Here is a genuinely fascinating and unusual little essay by Brad Delong:
Confessions of a Financial Deregulator
Back in the late 1990’s, in America at least, two schools of thought pushed for more financial deregulation – that is, for repealing the legal separation of investment banking from commercial banking, relaxing banks’ capital requirements, and encouraging more aggressive creation and use of derivatives. If deregulation looks like such a bad idea now, why didn’t it then?
The first school of thought, broadly that of the United States’ Republican Party, was that financial regulation was bad because all regulation was bad. The second, broadly that of the Democratic Party, was somewhat more complicated, and was based on four observations:
· In the global economy’s industrial core, at least, it had then been more than 60 years since financial disruption had had more than a minor impact on overall levels of production and employment. While modern central banks had difficulty in dealing with inflationary shocks, it had been generations since they had seen a deflationary shock that they could not handle.
· The profits of the investment-banking oligarchy (the handful of global investment banks, including Goldman Sachs, Morgan Stanley, and JP Morgan Chase, among others) were far in excess of what any competitive market ought to deliver, owing to these banks’ deep pockets and ability to maneuver through thickets of regulations.
· The long-run market-return gradient – by which those with deep pockets and the patience to take on real-estate, equity, derivative, and other risks reaped outsize returns – seemed to indicate that financial markets were awful at mobilizing society’s risk-bearing capacity.
· The poorer two-thirds of America’s population appeared to be shut out of the opportunities to borrow at reasonable interest rates and to invest at high returns that the top third – especially the rich – enjoyed.
These four observations suggested that some institutional experimentation was in order. Depression-era restrictions on risk seemed less urgent, given the US Federal Reserve’s proven ability to build firewalls between financial distress and aggregate demand. New ways to borrow and to spread risk seemed to have little downside. More competition for investment-banking oligarchs from commercial bankers and insurance companies with deep pockets seemed likely to reduce the investment banking industry’s unconscionable profits.
It seemed worth trying. It wasn’t.
Read on. I'll leave it to the experts to decide if it's an adequate or reasonable explanation. But I'll say this much: I haven't heard any of the other deregulators from that era even attempt to explain what they were thinking much less admit they got it wrong. And yet that's what academia is supposed to be all about.
This is actually a fairly familiar thing from my years as a pundit: the surest way to get branded as not Serious is to figure things out too soon. To be considered credible on politics you have to have considered Bush a great leader, and not realized until Katrina that he was a disaster; to be considered credible on national security you have to have supported the Iraq War, and not realized until 2005 that it was a terrible mistake; to be credible on economics you have to have regarded Greenspan as a great mind, and not become disillusioned until 2007 or maybe 2008.
He's right, of course. And it goes back a long way. I don't know how long, but I do recall that leftists who joined the Spanish civil war against the fascists were excoriated at the time and later dubbed "premature anti-fascists." Being right too early is never fully forgiven, I'm afraid. Perhaps the next question is why this is always aimed at the left?
A visibly angry Santorum told Fox News host Greta Van Susteren that Obama’s targeting of corporate jet owners defies the candidate’s pledge to bring Americans together.
That is the basis of GOP strength: Obama promises to bring the two sides together, they refuse to cooperate and then blame him for failing to fulfill his promise. Meanwhile the Village media tut-tuts themselves into a frenzy if he's the tiniest bit confrontational and the country blames him right along with the Republicans because they hate the fighting and believe Gloria Borger when she tells them both sides are acting like children.
Maybe it's not such a good idea to promise to bring people together when they have fundamental disagreements about how to solve our problems and one side has gone completely insane.
Jon Stewart takes issue with both sides of the aisle for their stubbornness in the debt ceiling talks and asks if there's anything they both agree upon. Then he shows some funny clips of Democrats and Republicans saying that the other side is kooky and delusional. What he fails to note is that there is one thing that both sides have already agreed upon: somewhere in the neighborhood two trillion dollars in spending cuts.
The only thing that's currently under debate is whether some gluttonously profitable oil companies should get their subsidies cut (until their lobbyists can sneak them back in) and whether CEOs should have to pay a little bit more in taxes for their corporate jets. That's the substance of the partisan argument. And somehow, I have the feeling that the Democrats are not going to tank the world economy because of CEO jet travel. And neither are the Republicans. The real problem is what they've already agreed to.
Dday has a great piece on that subject today in which he points out that the only leverage the Democrats have left is to deploy the so-called constitutional option, whereby the president simply orders the treasury to pay the nation's debts. I don't expect that will be necessary since I don't think the wholly owned subsidiaries of Wall Street in the congress are interested in angering their masters. (It's interesting that Tim Geithner apparently mentioned it today. It appears that the pageant is going to have quite the suspenseful third act.)
But Dday's analysis of the real stakes in this kabuki shows they are much higher than people are acknowledging:
I’m not only worried about the problem of the debt limit. I’m worried about the solution. Near-term fiscal contraction is going to kill an already sick economy. If anything will produce market uncertainty, it’s a double-dip recession, which is entirely possible in an extreme scenario where there’s a lot of deficit reduction at the federal level to match all of it at the state level. No less than Bill Clinton explains this:
“If they [the Republicans] said, look, that now is not the time for big tax increases to harm the recovery, they would be right,” Clinton told ABC News in an exclusive interview at the Clinton Global Initiative America conference in Chicago. “But it’s also right to say that now’s not the time for big spending cuts.
“What I’d like to see them do is agree on the outlines of a 10-year plan and agree not to start either the revenue hikes or the spending cuts until we’ve got this recovery underway,” Clinton added. “The confidence that the Republicans say would be given to investors with a budget plan, they’d get whether we started this year or next year or the year after that, for that matter.”
For the first time, the former president is focusing his Clinton Global Initiative on creating jobs here in the United States. He suggested waiting for the recovery to take hold before pushing spending cuts and tax increases will make the issues clearer.
“We’ve got to get the jobs back in this economy again,” Clinton said. “The more people we get going back to work, the more businesses we start, that’ll bring up the revenue flow, and it will cut down on the expenses. Then, we’ll see what the real dimensions of our problem are.”
Well, we wouldn't want to do that, now would we? We might find out that a good portion of these deficit projections were based on the fact that 20 million people who wanted to work full time couldn't find a job! That would waste this marvelous Shock Doctrine moment. (Having the Democrats lead the way is just icing on the cake...)
Everyone who reads this blog already knows what I think of these "negotiations." There's simply no excuse for the Democrats to have gotten to this point in the first place and I hold them equally, if not more, responsible for the repurcussions. There can be no excuses -- "the president had no choice" or "they didn't have the votes." Bullshit. The GOP signaled long ago what they were doing. The Dems could have held tough for a clean vote --- and taken it to the people if they had to. Would they have been any worse off politically than they are now?
