Post-Meltdown Mythologies (I): Americans Have Been Living Beyond Their Means
What brought on the economic meltdown of 2008? Besides the bursting of the housing bubble, Wall Street's malfeasance and non-feasance, and Washington's massive failure to oversee Wall Street, fingers are also being pointed at average Americans. Some of them took on mortgages they couldn't afford, of course, but we're also hearing a more basic theme that goes something like this: For too long, Americans have been living beyond our means. We went too deeply into debt. And now we're paying the inevitable price.
The "living beyond our means" argument, with its thinly-veiled suggestion of moral terpitude, is technically correct. Over the last fifteen years, average household debt has soared to record levels, and the typical American family has taken on more of debt than it can safely manage. That became crystal clear when the housing bubble burst and home prices fell, eliminating easy home equity loans and refinancings.
But this story leaves out one very important fact. Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.
It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.
The "living beyond our means" argument suggests that the answer over the long term is for American families to become more responsible and not spend more than they earn. Well, that may be necessary but it's hardly sufficient.
The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. And that requires, among other things, affordable health insurance, tax credits for college tuition, good schools, and an energy policy that's less dependent on oil, the price of which is going to continue to rise as demand soars in China, India, and elsewhere.
In other words, the way to make sure Americans don't live beyond their means is to give them back the means.
The "living beyond our means" argument, with its thinly-veiled suggestion of moral terpitude, is technically correct. Over the last fifteen years, average household debt has soared to record levels, and the typical American family has taken on more of debt than it can safely manage. That became crystal clear when the housing bubble burst and home prices fell, eliminating easy home equity loans and refinancings.
But this story leaves out one very important fact. Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.
It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.
The "living beyond our means" argument suggests that the answer over the long term is for American families to become more responsible and not spend more than they earn. Well, that may be necessary but it's hardly sufficient.
The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. And that requires, among other things, affordable health insurance, tax credits for college tuition, good schools, and an energy policy that's less dependent on oil, the price of which is going to continue to rise as demand soars in China, India, and elsewhere.
In other words, the way to make sure Americans don't live beyond their means is to give them back the means.
posted by Robert Reich | 5:11 PM
170 Comments:
One of the reasons that we are seeing our standard of living going in the wrong direction is because many people will choose the cheaper foreign import over the domestically-produced product option. Do these people think they are living in a vacuum?
The pursuit of cheap goods has sold off our country's assets and shipped the good paying jobs overseas. Now many talk about the demise of the domestic automobile industry like it is positive for America. Really? Losing hundreds of thousands of good paying jobs linked to the big 3 is good for America? Will the $7 to $10 per hour jobs that replace them support the substantially higher salaries of those who claim the automotive workers were overpaid?
Before the powers that be decide to sell off the country could those of us who believe in the Constitution and value the opportunities it affords "US citizens" have a say?
I for one do not want my country owned and operated primarily by foreign interests who will strip our resources and send all that is valuable back home to their own country.
I am so happy to hear you say that! My Depression Era mother, who is currently living with me, blames this on the greed of subsequent generations. I intend to show her your article. (She's a fan of your, by the way.)
Most of my friends are small business people, living as frugally as they can, and it's harder and harder to make ends meet--both for us and our customers.
This insight is right on, Professor. Those of us who are living a middle-class existence are finding it harder and harder to make ends meet. And what is sacrificed when the high price of food, gas, and insurance eat into discretionary income? Small luxuries like eating out, and what should be big necessities, like saving for college and retirement, go by the wayside.
I have two children who are 14 and 11, and Lord knows how we'll pay for college. Somehow we'll muddle through. But the gnawing edge of uncertainty is creeping through the middle class.
Anyway, thanks for your insights and trenchant commentary.
Liberrian in SC
The moral turpitude of the American people, if any, has been in not seeing what was really going on, namely the take over of the USA by the richest. The moral turpitude has been in being naive and uncritical. Just as when Bush went to war in Iraq.
One should not underestimate this sort of moral shortcoming. After all, it is what the average German was culprit of, as the Weimar republic became a fascist regime engaging in the worst horrors. The average German clang to denial, and willful stupidity, until the final defeat in 1945.
Patrice Ayme
Patriceayme.wordpress.com
As a two-income, college-educated household just trying to keep the same standard of living my high-school educated parents had a generation previous, I couldn't agree more.
I'd like to observe that runaway interest rates and hidden fees compound the problem of Americans relying on credit. I wish the first response to the credit crisis would have been usury legislation, instead of a bailout package.
Why can't we cap interest rates for loans before more people default on them?
Agreed. However, our national debt that has become obscene under mostly Republican administrations and doubled in the last eight years, has not set a very good example for people to follow. After all, the government is the people, in theory, and this debt just adds to their burden. It hasn't been enough to ship people's good jobs and our industries overseas, we've been left with massive credit card debt too.
Living beyond your means is a nice way to put it. How about divorced from reality.
Divorce in America requires two households when it used to take just one.
Now we have 2 Christmas Trees, and the kids get 2 houses to split.
How do we afford that? Both parents work 4 to 8 jobs at one tenth the pay.
Who raises the kids?
The most dangerous aspect of our national family. Profiteers.
Remember when you walked to school, or after school went out and played till dinner?
That was teh good ole days.
Now kids sit online for 18 hours drinking poweraid and eating microwave pizza.
Any wonder why they won't make good parents or be able to keep a family together?
Living beyond our means has cost us the security that once was taken for granted.
Now it has been taken for good.
In other words, the way to make sure Americans don't live beyond their means is to give them back the means.
As a self-employed small businessperson, I have seen my means evaporate over several years thanks to hyper-inflation. I finally had to shut down my long-running business. It didn't just start three weeks ago as it did for the fat ones on Wall Street. Middle America has been cutting back for some time. Thanks for exposing this myth.
I agree that the moral turpitude arguments are inaccurate and that some Americans have been having a hard time with stagnant wages. However, I disagree in two aspects
(a) a lot of average Americans ARE living beyond their means. The American concept of what is "normal" is out of touch with the reality of our economic situation. If more Americans travelled, they would see that their "normal" (size of cars, houses, energy consumption, food etc) are considered luxury in most other wealthy nations, like Europe or Japan.
(b) The concept that wages is the main cause of hardship on "working americans" denies the ability of said average american to be flexible and adapt. Its tough, but so are many people. A belief that they are only victims undermines their own empowerment. In view of the current economic mess, I doubt that there will be much of a rise in real wages any time soon, and I believe that we will all need to learn to tighten our belts.
Like Dr. Reich, I've been giving a lot of thought to the fine mess we are in. Upon deep reflection, I have come to the inevitable conclusion that the Baby Boom generation might be known in the history books as the generation that wrecked America. Looking beyond the many fine point made in the blog, I think the root cause is that we have evolved a society totally devoid of prudence. To wit, here is the definition of prudence from Mirriam-Webster:
1 : the ability to govern and discipline oneself by the use of reason 2 : sagacity or shrewdness in the management of affairs 3 : skill and good judgment in the use of resources 4 : caution or circumspection as to danger or risk
Let's remember that the European settlers of this Country were resoundingly prudent and the Constitution arose from their core values. So what happened to the Baby Boomers that changed the course of history? First, I believe that the sense of entitlement that came with being raised in unprecedented abundance created a "more is better" attitude. Second is the sense of rebellion from their parents generation (the ultra-prudent Eisenhower Generation) that resulted in a belief system of life without consequences during the formative years of the 1960's where imprudence became ingrained. "Free love" translated into a "I can screw whoever I want and no one gets hurt" attitude. Sounds like Wall Street? Are Bill Clinton and George W. any different in this sense?
But here's the truly scary part: we have exported our value system (or at least tried like hell to) around the world creating the greatest bubble scenario ever devised by mankind. Sure there have been generations of excess before but none with the sheer size, weapons of mass economic and environmental destruction and the reckless exuberance to carry out such a plan. And do you know who the bagholders are? All future generations.
We are witnessing the bursting of the bubble and there is nowhere to hide and no one left to con. As it turns out, free love isn't free after all.
FDR said "Only a foolish optimist can deny the dark realities of the moment." The next few years are gonna hurt because failure is suppose to hurt. For the sake of future generations and possibly the very survival of our species, let's make the necessary sacrifices now while there is still time. Baby Boomers have changed history once. Let's hope they can do it again by ACTING PRUDENTLY!
And that requires, among other things, affordable health insurance, tax credits for college tuition, good schools, and an energy policy that's less dependent on oil...
Would some of those other things involve liquidating the empire, cutting military spending and manufacturing world class civilian products?
@Bluetown,
Prudence is all well and good, if it is acknowledged. But, rather, why should the average person trust government to do anything at all, given the mess they seem quite capable of making out of crises.
I see plenty of new cars and HDTVs around where I live. Those people can't be making so much more than me, and I can't ACTUALLY afford either of those things, and I imagine they relied heavily on credit.
BUY WHAT YOU CAN AFFORD!
The global economy is capable of producing goods and services that better our living standards. Why should we not consume those goods and better our lives? True, we should not have to go into debt to do so. But if we do not consume those goods, there is no need to produce those goods. In other words, not consuming means not producing which means putting people out of work. Is that what we want for the global economy? More poverty? That's what starts wars.
What we need is a better understanding of our money system. I would suggest taking a look at the work of Abba Lerner. He called it functional finance. U of K Professor Randal Wray has an excellent paper on the subject.
Dr. Reich, you hit the nail on the head for what ails us. I'd wish Obama would consider you as Treasury Secretary but I won't hold my breath. And of course, who'll be President isn't for sure either.
I'd been living and thinking along the lines you've said. I don't owe hardly anything and yet will be a victim to this 'crash' as much as anyone. Blaming the victim is such a common argument from the Right but I'll not be surprised to hear it from so-called Dems like Rubin or Summers (supposedly the top of the pack of 'expected' Treasury Secs.) let alone the chorus of Republicans. Income, or lack of it is the problem for most of us.
Blaming 'baby boomer's'? Now, former "yuppies" maybe who are now Hedge Fund managers (with their Gen X brethren_) perhaps. But 'baby boomers' include low income "hippies", environmentalists, self employed subsistance level tradespeople, artisans, many of which have been living a life of restraint and responsibility. The Baby Boom generation could be described as the most ideologically split generation ever. The 'Culture War' is what defines us....those who bought into the Greed is good thing and those who didn't. I see myself as having more in common with my Depression era parents than with Credit Card merchants and Big Pharma salespeople. But then I am a "liberal" when it comes to social issues and the environment. Blaming a Generation is so off the point. Also, Alan Greenspan who officiated over the Deregulation of banks and finance and the resulting Bubble of Finance (shadow banking system) is hardly a Baby Boomer, nor was Reagan nor McCain.
However, I don't blame the Foreign producers (i.e. China) for our problems, unlike the mostly correct first commenter here (n.e. op). If we hadn't the 'cheap' goods from elsewhere, we'd have sunk a long time ago. I keep wondering how people who make only 8 to 12 bucks an hour do it as i tried back in 2000 to do that then and couldn't make ends meet and barely get by at 22 an hour now. I think it's cheap clothes, cheaper consumer goods, and fun things electronic that might be the 'bread and circuses' that keep the public from rebelling and I see "protected" classes like medical, legal, govt. and big corporations as being a bigger cause of American's loss of income. Now if medicine had 'competition' from say alternative medicine and foreign doctors maybe they'd lower their exorbitant fees? Or if we'd consider more 'socialism' in medicine, and other protected 'services' we could lower those fixed costs that are hindering the American Dream?
Real Competition of ideas, and products is always a good thing for the consumer. But like the first commenter, I'll agree we need more domestic production too of both ideas and products...and living within our means.
(a) a lot of average Americans ARE living beyond their means. The American concept of what is "normal" is out of touch with the reality of our economic situation. If more Americans travelled, they would see that their "normal" (size of cars, houses, energy consumption, food etc) are considered luxury in most other wealthy nations, like Europe or Japan.
Not to undermine your opinion, but having lived in Japan and East Asia, the above is false. Japan and East Asia are all about Material Posssesions and they stop at nothing to claim them. Ever been to Tokyo to notice everyone has nice fancy new 500$ jeans? That is within their means since they can and do afford those goods, and they are by no means luxury either.
As far as Americans living within their means is concerned, the poor and lower middle class can not survive in a world that is ruled by a few "top" corporations and endorsed by our so called government. These corporations have for the most part gone unnoticed by everyone. However, you can't blame CEOs for maximizing the value of their firm when they have such an easy and low risk way of doing so. You can easily blame the government though. Afterall they for the last 18 years have ceased to monitor anything relevant to our society, economy, and world. They two political parties have successfully drowned out democracy in favor of a bipartisan aristocracy, undermining the very foundation of the American society. In other words, the government has no interest in the people, only the people who can keep their pockets filled and their seats of power intact. Companies have been able to do this by abusing the power of the lobbyist.
