“Honey, I Shrunk Killed the Middle Class”

A new Bloomberg story, Americans on Wrong Side of Income Gap Run Out of Means to Cope, is a zeitgeist indicator: the normally-well-insulated-from-realty investing classes have noticed that large swathes of what was once the middle class aren’t just downwardly mobile but are struggling. Some facts from the story:

The top 10 percent in the US captured a biggest share of income in 2012 than any year since 1917

Real median income of college-educated men 25 or older fell 10% since 2007

Of people who lost jobs in 2009 through 2011 that they’d had for three or more years, only half the women and 61% of the men were re-employed by the start of 2012 (and remember, a mere one paid hour of work a week counts as employment)

Only 1/3 of adults 18 to 32 lived in their own household, only marginally higher than the 38 year low set in 2010

But the Bloomberg story find it hard to capture what this distress means in human terms. It does have this anecdote at the close:

The growing calls for action to reduce income inequality have translated into a national push for a higher minimum wage. Fast-food workers in 100 cities took to the streets Dec. 5 to demand a $15 hourly salary.

Latoya Caldwell, 30, of Kansas City, Missouri, is among those who took part. She’s been employed at a Wendy’s Co. restaurant for six years and earns the state’s minimum wage of $7.35 an hour. Working 25 to 30 hours a week, she has asked for more shifts to help support her four children, with whom she lives in one bedroom of her aunt’s house.

More older workers — including one over 65 years — as well as college-educated are joining her team, showing that rough economic times have swelled the ranks beyond the typical teenager at the register, Caldwell said.

“We’re making barely enough to even survive,” Caldwell said. “We’re not even surviving — we’re dependent on state assistance while our CEO makes $5.8 million and he’s sitting in an office.”

The nouveau pauvre are not much better off. I suspect some NC readers are feeling the pinch despite concerted efforts to live frugally. An email today had the subject line “Poverty is expensive”:

My expenses are beginning to get the better of me and month’s end is stretching beyond my dollars. Next year is looking the same. So, yesterday I was pointedly reminded how expensive it is to be poor. Instead of buying a lot when something I use is on sale, I have to buy what I have dollars for. No savings for me! And instead of buying by unit price–I’m a ferocious unit price shopper–I have to buy whatever size I have dollars for. And now I have to make more trips because I can only buy small dollars worth at a time.

Being poor is MUCH more expensive than being not poor. Not even wealthy, just not poor. Back in the day when there were two kids in the house, I bought detergent on sale, saved $10.00 per buy, and had detergent for months and months. Any sale of stuff I used I snarfed up a bunch. Makes a difference just in trips to the store. We tried to keep wkly shopping to the perishables and we pretty well succeeded. Sometimes went to DE for taxable items and calculated so the trip, gas and bridge toll, was worth it: loaded the car and considered a sale a small gold mine.

Can’t do that anymore. I don’t need eight gallons of detergent anyway, but even smaller lots are beyond my cash means. Does anyone who matters in economics realize how expensive being poor is? I think some do and most don’t care. Not their problem. I do so wish it were.

The one wee bit of good news in the Bloomberg account is that things have gotten so bad that pundits and politicians are starting to make noise about the destruction of the middle class, which is a necessary but far from sufficient condition for change. For instance:

“The middle has really collapsed,” said Lawrence Katz, an economics professor at Harvard University in Cambridge, Massachusetts, and a former chief economist at the Labor Department in Washington….

“Wall Street is roaring and Main Street is struggling,” Representative Kevin Brady, a Texas Republican and chairman of the Joint Economic Committee, said in an interview. “Quantitative easing has really exacerbated income inequality.”

The Brady quote and others in the article show that the Republicans are looking to get mileage from the increase in income inequality under Obama, which was greater than that under Bush. There’s a reveling lack of defenses for the President’s policies. And the Fed isn’t too convincing either:

Janet Yellen, nominated to take over as Fed chairman next year, defended the central bank’s actions at a Senate Banking Committee hearing on Nov. 14.

“The policies we’ve undertaken have been meant to generate a robust recovery,” Yellen told the committee.

Oh, puhleeze. Robust recovery for who? The Fed not only threw staggering amounts of firepower at salvaging bank balance sheets, while showing no interest in rescuing ordinary Americans. It was also all-in on the Administration’s program to paper over the banks’ chain of title problems and their widespread servicing abuses, and didn’t bother to obtain any meaningful concessions or reforms, the most important of which would have been principal modifications, a remedy favored by investors as well as homeowners. The Fed has been all too happy to accept mission creep rather than speak up forcefully for the need for more fiscal stimulus.

So it may be that even as the stock market roars ahead, more investors are coming to recognize the shoddy foundations of this so-called recovery and perhaps more important, that the legitimacy of the ruling classes erodes quickly when ordinary citizens recognize how badly the deck is stacked against them. But the upper crust and the technocratic elites are sufficiently cloistered that it will take more than an article or two for them to recognize the mess they’ve created for their fellow citizens, and ultimately, themselves.

Print Friendly, PDF & Email


  1. W.C. Varones

    She’s been employed at a Wendy’s Co. restaurant for six years and earns the state’s minimum wage of $7.35 an hour. Working 25 to 30 hours a week, she has asked for more shifts to help support her four children, with whom she lives in one bedroom of her aunt’s house.

    Um, did anyone think to ask whether it’s a good idea to have four kids while earning minimum wage at a fast food job?

    1. YankeeFrank

      Hey, I have an idea for you. Why don’t you write up a thesis on population control and why the poor should be chemically castrated so they can’t “over breed”. Better yet, get a clue and realize that there just might be a situation where this woman, who once had a husband, is now supporting her children alone and is desperate for a living wage, which you are clearly too miserly to agree to. Because let me tell you, kids or not, $7.35 an hour is not a living wage. I guess it is easier to be a sneering dipwad than actually care about the plight of ordinary people. How sad for your shriveled little heart.

      1. Yonatan

        Well said.

        You forgot to mention that Varones should also decry Ayn Rand who resorted to taking government handouts. What a hypocritical welfare queen she turned out to be.

      2. Clive

        Yeah, maybe she’d be better just throwing the kids under a bus. After all, they asked for it didn’t they ? Oh, hang one, wait a minute…

        You’d think by now that such thinking would have gone the way of the dinosaur. But no. Once in a while (and far to often still for my liking) up pops the likes of W.C. Varones with the same old variations of blaming the innocent. Glad to know (not!) that Victorian Values made their way far, far past England’s shores.

        Okay Clive, try to be polite here…

        W.C. Varones, let me try and illuminate your thinking with what is alas nothing but an anecdote. My mother grew up impoverished — and I can use that word legitimately because until the age of 11 her family had neither electricity nor mains water supplied to their tiny farm in rural (very rural) Wales. This was, scarcely believably, right up until the early 1950’s. She was an only child and, I’ve always suspected, an “accident”. Not all children of the poor are as a result of their parents fecklessness. And all of them — each and every one — are innocent (the children, that is). That includes those four kids in Missouri you’re talking about — not that you talked about them at all, you simply talked about their mother and made a few off-the-cuff value judgements as you went along.

        My mom, along with my dad were both clever — intellectual and what you’d also call “street smart”. So through that, and not a little luck they became on most measures what you’d legitimately call “wealthy”. But certainly for my mother, not for one single day could she ever really escape her childhood poverty. It stayed with her throughout her life. It impacted her world-view, her sense of safety and security and her ability to enjoy what was eventually earned. Not cripplingly so, but not unnoticeably so either.

        These four children in Kansas are going to carry the memories of their current childhood throughout what I hope a long and prosperous lives. However long and prosperous (sorry, I think I’m channelling Mr. Spock here) they are, they will never forget what they’ve lived through.

        So I hope they find their own Yellow Brick Road, somehow. With Wicked Witches of the West like you around W.C. Varones, they’re sure gonna need it.

      3. DakotabornKansan

        As Thomas Cahill told Bill Moyers, “I’ve come to the conclusion that they are really only two movements in the world. One is kindness, and the other is cruelty.”

        W.C. Varones is representative of the many who prefer to believe the worst of others. Cruelty is easy, cheap and rampant.

        “There are a lot of myths which make the human race cruel and barbarous and unkind. Good and Evil, Sin and Crime, Free Will and the like delusions made to excuse God for damning men and to excuse men for crucifying each other.” – Clarence Darrow

        “Sometimes the Bible in the hand of one man is worse than a whisky bottle in the hand of another … There are just some kind of men who – who’re so busy worrying about the next world they’ve never learned to live in this one, and you can look down the street and see the results.” – Harper Lee, To Kill a Mockingbird

        1. rex

          Not having children could at least be extended as a possibility. That is some family planning could be discussed without being accused of being a cruel and heartless person. Defenders of children would have to stop acting so self-righteous.

          1. aletheia33

            yes, i suggest the 1 percent not be allowed to have any children until they have made an appropriate contribution to the welfare of society as a whole and have demonstrated their capacity to function productively in society without burdening everyone else with the consequences of their reckless, deadbeat behavior. furthermore, they should not be allowed to pass on to those children any wealth superfluous to what society has agreed is adequate means for a decent life, which is to be provided equally to all. including a high-quality education.

          2. Barutan Seijin

            OK, say we take your advice. No one has children because it’s not economically rational. Where does that get you?

            Like goods & services? Then maybe you’ll want someone to provide them in the future.

        2. James Housel

          Thank you for those quotations, particularly the first which so eloquently reduces the question to its root. One modest reason for hope is the recognition this issue is now getting, even if it is faux populism I will take it. This year 2 million people will lose unemployment benefits and the food stamp program is shrinking. Ironically this will reduce the reported unemployment rate as these lucky souls are no longer unemployed…Perhaps the 1% could hire them to carry the rich over the bodies.

          1. Noni Mausa

            I worked out roughly what income a couple would need in order to escape the “too poor to have kids” criticism of the Varones of the world. It worked out to roughly the median wage. That is, half of Americans don’t have enough of an income to responsibly have children. (As of 2008)

            “So here is my attempt to lay out the prudent financial predicates for reasonable child-rearing–

            1. A household income greater than the poverty line for that size of family.
            2. In addition, income above that level sufficient to buy health insurance for that size of family.
            3. Income dedicated to a life insurance policy for the family breadwinners.
            4. Savings sufficient to pay all ordinary expenses for at least a year, including maintenance of the health insurance, in case of illness or job loss.
            5. In addition, factor in a savings account strictly for the post secondary education of each child in the family.

            – See more at: http://angrybearblog.com/2008/03/noni-mausa-who-should-have-children-or.html#sthash.zZ6e05aV.dpuf

            Sound reasonable?

        3. Glenn Condell

          Great quotes.

          ‘“I’ve come to the conclusion that they are really only two movements in the world. One is kindness, and the other is cruelty.”’

          Yes, in effect, but failing to account for cause. Drill deeper and where does kindness come from, and cruelty? One comes from the heart and the other the head, love versus greed, good versus ‘smart’. One embodies ‘all for one’, the other ‘one for all’.

          The extrusions of these opposed answers to the question ‘how to live’ are what we call kindness and cruelty. Cruelty is well ahead on points, but I guess it always was.

      4. newyorker

        Oh c’mon with the outrage. It’ s simple prudence of the kind we expect the dumbest citizen to have to -not- have kids you can’t afford. Now it could be true she had them when married and in better financial circumstances, but i doubt it from her age.

