The war on the middle class

“Behind every great fortune lies a great crime.”
- Balzac

Capitalism hasn't failed. What has failed is the economic system in place today.
No amount of government taxes, trade barriers, or regulation caused it to fail.
No investigative reporter, or congressional oversight committee, or regulatory watchdog, exposed the massive fraud and corruption in the financial system today. All of the safeguards put in place to protect the public, and the current system from itself, failed.
The global financial crisis came to light because what amounts to a falling out amongst thieves. They simply stopped trusting the ability of each other to pay their debts. Once lending stopped, credit creation froze, and the Ponzi-scheme that parallels our financial system broke down.

This so-called "Great Recession" isn't cyclical, it's secular and the problems are systemic. We didn't get here by accident. Choices were made by very wealthy and powerful people, thus those choices can be reversed.
It's important to understand that we aren't fighting Adam Smith's Invisible Hand. We are fighting against the Money Trust.

"We must break the Money Trust or the Money Trust will break us."
- Louis D. Brandeis, 1913

The first thing that one must acknowledge is that we have just witnessed one of the most massive transfers of wealth, from the poor to the rich, in mankind's history. This enormous theft now threatens the very existence of the middle class in America. David DeGraw does an excellent job of adding it all up. Here are a few highlights:

50 million Americans now live in poverty
Half of all American children will need foodstamps at some point in their lives
Hunger rates are now at all-time highs
50 million citizens are now without health care
1.4 million filed for bankruptcy last year, 60% of them because of medical bills
13 million are expected to lose their homes before the crisis is over
Meanwhile, we incarcerate more people in the world than any other nation, and a new prison opens somewhere in America every week.

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These are merely the highlights.
Make no mistake - this trend was in place even before the financial crisis struck. In 1972 the CPI adjusted wages for the average worker was $738.48 per week. In January 2008 that figure was $598.18.
Simply put, the average American worker has been getting poorer for a long time. What's more, the past decade was the worst in 70 years, and we are looking at a permanent underclass of former workers.

The trend isn't limited to America. In 1970, 434 million people were suffering from malnutrition. That number is now 854 million. In 1820, the gap between the richest and poorest country was 3 to 1. Today it is 80 to 1.

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On the other side of the coin, the wealthy have never had it better:

The richest 1% have seen their after-tax income triple since 1980 as a percentage of the nation's total income, while the bottom 90% have seen their share drop 20%
This trend accelerated since 2002.
The top 1% owns 70% of all financial assets, an all-time high
The average CEO makes 500 times the compensation that the average worker does. In 1970 it was only 25 to 1.
The top 400 richest have more wealth than 155 million Americans, and that gap is increasing

The list goes on and on...

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“The war against working people should be understood to be a real war…. Specifically in the U.S., which happens to have a highly class-conscious business class…. And they have long seen themselves as fighting a bitter class war, except they don’t want anybody else to know about it.”
— Noam Chomsky

So what? Why should you care if our nation has less and less equality?
It's not a matter of class envy. Going all the way back to Aristotle, a strong middle class has been the most important part of a stable and just society. According to Seymour Lipset, and many other economists, a strong middle class is necessary for a stable democracy.
To put it another way, the decline of the working class in this country is a threat to our Constitutional form of government.

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What does that mean? If you want a glimpse of the near future of America, look no further than Samson, Alabama.
Last March, Michael McLendon, a disgruntled worker from Pilgrim's Pride, a chicken processing company, went on a killing rampage that left 11 people dead. While a horrible tragedy in itself, the event was marked by something more unusual - federal Army troops from nearby Fort Rucker were brought into Samson and other surrounding areas to patrol the streets. This fact was largely ignored by the major media.

The reason why the troops were manning traffic stops in the small Alabama town, in clear violation of the Posse Comitatus Act, was because the local sheriff asked for support from the military. The reason he couldn't handle the situation? Budget cuts in police enforcement.
What has this got to do with Michael McLendon and Pilgrim's Pride? In 2006, the giant chicken processor teamed up with Wall Street and borrowed hundreds of billions of dollars to acquire a rival company. To pay for the buyout, and the executive bonuses that came with it, it cut the wages of its workers. Soon after it found it couldn't pay for the debt and declared bankruptcy. This led to massive layoffs and devastation of the tax base of the community.

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Note the inverted relationship between marginal tax rates and wealth inequality in the charts above

So who put together the deal that bankrupted Pilgrim's Pride? Lehman Brothers and Merrill Lynch. The Merrill banker who made the deal was recently hired by JP Morgan Chase. JP Morgan was behind the financial derivatives that has bankrupted Jefferson County, Alabama over a sewer project.
Because of the financial disaster regarding the sewer project, sewer charges were raised to more than double the national average. Poor, working residents are being forced to chose between water and heat. Cuts in the sheriff's office are so severe that plans are being made to call in the National Guard for any breakout in civil order.

