The other night on Marketplace on NPR they had a report about how this economic downturn affects more than the elites. They then went on to interview a number of small businessmen who expect to lose business because they mostly peddle luxury goods that are sold to the very, very wealthy.
Yeah, I laughed until I cried.
I’m reading Paul Robeson, Jr.’s book and he says that it takes $75,000 a year to live what used to be considered a middle class lifestyle. 18% of us are middle class. 2% of us are wealthy. 62% of us are working class. 18% of us are poor. When I went to college, my parents were trying to get me a middle class lifestyle that is, for all intents and purposes, out of reach.
I hear that our economy is on a downturn and the government is going to give us money to make it right. What I say is that the economy has been on a downturn, and it wasn’t until the very wealthy saw their extreme wealth threatened that we saw any action on it.
The irony is this: The fix for our problems is actually pretty simple. Capitalism per se is not the problem. In its place, it’s a good thing. But we need the basics to be made into public property—access to nutritious food, housing, health care, day care—and we need to get our capitalist system out of short-term thinking. We need to make it unreasonable and unprofitable to gamble on third world debt and the way it can be used to manipulate foreign currency. We need to make capitalism capitalistic again, i.e. return the risk to it, instead of offering huge government bailouts to save its failures. And we need high marginal tax rates to encourage capitalists to make long term investments instead of the short term investments that rule our culture.
My good Republican small government mother went, for a time, out of the field of entrepreneurship during the transition from the Clinton neoliberal years to Bushco’s governance, but the one thing that carried between the two was Greenspan’s willingness to manipulate the real estate market to keep the economy and his reputation afloat. My mother was, during those years, a lender in speculative real estate. And all that time, what she told me and tells me to this day is that people overstretched. She’s out of it and a good partisan now, so she won’t say the markets are about to crash, but when her livelihood depended on it, she said—daily—that the ongoing investment in real estate aimed at high end and short term markets was bound to fail. And we’re now waiting to see the bottom in that. (Buy in New Orleans, folks! They need you and real estate is dirt cheap. Good homes.)
I have a professional livelihood, but I’m solidly working class. I almost welcome the crash—and so should you, since crashes often signal a willingness of the upper class to admit the working class into the middle class. You will get your checks soon. Don’t feel guilty if you intend to do what I do, which is spend it on products made out of country and/or save it.
68 Responses to “Pardon me if I can’t panic”
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And then pixies will dance around us feeding us grapes!
Sorry for the snark there Amanda, but that’s a wildly optimistic scenario. Everything I’ve seen or read indicates that a crash is when the wealthy tend to further entrench themselves and squeeze the middle class even harder, using the economic downturn as an excuse.
It seems first and foremost to me that America needs national health care. With national health care the large companies can start paying competitive wages again, labour flexibility can increase, people staying on minimum wage or welfare to avoid losing medical insurance can get jobs again, the cost of your medical care will drop (freeing up disposable income) and improvements in lifestyle management will reduce the future cost of health care.
It’s a win-win, even the big manufacturers are starting to want it, but your political class refuses to consider legislating a basic, fundamental condition of every other advanced economy. Either your political class is extremely stupid or extremely uncaring or both.
And I don’t think that a recession is going to encourage them to make this necessary change, because in recessions the workers always have to tighten their belts…
I both welcome and don’t welcome a recession.
I welcome one largely because of environmental and resource issues. The last 15 years have been extraordinarily destructive and wasteful, especially in areas of the developing world. Also, we need to put off the Peak Resource crisis (energy, water) a bit, and best way to do that is cuts in absolute demand generated by no hay dinero.
I don’t welcome a recession because we should have had a nice, big, consumer-led recession in the late eighties and early nineties. We’ve only had a couple of small recession despite a few geopolitical crisises. The consequence of that is, um, well…this recession, or if Stirling Newberry is correct, the double dip recession that happens after this one is going to be very, very, bad. Mass hunger bad.
It’s just called facing the music, or giving the devil his due.
Capitalism per se is not the problem. In its place, it’s a good thing. But we need the basics to be made into public property—access to nutritious food, housing, health care, day care
You are, I assume, aware that market dependence for subsistence of the vast majority is one of capitalism’s defining features?
Praxis,
That was one of capitalism’s defining features in Marx’s day, sure, and it’s clear that the american upper class wants a return to those days. However, you could run a perfectly good capitalist economy where food, housing, health care, and day care are largely provided by social welfare programs. There would still be money in production of food, housing, health care, and day care, but the government would be paying for (at least some) of it. It would change the nature of the market a bit (if government subsidies provided enough for reasonable apartment housing, the bottom would drop right out of the slum market, and if government food allowances couldn’t be used toward commercially-prepared food or junk food, demand for those would decrease), but the suppliers would adjust. The market for consumer electronics, books, etc would probably not change at all.