        Even catholics long ago moved from the moral position that one must welcome as many children as they conceive even if unaffordable to the superior ethical position that one must limit the number to those one can afford to give a decent quality of life. Why shouldn’t we expect those with no history of such religious views to abide by the better standard.

        1. diptherio

          I bet her four kids consume fewer resources than one spoiled rich kid. The latter’s consumption is ethical, of course, since the rich parents can afford the massive carbon footprint they and their child create; but the poor folks, whose lifestyles are eminently more sustainable, are unethical since our (completely unethical) economic system has not allowed them to gain out-sized quantities of wealth. I see…how highly rational…

          The crux of the issue is this: there are more than enough resources to go around and take care of everyone’s needs, but we choose to withhold them from some people while allowing others to wantonly waste them. It’s the rich (and middle class) who are wasting the planet’s resources, but that won’t stop us from blaming the poor for “over-populating” (when over-consuming is the real problem). And then we throw in a little covert slut-shaming just to top off the hypocrisy. Beautiful…Jesus would be proud…

          1. Vatch

            You’re right that the rich consume far more resources than the poor, so rich families with too many children are quite disturbing. It’s not people’s wealth or poverty that is overpopulating the Earth, it’s the people who have more than 2 children. And the children of poor people can grow up to be rich, wasteful consumers, although nowadays that’s much less likely than it was a few decades ago.

            It’s definitely not true that there are enough resources to go around. I think I’ve posted the following URL before, but it’s worth repeating. If we all lived at the level of the average Costa Rican, we would need 1.4 Earths. If we lived like the average Nepali, we would need 1.9 Earths. We do not have enough resources to go around, unless we are all willing to live in poverty. We’re all computer users here at NC. That wouldn’t be possible if we all lived less “extravagantly” than the average Costa Rican. We’d even have to live less “extravagantly” than the average resident of China. Do you think the average Chinese farmer or factory worker is a computer user?

            You’ll have to scroll down to see the highly revealing graphics:

            The Big Squeeze

          2. newyorker

            Well, diptherio, it’s the 1%’s world. You and me, and latoya as well, just live in it. You must conduct your affairs in the world you live in, not the one you wished you did.

            So prudence and her own eyes should tell her she lives in a country that has little sympathy for the poor. Just now the rug is being pulled out from under snap recipients. The status quo is pretty insecure for one who has taken on the responsibility to raise four kids on such a meager wage.

          3. Lonely_in_Dallas

            One of Mahatma Gandhi’s less well-known sayings: “The earth offers more than enough for every man’s need, but not for every man’s greed.”

      5. optimader

        Many extrapolations about Varones awkwardly written post.

        Occam’s razor applies. At the highest level do not the Latoya’s own some responsibility for decisions that found her in her present position? There are always outliers with tragic circumstances, but in the general case I think yes. Does that hyperbolically lead to “throwing her children under the bus”? I think no.

        OK, that said, putting on my Nomex suit.
        From a public policy perspective is pushing minimum wage legislation that preserves the status quo of a structurally impoverished class working jobs that in the past were the domain of part-time HS kids really a long term good strategy?

        I actually don’t have a problem raising Min wage, but Min wage jobs do not address the underlying issue of putting Americans back to work in real jobs that create value and sustain a middleclass. Rather, they just perpetuate hopeless servitude that rearrange economic deck chairs while wealth consolidation continues.

        Jackson County’s home giveaway warms families’ hearts

        So in Latoya’s case, she is the “winner” poster mom of a local “home “giveaway” contest trotted out for the Holiday Season. If this is a good policy strategy, how does the scalability work? How about the “giveaway contest” losers? Let’s check back in a year on whether Latoya can survive in her single family home in the perpetual minimum wage paradigm, even if it is raised some miserly amount. At the end of the day she remains a person supporting kids with apparently zero skills, no prospects for improvement and presumably no time at this point to acquire any. Oh…, and they raised her cost of living to include insurance and taxes. . Who thinks giving her a couple more inches of minimum wage rope is the solution? A show of hands from wiser people here that know the answer.

        Would it not be more merciful to a motivated Latoya and her children to allocate the those funds to pick up room and board for her & children for a year (or two?), give her some breathing room while teaching her some skill at the local JC, any skill that offers some prospect of a living wage — Pharmacist assistant, EMT, Certified Welder? –just a few professions I know of LOCALLY that have well above minimum wage, training in time well within 2yrs and are in demand with unfilled positions, in my geography.
        A Low Time Preference strategy will always be more politically difficult because it requires both the political class and the public to be honest, but accepting the notion that perpetuating an unskilled class of people doomed to an “acceptable” minimum wage regime that merely allows existence (when combined with other forms of perpetual public assistance) seems a rather shortsighted objective that codifies a two class society.
        Minimum wage papers over other more basic and unsustainable socioeconomic dysfunctions in this country.

        1. diptherio

          You’re right, Latoya is responsible for the on-going recession. The (understated) 8.5% unemployment rate is also something she should take responsibility for. She has failed to succeed in a rigged system…you’re right, it is her fault…

          1. diptherio

            …in response to you’re second paragraph, I should add.

            As for your final sentence: “Minimum wage papers over other more basic and unsustainable socioeconomic dysfunctions in this country.” I couldn’t agree more.

            1. optimader

              If unemployment were half the rate, people w/ no marketable skills will still be competing for the minimum wage job. Reconciling our society to it now being acceptable for adults/head of households working what have historically been part-time service jobs for kids should be what is unacceptable. Negotiating minimum wage deflects the real issue.

              I think a reasonable consideration would be putting the arm on employers to supplement public benefits collected by their adult employees as this public aid is part of what finances the employment at minimum wage model.

          2. optimader

            “You’re right, Latoya is responsible for the on-going recession”
            Strawman Fallacy, that’s not what I said.

            1. readerOfTeaLeaves

              If you are asking, ‘What is a decent job, and how do we train people to do one in a limited amount of time?’, then I agree it is a fine question. Particularly in an era of robotics.

              But to answer that question would require more political leadership and skill than we’ve seen on the national stage; this topic has been most addressed, IMVHO, at the state and regional levels.

              But I agree that simply raising the minimum wage, without asking and whether it would be ‘socially more profitable’ to invest in better training programs is a question that needs more discussion.

              Your comment put me in mind of several conversations that I’ve had over the holidays, along the lines of, “What ever happened to shop classes?! Why can’t we find anyone to actually fix [our old stereo, my treasured piano, my older kitchen mixer]??” This topic came up repeatedly this year, and I don’t recall it being discussed much in the past – at least, not among my acquaintance.

              IOW, it appears that US society has come to have some gaps in terms of expertise. Are we training people to build custom cabinets anymore? Are we training people to build furniture? To fix electronic equipment? In my holiday conversations, I sensed a lot of frustration about what might be called ‘lost skills’. Those skills would pay well, and it would be socially beneficial to train people to obtain those skills.

              1. Waking Up


                I know you are well aware of what I am about to say, but I just want to add to your comment.

                When the United States began in earnest to outsource and reduce manufacturing (NAFTA, etc), we also lost many of the skills associated with those manufacturing jobs. It’s frequently those who are “on the line” or involved with manufacturing of a product that come up with better production ideas and new products. We have lost much of that. It isn’t surprising that the U.S. excels at “Social Media” or has so many college graduates wanting a job in finance. That was the direction we were pushed in order to make a few people very wealthy as quickly as possible.

                In addition, the endless quest to be a “disposable” society in order to require further purchases of goods has led to destructive forces on the environment. There WAS a time when we were proud to make quality products which lasted. Then monied interests and making a quick buck took over…

                1. optimader

                  If you recall in the Clinton admin the mantra was to become an “intellectual processing economy” we would just leave the nasty bits of actually producing products to the swarthy unwashed masses elsewhere.

                  1. farang

                    Not entirely sure that so-called “conversion” from Industrial to Service mantra started under Clinton: it started under Reagan. I know this, because during the last years of his second term, there was a Time magazine (cover) on just that subject.

                    And all of us working a production line in downtown Santa Clara were asking ourselves the same question (even my supervisor at the time): ” We’re all going to be burger-flippers and sell hamburgers to each other???” 1986, 1987? 88?

                    That factory closed (6000 jobs, 4500 of them managerial, 1500 production line manufacturing jobs, gone forever) in 1992. I left in 1990, accepted a buyout (and saved a less senior worker than I from lay-off): saw the handwriting on the wall. Factory started in early 1900s as an agricultural pump maker. John Bean Pump and Sprayers.
                    The nine years I worked there? The corporate beast that owned them at that time never took in less than 900 million in after taxes profit, at our location, and we were just one of 154 companies they owned….so of course, they closed it and moved it to a non-union, southern state…where they failed and had to sell that entity to another corporate beast that moved it up to a northern, union state. Our CEO was “earning” $52 million/year, 28 years ago, for such wise leadership…but they paid no dividends to shareholders…”the stock price will reflect the value added” or some such Fraudspeak……

                    They fought us every contract: think about it…we made them over $1 billion/year, on average, the nine years I was there…..1500 union workers, if offered a $2500/year raise for three years, would have meant “only” a $990 million/year profit. Less than $3.5 million/year cost to management. But that would have been big money to us. An incentive to earn them another billion a year for three years. I think we asked for $.35/hr., or $728/year.

                    Instead, they offered us a TWO CENTS an hour raise. In other words: your labor isn’t worth two cents.

                    The company parking lot full of new cars told me my fellow workers would bend over and accept it…and they did. Lasted less than 18 months, then they were looking for new jobs.

                    And we, according to the msm presstitutes, were the greedy, over-paid union labor. “Relics” of a by-gone Industrial age.

                    This, in a most fertile valley…now covered with tract homes, traffic and tilt-up buildings…while the “hills stay pristine”…and non-productive. I can recall eating fresh Sunnyvale cherries. Orchards and sales by side of road. Fremont-grown purple Japanese plums, sweet and juicy like syrup. Los Altos-grown white corn. Local avocados, blackberries, oranges and tomatos too. 1940’s Bay Area people used to have two new kitchens in Santa Clara and Alameda counties: one for canning all the fruit and veggies one grew in fertile Bay Area backyards, the other for cooking….it is why the Italian immigrants settled there: felt like home.

                    Lived five years on Sign mountain in late 60s: “South San Francisco, The Industrial City.” Armour. Swift. Bethlehem Steel. U.S. Steel. McCormick. So many classmate’s parents worked those factories… all going strong…all gone now. Fancy looking million dollar homes by the bay, though….but even back then, some other factories were being abandoned.

                    Like Detroit: Planned.

                    Nobody wanted to listen back then: we were just “greedy union workers” that couldn’t even afford homes in Santa Clara valley, even with our so-called ” high union wages.” Anyone you know criticize those darn “high-paid union workers?” That was a mantra, too. Planted.

                    I knew workers that “van-pooled” two hours each way from Modesto to San Jose, so they could afford homes…then the plants closed. Including all the corporate canning plants in downtown Santa Clara.