If this sounds suspiciously like the scenario of a 3rd world nation in Latin America, it only means that you are paying attention.

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Junk Economics

“For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.”
— George Orwell

Last November, Andy Haldane, the Head of the Bank of England, said that the state and the banking system was locked in a "doom loop", and that massive reforms were necessary to break out of it.
Since then there has been very little reforms on either side of the Atlantic.

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The biggest obstacles to reforms are a) the false belief that we have a free market, and b) the false belief that there are no other alternatives. These perceptions have been carefully shaped by the Federal Reserve, and other central banks, over several decades.

First of all, the Federal Reserve virtually controls the field of economics today.

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.
...
"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it."
- Upton Sinclair

As Barry Ritholtz has pointed out, the field of economics today has become a joke.

Indeed, the arrogance of economics is that it is the polar opposite of Science. It begins with a few basic assumptions, many of which are obviously untrue; some are demonstrably false.
No, Mankind is not a rational, profit maximizing actor. No, markets are not perfectly, or even nearly, efficient. No, prices do not reflect the sum total of all that is known about a given market, sector or stock. Those of you who pretend otherwise are fools who deserve to have your 401ks cut in half. That is called just desserts. The problem is that your foolishness helped cut nearly everyone else’s 401ks in half. That is called criminal incompetence.
Starting from a false premise that fails to understand the most basic behaviors of the Human animal, economics proceeds to build an edifice of cards on a foundation of sand.

It's hard to believe that a field of study could have drifted so far off course into obvious delusions...unless it was done intentionally. The fact that the wealthy elites have gained so much power and wealth from both the booms and busts of this unstable system is all the motive that you would need.

"The last duty of a central banker is to tell the public the truth."
- former Federal Reserve Vice Chairman, Alan Blinder

Albert Edwards, the chief strategist at Societe Generale, has flat out accused the Federal Reserve and Bank of England in complicity in robbing the middle classes of America and Britain.

while governments preside over economic policies which make the very rich even richer, national consumption needs to be boosted in some way to avoid underconsumption ending in outright deflation. In addition, the middle classes also need to be thrown a sop to disguise the fact they are not benefiting at all from economic growth. This is where central banks have played their pernicious part...
Now you might argue central banks had no alternative in the face of under-consumption. Or you might conclude there was a deliberate, unspoken collusion among policymakers to rob the middle classes of their rightful share of income growth by throwing them illusionary spending power based on asset price inflation. We will never know.
But it is clear in my mind that ordinary working people would not have tolerated these extreme redistributive policies had not the UK and US central banks played their supporting role.

To over-simplify things, the Federal Reserve has only one tool at its disposal: the printing press. The Fed cheapens money to stimulate the economy, but this encourages speculation, which leads to bubbles.

The moral is: Cheap money creates bubbles; and bubbles move wealth from workers to rich motherporkers. It's as simple as that. That's why the wealth gap is wider now than anytime since the Gilded Age.

Lately, the Federal Reserve has become much more open about its collusion with the financial elite. For examples, the Fed's efforts to cover up its role in the bailout of AIG, and its role involving the bankruptcy of Lehman Brothers.

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The Big Picture

"A corporation cannot be ethical; its only responsibility is to turn a profit!"
— Milton Friedman

One of the things missing from the economic discussion today is the lack of the perspective.

Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest “final stage” seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations.

The failure of today's economists extend beyond the fact that they failed to anticipate the recession (as late as January 2008, most economists were predicting we would avoid a recession). Their real failure is that they don't even understand why the recession happened, despite the fact that the man on the street can grasp the idea once he is aware of the facts. It's that sort of failure that cannot be forgiven.

My favorite contemporary economist with a historical perspective is Michael Hudson. His view of economists today is not complimentary.

the "intellectual engineering" that has turned the economics discipline into a public relations exercise for the rentier classes criticized by the classical economists: landlords, bankers and monopolists. It was largely to counter criticisms of their unearned income and wealth, after all, that the post-classical reaction aimed to limit the conceptual "toolbox" of economists to become so unrealistic, narrow-minded and self-serving to the status quo. It has ended up as an intellectual ploy to distract attention away from the financial and property dynamics that are polarizing our world between debtors and creditors, property owners and renters, while steering politics from democracy to oligarchy.

Economics today is not just a science without a purpose. Economics, as the professions now exists, is to science what Fox News is to the news media. Just like the purpose of Fox News is to misinform the public, the purpose of economics today is a PR con to justify inefficient and immoral policies that defend the status quo and keep mankind from advancing.

Manufacturing and industry, the great drivers of the American middle class for over 100 years, didn't die by accident. There was a deliberate decision made in the late 1970's to favor finance over industry.
We have arrived at this point because choices were made. One of those choices made by economists was to turn their backs on the moral values of classical economics. This was reflected by political ideology in a certain segment of society.

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For instance, I noticed Glen Beck had this to say at the CPAC.