What makes you think that high marginal tax rates would lead to a preference for long-term over short-term investments? High tax rates discourage investment, period, they don’t shift it to longer timeframes. (”Wow, I’m going to get less return than I anticipated. I know, I’ll compensate by deferring the return further into the future!”)
Crashes don’t encourage the wealthy to do anything other than hold onto their capital and refrain from exposing it to risk. They certainly don’t help the working classes, none of whom have the option of sitting tight and living off bank interest until things turn around. Working people have to work. Your position seems more inspired by nihilism (”bring it all down!”) than by concern for the poor.
“Should”? In what sense? That it was “the right thing to do”?
Eric…
Alan Greenspan is a key figure here, in the sense that the Fed had become considerably more aggressive in trying to prevent recessions, especially around election periods. He did it by encouraging fairly large bubbles, in coordination with Reaganites. The large oil bubble had burst with the opening of the North Sea and Prudhoe Bay oil fields, and it was replaced by a huge business real estate bubble that was supported by tax loopholes. The eventual S&L cleanup was massive, more massive than people really understand. Massive enough that HW Bush had to renege on tax cuts, and institute tax increases, which was then followed by Clinton’s tax increases.
All that debt was papered over without a real recession by increasing the regressiveness of the tax code (beginning with the “fix” for the first social security “crisis” in the early eighties). Where a real recession would have shaken out perpetual losers like Donald Trump, and put much more of the US’s physical and intellectual capital in the hands of innovators earlier on. We could have had the telecom and biotech revolution earlier, for example. We probably would have also had much more fear driving health care security in 1993 than we did, and a workable universal coverage system might have started then…So forth
What makes you think that high marginal tax rates would lead to a preference for long-term over short-term investments?
I think the point works best if we consider the behavior of the executives who run the businesses rather than ordinary investors.
From 1951 until 1963, the top marginal tax rate was above 90%. So if you were a CEO trying to accumulate wealth in the 1950s, it would’ve been sensible to look after the long-term health of your business and rely on a steady income, year after year, in the lower brackets. Short-term hysteria pushing your stock price to unsustainable heights wasn’t that helpful, because you couldn’t cash in big-time without the government taking most of your money.
Nowadays, you don’t have to do that. You just have to juke up the stock price without tending to the fundamental health of the corporation you’re running, earn an insane paycheck for a short period of time, and the low marginal tax rates will allow you to keep two thirds of the money you make. So CEO pay runs to 800+ times the minimum wage rather than the mere 50 multiple that prevailed in 1965, and the people at the top are ready to do ridiculous things to inflate the stock price, take the money, and run.
Neil, thank you for that thoughtful and on-target response. I see your point.
1. Micromanaging the Venezuelan food supply is not working out so well for Chavez, nor did it work well for the Soviets.
2. What is the name of the person who gets to decide what constitutes “nutritious food?” The “public school diet” proposal (from a few months back) banned diet coke in favor of Red Bull, which is exactly backwards.
3. If all homes were to be made public access, then capitalism has not only been abolished, but so have the twin concepts of liberty and privacy.
I do agree that businesses who target the wealthy bother me. Heck, one reason my husband went into the specialty he did (manufactured homes), was while it pays less that selling half-million dollar homes, knowing working class people can get into ownership FEELS right. Likewise, on my handicrafts, I *could* do like other artists and crafters and create things meant for people who have plenty of disposable income; businesswise, it’s not a bad move, because although the market is smaller, they spend more cash and more often. But I want for teachers to have original art on their walls and office workers to have a one of a kind bracelet.
I don’t really cry for the people who chose to be parasites on the rich. They made their choice and I took a road I consider much harder… but much cleaner.
I’m afraid people don’t grasp how bad a recession –or a depression which I, in my cheery way am anticipating–can be. Its not just that those rich bastards won’t be able to afford yachts. Its that those rich bastards will stop eating out, and stop paying the wages of high end shops and restaurants. Those people get laid off and then *they* can’t afford to buy clothes, food, and entertainment at the low end places. Its quite possible for there to be not enough money or security in an economy for low income people to earn even the low incomes they were earning before. I’m not saying this out of misplaced pity for wealthy people–I’m just pointing out that a huge swathe of the economy–in fact most of it–depends on lots of people having jobs in order to have spending money. And those jobs often, in this post manufacturing society, depend on *other* people ahving money to spend.
aimai
The Bushes, the Fords, the Scaifes - the Depression really woke them (and the rest of the wealthy) up to the needs of the many, really hit them hard, didn’t it?
Oh no, it didn’t. They’ve spent the last 3/4 of a century trying to roll back FDR’s (minimal) socioeconomic reforms and demonize him and them, after the Wall Street coup attempt of the 30s failed.