Where are the adults in Washington? By Gloria Borger, CNN Chief Political Analyst
Call me old-fashioned, but when the president and congressional leaders get into a tussle over who should be "leading" the country in matters of real national consequence, I feel like sending them to their rooms.
(Good thing she didn't use the "d" word or she might have gotten in trouble.)
Clearly, the Democrats believe that at the end of the day massive spending cuts will be so popular that the beltway and the people will reward them with fawning press and a big majority. I'm guessing they'll get the first, but if it tanks the economy even more I'm guessing that Michele Bachman is their only hope. They'd better pray the confidence fairy is so impressed with all this that it waves a magic wand and creates a gigantic boom that will make everyone in the country so rich that even the old and sick will be able to survive just by picking up the hundred dollar bills that are lying all over the sidewalks.
Oh hell, I had half a post written about this Mark Halperin flap (he said the president was "kind of a dick" on Morning Joe)and then saw this by Greg Sargent and realized it had already been written.
I’m sorry, but this is crazy. Halperin’s crack was crude and dumb, but it doesn’t deserve indefinite suspension. Halperin’s use of an expletive is trival when compared with the degradation of our political discourse we witness on a regular basis from Halperin and many others — degradation that is seen as perfectly acceptable because no curse words are employed. Suspending Halperin only reinforces a phony definition of “civility” in our discourse, in which it’s unacceptable to use foul language and be “uncivil,” but it’s perfectly acceptable for reporters and commentators to allow outright falsehoods to pass unrebutted; to traffic endlessly in false equivalences in the name of some bogus notion of objectivity; and to make confident assertions about public opinion without referring to polls which show them to be completely wrong.
I care less about Halperin’s use of the word “dick” than I do about the argument he and Joe Scarborough were making — that Obama somehow stepped over some kind of line in aggressively calling out the GOP for refusing to allow any revenues in a debt ceiling deal. This notion that Obama’s tone was somehow over the top — when politics is supposed to be a rough clash of visions — is rooted in a deeply ingrained set of unwritten rules about what does and doesn’t constitute acceptable political discourse that really deserve more scrutiny. This set of rules has it that it should be treated as a matter of polite, legitimate disagreement when Michele Bachmann says deeply insane things about us not needing to raise the debt limit, but it should be seen as an enormously newsworthy gaffe when she commits a relatively minor error about regional trivia.
This really is nonsense. It's not the word "dick" that's the problem, fergawdsake. It's not pictures of dicks either. It's that these people have contrived this absurd set of shallow manners in which saying dick or taking a picture of a dick is wrong while lying, manipulating and cavalierly risking the country's future (which is what Obama was allegedly being a dick about!) is considered perfectly acceptable.
It's the perfect manifestation of the Village. A bunch of decadent aristocrats pretending to be virgins and nuns, moralizing over trivia as a "lesson" for the rubes, all the while indulging in a debauched orgy of power and privilege.
Read the whole thing. Sargent discusses Halperin's personal part in creating this ridiculous system and admits that it's poetic justice that he would be caught up in it. But keep in mind that among Halperin's fellow Villagers, calling President Obama a "dick" will be considered an act of macho rebellion --- and that being suspended in the middle of the summer is unlikely to be a hardship for a millionaire.
It's a brave piece for a Washington Post writer to write. Bravo.
Congressional Republicans have refused to raise the debt limit unless the Obama Administration agrees to large and immediate spending cuts. They have their finger on the nuclear button and are threatening to detonate unless they get their way. It seems crazy that they would actually do it, but congressional Republicans have done a pretty good job of convincing the Administration (if not yet the financial markets) that they just might do it.[I think the administration knows very well that the Republicans won't do it, but ymmv -- ed.]
Obama has responded by entering into negotiations with the congressional Republicans. These negotiations have not gone well, largely because Republicans are united upon an all-spending-cuts, no-tax-increases approach to deficit reduction.
So what does Obama have to say to that? At his press conference:
Mr. Obama repeatedly mocked tax breaks that he said were for “millionaires and billionaires, oil companies and corporate jet owners,” saying that voters would not look kindly on Republican lawmakers who defended such breaks at the cost of cuts in popular programs like health care, education and food safety.
But he did not explicitly say that he would reject a deal that did not eliminate such breaks, saying that he believed his adversaries would eventually agree to what Democrats have called a “balanced approach” that included trillions of dollars in spending cuts along with tax increases.
“If you are a wealthy C.E.O. or hedge fund manager in America right now, your taxes are lower than they have ever been. They are lower than they have been since the 1950s. And they can afford it,” Mr. Obama said. “You can still ride on your corporate jet. You’re just going to have to pay a little more.”
How lame is this answer?
Let’s count the ways.
1) The stuff about corporate jets is just … crapola really. It’s the Democratic equivalent of Republicans pretending that the deficit can be closed by cutting PBS and the National Endowment for the Arts. If Obama, the supposed grownup in the room, wants to make the case for revenue measures, let him make the case for relevant revenue measures.
2) 30 or so days before a forced default on the financial obligations of the United States seems a poor choice of a time for negotiations over budget measures. Why is Obama allowing himself to be engaged in this way?
3) Why for that matter is Obama surrendering to the demand to change the subject from jobs to deficits? Surely Obama believes that rapid budget-cutting will be deflationary? And therefore irresponsible in the context of 10% unemployment, near-zero inflation, and 1% interest rates on federal debt? Why has he allowed himself to be pushed into measures he regards as irresponsible?
Does he? I think he believes what Tim Geithner believes, which is that austerity is the right policy. It's all the rage. And that's the real crux of the problem, isn't it?
Normally I would think that any erstwhile conservative's analysis in a situation like this is suspicious, but this argument is simply not partisan, particularly number three, which you hardly hear from liberals much less a Republican. The GOP is all-in on slashing spending, which they want people to believe is a panacea that will cure all our ills. For that matter, so are Democrats, except they want some symbolic tax increases on some symbolic rich people to make the medicine go down a little bit more smoothly. Indeed, the only people who realize this is completely cracked as a matter of economic policy are academic experts, liberal economists and the hated left. And, oddly, David Frum.
What’s important here is that the tax issues Republicans would have to swallow are trivial. We’re talking about a 5:1 ratio of spending to taxes or worse. Heck, because deficit reduction should not be a priority now, even a 1:1 ratio, seen as some kind of big liberal tentpole, is disreputable. It’s actually a net tax cut from the current baseline; $2 trillion in revenue increases versus $4 trillion in increases if the Bush tax cuts simply expire. What Republicans will have to “accept” is petty compared to what they would get.
