Money changes everything

Kevin Drum tells some very serious people are becoming concerned about income inequality.

This argument follows a simple causal chain: unequal growth concentrates wealth in the hands of a tiny slice of consumers who can only spend so much money. In turn, the vast majority of earners are left with little extra cash for goods and services. Resulting weak demand undermines growth. Low growth makes everyone poorer than they otherwise might be, including those who own the means of production. Inequality produces other bad economic outcomes, too, such as the underutilization of the nation's human capital, inadequate public investment in both human and physical capital, and social ills that are costly to address, diverting away resources from investment.

Of course, us unserious hippies and some shrill professional pundits have been saying this for years but nobody listened to us. Nonetheless, good to see the VSPs finally acknowleging what has been painfully obvious (emphasis on the pain) to most of America for far too long. [graphic via Progress Illinois]

RIP: I remember the middle class

Once the people worked hard and prospered. Those days are gone. The middle class is disappearing like free snacks at happy hour now. So for your Sunday reading, a good review of how we got to our current dismal state of "everything is all fucked up and bullshit."

When I was growing up, it was assumed that America’s shared prosperity was the natural endpoint of our economy’s development, that capitalism had produced the workers paradise to which Communism unsuccessfully aspired. Now, with the perspective of 40 years, it’s obvious that the nonstop economic expansion that lasted from the end of World War II to the Arab oil embargo of 1973 was a historical fluke, made possible by the fact that the United States was the only country to emerge from that war with its industrial capacity intact. Unfortunately, the middle class – especially the blue-collar middle class – is also starting to look like a fluke, an interlude between Gilded Ages that more closely reflects the way most societies structure themselves economically. For the majority of human history – and in the majority of countries today – there have been only two classes: aristocracy and peasantry. It’s an order in which the many toil for subsistence wages to provide luxuries for the few. Twentieth century America temporarily escaped this stratification, but now, as statistics on economic inequality demonstrate, we’re slipping back in that direction. Between 1970 and today, the share of the nation’s income that went to the middle class – households earning two-thirds to double the national median – fell from 62 percent to 45 percent. Last year, the wealthiest 1 percent took in 19 percent of America’s income – their highest share since 1928. It’s as though the New Deal and the modern labor movement never happened. [...]

The United States will never again be as wealthy as it was in the 1950s and ’60s. Never again will 18-year-olds graduate directly from high school to jobs that pay well enough to buy a house and support a family. (Even the auto plants now demand a few years in junior college.) That was inevitable, due to the recovery of our World War II enemies, and automation that enables 5,000 workers to build the same number of cars that once required 25,000 hands. What was not inevitable was the federal government withdrawing its supervision of the economy at the precise moment Americans began to need it more than at any time since the Great Depression.

The lesson of the last 40 years is that we can’t depend on the free market to sustain a middle class. It’s not going to happen without government intervention. Even when American industry dominated the world, one reason workers prospered was that the economy operated on New Deal underpinnings, which included legal protections for labor unions, government regulation of industry and high marginal income tax rates.

Related: The Complete Guide To The GOP’s Three-Year Campaign To Shut Down The Government. Alternate title, "The GOP invents its own reality." If it was a work of fiction no publisher would publish it because the storyline is so absurd.

Poverty is not healthy for children and other living things

A new study shows poverty is bad for your brain:

The mental strain of living in poverty and thinking constantly about tight finances can drop a person’s IQ by as much as 13 percent, or about the equivalent of losing a night of sleep, according to a new study. It consumes so much mental energy that there is often little room to think about anything else, which leaves low-income people more susceptible to bad decisions.

Previous studies have shown it is also bad for your health and diminishes a child's chances to escape the cycle of poverty:

Poverty has other negative impacts. The chronic stress of growing up in poverty has been found to impair children’s brains, particularly in working memory. A study of veterans found that poverty is a bigger risk factor for mental illness than being exposed to warfare. The mental stress of being poor is also a major reason for why low-income people tend to have negative health outcomes like high blood pressure and cholesterol or elevated rates of obesity and diabetes.

Poverty takes its toll on health in a number of other critical ways: It prevents people from buying healthy food, makes people more likely to smoke, means they are more likely to live in areas with poor air quality, and can cause health problems that begin in the womb.

I've long been astounded that so many people believe living in poverty is a willing choice because, free government cheese. I can only believe these people have never been poor or spent any significant time among the poverty stricken. Poverty hurts. The poor have to work ten times harder just to accomplish the simplest tasks of daily life. Small wonder they seek to escape the pain and fear in short term pleasures when their future prospects are so harsh and uncertain.