He then read disapprovingly the Theodore Roosevelt quote that "we grudge no man a fortune in civil life if it is honorably obtained and well used...so long as the gaining represents benefit to the community."
"Is this what the Republican Party stands for?" Beck demanded. He was answered with boos and cries of "no!"

It may seem ironic that a group well versed on religion, and supporting laws regulating practices that they consider immoral, would never consider extending their morality to the accumulation of great wealth and power. Their outrage appears limited to immoral acts that don't actually effect them.
Why should honor and benefit to a person's community be excluded from the discussion of economics and moral behavior in general? Also, isn't this strange concept of separating honor and morality from economics at least part of the reason why we are in this situation?

"We're moving to an oligopolistic situation."
- Kenneth Guenther, Independent Community Bankers of America, 1999

It should be noted that the field of economics wasn't always like this. In fact, its original purpose was enhancing the human condition.

What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, keeping natural monopolies in the public domain, and anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted.
A second Progressive Era aim was to steer the financial sector so as to fund capital formation...Today’s bank credit has become decoupled from capital formation, taking the form mainly of mortgage credit (80%), and loans secured by corporate stock (for mergers, acquisitions and corporate raids) as well as for speculation. The effect is to spur asset-price inflation on credit, in ways that benefit the few at the expense of the economy at large.

The current economic system is sick. It's been poisoned with self-serving ideology from top to bottom. It's needs radical and systemic reforms, not tinkering within the current system (like those proposed so far).
This will not happen within the current political and economic system because the wealthy elite do not want it to happen.

However, the system was constructed by choices that were made. It can be changed in the same way the progressives changed it a century ago, but it requires a mass movement. It requires people to understand that their enemies aren't working people from other cities, nations, races, religions, or anyone who collects a paycheck. Their enemies are those of the powerful and wealthy elite who rigged the current system.

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Comments

food stamps

it becomes even more stark when one realizes the poverty level to even get food stamps.

I mean people are living by the seat of their pants, most in the middle class, even those who have managed to keep a job and it's clear it's just imploding.

Yet we cannot get something turned around to be Pro worker, we need a change in corporate law to force these companies to be responsible to labor. When I say this, I do not mean unions, I mean the entire U.S. labor force, including entrepreneurs and small business.

That's the problem with people like Glenn Beck, they may describe the problems and even hit the mark, but every single solution they promote will only make it so much worse.

It's amazing how such insanity which would give corporations even more power has been twisted to think somehow that would help your average Joe on the street.

I think a worse problem is things which would help have been preverted from the left. I have seen as sick as it is, people believing bailing out Wall Street is Keynesian economics, unreal.

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Unions

we need a change in corporate law to force these companies to be responsible to labor. When I say this, I do not mean unions,

I certainly do. I'm sure you realize that all the labor laws currently in place came about because of the labor union movement. If we are to see any other improvements it'll be because labor unions forced them to, not because a benevolent government decided to side with us against their campaign contributors.

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correction

not just unions instead of not unions. What I was thinking about was Stimulus dollar recently. They went to a lot of union type jobs, teachers, state public service, etc. but those are not the ones really hurting, they are the ones with any political power. So I am thinking across the board, but I agree with you that unions are the main reason the U.S. has things like minimum wage and so forth but that's also due to political movements that we got the 8 hour day and so on.

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Colossal point on unions, midtowng

Somebody made this brilliant point, either on DailyKOS or HuffPost, that the unions began losing their power when Bobbie Kennedy went after the organized crime element involved with the unions.

This was truly one of those actual unintended consequences moments. It set off a cascade of memories, so in going back to review those times, and later, that is really when events and circumstances began to diverge.

Without an alliance with organized crime, unions would never, historically speaking, have made any headway. It wasn't from any grassroots groundswell, but when the corporate and trust boys began to sweat and get scared of them.

Ironically, it was possibly Bobbie's father (unbeknownst to him, as he was purposely raised in a somewhat sheltered situation), who aided in this union-criminal alliance.

Prior to that, the corporations and their company goons held full power.

And notice what happened with the organized crime elements in America? Converged with Wall Street, of course.

A rather mundane explanation, but one which really bears the stamp of truth and history.

(Wish I'd thought of it!)

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I have a different perspective

Somebody made this brilliant point, either on DailyKOS or HuffPost, that the unions began losing their power when Bobbie Kennedy went after the organized crime element involved with the unions.
...
Without an alliance with organized crime, unions would never, historically speaking, have made any headway. It wasn't from any grassroots groundswell, but when the corporate and trust boys began to sweat and get scared of them.

I see things differently.
I think the downfall of unions (which more closely coincides with the numbers) started during the Red Scare of the early 1950's.