                    Why so-called “intelligent folk” would not build their houses in the mountains where only Scrub Oak will grow, and leave the fertile valley an orchard oasis, a farmland bonanza, is beyond me…that could all be vineyards….orchards….Productive for all. Could have still had plenty of room for manufacturing “hi-tech” and so-called “low-tech”…take a drive down to the central coast @ 3-4 hours south, in less perfect weather conditions and much less perfect soil conditions, to see agriculture the Base of the economy. It’s growing, as is the north of San Francisco area. California is an agricultural king, that is reality.

                    So, let’s pave it!

                    Don’t get me started on why Jobs had to move manufacturing from Cupertino (where we went to high school) to China, to “save” $14 billion…out of what? $110 billion? Is that a good example of a “shrewd businessman,” to move manufacturing away from a high-paid consumer base, to one were the workers can’t afford to buy what they are manufacturing? Was Henry Ford wrong? Not a great long-term strategy: lowering your consumer wage base while locating in area where workers can’t afford product…..and I’ll bet Apple soon consumes that nest egg. Greed. Who *needs* a new damn phone each year??? Not to mention all the sharks circling that nest egg.

                    You may mean under Clinton that the “High-Tech” stock revolution occurred, which fed into the same (ill)-logic: that “hardware/manufacturing” was “nowhere” and the “future” was F.I.R.E. Economics 1. Aka Fraud…”shaking paper back and forth.” Always fails.

                    “Nowhere” manufacturing giants China and India imported @ 950 tons of gold in 2012. From the “First-World” West. Fact, west to east.

                    “Hi-Tech USA?” The US Federal Reserve was very busy…. blowing Wall Street…..up….into a bubble: sure to pop soon.

                    Expanding wealth inequity a “Tell.”

                    Apologize for the long-winded middle class rant. Not directed at you or anyone here.

                    But you don’t even want to hear what happened to my former upper-middle class Michigan relatives…except to say, they aren’t in Michigan anymore, long time now.

                    They were all very hard-working, hard-living, hard-playing people. Good Americans. A big loss for the US…which is rapidly spinning apart. Detroit was a “center,” and entities do not last long when their strong “centers” virtually collapse.

                    Non-regulating Regulators have that effect. Lawmaker dictators do too.This will not end well. Squinting a bit through the history looking-glass…it looks like Rome falling. Or the USSR. Both militarily over-extended……..with looting and control the goals of “public servants.”

                2. readerOfTeaLeaves

                  Wow, what a wonderful comment!
                  I wish that Yves or Lambert would dedicate an entire post and thread to this idea of ‘what is lost – intellectually, in terms of skills and problem-solving’, when people don’t actually work with materials any more.

                  One of the themes of this holiday seemed to be, “Do people actually understand what they are doing any more? Do I?”

                  For instance, I don’t know the pieces of my car engine. Nor do I know how to fix my Cuisinart. So I’m as guilty as the next person. But what happens when we have too few — if any! — people who actually work with these things? We lose more than ‘jobs’; we lose knowledge. I think that is what you are getting at in your comment.

                  And it’s this underlying loss of knowledge and experience that is really a long-term social and economic deficit. Yves has touched on this topic before, but I was struck this holiday season at how many times this theme was raised in conversations.

                  As for NAFTA and intellectual claims, I have my own private theories:
                  1. We have lost natural resources at a faster clip than is widely reported. By the early 1970s, much of our heritage of timber was lost. By the 80s, our fisheries were already severely impacted. That left us with less ‘buffer’, as there were fewer natural resources to cheaply exploit.

                  2. To actually create and produce (and manufacture) and then service a product is actually hard work. It’s really, really hard sometimes; materials aren’t quite right, the pieces don’t all come together smoothly and have to be reconfigured… no end of iterations and quality control. So manufacturing and making products is difficult and challenging. In contrast, if you want to set up a bank, you simply get a nice building and hire an interior decorator and focus on ‘services’. You have no manufacturing infrastructure to maintain and upgrade, and far less liability – particularly with the government bailing you out when you overextend. And yet the banking revenue is given the same b.s. ‘GDP’ treatment as manufacturing. This is sloppy, erroneous thinking.

                  1. farang

                    After my inhaling a few deep breathes, please allow me to add a few comments regarding the NAFTA scam of Bush1 and Clinton:

                    I recall quite well writing a “letter to the editor” (Santa Rosa Press Democrat) back during Bill’s NAFTA signing, and how I first realized that I had been duped, by this conman, by these supposed political opposites. Out of the Big Dog’s fascist slobbering lips, went something like this (use your own Clinton Impression voice-over): ” This trade agreement will hopefully level the playing field for Mexican, Canadian and American workers.”

                    Does anyone here think Clinton gave a rat’s patoot about a Mexican worker…unless female? Or rather the goal to drag down the Canadian and American labor/wage earner to Mexican worker levels? One very valuable lesson learned for me was: there is a One Party system masquerading as “two.”

                    I wish more would consider the premise.

                    I need to add one thing about this first comment….I think all were a tad judgmental, however a lesson learned in not making Generalities/assumptions. That said, my mother went through the Great Depression, her family (father an immigrant) large, and she told of times her mother ate fried (home-grown potato) peels so they could eat potatos, stuffing cardboard in too-small-shoes when soles wore out…and all of their children, my cousins, are damn glad that family was large.

                    But one last thing…why is it “okay” to pay high school kids a minimum wage? I recall that working after school routine: $1.25/hr.

                    I took care of and fed senior citizens from my community, in a corporate-owned home….and all of us will get there, sooner or later….and no, no one could live on that wage back then (1971/1972), nor can they be expected to live on today’s minimum wage. But they can be expected to have normal, human relations. Isn’t that what we would all wish for ourselves?

                    Happy New Years from Chiangmai!

        2. Klassy

          Why don’t you come back with this argument when there are three jobs for every one employee. Also why don’t you wait until we no longer need home health aides or someone to clean the rest stop bathroom.
          Job training is not the same as a job, and did you know– sometimes colleges for profit and non profit exaggerate job prospects. Shocking.
          Why do you assume that higher paying jobs are more “socially useful”? I think I would miss the person who cleans that restroom more than the people who come up with that annoying Boniva ad campaign.
          Seems like a lot of work is make work and most is dependent on government spending in some way. The higher you get up the pecking order, the higher mre you reap from government spending. You’ve got your Jamie Dimons or your Larry Ellisons at the top.

          1. kareninca

            “Why do you assume that higher paying jobs are more “socially useful”? I think I would miss the person who cleans that restroom more than the people who come up with that annoying Boniva ad campaign.”

            No kidding. I have a relative in Indiana who worked for decades, part time as a cook in a school, part time as a cook in a nursing home. She “retired” on disability at about age 55, and believe me she was disabled at that point. From those two jobs, which she performed diligently and with care and dedication, she receives a total monthly pension of $100 per month. I kid you not.

            Well, she is not a complainer at all, and she is religious and feels that her work was innately valuable, which it was, and her husband has an okay pension and costs are low in IN, so no tragedy here anyway. God how I loathe Blankfein and Dimon and Geithner and Bernanke.

          2. Ben Johannson

            There’s little awareness on the part of the Free Marketeers that higher paying jobs are concentrated in sectors heavily subsidized by government, which creates demand and stronger wages. If government decided that starting tomorrow it will prioritize clean structures, there would be a surge in pay for custodians.

      6. Justicia

        Maybe she had the children before she was reduced to working a minimum wage job because computers ate her paycheck.

      7. Crazykool

        Meh. Such individuals end up overspending. Its common knowledge to spend to one’s earning potential. Earning potential for an individual is increased by developing skills either on job or by going to school. you also have to question some of them using smartphones paying a whopping 80-100 $ a month on minimum wage.

          1. fajensen

            Or walk.
            Not in the US, generally, you can’t! As soon as one moves outside the town centres, there are no footpaths, no street lightings, no pedestrian crossings and no fucks given from motorists.

            I tried walking 2 km in Knoxville, that was a scary experience!

      8. PMBurton

        Rather WC Varones should be censured for his remarkably poor understanding of rational utility-maximizing behavior. As Swift (1729) pointed out, children are an important source of calories for adults and the lady is to be congratulated for her foresight in producing an important food source for herself.
        I believe Paul Samuelson later refined the model to determine the optimal age and weight at which the marginal benefit of eating the child was just equal to the marginal cost.
        Later Gary Gorton wrote a paper on how to increase market liquidity of babies through securitization.

      9. Mike

        I want everyone to make a living wage, but what everyone misses is that you raise the minimum wage to $1,000,000 per hour and it wouldn’t make any difference. Any increase in the minimum wage will (as it always has) result in a domino effect of rising wages all the way up to the CEO scale (followed by rising prices on everything) – leaving the poor in exactly the same place they are today.

        The single way to better your station in life is to learn a trade for which the market rate of pay provides a living wage.

        This is simply not a ‘left-right’ issue – it is a reality issue.

        1. Lambert Strether

          Hmm. You’re saying the curve created by the Gini co-efficient can never be flattened? I’d like to see some evidence for that.

          Was for “market rate of pay” you seem to assume that remain stable over a person’s life time. Not so.

      10. Eric Sabety

        Virtually all the worlds decrease in poverty in the last several decades is attributed to China……and the one child policy………Africa is poorer, India is poorer……..one could argue that unlimited immigration and childbirth are strategies of the 1% to hollow out the notion that we can have a humane European style welfare state…..because with unlimited population growth we can’t………finite resources………infinite demand

      11. Eric

        Wow, that was a big stretch. Most adults budget for things like living, paying bills, mortgages, car payments, and get this one, kids. Why would you attack common sense?

    2. Ben Johannson

      That you object to giving aid which wouldn’t cost you a penny is a pretty sure sign you’re a sadist.

    3. Banger

      Personally, whether it was a good idea or not she has four kids and so the question is, for the most part, absurd. What do you suggest? Putting her in jail, executing her, forcing her into prostitutions? Using logic and science we realize that people are not, as the more puerile economists suggest, independent actors but come to their judgments, morals, wants and personality as a function of their social milieu–if we want to solve the problems of young mothers we have to look much deeper than their individual choices and individual responsibility unless we are ready to allow them to crash and burn with their children along side them.

      Sadly, the fake-left and pwogwessives are afraid to confront the right with the question of whether they are prepared to see people starve on the street or waste away suffering from depression, chronic and untreated disease, and lack of shelter and social services. Some on the right will answer that yes, these people should be left to die and lower the surplus population.

      1. readerOfTeaLeaves

        Banger, if you have time, check out the book ‘The Spirit Level’. They’ve shown with eerie detail that societies with greater inequality have more young (unwed) mothers. So paradoxically, living in a society with a great deal of inequality would place this mom at risk for having more kids, and having them early, if she were on the lower end of the income scale.

      1. Whine Country

        Varones reminds me of what was said about George W. Bush: “The guy was born on third base and thinks he hit a triple”. That children are born wherever they are born with no say in the matter, is lost on most people. Also, that those who are successful somehow cannot comprehend the efforts of literally billions of people before them who contributed so much to their so-called self-made success, is a sad fact of life. Maybe Mr. Varones will grace us with some further commentary about how he alone has been able to do such wonderful things with his life.

    4. Vatch

      Nobody should have more than 2 children. It doesn’t matter whether they can afford to have a large family or not. Our planet’s resources are finite, but our population just keeps going up, up up. However, no children should suffer because their parents made a mistake. The growing disparity in wealth between the top 0.1% and everybody else is a sign of a failing nation. Instead of austerity, assistance programs such as SNAP (food stamps) and unemployment compensation should be extended. And contraceptions for family planning should be provided for free by the single national health care payer, which doesn’t exist, of course. We’re in deep doo doo.