RIch get richer, the poor get screwed

Another in long series of reminders that the wealth created by financial markets only raises the luxury yachts, leaving everyone else underwater in their wake.

The biggest gains in wealth are going to wealthy households that tend to save a big chunk of their incomes and spend a smaller proportion on basics such as food and clothing. "Those guys don't spend much," says economist Edward Wolff of New York University.

So Wolff looked at the net worth of the median U.S. household — those smack in the middle, where half of households earn more and half less. The median family's net worth is far more modest than the average: $61,000, Wolff estimates. That is $50,800, or 47 percent, short of where it was in 2007.

They make their wealth here, invest it overseas and hide it in offshore tax shelters. Their biggest investment is in buying politicians willing to enact their think tanks' policy prescriptions -- to only their own benefit. Meanwhile, hundreds of millions of Americans are coping with devalued homes, diminished wages and benefits in a limping labor market and rising costs of living and the wealth holders want them to sacrifice more.

We are truly ruled by evil people.

To have and to have-not

I'm late to this but let's never forget for whom the economic recovery tolls:

The U.S. economy has recovered for households with net worth of $500,000 or more, a new study shows. The recession continues for almost everyone else. Wealthy households boosted their net worth by 21.2 percent in the aftermath of the recession, according to the study released Tuesday by the Pew Research Center. The rest of America lost 4.9 percent of household wealth from 2009 to 2011.

Pew attributed the disparity to gains during that period in the stock and bond markets, benefiting affluent households, while the housing market's decline hit others harder. The report underscores the nation's growing income inequality, with the top 13 percent of households recovering their losses from the 18- month recession that ended in June 2009, and the rest of the country continuing to hemorrhage wealth.

Meanwhile our Congress, with astonishing haste, is addressing the very important problem of frequent flyers being forced to wait an extra hour or two in airport bars. I'm hearing they're ready to throw $357 million to the FAA to fix it. No questions asked. Too bad about you poor olds who won't get Meals on Wheels. Wheel your ownself over to the food bank and cook your own damn food. And so sorry hungry poor kids who need free food at school. There's no free rides. Maybe they'll let you six year olds sweep floors and clean bathrooms to earn a cafeteria ticket.

Look at all the hungry people

Wall St. Journal is concern trolling about the rise in use of the food assistance. Some well fed genius is appalled to learn the number of enrollees aren't falling along with the unemployment rate. Well you don't have to be a rocket scientist to figure it out. There's a simple answer:

There are record numbers of Americans on food stamps today because there are record numbers of Americans in poverty (records begin in 1959.)

As of 2011, there were 46.2 million men, women, and children living below the U.S. poverty line. There isn't much reason to believe that the last year of mediocre job growth has dented that number. And until it plunges, the food stamp rolls are going to stay full -- plain and simple.

The jobs being created are minimum wage positions that often only offer part time hours. Minimum wage in this state is $7.25 and most of the jobs in that range won't give any one person more than 24 hours of work in a week. The price of everything from food, to fuel, to clothing to shelter has risen far faster than wages, which we already know have been basically flat for over a decade. Every private food bank is seeing an astronomical rise in clients who were formerly secure in the middle class.

Furthermore the vast majority of the weath that's been created during this stubbornly slow recovery is being sucked up by the already wealthy 1% at the top. But sure, let's demonize the poors. You know, you give those people too many free ramen noodles and they'll never want get off the dole. Better we should let their kids starve than ask the wealthy to kick in a few more tax dollars to help them out. [graphic via Class Wars]

All they're asking for is a little respect

I've been saying for years, after the first million, it's not about money anymore; it's about power. Of course, times being what they are, perhaps I should revise it to say the first ten million, but the point is the same. No one needs more than a few million to live a comfortable life. After the point of ensuring economic security, accumulating money is just a way to buy influence and respect.

But respect isn't so easy to buy these days and as Dr. Krugman points out, the increasingly thin-skinned filthy rich are pissed that the automatic kowtowing has ceased.

For all the brashness and bravado that goes with their world, it seems the managers are oddly insecure about their purpose. For years, “most people in the financial service sector were viewed with enormous, out-of-the-box respect and adulation,” says Daley. “These guys were on pedestals, and now that pedestal’s gone, and now, in a lot of people’s minds, the industry doesn’t have that glow, and that bothers them, and now they join that with the president and his theoretically bashing the wealthy. They’ve got to blame somebody, and they blame him because he is representative of that group of people who ‘aren’t us.’” Former Official B told me, “Whether it’s [former Fed Chairman Paul] Volcker saying there’s been no financial innovation worth a shit since the ATM or the president saying his thing, they’re hypersensitive.” Former House Financial Services Committee Chairman Barney Frank was more scathing: “They don’t just want us to represent their interest, they want to be told that what they do is very good. They want to be honored for what they do for society. And Obama has hurt their feelings. Raising their taxes is not simply a blow to their income. It is a blow to their psychic income, a failure to recognize the enormous good they do for the world.”

