Wednesday, March 24, 2010

Math Problem

For the country as a whole, trickle-down economics haven't worked. At least they haven't worked for most Americans who aren't ultra-rich -- the middle-class and underprivileged entreated to sit beneath the the table of the wealthy and wait for the scraps to fall, to "trickle down" as it were. More than any other socio-political paradigm, this overarching pseudo-Randian belief that wealth should and will flow top-to-bottom, from the elite to those who supposedly benefit from their actions and largess -- espoused and imposed nationwide by Ronald Reagan -- has been the defining ideal of the last thirty years. It's been the one factor that's remained constant throughout the tenures of five presidents. Despite plenty of lip service paid to a constantly expanding economic inequality in this country -- with, as the zero-sum cliché goes, the rich seeming to get richer while the poor get poorer -- no one's ever attempted an honest-to-God sea change in the way America practices capitalism.

Maybe until now.

Today there are a couple of really interesting articles highlighting inequality in this country and what's being done about it. I'll say right off that bat that I'd be one of the first people to agree that while the Declaration of Independence stakes its claim on the notion that all are created equal, it doesn't mean that all are entitled to reach the same level of status. Equal human dignity at birth and throughout life won't guarantee equal wealth, power or prestige; it just doesn't work that way. I'd also agree that we don't outright punish people for striving to be the best or get the most they can out of life, provided they're not breaking the law or depriving others of the same opportunity. But you're a fool if you deny that something is very wrong in this country when a tiny portion of it -- the insulated elite -- are allowed to seemingly run roughshod over a middle-class that's dwindling in numbers. There were always the very rich in our nation, and it helped to make us powerful -- but there was also a strong middle-class to provide a foundation for the American dream. More and more, that foundation is weakening -- due in large part to an entire way of thinking, fomented by a government and media that themselves have become tools of the super-rich, which held that the quest for wealth above all was the greatest good and that anybody could get to the prize at the end of the rainbow.

Today's New York Times looks at how, despite what many claim is a payout to the insurance industry, the new health care reform bill is actually the first major piece of legislation in thirty years to attempt to turn the tide against the very ideals of Reaganomics.

From that piece:

"Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform’s effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan.

Speaking to an ebullient audience of Democratic legislators and White House aides at the bill-signing ceremony on Tuesday, Mr. Obama claimed that health reform would 'mark a new season in America.' He added, 'We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their health care.'"

The article goes on to spell out the ways in which the Reagan-era's laissez-faire attitude toward big business practices and corporate excess contributed to our current Great Recession. But make no mistake: A minor step in the direction of changing our views on Greed-is-the-Ultimate-Good economics doesn't mean we're all suddenly all living in Utopia (as if something like that would even be possible). A short piece in the Examiner Online gets into not simply the current fight over extending unemployment benefits to the 14-million Americans still without jobs or severely underemployed but details what would've happened had the money given wantonly and without restriction to failing Wall Street titans instead been put in the hands of average Americans.

"Think of all the trillions that have been spent on banks and insurance giants yet underemployment has reached record levels. I mention this stat on occasion because it shows you just how much money has been wastefully thrown at corrupt and insolvent financial institutions. According to numerous reports, the US Treasury and Federal Reserve have pumped upwards of $14 trillion to support failing financial institutions. There are approximately 100 million households in the US. So if you divide that $14 trillion by 100 million and that means that each and every US household could have been sent a check for $140,000. Just think of what the American consumer would have done with $140,000 in their checking account. Instead of a failed trickle-down economy, we would have had a robust trickle-up economy."

Of course this is a pie-in-the-sky notion, but as an object lesson it goes a long way in showing how our government's priorities have always been the people at the top -- and how its efforts to appease them have rarely benefited the rest of us. No, contrary to the knee-jerk idiocy you'll hear from the tea baggers, this isn't a suggestion that socialism is the way out; as I said, not everyone can be assured an equal standing in our culture, nor should they be. But the massive inequity just can't be overlooked or disregarded.

Far too many of us are getting screwed by this system -- and we're tired of it.


ntx said...

One of my favorite curmudgeons, Joe Bageant (, had a great line in his book "Deer Hunting with Jesus: Dispatches from America's Class War." It touches on the misplaced popular faith in trickle-down economics, and also on Americans' reliable penchant to vote against their own interests.

Bageant wrote: "Since when did working people start feeling so sorry for their bosses?"

Chez said...

I read that. Really entertaining book. Look, we need bosses -- there's always gonna be a hierarchy, and there's nothing wrong with that. What's happened over the past couple of decades though is that the entire paradigm has changed when it comes to how we make money in this country. A lot of the ultra-rich in this country aren't oil barons or steel barons -- people whose companies actually make things. They're people like Lloyd Blankfein -- CEOs of casinos or people in charge of our burgeoning service industry. That's what America seems to be these days: a service industry. And the awful thing is that the executives at the top of even the manufacturing end of the spectrum have gorged themselves on so much personal indulgence that their companies have suffered. Case in point: GM execs. It used to be that CEOs made money -- but not the kind of ridiculous seven-figure incomes they make now. And quite a few of them have done little more for it than steered the wheel of a sinking ship.