      1. Eureka Springs

        @Vatch Here here!

        As an aside… The people asking for 15 per hour should raise their demands to 25 or 30 if they ever expect to get over 10 or 12. I’m so tired of poor folk or just plain Democrats failing the basics of negotiation 101.

        Additionally what we struggling folk need is not just a raise but dramatic reductions in rent extraction, including a vast number of seemingly small fees and taxes which really add up. One would have to dedicate many hours a week to try and accurately count the number of extractions (just read fine print on all utility bills or try to determine all your state and local taxes/fees elsewhere) and amount as Yves and the emailer notes a few in the post.

        We desperately needed a reduction of 50 plus percent in Heath GDP with iron-fisted negotiation to the lowest pharma prices in the world. If an anti-depressant prescription bankrupts you, what good is it?

        Telecommunications (meaning phone, internet and TV) is a giant rip off in the US. So are most foods these days. I rarely if ever see a single missing box of cereal in grocery store aisles anymore. Over five dollars for a box of more than half air! People aren’t even considering it.

        If government wont do these things then the activists should really be demanding something like 25 per hour minimum wage or GDP sharing, whichever is greater.

        1. Gerard Pierce

          I don’t yet have even a start of an answer, but I have concluded that we need something other than “micro” or “macro” economics to deal with economics at the bottom of the totem pole.

          I’d be interested in hearing about the follow-up if all the hamburger-flippers and custodians were given an immediate raise to $30 /hr.

          My first thought is that it would cause a great improvement in the lives of all of the rentiers that are in a position to exploit these people.

          It would have a significant negative effect on all those still trying to survive on $7.50 /hr.

          The law of supply and demand kind-a sort-a enters in here, but what is left out is the balance of power that allows some to live off the income of others. If the supply of money in the hands of the poor increases, the demand on the part of the rentiers increases in proportion.

          We don’t know how to pay a hamburger flipper a higher wage and actually improve his life.

    5. JTFaraday

      “Um, did anyone think to ask whether it’s a good idea to have four kids while earning minimum wage at a fast food job?”

      Okay, I’ll bite. No, it is not a good idea to go out and have 4 kids if you are in danger of earning minimum wage.

      But did you ever think to ask whether the Bloomberg reporter went out and found, and chose to feature, a fast food worker named “Latoya” who has 4 kids and lives with her aunt in order to further the narrative that it’s all about personal responsibility and that there is no real macroeconomic problem?

      Did you ever think to ask if this is crap reporting, that poses a problem only in order to dismiss it?

    6. Glen

      Very good point.

      She should be one of those overpaid CEOs that ran their banks into the ground in 2008 and were bailed out with our money.

      In fact, everybody should be one of those CEOs, it would solve all of America’s problems.

    7. BondsOfSteel

      Spoken like a rich guy that never had to buy birth control (and see a doctor) out of pocket on a minimum wage job. Sure condoms are inexpensive, but they tend to fail long term and rely on your partner. (Ask the Swedish women who slept w Julian Assange… or just about any woman that’s relied on condoms.)

      Sure… there’s abortion. But that’s not easy either. It’s difficult morally, emotionally, logically, and financially. I wouldn’t dare judge unless I walked a mile in her pregnant shoes.

      Face it… pregnancy and multiple births are the natural order. Access to birth control and healthcare is what helps us rise above. Universal access to birth control wasn’t available until.. well.. thanks to Obamacare… in two days.

  2. timotheus

    Yeah, all her fault. Must be one of those undeserving poor. I assume your surname of “Varones” indicates that you are a male–why does that not surprise me? Not that you’re interested, but Missouri has nasty, tough abortion-restriction laws. http://bit.ly/1djDXLK Oh wait, she should have Just Said No, right?

  3. Hugh

    I saw the title and thought an alternate might be “Wall Street mystified why the goose that lays the golden eggs they hate last week isn’t producing more eggs.”

    “The growing calls for action to reduce income inequality have translated into a national push for a higher minimum wage.”

    I hate to break this to anyone but this is a dodge and a scam. Don’t get me wrong. I think paying workers a living wage should is a good idea. But throwing a few dollars at the bottom end of the wage scale is not going to have any appreciable effect on wealth inequality.

    By the way, if you calculate that on average workers work a little over 34 hours a week and throw in around 10 national holidays, a worker works around 1700 hours a year. At $15 an hour, this would provide a gross income of $25,500. After taxes (FICA, income, sales, etc.), we are likely talking an income closer to $20,000. In any case, this is not a lot to live on. It certainly is not enough to pay down debts, raise children, or buy a house. A $20 an hour wage with guaranteed hours of at least 34 hours a week would yield a gross income of $34,000. At this level, we are probably beginning to edge into living wage territory as long as you are single, without kids, have low debt overhang, and are not living in a major metropolitan area.

    It is only when you double this income or as is more commonly the case have a two income household that some of the elements of the American dream become possible.

    But back to income inequality. It is important to realize that it is wealth, not income, that is the real killer in inequality. High income people have more disposable income left over at the end of the year, year in year out. Ordinary Americans have little or none. As a result, wealth increases geometrically among the rich as compared to the non-rich. And as wealth increases, the access to financial scams vehicles which multiply gains and reduce taxation of them increases as well. So wealth inequality snowballs on itself.

    So if you want to reduce the real problem of wealth inequality, what is needed is serious progressive taxation. As I have written before, my suggestions for this are:

    A 50% tax rate for incomes above $300,000 going to 75% at $1 million.

    A marginal 90% tax rate for income above $1 million. All earnings here and abroad from whatever source to be declared and taxed as income. Any wealth and/or income undeclared to be confiscated and subject to additional financial and criminal penalties.

    A yearly 10% asset tax on household wealth above $20 million.

    Current charitable foundations set up by families (think Gates, Buffet, etc.) to also be taxed at this same rate. Ban family foundations in the future.

    A 50% tax on gross corporate profits. All profits and assets here and abroad to be declared or subject to confiscation with additional financial and criminal penalties for both the corporations and their chief officers.

    100% estate tax on all estates over $3.5 million per individual, $7 million for couples. Eliminate most trusts.

    1. MikeNY

      Thanks again for a thoughtful post, Hugh.

      I agree that some form of wealth redistribution will be necessary, if we want to preserve the nation. God knows leaving things to the Fed has only worsened the problem, and if social instability erupts in the near term (which may be necessary to force DC to address the problem), the Federal Reserve will certainly deserve much of the, erm, ‘credit’. Functionally, they have become a reactionary force.

      I do think any solution must involve a jobs program and a living wage mandate — this is a requirement of human decency and justice.

      I wish we had already rightsized the military and reigned in the NSA. One of my biggest worries is that our leviathan military-security apparatus will be used to try to preserve the plutocratic status quo. And that is an important reason why I dislike and distrust the thoughtless, reflexive veneration of the military in this country. Especially by politicians who are largely in the pockets of plutocrats.

      1. PaulArt

        I don’t understand why people conflate progressive taxation with wealth redistribution. Do we really take all that money and give it out to the poor and undeserving? I have always interpreted progressive taxation as an acknowledgment that Capitalism is flawed. It is an idiotic running race where there are 3 prizes and 50 people who come first, 100 second and 200 third. Progressive Taxation is an implicit statement that even though you may be very good at the game of making profits, civilized society has not been set up for you to keep making profit. Excuse me, Society is NOT about making profit. Enterprise is NOT about making you rich. It is about making society better for everyone and when you start an enterprise or whatever you are implicitly accepting the compact that betterment of the human race is a primary objective and personal profit is a distant second. Progressive Taxation is NOT redistribution. If personal profit and accumulation are your main objectives then you need to be taken out at dawn and shot because your genes are not worth propagating however great a brain you may have.

        1. Katniss Everdeen

          You take the money away from them so that they don’t buy the politicians and the government.

          You take the money away from them so that they don’t buy up the competition and create monopolies.

          You take the money away from them so that they don’t pass it on to their heirs and create a ruling, financial royal club to which no one else can belong.

          You take the money away from them so that, if they want more, they have to produce and sell more, creating more jobs and more customers. (See Henry Ford.)

          If they complain that you are taxing away too much of their profit and they’re just not going to work any more, you say, “Fine. Good-bye.” And when they get their lazy, entitled asses out of the way, some one else who is willing to work within a system that benefits everyone will step up and do the job.

          It’s not so much about redistributing the money as it is about redistributing the opportunity.

        2. MikeNY

          We already recognize the social necessity of wealth redistribution in the estate tax. However, the system and tax code have been gamed such that we have 0.0001% of the population controlling more wealth than 50%, which is a state of affairs I believe to be both immoral and unstable. So I would argue that we need asset or wealth redistribution. As well as more progressive taxation.

      2. rand

        I hear there used to be a provision where the Fed Reserve could actually provide cash directly to the citizens, but the provision was recently removed from the statutes. Seems like direct payments could be the best way of doing some wealth redistribution.

    2. Jim A

      Simply not giving income from wealth preferential tax treatment would be a step in the right direction. Even saint Reagan thought THAT was a good idea.

    3. Rodger Malcolm Mitchell

      Not sure how increasing taxes on the rich helps the middle and the poor.

      All that would do is take dollars out of the economy, which is the opposite of stimulative. So the economy would suffer, the rich would be a bit less rich, and because the economy suffers, the middle and poor would suffer.

      By far the better solution is for the federal government to deficit spend more on programs that help the middle and the poor, thereby adding dollars to the economy — dollars that directly lift the middle and the poor.

      These are listed in the Nine Steps to Prosperity

      1. PaulArt

        “…All that would do is take dollars out of the economy” You mean like the billions of dollars that Corporations and the 0.1% are sitting on right now in America? Or maybe when you say ‘economy’ you mean the Indian, Chinese and Bangladeshi economies perhaps? Very true. Taxing the rich more would definitely harm the Third World economies.

        1. Wayne Reynolds

          I believe all of those billions that the .01% are sitting on are in the Cayman Islands and all the other offshore shelters around the world, not in America.

      2. Lambert Strether

        Increasing taxes on the rich helps the poor in two ways:

        1) It makes it harder for the rich to purchase the government with whatever loose cash they have lying around, and

        2) It reduces the possibility of creating an aristocracy of inherited wealth.

        Next question, please.

    4. Jim Haygood

      In the 19th century, coupon-clipping plutocrats were so fanatically anti-inflationist that after the War Between the States, Congress repegged the dollar to gold at its prewar value, prompting a record 5-1/2 year recession (1873-79) and another 20 years of grinding deflation.

      A half century later, as Frank Roosevelt grabbed both gold and estates (via confiscatory taxation), the wealthy had an epiphany: the mirror image of the Federal Reserve’s currency depreciation is asset inflation. That is, the inflationists whom they’d fought so bitterly in the William Jennings Bryan campaign of 1896 could be their unwilling allies!

      Given the highly skewed distribution of assets, asset inflation is captured almost entirely by the wealthy. For the poor, chronic depreciation of their purchasing power is simply another nuisance tax. The Federal Reserve, which after all is a cartel founded by elite bankers, is the best friend plutocrats ever had.

