Category Archives: The Economy

From Kevin Drum at Mother Jones…

I think there is a lot of truth in this…

In my post last night about Martin Gilens’ research showing that politicians don’t really pay any attention to the opinions of anyone but the well off, I quoted Gilens’ concluding guess that “the most obvious source of influence over policy that distinguishes high-income Americans is money.” Matt Yglesias isn’t sure this is right:

I would say the most obvious mechanism here is socialization. The president, the senior White House staff, the cabinet secretaries, the senators, the House members, the senior congressional staff, and the lobbyists, association heads, business executives, governors, mayors, foreign officials, and media celebrities who they interact with are all personally pretty high income. You get into the top decile of the US income distribution with a household income of $138,000, so the entire congress is in the top ten percent. What’s more, political elites tend to have college roommates, siblings, in-laws, etc. who are also prosperous.

Obviously the fact that rich people have money to spend on politics doesn’t hurt either. But I would never underestimate the human desire to believe that one is doing the right thing, and thus the importance of socialization to determining bias. Nobody in Washington seems to know that the public is clamoring for higher Social Security benefits and more federal spending on health and education largely, I think, because this isn’t what the people they know personally are clamoring for.

Full confession: I think there’s a lot to this, though I’d emphasize the raw power of money a bit more than Matt. It’s just that I liked that quote so much that I felt obligated to share it with everyone. But whatever the reason, here’s the takeaway: if you don’t have a six-figure income, Congress doesn’t much care about you. Sad but true.

via The Other Secret Weapon of the Rich | Mother Jones.

Sounds good to me!

From John Arovosis at AmericaBlog:

If the House Rs want to cut $100bn out of this year’s budget, let them – in their own districts back home.  The Rs would have us believe that this is what people voted for.  Let’s call their  bluff, and do a little experiment to see who’s right.  Ds don’t think that this is what people voted for, so we won’t cut spending in our districts.  Rs, on the other hand, will cut programs in their districts to the tune of $100bn, or more if they like.  Then, at the end of the year, let’s revisit whose constituents are happier.  After all, if all this money is just being wasted, the Rs surely can’t complain about cutting it in their own districts.

I know it sounds like a “modest proposal,” but at this point, why not just give the Republicans what they want and see how their constituents like it?  Call their bluff.  And school the true believers, like Rand Paul, in what actually happens when you claim spending is wasted but it’s really not.

via AMERICAblog News: Why not just cut $100bn in GOP districts?.

And he doesn’t care….

At a press conference yesterday, House Speaker John Boehner (R-OH) told reporters that if some federal jobs were lost as a result of his proposed spending cuts, “so be it.”

How many jobs are we talking about? According to federal budget expert Scott Lilly at the Center for American Progress, Boehner’s proposed spending cuts could kill almost 1 million jobs.

Lilly ran the numbers for Dana Milbank of the Washington Post:

using the usual multipliers, [Lilly] calculated that the cuts – a net of $59 billion in the last half of fiscal 2011 – would lead to the loss of 650,000 government jobs, and the indirect loss of 325,000 more jobs as fewer government workers travel and buy things. That’s nearly 1 million jobs – possibly enough to tip the economy back into recession.

Milbank additionally notes that Boehner’s spending plan includes some $450 million for the development of a second engine for the F-35 Joint Striker — which is done in a GE plant in Boehner’s district that employs 7,000 people. Lilly wrote Sunday that, despite Boehner’s promises to end earmarks, the job-saving money for the engine’s development looks a lot like an earmark.

via Boehner’s Spending Cuts Would Kill 1 Million Jobs | TPMDC.

I’m sorry, but this just isn’t right…

Many people don’t understand our country’s problem of concentration of income and wealth because they don’t see it. People just don’t understand how much wealth there is at the top now. The wealth at the top is so extreme that it is beyond most people’s ability to comprehend.

If people understood just how concentrated wealth has become in our country and the effect is has on our politics, our democracy and our people, they would demand our politicians do something about it.

How Much Is A Billion?

Some Wall Street types (and others) make over a billion dollars a year – each year. How much is a billion dollars? How can you visualize an amount of money so high? Here is one way to think about it: The median income in the US is around $29,000, meaning half of us make less and half make more. If you make $29,000 a year, and don’t spend a single penny of it, it will take you 34,482 years to save a billion dollars. . . . (Please come back and read the rest of this after you have recovered.)

What Do People Do With SO Much?

What do people do with all that money? Good question. After you own a stable of politicians who will cut your taxes, there are still a few more things you can buy. Let’s see what $1 billion will buy.

via Nine Pictures Of The Extreme Income/Wealth Gap | OurFuture.org.