And the middle class bought right into it, with all the rise of the right in the 50s/60s/70s/80s/90s/aughts, the sweeping bipartisan reelection of Nixon to the sweeping bipartisan election/reelection of Reagan (”greed is good”) to the welfare “reform” of the not-so-liberal Clintons, culminating in the reelection of Bushco and the current Republican campaigns blaming it all on foreigners just as ever in the Gilded Age.
Why is this time going to be any different?
Neil, according to a Marketplace report last year, Wall Street actually hates and penalizes CEOs who try to grow their businesses long-term and forgo short-term profits in order to do so, any more. The head of Costco was ranting about it, how they accuse him of being a “humanitarian” because he tries to retain trained workers and keep customers happy, and he was vigorously denying any speck of altruism, just pointing out that this was the way he kept customers coming back and expenses down…
spend it on products made out of country
I had an argument once with our resident department redstater, and he didn’t understand why buying goods that were made-in-America-but-not-really (i.e., products made in territories that allow for the made in america label but are exempt from our labor laws) isn’t really much better than buying something made in China. As far as he’s concerned, as long as the money stays in America’s borders, it’s all right. Just getting some people to take the log out of their eye and see the problem with insane wealth disparity is going to be a problem, much less convincing them that this free money from the government should be making them a little queasy.
I know that feeling, Samantha- wanting to keep yourself “clean” in an industry not known for it. My husband is an insurance agent and deliberately limits his available products to a company that is ethical and quick with claims. He will not sell a policy of any type to someone unless there is a true need for it and they can afford it- he will not “take off of someone else’s dinner table to put food on ours”.
Damned rare in the industry and goes opposite of the goals of upper management types who just want sales by any means whatsoever.
The downturn is definite in impacting the working class in residential construction. Home sales dropped 12.7% in 2007, and we’re seeing the impact in significantly reduced new home construction.
Most of the new homes weren’t for the very wealthy (though far too many people bought bigger than they could really afford), but the people who are feeling the pinch are carpenters, concrete finishers, landscapers, roofers, drywall hangers, painters, plumbers, electricians and HVAC people.
Wall Street has their head so far up their ass that they can’t recognize common sense.
If I were in charge, one of the first things I would do would be to reduce the quarterly SEC filings to annually. The quarterly filings create an obsession with short term thinking that leads to companies doing extremely stupid things to keep Wall Street happy. (Circuit City firing all its most experienced sales staff comes to mind.)
I’ve already decided what I’ll do with whatever check I get.
Not that I had much choice.
Only 18% of us are middle class? By definition, the “middle” class is the class that contains middle-income earners.
Amanda’s point is a reverse Lake Wobegon: All of us are a little bit below average.
I couldn’t agree more, especially with your last paragraph. My husband and I have already decided that we are going to spend our money in Europe this summer…
“Capitalism per se is not the problem. In its place, it’s a good thing. But we need the basics to be made into public property—access to nutritious food, housing, health care, day care—and we need to get our capitalist system out of short-term thinking.”
As someone who spent the 1990s in Russia, watching as the society crawled out from underneath the rubble of a system that did exactly that, made such basics public property, I really really do hope that you don’t get what you wish for here.
One could conceivably argue that “middle class” is a subset of all middle-income earners. However, I don’t know how Robeson is differentiating the middle class from the working class, here.
However, seroj, YOU are using a self-referential definition of “middle class” to be “everyone in the middle-income band.” “Middle class” is clearly being used in order to define a specific lifestyle.
“if government subsidies provided enough for reasonable apartment housing, the bottom would drop right out of the slum market,”
That would be amusing if it weren’t so tragically wrong headed. Thew worst slums in America are precisely those that were actually built by HUD: that is, the public housing.
The same is true all over Europe, from the Kruschev era apartment blocks in the East, to the places outside French cities to the council estates of the UK.
There is the domino effect, too. If I stop eating out 3-4 times a week and stop buying a $3.50/day latte from the independent coffee house around the corner (and there are legions like me), there’s an impact on folks who are already having a difficult time of it.
I think you’ve discovered the problem, too. The middle class lifestyle in the lifestyle lived by middle income earners. If Paul Roberson, Jr., wants to define middle class as the top 20 percent of earners, then fine. But it would be more honest just to call them the rich or upper class. By defining everyone except the top 20 percent just shows that he is playing with definitions rather than making a substantive point. You might say, for example, that he is attempting to frame the debate — but in a very dishonest and transparent way.
The middle class lifestyle is the lifestyle lived by middle income earners
Class and income are two different things, and “middle class” has come to reflect a few defining, non-circular, characetristics.
It is certainly possible that a large group of people in the “middle income band” can cease to be able to life a “class lifestyle” that was accessible to those in that same income band a few decades ago. There’s no reason to start using circular reasoning to deny that reality.
I agree and disagree, Amanda.