    5. Banger

      Great post as usual, Hugh. I think your solution is not a good one though. While, theoretically, I think progressive taxation makes sense it is just too complicated and too easy to game as a practical matter. We should be taxing wealth rather than income, in my view. We need higher property taxes, excise taxes, perhaps look at VAT, high luxury taxes, higher user fees for federal lands and so on. But the main focus should be in reforming the political system including election reform and the breaking of the DP/RP stranglehold on politics.

      In terms of economic gains we should focus on nurturing cooperatives, unions (of all kinds and shapes). We should all try to either eliminate the status of corporations as people or use the laws to re-organize into corporate communities and networks of corporations. The challenge of this time is can the non-rich turn of the cable TV and organize to neutralize the political power of the corporate elite? Without political organization no reform is possible. Let’s be clear here–the Democratic Party has shut the door on reform and needs to die along with the Republican Party which will dissolve like the Wicked Witch of the West when doused with water. What is the water? The willingness of people to expose its policies as anti-human, anti-spiritual, and based on Ayn Rand not the Bible.

    6. porge

      There are a lot of crazy lone gunman out there that would be very upset with this proposal.
      I think it is plainly obvious that taxing passive income at higher rates and lowering taxes on productive activity and wages would increase real economic activity.
      The real problem is the same problem that has always been manifest and that is that money is power. Those with money will always…..always influence the structures of society to increase their control.

    7. Clive

      Hugh, ha !

      Can I steal your opening funny line and offer my own (inferior) variant ?

      ““Wall Street mystified why the Genie of the Lamp who appeared offering free wishes but was told to go and jump in a lake, and who then promptly did so, now no longer around to respond to requests for new wishes”

    8. Crazy Horse

      re progressive income taxation:
      Addressing inequality by leveling of wealth is all very well, but more important is changing how the money that Government collects is spent:

      1- Cut the budget for the imperial military/surveillance state to a constitutionally mandated amount not to exceed the per capita average expenditures of the 20 most wealthy countries in the world.
      2- Make all features of politics as usual— lobbying, vote buying, revolving door jobs, ect. a capital offense. Publicly fund elections and ban retired/defeataed politicians from future corporate employment.
      3- Distribute the annual proceeds from the 100% estate tax equally among the entire population of 25 year old’s as a nest egg/start up opportunity fund.
      4- Provide free higher education and medical education for all on a merit basis.
      5- Eliminate private medical insurance and replace it with a national single payer system.
      6- Eliminate monopoly prescription drug licensing and fund medical research through publicly funded research hospitals and institutes.
      7- Initiate a massive publicly funded program to provide living wage jobs and convert the national infrastructure into one with a sustainable energy budget and climate neutral impact.

    9. flora

      Well said, Hugh.

      Rolling the tax rates back to 1981 would help. Reagan came in vowing to cut taxes. And he succeeded in cutting taxes. There have been only tax cuts for the top 1% for the past 30 years. As the old saying goes, “it’s not what you make, it’s what you keep.” For the last 30 years the 1% have been able to keep more and more and more by shorting main street and most of the

      Top tax rates 1980 to 2010. (numbers not adjusted for inflation.)

      Corporate tax rates in 1980, 46% with a top bracket at 100,000 (in 1980 dollars)
      In 2010, 35% with a top bracket at 18,333,333.

      Personal tax rates in 1980, 70% on incomes $215,400 and over (in 1980 dollars)
      in 2010, 35% on incomes over $373,650.


      With corporations and the 1% paying much less in taxes, the middle classes have seen rising fees, local tax increases, reduced govt services, reduced govt financial support to local schools and roads, and a decrease in govt saftely net programs. The 90% have been shouldered with the task of subsidizing the last 30 years of tax cuts for the 1%. Leaving less money for Main Street, lower job creation, and an overall poorer citizenry.

      1. readerOfTeaLeaves

        If you ever want to read a brilliant analysis to back up your points, pick up a copy of Elizabeth Warren’s “The Two Income Trap”. I suspect that the reason she is so disgusted with the banks is because she’s seen the data to back up the claim that in the 1980s and 1990s, ‘debt’ became America’s most profitable line of business. And a huge amount of that debt was taken on by the middle class.

        Hence, as Hugh eloquently points out, the Golden Goose is no longer able to produce. The parasite has eaten its host. Which calls for new rules.

    10. optimader

      How about unwinding the Mil/Ind 50% to start, Homeland Insecurity by ?% (because we don’t even grasp what is spent), farm subsidies 100% (I read a few years back farm subsidies represent 25% of every retail food $ spent in the US, probably more now?), treat interest income the same as earned income, delete home mortgage deductions, CntrlAltDel the current healthcare “solution” and type in single payer?
      Corporate welfare is cultivated by a small constituency (by popular vote) and is bought tragically inexpensively at the political level.

    11. Dan Kervick

      Right. Things like an increased minimum wage are better than no increase in the minimum wage. But it’s just one of the crumbs that a slightly more nervous elite is hoping they can swap in to co-opt and distract the emerging new egalitarianism.

  4. Peter L.

    I thought this was an interesting quote (from the article, Bloomberg link in the post): ‘“It’s great politics to demagogue income distribution and complain about the rich getting ahead and the poor falling behind,” said Holtz-Eakin, a former Congressional Budget Office director. “The substance of what he’s actually done doesn’t match the enormity of the problem as he’s portrayed it.”’ Sophisticated irony?

    I don’t think it is clear that the “upper crust and the technocratic elite” have made a mess for themselves. It might turn out wrong, but it seems not unreasonable to imagine a world where these folks do quite well for themselves for generations to come. Maybe we could call it a neo-feudal world. For the very top it could be stable.

    I think it is wrong to believe that the upper crust and technocratic elites will ever “realize” they have created a mess for themselves because there are some compelling reasons to believe that they haven’t. It is not crazy to think that they will be able to further cloister themselves, and protect their families from a horrible world that the rest of us have to deal wlth.

    At best, I think we would have to hope that these elites would become concerned about their great grand kids. It’s not impossible, I suppoe.

    1. Russ

      It is not crazy to think that they will be able to further cloister themselves, and protect their families from a horrible world that the rest of us have to deal wlth.

      In my area of the world, the “cloistering” strategy is starting to fray. In a sort of perverse unintended consequence, people driving late-model cars with the latest theft prevention systems have been subject to a much higher rate of carjackings. The thieves realize they can’t defeat the theft protection system, so they just steal the running car from you at gunpoint.

      1. fajensen

        The thieves realize they can’t defeat the theft protection system,
        In Belgium, Brussels in particular, even people who are not drug dealers, now have two exterior-type doors: One from the street and a second one into the house/apartment. Like “street -> hall -> house”.
        They leave their car keys and the throw-away wallet in the hall, so the Albanian gangs of thieves will not bust into the house with guns and violence before the police arrives.

    2. Eleanor

      I don’t think anyone has generations of the status quo. The articles I read on global warming get more and more scary. The rich are going to find it difficult to insulate themselves from huge climate changes and the resulting social disruption.

      1. Peter L.

        I figure the practical question, roughly, is this: how much time and effort should we spend trying to persuade the “upper crust and technocratic elite” that it is in their self-interest, or in the interest of the progeny, that global warming be dealt with immediately, and that the dangerous level of inequality be reduced, and so on?

        I’m not sure of the answer, but in the post it is assumed that they have created a mess for themselves. I think it is possible this is right, especially given global warming as you say. However, I think it might be wrong, and maybe more importantly, I think “upper crust and technocratic elite” might reasonable judge that they will survive comfortably, because of technological advances and a strong security state.

        For instance, (I haven’t googled this but) I bet that New York City has a police force with more manpower than the entire Canadian army (there are often many more police officers surrounding demonstrations in NYC than demonstrators), and maybe is even more sophisticated technologically by some measures; the Hurricane, Sandy, was most devastating in areas where poor people were living. Maybe this is the kind of thing that would allow those folks in the upper crust to, even if subconsciously, calculate that everything is going to be fine for them for a long time.

        1. Canadian maven raven

          Peter L,
          I hate to be the bearer of bad news, but you bet wrong :
          Total active and retired NYPD officers: 50,000 (approximately)
          Total Canadian Forces personnel (as of March 31/2011): 119,000

          Getting back on track with the theme of the discussion, I’d say it’s probably a reasonable conclusion to state that “the upper crust and technocratic elite” will continue to be sheltered from the consequences of economic inequality. For the most part, they live in communities that are insular and a good geographic distance from those whose lives are, daily, severely affected by the outcomes of the short-sighted and hard-hearted social and economic policies (and business decisions) that are often enacted to protect the financial interests of a small demographic group.

          I live in the Metro Vancouver region–an area comprised of 24 municipalities– and within that region we have one of the wealthiest neighbourhoods (the British Properties in West Vancouver) and the poorest neighbourhood (Vancouver’s Downtown East Side) in the country. These two neighbourhoods are the extremes. What’s more difficult to guage is the extent to which middle and lower middle-class individuals and families are scrabbling to keep their heads above water as the cost of living gets increasingly ridiculous (especially in Vancouver).

          We’ve also seen a lot of jobs disappear in Canada, along with the middle class that held those jobs–to be replaced by a working poor service class who can mostly only find jobs in the retail and (fast) food service sectors. While the minimum wage in British Columbia is CAD $10.25/hr. (I was appalled at reading about minimum wages as low as $7.35 an hour; the lowest minimum wage in any of the provinces in Canada is CAD $9.95/hr in Alberta), it is still a poverty (or below poverty) level wage as most of the service sector only employs people on a part-time basis. A living wage in Vancouver is closer to $19/hour (based on full time employment of 35-40 hours per week).

          While it’s true that an increase in minimum wages–or better yet a commitment to paying a living wage and cutting the huge disparities between the CEOs and workers at the bottom of the ladder–is papering over a fundamentally flawed system if we’re not addressing the systemic inequalities–I don’t think we should expect those who are suffering the most economically to keep toughing it out until we can change the system. We need both short and long term solutions.

          One last thought, directed to those who got on their high horse about the lack of family-planning on Ms. Latoya’s part. From what I’ve read and heard, it seems the religious right in the USA has been all too successful in lobbying to axe sex education and family planning from high school curricula in some states. Where exactly will these teenagers and young adults learn “family planning”–or more precisely how to choose a reliable contraceptive and remember to use it every single time–if they’re not taught at school and not given the clear facts at home? Furrthermore, the more reliable forms of contraceptives are expensive. How exactly would you expect the Latoyas of the world to be able to get to a doctor to prescribe her contraceptives, let alone be able to pay for them on a regular basis if they are at a job that pays minimum wages and offers no medical or extended health benefits?

    3. Katniss Everdeen

      I’d have to agree.

      A motivated, well-educated and hard-working middle class with an ingrained belief in possibility is a mortal threat, not a “mess” that the elites have created for themselves. The upper ranks have been filled. No one else need apply.

      The focus is now being shifted to controlling the fallout. TSA. CIA. Obamacare. Electing schmucks like Obama who are more than willing to say one thing only to act in service of the status quo for whatever future reward he has been promised. Social media (Jeez!!!) Candy Crush. Legal drugs and GMO food.

      Appeals to “humanity” or the “fabric” of America are stale jokes, relentlessly retold because there’s a lot of airtime to fill.