On target as usual…

From the Huffington Post:

To official Washington it seems like 1995 all over again, when Bill Clinton and Newt Gingrich played a game of chicken over cutting the budget deficit, the hawks warned about the perils of giant deficits, and the 1996 general election loomed over all. Washington politicians and the media know this playbook by heart, so it’s natural for them to take on the same roles, make the same arguments, and build up to the same showdown over a government shutdown and a climactic presidential election.

But the 1995 playbook is irrelevant. In 1995 the economy was roaring back to life. The recession of 1991 had been caused (as are most recessions) by the Fed raising interest rates too high to ward off inflation. So reversing course was relatively simple. Alan Greenspan and the Fed cut interest rates.

In 2011 most Americans are still in the throes of the Great Recession, which was caused by the bursting of a giant debt bubble. The Fed can’t reverse course by cutting interest rates; rates have been near zero for two years.

Big American companies are sitting on almost $2 trillion of cash because there aren’t enough customers to buy additional goods and services. The only people with money are the richest 10 percent whose stock portfolios have been roaring back to life, but their spending isn’t enough to spur much additional hiring.

The Republican bromide — cut federal spending — is precisely the wrong response to this ongoing crisis, which is more analogous to the Great Depression than to any recent recession. Herbert Hoover responded the same way between 1929 and 1932. Insufficient spending only deepened the Great Depression.

The best way to revive the economy is not to cut the federal deficit right now. It’s to put more money into the pockets of average working families. Not until they start spending again big time will companies begin to hire again big time.

More:   Robert Reich: The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy.

This is good news…

The U.S. economy will create 2 million jobs in 2011, twice as many as last year, said Scott Brown, the most accurate forecaster of the jobless rate over the past two years according to Bloomberg News calculations.

Unemployment will end the year at 8.6 percent, projected Brown, chief economist at Raymond James & Associates Inc., less than the 8.8 percent median forecast of 61 economists surveyed by Bloomberg from Feb. 2 to Feb. 8. It dropped to 9 percent in January from 9.4 percent the prior month.

President Barack Obama’s deal with congressional Republicans to reduce the payroll tax and extend Bush-era cuts will put more money in Americans’ pockets and spur demand, said Brown. The need to rebuild inventories as sales climb will give the world’s largest economy an added lift this year, he said.

“We’ll see consumer spending remaining pretty strong,” Brown said in a telephone interview from St. Petersburg, Florida. “Firms large and small won’t hire unless they see more demand.”

via Top Forecaster Brown Sees U.S. Adding 2 Million Jobs in 2011 – Bloomberg.

Interesting…

Make of it what you will….

Thanks, to my friend Kirk, for sending this to me…

Don’t look now, but the mass-elite customer is coming back. If three times is a trend, then we definitely have a trend of brands catering to high-end and aspiring consumers reporting impressive numbers.

On Wednesday, Polo Ralph Lauren reported that third quarter revenues rose 24 percent. Yes, sales in Asia were up. But the firm said “higher domestic and European shipments for our apparel products and increased domestic accessories shipments were the largest contributors to growth” in its wholesale sector. Sales at RalphLauren.com were up 33 percent. And in a move certain to warm the hearts of Muffy and Potter, the company announced a dividend increase and a $250 million stock buyback. It looks like more swells were donning Peccary leather gloves, a bargain at $399 (originally $599), to protect their hands as they drove in their BMWs. BMW this week reported that it sold 18,656 cars in the U.S. in January 2011, up 21 percent from January 2010.

And where were the BMW owners driving? Why, to the Whole Foods, of course. On Wednesday, Whole Foods  noted that discriminating food snobs had been flocking into its stores in search of arugula, heirloom tomatoes and cheeses with lengthy names (insert your own Whole Paycheck joke here). Total sales were up 14 percent for the quarter, and identical-store sales were up 9.1 percent. Not even food inflation could deflate Whole Foods’s earnings soufflé: EBIDTA (earnings before interest, taxes, depreciation and amortization) was up 26 percent from the prior-year quarter.

The current expansion has entered its seventh quarter, and the pace of growth is accelerating. But these businesses are growing much more rapidly than the overall economy. It’s common to speak of a two-speed recovery: the U.S. vs. emerging markets; business vs. consumers; Wall Street vs. Main Street; exporters vs. purely domestic companies; and comparatively rich vs. comparatively poor. Call them Bobos, Yuppies, elites, swells, toffs, or snobs. Just don’t call them frugal anymore.

The Panic of 2008 and the ensuing market crash were big blows to the self-worth, financial and otherwise, of high-earners. But they’ve benefited disproportionately from the policies and trajectory of this recovery.  It’s always been the case that it’s better to have more money than to have less, and to have more education than to have less. But this has been particularly true in the past two years.

via The Yuppies Are Back – Yahoo! Finance.