Worse than all this, because we don’t know the details yet, is that the President stated a clear belief in the confidence fairy, the idea that if businesses are confident in the fiscal matters of the United States, they will invest in the country and create jobs. This is a completely ahistorical statement that’s impervious to logic. But there we are. Obama said that deficit reduction is part of an overall strategy of job growth. He mentioned a couple job-creating strategies as well, but mainly that was just extending the current payroll tax cut (not a net stimulus if it extends current law) and some mumbling about infrastructure. The infrastructure mumbling was actually one of the better moments, but if that’s offset by deficit reduction, it doesn’t really amount to much.
We, the undersigned economists, urge Congress to raise the federal debt limit immediately and without attaching drastic and potentially dangerous reductions in federal spending. Not doing so promptly could have a substantial negative impact on economic growth at a time when the economy looks a bit shaky. In a worst case, it could push the United States back into recession.
Why do I have that same disoriented feeling I had in late 2002 and early 2003 when all of Washington decided that we needed to do something ridiculously expensive and counterproductive even though it was patently obvious that it was lunacy?
Is this just the new normal?
The gasbags are out in force tonight. When questioned by Spitzer about the left's discontent over the measly "revenue" proposed in the debt ceiling pageant, Gloria Borger replied that that for Very Serious People the problem was that the president's rhetoric went too far, rather than not far enough.
What we heard from the president was sort of the "campaign talking points" that we've heard from the Democrats on Capitol Hill which is, "you don't want to end oil subsidies and the corporate titans are still going to get their corporate jets" which, by the way if you took back that tax break would save you three billion dollars over ten years, so that's not going to solve our fiscal crisis.
So, I think in a way Nancy Pelosi was thrilled with the president's said today but the people who really want to get a deal done, and by the way that includes people on both sides of the aisle, were kind of scratching their heads and said "well, you know, this makes the job that much more difficult."
Meanwhile, David Gergen feels that Obama hasn't shown enough leadership in preparing the country for the horrors from hell that they must endure in order to raise the debt ceiling.
Apparently, he is unaware of the fact that the debt ceiling has been raised every other time without these kinds of conditions and that they could do exactly the same thing tomorrow if they chose. Just because some Tea Partiers came to congress it doesn't mean that cutting the deficit in order to raise the debt ceiling is a constitutional requirement or a law of nature. It's just another vote. They don't have to do any of this.
Oy. Turning off cable news now. Must cleanse brain. Tequila required.
Just one short week ago, I published a shocking expose in the New York Times. It was my life story. I am an undocumented immigrant, an outlaw in my own country.
Since publishing "My Life As an Undocumented Immigrant," I have been drowning in media requests, tearful letters, and powerful Facebook messages. I want to thank all of the individuals who have both challenged and supported me, as well as ask those who have not yet done so to join me.
I decided to quit my job as a Pulitzer-prize winning journalist and come out about my immigration status in order to launch the project "Define American." I knew it would be a risk, but I also knew it was long past time to strike up a more civil, inclusive debate about immigration in America. After all, I had a unique story to tell, and I was tired of staying silent.
We may not all agree on how to fix it, but one thing we can all agree on is that our immigration debate is out of control and our immigration system is badly broken. I believe that not only can we do better, but that we must.
Will you sign the pledge to stand with me -- Jose Antonio Vargas -- in saying that it's time for a new national conversation on immigration? Define American. Pledge to ask questions, debate, listen, and learn.
Some would say my story is the tale of a hard-working immigrant who defines the American dream: achieving success against great odds, working hard, and even earning a Pulitzer Prize for my reporting. Still, despite everything I've achieved, the law still says I am not technically an American. I am undocumented.
I want to ask my fellow Americans: what would you do, if you found out at age 16 that you didn't have the right papers? As a journalist, my job is to ask questions that spark conversation. Now I am asking you to join in.
Sign the pledge to "Define American", share it with everyone you know, and then leave us a comment about what you would do if you found out you were undocumented.I will bring your comments with me as I head to the next round of media interviews.
We all have a story to tell, so let's talk. Let's debate. Most importantly, let's listen.
In Georgia, six young undocumented immigrants risked deportation on Tuesday by staging a protest in the state capitol. The demonstrators — most high school aged — were arrested after they sat and blocked traffic, declaring their status and denouncing anti-immigrant state policies. The young people were specifically directing their protest at a policy that bars Georgia’s most competitive universities from accepting undocumented immigrants. The protest is the latest in a string of so-called “coming out” demonstrations throughout the country, intended to pressure lawmakers into adopting policies that would favor young undocumented immigrants seeking higher education and other rights. Meanwhile on Capitol Hill, the Senate held its first-ever hearing Tuesday on the DREAM Act, legislation that would provided young undocumented immigrants a legal pathway to citizenship through attending a university or serving in the military.
As Sargent notes, Republicans are already attacking Democrats for cutting Medicare. The waters have been muddied, and Democrats are winning anyway. They're winning because there's a fundamental divide between trimming Medicare and ending Medicare. That will continue to exist even if both parties agree to Coburn/Lieberman.
That's the fundamental "divide?" Since when? Certainly, nobody told the people that. And i'm not sure they're going to find that particularly compelling, especially once they read the laundry list of absurd rationales for slashing the most popular health care program in the country. (Apparently, what we need is for the elderly to have more of their paper thin, easily bruised skin in this game so they'll stop "over-utilizing" the system. I have to wonder if people who say these things have ever been around an old, sick person in their life?)
And then there's this:
Now, it's true that a bipartisan deal on Medicare will help Republicans present the Ryan plan as just a conversation starter they don't really want to, you know, happen. But everybody still knows this is what Republicans would like to pass if they actually had the power to do so, and Democrats should be able to make this case to the voters. Meanwhile, the deficit is an actual problem, and Democrats need to find politically feasible ways to help solve it. There are bright lines to draw: slashing the already-lean Medicaid program, starving the long-starved domestic discretionary budget, and failing to require any sacrifice from the affluent. "No cuts to Social Security and Medicare" is the wrong place to draw the line.
Right, those are the most politically feasible ways to close the deficit. People love that stuff. It's catnip to voters.
As I said, just read it and decide for yourself if any of it makes sense for even one liberal in good concience to pay attention to it.
However, I would just remind everyone that all of us write things off the cuff that we later wish we hadn't written. Such as this piece Jonathan Chait wrote back in November of 2006 in which he suggested that the US should put Saddam back in power to tamp down the insurgency.