What we have is runaway capitalism that created a ‘profit for profit’s sake’ atmosphere that has led to corporations cooking their books, sending manufacturing jobs out of country and importing literally *anything* that they can as cheaply as they can.
Corporations used to take a hit when they axed thousands of jobs. It meant that there was something wrong. Hell, now it likely means a stock price jump because significant ‘outsourcing’ is happening.
Banks and investment houses used to be separate and didn’t mix much and now they are the same entity and all kinds of shady deals happen.
Accountants used to work for the good of the shareholders by reigning in illegal and unethical behaviours and now they spend the majority of their time seemingly to find new dodges and creative ways to cook and pump and fluff financial data.
Corporations used to value employees and their knowledge and now look at employees as living and breathing liabilities who are a drain, a necessary evil as it were, and to be bought and sold at the lowest prices available. Disposability is the key. Like toilet paper, why pay more than you have to.
Unions brought many people out of economic slavery and probably helped more than other things to create and support the ‘middle class’ for members and non-members alike. Now the largest employer in this country openly flaunts their dislike of labor laws and is probably the largest if not one of the largest corporate ‘welfare queens’ in existence.
Accountability was something that people feared because there were real consequences for their illegal and immoral actions. Now politicians and corporate poobahs openly scoff at being held accountable. It’s ‘catch me if you can’ and then the ‘where’s Waldo’ in the search for the hidden cash.
The Federal Reserve favors Wall Street which has become not a measure of the strength of the economy but of the depths that those that ride the foam will go to keep their piece of the pie.
Rate cuts help the rich and hurt the poor. People with savings take a hit with every cut. The tax structure cuts the poor and middle classes to the bone and yet support and encourage the reckless practices of the ‘Loyal Bushie Super Rich Base’.
Nothing short of a 1,000 point drop in the Dow will help this economy. That and a leader that understands that the ‘Wall Street’ sect of America has no contact of empathy for the rest of the country.
The ‘We the People’ of the premier document of the founding of this nation have been dealt out of the game and must watch it from the floor under the table and scramble and fight for what crumbs fall to the floor.
That is how I see this country. Admittedly it’s a little Nihilistic…
Oh, and in this day of increased secrecy, watch for that ‘bus sized’ satellite falling from the sky. Wouldn’t it be fitting if it fell on Wall Street?
Not necessarily. A historian of the middle ages in Western Europe would probably identify the “middle class” of that time and place as merchants and skilled craftsmen, and maybe small landowners and local clergy. That would be a totally honest characterization, even though not only were none of them were anywhere near the middle of the local economic distribution, they made up much less than even the 20 percent of the population that Robeson places in America’s middle and upper classes.
I’m going to use our money to pay off some debt. My wife and I don’t own a house and have managed to just finish paying off the last of our credit cards. Our new car, which we have a five year loan on, will be half payed off (in only a year and a half) once I send that 600 bucks in.
We’ll still have student loans but those are never going away and frankly, will never be paid in full. And I don’t really care, either. We’ll make token payments on it eventually but as far as I’m concerned, getting educated so we could live a middle class lifestyle mostly debt free is a better benefit to society.
So what I’m saying is, if President Obama were to forgive Student loan debt and just call it even, I’d be OK with that.
You just have to juke up the stock price without tending to the fundamental health of the corporation you’re running, earn an insane paycheck for a short period of time, and the low marginal tax rates will allow you to keep two thirds of the money you make.
Not only that, but CEOs know that if they fuck things up and get fired, they’ll walk away with, say, $115 million for the privilege of running their company into the ground.
And they have the balls to tell us, the workers, that they have to lay people off because the company is going broke and isn’t making enough money. Here’s an idea — maybe if the CEOs and other executives weren’t skimming so much off the top, there would be some money left over for the company to invest long-term and, you know, survive beyond one set of executives.
Amanda, your prescriptions are fine so far as they go — old-fashioned liberalism at its most pragmatic — but you’ve got it wrong about the very wealthy. They stand to get even wealthier. Luxury consumer goods are supported largely by the upper-middle-class, who are tightening their pursestrings as the stability of various markets begins to look precarious. Very wealthy people the world over are raking it in.
We haven’t been in a recession a long time, we’ve just been living on borrowed time and we’re just now getting the bill. Unregulated, orgiastic, predatory lending practices — blame conservative policy for this, but no need to go too far with it; there’s blame to go ’round to consumers, as well — are having a ripple effect throughout the world economy.
The causes of the looming recession — the “subprime mess,” as it seems to be officially called, serious instability in the bond market, a teetering Wall Street, gross inflation of basic commodities driven largely by demand from China and India, oil prices that aren’t going down anytime soon, inflation driven by all of these factors, and the very real possibilty of U.S. currency dropping sharply against the Euro or other foreign currencies — are too much a a perfect storm, and too global, to be addressed funadamentally by either classic liberal or classic conservative measures.
