Thursday, April 07, 2011

It's The Economy, Stupid - The Masterful Plan To Avoid Recovery

The dreary theatrical spectacle of a Tea party Congress seeking to lay blame for our economic peril on government spending which the actors claim "must be shut down!!" is a goofball sideshow which will do absolutely nothing to repair and restore the economic life of the United States.

The Tea Party Republicans are acting their hearts out onstage, hoping their performance keeps voters and media distracted as they urgently pound away at the very organization they work for:

the Koch-financed Americans for Prosperity held a rally this afternoon across the street from the Capitol, with several dozen right-wing activists on hand to listen to speeches from Rep. Michele Bachmann (R-Minn.), Republican Study Committee Chairman Jim Jordan (R-Ohio), Reps. Mike Pence (R-Ind.), and others. The Republican voters chanted, "Shut it down!" during the rally, and every other sign at the rally urged the GOP to shut down the government.

The cause of our economic collapse was not government spending - it's long-festering government policies which holds wealth sacred, eliminates regulation and oversight, discards the worth of workers, and reinforces itself to hold even more power and wealth. Nobel laureate economist Joseph Stiglitz' book "Freefall" captures the realities of this dilemma:

Throughout the book, Stiglitz emphasises the borderline-jingoistic mentality that pervades much of the financial community. Emboldened by the sense of being “too big to fail”, banks engaged in increasingly risky activities and predatory lending practices. To support these activities, bankers initiated a multi-decade push for deregulation and significantly reduced government involvement in the financial sector. With hundreds of millions of dollars in political contributions, the banking sector was able to wield considerable influence in the political sphere—often at the expense of average citizens. Once the 2008 collapse occurred, bankers were only too happy to reap the rewards of their political “investment” in the form of taxpayer-subsidised bailouts and hefty bonuses. Indeed, Stiglitz deadpans that “a country [i.e., the United States] in which socialism is often treated as an anathema has socialised risk and intervened in markets in unprecedented ways.”

Of course, with their combination of astounding potential rewards, excessive risk-taking, and aggressive virility, major Wall Street finance firms have a tendency to attract and encourage the ethically challenged—the kind of people who are willing to take risks with the assets of others and show little regard to the final outcome. Stiglitz argues that we should not be surprised when markets function in a suboptimal manner; indeed, individuals acting only in their own self-interest are likely to ignore the negative effects of their actions. It should be made clear that Stiglitz is not “anti-capitalist”—far from it. He makes it apparent, however, that we cannot assume that markets will be self-correcting in the absence of a progressive regulatory regime."

And in a must-read new essay in Vanity Fair, Stiglitz lays out precisely the real issues being ignored by the Tea Party Congress and how their plans will maintain a corrupt system:

The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall."
"But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

BONUS SECTION: Here are some further snapshots of current state of America's middle class (via):

Real unemployment is well over 20%

Average job search time is at an all time high, 39 weeks

Non-discharageable student loan debt is at an all time high, passing total credit card debt

Labor force participation is at 25 year lows

Average household debt is at all time highs

44 million are on food assitance, up 12.8% Y/Y and over 200% since 2001

52 million have no health insurance

Real median household income is down 5% Y/Y

25% of household have 0 or negative net worth

The average American now spends approximately 23 percent of his or her income on food and gas.


  1. carpenterjd11:23 AM

    it never ceases to astouind me how little critical thought enters into the process of governance. It has all been reduced to sound bites that can fit on bumper sticker or homemade protest sign, (which , of course, is only proper for a right winger to wield!)

  2. likewise disappointing is how the mainstream press simply regurgitates the spin rather than provide critical reporting. the loss of a critical press is a loss of a vital aspect of public discourse.