Here's the piece I wrote on that which featured an exchange from the old Tucker Carlson show:
We've learned that there are worse things than totalitarianism and one of them is unending chaos...My argument is not an entirely cynical argument... One of the things that foments chaos is the expectation of chaos, when people's behavior changes, when they don't see any established order, and one of the few things we'll be able to do, I was sort of supposing, would be the return of Saddam Hussein --- he has high name recognition, people know who he is, they know what he's capable of doing and you have, it's still a recent enough that he was in charge of the state, that you still have the Baath army units and the infrastructure to put in place. So I was hypothesizing that this may be the only force capable of actually ruling the country, not that we want that by any means, it was horrendous, but simply that you have order, I mean it might be the best of some very, very, bad alternatives.
TC: Best for us. It seems to me the one thing about Saddam, as deranged as he may have been, he did have something to lose, he didn't want to die, and he wasn't a religious nut, he was incredibly brutal. Does that tell us something about what we would need to do in order to secure Iraq. I mean, he killed people with poison gas, Was that something he had to do? Was that required?
Chait: No I don't think so. But look, he's psychotic so you can't assume that anything a psychotic man does is something he rationally had to do. And he would still be psychotic if he was in power. There would be no doubt about it. I mean, it certainly would be better for us,
We wouldn't have the Iranian influence and you wouldn't have Iraq becoming a potential terrorist haven, both things that threaten us a great deal, if we had Saddam in power. You would have someone who would brutalize his own population but again you're getting that right now anyway and you might be getting less of it if he returned.
TC: Obviously we're not... because there is a civil war, and according to NBC it officially begins today, that kind of implies we ought to pick a side. And in fact pick a strongman to preside over the country in a less brutal way than Saddam did, but in a brutal way nonetheless and keep that place under control? Should we pick a side?
Chait: I don't know. I think I'm probably like you. You read all these proposals about what to do with Iraq and there all people who specializing in the topic and know more about it than I do and probably more than you do and it just doesn't sound that convincing and when they pick apart the other guy's proposal, when they say "here's why we need a strongman and here's why partition won't work" and you say "that makes a lot of sense" and the other person says "here's why we need partition and why the strongman won't work" and that seems right also, so that sort of the mode I'm in. I just don't know what to do. The only time anyone seems convincing is when they say why everything else won't work.
I know it's unfair to look in the rear view mirror and play the blame game. I only do it to show that making a totally ridiculous argument can happen to anyone. Repeatedly.
As a general rule we turn to the likes of Fed chairman Ben Bernanke, economists, Nobel Prize winners to give us their take on important financial issues like inflation. But in the Twitter age, everybody has an opinion on just about everything.
So I guess it wasn’t too surprising to read this tweet today: “Have you guys seen food and gas prices lately? U.S. $ will soon be worthless if the Fed keeps printing money!”
Of COURSE the tweet was from…Lindsay Lohan. She later clarified to her two-million-plus followers that it was a sponsored tweet. But then added that: “I actually do care about gas and food prices, so whether it’s an #ad or no [sic], it’s important for people to be aware of it.”
Evidently nobody knows who the sponsor was, but we can probably guess. And it's actually pretty smart. Lohan's followers probably don't care about politics and certainly won't care about any controversy over this. But the meme will make its way into the ether at what I assume is a very low cost.
On Friday, the governor of New York signed a marriage equality bill, hours after it was passed by the legislature. It's being called a monumental historic victory and is in the news all around the world. The suspense leading up to it built for weeks, ending in a cliffhanger finish that rivaled your biggest Hollywood blockbusters. New York's Gov. Andrew Cuomo has been called a true hero, and is even being mentioned as 2016 presidential material. And he's not even a showy guy. Just imagine what you could have done with this in a state twice the size of New York!
But what Andrew Cuomo signed was something that you vetoed... twice.
To put it bluntly: where you cowered, Cuomo led.
And I'd like to thank all of my fellow liberals who voted for Arnold because they really liked The Terminator and thought Gray Davis was like totally boring.
But I do think Keegan is being too harsh here. After all Arnold was just taking his duty to protect our moral values very seriously ...
From his press conference today, it would appear that the president's negotiating strategy really is to give Republicans huge cuts in spending (and "make his base give him a hard time") and then shame them into "meeting him halfway" by agreeing to mildly raise taxes on some luxury items like corporate jet travel. (Luckily, he reassured the nervous CEOs by saying "you'll still be able to ride on your corporate jet, you'll just have to pay a little more" so hopefully they won't have a fit.)That's what constitutes shared sacrifice and fiscal responsibility. Good to know.
Now, I have no idea if the Republicans will "blink" and pretend that despite their deeply principled opposition to any kind of tax increase (because it will cost jobs, dontcha know) and eventually agree to this measly demand. But if they do, be sure to look closely because I don't think it will be a blink at all --- it will be a wink. Somehow, I just have a feeling that at the end of the day John Boehner will be able to get just enough Republicans on board with this "deal" to raise the debt ceiling. (Or maybe not, in which case the president will have to find some other face-saving item to call a win.)
Either way, once the debt ceiling is raised with much drama and phony suspense, the whole GOP caucus should go into a room and give Boehner a standing ovation.
Update: Oh, in case you were wondering, we must focus on jobs at the same time as we slash spending."We can walk and chew gum at the same time." So in the short run, Keynesianism really is dead. (I imagine it's dead in the long run too --- just like all of us.)
On tax breaks: These are good for boosting the economy, so we need to do them. (Bipartisanship!) We must restore business confidence, and nothing does that like more tax cuts. But we need to cut the deficit.
By the way, the MSNBC crawler under Obama: "61% disapprove of how Pres Obama has handled federal budget deficit (from McClatchy-Marist)"
I'm guessing that's because everything he says on the economy lately sounds like mush.
Both sides, as they often said, were shooting for about $2.4 trillion in deficit reduction over 10 years. They'd already agreed on around $1 trillion in spending cuts and were making good progress on the rest of it. But Democrats insisted that $400 billion -- so, 17 percent -- of the package be tax increases. And that's when Republicans walked.
Gosh, I sure do hope that the President can hold tough and get that whole 17% in tax increases or it will make the Democrats look like they really got screwed in this deal.
See what's happening here? They aren't having any trouble agreeing to trillions of dollars in spending cuts, are they? The talks aren't breaking down over that. It's the measly little tax increases on some luxury goods for millionaires that they are now pretending to haggle over. The rst of the "deal" is just fine with both parties.