What we need to do now as a united country is to review our entire way of life. From living expenses to human rights and government. What has happend now is the beggining of bad times, and if we do not take responsibility and take control of our country, we will find these bad times to be the worst in human history if we are not careful.
If Americans valued their life and their freedom, they will change their current government and see to it better laws, and ways of living are developed.
Prudent- were the first white settlers here prudent? Roanoke colony and to a certain extent Jamestown would suggest otherwise. The first waves of Europeans came here with an eye to quick easy gain, work done by others (the local indigenous folks)and not much of what I would call prudence.
The Eisenhower years were marked more by paranoia and extremism than prudence. It was the era of conform or be excluded.
As a member of the earliest of the post WWII babies (63) I know that my Depression era parents wanted to give me all the stuff they didn't have. Way too much of it at times.
Doesn't really do much good to try to isolate and blame a group for all this. Let's maybe all just take some responsibility for our future behavior and try to live the way we all 'say' we want to see everyone else live.
Carolyn Annafiglia
Like others, I sure hope Obama is talking with you about a cabinet position. He needs you and I'm quite sure you'd make an important contribution to his administration.
I also think the conservatives have been doing a kind of mental jujitsu. There have been many who have said that the income inequality was unimportant because consumption inequality was so much lower, inflation was a non-issue, and basically that rich people were just buying nicer versions of the same goods that regular people got for lower and lower prices. Now they are blaming people who borrowed too much against their houses, with an implication that it was minorities. The situation of cheap consumer goods keeping middle income people remaining able to consume was really created by an overvalued dollar created by increased demand for US financial assets by foreign investors, sovereign wealth funds, and governments expanding foreign currency reserves with over 80% dollars.
Let's cap credit card interest rates (no more than 5%), ban the mercenary fees, require the reworking of all mortgage loans (for primary home only) that are under water, regardless of whether you are currently behind on payments, and provide more tax breaks and investment incentives for the middle-class.
Significantly raise the minimum wage.
Make good housing, and not home ownership THE goal. Go back to 10 to 20% down as the standard, OR, make ALL lenders keep the mortgage loan for a minimum of 5 years.
The unsustainable costs of going to college has been caused, in part, because of govt. guaranteed student loans. The colleges have increased costs and just passed them on to students and parents.
Create a student loan bank that does not make loans to institutions that have costs increases that exceed a set dollar figure or percentage each year. Colleges or universities that offer duplicate programs of nearby universities would also receive less student aid.
We have to do something to de-incentivise higher education from passing on reckless spending to students and families in the form of ever higher tuition and fees.
Art, to continue our conversation from the previous post...
On alternative fuels, these can provide up to 20% of the energy and wealth we're accustomed to, on the high side.
It takes over 50 nuclear reactors to produce the same energy as is found in only 1% of the oil we consume.
To get back to a modest 2% energy growth right now, we need to put over 100 new nuclear plants online each year, with the figure growing year by year.
Once oil production goes into decline, we may need to put several hundred new nukes online each year.
Where will the increase in energy come from to build all of these nukes?
If we talk about solar or wind, the scale dramatically increases.
The PC revolution gave us the capacity to consume energy faster than ever before. Personal Computers don't extract energy, though they make it possible for us to use up fossil energy faster.
I fail to see how genetics can break the Laws of Thermodynamics. there is great potential there, but so far, it really hasn't proven out in ways that matter to continuing the infinite growth of our population and civilization.
Biology and genetics are the fields that I had originally intended to get into. so I do keep up with those. Especially in food crops. So far, genetic tinkering has done nothing at all to increase our food production. It seems so far to only serve to bankrupt farmers and put money into the hand of wealth internationalists and bankers. In fact, since our energy crises began again in 2001, world food production has been down, giving further evidence that our food supply is dependant on our fossil fuel supply.
World oil production these last few years has been flat, and it's likely that we're at the maximum rate of production. Soon we're going into decline.
We can innovate new ways to consume energy. But we can't innovate ways to create energy from nothing. If you can find a way to do this, then you will have radically changed our understanding of the universe and we'll be able to expand our population and energy consumption until the waste heats destroys our planet and kills us off.
After the Great Depression, the US Energy supply was still growing. We were able to keep increasing production until the 1970s, when right after oil peaked in the US, costs went up and industrial jobs began going were energy was cheaper.
In the USA the last gasp energy source we have that is still growing is natural gas. So we'll continue to use that faster and faster until it drops off a cliff. then the lights will go out.
Using deficit spending to power growth in the US will only work if our energy supply can increase to power the productivity. The best thing we can do to power our recovery is to cut back our waste. End the wars. Sun Tzu tells us that an extended occupation will always bankrupt the occupying nation. This has always been true. It is still true. We pay more than $50 gal for fuel in Iraq.
Art, I know you believe that we can innovate our way out of the exponential function, but nature and basic math show us that the only way to solve the problem is to never let it become a problem to begin with.
Our population keeps growing and we need to eat more stuff faster every day. The Earth can't provide infinite food to supply an infinite population. So there's a limit to how far we can go before we crash. We are hitting those limits now.
From the archives of a failed speechwriter:
ABOUT THINGS THAT HAVE BEEN BOTHERING A LOT OF FELLOW AMERICANS LATELY AND WHY THEY SHOULD QUIT BOTHERING
Draft for SIXTH Presidential Address to the American People
October 5, 2005
My Fellow Americans,
Howdy!
I want to touch base with you about a couple of things that's been bothering a lot of people the last few months, some a little longer; and I understand that and appreciate their concern. 'S'matter of fact, I have been thinking about them myself for a long time, only they've kind of come to a head, in some people's mind lately, the public's I mean, which is why I want to take a break from what I was about to do and visit with you and address some of these concerns you may or may not have, some of you, although some of you don't. ------
-------- Which brings me to the third worry that many Americans have: The Economy. Many Americans are worrying about it and how it may impact their own. What with gas prices going up, a big part of the business in the Missisippy basin paralyzed, cities having to be rebuilt, and threatening civil war in Iraq - to mention some of the big ones. How are we going to pay for all this and still have cash to spend on ourselves and our families, such as consumer goods and the other things we have come to appreciate as part of the American way of life? And dream. Are we going to let go of the tax breaks, that everybody has been enjoying? Or what?
I have been thinking hard about it, which is part of my job. The answer is: No! But how can we keep spending at the current level? Simple, my Fellow Americans: By exporting something we still have plenty of: JOBS! That's right: JOBS! Some of my opposers, that never agree, have been moaning and whining about American jobs going to other countries and elsewhere. And keep going on about it.
They have got it all wrong: we need to export more American jobs, not less!
Let me let explain how it works: An American worker normally gets paid, say, 100 bucks a day. A Chinese worker gets paid 2 dollars a day for the same work. By exporting the job to China we have a gross margin of 98. We spend a bit of that on making the Chinese worker want to take the new job, say 3 bucks; that's a one hundred and fifty per cent pay raise for him right there, same if he's a woman -leaving 95 bucks for America. We take 10 bucks off that for the US Treasury, which leaves 85 bucks. Which we print out and mail to the American worker who had the job in the first place. It's as simple as that. Everybody is happy.
"But wait a minute", some so-called protectionists may say, " that means the American worker goes down in pay!" (He used to get 100 bucks, remember, before we exported his job; he only gets 85, in the mail, I mean). Wrong again! No, on the contrary, he goes UP! Let me explain why:
In America, we work five days a week, and there are plenty of holidays. In China they work seven days a week, on account of them having no religion, with hardly any holidays either. That easily makes up for the difference on a yearly basis. In fact, my administration plans to export, not just the jobs currently held by American workers; we are going to create new jobs - so that we can export them! There are hundreds of millions of Chinese who would love to se their pay go up by one hundred and fifty per cent. Coming generations of American workers are going to thank us for this visionary approach to globalization. Since two or three Chinese jobs will be created for each American job exported, the average daily compensation to each American worker will be 170 to 255 bucks per day instead of just 85! A massive increase in spending power! On consumer goods, which is one of the things we’re good at, as Americans, being consumers, I mean. And if we stick to it, the US Treasury is going to fill up quickly.
My fellow Americans, there are currently only three billion Chinese, give or take a couple. My administration hopes to persuade the Chinese government to lift the current restriction on family size from one child to two over the next five years, with further increases as dictated by US consumer demand in the future! If these negotiations are successful, the future looks bright for our great Nation!
So quit worrying about the economy! And the other things I talked about.
Thank you for your patience, and God bless you! And America!
Well at least some Americans were living beyond their means, but they are not totally to blame. As a listener of Air America progressive talk radio, I was barraged by ads from mortgage companies encouraging me to refinance my house. They were all over TV too. These ads and mortage companies sprung up like the S&L's did in the 80s. Americans are sold a bill of goods by advertising every day of the week. They created a culture whereby you were a sucker if you didn't start flipping houses. The run-up in housing prices confirmed this.
Unfortunately, a lot of people were taken in by this, but, definitely, their own greed contributed to it. When my daughter moved into a McMansion (only one of four houses she and her husband owned) with a mortgage payment they couldn't afford and an ARM, she told me that when they needed money, "they just refinanced one of their houses." I said to her, "Yeah, but this can't go on forever." Evidently, she thought it could. Today they've lost all their properties, have gone through bankruptcy and ruined their credit to the point that no one will even rent to them.
Fortunately, I converted all my mutual funds to money markets over a year ago and was able to buy a foreclosure condo for half the price they sold at two years ago. Now they and my grandchildren have a place to live in a pretty good neighborhood, and I have another investment.
As a radical in the 60s and a critic of capitalism, I learned what capitalism was all about from reading Das Kapital (among other literature), and so now I'm able to profit from the knowledge that most Americans were never educated in. I was also able to save my extended family from living on the street. This does not make me a good person, just one who is totally wary of advertising, never approved of Ronald Reagan and the era he brought forth and is still a critic of capitalism albeit one who has profited from it. The point is you just can't believe the hogwash of the prevaling culture including the American Dream. It's just a bill of goods we've been sold.
Professor Reich, once again you have hit the nail on the head. Your insights are so spot on I can't understand why they don't resonate with more people. These days I often say what we need is another FDR. Heck we don't need FDR we have YOU.
Seriously, if given the chance to return to government service PLEASE give it a chance. We need your voice!
Harvard's Elizabeth Warren has done some original research on this and has found that the cost of "necessities" has outpaced the inflation rate for over a decade.
So the idea that people are spending on plasma TV's and the like is mostly a fiction. The real cost increases have been in the cost of health care (now not provided by employers as before), college tuition, transportation and housing.
Manufactured goods have gone down in price and this is the area the the conservatives like to point to when promoting the benefits of "free trade". But, the proportion of budgets devoted to these items has also decreased.
If you've got an hour to spend you can watch her talk on YouTube:
http://www.youtube.com/watch?v=akVL7QY0S8A
Even Reich tends to buy into the profligate consumer story, but she shows that it is mostly not true.
Mr. Reich,
I believe you are ignoring the facts in this post. The longer-term trends show an increase in the debt service ratio of American households specifically due to mortgage financial obligations. Consumer financial obligation ratio has been on a downward trend.
The increase in the mortgage ratio is specifically correlated to growth in the median square feet of single family private homes. The fact is indisputable that we are in this mess because Americans have been buying bigger and bigger homes with the aid of increased borrowing which became available due to declining credit approval standards. Nothing more, nothing less.
The orig. post, way up there at the top, is great!
I agree with Robert Reich but I also know that many people can do a little better job of managing their money. Since when do you buy a car that gets less than 15 mpg when you are on a budget and struggling to keep up? No one forced people to buy those huge SUVs. I am always shocked to discover that my gas bill for one year is the same as that for one month for most people.
Our tax system, our broken lobby system, and our supply-side economics has not produced any good paying jobs for the middle class.
Living standards, inflation, and job opportunities have been eroding the middle class.
Corporations have been focused on global sales and operations for maximizing stock prices for corporate raiders.
America's families have been broken down because both parents are working and commuting for 12 hours/day. No family connections... resulting in broken families and lost children.
America has lost it's way.. starting with the destruction of the core family unit, lowering of standard of living, and lack of job creation… which has led to many social-economic problems (drugs, crime, illegal immigration, minimum wage jobs, hopelessness, lack of government trust, etc..)
Nobody has a vision of restoring the American family or making America a better place to live. Where is the leadership… who can bring the American dream back to our country??? Don’t we all have a responsibility to make a change for our children’s future.
Barack is the only politician that seems to speak to that dream and has messages of hope for change.