In short, we’re fucked. I hope someone real smart fixes it. Ain’t holding my breath.
seroj, who’s middle class and who’s working class: the bus driver who earns $50,000 a year or the college professor who earns $35,000 a year?
I assume you are making a white collar/blue collar distinction. It’s absolutely true that many, many blue collar workers outearn their white collar counterparts. Think of a English major working a clerical job versus a plumber or electrician. Parents should probably warn their kids about this before they take out $50k in student loans.
I also think it matters an enormous amount where in the country you live. Big cities are very hard places to live, even if you are uppper middle class. Medium or small cities, by contrast, have an excellent standard of living.
Regarding indicators in the retail market as economic predictors, Atrios once opined that the performance of stocks of restaurants like Red Lobster and mid-range steakhouses were good leading-indicators of the economy and condition of the middle class. These were the places that people who didn’t eat out at nice restaurants would go, but people who didn’t typically eat out would go to if they felt like celebrating and felt like they were comfortable economically. It strikes me that “middlebrow” luxury retailers (precisely the sort that we “common people” have heard of and the sort that a radio station would be able to find a local who owned such a business) would be precisely the first kind of retailers to get hurt first and the worst in an economic downtown.
Hmm, what is middle-class. Let’s look at two examples with 1000 people:
a) one person makes $1,000,000 and the others all make $1. The average is $1,000.1 and I would argue that there is no one in the middle-class, there is one rich and the others are all poor.
b) all 1000 make $1000.1 and I would say they are all middle-class (although this depends on the country–they could all be poor or all rich).
In terms of a recession, I agree with Grimgrim: a recession migh hurt the rich, but recessions almost always hurt the poor and middle-class more than the rich.
I think Amanda was going for the Social Democrat model in terms of capitalism–a strong safety net with universal healthcare, universal housing, universal food, universal day care, …–in the sense, that if you are poor these things will be subsidized by the state (which could mean they subsidize the rent, not own the building, …).
“The tax structure cuts the poor and middle classes to the bone and yet support and encourage the reckless practices of the ‘Loyal Bushie Super Rich Base’.”
…which will become the ‘Loyal Clinton Super Rich Base’, or the ‘Loyal Obama Super Rich Base’, or, god forbid, the ‘Loyal McCainiac Super Rich Base’.
Their interests are always the same, and the government is setup largely for their benefit. Their money gives them power and influence much larger than their numbers would indicate. They will fight tooth and nail to keep their advantages (and expand them), and if that results in the destruction of America? - oh well, they’ll just hop over to some other nation and do it all over again.
The rich in American only have loyalty to America to the extent that it gives them what they want. They largely live one financial quarter at a time. Their only long term plan is to accumulate more, and get taxed less.
Other people are merely a means to an end, and a person’s humanity correlates exactly with the amount of money they have. The rest of are just bit-players in their life drama.
An FDR - who is willing and able to vigorously work against the interests of his own class in helping the lower class and middle class - is a rare creature. But that’s exactly what we need. Where we will find that person is an open question.
Is there anyone left in this republic who is strong enough and yet compassionate enough to turn things around? Or are we doomed to sink down into becoming another version of Indonesia, the Philippines, of some corrupt African “democracy”?…
I’m all for FDR-like implementations, but the scope of the coming recession goes far beyond American shores. We simply have no control over most of the contributing factors. A safety net for our poor is fine, but it will do little to alleviate the underlying economic woes. This, my friends, is “globalism,” and make no mistake, it benefits the very rich — very much. (BTW, no thanks goes to B Clinton, who cheerfully passed NAFTA.) The way it’s set up is completely dependent on Americans spending money. That’s the only part of our economy that’s not smoke and mirrors, or else outsourced. High inflation or high unemployment — God forbid both — will be disastrous. Obviously, the profligate GWB is hoping an infiusion of spending cash will temporarily shore up the economy until it gets back rolling of its own momentum. Gotta hand it to GWB — he’s always willing to hope against hope.
The notion that this is a rich man’s panic is wrong. The whole freaking house of cards is starting to wobble. Yes, alarmingly.
Amanda, your analysis was very good for the most part, but I think you’ve missed something with your remarks about Greenspan. He wasn’t a genius or savior, but he wasn’t responsible for the current mess and I don’t know that singling him out served any purpose in your otherwise reasonably reasoned post.
The way I see it, the real estate market is one of the few things we can count on to hold up the economy. Having lost our manufacturing base, and with the balance of trade so out of whack for the US, one of the few industries that will always remain here and be a source of monetary movement (as opposed to bringing in money from overseas) is the housing market. You can’t have someone in Asia build your home in Little Rock and you won’t see that many people leaving a less expensive country, legally at least, in order to buy a home in Austin. At least not in comparison to US citizens. Housing held up the economy because housing is one of the few things that stays here. When the diversity of your economy shrinks, you have to lean on the few industries you have left or expand your economy.