Believe me these Republicans are not going to crash the global economy over some tax loopholes for jet travel. Maybe they genuinely don't want to give Obama this band-aid and maybe Obama will hold out for it and get it. Or not. But who cares? I think it's pretty clear that the debt ceiling is going to be raised as a result of a deal that cuts trillions of dollars worth of spending from the federal government at a time of 9.1% unemployment and an economy that is slowing. The "win" they are building up here (and alleged capitulation by the Republicans) is a joke.
The latest polling shows a deeply insecure and pessimistic public on the issue of the economy. But in my view, there's an even worse problem, one that is likely to persist long after this crisis is past:
But another result from the Bloomberg poll suggests a fair amount of of public confusion about how to turn things around. Fifty-five percent of respondents said cuts in government spending and taxes would be more effective at creating jobs than maintaining or increasing government spending.
The question is confusingly formulated, because economists usually think of tax cuts and spending increases as part of the same stimulus-based approach, not as opposing approaches. But at root, the results appear to indicate that most Americans think cutting spending, not increasing it, is more likely to create jobs.
But that's almost the opposite of what most experts--on both sides of the political divide--believe. "That wouldn't square with the way we normally think about economic activity in a depressed economy," Andrew Samwick, a former chief economist on President Bush's Council of Economic Advisers, told The Lookout. When the economy suffers from a lack of demand, as it does now, Samwick explained, most economists think increasing spending is the more effective way to generate that demand and get things moving again.
Why has the opposite view begun to take hold? In part, Samwick argued, it's thanks to the efforts of congressional Republicans, who want budget cuts and lately have hammered home the view that government spending has stymied growth. "You have the Speaker of the House talking about job-killing government spending," said Samwick, now a professor of economics at Dartmouth College. "But they have not been tasked with making clear exactly how the government is killing jobs."
It's true that Republicans have hammered this misinformation home. But has anyone really countered it? I hear the Democrats all fetishizing the deficit as well and in the context of people's angst about the economy and jobs, they hear they same logic from them.
I knew this was how it was going to end up if the Democrats didn't find a way to explain why the Republicans were all wet about the deficit being the most important thing in the world at a time of low demand and high unemployment. My personal preference was that they come out swinging saying that this level of joblessness was completely unacceptable in the United States of America and that if the private sector won't hire people the government has to step up and do it for them. I think people might understand that. Instead we got "Americans have to tighten their belts and so does the government" --- and here we are.
I think we're probably too far down the deficit rabbit hole now and I honestly don't know what it would take to turn this around. The liberal economic argument doesn't even exist these days except to the extent that you should cut taxes in a recession. Unfortunately everyonealso agrees that deficit reduction is the first priority, meaning we must slash government --- which offsets any stimulus the tax cuts might provide. It's daft, and yet we're doing it.
Maybe after a full blown depression or a long and painful lost decade people will ask whether any of this makes sense. Right now, there's just nothing to do but fasten your seatbelt and hope you make it out of the train wreck alive.
Update: Via Susie, I see that we have some current information on the subject. Too bad the Democrats are jumping on the "slash spending" bandwagon too or they might be able to make something of it. On the other hand, maybe people hate these Republicans so much that people won't realize that many of the Democrats have basically acquiesced to their ideas.
You can always count on him to articulate what the bigots are really thinking:
We have within our country 12- to 20-million illegal aliens, with Mexico the primary source, and millions of others who may be U.S. citizens but are not truly Americans. As one fan told Plaschke, "I was born in Mexico, and that is where my heart will always be."
Perhaps he should go back there, and let someone take his place who wants to become an American.
By 2050, according to Census figures, thanks to illegals crossing over and legalized mass immigration, the number of Hispanics in the U.S.A. will rise from today's 50 million to 135 million.
Say goodbye to Los Angeles. Say goodbye to California.
He doesn't even see the irony of saying all that about a city and state with Spanish names.
I guess Buchanan never heard any Irish immigrant songs. Someone should play them for him some time:
I'm bidding you a long farewell My Mary, kind and true But I'll not forget you, darling In the land I'm going to They say there's bread and work for all And the sun shines always there But I'll not forget old Ireland Were it fifty times as fair.
John Quincy Adams was eight years old when the Declaration of Independence was written.
UPDATE at 6/28/11 10:58:15 am And now, someone has tried to edit the Wikipedia page for John Quincy Adams, to make him a founding father: John Quincy Adams - Wikipedia, the free encyclopedia.
Airbrushing history was a hallmark of the old Soviet Union. They tended to take out inconvenient people rather than put preferred people in, but the idea is the same: if you don't like what happened, just alter the history to reflect what you want it to reflect.
It's always so interesting to see the similarities in totalitarians of all ideological stripes. What they don't like, they change by force. All of 'em.
When Eric Cantor shut down debt ceiling negotiations last week, it did more than just rekindle fears that the U.S. government might soon default on its debt obligations -- it also brought him closer to reaping a small financial windfall from his investment in a mutual fund whose performance is directly affected by debt ceiling brinkmanship.
Last year the Wall Street Journal reported that Cantor, the No. 2 Republican in the House, had between $1,000 and $15,000 invested in ProShares Trust Ultrashort 20+ Year Treasury EFT. The fund aggressively "shorts" long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable. (A short is when the trader hopes to profit from the decline in the value of an asset.)
According to his latest financial disclosure statement, which covers the year 2010 and has been publicly available since this spring, Cantor still has up to $15,000 in the same fund. Contacted by Salon this week, Cantor's office gave no indication that the Virginia Republican, who has played a leading role in the debt ceiling negotiations, has divested himself of these holdings since his last filing. Unless an agreement can be reached, the U.S. could begin defaulting on its debt payments on Aug. 2. If that happens and Cantor is still invested in the fund, the value of his holdings would skyrocket.
Now, it's my opinion that Cantor is playing the designated "madman" role in the negotiations and that he will "come around" at the last minute after they've squeezed every cut they can. But what he is doing could very well roil the markets, even if they don't recklessly default in the end. No way should he be allowed to benefit from that.
I just can't believe these people aren't forced to put their holding in blind trusts. Why should any lawmaker be in this position?
It was with gladness in our hearts that all of us at Blue America celebrated the state of New York legalizing gay marriage this past week-end. What a welcome reminder that even in this era of Tea Parties and economic malaise, human progress cannot be stopped. Imagine if we had a national government with enough fighters for working families to make progress on all fronts, from civil rights to economic justice to ending our useless expensive wars. Imagine if we had more leaders like Raul Grijalva, Keith Ellison and Donna Edwards to press for that agenda.