Dr. Reich,
I'm glad to see you confirm the real story about who's losing in our economy over the past 25 years.
During 2002-07 particularly, It's pretty obvious that the working middle class, squeezed by stagnant wages, resorted to cheap debt to subsidize their standard of living. And the financial institutions played on this vunerability with the huge revolving amount of funds they were generating by the complex pyramid leveraging game.
To clarify with facts the dimensions of this squeeze of the working middle class' wealth and income over the past 25 years, for new readers here is a repeat of some actual data posted to your blog many weeks ago.
___________________________________
TABLE 9: DISTRIBUTION or CONCENTRATION OF WEALTH AND INCOME IN 2004
___________________________________
WEALTH:
Top 5%..............58.9%
Top 20%.............84.7%
4th 20%.............11.3%
3rd 20%..............3.8%
Bottom 40%...........0.2%
INCOME:
Top 5%..............21.8%
Top 20%.............50.0%
4th 20%.............23.2%
3rd 20%.............14.7%
Bottom 40%..........12.1%
COMMENTS:
Wealth Distribution among households is much more unequal than Income Distribution -- especially when focusing on Bottom 60% of households. In 2004, this group owned 4% of nation's Wealth while it earned 26.8% of all Income.
Greenspan always thought that Wealth more fundamentally represents the ability of households to consume. The Fed's cheap money policy under his chairmanship during 2002-06 caused family households en masse to sell/refinance assets to maintain living standards. This, as Dr. Reich is now confirming -- in combination with snake-oil lending practices minus effective Fed Oversight -- resulted in total credit market debt exploding to over 320% of GDP by 2007 ... with all the inevitable disastrous financial repercussions we are now experiencing.
Source: Survey of Consumer Finances: Sponsored by the Federal Reserve Board
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TABLE 16: GROWTH in NET WORTH and INCOME by WEALTH CLASS BETWEEN 1983and 2004 (Date in 000's 2004 Dollars)
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NET WORTH:
...........1983.....2004...% Change
Top 1%...$8,315...$14,786.....77.8%
Top 20%..$1,002....$1,822.....81.8%
4th 20%... $154.8....$243.6...57.3%
3rd 20%.....$64.3.....$81.9...27.3%
Bottom 40%...$5.4......$2.2..-59.0%
INCOME:
Top 1%.....$698....$1,169.....67.5%
Top 20%....$141......$198.9...41.1%
4th 20%.....$58.5.....$68.4...16.3%
3rd 20%.....$38.5.....$41.5....7.8%
Bottom 40%..$16.8.....$17.5....4.2%
COMMENTS:
The Top 20% saw average Household Wealth rise 78% (to $14,786,000between 1983 and 2004 compared to 82% for the Top 20% (to $1,822,00 in 2004).
In sharp contrast, the next 40% saw their Household Wealth increase on the average 42%compared to a whopping -59% decrease in Wealth by the Bottom 40% to a tiny level of $2,200 in 2004.
The growth history is eqally bleak for average Household Income between 1983 and 2004. The Top 1% saw a 67.5% increase in Income compared to 41% for the Top 20% of Households. The next 40% of Households saw their Income grow on the average 12% to a meager 4% for Bottom 40% ... so well BELOW the average annual rate of inflation for the Bottom 80% of Households!
The Top 1% of Households earned an average of $1,169,000 compared to $199,000 for Top 20%. The next 40% of Households earned less than $55,000 in 2004 with Bottom 40% earning less than $18,000.
This reflects 25 year trend of a severe "structural Wealth/Income stagnation and squeeze" on the working middle-class ... a reality which has only intensified over the last 8 years.
Source: Prof. Edward N. Wolff, "Recent Trends in Household Wealth in US: Rising Debt and Middle-Class Squeeze," June 2007
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blutown,
This idea that the Boomers were all spoiled brats who grew up with privilege is completely at odds with the experience of many in my father's generation, i.e. the Boomers. My old man grew up poor as hell in a West Texas oil town, where the divide between the haves and have-nots was rigidly enforced. I grew up only slightly less impoverished, and then only because he worked his butt off for 30 years at a lumber company. I've seen plenty of silver spoons, but none of them were ever put in my mouth.
To Reich's point, though, I do concur that the income-to-expense ratio has grown way too far out of whack. However, we should consider the sorts of things that we perceive as necessary which our grandparents wouldn't have: Air conditioning, internet access, cell phones, television (cable for most, I make do with rabbit ears), and cars which need to travel farther on a daily basis than they ever have.
But life has changed in such a way that living without these things weakens your ability to make a living and survive. Houses are no longer built for cross-breezes, and thus require air conditioning, particularly here in Texas. If you didn't have A/C, there's a good possibility someone could come and take your kid away for neglect. Lack of familiarity with computers and the internet would relegate you to minimum wage jobs. Minus TV and radio, plus blogs like this, a person is woefully uninformed about the goings-on in their country, and thus more subject to demagogues like Palin.
Cities have developed in such a way that there is no single central business district, and thus it is difficult to find a place to live where you will have short commutes to any jobs you may acquire. And of course those jobs are not secure, owing to the phenomenon alluded to in the comment above by new england opinion.
I will say, though, that I've watched some of those late-70s "buy American" union ads, and it's difficult not to think we should've listened.
Excellent post.
tUrpitude.
Dr. Reich,
Obvious correction in Comments to Table 16:
First sentence should say,... Top 1% saw average Household Wealth rise 78% ...
Dr. Reich,
I'm a huge fan of yours. I try never to miss a post, an appearance on the Daily Show, or NPR podcast. However, I believe it's denial/regression toward the mean. The USA has had such a great standard of living for so long, I say this as a sojourner of South America. I love the USA, but we consume far more energy per capita than the world.
The government can help by focusing on equity, but just remember that the per capita equity should regress toward the mean.
I think it's a combination of many things. Income doesn't rise because we have to compete with foreign markets where incomes are even lower than ours. We are in a changing world and we haven't wanted to accept that. Our government has gone deeply into debt for a war that it won't even tell the people its true cost. Now a bailout with no certainty where the money will go or if it will help but leading to more government borrowing.
Whoever gets in as president this time is going to have to tell the American people some hard truths if they themselves are capable of facing what is happening. It is going to take a lot of readjustment to fix this and things won't go back to where they were. Always we have to move on taking into account what reality means
I could not disagree more. America is a nation that has been awash in profligacy for at least the last twenty years, a fact that is clear to all but the most obtuse observer. To present the notion that going into debt to "maintain your lifestyle" is anything but irresponsible is an abuse of language and is a textbook example of moral turpitude. The fable of the grasshopper and the ant is very apropos.
Unfortunately, we have evolved a society that believes no problem is too small for government to solve and suffering of any kind is proof of abuse by some one. The current mess was manufactured by government intervention and the foundation is being laid for the next crisis as I type. Even assuming the bailout execution will be done with scrupulous honesty (it will of course not as no government program ever is) this will be yet one more never ending drain from public coffers as the "need" will never go away. Future government obligations are already unsustainable and this just hastens the inevitable governmental collapse.
The difference between a welfare state and a totalitarian state is merely a matter of time. - Ayn Rand
Why doesn't anyone else talk about the dollars that have floated to the stratosphere of American tycoons only to be invested by American buffoons in imaginary derivatives and credit swaps?
It's taxation, Stupid. There is no reason on the planet why Warren Buffet should pay the same proportion of his income as my neighbor the occasionally successful building contractor.
If this wealth had been redistributed, read taxed, into infrastructure, education, research and development and health care, this country would have a whole 'nother look and feel today.
On my blog, I've linked a video documentary on how the banks bankrupted Argentina.
It has English subtitles.
http://weaseldog.blogspot.com/
Anonymous,
What do you call the current economic breakdown? Capitalistic benovolence? Republican administrations since Reagan have created $7.4 of our $10.0 billion national debt. The Republicans have been teaching everyone a lesson that "no problem is too big for government to solve," like starting wars, cutting taxes for the rich and ignoring internal decay of our society. This is totalitarian Capitalism.
It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises.
Actually, many of them did.
I live in a very nice working class neighborhood ("high prole" in Paul Fussell's lingo) and I am constantly amazed the number of boats (fishing, not yacht, but still very expensive), new SUVs, major home improvements, flat screen TVs, and expensive cell phone plans I see and that our neighbors appear to consider necessities.
When these folks went to the bank and were told they could walk out with 50K in cash and their monthly payments would remain unchanged, they bit. Now they are facing the consequences. We all are.
I'm guilty of purchasing beyond my means. Over 30 years I've spent money on mutual funds. Mid-cap, tech, dividend funds. Two years ago I had noticed the stocks bought by the fund managers swung from manufacturing to financial companies. What did I get? Two years ago I sold it all at a 50% loss. After seeing years of large fees the broker "earned" for managing the funds and service charges for not having an account with more than $150K, I sold it all.
As an early Baby Boomer-aged small business owner who has been forced to live as frugally as possible and STILL finds it hard to both make payroll and timely pay the utilities and car payment, I appreciate your recognition that there are many of us who are struggling even though we haven't been running up our credit cards or otherwise acting irresponsibly.
I'd love to see a way to help everyone - beyond the concept of starting up a new CCC to re-build our infrastructure, or other similar government programs designed to employ Americans.
Anne Holmes
It looks like the standard 'endgame' in monopoly to me.
The winner has at this point collected most of the money and properties on the board, are charging everyone else gratuitous rent, the end is nigh - and then you often see an odd behavior:
The winner, in order to extend their winning streak often begins making weird deals with the losers, buying up their remaining properties at grossly inflated values or even giving LOANS to a player so that they can pay the immediate fee on a rent space rather than forcing them out of the game! All just to extend the dominant 'experience' of ruling the roost in the endgame.
In essence, that is what financiers have been doing in the last 8 years in particular. They have collected an overwhelming advantage in capital funds, and started having to prop up the middle-class 'losers' with extravagant credit and mortgage schemes to keep them spending despite their rapidly falling spending power.
Of course, as anyone who has played monopoly should have learned, all those 'schemes' you run into in the endgame have no beneficial effect on the ultimate outcome - they always function to seal it all the more tightly by creating an unbreakable web of obligations for the losers that MUST ultimately end in bankruptcy.
Unfortunately, when the economic game 'ends' in the real world, everyone loses. The poor generally starve while the rich are classically driven out of the country - or shot.
Re: US v Asia
Having spent quite a bit of time in Asia, I agree that there is a lot of materialism there, such as $500 genes, nice electronics etc.
This does not undermine my argument at all, however. Conspicuous consumption on smaller goods is much less of a problem for the economy than purchasing, say, a bigger house, car etc: not only are these big ticket items, but they have ongoing costs, and are harder to downsize. Indeed, the much greater cost of housing, cars, energy in Asia leads people to spend more of their money on such things as clothes and electronics.
Okay, that does it.
If you don't have a cabinet portfolio in the Obama Administration, I'm moving to Andorra.
"The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living."
Please, Americans and particuliarly the Middle Class have and are living at levels that few people in the history of the planet have enjoyed. The oversized houses, multi-cars, RV's, boats, Hog motocycles and the endless attempt to display wealth by vacations and cruises to just about anywhere not to mention the designer this and that craze.
What you really mean is that we got to get the Middle Class buying and going into debt again either by more education, longer working hours etc.
Reich you are nothing but another shill for the finance sector, go out and get a real job!
Give back the middle class the means?
Truth is American as a whole have spent beyond their means. Plain and simple. I'm surprised you've pointed the finger some place else.
Let me see... if I buy most of what I want.. by credit or otherwise and neglect to save maybe 15% of my income there is no buffer. What happens when you get behind?
My wife and I and my two kids live well within our means... have savings... and are not hurting one bit.
If you live to two incomes...
The truth is the American standard of living needs a reality check.
Come on Robert... grow a pair and fess up!
Dear Mr. Reich, I would like to bring to light an aspect of republican economic theory people (including yourself) have brushed upon...but perhaps not articulated in a way that non-PHD types can grasp. The theory of trickle down economics (I will reference as TRE) (the mainstay of the republicans' economics since William F. Buckly). It is not that TRE is inherently evil or meant to keep the lower classes down...it is that it is OUTDATED. I think of it in simple terms. If my income in 1960 was $200,000/year, I would be considered rich. Furthermore, if you were to give me a %10 tax cut, I would probably take that money and buy mostly American made goods from the increase in my disposable income (A Cadillac, an RCA TV...etc). This would inject almost %100 of $20,000 straight back into the American economy...thus leading to more jobs for people that make tv's cars...etc. In 2008 we live in a globalized world. If you give a man who make $1 million dollars a year a 10% take cut (as Reagan, Clinton and Bush have done cumulatively). I would probably not buy a Cadillac, but a lexus, or a mercedes..my new 80 inch television would be a Sony, thus very little of that tax cut money would actually go directly into the American economy. My stock portfolio investments would include a higher percentage of Asian companies, as that is where the growth is. In fact it is worse, even if you did buy a cadillac, the parts come from all over the world (computer chips from S. Korea..etc)
Now if you give someone who is making $60,000/year a %10 tax cut, he/she would most likely use the money to pay down credit card debt, pay off their mortgage, go out to restaurants more often, etc. This is DIRECT COMMUNITY INVESTMENT which helps local economies.
