and so occasionally, as with the notorious Citigroup plutonomy reports, their analyses leak to us 99 percent.

Two such leaks are reported in a short article by Timothy Noah in the October 6^th issue of The New Republic.

Inequality and deficits on the current account…

from Merijn Knibbe

Is it possible to construct a plausible economic story which tells us that a fast increase in debts led to or enabled, in this century, economic bubbles as well as higher inequality, deficits on the current account and an erosion of the tax base, a situation which, when the bubbles deflated, led to large government deficits? Vicente navarro tries to do this. And he might have a point (graph 1).