Yesterday, longtime progressive congresswoman Lynn Woolsey announced her retirement from the Congress after a long and illustrious career. And Blue America endorsee and longtime political activist and author Norman Solomon stands ready and able to carry on the progressive tradition of that district and join that list of leaders.
“We’re gaining the kind of traction that a grassroots campaign needs in order to win,” Solomon says, “the groundswell of support is very encouraging. Indeed it is. We need congressional representatives who understand that we are no longer able to afford open ended military adventures and corrupt political boondoggles and Norman has been fighting to end them his entire life.These issues are no longer matters of abstract ideology-- they are necessary and pragmatic approaches to the problems of our time. We need people like Norman Solomon in congress to lead the way.
The good news is that it looks as though we aren't the only progressives who are enthusiastic about him-- the campaign has managed to collect $100,000 already from small donors. But he is not a corporate funded Democrat and will need our help to compete.
Yesterday Norman penned a guest Op-Ed for the Marin Independent Journal that presents a lot of insight into what kind of congressman he'd be-- and into why Blue America is so committed to his candidacy. I bet this is what you wish YOUR congressmember and senator-- not to mention our president-- was saying about the dangers of nuclear energy... and what to do about it. But they're not. It's why it's so crucial that we need real leaders like Norman Solomon, not just someone who will probably vote well in the House.
Several decades ago, three expert nuclear engineers told a congressional panel why they decided to quit: "We could no longer justify devoting our life energies to the continued development and expansion of nuclear fission power-- a system we believe to be so dangerous that it now threatens the very existence of life on this planet."
The Joint Committee on Atomic Energy heard that testimony in 1977, when the conventional wisdom was still hailing "the peaceful atom" as a flawless marvel. During the same year, solid information convinced me to move from concern to action against nuclear power.
By the time the 1979 accident at the Three Mile Island nuclear power plant came close to rendering much of central Pennsylvania uninhabitable, I was nearly two years into full-time anti-nuclear work that included public education, civic activism and nonviolent direct action. Given what was at stake, I didn't mind spending a month in jail for civil disobedience.
More than 30 years later, the ongoing disaster at Japan's Fukushima Daiichi plant underscores the grim realities of nuclear power, ranging from catastrophic reactor accidents to highly radioactive waste that will remain deadly for many thousands of years. [...] The U.S. Nuclear Regulatory Commission and the Energy Department have been avidly promoting nuclear power for decades. Periodic calls for more "studies" have kicked the radioactive can down the road.
I reject the notion that we should wait for such nuclear-enthralled agencies to tell us whether nuclear power is an acceptable risk for Californians.
As the director of the National Citizens Hearings for Radiation Victims in 1980, I learned a lot about patterns of official enabling of the nuclear industry-- with awful results for human health and the environment.
Similar patterns persist in this country.
In contrast, the government of Germany has seen the light. At the end of last month, Chancellor Angela Merkel announced a reversal of policy-- moving to shut down nuclear power instead of trying to expand it.
The decision to immediately close eight German nuclear power plants and shut the rest by 2022 came in a country that had been getting 23 percent of its electricity from nukes.
Here in California, we're less reliant on this Faustian technology, getting just 15 percent of our electricity from nuclear power. The state has a lot of excess generating capacity from other sources, but far better choices for the environment are within our grasp.
Don't you think that's a point of view that deserves to have representation in the congress? Is it too much to ask that we have at least a few liberal voices willing to speak out on issues like nuclear power and endless wars in the US Congress? We don't think so.
Norman summed his platform up in one powerful sentence today saying is he's elected to Congress, he "will insist that we need to bring our troops and tax dollars home-- that we need healthcare not warfare-- that we must resist corporate power-- that caving in to Wall Street and polluters and enemies of civil liberties is unacceptable."
The conventional wisdom, of course, is that Wall Street has turned its back on Mr. Obama out of frustration with his so-called antibusiness rhetoric and “fat cat” comments about bankers.
But Wall Street’s absence may be more about optics — the way things appear— than reality. Behind the scenes, it seems that many bankers are not running away from the president as quickly as some might suspect.
While many of the biggest name financiers feel that they can’t publicly support Mr. Obama through campaign contributions the way they did in 2008 — “it would be bad for business,” one brand-name chief executive of a major bank acknowledged — some still plan to vote for him. And some begrudgingly acknowledged that they don’t yet see a viable alternative to Mr. Obama among the Republican field.
It also turns out that Wall Street is not the only one concerned about optics. The president’s re-election campaign has not been actively courting Wall Street’s biggest C.E.O.’s to appear at such fund-raisers out of fear that their support could offend his most liberal backers, two people involved in planning his fund-raiser at Daniel said.
“A picture of Lloyd and Obama together probably isn’t helpful,” one of these people said, speaking on the condition of anonymity to avoid upsetting his role in the campaign. (It is unknown whom Mr. Blankfein plans to vote for.)
Yeah, it probably isn't...
Of course most of this Wall Street whining was playing the refs. And it worked beautifully to keep any policy options narrow and geared toward everyone's personal interest. Since campaigns are now costing in the billions, any candidate is going to have to give them a certain deference. After all, they have most of the money. (Recall that Wall Street was Obama's single biggest contributor in 2008.)
I think what still astonishes me, however, is the degree to which these Masters of the Universe were willing to play the role of sniveling little babies, insisting that they deserved to looooved not hated. It was mostly for show, but it just proves once once again that there is no depth to which they will not sink in order to grab a buck. They have no pride and no dignity.
The NY Times featured a huge expose of the natural gas industry on Sunday singling out several companies for corruption on a number of levels.The CEO of one of the companies sent out an email to employees explaining that the NY Times was all wet and that they are actually following the law and accounting rules to the letter etc, etc.
The US natural gas industry has created more than 500,000 jobs in the past 7 years of the gas shale revolution and created tens of billions of $ in economic value at the same time, plus reduced the amount of coal and oil burned in the US – I ask you, what value has the NYT or environmental activists created during these same past seven years? You either create value in this world or you consume/destroy it – we are value creators, please never forget that and know that you are on the right side of history, they are not, so always stand tall and proud for CHK and our industry.
I'd say that somebody's been skimming the Atlas Shrugged Cliff notes again, but it seems he has quite a library of such nonsense:
Sure, it's become a little noisier in the media since we started moving some folks’ cheese, but we will remain committed to state of the industry performance in all that we do and we will now re-double our efforts to educate as many people as possible so that they may know the truth from us rather than distortions and dishonesty from others.
Over the course of the past few years I've become convinced that the problem isn't just that CEOs and Masters of the Universe are tremendously overpaid. That's undoubtedly true. I think the bigger problem is that so many of them are vacuous airheads.