Back then the most active grassroots organizers were the communists and socialists. The labor unions, under pressure from the manufactured political scare, kicked the leftists out of the unions.
Not only did they lose their most ardent supporters, but they also rejected the political premise that labor unions are founded upon. Suddenly labor unions were about wages and benefits and nothing else. Before the 1950's, labor unions were a political movement. After the early 1950's labor unions were a social group.
It's hard to imagine anyone being ready to get their head split open from a cop baton just to maintain their dental benefits. OTOH, it's easy to see someone sacrifice for the goal of a world dominated by the proletariat.

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very interesting slant midtowng

I never thought of that and they did do the "red scare purge".

Be interesting to see the overall union membership rates in conjunction with the "communist threat", which I believe hit max in the 1950's, although it seems in the 1960's it was similar (?) (dunno the "cultural" history of union membership in the 60's).

You post is a huge hit, people are linking to it (and here which is good! ;) I just looked at the site stats...

Great piece.

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Union membership peak

I found this (with chart):

After peaking in 1953, and largely leveling off afterward, union membership as a percentage of the private sector workforce began declining during the period of 1959 through 1970 largely due to the much faster growth of the non-unionized ranks of the private sector. Remarkably, this occurred even as the total number of private sector labor union jobs increased throughout this period. At its peak in 1970, the number of union jobs in the private sector nearly reached 17 million.

So you are right about overall numbers, but I'm spot on when it comes to percentages (which I think is more important). The peak percentage coincided almost exactly with the end of the Red Scare.

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A fascinating and subtle point...

...and I can't argue with it, but that unholy alliance with the criminal element was a big motivator for companies to "allow" unionization.

And today, we shall never see any action on card choice in congress without something similar.

Wanna place any bets?

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When They Dropped Steel Tariffs in the 60's

Because corporations were complaining about the high cost of steel and foreign nations were complaining we were being protectionist.

These actions killed an industry with a huge US presence and great paying union jobs.

Killing tariffs has killed unions here. No one can match the minimum wage in Mexico, $1,800 a year or the wages in Asia.

Meanwhile somehow Germany who has a very strong union presence (maybe the worlds strongest) somehow manages to compete. I own 3 appliances made in Germany, my Maytag washer and dryer made in Germany and my Bosch dishwasher.

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Just to Add

I don't believe any of these appliances is made at all in the state anymore. We haven't made tv's here for decades. Computers are mostly made overseas etc etc.

Boeing just announced another 1,200 layoffs. 800 of them were IT positions that have been outsourced to India. All union jobs I believe. Of course they are moving their manufacturing to South Carolina also where there is no union labor.

Outsourcing will kill the higher value jobs that no tariffs haven't killed yet.

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The worst thing to ever happen

was the development of mega corporations, international corporations or any other corporation that is "Too big to fail."

Profit is not a four letter word but rape is. The above corps so often go beyond profit and enter the area of monetary rape. They have no moral compass and no loyalty to any country. There are like a pirate ship wondering the waters of the world looking for a victim. They aren't here to provide a service but look at us to service them.

Beck is right about things but I can't agree with all his things. Not sure if there is anyone that I can agree with all their thoughts.

For 17 years I was in the investment business. I was an independent and never, ever worked for one of the houses. But I can tell you they hated independent broker dealers and made life hard for us. The wirehouse's were big and powerful.

I remember one time I found out that people working in certain bank departments could do the same stock trading as me but didn't need a Series 7 license. I investigated this matter to find why. Ok are you ready, holding onto your hat? The answer was that their honesty was beyond reproach.

Banks and Wall Street serve a purpose but they are now big, big political powers. They are far too big of a political power.

There is no corporate moral anchor anymore. I don't think you can legislate morality. I look at the law of the land to allow me to make money, to care for myself and be more independent. It seems the government works against my want and would like me to be more dependent, on them.

The consumer driven economy is DOA. It should not even be revived because it is a false economy. But the President and others are trying their best to breath air into the corpse. Which in the end is cutting the jugular of the middle class, cut by cut.

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Thank you.

It is very much about economic policy. Policy that has for several decades now redirected income upward to top income households and corporations.

I am glad you mentioned wages. Wages growth was replaced by more debt to just maintain the existing living standard. Wake up people - we are a CASTE SYSTEM. The opportunities to climb the 'economic ladder' are pretty much gone.

I know people don't like to hear it but we need fiscal policies that work - not just monetary policies. The fact is the private sector has NEVER been able to achieve Full Employment on its own - especially now. We need the federal government to step up and fill the void and do it quickly. Yes, I am talking a direct jobs program.

Forget about the deficit - once the economy is operating at full steam that will take care of the deficit and ugly debt to GDP ratios deficit hawks like to crow about. Keep this in mind, the job/labor market is NOT self-correcting so we can keep twiddling our thumbs and do very little to nothing at a much higher social and actual cost than actually spending the money now and putting every abled and willing person to work.

RebelCapitalist.com - Financial Information for the Rest of Us.

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The corruption of economics

The trick to changing economic policy is that you must have a generally accepted economic science behind it. Otherwise no one will take it seriously.
That's the problem. The field of economics has coalesced around a philosophy that justifies the status quo. As if what we have today is the best economic system that mankind can create, even while the field of economics continues its march to failure.