Mind you, the best option, the thing that could have saved the US economy as well as the environment and US influence worldwide, would have been a president who challenged us to an Energy Race the way Kennedy challenged the country to a Space Race. That ship has, I fear, sailed. It is still possible to do it and there is time, but I don’t see either Clinton, Obama, or Edwards having the courage and vision to do it. I’ve pushed various politicians on this for several years and none of them have what it takes to be that brave and sensible. There was no way that any of the last three Republicans, not a one of them having any interest in governing for the greater good, could have done it. The last Democrat in the White House never had the political capital to get the support it would have taken through Congress.
Darden Restaurants, which owns the Red Lobster and Olive Garden chains, reported a 30 percent drop in profits last quarter and cut their earnings forecast for 2008.
Not to mention that we just had the biggest 12-month price drop in new home prices in 37 years.
Buckle down — it’s gonna be an ugly ride.
shah8, thanks for the explanation. However, I feel it is misleading to characterize such an action as “consumer-led”. “Functionary-led” would be more accurate.
“Obviously, the profligate GWB is hoping an infiusion of spending cash will temporarily shore up the economy until it gets back rolling of its own momentum.”
I’m not sure that even GWB is stupid enough to believe the economy will get fixed by a (very small) infusion of cash. I think he’s just trying to get out before the shit REALLY hits the fan.
Then the Rethugs can blame the Democrats for the shitty economy over the next 4-years and set the stage for Bush 3, The Jebster to come riding in on a white horse to save America…
Yeah, point taken — put a Band-Aid on it that’ll (maybe) last until he can bail.
Great criminy, I would like to think that even your average Republican can see how disatrous this admin has been for our economy. I’m an economic moderate — any pragmatic soul is — and let me tell you, GWB has been the worst of both worlds. He’s a betrayal of the the sounder economic principals of classic conservatism, with only the “robber baron” mentality preserved; meanwhile, he spends money like a drunk sailor and writes checks he’ll never be able to cash. He should be regarded as a nightmare by left and right alike, and I suspect that he is — but Repubs will have a short memory once they have to be subjected to a “librul” for a few years and the bile commences to burnin’ in their throats. Dear jesus, please just don’t let it be Jeb.
Well. Strap in indeed.
Mind you, the best option, the thing that could have saved the US economy as well as the environment and US influence worldwide, would have been a president who challenged us to an Energy Race the way Kennedy challenged the country to a Space Race.
Um, so, just like the “Space Race,” taxpayers could have spent billions on a foolish vanity project that lined the pockets of a few favored industries while producing nothing of any actual value?
Sounds about right.
Actually, no. Real estate is crazy expensive in New Orleans now. And in capitalism, higher cost due to scarcity, regardless of basic human need, is a feature, not a bug.
As someone who spent the 1990s in Russia, watching as the society crawled out from underneath the rubble of a system that did exactly that, made such basics public property, I really really do hope that you don’t get what you wish for here.
Right, Tim. There’s either Soviet-style communism or laissez-faire capitalism, with no shades of gray in-between. Well, at least if you’re a Libertoonian, with your highly abstracted concepts of reality and “freedom.”
Um, so, just like the “Space Race,” taxpayers could have spent billions on a foolish vanity project that lined the pockets of a few favored industries while producing nothing of any actual value?
The Space Race was not a “foolish vanity project.” It expanded human knowledge, particularly the scientific kind, greatly, and contributed to later technological breakthroughs. And if we trash this planet, it may help many of us escape to another one. Sneer all you like about how this sounds like “science fiction,” but much of what exists in today’s world would have sounded like science fiction 50 years ago, too.
Um, so, just like the “Space Race,” taxpayers could have spent billions on a foolish vanity project that lined the pockets of a few favored industries while producing nothing of any actual value?
I’m pretty fond of Velcro.
That’s true. However…
In socialism, shortages (not scarcity) due to price controls, regardless of basic human need, is a feature, not a bug.
***
The examples of this are legion, from rent controls in NYC to near empty food markets in the good old Soviet Union.
Mr Ess wrote:
I gotta admit: I like it!
Dana, the Koolaid may taste great now, but it’ll kill you in the end. And unfortunately, you’ll take the rest of us with you…
“But we need the basics to be made into public property—access to nutritious food, housing, health care, day care—and we need to get our capitalist system out of short-term thinking.”
What exactly are you proposing to create “public property?” How does a “capitalist system” think? Did the system’s thought cause mortgage defaults?
“…crashes often signal a willingness of the upper class to admit the working class into the middle class. ”
Does this mean “chrashes” are caused somehow by the “upper class”? How exactly does that happen? I can’t even think of a question about the “admit the working class” statement, what in the world?