So, I was thinking back to the health care debates the other day and reminded about what a terrible squeeze the whole thing put on the progressive faction of the Democratic Party over the Medicaid expansion. You remember that, right? That was the big liberal kahuna, the one outright progressive policy that was going to bring necessary health care to millions of working poor Americans and their families who could not afford even the allegedly affordable health care policies that would become available in the exchanges.
That provision was always vulnerable in the long term but I think everyone assumed that the president himself would protect all aspects of his health care reforms above all --- it's his "signature issue" etc, etc. as I've written here many times. That seems to be seriously in question. Joan McCarter writes:
The Center on Budget and Policy Priorities has a review of one of the Medicaid proposals the White House has forwarded in budget negotiations, warning that the cost shift it includes would mean a cut in services...
Under current law, the federal government pays a fixed percentage of each state's Medicaid costs, from 50 to 75% of costs depending on the state with an average of 57% nationally. It pays 70%, nationally, of the children's health program, SCHIP. The Affordable Care Act would increase that commitment to 100% for the population that is made newly eligible for Medicaid under the law, and for the first three years (2014-16) with a reduced commitment until 2019, when it's down to 90%. States that expanded Medicaid to cover patients who aren't traditionally covered (childless adults) could qualify for a higher matching rate from the federal government.
That's all if the ACA is implemented as written, in addition to current law. This new, blended-rate proposal, however, "would replace this mix of matching rates with a single matching rate for each state, which would apparently apply to all of a state’s Medicaid and CHIP expenditures, outside of administrative costs." And that would mean more burden on the states and, likely, curtailed ability on the part of the states to pay providers (meaning fewer doctors taking Medicaid patients) and to cover people who would otherwise qualify...
The fact that it would undercut the expansion of Medicaid under the ACA—the most significant part of the law for actually expanding health care—should send White House negotiators back to the drawing board on what to do with Medicaid in these budget negotiations
Indeed, they should. But since they are the one's proposing it, I doubt that's what going to happen.
A lot of us have been trying to read the tea leaves about how the Democrats were going to end up handling "entitlements" during this time of irrational deficit fever and there's been a ton of speculation about Medicaid in recent days. For all the talk about them, Medicare and SS are third rails for a reason --- they have a large and distinct constituency that will vote on those issues regardless of their political ideology. It's a heavy lift to fight back the endless assaults, but if enough people put their weight behind it, they have shown that it can be done.
But Medicaid is vulnerable and always has been. It's why the progressives with conscience were torn apart at the idea of walking away from the one chance they saw to expand this program in this era of extreme selfish indifference (if not outright hostility) to the plight of those at the lowest income strata. When would this again be possible --- and under the protection of the president and party which implemented it for at least a few years to come?
I don't think anyone expected the Democratic leadership and the president to walk away from their own hard fought health care reforms before they even had a chance to be implemented. And I didn't think this because I believed the Democrats and the president were good hearted folk who just want to help the poor. I have no idea what's in their hearts. But I did think they would have wanted to give their legacy issue a chance to be implemented in full at the beginning, so they could continue to brag about bringing health care to 30 million uninsured Americans if nothing else. I suppose they'll continue to say it, but if they approve these changes it won't be true.
But as the president says, in these tough times the government has to tighten its belt just like all American families. I guess he must realize that one of the things American families have had to cut out is their health insurance. So much for that legacy.
Oh, and by the way --- the only way this gambit saves any money is if they cut people off. Medicaid is the least expensive health care in the country.
Often folks ask me how America can be saved from its present course. Not by changing wingnuts—they will always be wingnuts, same methods and worldview since the 1950s; and not by changing the hearts corporate plutocrats—ditto, since the dawn of corporate capitalism; BUT SHAMING MEDIA GATEKEEPERS WHO LEGITMIZE THEIR ANTISOCIALITY AS MERELY "ONE SIDE OF THE ISSUE" IS UTTERLY NEW WITHIN THE PAST THREE DECADES. To wit...
Andrew Breitbart uses his network of Web sites and their legions of followers to bring conservative media red meat.
I honestly don't know how many more glowing profiles of the bad boy blogger the country needs, but there seems to be a tremendous appetite for them in the mainstream media.
And what Perlstein says about this is absolutely true: the guy is not normal, he is not the Right's answer to Hunter S Thompson or even Abbie Hoffman. He's a con-man and a truly malevolent liar who is just the latest wingnut creature to be feted by the media as an interesting "celebrity" phenomenon rather than the political operative he is. Media Matters unpacks this NY Times atrocity in detail, pointing out not only the cavalier avoidance of discussing his real purpose, but also the massive errors of fact involved in all of his so-called scoops, none of which are mentioned in the paper of record.
But it's a mistake to only focus on Breitbart. As Perlstein writes, this journalistic convention is one of the things that's killing us. They are legitimizing anti-social political behavior to the point where the depraved Ann Coulter -- featured in a cover story in TIME magazine just a few years back --- is still considered an acceptable guest on a staid political round table hosted by Fareed Zakaria. Indeed, there's an entire generation of these hideous right wing destroyers of any and all rules of engagement who are treated as perfectly normal political players by the mainstream press.
I'm with Perlstein. If you want to figure out what's gone awry, don't look to the malefactors of wealth or the right wingnuts, they've always been around doing their thing. What's different is our allegedly free press being neither adversarial, openly partisan or responsible any combination of which would at least create the conditions within which a democracy could function. As it is, hoaxsters, hucksters and millionaires seem to be the only ones able to manage.
So Michele Bachman may have had the worst GOP presidential campaign rollout since Newt Gingrich's this morning when she misstated that Waterloo Iowa was the home of John Wayne instead of serial killer John Wayne Gacy.
The presidential hopeful -- who was born and grew up in Waterloo as a child before moving to Minnesota -- said, "Well, what I want them to know is just like, John Wayne was from Waterloo, Iowa. That's the kind of spirit that I have, too."
The Washington Times points out one slight problem with the Tea Party favorite's remarks: The John Wayne with roots in Waterloo is John Wayne Gacy, a serial killer who was executed by lethal injection in 1994 after being convicted of 33 murders.
John Wayne -- the late movie star, director and producer -- was born in Winterset, Iowa, but appears to have no specific connection to Waterloo.
Winterset is three hours away...
It's going to be hard to beat that one. But as amusing as it is, I wouldn't say that it's the quote of the day.
I'm going to vote for this one, a tweet from our majority leader:
@SenatorReid: Cutting debt is equally important to job creation
Any idea what the hell he's talking about? I assume he's talking about cutting government debt. What effect do you suppose that's going to have on job creation, other than making it less likely?