In summary, its not that Trickle down economics NEVER worked.....it is simple that it is outdated, and in a globalized world, only increases the gap between rich and poor.
I hope you read these comments. I get frustrated every time I hear demonizing of trickle down economics without explaining in a simple manner why (in a globalized world) it is soo destructive.
Sincerely,
David Mast
dave.mast@gmail.com
I think the real head's up was a few years ago, when news stories were coming out of people using credit cards to purchase groceries.
P.S. What about the "moral terpitude" of the removing the usury laws?
The return of Labor Unions and abandoning right to work laws will fix everything. Labor Unions had nothing to do with the disasters at GM and Ford. NOT!!!
Uh, no mention of outrageous Social Security Taxes and Medicare Taxes on those low paid middle americans? What about horrendous local property taxes to prop up failed schools? What about huge tuition costs at universities run by liberals???
Don't worry folks, socialism has failed in Europe and Communism in Russia and China. But brilliant liberals KNOW they can make it work here.
You think you are broke now? You wait.
The "spread the wealth around" system of economics will finish off what is left of this economy and business people will give up entirely.
wwaaaaaaaa........somebody made me buy the mcmansion....waaaaa....somebody made me buy 150 dollar shoes for my 13 year old kid....waaaaaa.......
GROW UP!
" No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar's worth of service rendered - not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective - a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.
The people of the United States suffer from periodical financial panics to a degree substantially unknown among the other nations which approach us in financial strength. There is no reason why we should suffer what they escape. It is of profound importance that our financial system should be promptly investigated, and so thoroughly and effectively revised as to make it certain that hereafter our currency will no longer fail at critical times to meet our needs. "
- Theodore Roosevelt (Osawatomie, Kansas on August 31, 1910)
Link:http://en.wikisource.org/wiki/The_New_Nationalism
This pre-dates the "welfare state" and
P.S. Ayn Rand is garbage.
David Mast,
Your logic why "Trickle down" no longer works seems appealing but it has some time flaws.
First, in the 60s and through the 70s, all Americans were progressing financially (with a strong industrial economy) and taxes were more progressive. So "Trickle down" did not depend on the upper income/wealth group as you erroneously suggest.
Trickle down started to become enfranchised under Reagan who in his first term promoted a huge tax cut that went largely to the top 10%. Result? Gigantic annual Deficits started and were exacerbated substantially by raising Defense spending through the roof. The double hit of reduced tax revenues and higher Defense spending exploded the Deficits. Reagan saw this, and to his credit, realized that his first term tax cut was not working in regenerating tax revenues and cancelled his second term planned tax cut.
Trickle down way back in Reagan's time (1981-88) in combination,with sharply reduced progressivity in taxes, was a failure. The eight year Deficits under Reagan were so high in absolute terms that Bush Sr.(1989-92 had to raise taxes. The latter's spending was still so high that Clinton had to raise taxes. Now Bush Jr.s Deficits are so high the next Administration will have to raise taxes to help pay for the regeneration of our economy while keeping Deficits from skyrocketing even further.
For Bush Jr. also instituted tax cuts going mainly to the top 10% of households while simultaneously (like Reagan) exploding Defense spending. Here again, Trickle down has been a failure, also for added reasons you mention. But more fundamentally it fails because it's junk economics in a society where the gaps in wealth and income of the top 10% of households and the bottom 90% are accelerating.
When working middle-class wages sat relatively stagnant for last 25years, as they have, then the most important source of Trickle down dynamics vanishes. The Debt mania starts to become main way to keep one's standard of living from falling. You then have the recipe for recurrent over-leveraging and financial breakdowns, reaching the level of seriousness we are now experiencing.
With apologies for repeating myself, the points being made here are twofold: "Trickle down" had no wealth or income barriers in the 60s and 70s as everyone was progressing economically i.e., there was Trickle up and Trickle down; Trickle down clearly becomes an invalid and even destructive economic theory for the entire nation when special tax privileges start to go predominantly to the top 10% of society while Mainstream wage growth falls behind inflation for long periods ... as has happened the last 25 years. Trickle down without Trickle up is a formula for recurring economic crisises.
We need to focus on ideas to modernize and re-industrialize our economy based on powerful innovation/reform efforts in the alternate fuel, automobile, mass transit, health care, and educational fields to name the obvious.
The term "Trickle down" should be retired to the history books of "junk economics"... all about exploiting the working middle class and dividing our nation into the Haves and the Have Nots.
Gore Vidal reviewing Ayn Rand
July 1961 Esquire Magazine
"Now, before I’m investigated for having taken the un-American stand that sex is a minor department of morality, let me try to show what I think is morally important. Ayn Rand is a rhetorician who writes novels I have never been able to read. She has just published a book, For the New Intellectual, subtitled The Philosophy of Ayn Rand; it is a collection of pensées and arias from her novels and it must be read to be believed. Herewith, a few excerpts from the Rand collection.
• “It was the morality of altruism that undercut American and is now destroying her.”
• “Capitalism and altruism are incompatible; they are philosophical opposites; they cannot co-exist in the same man or in the same society. Today, the conflict has reached its ultimate climax; the choice is clear-cut: either a new morality of rational self-interest, with its consequence of freedom…or the primordial morality of altruism with its consequences of slavery, etc.”
• Then from one of her arias for heldentenor: “I am done with the monster of ‘we,’ the word of serfdom, of plunder, of misery, falsehood and shame. And now I see the face of god, and I raise this god over the earth, this god whom men have sought since men came into being, this god who will grant them joy and peace and pride. This god, this one word: ‘I.’”
• “The first right on earth is the right of the ego. Man’s first duty is to himself.”
• “To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men.”
• “The creed of sacrifice is a morality for the immoral….”
This odd little woman is attempting to give a moral sanction to greed and self interest, and to pull it off she must at times indulge in purest Orwellian newspeak of the “freedom is slavery” sort. What interests me most about her is not the absurdity of her “philosophy,” but the size of her audience (in my campaign for the House she was the one writer people knew and talked about). She has a great attraction for simple people who are puzzled by organized society, who object to paying taxes, who dislike the “welfare” state, who feel guilt at the thought of the suffering of others but who would like to harden their hearts. For them, she has an enticing prescription: altruism is the root of all evil, self-interest is the only good, and if you’re dumb or incompetent that’s your lookout.
She is fighting two battles: the first, against the idea of the State being anything more than a police force and a judiciary to restrain people from stealing each other’s money openly. She is in legitimate company here. There is a reactionary position which has many valid attractions, among them lean, sinewy, regular-guy Barry Goldwater. But it is Miss Rand’s second battle that is the moral one. She has declared war not only on Marx but on Christ. Now, although my own enthusiasm for the various systems evolved in the names of those two figures is limited, I doubt if even the most anti-Christian free-thinker would want to deny the ethical value of Christ in the Gospels. To reject that Christ is to embark on dangerous waters indeed. For to justify and extol human greed and egotism is to my mind not only immoral, but evil. For one thing, it is gratuitous to advise any human being to look out for himself. You can be sure that he will. It is far more difficult to persuade him to help his neighbor to build a dam or to defend a town or to give food he has accumulated to the victims of a famine. But since we must live together, dependent upon one another for many things and services, altruism is necessary to survival. To get people to do needed things is the perennial hard task of government, not to mention of religion and philosophy. That it is right to help someone less fortunate is an idea which has figured in most systems of conduct since the beginning of the race. We often fail. That predatory demon “I” is difficult to contain but until now we have all agreed that to help others is a right action. Now the dictionary definition of “moral” is: “concerned with the distinction between right and wrong” as in “moral law, the requirements to which right action must conform.” Though Miss Rand’s grasp of logic is uncertain, she does realize that to make even a modicum of sense she must change all the terms. Both Marx and Christ agree that in this life a right action is consideration for the welfare of others. In the one case, through a state which was to wither away, in the other through the private exercise of the moral sense. Miss Rand now tells us that what we have thought was right is really wrong. The lesson should have read: One for one and none for all.
Ayn Rand’s “philosophy” is nearly perfect in its immorality, which makes the size of her audience all the more ominous and symptomatic as we enter a curious new phase in our society. Moral values are in flux. The muddy depths are being stirred by new monsters and witches from the deep. Trolls walk the American night. Caesars are stirring in the Forum. There are storm warnings ahead. "
July 1961 Esquire colunm
How can it be true that people have not lived beyond their means? Look around many businesses in New York City. How many of the clerical staff have cell phones, iPods and have had some kind of non-essential plastic surgery? Are these things that are requirements of everyday living?
Most Americans is a generality. Let's consider the 50 top banker families who will benefit from Hank Paulson's bailout.
Next, let's ask how many families had one family member apply to a health sciences academic program? The Chronicle of Higher Education could probably help provide the numbers.
Then, how many families had a family member successfully complete the program? The Chronicle, again.
Then, families who re-trained and somehow have beat the offshoring phenomenon.
The current credit card debt of all.
How many families fall in none of the above categories. They're the ones who will need help.
The families whose primary income was IT, who endured layoffs, especially in December to please Wall Street, most likely have zero sympathy for the plight of Wall Street.
I didn't vote for George W Bush and plan to savor the turmoil and watch the outcome of the above.
Was impressed by Obama during last night's debate. I enjoyed his reminder, during the Roe v. Wade discussion, that the US Constitution does guarantee privacy of each person's home. The government stops at your threshold. My ethics course covered the concept, and I enjoyed being reminded.
"living beyond our means" vs. "declining real incomes" ?
I think it's a little of both.
Note to David M:
Actually RCA is not American owned.
Today, the RCA name is owned by Thomson, a French company, while the German conglomerate, Bertelsmann, owns the RCA record division. The corporate headquarters was moved to Indianapolis, where RCA had once operated a large manufacturing facility. Today, Thomson manufactures consumer electronics in a variety of countries and sells them under the RCA and GE names.
Here's the link.
In last night's Presidential debate McCain got a lot of mileage out of referring to Joe the Plumber and how poor Joe would suffer under Obama's tax plan but not under his. Well let's get real. In order to "suffer" under Obama's plan, poor Joe is making over $250,000 - pretty good for a plumber! Which begs the question - why go to college? If you can make $250K a year as a plumber, why suffer through 4 to 8 years of college going into debt to the tune of around $100K when you could be out making money right out of high school, if not before, and we're talking pretty big money here? OK, so it's not a CEO's salary, but it's pretty good upper middle class money - top 5%. Joe could have picked up his plumbing skills during high school and while his classmates are going into debt, Joe is pulling in the long green. While his classmates that went to college are accumulating a mortgage with only a piece of paper to show for it, Joe is buying a real house. Shucks, he could almost have it paid for by the time his classmates graduate from college. Note to high schoolers: the real American dream is what Joe did not what the suckers that went to college, came out with no job prospects because their potential jobs had been off-shored, and found themselves in huge debt which they were incapable of paying back, did.
I don't think we have to feel sorry for Joe. He's making good money. He has his own business. Plumbing can't be off-shored. It's a job skill that will always be in demand. He is in a position to marry, start a family and buy a house right out of high school instead of waiting 4-8 years until he gets out of college. The idea that everyone needs to go to college is a bunch of bull. Not everyone has the aptitude for college nor are there jobs available in sufficient numbers for college graduates. A college diploma allows you to go and beg some employer for a job and usually does not equip the graduate to start his own business except in certain fields like medicine, law and architecture. The myth that having a college education is part of the American dream is a bunch of crap. A lot of men want to work with their hands, do something useful, not have to suck up to their employer and not be in a position to either be layed off or have their job off-shored. You can be a plumber, an electrician, a landscaper and hundreds of other professions, have your own business, make good money and not have to suck up to anybody.
How many times have we heard that "the average college graduate makes a million dollars more over the course of a lifetime than the average high school graduate." This is lying with statistics writ large. Did they include Bill Gates in their statistical sample? Or Larry Ellison? Or Michael Dell? They're all high school drop-outs and mega-billionaires and the irony of ironies is that they're all in high tech fields, the kinds that you have to go to college for and study and study. Oh, by the way, Joe the Plumber might be a high school drop-out too thereby gaining an even greater advantage in terms of earning power over his college bound peers, having started earning money 4 to 10 years earlier than his classmates. Joe probably has a great paying self-employed business, a wife and a family and an almost paid for house by the time his college bound classmates have graduated from college with a $100K debt!