Did all the wealthy hedge fund managers who are getting killed by the MBS liquidity crisis, did they somehow stage this for nefarious class purposes?
Look, the current recession stems from troubles in the MBS (mortgage-backed securities) market, which was created by some Salomon Smith Barney (and other) bond traders in the 1980s when banks were not lending because of the S&L crisis. The market proved to be an efficient way for lenders to finance loans. The market grew, bond investors made money, but it also served to reduce mortgage rates, making loans cheaper for consumers, rich and poor.
The success of MBS led to an explosion in a variety of fixed income sectors. Lenders, investors and others made lots of money until they pushed the envelope too far. The problem was created by the acts of tens of thousands of people in a plethora of sectors for whole different reasons.
Whether you like him or not (and I don’t) Alan Greenspan doesn’t have the power to do much to the economy.
Given the complexity of the global financial markets, the problems grew. For example, the price of commercial MBS has plummeted to record lows in sympathy with residential MBS, even though defaults in the commercial sector are at historical lows.
Oh, and “Marketplace” is not the place for any true analysis. I was interviewed for a report on Marketplace last year (and they used a quote of mine), but it was painful because the reporter had no understanding of the topic. The report was sort of right generally but completely wrong in every particular. They got my name right, so I can’t complain.
I’m pretty fond of Velcro.
That’s nice for you. But given that Velcro was invented and patented by a Swiss guy years before manned space flight, I fail to see how its a justification for the Space Race.
I wish I could be so optimistic. I’ll be graduating with a master’s degree in a year and half in an industry where the job prospects aren’t all the great to begin with. I’m not too excited about the prospect of looking for a job in the middle of a recession.
That said,
“I hear that our economy is on a downturn and the government is going to give us money to make it right. What I say is that the economy has been on a downturn, and it wasn’t until the very wealthy saw their extreme wealth threatened that we saw any action on it.”
is right on.
However, you could run a perfectly good capitalist economy where food, housing, health care, and day care are largely provided by social welfare programs.
No.
Amanda’s comment was about *access* to the basics. *Provision* is another matter. Wherever possible the market system should be encouraged - it has considerable advantages over planned economics in responding to information signals, and it also fosters real freedom. If a grocer doesn’t like you, you go elsewhere; if the government doesn’t liek you, and it acts as the grocer, you’re stuffed.
Socialism may be superior to the market in limited spheres based on the weaknesses involved in the market model. To look at your issues above:
- Food: many suppliers, many consumers, relatively free information. Supply via the market, with regulation for safety purposes.
- Housing: many suppliers, many consumers, relatively free information. Supply via teh market, with regulation for safety purposes.
- Health care: many suppliers, many consumers, distorted and competing incentives, information problems. I’d go for a combination of public and private provision.
- Day care: possibly a limited number of suppliers, many consumers, possible information problems. I’d plump for market provision with heavy regulation, possibly supplemented by public schemes run at the urban level.
Where Amanda’s comments are wrong, IMHO, is focusing on marginal tax rates as a means of preventing short-term thinking. Short term thinking is fostered by an overwhelming concern for share prices in a volatile market - executives HAVE to concentrate on keeping the prices up in the short term. If the prices drop for a quarter, they get replaced by those who will keep them up instead.
The incentives offered by the way the share markets work these days for public companies work against longer term thinking.
Blujersey,
Exactly. While you clearly know the subject better than I do, I would also chime in that the entities which ensure bond ratings are in danger of going belly-up, which would mean that municipalities and the like will have a hard time issuing debt for capital projects.
Sounds dry when you say it, but it’s horrible when you think about it. In the U.S., or at least in reasonably affluent areas thereof (i.e., not Arkansas or West Virginia), we take bond proposals for big-ticket capital programs totally for granted.
It may not be rich people’s fault exactly, but sure enough they’ll be the ones who suffer the least from this whole fiasco. What else is new, I guess.
Did the system’s thought cause mortgage defaults?
The system’s “thought” caused the speculative market in both housing and mortgages that sent prices higher and higher and made punitive mortgages more profitable than traditional ones, giving mortgage brokers a financial incentive to push those even to people who could have gotten traditional mortgages.
Basically, it’s yet another demonstration that laissez-faire capitalism without consumer protections is bad for everyone, including the finance people who think they can game the system indefinitely.
I thought this was an interesting article in Slate: “Crashing the Subprime Party: How the feds stopped the states from averting the lending mess”.
That’s nice for you. But given that Velcro was invented and patented by a Swiss guy years before manned space flight, I fail to see how its a justification for the Space Race.
Velcro was popularized by the space program. The fax machine was invented in 1964 but wasn’t in wide use for another 20 years.
How about smoke detectors? But, hey, all they’ve done is save mere human lives, so there’s no reason to give the space program credit for such silly things.