What they seem to not to have noticed is the "enormous good" they're doing these days is for each other at the expense of the underclasses. Even the slowest witted out among the hoi polloi have finally caught on to their game and they want to review the rule book.

Related, a new study finds holding power can make you stupid. Sadly, the proposed cure of shaming the oligarchs into reality probably won't work. As long as they pay no price for cheating and unbridled greed, what reason would they have to be ashamed?

[More posts daily at the Detroit News.]

Filthy rich

David Cay Johnston provides the jaw dropping statistic of the day:

Just 15,600 super-rich households pocketed an astonishing 37 percent of the entire national gain.

As he points out, the rise of the national wealth to the tippity top tiers of wealth holders has been happening for a long time under both Republican and Democratic presidents. Because, government policy encourages it and they just don't make presidents like FDR anymore.

But not to worry, at least 20 of these people no doubt feel the average guy's pain. Hell, super rich people lose money too. Take this horrifying day a couple of weeks ago.

The 20 richest people on Earth lost a combined $11.3 billion yesterday as global markets fell after European economic growth slowed and investors weighed Greece’s chances of getting bondholders to accept a debt swap.

Heck this poor rich guy got kicked right off the 20 richest people in the world list:

Lakshmi Mittal, chairman and chief executive officer of ArcelorMittal (MT), the world’s largest steel company, fell from the ranking after his fortune dropped $918 million, or 4 percent. Shares of ArcelorMittal declined 5.5 percent in Amsterdam trading. Mittal, 61, is now the 21st-richest person in the world with a net worth of $22.3 billion.

I mean, ouch, that's got to hurt. I'm sure they will all be brimming with empathy for the declining middle class peeps after living through such horror.

[More posts daily at the Detroit News.]

Greed is great, greed is good

News from the Dept. of Obvious, a new study finds wealthy people, lie, cheat and view greed as a virtue. And not just on big stuff. They'll cheat for $50. They see no problem with lying to advance their goals and greed? Piffle. That's just "enlightened self-interest." A good thing in their gilded book.

Apparently, this is particularly common in economic studies majors. Something I can confirm with anecdotal evidence. Fully two thirds of my critics who have openly praised greed also claim to be economic professors or experts of some kind.

The researcher posits that "pairing ethics courses with economics may be beneficial" in changing the dynamic. Good luck with that. The problem is these people have no empathy and their world view is intractably solipsistic. Their moral clock didn't just stop ticking, it never had any juice to begin with that I can see.

And they're cheap. They'll nickel and dime you to death. There are of course exceptions, some few are extraordinarily generous, but as a whole, the more money they have, the more likely they are to stick you with the tab. And the worst are the trust funders. They never had to work to earn their money. They only work to hold onto it.

[More posts daily at the Detroit News.]

Huntsman gets a new job

Ah America. Ain't it great. Where else can a kid pull himself up by the bootstraps from an ego-crushing loss in a political campaign and rise up a mere 10 days later to become chairman of an important charitable foundation?

Oh, did we mention said charitable foundation was founded by his billionaire father? I'm sure that had nothing to do with it. Certainly, in our society where only the lazy and unambitious are poor or unemployed, Jon was selected solely on his merits.

[More posts daily at the Detroit News.]

The New Poor

Once they had it all. A good and comfortable life with a rosy future that stretched into forever after. Today, increasingly, the formerly well off are filing into food banks as in this story about a wealthy enclave in the burbs of Atlanta. And who are the new poor in Forsyth County? People who as recently as two years thought it would be impossible.

People like these married retirees in their 70s, too embarrassed to appear on camera. They said they could not feed themselves now without help.

They retired comfortably in their early 50s. But now, after bad investments, a ruined portfolio, and costly medical issues, they qualify for food stamps - and could lose the house.

"Taking the food was really tough," the woman said. "The hard part was, we used to give it, and now I'm taking it back, you know?" she said, crying.

Don't mistake these people for the nearly poor who have always lingered on the edges of poverty, no matter how hard they worked. This new class of poor are the only the front line of the former comfortably secure, now engulfed by the tidal wave of income inequality. Unless something is done to stem the tide of corporate greed, their numbers will surely grow.

[More posts daily at the Detroit News.]