Oh, and by the way, if Joe is earning $250K annually with a 10 year head start over his classmates who are college graduates, he's already earned $2.5 million by the time they've graduated!! Now who's earned millions more over the course of a lifetime?
And John McCain: why did you vote to raise the self-employment tax on Joe the Plumber?
Check out why a college degree represents a social contract ... except in America on Will Blog For Food.
And the big problem is that when times get tough, credit card companies are there for us--with a manifold of deceitful offers: double cycle billing, universal default, changing terms for any reason. Surprise surprise, there has been massive deregulation of credit cards, and credit card companies are one of the biggest lobbies. From colonial times to 1978, usury was illegal: not anymore, thanks to your local lobbiest, and your politicians (both republican and democrats) who are beholden to them. Americans fall into debt, and can't get out, in part because the rules are rigged against them.
Robert, what's the matter with you? You're so S A N E!!!
Wish Obama had named you along with Paul Volcker as a favored economic advisor. Worried he'll be suckered/pressured into listening to Rubin.
Can you clarify the story about ClintoN "Surpluses"? My understanding is that Clinton ran up deficits like everyone else, but spent "trust funds" (social security?) to run the country. THEN called leftover tax revenue a "surplus." Since the "surplus" story is repeated endlessly, what's the truth?
Thanks, always, for your *consistent* humanity AND sanity. I'll never forget that about 4-6 months ago, you TWICE cited a major Wall-Street figure as saying we had a 20% chance of a DEPRESSION. Yeah, the big D word, when people laughably called "responsible" -- Paulson, et al, can't even choke out the R word!
One last one: when has there been a more pathetic -- and laughable -- figure than Alan Greenblatt? Maybe it's mad king George -- when he stands up and say although we're in a "rough patch," he's *confident* we'll come out of it STRONGER THAN EVER! (Then the Dow crashes 750 points . . . )
Whoops! That was Greenspan!
John Lawrence, not to be too picky, but my point is that if you bought an RCA TV in 1960, at that point, the RCA Victor corporation was majority American owned. They had large plants in the US. Even (according to wikipedia) a World class R&D lab in the US
In 1941, prior to Pearl Harbor, the cornerstone was laid for a research and development facility, RCA Laboratories, located along Route 1 and just north of New Jersey Rte 571 in Princeton, New Jersey. It was in this facility that myriad innovations and key technology such as color television, the electron microscope, CMOS based technology, heterojunction physics, optoelectronic emitting devices, Liquid Crystal Displays (LCDs), video cassette recorders, direct broadcast television, direct broadcast satellite systems and high-definition television would be invented and developed during ensuing years. (After 1988, the facility would be known as Sarnoff Corporation, a subsidiary of SRI International.)
minor correction:
Bill Gates, Larry Ellison and Michael Dell were college drop-outs not high school drop-outs.
weaseldog:
Why do I feel that I've unleashed a budding encyclopedia writer? ;)
First let me state my oft posted remark. "Science and I went to different schools together". If you get beyond boiling water you've lost me.
That said, does it make sense that if alternative fuels can cut our oil energy use by 20% then that will extend the period of Peak Oil? You can argue that others will pick up the slack but they're just as likely to take advantage of our efforts and reduce their dependency as well. I don't think we're looking at mutual exclusivity here. It's not an all oil or no oil question. There are expectations that there are untapped sources of oil around the world and if we can lower demand that supply will last longer.
Now I'm not big on nuclear at all. I'm not as worried about nuclear accidents as the waste problem and the voluminous water requirements. Water resources may be the true cataclysmic delimiter. My understanding, limited as it is, of statistics, would suggest that there are no greater odds of an accident at a nuclear plant whether we have one or one hundred. I don't find a lot of solace in that but the question might be worth the risk. The waste disposal problem, to me, is serious. Piling it up in backyards around the country or in one backyard somewhere in the country appears as a catastrophe waiting to happen.
The other reason nuclear may not be a viable option is that it takes years, 10, I think, to build a nuclear reactor, starting with permits and specs through churning up production. It also costs mucho dinaros to build each plant. Doubt that the best of cash flow managers could keep up.
Wind, solar, geothermal, tidal, none may be replacements for oil but, again, they reduce the need and extend the life of whatever oil remains in the ground.
Just guessing here, since I never entertained science as a profession, but genetics is at its birth. Whatever advances it can provide may not even be on the table currently. My understanding is that biogenetics, in food sources, is less encumbered by the science and eventual economics than by the resistance to its use.
In fact, since our energy crises began again in 2001, world food production has been down, giving further evidence that our food supply is dependant on our fossil fuel supply.
Methinks your conclusion there is a little flaky, that tendency I talked about. Certainly in the modern world growing crops and animals uses more energy than it used to; some of that is efficiency and profitability; some of it is convenience; some of it is more humane treatment and some of it is necessary. Historically, with a few hiccups, the civilized world has managed to keep up with food supply demand, even before we knew of the wonderful world of fossil fuels. Africa, with some education and funding, is a significant frontier of potential for food production.
World oil production these last few years has been flat, and it's likely that we're at the maximum rate of production. Soon we're going into decline.
Maybe, maybe not. You can find experts on both sides of the question. Just ask sbvor.
We can innovate new ways to consume energy. But we can't innovate ways to create energy from nothing. If you can find a way to do this, then you will have radically changed our understanding of the universe and we'll be able to expand our population and energy consumption until the waste heats destroys our planet and kills us off.
Now we have never radically changed our knowledge of the universe? We've never discovered unknown knowns that we didn't know were unknown? (love that Rumsfeld) Science is at its apex? All there is to know, we know?
Let's not get ahead of ourselves. First new energy sources enabling consumption, then we'll deal with the waste problem.
It seems to make sense to be a harbinger of doom, especially given the current complexities, but you are late to the party. There have been many before you throughout the history of the world. It could be that Malthus was a victim of bad time estimating or maybe just a crackpot.
After the Great Depression, the US Energy supply was still growing. We were able to keep increasing production until the 1970s, when right after oil peaked in the US, costs went up and industrial jobs began going were energy was cheaper.
The rising costs of oil in the 70s were not predicated on our having reached peak oil in the US. They were mostly of political origin. At that time the cheapest oil would have been in the Middle East and I don't recall many industrial jobs going there. Jobs went, and continue to go, where labor is cheaper. Oil prices are important but if they stay in a relative range, around the world, they have much less influence on the location of jobs than labor rates and regulation.
Utilizing natural gas also could reduce demand for oil, extending its life once again. One point I cannot argue with you about is that in the long run we are all dead.
Now I have no problem with ending the wars. They are a stupid waste of resources, monetary and human. I also don't have a problem minimizing waste in general. It ain't the total answer but every little bit helps.
Art, I know you believe that we can innovate our way out of the exponential function, but nature and basic math show us that the only way to solve the problem is to never let it become a problem to begin with.
An interesting assertion especially when you spend a great deal of your treatise explaining to me that we are doomed and there is no way to avoid the problem.
Our population keeps growing and we need to eat more stuff faster every day. The Earth can't provide infinite food to supply an infinite population. So there's a limit to how far we can go before we crash. We are hitting those limits now.
Our population eats far more than it needs every day. A cutback there would have multiple benefits. I haven't run across many who suggest that the Earth has reached its maximum capacity for food production.
Your gloomy scenario may ultimately prove to be right. Whether we are at the threshhold today, or even in the near future, is far more questionable.
The difference between you and silverfox is that if you are right you'll have to tell me "I told you so" in the next life.
Frank:
A worthwhile exposition but left a couple of things missing.
No mention of Reagan's tax increases, one of which is still considered to be the largest tax increase ever. Not entriely germane but worth repeating over and over.
The more important aspect and the one that David is missing is that "trickle down" was not theorized as providing more spending by the wealthy and through the multiplier effect lifting all boats. It was predicated on the idea that those receiving huge tax cuts would invest in new business start ups that would employ more people and raise all boats through more jobs. That never happened.
What new jobs were created were often in industries with lower wages and after the settling down of the inflation problems of the 70s coupled with the diminishment of labor unions, annual wage increases
were limited to inflation which meant that the average worker was left treading water. This of course lead to your credit usage points.
"Junk economics" is good but I much prefer Bush 41's term of "voodoo economics".
john lawrence:
My, my! Such an outburst!
What you fail to understand is that Joe's classmates went on to be Hedge Fund managers and passed Joe's to-date accumulated earnings in their first 2 months on the job.
Passing the Employee Free Choice Act should without question be added to the list of priorities. Union workers earn more money, enjoy more job stability and a markedly improved ability to plan for future economic crises, and finally, are far more likely to grasp that in a general sense, they can and should be part of something bigger and stronger than themselves.
Here's a link to check out:
http://www.aflcio.org/joinaunion/why/uniondifference/index.cfm
Bloqueur,
Based on data taken from the White House Office of Management and Budget, following are reported annual Deficits/Surpluses during Clinton's term of office:
............(Deficit) Surplus $Bil.
CLINTON
1993..........$(251)
1994..........$(203)
1995..........$(164)
1996..........$(107)
1997...........$(22)
1998....................$69
1999...................$126
2000...................$236
I can't dispute nor confirm your story about Clinton's using Soc. Security funds to run country and then called left over tax revenue a "Surplus." Does sound rather untrue to me, but I'm a novice in creative accounting. I have checked Soc.Security Outflows during Clinton's term and noticed no unusual drop in figures one would expect if the rumors you've heard were true.
The Gross Federal Debt history also confirms that Clinton´s administration had one of the lowest average annual increases:
-----------------------------------
TABLE 14: GROSS FEDERAL DEBT AT BEGINNING & END of EACH PRESIDENTIAL TERM ($BILLIONS)
-----------------------------------
...............DEBT.... AVE. ANNUAL
........................% INCREASE
CARTER
1977..........$629.0
1980..........$909.0........9.6%
Increase......$280.0
REAGAN
1981..........$909.0
1988........$2,601.1.......14.0%
Increase....$1,692.1
BUSH Sr.
1989........$2,601.1
1992........$4,001.8.......11.4%
Increase....$1,400.7
CLINTON
1993........$4,001.8
2000........$5,628.7........4.3%
Increase....$1,626.5
BUSH Jr.
2001........$5,628.7
2008..est..$10,000.0........7.5%
Increase....$4,371.7
SUMMARY: AVERAGE ANNUAL INCREASE
Carter/Clinton Years........6.1%
Reagan/Bushes'Years........10.9%!!
-----------------------------------
Mr. Reich, I tend to agree with your point of view 99 percent of the time, however, on this point I do not. I think history will look back at this era in america as the "consumerism era". People are constantly barraged with advertisements to buy things they don't need. Everytime excuse for a holiday is used buy companies to sell products and boost sales. Christmas is no longer a sentimental holiday about family and thankfullness but is instead a season of shopping sprees.
Our economy needs to find another fuel source other than mad crazy consumerism by the middle class. Yes, plasma flat screen TV's are better than the tube kind, but the TV I purchased in 1990 still works, and just because BestBuy is advertising a Christmas sale doesnt mean I should go spend/charge a thousand bucks.
I would refer everyone to read Bill McKibbens book "Deep Economy"
Art, a couple of points. I'm not going to write a long treatise.
Populations and food. That one is self limiting. Populations don't outgrow the food supply. Malnutrition leads to plagues. Overpopulation is fixed quickly.
Malthus said that populations can't keep growing, when the food supply isn't growing. He said that increasing the food supply will cause the population to grow. He has never been proven wrong.
Every energy source we're using except for nuclear, was known in prehistoric times. The world has 40 years of urnaium left at current usage rates.
To get alternative energy sources up to 20% of what we consume today, will take decades. We'll be well down the slide by then and unable to invest in them. It won't create a new peak.
Our food system needs fossil fuels to stay at the current high rate. We need fossil fuels to make the chemicals used to grow the food. The last few years we've had natural gas shortages cut fertilizer production, leading to decreased yields. More to come.
GMO crops have not yet beaten non-GMO crops in production yields.
No, this problem is happening now. It's not something that will occur after we're dead. We can revisit it in five years if you like. You may still be alive then. I'm gonna try to be around.
And if the Right truly thinks that the financial meltdown was caused by middle-Americans living beyond their means, then Bush should have known better than to tell them to go out and shop after 9/11!
cynthia, that occurred to me too.
OT: evidently CNN has investigated and learned Joe the Plumber is in fact not a licensed plumber and owes back taxes, via Mike Shedlock's financial blog.