BTW, I updated this essay with a few choice opinions.

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Agreed

and that is incredibly frustrating. There are economic policies that can have a positive impact on a larger portion of income strata but the dominant economic orthodoxy has gone out its way to discredit them and having the traditional media including business media in their corner is incredibly helpful.

The other thing is this dominant economic philosophy is what is being taught in economic classes across the country. It wasn't until recently (after 20 yrs. from graduating from college) that I became familiar with the alternative economic philosophies.

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rhetoric vs. reality, RC you'll like this op-ed/article

Galbraith, we need jobs...

and he rails on idiots claiming to know economic theory who then try to claim the "new normal" or unemployment is the "fate" of the masses.

Galbraith is an economist. ;)

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Absolutely

And here is the another thing which Galbraith implies - the Fed has already shown that it can control the yield curve - but it chooses not to continually do so as a matter of ideology not economics. It can control interest rates to the point of not allowing the vagaries of the bond market to impact or 'dictate' whether we change economic policies in favor of working class Americans.

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economists vs. economics

I think it's more of an "Emperor has no cloths" situation where if one says anything outside the religion they are ostracized. The hard economics itself, when one gets into the mathematics the deep equations, it's almost bizarre that Economists will not recognize, so often what those equations imply.

Let's take Stimulus. It implies you must keep all expenditures within that domestic economy, esp. the domestic labor force exclusively...

Yet, you won't hear that mentioned when it's right there, in the mathematical equations themselves.

Midtowng, your images go over the 525px width (width="525") which screws up the site. You need to crop that one with the double graph and put the second below instead of by it's side.

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What?

I've lived / worked during the times that we didn't need what you say, "The fact is the private sector has NEVER been able to achieve Full Employment on its own - especially now."

I've never worked during a time of zero unemployment, is that even possible?

I've said it before and I'll say it again, manufacturing. Capital producing and jobs producing. It wasn't until people bought into the global economy fantasy that things starting to down hill. When people have jobs they look to the government for minimal services.

Sometimes I want to buy into the conspiracy theories. Where companies outsourcing jobs and government work in collusion. The more jobs outsources, the poorer the people become and look more to government for help. The more help, the greater their power.

More to day but my respiratory infection is now pushing its power, its power says go lay down. COugh cough.

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Outstanding post, midtowng

Although my personal wish (not to be hypercritical here) is that EVERYONE would quit mentioning that Glen Beck(erhead) character; he's such a complete nimrod!

I'd doubt anyone would have ever heard of him if we didn't a hundreds of cable channels that needed filling with something, and there's just so many chicken farming shows out there.

Well written, well connected data.

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Glen Beck is a moron

The only reason I mentioned him was because of the Teddy Roosevelt quote he used, and how it was received.
When I ran across the paragraph in the WashPost I couldn't help but think, "Uh, what exactly is wrong with Teddy's thinking?"

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Glen Beck?

But he looked so smart in that Stasi uniform on his book cover -- or maybe he just felt so comfortable in it.
Frank T.

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Frank T.

Yes

I've been using the "midtowng" handle for about 15 years.
"gjohnsit" I only invented about 5 years ago.

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Tax rate on top 400 drop while income soars

This is a little update to the essay.

The incomes of the top 400 American households soared to a new record high in dollars and as a share of all income in 2007, while the income tax rates they paid fell to a record low, newly disclosed tax data show.
In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16....
The long-term data show that under current tax and economic rules, the incomes of the top earners rise when the economy expands and contract during recessions, only to rise again. Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show. That rate is lower than the typical effective income tax rate paid by Americans with incomes in the low six figures, which is what each taxpayer in the top group earned in the first three hours of 2007.
...
Payroll taxes did not add a significant burden to the top 400, not changing the rounding of rates by even one decimal. With payroll taxes taken into account, the effective tax rate of the top 400 would be 17.2 percent in 2006 and 16.6 percent in 2007, my analysis shows -- the same as not counting payroll taxes. As a point of comparison, about two-thirds of Americans pay more in Social Security, Medicare, and unemployment taxes than in federal income taxes.
The top 400's share of all income grew from 1.31 cents out of every dollar earned by all Americans to 1.59 cents.
Adjusted for inflation to 2009 dollars, the top 400 enjoyed a 27 percent increase in their income, or nine times the rate of increase for the bottom 90 percent, based on an earlier analysis of tax data published by Profs. Emmanuel Saez and Thomas Piketty, economists at the University of California at Berkeley who have been studying global income trends.

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Middle Class is Being Sucked Dry From Three Sides

Not to belabor the point since yes all this is true but the bulk of federal spending now comes from benefit programs that never existed prior to the 1960's.

So most of our tax drain comes from providing for those that do not provide for themselves.

These programs were enacted at the same time top tax rates started to drop from 91% to what they are now 35%(?).

