Monday, February 11, 2008

Economic Policy

An editorial in the New York Times really got my blood boiling yesterday. You think you’ve seen me become outraged in these posts in the past, but you have seen nothing yet. That was just a warm up. We’ll get to that editorial in a minute, but first some background.

The working class in this country (yes, this has become a country of social and economic classes) is not doing well. Here are a few facts that illustrate just how unwell the working class is doing:
1. After correcting for inflation, weekly wages were just 1.9% higher in 2007 than in 2001.

2. Seven million more people were without health insurance in 2006 than in 2001.

3. After correcting for inflation, median household income in 2006 was down 2.0% from its 2000 level, and down 8.0% for black families.

4. U.S. inequality reached levels not seen since the 1920s as from 2001 to 2005 the average real (inflation-adjusted) income rose 34.8% for the richest 1% of households, rose just 0.8% for the middle fifth of the population, and fell by 3.0% for the poorest fifth.

5. And corporate profits skyrocketed 12.8% per year during the past five years.

This came about, in no small part, as a result of George W. Bush’s “ownership society,” which was a scam of monumental proportions. His plan was to make everyone believe that they were part of the “owning class” of this country so that they would not balk at the policies which moved wealth away from massive portions of the population and into the hands of the wealthiest 1%, his cronies and financial supporters.

If you own stock then you are part of the “ownership society” and you are not going to object to policies which enhance the value of that stock. Bush, then, can blind you to the fact that he is not enhancing your wages, that he is increasing your debt burden and the debt burden of your nation, and that he is vastly enriching himself and his cronies. He can do this by chanting his mantra of “ownership society” and reminding you that he is enhancing the value of your two shares of Disney.

He also conned you into buying a house that you cannot afford so, in addition to your two shares of increasingly-valuable Disney, you also own a $400,000 home which carries a $600,000 mortgage on which you can no longer meet the payments. But don’t worry, son, because you are part of the “ownership society.”

And part of the reason you can’t meet your house payments is that your income has only gone up by 0.8% in the last six years while the banker who handled the loan has enjoyed a 34.8% increase, and his bank has enjoyed a whopping 80% increase in profit. The financial broker who sold you the loan has enjoyed a several-hundred percent increase in income and pays income tax at something like half the marginal rate that you do..

But it’s all good says the Federal Reserve in an op-ed yesterday printed in the New York Times. Inequality isn’t as bad as it looks because, while the upper class may be making 100 times as much income as you are, they are spending a mere 4 times as much as you are.

Wealth isn’t measured by how much money you shovel into the bank, it’s measured by how many effing dvd players you buy.

Read this excerpt and weep (or gnash your teeth),
The bottom fifth earned just $9,974, but spent nearly twice that — an average of $18,153 a year. How is that possible? A look at the far right-hand column of the consumption chart, labeled “financial flows,” shows why: those lower-income families have access to various sources of spending money that doesn’t fall under taxable income. These sources include portions of sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, or the drawing down of bank accounts. While some of these families are mired in poverty, many (the exact proportion is unclear) are headed by retirees and those temporarily between jobs, and thus their low income total doesn’t accurately reflect their long-term financial status.

So if you are selling your car to feed your family, it’s all good.

Phhht, phhht, *#@#!#&**#^$&*#*^%$*, phhhht.    #!

Unless, of course, you’re part of that “unclear exact proportion” of those whose “low income total doesn’t accurately reflect their long-term financial status.”

I remember the days (happily long past) when, after I got fired from one job and before I managed to find a new one, I referred to myself as being “temporarily between jobs.” It’s also known as being unemployed. These days that condition can last for many months, is often by no means voluntary, and obtaining “access to spending money” by “drawing down bank accounts” is a considerably more pernicious method of dealing with that condition than the Fed suggests it is.

The Fed is supposed to be non-political. Nobody has ever really believed that, of course, but there was always a sort of civilized pretense maintained to that effect. Now even that has been stripped away by this administration. Read this op-ed piece and you can realize just how transparently this administration is using the Fed to pursue a desperate attempt to salvage its last year in office.

For many years whenever I have read stories about athletes holding out for enormous amounts of money, offered dozens of millions and declining it to demand more, I have wondered what the point was. They have been offered more money that they could possibly spend in a lifetime and declined it as being insufficient. That is simply incomprehensible to me. Why would someone want to have so much money that even the most sybaritic lifestyle could not deplete it?

The Fed seems to support my question, doesn’t it? With the theory outlined in it’s op-ed it claims that wealth beyond what is consumed is not actually wealth at all, and that it might as well not be accumulated at all. Wealth is measured, after all, not by accumulation but by consumption.

The Fed also betrays the myth of the “ownership society” in this op-ed piece. This administration does not want any money to be saved or invested in ownership. It wants money to be spent to rescue it from the economic disaster it created. (Not that any forseeable amount of consumer spending will accomplish that goal.) By postponing the recession for just one year, if it can do that, this administration can blame its own malfeasance on its successor.

You, too, can be wealthy. All you have to do is spend more money. You don't need to make more income, making money is missing the point.
You need to spend more. You can obtain funds by selling property and "drawing down bank accounts" to achieve the wealth you desire. What are you waiting for? Start now. Go shopping.

God help us all.

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