Anonymous said...

Thinking of what consumers would do with $140,000 in their checking account: spend it. Who would benefit from the spending? Evil corporations, feeding the people at the top.

Why not eliminate all forms of private business and set a standard salary of every person at $500,000/year? Every occupation from writers to architects to surgeons will all make the same amount of money, regardless of performance or ability. If we limit savings and take all funds and private possessions upon death we'll have ensured that no one can obtain a windfall from a rich uncle.

So what happens when everyone makes the same amount of money? Is everyone rich? Or is everyone poor?

Ethnic Redneck said...

Not to mention the whole "All men are created equal" line is in reference to the government and their policies. You can't force an individual to not have prejudices, but you can limit the government's ability to, say, guarantee wealth and privilege. Of course, the founder's were also deeply anti-corporate and that got swept under the rug, so really, people will still try to pull the same old crap, regardless of what we try to do.

The only solution is to actually slap them down when they pull this horse crap, but since every hillbilly and redneck thinks they will need the financial protection once they win the lotto, we probably never will see real financial reform.

Anonymous said...

Awesome post!

A few things:

1. Something I read a little while ago is that Americans are fine with income inequality as long as the system is thought to be fair. It's not.

2. The wealthiest people benefit the most from the commons, therefore they should pay more taxes. As it is, the very top pay a lower effective tax rate. Even Warren Buffet says it isn't right that he pays less in taxes than his secretary. Then there is the fact that payroll taxes (like Social Security) stop after a certain level of income.

3. Unlike Michael Moore, I do not think capitalism is inherently evil. Like so many things, it can be misused and abused.

4. The middle class is being crushed.

5. Power corrupts, absolute power corrupts absolutely. That's why something like communism will work.

Rory said...

Give a poor man a thousand dollars, and he'll spend it on bills, food, other necessities, etc.

Give a rich man a thousand dollars, and he'll throw it on the pile and say, "Thanks."

That simple truth is why trickle-down economics is bull.

Le Penseur said...

I'm not usually such a stickler for regulations, but the Taibbi Rule clearly states that anytime you refer to the CEO of Goldman Sachs by name in print it [his name] should always contain the phrase 'God's Work' in the middle, i.e. Lloyd 'God's Work' Blankfein.

L. said...

There's a statistic saying something like 80% of the population believe they are above average in intelligence. (And apparently have no idea how statistics work.)

I suspect that a decent portion of people the middle class (and below) are also artificially inserting themselves into a higher economic strata. At least that's my theory as to why people aren't infuriated by the disparity in the distribution of wealth across the classes and the concept of trickle-down economics.

ntx said...

There's another factor that comes into play in what L. just said. It also runs through a lot of the recent tea baggery.

Plenty of people have a bit of the latent Calvinist in them. They believe that people who are economically secure achieved their fortunate state because they were worthy of it. Conversely, people who are just holding on (or worse) must have done something to deserve their lowly status. Since we're a nation of strivers (as if others aren't), it would be psychically damning to do anything other than idolize the rich. Thus our easy identification with people who would no sooner identify with us than they would stop by the Sev for a six pack and a Slim Jim.

drater said...

Rory, best critique of trickle-down economics I've ever seen.

ntx, good point about the Calivinist "nation of strivers" BS. Interesting that those socialists in France and Scandinavia actually have more economically mobile societies than good ol' capitalist USA:

anticontrarian said...

"[T]hroughout the history of human civilization, since the first tribe stayed in one place long enough to grow its own food, thus guaranteeing their survival and allowing some of its members to do things other than hunt and gather, there has always been a parasite class, who through monopolies first of violence and later of ideas arrogates to itself a greater than is rightful share of the fruits of the tribe's efforts and labor."

Thanks for the inspiration, Chez. I greatly appreciate your work. Keep it up, man.

Anonymous said...

Most, if not *all* of you are too young to remember ol' Ronny R. before he was on the path to politics.

As a youngster, I used to watch lots of TV closely (myopicly) during the late 50's & into the 60's. Ronny was the spokeperson for "20 Mule Team Borax", a household cleaning compound.

Today, as I reflect, I now see the obvious similarities between the analogy for that product cleansing strength and the herculean effort subsequent US generations will face tryin' to dig out of the debt hole Reaganomics and the rest of American politics (see? Fair & Balanced!)has bestowed upon us since the early 80's.

Think South Pacific:

"I'm gonna wash that man right outta my hair"

Rinse. Repeat.


Anonymous said...

"Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice... you don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own, and control the corporations. They’ve long since bought, and paid for the Senate, the Congress, the state houses, the city halls, they got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying... lobbying, to get what they want... Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want... they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that... that doesn’t help them. That’s against their interests. That’s right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fuckin' years ago. They don’t want that. You know what they want? They want obedient workers... Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it, and now they’re coming for your Social Security money. They want your fuckin' retirement money. They want it back so they can give it to their criminal friends on Wall Street, and you know something? They’ll get it... they’ll get it all from you sooner or later cause they own this fuckin' place. It’s a big club and you ain't in it. You and I are not in The big club. By the way, it’s the same big club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table has tilted folks. The game is rigged and nobody seems to notice. Nobody seems to care. Good honest hard-working people... white collar, blue collar it doesn’t matter what color shirt you have on. Good honest hard-working people continue, these are people of modest means... continue to elect these rich cocksuckers who don’t give a fuck about you. They don’t give a fuck about you... they don’t give a fuck about you. They don’t care about you at all... at all... at all, and nobody seems to notice. Nobody seems to care. That’s what the owners count on. The fact that Americans will probably remain willfully ignorant of the big red, white and blue dick that’s being jammed up their assholes everyday, because the owners of this country know the truth. It’s called the American Dream cause you have to be asleep to believe it..." - George Carlin

From a while ago but every bit as pertinent today as then.

S NY said...

"For the country as a whole, trickle-down economics haven't worked.

Stick to non-fiction and opinion writing Chez; economics and tax policy are obviously not your strong suit.

There has been and will always be people at the top and those at the bottom of the economic mountain.

Attempts such as communism and socialism are wonderful concepts in the abstract, but fail when faulted and imperfect humans impliment that plan and ultimately enrich themselves in the process.

When you tax the guy or gal at the top of the food chain 70%, they will not spend, they will not hir and they will not expand. Were you even old enough in 1974 to recall that this shit didn't work? I am not saying it was trickle down that corrected the course, but when you dropped those 70% to 38% and broadened the tax base, it started 30+ years of sustained growth.

The entire concept of trying to correct the "massive inequity" through policy changes will always have unintended consequences. Christ, how many times do we have to go through this?

I was not born looking like Brad Pitt, nor was I born wealthy, Chez.

I stopped being pissed off or demanding fairness in the world when I was seven.

I have bad news for you, the founding father's lied. All men are not created equal.

Think of this analogy: you have $100K in scholarship monies to award. You have two candidates. One will make a fine doctor (needing $90K) and one will be a good welder (needing $10K). What is fair, to award the monies 50-50 or to give each person the money they need to best achieve what they are capable of?

Chez said...

And maybe you should stick to reading at an 8th grade level.

Look, while I appreciate your points and I see what you're getting at, I'm pretty sure I defused half of what you're saying by noting that, no, of course all men aren't created equal. I never suggested communism or socialism as a solution and in fact I said that socialism isn't the answer. But there's nothing wrong with demanding that, as a previous commenter said, the deck not be stacked against the middle-class to the point where it almost can't win. And that's the situation we have today.

What we also have is the antithesis of what you describe as the "ideal" goal of giving those in the top tier tax bracket a little leeway: The people there now aren't spending money and putting it back into the economy -- they're basically hoarding it. I hate to use a tired cliche, but any good that happens on Wall Street no longer has a direct positive impact on what happens on Main Street.

S NY said...

Ah, shit. Your “created equal “ comment must have stuck with me when I started pecking at the keys, I’ll give you that.

But I think some of your other comments kind of betray the populist rhetoric as opposed to what is social-economic evolution of the human species.

You first concede that that the wealthy “seemingly run roughshod” over the rest of us. You then point to the obvious dearth of separation between those at the $350K –a-year level and those that are at the +$1mil-a-year-. There is a divide, without a doubt. You then loop back into your first point and the “seemingly” (READ: Baseless, Intuition, Appears,…) that the rest of the planet is “getting screwed by this system”.

Wow! Talk about elite Superman! Did you see the leap that you made from two asserted points, right into conclusory causation, all with the undertone that steps should be taken immediately to correct what is such an obvious problem that is easily correctible.

I am not saying that it’s not easy to draw that same conclusion. How many of us have competed against that talentless little shit that happens to be the son or daughter of so-and-so and you knew that your efforts were in vain?

But living life anecdotally ignores the very basis of economics.

For every little shit, there are many, many more Michael Dell’s, Bill Gates, Warren buffets and so on. Julián Slim Haddad found himself in a foreign country, literally on the streets, not speaking the language. His little shit became the richest man in the world today.

But, let’s ignore the overwhelming fact that the middle class in this country is NOT shrinking. Let’s ignore the overwhelming economic evidence that free flowing money will amass in the hands of those who are adept at its management and will spread that money around. It remains your unstated advocacy for allowing government action to do the same.

Let’s ignore that and embrace that “the rich seeming to get richer while the poor get poorer”

There will always be anomalies, there will always be corrections, there will always be opportunities to make the system better.

But I make no distinction between this baseless, populist rhetoric and the inflammatory comments by some of the right that you so readily decry. And please, no arguments of degree.