The private sector middle class is also being sucked dry by the political class which includes public employee unions.
$780 billion for stimulus to save existing public union jobs while a new $15 billion dollar bill to aid private sector hiring shows the real focus of this administration.

$780 million for the public sector unions which everyone will be expected to pay back and just $15 billion for the rest of us.

The private sector middle class seems to be expected to shoulder the burden for all these groups and no one represents the middle class in the admin certainly not Obama despite running on that as a platform.

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Where do you get your information?

30% of $780 stimulus went to individual tax cuts - the biggest use of stimulus - and least 'bang for the buck'.

Source: The Recovery Package in Action

And what benefit programs are you talking about? Social security and medicare?

Look, the middle class is being squeezed because the one true "trickle down effect" is in cut in federal government spending for needed programs. Cuts in college grants and student loans, cuts in school lunch subsidies, cuts in other education spending, cuts in law enforcement spending. See, cuts at top trickle down to state and municipal levels - they either have a choice cut or raise taxes and most taxes at that level or very regressive. That is where the squeeze is coming from - not 'benefit programs' such as social security and medicare.

RebelCapitalist.com - Financial Information for the Rest of Us.

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beg to differ here

While social security is ok, Medicare/Medicaid is not. That's not to say these programs should be reduced, it is to say that the entire for profit system needs to be revamped. It's the costs, the U.S. pays the most for medical services of all types than any other industrialized nation. In fact going over costs and how other nations run their system and why their costs are so much lower would be a bad ass dynamite post.

I've written a few in the past and maybe I'll do it again with very specific answers to drive home the point.

I mean how much intel does one need yet we still have people claiming it's the benefits and service instead of the costs and methods?

That's the problem here. The facts cannot be denied, so please do not deny them, but the solutions, which are usually presented by lead screw America Patterson group, are to deny Americans health care. That's not the answer, the answer is reducing those costs, not the actual real benefits.

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So 70% of the Stimulus Went Where?

It certainly didn't go to the private sector. Least bang for the buck according to who? - the public union leeches that wanted it all I guess. From what I have read they haven't even spent a third of the money yet so if they spent 30% on tax credits - you are saying they spent it all on tax cuts which doesn't jive with anything else out there. I know a link to a another blog is the absolute fact though so of course you are right (heavy heavy sarcasm).

Right $15 billion in hiring incentives is for the rest of us so lets add the $400 credit that went to everyone including those in unions and the public sector and then look at the bulk of the spending that was targeted at maintaining public union employment.

Cuts in education spending? You'd have to only be living in the past year to believe that. Education spending has been out of control for decades. Education spending has far exceeded inflation stats for the past 30 years.

Medicaid is 20% of states budgets and growing.

Please stop linking Social Security (something I have paid into for 40 years) we all know that program has been used to fund the general budget since Reagan but where is it going is the question. The $400 credit will be used as an incentive to show that the SS fund is broke earlier than it would otherwise be further screwing the working class that actually contribute to it.

Almost every state in the country kept the status quo and made up for their budget short falls through the stimulus money rather than make cuts which will have to be made sooner or later.

I know that the wealthy are not paying their fair share but to argue that programs such as welfare, medicaid, food stamps, section 8, HUD, overspending on education, free lunches, free breakfasts, etc etc has no negative effect on the budget and the people that actually pay taxes is nothing but a disingenuous self serving lie.

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Least 'bang for buck' according to CBO

right here. You can ignore facts - I can't help that. All I can do is provide information and point out where you are incorrect.

I will ignore your last paragraph because it's pretty ignorant of reality.

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Ignorant of Who's Reality?

If the CBO presented facts rather than their opinion they would never be wrong unfortunately all they present is their educated opinions which are as wrong as yours. Their track record speaks for itself.

You will ignore my last paragraph because you have no retort as to why those actual expenses are not a burden on the middle class.

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See below for response to your ignorant statement

and for another source for 'bang for buck' check out graph in middle of page on this post: A Proposal for True Keynesian Economics

Got any sources to the contrary?

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Another Blog Post as Evidence?

And you want me to look at hand picked isolated charts and graphs absent any original comment from the source?

What that says more than anything else is that you disagree with the middle class working stiff getting anything out of the stimulus.

I have to love people that live in a world of charts and graphs, they are so full of charts and graphs.

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this site is all about charts and graphs

That's the bottom line here. I rail on everybody regardless of argument on this issue and that's the point of this site...so many people have beliefs and opinions but when you examine the raw data, the statistics, the actual theory and get objective....
then those beliefs and opinions are quite often plain wrong.

That's the bottom line and why this site's motto is:

when in doubt use a calculator as well as be good to each other

So folks, please do not degenerate into your typical political beliefs punditry which I see going on in these comments.

The point is to prove these facts and look at the raw data.

Now if someone needs help in getting access to the raw government data or theory, I can help you get it from the government databases.

