April 24, 2011

Refighting 1936

A campaign speech by Franklin D. Roosevelt in 1936 is eerie to hear today. He addresses almost every single one of the right-wing dangers we face today. Read it and hear it here:

Some choice quotes (emphasis added):

"We had to struggle with the old enemies of peace--business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me--and I welcome their hatred."

"Only desperate men with their backs to the wall would descend so far below the level of decent citizenship as to foster the current pay-envelope campaign against America's working people. Only reckless men, heedless of consequences, would risk the disruption of the hope for a new peace between worker and employer by returning to the tactics of the labor spy.
     Here is an amazing paradox! The very employers and politicians and publishers who talk most loudly of class antagonism and the destruction of the American system now undermine that system by this attempt to coerce the votes of the wage earners of this country. It is the 1936 version of the old threat to close down the factory or the office if a particular candidate does not win. It is an old strategy of tyrants to delude their victims into fighting their battles for them.
      Every message in a pay envelope, even if it is the truth, is a command to vote according to the will of the employer. But this propaganda is worse- it is deceit."

Read the whole speech. You will see that we are now refighting the same battles we thought had been won 75 years ago, against the same big-money forces. Who will call them out in 2012? Can the American people see clearly enough to reject them in 2012 as we did in 1936?

April 16, 2011

Gas or Hot Air — Outside DC?

Biogas fuel sources, rural Guatemala
Larisa posted here her experiences and thoughts on bringing low-tech biodigesters as fuel source to rural Guatemala.
      One of her points is that what seems technologically sensible often runs up against cultural factors. Could the same be true of politico-economic questions here in the US?

      Paul Krugman argued here in 2002 that the growing inequality of income and wealth in the US has been supported (even driven) by some cultural changes since about 1980. Perhaps it's time we reversed some of those.

April 14, 2011

How the Financial Crooks went Free

Many have wondered why no big executives of banks, financial or insurance companies were prosecuted after they plunged us into the worst financial crisis since the Great Depression. There are four possibilities:
1)    What they did was stupid and reckless, but not illegal. Nothing to prosecute.
2)    Financial systems are extremely complicated, so it’s almost impossible to prove criminality in court. There may have been crime, but it’s too hard to get convictions.
3)    State and Federal officials knew or suspected that there were crimes committed, but were afraid of causing more financial panic if financial bigshots were hauled into court.
4)    The extremely rich do not have to play by the same rules as others. These guys were not prosecuted because they had friends in high places.

An April 13, 2011 article here by Gretchen Morgenson and Louise Story in the New York Times lays it all out, as clearly as it’s ever been done. So what’s the answer?

It looks like (2) and (3) and (4) were all true at the same time. Note in the story the use of the term “collective embezzlement” to describe how financial executives enriched themselves while driving the entire US economy into the ground.

When you read the story, note especially how officials at the Dept. of Justice make it very clear that if financial regulatory agencies don’t do their jobs, it’s almost impossible for prosecutors to get on top of things. The financial regulators of the Bush years had plainly been told to lay off the financial guys – in other words, you get paid to regulate, but don’t regulate “our friends”. For those 8 years, our tax dollars were going to pay people at SEC and other agencies to turn a blind eye to Wall St. And it doesn’t look like much changed when the Obama Administration took over in 2009.  Lovely.

So when you feel like the Wizards of Finance have left ordinary American taxpayers holding the bag, getting their companies bailed out with your tax dollars so they can go back quickly to paying huge bonuses ---  well, that’s right!

And remember, these are the same people who claim they’re being over-taxed. If it weren’t so viciously destructive of life in the US, it would be laughable.
Lew Jacobson

April 7, 2011

The Rich and the Rest of Us

     Americans seem to have a grossly incorrect idea of how unequal the US actually is in incomes and wealth. (Income is what you earn each year; wealth is what you own.) See this online article from Mother Jones.
      One measure of income inequality is what’s called the Gini Index. The data in the map below come from a well-known liberal-biased source — the CIA:

What the Gini Index tells us is that the US has among the most unequal income distributions in the world. Oh, we’re better off than Brazil or South Africa. But we have much more income inequality than Canada, Britain, Australia, France, India, Sweden, Japan, Poland, Italy. We are about the same as China or Argentina. Make you feel better?
      Are we improving over time?  Historical Gini data show a gradual but steady improvement in the US from 1929 to 1968, when the US Gini reached its lowest point -- that is, incomes were most equal.
      It's hard to tell about more recent trends from the Gini Index, because the basis of calculation was changed in 1992. We showed no significant change 2000-2009.  However, there is this undisputed fact: Of all the income gains in the US from 1980-2008 (a whole generation!), 96% of the income gains went to the top 10% of the population, leaving 4% for the other 90% of the people.  This is after the distribution of incomes held pretty steady from 1950-1980. See my post of March 17 for details.
      What about wealth? Data from E.M. Wolf, Recent Trends in Household Wealth in the United States (Levy Economics Institute, 2010) show this:

It shouldn’t be a big surprise that when incomes stay unequal for a long time, those getting the big incomes end up with most of the wealth. But this is way out of balance, because we have let incomes get way out of balance in the US.
      There are two forces making this even worse:

1. In the US, we primarily tax incomes rather than wealth. Only real estate taxes and inheritance taxes are taxes on accumulated wealth. For a generation now, Republicans have been pressing to eliminate the “death tax” — their absurd name for inheritance taxes. They claim falsely that this tax hurts families that run small business or farms, but in fact only about 1% of such families ever pay inheritance tax. They have succeeded in lowering Federal inheritance taxes from 70% in 1980 to 35% in 2011.  And consider this: At present we only impose Federal tax on estates over $5 milllion, so this is not hurting little folks. As we lower inheritance tax rates, the rich get to keep more of their accumulated wealth.

2. Unless you’re very rich, the odds are that most of your accumulated wealth is tied up in your home. The top 1% have about 10% of their wealth in their homes, whereas the average family— if it has any wealth at all, many have none — has about 65% of it in a home.  (The data are here.) This means that the slump in house values 2006-2011 is destroying average families’ wealth much more than the wealth of the rich. Furthermore, as Federal aid to localities goes down, cities and towns depend more on real estate taxes — which disproportionately impact the average family.

These unequal distributions of incomes and wealth in the US are not just matters for envy, they are adversely affecting many aspects of our lives. More to come.

Lew Jacobson

April 1, 2011

A Simple Idea

A beautiful statement in an online discussion, posted by someone using screen name "CBS from the West":

"We are still a very wealthy society as a whole and we can afford for some of us to sacrifice some luxuries so that others can be spared genuine hardship. It all depends on our values."

Yet our public policy and rhetoric show that this simple idea would provoke vehement disagreement from a substantial minority of Americans.  Don't oversimplify: Not all Republicans would disagree. Some Democrats would. It's simply shameful.

I think of it like this:  There are those whose first thought is "ME" and others whose first thought is "WE".  You can't have a decent society built on "ME" alone.

Lew Jacobson