Tuesday, October 18, 2011

The Fix Is In

As quoted several months ago from Joseph Stiglitz in Vanity Fair, speaking about protests in Europe and the Middle East:

“In recent weeks, we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. These are societies where a miniscule fraction of the population – less than 1 percent – controls the lion’s share of the wealth; where wealth is the main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve the lives of people in general. As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our country has become like one of these distant, troubled places.”

Ouch.  Like Nostradamus on a good day, Stiglitz might have been on to something.  Occupy Wall Street has spread to 60 cities in the U.S. within a month’s time, and shows no signs of slowing.

Conventional wisdom has that the Occupy Wall Street message is muddled.  Is it?  The New York Times summed up the issue like this:

“The protests, though, are more than a youth uprising. The protesters’ own problems are only one illustration of the ways in which the economy is not working for most Americans. They are exactly right when they say that the financial sector, with regulators and elected officials in collusion, inflated and profited from a credit bubble that burst, costing millions of Americans their jobs, incomes, savings and home equity. As the bad times have endured, Americans have also lost their belief in redress and recovery.”

When my friends on the Right rail with their Pavlovian revulsion to “spreading the wealth around”, I find it important to remind them that what is actually happening today is a consolidation of wealth into the hands of the few at the expense of the many.  That is documented fact.  We should not argue that the trend is dangerous for a nation.  We should only argue as to how it should be fixed. 

Again from the Times:

“Extreme inequality is the hallmark of a dysfunctional economy, dominated by a financial sector that is driven as much by speculation, gouging and government backing as by productive investment.”

Do you doubt the fact that income disparity is growing to dangerous levels? Median pay for CEOs in large corporations rose 27% in 2010, according to federal data, with the median salary now at $9 million, including $2.2 million in bonuses. Pay increases for private industry workers fell on average 2.1% during the same period, according to USA Today. Could it be that those private industry workers are lazy rabble, waiting for the next hand-out? Not so, according to The Wall Street Journal. For the two year period from January 2009 through December 2010, worker productivity rose at an annual rate of 4%. Corporate profits, it reported, rose 30% during the same period.

Please check out these amazing charts that summarize the landscape with great clarity. 

Rest assured, protesters, your GOP is listening, and they have a new plan to fix what ails us!

Fix #1:  If only large companies had more money in the form of tax cuts, they could hire more workers.

That conventional Right wing thinking is not supported by any statistics, and flies in the face of reality. Let me paint the picture in more blunt terms: Pay at the top is up, pay at the bottom is down; company profits are up, but hiring is stagnant; taxes remain at the lowest level per capita in 50 years, yet the GOP Plan calls for another 10% reduction in the top rate…while crying about programs that assist the lowest 20% of the population. All this is happening in the shadow of the Citizens United court decision, allowing unlimited corporate money to influence political campaigns and ultimately government policy.

It’s demand, stupid, and tax cuts to corporations will not spur demand any time soon.

While we’re at it, let’s squeeze more out of the lazy poor that own a ‘staggering’ 2.5% of the national wealth.  That’ll teach them not to complain next time!  Nice fix.

Fix #2:  If only large corporations had fewer regulations, they could hire more workers. 
Great bumper sticker material, but this position is not supported by any credible research.  Facts are stubborn things.  For several years, the Bureau of Labor Statistics has asked companies that are laying off workers if regulations are the cause.  Overwhelmingly, the answer is no.  The frequency of “regulations” impacting jobs is unchanged under the Obama administration when compared to the Bush administration.  The Wall Street Journal and the National Federation of Independent Business found the same thing.  Why are companies laying off workers?  Low demand.

Bruce Bartlett, former Reagan administration domestic advisor and George H.W. Bush Treasury official, correctly sums up the GOP position on government regulations thusly: 

“In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out. In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment.”

Isn’t one of the reasons we’re in this mess a lack of regulation within the financial services industry?

Fix #3:  If only we could drill more oil domestically, we could create more jobs.  
That’s a solid 20th century answer to a 21st century problem.  By the way, the Gulf region is back up to pre-Deep Water Horizon disaster levels of drilling and production.

The GOP has devolved into a party with knee jerk answers to complex questions:

Economic downturn?  Easy!  Cut taxes.  We’re holding back job creators.  Cut regulations and oversight.  It is holding back job creators.  Drill for more oil.  It will create jobs.

Economic boom?  Easy!  Cut taxes.  Job creators don’t need to pay any more.  Cut regulations.  The market is doing its job.  Drill for more oil.  We need the energy to continue the expansion.

I think we should be suspicious when the answers are always the same, regardless of the questions.

Disperse the protesters, or let their energy fade away.  The problem of income inequity will still be with us, and not because some work hard and some are lazy.  It is because the system is rigged.  The only thing that is “fixed” right now is the system, and the Occupy Wall Street crowd and their sympathizers are done placing bets when the house always wins.

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