But claiming it's all of those "lazy ass welfare moms" to "everybody deserves a job and is just misunderstood" ...
those are beliefs and assumptions...

it's not economics, statistics, theory.

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I Didn't Make Those Claims Did I?

You and Rebel are now both implying that I have said such things in this thread.

I have not said any such thing.

I have said that these debts contribute to the middle class burden and have been attacked for that. I have said that the stimulus has targeted public union labor and not done much for the private sector. Rebels own link has a paragraph which I used that states $200 billion of the stimulus was already spent on states much of it mandated for education and healthcare two heavily unionized industries. They have ignored that.

Is there a problem here?

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I'm sayiing this to both of you

and the crack about Welfare moms is a typical rant by conservatives and the "everybody is just misunderstood and entitled to a job" is a typical type of rant from liberals.

not that either of you actually said this, no way am I personally swimming through these comments to be thought police.

That said,

I'm saying this is clearly an argument and while I'm not involved I am site babysitter and rules enforcer.

I'm saying everyone must use statistics, graphs and that is the point of this site.

I find raw data, evidence keeps these arguments on low because facts have a tendency to do that.

I didn't say that a large part of Stimulus did not go to organized labor, it sure seems that way but I haven't read through the data and I also won't' tell you that illegal immigration, or say drug cartels taking over a city, won't do serious damage to a local economy.

I will not claim that because the statistics do not support it.

The point is this is an ECON blog and everytime it goes into belief or political spin on here, we get these threads.

I guess people love to do that but the site motto and rule is to when in doubt, use a calculator.

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“lies, damn lies and statistics?”

If charts, graphs and calculators show beliefs and opinions wrong, how do you explain the differences between the beliefs and opinions on this blog and other blogs like Bonddad. There are no shortages of charts, graphs and calculations on Bonddad et al and yet there are extreme differences of opinion. Have you ever heard of the expression “lies, damn lies and statistics?”
ps I'm not talking about 'welfare moms' - rather political economic theory

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well, one has to be able to read a graph too

and not believe slope somehow means an absolute number.

They also need to realize things that are cyclical are not always so and there are different cycles and sizes, that would help.

When I say theory, I mean towards the mathematics of it.

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How Many Economic Theories Dispute Each Other

You have been taught a method and others are taught differently so your charts are designed to back your view and others show other views.

There is no shortage of charts and graphs that can show other viewpoints. It is comical when someone points to a chart or graph as prima facie evidence of their view.

I work in an engineering discipline which has but one absolute correct answer versus 10 (thats a guess) competing and unproven philosophies of economics. To my knowledge the only economist ever granted carte blanche for their views was Friedman in Argentina with a dictatorship backing them.
It seems to have worked if for no other reason than because it was in essence a laboratory experiment on a large scale.
Anyone here an ardent Friedman (sp?) economist?

I could just as easily cite anecdotal trends which have as much weight as competing statistical viewpoints since sooner or later the rubber meets the road in the real world. The trend is now and has been for some time that we are spending more than we contribute to our budget. Stidlitz states we can go into near infinite debt with no problem and others say that we will have serious issues before we get to that point.

I wonder if a patient needs to cut their wrists and nearly die to prove to themselves what the outcome will be rather than live within theory.

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engineering is not EIs

Uh, no, sorry that's not how econ works, unless of course you failed the course you took? You don't get to "make up" graphs and charts, if you do not believe me, I suggest taking a course or two and trying that one.

one could design a parallel circuit to do the same thing as a series circuit, the voltage and amps is identical.

One is structural, architectural and efficiencies, the other is I/O. statistics are equivalent to I/O. General theories such as monetary vs. Keynes are architectural design or your VLIW vs. parallel processing cores if you will get that analogy.

If you are as technical as you claim then you should be aware that Econ is a school major, a soft science and if one bothered to take econ 101/102 even watered down as an elective not for the undergrad majors, one would be aware by the tests that you had a series of formulas, graphs and equations. it is not a philosophy major, even when trying to claim it's a logic class.

You would also know that Thomas Friedman is not an economist, he has zero background in econ at all. If you are referring to Milton Friedman, most of his "theories" have proven economic disasters frankly. His monetary theories have better results.

I'll assume you mean Stiglitz instead of whatever that was typed and I do not recall Stiglitz ever claiming one can run infinite deficits.

In future, comments based on facts are always useful and welcome on EP, inaccuracies not so much.

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Bad Example

The result of the circuit is based on hard facts that create the results not soft science so you make my point apparently without realizing it.

Your assertion that charts cannot be made up while at the same time stating that economics is a soft science is well, funny.

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FYI - It was Chile not Argentina and

the experiment ended with hyperinflation. There are a lot of economic theories out there but typically there is one theory is dominate or most influential. From the Great Depression through the 1970's a weaker version of Keynesian economic theory of full employment through use of gov't fiscal policy was dominate then Reagan ushered in more conservative economics such monetarism, supply-side & Non-Accelerating Inflation Rate of Unemployment (NAIRU). Inflation was the focus and quasi-full employment fiscal policies were abandoned.