The layoffs of thousands of government workers may threaten the already slow-motion economic recovery in many U.S. metropolitan areas, according to a report released on Wednesday by the Brookings Institution.
"Job growth, though occurring in more metropolitan areas than in the past, was sluggish," the think tank said. "Those that suffered the most, as well as those with the weakest economic recoveries, typically lost government jobs."
Since the recession began in 2007, 19 out of the 20 metropolitan areas with the strongest economies gained government jobs, according to the report which focused on the first quarter of the year. Conversely, 13 of the lowest performing 20 areas lost government jobs.
Looking at the 100 metropolitan areas combined, Brookings said total employment rebounded by 0.8 percent after hitting its low point in the recession. But local government employment fell 1.2 percent and state employment dropped 0.2 percent, "reflecting the impact of reduced local and state revenues."
Political leaders and economists have warned that government layoffs could pose serious obstacles to economic recovery. Brookings noted that state and local employees make up the bulk of the government workforce.
And this isn't even going to appease the confidence fairy. Check this out:
Analysts and investors in the $2.9 trillion municipal bond market are worried that tax revenues have not rebounded enough to make up for this summer's end of the 2009 economic stimulus plan, which included the largest transfer of money from the federal government to the states in U.S. history.
Senator Reid surely knows better. But they've all decided to pretend that this makes sense because ... well, just because.
The disaster at the Fukushima Dai-Ichi nuclear plant in Japan prompted some people to contend that since U.S. reactors have Severe Accident Management Guidelines (SAMGs) they are less susceptible to disaster.
A recent NRC audit of SAMGs at the nation’s nuclear power plants, however, suggests otherwise.One of the lessons from the 1979 Three Mile Island accident was that U.S. nuclear plants needed better emergency procedures for and training of control room operators. Two sets of procedures were developed.
The first set was the Emergency Procedure Guidelines (EPGs), which were introduced in June 1980 to help the operators respond to emergencies at the plants. These emergencies included transients (e.g., unplanned reactor shut downs) and accidents (e.g., pipe breaks that drained cooling water from the reactor vessel). The NRC licenses control room operators, and to obtain a license, operator candidates must demonstrate proficiency on the EPGs both on written exams and in control room simulator exercises.
The second set was the SAMGs. They were first introduced in June 1996 to back up the EPGs for severe or unusual events – those involving multiple failures of safety equipment or unanticipated accident sequences. For example, the EPGs lay out various means of supplying water to the reactor vessel to cool the nuclear core. If none of those options are available, the SAMGs take over to provide options like flooding the containment structure around the reactor vessel with water to a level above the top of the core.
Unlike for the EPGs, candidates for NRC operator licenses need not demonstrate any knowledge whatsoever of the SAMGs and their application.
The nuclear industry developed the SAMGs, but they are voluntary. So the NRC can monitor them but cannot force the industry to take them seriously.
Well that certainly makes me feel a lot better.
The idea that the US has taken an "it can't happen here" stance is absurd. It's not as if Japan is a third world banana republic rife with systemic corruption and a cost cutting, short term business ethos like well ... us. And yet it happened there and the worst of it was the fault of the company and government refusing to do what was necessary to contain the damage because of the costs involved. So you tell me just how secure we ought to feel in the great US of A that those things are being "voluntarily" done here. According to the article --- they aren't.
By the way, Japanese kids in the Fukishima area now have a cool new necklace they have to wear:
Was waiting for it to happen: Fukushima Prefecture kids get their own portable dosimeters. (Any similarity to the iPod, I assume, is strictly coincidental.)
Update: I guess it's a good thing these Mississippi floods are happening slowly because it's giving this Nebraska nuclear plant some time to read their emergency manuals. No word on whether they are learning anything from it.
Ad Age analyzes the economy from the marketing perspective. I think what's most interesting about it is the blase way the article describes income disparity. It looks to me as if this information has been absorbed and ... accepted. Business is adjusting as it will. Winners will emerge, losers will disappear. Customers ... well, it depends on who you are servicing.
The rich -- and marketers who cater to them -- just keep getting richer as everyone else struggles through a so-called recovery. That fact of economics could reshape marketing strategies this year, and for years to come.
Last year, the only growth in spending came from people making $100,000 or more annually, said David Calhoun, CEO of Nielsen Co., speaking at the Advertising Research Foundation's annual Re:Think conference in March. If anything, the disconnect between the haves and the have-lesses has only kept widening since. The ConsumerEdge Research monthly tracker, based on surveys of more than 2,000 consumers, helps illustrate this vividly.
Overall, its "Willingness to Spend" index of U.S. consumers has fallen fairly steadily from 103 in May 2010 (just before the so-called summer of recovery) to 96 last May, where 100 equals sentiment levels in December 2009. But willingness to spend has been on the rise lately among the high-income segment -- that 16% of the U.S. population making $100,000 or more annually. Their spending sentiment index rose from 118 in December to 131 in May. Their index is down 6 points from 137 a year ago, but they're the only income group more willing to spend now than they were in December 2009.
One reason Procter & Gamble Co. is confident its current round of price hikes to recover commodity-cost increases will stick more readily than those taken in 2008 is that at least this year, wealthier folks are more confident. "You saw the whole affluent class come out of the market in 2008, and what we're seeing now is a very strong resurgence of the affluent class," said P&G Chief Financial Officer Jon Moeller at a Deutsche Bank investor conference in Paris June 15.
In one sense, nothing much has changed from the trend of the past three decades. Real wages have been largely flat overall since 1980, even as real GDP doubled. The top 1% of earners, as a result, have seen their share of total income double to 20%, even as their tax rates plunged. More broadly, the top 20% of earners have seen their share of U.S. income increase from 45% in 1980 to 50% in 2009 while the shares of every other quintile fell, according to Sanford C. Bernstein research.
For much of that period, however, middle- and lower-income people could grow spending faster than income thanks to loose credit and rising home prices -- factors that disappeared in the Great Recession and show no signs of returning.
I have been telling my friends for the past couple of years that in the new servant economy the only smart place to put your entrepreneurial skills is to cater to the wealthy: that's where all the money is. Hey, it worked for feudal Europe for centuries.
Update: I would also mention that in the article WalMart is particularly suffering. But they forgot the old Henry Ford maxim that you need to pay your workers enough to be able to buy your product. That race to the bottom has finally landed on their balance sheet. Their customers have migrated to the dollar stores and the downsized affluents who felt the squeeze for a while are back in the malls. They've got nothing.