Disgusting. Exactly what I would expect from Roger Ailes, Karl Rove, and the neoCONS; in addition, makes me remember to be thankful I had more sense than to vote for George W Bush.
Frank:
Table 14 would be more impressive if, instead of the % annual increase in the Federal debt, you listed the % increase over the length of time of each administration. In that case Carter would have about a 50% increase, Reagan would have about a 300% increase, Bush Sr would have about a 100% increase, Clinton would have about a 30% increase and Bush Jr would have about a 100% increase.
Reagan proved that Reaganomics was futile and yet we've had 20 more years of it since he left office. Republicans will go on making the same arguments as long as we let them. Reaganomics needs to be totally and finally discredited.
Art a Layman:
I think more became plumbers than hedge fund managers. I personally know some college graduates that went to work on Wall St, were prodded into working 15 hour days and ended up quitting after a year or two, moved back to California and became yoga instructors.
However, they didn't make as much as Joe the Plumber!
Mr Reich,
I would like to hear your opinion on Trichet's recent comments regards a return to the Brenton Woods agreement. Is this a viable direction in our modern economic context, how could this return happen, who would implement for a global agreement from the US?
Thanks, GJR
john lawrence:
Those who quit Wall Street and went into other venues were probably more interested in enriching their karmas than their wallets. ;)
John,
Yes, you are right as increases over entire term are visually and mentally more dramatic in getting the factual message across of how Republican administrations have been the Great Spenders and Deficit producers the last 28 years. Thanks.
Art,
Garrison Keillor's shades of poetic, folksy humor applied to writing about the political-economic situation entertain and "reflectize" the mind again in his latest essay entitled, "Let the Leader Lead" (in yesterday's NY Times, I believe).
weaseldog:
Not to worry about treatises, despite my humorous chiding. Frank and I live in that glass house and therefore must lob cotton balls not stones.
Notwithstanding Malthus's exalted visions, we have managed to dodge a lot of bullets as we have progressed. Perhaps, in the long run, Malthus will be proven to have been prescient but as I said before, mankind is not given to going quietly into that good night. While the world's population continues to grow, the rate of growth has been declining since the mid-sixties. Agreed he has not been proven wrong but neither has he been proven right, as yet.
My reading of Malthus suggests he is saying that population growth will outgrow food production leading to his "catastrophe". Man and Nature have managed to introduce variables that alter his premise. Although heinous and unfortunate, disease and even starvation sometimes combine to limit overpopulation in areas around the world. Better, more efficient methods of food production have served to allay the threat of overpopulation.
I am not sure that a declining supply of uranium is a bad thing. We may have known about all our forms of energy in prehistoric times but it took us ages to learn how to harness much of it and we do tend to improve our ability to make many of them more efficient. Can you be absolutely sure that there is not another x energy source out there traveling the same path as that of nuclear?
It is not important when we get to 20% or even higher. Beginning the process will chip away at oil consumption while we continue to find additional oil resources and that, in and of itself, will tend to extend current and future supplies. Scientific advances, of whatever kind, could move the goalposts even further out. Even if we are at peak oil, and this is not the first time that has been suggested, that doesn't mean that we'll be out of oil tomorrow. As the world intensifies their efforts to be less reliant of fossil fuels, the supply is extended. No doubt it is a race and maybe we'll lose but are you suggesting we shouldn't try?
Currently we are still an economically driven planet. My understanding is that there is a strong resistence to GMO crops around the world. That means that resources to further research the issue are limited beause there is no expected payback. Should that begin to change, especially if due to a "catastrophe", then the research will intensify and then we'll find out if they are a viable alternative, perhaps even a better one. It's far too early to send this one to the jury.
It is generally the rule that we don't seek solutions until there is a problem. Often the degree of the problem is determinate in the work effort for finding solutions. Sounding the alarm bells to initiate or intensify action is in the best tradition of Paul Revere. Presaging doom, suggesting that there are no ways out, adds nothing of value to the process. Again, you may be right, but that does not exempt you from the pending doom; so what's the point?
One of the startling, and depressing, revelations of old age is that one can no longer peer out even five years and be assured one will still be around. Should the Gods look favorably upon me and I am still here, I will be happy to revisit. That will allow you to tell me "I told you so" without having to scour the afterlife looking for me.
Robert, you just didn't feel like using your well-known words like "radically skewed wealth distribution" this close to an election:) Your (and Lester Thurow's) thorough documentation of the decline of median household incomes over the last 25-30 years is well-known (to your regular readers) and is a powerful corollary to the wealth distribution phenomenon.
amen dr. reich. amen.
it's worth taking a look at paul krugman's editorial in the ny times today.
i pray mr. obama will take heed of the wisdom of both you and paul krugman.
Frank:
God! I wish I could write like that. Beautiful piece. Interesting that it parallels your buddy Brooks today, although Brooks appears more of a "left-handed compliment".
By the way, I doubt you regularly read her but Maureen Dowd had a great piece Sunday, somewhat in line with our humanities discussion with heartening news.
The beginning of Keillor's article reminded me of a punch line to an old joke: Moses comes down from the mountain and proclaims to his followers, "I have good news and bad news. The good news is He wanted twenty and I got Him down to ten. The bad news is that adultery is still one of them."
BTW, it was in the IHT not NYT.
weaseldog:
Should you find it necessary to look for me in the afterlife be sure to start down below. That will improve your odds of finding me.
Hello Art, Nature's solutions I think, are the catastrophes that Malthus referred to.
There may be another energy solution that we can use in the future to expand our population further, so that we can eat more of the planet. but that will likely take decades to develop. By then we'll be significantly further down the slope. And maybe, if I'm still alive then, my last few years can see the changes it brings. To matter in my lifetime, we need a new exotic energy source and time travel, so that the inventors can go into the past, implement and undo our current crisis. I'm not aware yet that this has happened.
But I'm 45. I expect that I'll have a few years to deal with the effects of the imminent downturn. I can pretend it won't happen, as many other people have suggested, and just be surprised at every turn, or I can attempt to understand it, and prepare the best I can.
I've never been the kind of person that just trusts that someone, somewhere will fix things, then goes on oblivious to the world around them.
One of the market effects of Peak Oil, effects that I believed I saw coming in 1998, was an increase in the frequency and intensity of economic bubbles. I believed then that a shorting of oil supplies, would lead to price increases. this would create demand destruction. Then shortly after demand destruction kicked in, we'd see economic crashes corresponding with dropping fuel prices.
Then a new bubble would be blown, demand would increase, prices would go up until demand destruction kicked in again.
Now I'm not retired. I have people and pets that depend on me. I have IRS debts. If our current energy crisis is going to keep causing me pain, then I feel it's in my best interest to understand the issue so that I can form my only limited strategies for dealing with it.
Now, maybe you don't have kids or grandchildren that you worry about. Though I don't have children, I have nieces and nephews that I love. I do worry about their future. Unfortunately only one understands anything I say about energy or economics.
This is a bit like someone who learns they have cancer. They change their life and get treatment, that may or may not cure them. Or, they could pretend they don't have cancer and wait until someone comes up with a simple cure that they can buy at the drugstore.
Most people in world, are waiting for the easy cure for our energy problems. I believe that this is the wrong course.
Still I find that the only person I can count on to do for me, is myself. I will have to live through the effects of the imminent downturn. It is personal to me. It's effects began in 2001, and they continue. the more I learn about it the better I can prepare.
If you don't expect to live much longer, then I can see your point of view.
I however don't expect to lay down and die soon. I might, I've had a few near misses with death, but that isn't my goal. So I believe that I need as clear a view of the road ahead as I can find. I can't ignore the forces that will shape what is left of my future.
Fundamentally, Americans have the lowest savings rate in history, the highest credit debt in history and we're losing our home value wealth, jobs, and retirement or stock portfolio wealth.
We have to "deleverage" but we have no leverage, period. This is a recipe for a very bad future for the average American.
Art,
The irony is you could write like that if your didn't so often try to take such broad and in depth swipes of both sides of a question ... ultimately often (not always) resulting in burying crisp ideas of what your firm stand for or are against something and related opinionated solutions. For you have a great sense of humor when you're not applying it too much to always winning the argument. Sorry... just teasing! I'm in the roasting spirit.
I enjoy Maureen Dowd most of the time and read Latin article you refer to. I attended a Jesuit high school and had four years of Latin, including two-hour lessons the first year.
When I came to Holland to marry my darling wife, Liselotte, the very first thing her incredibly funny father did (this is not a joke) was thrust a book in Latin to me and very politely asked me in so many words, " I would be so pleased to hear an English interpretation of this ancient piece I've always loved." I won't tell you how I performed, but it was probably (?) a passing grade as he laughed and patted me on the back ... which in Dutch meant welcome to the family.
I loved the roasting celebration between Obama and McCain! Nothing like self-deprecating humor to bring people back to their common humanity.
It's quite prevalent in the Dutch culture too. When politicians here take themselves too seriously or go off the ridiculous end, someone's going to do a masterful job of humorously bringing them down to earth.
Art,
Sorry, my carelesness again: in 1st paragraph, 5th sentence should be:
....of what you firmly stand for or are against ...
"Art A Layman said...
Weaseldog, Should you find it necessary to look for me in the afterlife be sure to start down below. That will improve your odds of finding me."
I'll bring a bottle of Isle of May Scotch. :)
Greetings from the Netherlands, Mr. Reich. I saw your appearance on the Daily Show yesterday and was interested to learn more about you. After reading your Wikipedia profile I stumbled on your blog, which is fantastic. I've subscribed to your RSS feed. Best regards,
Jaap Vermeulen
Jaap,
Welcome! Nice for this Dutch-American to hear from a fellow Dutchman visiting Dr. Reich's blog. He keeps us sharp with his provocative, well structured opinions that beg a thoughtful response whether you agree with him or not.
Our economy needs to find another fuel source other than mad crazy consumerism by the middle class. Yes, plasma flat screen TV's are better than the tube kind, but the TV I purchased in 1990 still works, and just because BestBuy is advertising a Christmas sale doesnt mean I should go spend/charge a thousand bucks.
This is undeniably and emphatically true. If such a prescription was followed we would all be better off. The fundamental confusion in much of the chatter today seems to be that somehow (perhaps with magic) the government can do this for us.
It can't. It never could. It never will. When it tries it fails.
The basic truth is that the consumerism so widely decried is cultural and is as controllable by the state as much as religion was in Stalinist Russia.
To wit. What in any of these bailout proposals does anything to encourage thrift, prudence, responsibility, honesty or restraint, the very behaviors that would ensure we had avoided this? Regulations you say? That is a talisman for people not paying attention. Fannie & Freddie, the ultimate culprits to our crisis, were heavily regulated, and just as heavily fought for by an army of lobbyists, and a slush fund legislature.
Another simple truth: Government is corrupt in proportion to its size and will always be so.
Conclusion: shrink government
weaseldog:
To what end?
Facetious I know, but if we are talking the imminent end of the world would not following Epicurean be the better choice?
Granted in the remaining years we have left, preparation is wise for living out our lives in comfort but generally we plan ahead and prepare for the future and that of our progeny. If there is no future, planning and preparation seem to be lessened in importance. If the end is as near as you think I wouldn't worry too much about IRS debts, it takes years for the IRS to get around to seriously punitive actions and by that time we may all be dead.
I have two children and two grandchildren whom I love and care about, deeply. That love and concern is for their current welfare and their future welfare. I can continue loving and caring currently but if there is no future there is not much to do about that if there are no options. Maybe leaving our houses and finding a convenient cave might ensure that we are one of the last to go but that's arguable. In fact, that may become the new competition: No longer fight and scheme and plan and prepare for accumulating more wealth and more stuff, more comforts; let's just see if we can be the last to go. Maybe as the time draws near we can begin clubbing others to death to improve our chances. We will have to be careful about the scientists though, just in case one is on the verge of a miraculous solution. That will require planning and preparation, good thinking on your part.
I always thought it was a cardinal rule of time travel that you don't tinker with what took place because you can never be sure of the consequences. Someone could make a change that would mean that you never existed and then who would I have to blog with?
Can appreciate your unwillingness to stand on the sidelines but faced with impending doom all other options seem futile. Generally being proactive means seeking change to improve or correct a looming disaster. Hope requires a predicate of solution. If there are no solutions or just ones that prolong the agony then we are all effectively observers, standing on the sidelines. There is not a whole lot of solace in being prepared to die. It can be a relief to your loved ones but if they are faced with their own mortality their grieving will be short-lived.
Transfiguring our recent recurring bubbles to the oil crisis is a little bit of a stretch. More likely the bubbles had nothing to do with oil or energy costs but with our new pastime of figuring out how to make more money from money coupled with debt rather than from labors.