To a certain extent this more conservative, what I call neoliberal, economic policy is still dominate.

I would be surprised if Stiglitz, a Keynesian, would say such a thing about debt. Now, he may have said that deficit should not be a concern right with unemployment very high and economy not operating at full capacity.

Here is a theory for you (and what I believe): government deficits lead to private sector savings and government surpluses lead to private sector dissaving - meaning in order to operate private sector has to borrow (sound familiar). This theory is Post-Keynesian.

No theory gets fully implemented - politics usually prevents that. I know, I know so many theories. But that's it in a nutshell. What works? Look at history.

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Well Then

Fine it was Chile, you have me.

Where has economic theory proven itself without contradiction?

If it had anywhere all economists would flock to the proven theory - well that is except the ones that have agendas to prove through economics.

Stiglitz has been advising Greece for some time now and recommends more government spending there and in the UK.

Lets see what happens there. Of course an outside bailout would prove him correct right?

How can competing charts espousing pure theory all be
'correct'?

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Competing charts???

Chart depicts data - assuming the data is correct then it's a matter of interpreting the chart. Sure a chart could be dressed-up by exaggerating scale and units but if the underlying data is correct then again its a matter of interpretation.

For instance, charts showing the amount of income inequality in U.S. over time - to me that they are alarming and so we have a problem - to someone who is conservative they would say so what - income inequality is not a problem. It is a matter of interpretation.

Theories are developed by humans and last time I checked humans are not perfect, therefore theories will not be perfect or w/out contradiction.

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Of Course Competing Charts

Economists use different data and interpret the same data differently to 'prove' their results.

Thats competing. They compete. If that wasn't true they'd all be on the same page or at least they'd all be claiming a series circuit is the same as a parallel one and out of work as an electrician.

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As for state budget cuts

this doesn't look like status quo: at least 44 states Have Already Imposed Cuts That Hurt Vulnerable Residents

Now, if you have information to the contrary I certainly will read it.

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No, I can't ignore such ignorance

You rail against food stamps, section 8, blah, blah. Do you how many people were in "secure" jobs last year or year before and are now on food stamps, and possibly section 8 housing?

What people fail to realize is that for many of us we are just, ONE fucking job away from the poor house?

Think about that when you trot out your Reaganesque "welfare queen" bullshit.

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I'm Not Railing Against Anything but Your Overreactions

I didn't rail against those things. You just can't handle any discussion that calls those what they are - mandates that are contributing to the deficit and that never existed before the 1960's.

If you go back and reread what I said rather than to continue to stuff your preferred image of what you WANT to respond to all I said originally was that these are just another expense forced on the middle class and that any discussion of a war on the middle class needs to acknowledge them also. I added that the wealthy are not paying their fair share of things and that something has to give.

So lets review.

The middle class is subsidizing the wealthy according to this blog and that was generally agreed on.

Now who is paying for these other programs if not the middle class? Answer that.

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In the interest of reason

Your first comment was about:

Not to belabor the point since yes all this is true but the bulk of federal spending now comes from benefit programs that never existed prior to the 1960's.

I asked what benefit programs? I think you responded with food stamps, HUD-section 8, medicaid.

Maybe, I should have corrected your first paragraph - actually the biggest federal budget items are: military spending, social security and medicare.

So again, do you want to cut social security & medicare?

Next, you said:

The private sector middle class is also being sucked dry by the political class which includes public employee unions. $780 billion for stimulus to save existing public union jobs while a new $15 billion dollar bill to aid private sector hiring shows the real focus of this administration.

$780 million for the public sector unions which everyone will be expected to pay back and just $15 billion for the rest of us.

To which, I responded you were wrong. 30% went to tax cuts. Again, do you have different information?

To answer your last question: who is paying for programs? Assuming, I believe they same way you think that gov't programs are financed (BTW, which is quite different than what you think), sure the "burden" for paying for whatever "welfare programs" are left to those who are paying more. But, what should we do - eliminate food stamps, section 8 housing, blah, blah?

Believe me, if you do, there will a huge social cost for doing that. Including, civil unrest that will make a tea party protest look like a coffee klatch.

So, what benefit programs are you talking about again? And, what do you propose we do with food stamps, section 8 housing, blah, blah, blah?

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Its a Shame You Can't Edit My Posts

I never said nor suggested that we eliminate these programs.
You say that as if I have said that.

I said that these programs are a burden on the middle class. I never said anything about a social cost for removing them. You can't answer a straight question rather you answer someone's question with a series of answers about why something should exist. Its a game of dodgeball.

I have asked you to show me how money spent on the wealthy is a tax burden while money spent on the poor is not and since you have repeatedly dodged that question

Funny I have used a few links here myself and you have read none of them instead asking the same questions over again.

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