      Ironically, if the US middle class is to be “saved” or reconstituted, it will be done by China, I think, when they take over as the newest global “superpower,” establish a new world’s reserve currency and deny membership in the club to the likes of Jamie Dimon, Allen Greenspan and Bill Clinton.

    4. Banger

      I think you bring up an important point. Do the oligarchs really want the world they are creating? My answer, from experience with the rich (though not recent) is that they are as unconscious and obsessed with escapism, shopping, the latest fad, entertainments, sex and status as the rest of the population. To imagine the elites as more sophisticated, literate, rational is a mistake. In my view, their money and wealth corrupts and degrades most of them. Unlike Jefferson, Washington, Hamilton and Franklin these elites care very little for society except in a kind of piecemeal way that makes them feel good about themselves like the Gates family which has been so generous but in areas that are questionable.

      The problem I see is that the oligarchs are surrounded by flatterers as has always been the case and flattery whether you are a Wall Street player or a rock star can only be destructive because it is hard to see and the people who surround the rich are well-equipped with a psychic sense of what will impress their patrons. You have to see it up close to fully appreciate the dynamic. Now, to be clear, not all the rich oligarchs are so weak–just most of them. All this is particularly true for America’s rich because we, as a culture, imbue wealth with the highest possible achievement for any human being–the rich are, to many if not most Americans, semi-divine.

      1. readerOfTeaLeaves

        I tend to disagree.
        To talk about ‘oligarchs’ seems too broad a brush.

        I’m in the Puget Sound region, and so the 1%ers that I know are self-made. They grew up in the middle class, went to (very good) public schools in large cities and suburbs, and most are astute enough to know that they were ‘in the right place at the right time’.

        IMVHO, the manner in which a person makes the wealth is a key issue. If you have simply made your wealth by either trading, or by financial manipulation, then it’s a very different mindset from people who actually invented things, hold patents, benefitted from research discoveries.

        IOW, did they simply ‘make money from money’? Or did they actually *make something* and build a company that then translated itself into wealth? Those two are very different mindsets. I’ve observed both, and in my experience the first group is more cynical and clueless; the second group is full of people with a hefty amount of social conscience and social responsibility. The first group thinks they are God’s Chosen; the second group has actually had to solve complicated problems.

        To paint both mindsets with the same brush is a serious error, IMVHO.

      2. Glenn Condell

        ‘these elites care very little for society except in a kind of piecemeal way that makes them feel good about themselves’

        It’s true noblesse oblige is on life support, but it was probably only ever a minority pursuit for elites and their flacks. I see the current unsustainable concentration more more as a function of late-stage capitalism, the Greshamite operation of self-interest by parties probably aware of the negative and potentially disastrous macro effect of their collective actions but individually ‘locked into’ them, because in an environment denuded of effective regulation, elites that choose probity will fall behind, and eventually out of the 1%. It’s the same mindset as the looter after a natural disaster, all this stuff just lying around, and no cops!

        You gotta keep dancing while the music plays, even if they are playing ‘The End’.

    5. Justicia

      Perhaps you’re right that the plutocrats think their power and privilege will be passed on to their grand and great-grand children. I’m sure the aristocrats in France circa 1783 thought the same thing.

      1. Glenn Condell

        ‘I’m sure the aristocrats in France circa 1783 thought the same thing.’

        Yes but they didn’t have Total Information Awareness and Full Spectrum Dominance. ‘The state’ arose as a result of their greed, arrogance and short-sightedness, but has morphed from prophylactic against elite power into protector of it.

    6. Wayne Reynolds

      The cloistering strategy of the elite did not work out very well for them in the E.A. Poe story “The Mask of the Red Death”. What delicious irony.

  5. Wake Up America!

    It’s not just the Latoya Caldwell’s who are struggling to make it and Corporate America knows it. And they are capitalizing on it.

    For the last week, I’ve heard many commercials for the American Express Prepaid card on a popular New York City radio station. No doubt they are targeting many former middle class customers who can barely make it but would like a reminder of better financial times. The same former customers who had their credit lines reduced or accounts closed by Amex at the start of the “Great Recession.”

    Instead of an annual fee, you’ll pay Amex $2 every time you use their prepaid card at an ATM (they are kind enough to waive the first ATM transaction each month). And you will pay the bank whose ATM you are using $2-3 for the same transaction. Withdrawing $40 just cost you $4-5.

    This is no different than having your house wrongfully foreclosed on and then having to rent a similar house for more than your previous monthly payment.

    I just read an old story form 2012 where a homeless man was sentenced to 180 days in jail by a judge in Orlando, FL for stealing $2 worth of candy. The man actually went back to the store to confess to the crime. Contrast this with the bankers who crashed the economy and at worst, were sent off to an early retirement via a golden parachute.

    As the American Express ad reminds us, “Membership has its Privileges.” For a select few in AmeriKa, it certainly does.

  6. John

    The big issue has been Washington’s Herculean effort to further income inequality.

    Consider the OCC, a branch of the federal govt tasked to ensure the foreclosure mess was handled fairly. OCC has done all it can to side with banks at the expense of property owners. OCC paid consultants earned more in settlements than aggrieved home owners — just when huge write downs on property values were needed. This is just one example.

    Another blog is almost needed to detail Washington’s championing of wealth distribution to the very top which continues unabated. The recent Ryan-Murray budget is the most recent example in which Washington is making the American middle class pay for what ails the country while sparing the very rich.

    The shrunken middle class was no accident.

  7. Teejay

    Is there any mechanism by which the Fed can in effect buy up consumer debt? Mortgages, car and student loans. President-elect Obama rejected Secretary Paulson’s offer of including
    mortgage write-downs in TARP 2; what a mistake.

    1. taunger

      The Feds already own or insure the vast majority of mortgage and student debt … the point here being that both parties are on the oligarch’s side, and care not for helping us lesser beings that scamper to and fro.

      1. Yves Smith Post author

        “The Feds” are not “The Fed”.

        To answer tejay’s question, under the Fed’s “unusual and exigent circumstances” authority, it can lend against anything, including, per former central banker Willem Buiter, a dead dog.

        1. Teejay

          To clarify, I wasn’t conflating/confusing the slang for our government (the Fed’s)
          with our central bank (the Fed). Obama turned down Paulson’s write-down offer which would have freed up the middle class’s buying power. Instead
          we’ve got Bernanke buying up overvalued or non-performing mortgage securities (aka toxic sludge) with his QE trickle down policy. If the Fed can buy up bank assets why not buy up the difference in mortgage value?
          Bubble value minus Real value. The banks get paid and haven’t lost money from a write down, the homeowner gets a chunk of crushing debt off their backs freeing up money to spend and we experience a real recovery without
          re inflating the debt bubble economy. Certainly the real economy would have gotten a much bigger bang for less than the ~$3T QE buck that was given
          essentially free to banks that did little more than increase their bonuses
          (2011-2012 up $4.5 m on average).

  8. Monhegan Curmudgeon

    It turns out that, simultaneous with the introduction of Obamacare, the IRS has upped the threshold for deducting unreimbursed medical expenses (such as health insurance paid by the individual) on your Schedule A from 7.5% of adjusted growth income (AGI) to 10% of AGI. Interestingly, there is a major exception: filers over 65 (who, of course, qualify– in most cases– for Medicare, the government’s low cost and highly effective single payer system).

    However, for all those under 65 who are paying their own health insurance expenses, their ability to deduct a portion of those costs has– starting in 2013– been substantially reduced or even eliminated. It strikes me as incredible that this change would be introduced at exactly the same time poorer working folks without employer funded health insurance are being asked to come up with payments for health insurance, a cost that– no matter how justified– is likely to represent a financial hardship.

    Finally, since this strikes me as a fairly material tax increase, I am more than a little struck that I had not heard one bleep about in any of the financial publications I follow. I would be curious if I just missed the story or if other NC readers are as surprised by this back door tax increase as I am. (I only discovered the change in the tax law from preparing my 2013 return over the weekend.)

      1. Jim Haygood

        The NY Post had a story on this last week:

        ‘Americans are currently allowed to deduct expenses that exceed 7.5 percent of their annual income. The threshold jumps to 10 percent under ObamaCare, costing taxpayers about $15 billion over 10 years.’


        That’s rich, but so is this:

        ‘The new taxes and fees include a 2 percent levy on every health plan … a $2 fee per policy … [and] a 3.5 percent user fee [for insurers] to sell medical plans on the HealthCare.gov Web site.’

        How’s that for enhancing affordability? Add $2 plus 5.5% to every premium. As in virtually all federal legislation, upbeat-sounding adjectives such as ‘affordable’ are used in a cynical, Orwellian sense.

    1. John Glover

      The IRS didn’t up the threshold. Congress did.

      Honestly, I’m really tired of people blaming the IRS for simply carrying out the laws that Congress passes.

      1. Robert Frances

        Thank you for mentioning this. When I hear people criticizing the IRS for one tax rule or another I assume they have some hidden agenda. Congress (and state legislatures) are the primary means by which federal and state tax rules get changed, not flunky IRS agents and state tax agencies.

        The majority of lower income people don’t “itemize” anyway and use the “standard deduction” (in 2013 it’s $6,100 for single filers; $12,200 for joint filers). The majority of tax itemizers often own a house/condo with a mortgage and/or pay relatively high property tax, or pay high state income taxes, or are especially “generous” chartitable givers (especially with their previously untaxed appreciated assets like stock or art or real estate.)

        Every tax deduction and tax credit has tens of thousands of supporters, but lowering tax rates for lower-income families on regressive payroll (federal) and sales taxes (state) in exchange for abolishing Sch A deductions (mortgage and investment interest, property and state taxes, charitable contributions and, yes, medical deductions) would be very beneficial for most lower income households. The wealthy wouldn’t be able to tax shelter as much income and the lower income househods would have much more after-tax income.

        Many of the points made above about the tax system are well-stated. The tax system is indeed one of the major reasons why there is such a wealth disparity in the US (and world). Asset gains are taxed very lightly (if at all) and wages and basic consumption are taxed quite high compared to decades past. Reforming the tax system to reduce and eliminate regressive payroll and sales taxes with offsetting tax increases on large passive incomes including rent income, interest income, dividends and capital gain income would go a long way to helping restore a better balance between the haves and the have-littles.

  9. Adriannzinha

    If anything can be said about 2013 is that the forecast, if anyone harbored any doubts is now quite clear. I’m reminded of an image of a train full of passengers going downhill with the conductors furiously throwing more coal and wood to increase the speed. Where in 2007 I’d have said the passengers were happily oblivious, that seems to be much less so. That is, save for the holdouts, mostly in the Democratic party, who still linger illusions about the next great political savior who’ll yet again “disappoint”.

    There’s only so long and so hard the elites can push a population of brain-washed debt zombies who do nothing but shop, tweet, and text before they enter a terminal cannibalistic decline.