All in all the best we can do is to plan and prepare as if the world will continue, infinitely. We can be knowledgable of the likely disasters and inconveniences ahead of us and take precautions to be able to weather the storms. If that perspective proves wrong and in hindsight stupid, so what? If we have the expertise to enter the solution game then we should do it. Otherwise our choices are to give up or continue the battles that began with our birth. Accepting that the end is imminent argues strongly for the former.
Each of us has two options. We can go forward with hope; with optimism; with faith that it will all work out. We can be proactive to whatever degree our expertise affords us and we can be sorely disappointed when our optimism, our blind faith, failed us, and then we die. Or we can preach of impending doom converting all those souls we can and then die comfortable in the knowledge that we were smarter, that we foresaw the real truth. Either way the ground, six feet under, gets chilly. That approach, your apparent approach, is akin to the clergy preaching the coming Rapture. As I gasp my last breath the thought in my mind will be, in either of those events, "shit happens".
Could you make that a good Bourbon? I hate Scotch. Might have to do with my Irish heritage.
Let me get this straight.
There are people, institutions, banks, retirement funds, etc., out there with plenty of cash who want a safe return on their investment. But in this economic climate, these players don't know who to trust, so they are keeping their cash "safe" by storing/hording it. No lending of money, then no economy as we know it. Is that part of what's happening?
It seems to me that an honest broker can connect credit-worthy businesses and players willing to lend. If there is real money to be made, doesn't that atttract those who want to make real money?
Won't new or refashioned lending institutions appear? When their credibility and ability to make money is verified, won't they become successful?
Shouldn't this take a couple of years to establish?
Am I missing something?
Frank:
One of my many laments is not taking Latin in school. I took French instead. My rationales were that only dead people spoke Latin and French is the language of love. Saying "I love you" in Latin just didn't have the same ring.
Who knows to what levels I might have climbed had my hormones not conflicted my good sense.
The roast was great. I have seen snippets all day, didn't get to see the whole thing but the self-deprecating humor was awesome. I have long been a proponent that none of us should take ourselves too seriously.
I do love Dowd, she would appear today's answer to Dorothy Parker. Acerbic seems inadequate in describing her wit.
Frank:
I am cursed with an analyst's mind. I have opinions and voice them loudly and often but at the same time my mind suggests that there are no one-sided answers. Most answers have flaws. As you have noted this is especially keen when I am talking principle but thinking reality.
It may be further driven by my desire to go to my end as an enigma.
Art a layman...
Weaseldog....
Please take your witless exchanges to a gay chatroom and give us a break
hey anonymous:
Skip over them, you savage!
Art, the decline of our civilization is not the end. It is simply the beginning of change.
And hope can be easily misused as an excuse for inaction.
It's said that the Jews went to the gas chambers, hoping that things would work out. Had they lacked hope, they would've rebelled and lived.
Likewise friends and neighbors have implored me not to make any preparations because someone will think of something, and everything will continue as it is.
Perhaps it is my education in biology and ecosystems that leads me to use words in a manner that is obtuse or easy to misread?
Finally I spent so much of my childhood with a grandfather that was a poor sharecropper during the Great Depression, that a lot of his outlook and habits have become a part of me. I can't help but watch for the storm clouds.
People have survived the collapse of many civilizations. Only the scale of this one, differentiates it from the others.
I can hope that the Tooth Fairy and Easter Bunny will save our civilization. but that's a bit pointless. Likewise, I can hope some backyard inventor finds a way to open up a new exotic energy source.
But if my pantry is empty, my hope won't feed my family. If I assume that an exotic source of energy won't be found and developed quickly, then I have a reason to try to prepare to be more self sufficient, so that I can weather temporary food shortages. If I'm wrong, I'm burdened with a garden to work in, and a pantry full of tasty preserved foods. Does that sound so horrible?
I don't mind being the nutcase neighbor with 22 chickens and vegetable garden, where most people would farm grass for the landfills. When I'm picking fresh beans or sifting compost, I don't have time to worry. I'm doing something. I'm too busy to worry whether things are hopeless.
Art,
Fortunately, the Jesuits forced French and Greek upon us in the 50s. From that moment, I acquired a love for the French language ... and the unique cultural idiosyncrasies of the French with whom I had the pleasure of much business contact in the 70s.
You had an excellent language training experience, Art. Your passionate goal to get at root causes of things in your writing is embodied in the words of the French writer Antoine de Rivarol (1753-1801):
" Ce qui n'est pas clair n'est pas francais." What is not clear is not French.
Yup.
I've maintained for a very long time that the money men have gotten away with the "rich getting richer," death-of-the-middle-class soaking we've all been taking for so long, because the constant flow of cheap, imported toys and easy credit has kept the large majority of Americans happy enough that they couldn't be bothered to see what was happening, much less move themselves to do anything about it.
We're coming to the end of that road; the piper is going to have to be paid. The question is: who's going to pay him?
Two main points to solution:
1. Provide every citizen an annual minimum income (a la R M Nixon) of $100 K... talk about an economic stimulus! Whether saved, invested or spent the wealth will trickle up to the top 5% of the population. No need for welfare or social security... it would be up to you economists to control inflation and regulate the markets...
2. Provide single payer health care: No more worker's comp. No more insurance bureaucracy. No more insurance billing departments. Regulate quality and costs... must provide more doctors and nurses and orderlies... cut the billing costs and expand the service availability and quality. We have always been able to do what the Europeans have done!
Art,
Read David Brooks article in IHT about Obamam's cool, calm disposition at all times, no matter what the pressures. A few times time on this blog, I have referred to that quality as Obama's high Emotional IQ as well as his obviously pragmatic, keen mind ... just what we need in these treacherous economic times.
At the end of his laudatory essay about Obama, Brooks battles with his inner conservative spirits who whisper to him to "cast doubts" about Obama's ability to achieve the Real Change he's been fighting for. Brooks seems to have a "reality lapse" or "reality revelation" as he suddenly switches to suggesting some, negative fault lines in Obama's personality that might not make him an ideal President, e.g., promising too much he can't deliver on because of an "aloof observer trait" in his character that could compromise his leadership skills. Obama will lose his passion and become an "anti-climax."
Brooks alert mind then conveniently displays memory loss on two formidable leadership achievements of Obama, namely: (1) advancing this far as a newcomer electrifying and gaining the trust of a majority of Americans as a credible Presidential candidate and (2) doing this with an original, powerful, democratic "BOTTOMS-UP" campaign theme and money raising technique that stops the powerful, corrupt lobbyists in their tracks from owning him.
If these achievemnents are not evidence of Obama's ability to stir real Change, then I don't know what is. Obama's natural gift is both to get inside a problem with others and to take some distance from it (and from others) for a time in order to come to sound, objective reasoning on how to improve things ... on how to look inspirationally to the future while using and not using selective experiences of the past to ressurect our social-democracy from its current economic morass.
His bottom-uo approach makes him very "accountable" to the American people as he is well aware of.
Too bad Brooks has this tendency to say things quite genuinely positive of someone, and then guilefully turns around to give that same someone a slight kiss of death with a couple of bitingly undermining, closing remarks.
In this essay he reversed back again to a quasi-positive conclusion about Obama, referring to his reliable "self-contained, self-controlled, almost boring" temperament.
Maybe Brooks sees himself as a mentor to misguided, but promising politicians. Whatever it is, it's Journalistic Neutralism at work again ... also often boring with its reliance on soap rumor mongering, negatively suggestive and titillating elements when communicating with the general public.
At least Brooks engages this journalistic art-form quite introspectively and skillfully and with some intellectual prescience.
I agree that I don't want America owned and operated by foreign interests, but the failure to enforce antitrust laws vigorously led to the reduction in the number of domestic auto manufacturers to the "big" 3. Despite decades of American consumers crying out for cars with better mileage and better quality control, American mfg's merrily ignored the American consumer. I bought American and my transmission blew at 60,000 miles. I was a volunteer BBB Autoline arbitrator and it is shameful that consumers were sold new cars that were "lemons" but they were so ill treated by the American manufacturers who would not back their products' quality. I want to buy American and I'm willing to pay some more for this, but I am still waiting to see the American auto makers "get the message" that Americans are loyal, but not stupid. I think that the US government should have mandated better fuel economy as a matter of national security a decade ago. There is nothing fair about so-called "fair trade" and it turned out to be merely an end run around consumer protections here in the US and as an excuse to ship good American jobs overseas. We need to get along with the rest of the world but protectionism regarding our industries at home is a matter of national security as we have tragically learned.
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weaseldog:
I would suggest to you that a decline in our civilization, of the magnitude you are proposing, will in fact lead to the end of the world, at least an end to any civilization as we have ever known. Civilizations either advance or they decline, once they commence declining, with no resources available to return to advancing, which may separate this decline from historic ones, the bottom will likely be a return to survival of the fittest. Not the economic fittest but the fittest in terms of physicality and the wherewithal to survive, literally.
Another aspect of concern is the degree to which our civilization has become "self" focused. My cursory recollection is that in historic civilization declines, they occurred when there was still some sense of community welfare. It would seem to me that this is a necessary condition for survival. I would guess that as a decline of our civilization reaches serious stages a communal affect will rise and groups will band together to nuture a "greatest good for the greatest number" philosophy within their local spheres. This will, of course, mean that your pantry and your garden and your chickens will be managed by the community for the benefit of the community and will not inure simply to your families use.
The irony may be that it is similar to our present dilemma. Those, such as yourself, who saw the "storm clouds" on the horizon and prepared in advance, will find your efforts employed in saving many of those who were "standing by" merely "hoping" in the lead up. We have a civilization or a society which has spent the last few decades separating the wheat from the chaff but will now scurry to put the wheat back on the chaff to maintain a solidarity of the whole.
Realistically a decline to this point will be far enough in the future that you will be long gone. But it is you who is trumpeting that the saga begins sooner rather than later.
Your Jews analogy is a little faulty. Rebelling would have done the Jews no good other than dying with the knowledge that they fought to the death. In novels this is heralded, in reality, dead is dead. They would not have lived in either case.
Now personally, I'm a "to each his own" believer. I have no problems with you attempting to secure your future in whatever manner you see fit. I can sympathize with your neighbors if you live in a decent surburban neighborhood and you are erecting a farm in the middle of it. Should you end up wrong you will have produced a negative effect on home values. If you're right, your farm may end up a communal drawing card.
The survival of a civilization, facing the peril you describe, will not be dependent of "self-sufficiency" but on collective endeavors. Individualism will fade away and collectivism will rule. Your soothsaying may provide you a place of leadership in the new civilization and your fortunes may be better than others. But one of the dangers of leadership, in a less civilized civilization, is that lacking a continued ability to predict the future, correctly, you may find your power forfeited and your spoils redistributed; your life itself at risk.
More irony: Those in the world we currently consider less fortunate, those in the third world who scrimp and scrape just to find a day's rations, have far superior skills for dealing with your worldview of the future. When the energy runs out, production dies. We will quickly discover that the animal extinction taking place further imperils our survival. When production dies there will be no more ammuniton for our guns. Soon, those of us living in comfort who have become expert in enjoying scientific advances will be remanded to not only having to know how to skin a bear but in how to kill one with only a club. The market for slingshots will soar. As we speak I'm practicing rubbing sticks together.
In the final analysis, if you are correct, in the immortal words of a frequent poster here, though missing of late: "We are toast".
Very good article. I enjoyed reading it. It was cogent, concise, made a lot of sense, and helped me get a better overall picture of what's going on in reality.
You debunk the "living beyond our means" argument as it pertains to the public in general. Although, I think Obama's "living beyond our means" argument was meant more as an argument against splurging at the federal government level, not so much the private citizen level.
Obama mentions it here:
http://www.youtube.com/watch?v=UAEofgJfkI4&feature=related
The subject is federal government spending; and he says "living beyond our means" in the context of wasteful programs. However, at the very end of the clip he mentions "living beyond our means" in terms of the private citizen. So it appears that Obama attributes "living beyond our means" to all levels of society. Although, I think he means it more of the federal government than of the public in general. He kind of blends it all together as a kind of moral condition of society in general. So, you're right. Thanks for helping me observe that.
Raffi,
Yes, Obama is refering to both our Governmemt and Private Citizens when he says "we are living beyond our means." That's his intelligence and honesty in describing things as they really are ... and not always as we want to hear them to feed our own self-delusions.
It's called "speaking the naked truth." Our Consumption and Savings levels are the HIGHEST and LOWEST, respectfully, of any other mature Western or Asian country in the world. This, plus over two decades of stagnant working middle class wages and cheap money has caused us to go on a Debt Binge in all directions (Federal Budget Deficits, Credit Card Debt, Home Sub-Prime Mortgage Debt, Financial institution exotic Debt, etc.) future generations will be paying for years to come! And, let's not forget the huge monthly Trade Deficits.