I love the space program and the space race but have a hard time standing behind the space shuttle as anything more than an onsite service department for real science programs that need some TLC and lens polishing.
The ISS (International Sucking Sensation) has been largely a huge drain on already cut to the bone true science projects. The thought that they (the brain dead loyal Bushies) actually want to abandon the Voyager program now is ridiculous and junk the Hubble space telescope? Damn, that space telescope has done more real science than the floating Holiday Inn has!
But, hey. Let’s put men on Mars. Let’s have a Hilton Hotel on the Moon. Let’s smoke money like we’re smoking crack back in the Texas Air National Guard.
There is a satellite that is in a clean room back in Florida that the ‘Loyal Bushies’ won’t allow to be launched! Oh, but they’ll launch Japanese adventure golfers in a heart beat.
I vote that Bush be put on Mars. Tomorrow! And send Darth Cheney and Alberto! Gonzales and Ashcroft and the whole list of sycophants up there too.
But seriously folks, the Arecibo installation in Puerto Rico is about to be abandoned and Bush wants to send that money to Iraq/n.
True (usable) science has taken a hit, almost like in the dark ages.
Quiet Truths: When you take the affect of the marginal rates on wage income, and compare them to the rates on capital gains, you also get (uner a higher marginal rate system) an incentive to invest in things which have a deferred payout.
When stocks cost 30 percent, but higher paychecks were taxed at 90 percent, then investing in companies; and so improving the overall economy, becomes a bigger incentive.
seroj, middle class has traditionally been defined as being between upper and lower classes. This is not measured by income, but by lifestyle, attitudes, occupation, respect, source of income…
Historically, there have been time when there wasn’t a middle class, though there was a mean and median of yearly income.
Tim, so you do not have the impression from current events in Russian, that people would accept authoritarian rule, as long as basic needs are met, to the mafia capitalism of the 1990s where everyone grabs what they can afford the thugs to defend?
On government-build slums and ghettos: No matter who builds those things, if you force people with no work, no hope and no stake in society together in some place half an hour or more from anything interesting, you can bet dollars to sand that shit will happen, the question is when.
OTOH, if there are tax advantages in making one luxury condomium out of four affordable flats, slums will happen, again, no matter who builds them.
PiaToR, Where Amanda’s comments are wrong, IMHO, is focusing on marginal tax rates as a means of preventing short-term thinking. Short term thinking is fostered by an overwhelming concern for share prices in a volatile market - executives HAVE to concentrate on keeping the prices up in the short term. If the prices drop for a quarter, they get replaced by those who will keep them up instead.
But behind that fixation on share prices is the possibility to Get Rich Quick. If a high marginal tax rate makes “1 million now” less profitable than “100K a year for 10 years”, “now” loses importance versus “years”, and so does the share price “now” versus the share price over the next years.
Amanda, like many of the posters I’m far less optimistic about the effects of a recession than you are. While it may be hard-earned Schadenfreude to see the folks who were gaming the system whine over their downwards-pointing trend lines, most of the rich can weather depressions without having to sell one of their yachts, while the middle class becomes poor and/or desperate, and the poor become starving.
Looking at the 20th century, severe recessions seem to have a tendency to bring up politicians with excessive energy and big ideas. And few of those are FDRs. It’s demagogues who thrive on catastophes.
But behind that fixation on share prices is the possibility to Get Rich Quick. If a high marginal tax rate makes “1 million now” less profitable than “100K a year for 10 years”, “now” loses importance versus “years”, and so does the share price “now” versus the share price over the next years.
Not quite. The profit motive for shareholders comes from increases to the share price rather than the long term sustainable dividends of the company. The share prices MUST go up each quarter - or the shares will get dumped and the money flow into something that does.
Acquisitions and downsizing thus become “logical” as a means of increasing expectations and thus market-prices - *regardless* of their effect on the longer term prospects of teh underlying corporate economic activity.
PiaToR: But consider that with a 90% marginal rate, you could cash in only a small part (small to a filthy rich person, that is) for close-to-full price, and many only for 10% of their nominal value. Unless you’re happy with 10%, you’d have to space out selling, too. And wouldn’t it be nice if the company wasn’t bankrupt when you sell the last batch…
PiaToR: But consider that with a 90% marginal rate, you could cash in only a small part (small to a filthy rich person, that is) for close-to-full price, and many only for 10% of their nominal value.
i, We’re mainly talking institutional shareholders.
ii, The purpose is to generate capital gains by turning over shares rather than seeking dividends. The goal is not investment, but to generate the maximum amount of profit on a pool of capital by speculation in shares. Tax is a seperate matter.
Shares in which a rise in the market price is expected will be sought out, those which are steady will be avoided. CEOs, in order to generate rises in share prices, do not have an incentive to provide dividends but to give the market some reason to justify expectations of price increases - i.e. to do something visible rather than something useful.