  10. Arnold Lockshin

    In times of crisis, the main task of the US government, the Fed, Congress etc.is to enhance profits, especially for the banksters – the most powerful sector.
    “Quantitative easing” was never about lowering unemployment or improving the lot of the averge American. It was about buying up the dead trash (bonds etc.) at nominal prices for the Wall St. thieves.
    That’s the name of the game. “Change you’re a fool to believe in” or some other ad agency slogan provides the cover. US capitalism uber alles!
    Arnold Lockshin, political exile from the US now living in Moscow, Russia

  11. PaulArt

    One thing that really drives me nuts about this article is how we NEVER discuss the trade deficit in the context of income inequality. The 0.1% rich in America are dependent on the 60-70% consumer driven economy of THIS COUNTRY, i.e. the USA for their profits. India and China are not buying the products and services that they make and provide, it is the people and middle class people of the USA who shell out $$$ for the crap that comes from these countries. The 0.1% rich are looting this country to put money in their own pockets and Bloomberg is an A55h*le not to discuss this in the context of income inequality. Let’s devalue the dollar first and then start the discussion anew. It is amazing and stupefying how even well read people simply keep sitting inside the metal walls of Robert Rubin’s prison chamber and keep yammering about income inequality and progressive taxation and yadda yadda. As Hugh mentioned, these are all distractions. We first need to get out of these magic woods of Free Trade and Free Capital flows. Free Trade and unfettered capital flows were ALWAYS a banker’s wet dream not to mention a strong currency. Let us first start by discussing a Final Solution for Bankers followed by their minions in the Business and Economic Departments of Universities next. Let us have a disemboweling of Robert Rubin followed by Pete Peterson. These fellows were the master web spinners. It’s unfortunate that Walter Wriston is already dead otherwise we could have started with that A55h*le first – still there is his wonderful disciple Sandy.

    1. Lambert Strether

      A Post Office bank would be an excellent final solution for a lot of banksters. I don’t care if they play the ponies with their own money, I just don’t want them anywhere near mine.

    2. Lonely_in_Dallas

      Actually it is not true that the rich in America depend on the USA for their profits. I read an article two or three years ago (perhaps in Businessweek but I can’t be sure) that listed all the Fortune 500 companies, and what fraction of their profits during the preceding year came from the USA. Not only were the ratios uniformly very high, meaning that these companies made much of their profit overseas, but in some cases the ratio was more than 100%, meaning that the US operations were running at a loss. Don’t forget that all those profitable Indian IT companies buy Dell laptops and desktops, Cisco routers, etc.

      1. Otter

        Don’t forget that all those profitable Fortune 500 companies rent postboxes in low tax jurisdictions and cook their books to show profits where they taxed least. Some even arrange to show year after year losses where they can attract refunds and subsidies.

  12. Adam_Smith

    Many individuals at the top of the economic ladder are fond of claiming that nobody should mind if the very rich are getting richer and pulling away from the rest of us so long as everyone is getting richer — or, at least, not getting worse off as that can be interpreted as meaning that nobody is being made poor by the success of the very rich. This argument also works well in reverse: those at the top of the economic ladder should not mind those lower down gaining on them as long as the very rich continue to get even richer. That can be interpreted as meaning that nobody rich is suffering from gains made by the poor or anyone else lower on the ladder.

    Minimum wage hikes probably don’t help the overall situation much as wage gains by some will be balanced by job losses by others. Political concern over inequality has risen to prominence only quite recently and these proposals are the easiest to make quickly. We have quite a ways to go before the thick-headed political class can begin to understand and address the root causes of the situation and, as usual, it will be much delayed by the demands of powerful special interests. Eventually, I predict, the extreme over-financialization of the economy and the involvement of monetary policy in bringing it about will be identified as major root causes in need of correction — but that will be a very long time in coming.

    1. Lambert Strether

      It’s the undeserving rich that are the problem. Many of them are criminals, and many come from the FIRE sector, which is wholly parasitical.

      Also too, the world economy, which they crashed.

      1. Ebenezer Blackadder

        Also Fed policies make reach reacher without them even trying. How people consider “trickle down” theory acceptable and not immoral is beyond me.

    2. Wayne Reynolds

      ” We have quite a way to go before the thick-headed political class can begin to understand and address the root causes of the situation…”. I think you have these things upside down. It is the struggling masses on the bottom that need to be awakened and educated about the causes of their downfall. Not a top down solution, but a bottom up solution is necessary to eradicate and solve these social problems. Unfortunately, I only see a slight stirring of insight among the lower classes and those with the most insight are the people so many in this country are loathe to associate with. Without the consensus of those on the bottom, the current status quo will proceed, business as usual.

  13. Banger

    All this was predictable 3 decades ago. The wealthy, through a variety of methods were allowed to seize the government bit by bit in its entirety. The result: an inexorable march to neo-feudalism. I want to emphasize that it cannot be stopped. What we can do is to face the situation, stop fretting and complaining about it and find ways for those of us who are not rich or in the upper-middle to survive in convivial society.

    There is only one solution, IMHO, and that is coming together with others in community and re-learn the social skills that enabled our ancesters to come together in mutual aid.

  14. clarence swinney

    Story told me.
    A policeman was checking a neighborhood walking the street with a dog sniffer sniffing each car for drugs. They came upon a station wagon and dog went wild. He was trying to get in the car.
    The officer had to drag the dog to the door of the home. The owner of the car had just arrived from a distant state for a Christmas visit. He was a minister. He asked the officer to wait a few minutes.
    He brought forth a dog, opened the storm door a few inches, and backed his dog to the door.
    The sniffer went wild trying to get at the dog in HEAT.
    The officer was last observed forcibly dragging his dog (with an erection) up the street.

    1. fajensen

      The owner of the car ….. He was a minister.
      A student of James Brown? Trucking in from Colorado?

  15. neil

    The system is reaching a tipping point, as the degrowth evangelists have been alarming. Just a matter of a few more years before we see some very big changes ahead.

  16. direction

    Being poor is so expensive! The poor rural area that I live in has much higher gas and food prices than the city 6 hours away. But rents down there are second only to the Big Apple, so it’s hard to imagine moving there to find work. One of my friends works as a housecleaner and her monthly (self employed) health care insurance is going to run over 400 bucks. 7.5 bucks an hour is 1200/month, subtract rent and, oh wait, sorry that’s Before Taxes are removed. I don’t know what the take home is because when I worked for minimum wage I needed to pull 50 to 70 hours a week because you can’t survive on less (and that was with cheap rent and zero health insurance). Also: it is standard for employers make you sign away your rights to overtime pay during the hiring process. Clinic doctors treat you like dirt because you don’t look affluent. You start doing every chore by hand and then that takes up all your time. I’m a female, but even I got to the point where I had to estimate that taking time off work to replace the radiator in my car or change my own engine mounts was cheaper than working to pay someone else to do it. But then you end up discovering some inaccessible recess with a stripped screw and yes, well, you feel stripped and screwed as well.

    1. J.

      > Also: it is standard for employers make you sign away your rights to overtime pay during the hiring process.

      In that case you should discuss it with the DOL. Your state DOL will also find that very interesting. In general, hourly workers must be paid overtime.

      quoting from http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.pdf:

      Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455
      per week. Job titles do not determine exempt status.

      1. direction

        Well, they do this pretty standard here. I’ve had the same treatment in 2 different counties. Once at an orphanage where we commonly did 12 or 16 hour shifts and the other in eldercare where you are in their homes for 60 -72 hours straight.

        When an employer hands you a paper that says you legally waive the right to overtime, he just asks of you want the job or not.

  17. susan the other

    The Fed, the Administration, Congress, Treasury and all central bankers are either complacent or dedicated to a certain goal at the expense of poor people. It has never been articulated. Just smiles and promises and platitudes. There is no timeline to this torture; it could go on forever, the goal posts could be moved back; who knows what they are really doing. Raise the minimum wage? What nonsense. The goals of society need to be discussed.

  18. Sagebrush

    Playing the people against each other, the pre scripted Democrat vs Republican, left vs right fantasy theater in Washington D.C. allows both parties to keep the establishment agenda going full speed ahead. The Associated State Propaganda Bureaus, AKA the Main Stream Media keep the people arguing over things Congress is probably never even going to vote on while paying little attention as the FED shovels the general populations wealth to the Wall Street banks, the corporate elite and the ultra-rich. Things may not be good at all for most Americans but Wall Street and the 1% are doing the best they ever have. I have to believe Lincoln’s (“Government of the people, by the people, for the people, shall not perish from the earth”) did perish and was replaced by a Government of the ultra rich, by the ultra rich, for the ultra rich. As far as the major political parties are concerned, both sides are two sides of the same coin and have been for a long time. It was obvious to me, when more Democrats then Republicans voted for Bush’s TARP bailout program. They knew that 75 to 80 percent of the voters were against the bailout but they voted for it anyway with little if any oversight requirements. Doesn’t take a Genius to realize the deck was stacked by both parties before the hand was dealt. Once TARP was occupying everyones attention it was easy to shovel 16 trillion to the domestic and foreign banks. Funny how that happened isn’t it?

    1. Wayne Reynolds

      We have never had a “government of the people, by the people and for the people”. Read Howard Zinn’s chapter of the Revolution in the “People’s History of the United States”. The crushing of Shay’s Rebellion and the Whiskey Rebellion should have laid that myth to rest centuries ago.

      1. Sagebrush

        I have to agree with you, Lincoln was probably just being a typical tell them what they want to hear even if it isn’t true, american politician.
        Looking Back, it seems as soon as the merchants, bankers and the rich got together after the revolution the U.S. Government was destined to evolve into the totalitarian oligarchy in place today.

  19. bob smith

    couple of points on some though provoking blog entries.
    What is money- when the government runs a deficit, and the fed prints as much as it wants, when the US government must print 1 trillion a year in interest payments on the debt, well, when there are trillions and trillion of this stuff floating around like confetti, it makes me wonder why fiat is hoarded.

    Wages should be tied to dollar creation, not to cpi. Does anyone here believe CPI: i do know that CPI tracks the cost of a laptop and iphone very well, but for everything else- not so much.

    Inflation of food has been kept down due to substituting GMO in lieu of organic food. same with farm raised fish, rather than ocean caught. but for personal inflation look to your most expensive items. – i know that your fancy TV is cheaper than ever- but what about the rent?

    Since 2000 i am paying:
    3x for rent
    3x for gas
    3x for medical costs
    3x for organic food
    3x for gold

    has everyone’s salaries increased 3x since 2000?

    the minimum wage needs to be tied to dollar creation, not the cpi.

    another food for thought idea.
    money velocity will slow dramatically, as peer lending and crowd funding go viral.
    p2p lending has already loaned out more than 5 billion in the last few years, and it is just getting started. If people continue to borrow from other people, rather than from a bank, which can just create credit on a whim, will we see true deflation?

    the only shot the middle class has, is crowdfunding, peer lending, and creating worker owned business that pay well, all on a local level.

  20. American Slave

    Whats going on reminds me of a movie like Water World or Mad Max. The system seems to have run out of steam and now people are just fighting over ruins from a once productive civilization.

    I think there are many ways forward but one I would favor most is more local power and reduced federal taxation thereby leaving more room for local taxation and development and a move more generally not to a manufacturing or consumer of finance economy but to a R&D and engineering economy where a substantial amount of people work in that sector that should be financed by any and all means available even if its quantitative easing.

    Ive met people of incredible intelligence and talent that could move the world forward but its wasted on them being a fund manager or in marketing and advertising or some other b.s. and ive met people as simple as a farmer in Oregon who didnt even go to high school and took over the family farm but was able to build incredible machines such as one that in a single pass could dig and connect and bury irrigation pipe and work 90% of the time, it wasn’t perfect but it more than did its job and people shouldn’t underestimate anyone based on their education because you never know what people are capable of.

    Instead of controlling money we are letting it control us and use it for commodity speculation instead of building civilization, corporatists may think that it was a good thing when they destroyed the Soviet Union and attack big government but now it lost and is losing its purpose in the eyes of many. The dynamic people who would normally join some kind of left movement that no longer exists in any meaningful capacity are now joining the radical progressive right and taking there anti big gov stance to the next level against big business and are finding that they want small local community and small local business despite the attempts of the corporatists to capture the movement.

  21. Android 16

    This all seems like a synthesis of government capture by usurers who have in turn financialized and levered the economy that is slowly getting to a point where it will not be able to service the numbers … principal plus interest recycling into various misfinancializations.

    1. Android 16

      “The financialization of the US economy follows the same pattern that marked the beginning of the decline of the Habsburg Spain in the 16th century, the Dutch trading empire in the 18th century and the British in the 19th century (final step being the collapse). The leading economic powers have followed an evolutionary progression: first, agriculture, fishing and the like, next commerce and industry, and finally finance. Several historians have elaborated this point. Brooks Adams contended that societies consolidate they pass through a profound intellectual change. Energy ceases to vent through the imagination and takes the form of capital. (K.Phillips, The peril of and politics of radical religion, oil, and borrowed money)

  22. fresno dan

    “Oh, puhleeze. Robust recovery for who? The Fed not only threw staggering amounts of firepower at salvaging bank balance sheets, while showing no interest in rescuing ordinary Americans. It was also all-in on the Administration’s program to paper over the banks’ chain of title problems and their widespread servicing abuses, and didn’t bother to obtain any meaningful concessions or reforms, the most important of which would have been principal modifications, a remedy favored by investors as well as homeowners. The Fed has been all too happy to accept mission creep rather than speak up forcefully for the need for more fiscal stimulus.”

    It has been awfully hard for me not to think that by making the wealthiest totally exempt (from well deserved bankruptcy for fraud, idiocy, and fraud/idiocy) we have made a class that ACTUALL believes they are the “meritocracy,” that they “are doing God’s work” and that in running derivative plays that broke the world they need their bonuses to fix what they screwed up. To say the FED saved the economy is like saying a guy who broke your leg, than set it, is your friend.
    The US – of the banks, by the banks, for the banks…

  23. Tim Gawne

    Until our gutless liberals will accept what people like FDR, Samuel Gompers, and John Maynard Keynes realized, that nobody beats supply and demand, and nobody beats demographics, this is all lip-flapping.

    Enforce the laws on illegal immigration. Restrict legal immigration to moderate levels. Give the average worker some leverage. Or shut up and spare us your hypocrisy. It’s that simple.

  24. GRP

    Depressing as Ms Caldwell’s story is, it is extremely common in the world. The difference is that in most parts of the world, they don’t complain about it. In fact, people in far worse position than Ms Caldwell may not only find nothing to complain about, but even grateful for having what they do.

    So what is the difference? It is in expectations and how the present compares to the past. In the West for a few generations it was taken for granted that future will be, in material prosperity terms, better than the present for most of the people. Increasing material prosperity came with increasing depletion of non-renewable resources. We are now at a point resource extraction in the world has reached a peak meaning overall resource consumption in the world can only go down and not up. Which means it a zero sum game now. Someone has to consume less for someone else to consume the same or more.

    How much notional wealth the rich in the West possess is not of much significance. The key is how much resources they consume. Someone who is a billionnaire doesn’t consume million times more resources than someone who is a mere millionnaire and a millinnaire doesn’t consume a million times more than some who has no assets. Even if you stripped all the 1%ers of their wealth, the total resource consumption will not be impacted significantly. However if the rest are impoverished by 10%, their resource consumption will come down by that amount.

    The recession/depression in the West is here to stay. It is possible to hang the elite to get some satisfaction, but not to convince the rest of the world to divert the dwndling resources to keep up the standard of living of the Western middle class.

  25. Sir Flatulus

    There is something very revealing about the anger and outrage so many of you commenters are putting on display toward WC Varones. Something very self-congratulatory. So many of you are tripping over each other to be the first to condemn and the most angry and hateful. This reveals more about you than it does about WC Varones, whose point you can ignore but that won’t make it go away.

  26. farang

    Well geez, speaking of “Mantras”, here is a prime example of “Industry/Production bad, Speculation Good” CRAP:

    “Dimon, whose father is JPMorgan Chase CEO Jamie Dimon, described…..the country’s “manufacturing and industrial hot spots” as “mere vestiges of a bygone era that’s been eclipsed by new economic power centers like Wall Street and Silicon Valley.”


    Apparently, this bimbo journalist has never been to Shanghai. Wall Street? Like a small block in Shanghai. Make that tiny block. Silicon valley? Yesterday’s news. Silicon valley, what are they inventing: new ways to spy on us? Oh yeah, that should be a real sustainable money-maker…..

    Am I the only one that recalls the well-documented 15 year cycle between rising east and falling west, rising west and falling east? Seems that East started its descent, oh…back in 1997….which may explain why one no longer sees rusting hulks of stopped high-rise construction in Thailand, and instead cranes blooming on the horizon now….

    Yes, Industry is a relic, a “mere vestige” of a bygone era. Walmart stocks their shelves with goods made on Wall Street and El Camino Real, didn’t you know? Just ask a Chinese or Indian……..the ones making things for Walmart and now holding the gold. Gold that they will not be speculating with, they are buying on the cheap now (thanks to fraud/manipulation of PM markets and non-regulation/enforcement) and they will HOLD. Or Sell Dear.

    Meanwhile miners are closing operations from said Fraud-based pricing manipulation, and Swiss refiners are running three shifts and finding sources more scarce…say, isn’t that something called Supply and Demand? Probably a vestige too? Amazing how blatantly obvious those that believe their own hype can be, isn’t it?

    Gold. I can show a written history of use as currency as early as 1700 b.c. Egypt. And I still have old US $50 dollar bills…..Gold Certificates. “Good as gold.” Well, they used to be…before they became “relics.”

    Gold. Silver.
    Let’s see fancypants gangster Jamie and his new sugarmamma Janet print some of that!

    BTW: as a very amateur, “armchair” historian, I should offer the following as a warning: almost all the ancient cultures had Debt Crisis right before failure. Not just democracies. Over and over, a mark of history, and usually solved by the king/ruler declaring debt wiped clean, and/or absorbing it himself.
    1656 b.c.Babylonian Kassite king “Ammi S(h)aduqa” being one of them….and I’ve always wondered if he isn’t the “source” of “Shakamuni”, the “peasant prince” that gave all his wealth away, and took a vow of poverty. Yes, “Buddha.” One of them, anyway.

    That would certainly make one popular and legendary, to say the least.The timeline matches, even if one thinks it does not. (Not the “conventional timeline” that it matches, that is.) One of the last Roman emperors also declared a debt holiday/jubilee.

    Aren’t we doing that for the bankers like Jamie Dimon and his idiot offspring now? Only we aren’t kings. We are absorbing what only kings can afford: won’t work.
    History does repeat itself, over and over and…..over again. No, the world won’t become a dark futuristic cinema, but fundamental changes will occur. Label it “standard of living deflation.”

    Dimon (like that is their real name…) might want to stfu and pack now. Her daddy is a GANGSTER. Fancypants one in $3000 suits, yes, but still a common gangster. You know what happens to fancypants that forget they are gangsters? Ask “Big Paul” Castellano.

    Jamie and his merry band of banking riff-raff gamblers have trillions outstanding in derivative bets. They will not be able to pay their loses, fiat paper will fail: something bad is coming. Frankly, I hope they all have every last cent taken away to cover their gambling, then put to work in one of those private prisons they invest in now.

    The presstitute msm is pushing war, with China, with Russia, with Iran, with Syria. with Africa…ANYTHING to stave off losing the Printing Press.

    “tick tick tick tick…..”

  27. Locke

    The first post here was an exceptional troll bait post that got the right and the left brawling until the new year.

    I’m unsettled by this sob story because I honestly do not know how the current system can really help the Latoya’s of America. Keep in mind that we live in a different world today than the ’80s. Transportation / automation / communication / technology has disrupted the way how businesses run. It is much cheaper to move businesses from one city, state, country to the next. America is no longer what it used to be. There are other great places to do business now; India, China, HK come to mind right away.

    So with that in mind, Americans do not live in isolation any more. While it may have been different in the past, capital moves very quickly and it will flow into regions with lower capital requirements, regulatory burden (minimum wage, onerous regulation), lower costs, and lower taxes! The trouble with a broad socialist thought to simply “redistribute” wealth – some folks earlier like to mask it and call it something else but let’s call a spade for a spade and not waste time debating whether it is right or wrong – from the rich to the poor is that although it sounds nobel in principle and may solve problems for the short term, I am fearful of longer term impacts.

    We have already seen folks like Eduardo Saverin (Facebook, http://www.bloomberg.com/news/2012-05-11/facebook-co-founder-saverin-gives-up-u-s-citizenship-before-ipo.html) leaving the country. Here we had a young, nimble, well educated entrepreneur/financier leaving the country for opportunities elsewhere. Forget about his reasons why, focus on the fact that there are other great places to be. It is easy to imagine how the Facebooks / Googles of the world can relocate – over half their servers are already outside the country. But remember that it is not difficult for other companies to leave too. If a commonly spread adage that entrepreneurs drive job creation (http://www.huffingtonpost.com/jim-price/small-business-job-creation_b_2678360.html), should we not find more reasons to encourage those folks to stay in the country while at the same time as finding ways to help the Latoya’s of America? I think they are equally important.

    Although it is sad to say, it may already be too late to help Latoya’s. At least I can’t think of the solution that actually produces short term benefits for her and society for the long term. But I think there’s hope for the future. We can prevent the Latoya’s of tomorrow with improvements to education and adult job training, simplification of taxes, and thoughtful reforms for entitlement spendings – I think we need to really consider cutting programs that cost way too much for the benefit it provides so we leave more money on the table to put towards programs that do. Social security, the biggest ponzi scam in our history, comes to mind first.

    Global economy has global rules. The old rules don’t apply any more.

    1. VXXC

      Global Economy’s Global Rules are written by and for the elite. It’s all nonsense, only the USA plays by these rules. China and all the rest absolutely don’t. We’re alone in our religion of free trade. It was all done to justify looting the country of tens of trillions of cheap easy stock market money. Capital my @zz.

      Our Elites- aren’t BTW…they had no training or character building to be elite. They were educated in the best institutions to betray, lie, steal, and told this is birthright. You are thieves, liars, traitors…morally feral, personally vile, physically craven. Pajama Boy is the perfect poster boy of the elite, that’s why they chose him. Which is proof of another of your many elite qualities…you’re insane.

      The instant that a closed economy is needed in the US to maintain our Bankers Communism…then the US borders will resemble the Wall of East Berlin. If we allow ourselves to continue to be passively victimized. Human nature, the weak are prey.

      We can’t say we didn’t vote for it, LaToya can’t say she didn’t volunteer. Read between her lines…she is lamenting that being a State subsidized baby factory doesn’t pay like it used to.

      That’s how innocent she is.

      I’m so Right I’m going Left…if it isn’t obvious.

      Genug. You prey on my people from both wings, and I’ve had enough.

      Happy New Year, and many Happy Returns on Investment in 2014.

Comments are closed.