We've got Big Problems that government can't solve entirely alone but citizens and firms must also do their part by changing their personal living and business styles, e.g., back to the old traditions of Prudence, Savings, and Investing our Taxes and Debt borrowings in infrastructure, health care, energy independence, educational/worker retraining, and innovative, new job producing industries benefiting ALL Americans ... and not just enriching the financial and real estate sectors of Wall Street.
Pathetic. This argument that the "rich get richer" demonstrates a pure lack of reality. I am "rich" by your standards. My income is in the top 8% of individuals of the US. BUT, here is the kicker morons. I have 150K of student loans (of which I cannot deduct the interest because I am too "rich"), so I pay 1700 per month for that. Then, of course, since I am "rich" I get reamed on a higher tax bracket, and I can't get the credits that the "poor" or "middle class" gets. So whats left for me? I have 300 in my savings and only 15K in my retirement fund. I could put more, but I know that since I am "rich" my daughter will not qualify for several scholarships for college, so I place 100 per month in per 529 plan. Yeah, the rich keep getting richer. Just plain ignorant. Sad, really how ignorant most of you are. By the way, I often work 6 days a week, so don't give me this nonsense that the "rich" are not the "working man".
Frank:
Agree, it was an extremely objective article in many respects. Even David's escape hatch you refer to could be considered a valid devil's advocate objectivity.
Brooks always appears to struggle with his Democratic past and his conservative cheerleading. He segues back and forth between honest appraisals and, sometimes, vitriolic partisan pandering. I would guess it's an attempt to balance his superior mental abilility for objective analysis with his desire to continue receiving a paycheck for his chosen profession. He has an audience which he would like to enlighten but knowing that conservatives do not take kindly to enlightenment attempts, he must include meat with his helpings of health food.
I would guess that he also feels a need to cover his bases. Though Obama looks to be far ahead, there is still the possibility that McCain could triumph (shudder). Brooks, by his own admission, has studied McCain for years and is surely aware that McCain does not suffer naysayers gladly. Access to the roots of power being essential to an op-ed writer, I'm sure he is cognizant that a completely favorable piece about John's enemy could inhibit his access going forward should the election yield heinous results.
I do agree that Obama's successes so far portend a picture of a proactive, decisive, deliberative management style. His self confidence is so strong that he has no misgivings about listening to the ideas of others. He appears to full well understand that "good" ideas abound from all corners of the political spectrum and incorporating the "good" ideas of others does nothing to demean his intellect or ego. Sorely, McCain exhibits just the opposite.
I know McCain has worked across the aisle to effect decent legislation but the feeling one gets is that he did it to get his ideas passed, compromising, giving and taking, where necessary, to achieve his ideas, not necessarily to achieve optimal ideas.
I sense in McCain a strong desire for power not to result in collaborative decisions but rather to effect "my way or the highway". He has dutifully played the Senate compromise game because he had no other choice but I see his desire for power as a breaking of the chains that bind him and will allow him to unleash the "wisdom" of McCain on a witless world.
His consistent, persistent assertions that he "knows" how to fix this or that, presents to me an aura of a man who doesn't have a clue but who figures he has time to figure it all out. And if he doesn't? Well he only intended to serve one term anyway. Though it may not have the intensity of Dumbya's I also feel that McCain is fighting the ghosts of fathers past. Being a Senator should rank him high in the familial heirarchy but as a Senator he commands nothing. He has a degree of power but he can't command ships to move in the night. As a President he will have surmounted the epoch of his ancestry. He will have attained that level which none of his progeny can ever surpass. He will, finally, have become the "patriarch".
I thought the most telling analysis offered by Brooks was that Obama does not seem to carry this kind of baggage; even when he might have more reason to. Brooks's misgivings have minor merit but he fails to connect all the dots. Obama may very well be distressed and discouraged by the frightful process we call politics. It is a process that would deter the best of us and render us to that "calm" state of removal. But Obama has that ability that only seems to come around periodically; that of an inspirational speaker.
The bully-pulpit has long been considered the real strength of a presidency and those who are inspirational, polished speakers and steeped in the ability of using that pulpit will never slumber because the road is rough. Faced with gridlock or resistence or frustration to progress they will mount that pulpit and sell their ideas to the general public exerting great pressure on the naysayers or obstinates. It has been the invaluable tool of those who had the talents to use it. FDR, Kennedy, Reagan and Clinton, all were masters of the pulpit because they were masters of communication. There is the sense that all of them would far prefer to address the American public, and the world, as opposed to engaging in backroom fighting and scratching to achieve goals. I suspect even Lincoln felt he could afford the vehemance of his cabinet full of political enemies because he knew his communicative powers could rule the day.
Obama, through his experience, has learned the value of collective dialogue. Hashing and formulating and selling ideas among a group of interested and equal minds can lead to grand ideas. The ability to assimilate and to convince great minds to an acceptable conclusion is, I believe, the government that our founders foresaw.
It is not that McCain does not exhibit some of this but his experience is from a much more disciplined environment. Dialogues in a military structure tend to drive consensus from the top down. It is necessary in their world that it be that way but that experience leads to a reliance on top down decision making and severe frustrations if those at the top are not given preference. One could argue that McCain's personna may be far more inclined to withdraw and pout if other's ideas win the day. He would seek to exact his vengeance, later, but he might take the position that others are wrong but they should go ahead and screw things up because they didn't listen to me. To John, it's all about winning not sensible resolution.
As a nation we have been further misled to believe that the presidency is the real power of government. That somehow our founders wanted just "one" strong hand in command. Total fallacy! Our founders understood the value of strong leadership and devised a structure where the seamen at the helm, the Congress, were simply influenced and guided by the navigator, not ordered to ignore the iceberg dead ahead.
Anonymous,
Can you imagine what the bottom 80%must be suffering through with paying for college bills, meeting escalating monthly living costs, and unable to build up any savings if, as you claim, you are suffering so much as someone with a very high household income in the top 8%? The term working middle class does not exclude you as a "hard working" individual. BUT, when your children's college bills are paid, you will be very liquid still earning a (deservedly) high income. But the bottom 80% won't be liquid, may have had to stop paying anything for their children's education, and if they managed to pay those bills, they will be still stuck with stagnant wages out of fear for outsourcing, downsizing, automation, redundancies coming from mergers and acquisitions, etc. Are you as blind to these realities as you are in accusing others of being blind to your top 8% earning position?
anonymous:
Such a depressing expression. Did you ever consider giving up your vaunted salary and just becoming one of the rest of us, the working people? Your daughter could then get scholarships and you could deduct the interest on your college loans and add more to your 401K. Your life would be so much less stressful. The simple life is surely the better one.
C'mon in the water's fine!
Given the FIRE economy is bolted on, it seems reasonable that the FIRE economy can come unbolted, then we should be left with the economic status we had previously.
Every person hired for FIRE economy tasks have job descriptions and pay stubs. Put the upper echelon management out of their jobs. Prison is an option. Let the lower echelon retrain in health sciences.
I was in line this morning at 9:25 am to vote, thanks to early voting in North Carolina and the online ads the Obama campaign is providing to help one determine where to vote early. I talked to a woman who described how she struggles to make ends meet. She also described how she made her children register to vote and how she telephones them until they have. She described how she participated in the North Carolina primary. We quickly moved forward in the voting line. Right before three of us headed in to vote, somehow the conversation turned to Bush. We spontaneously agreed that George W. Bush is an ...fill in the blank, and that Elizabeth Dole is the same.
kayxyz:
Interesting story but the statements about Bush and Dole can hardly be viewed as revelations.
Bush is just plain...well....err....dumb. Dole is to NC what McConnell is to Maine.
Was she even there in the last six years? Edwards accomplished far more and he wasn't there much of his six years.
Art, the part of town I live in, never quite kicked it's farming roots, even as the metroplex wraps around it. Every monering we can hear roosters from some of our neighbor's yards. Behind us, some folks still keep two horses.
It's just that your wouldn't know it from dirving the city streets.
Argentina began a large scale transfer of government fund to Bank of America, Citicorp and other major banks in 2001. Then they crashed hard.
We're giving that a go now.
Civilizations and ecosystems never see steady declines. They are always punctuated. Pressure builds for change and then a whole series of structures collapse together.
There's no reason to think that the USA will break the mold in this respect.
If we can give all of our welath away and stay prosperous, then maybe we have entered a new age. But I doubt it. I think that as our goverment gives away everything of value, we'll find our selves plunged into record economic and a massive strign of bankruptcies.
Argentina hit bottom in only 3 years. Collapses can come quick.
As someone who worked with the urban poor for the last 13 years I have to say that a good many of the working and non-working poor ARE living beyond their means. The cost of housing has risen so high as a proportion of the family budget that it is difficult to keep from living beyond their means ... but in a consumer culture the virtues of thrift and planning that used to be forced on the poor have pretty much gone out the window, as far as I can tell, especially for families with children.
It is hard to deny children the toys, clothes, electronics, and vacations that they want, and that the daily diet of TV is convincing them they have a right to. Working parents who have little time for their children compensate by buying them stuff on credit -- especially if that "stuff" is entertainment that will keep the kids occupied while they work, do chores, or rest from their multiple exhausting jobs with inconvenient hours. The poor labor under a tremendous deficit of TIME, and often borrow or waste money in order to buy time, of which there is an absolutely finite supply and which can't be borrowed.
One of the things that middle-class people discover when they set out to work with poor children is that they do not match our romantic-Victorian image of poverty. Mostly, they have plenty of stuff--toys, clothes, electronics, etc.--though often cheap, poorly made knock-offs of the national brands. A surprising number of them have been to Disney World or other exciting destinations. What they don't have is books, privacy, physical and emotional security (they move house frequently), time alone to tinker and think, exposure to nature and traditional culture, someone to listen and answer their questions, and quality time with their parents.
weaseldog:
That's my excuse!! My neighborhhod never had any farming roots so while I agree wholeheartedly with your prognostications I am limited in my reactions. My Home Owners Association would have me tarred and feathered if I brought chickens, live ones, into the yard.
Now seemingly comparable events can produce learning curves but I'm not sure that we can view what happens in Argentina as commensurate with what takes place in America.
First of all, hopefully we learned from those experiences. Secondly, we would seem to have a much stronger and better foundation to our economy than Argentina.
I think there is every reason to believe we can break that mold. If nothing else, the world cannot afford a serious recession in America.
You're sounding a little bit like Chicken Little. We are far from giving all our wealth away. And the great majority of our current investment, if not all of it, is staying within our economy.
Now the whole point of my last post was to suggest that if a serious decline starts it will not be a slow steady decline. If it commences with a severe decline in energy resources it will reach crescendo quickly. If it is to be driven by energy availability we have a few years to go yet, maybe quite a few. In the latter case the horizon appears to be beyond our lifespans, mine being much shorter than yours.
Even as some particulars of our current dilemma mirror the Great Depression many others don't. The Fed failed to act at the outset of the Great Depression, exacerbating the problems. We already have a leg up there. Our economy and production are far stronger than in the early years of the GD. Our unemployment is nowhere near the levels of the early thirties and would not appear to come anywhere close to those levels going forward.
If you stick with the energy Armageddon, you've got legs but we also have time. If you shift to a financial Armageddon you're drifting to fantasy again. We will have some more turmoil and with it, pain. There will be some bankruptcies but a financial storm we can weather. An energy one much more iffy.
It's not just crass consumerism that makes people spend beyond their means. I recommend Robert H. Frank's Falling Behind: How Rising Inequality Harms the Middle Class.
Economic inequality has carved out a new geography. We're spending more for housing or commuting twice as far so that we can send our kids to decent schools and live in safe neighborhoods. That's not extravagant, as Robert correctly points out.
Another big factor is what Kevin Phillips calls the "financialization" of the American economy. We've traded union manufacturing jobs for non-unionized lower paying financial jobs in cubicles. Like the manufacturing jobs, the financial jobs are going offshore, too.
Grow the green economy: food, energy, infrastructure!
Anonymous. You do have big bills but you also can PAY them. That is the difference between rich and poor. The poor have much lower expenses but they cannot pay them each month. You will never fully understand that until you have lived it. When I was young and just out on my own, I was faced with a large car repair bill. I complained to my Dad who asked if I had the money to pay for it. I did and I told him so. He looked ta me and said "then why are you complaining". Enough said.
John Freeland,
Yes, I enjoyed reading a synopsis of Robert Frank's book, "Falling Behind, How Rising Inequality Harms the Middle Class", published in 2007. Thanks for mentioning this book.
Frank argues we have an economy where the wealthy set the norms for other class consumption patterns by a powerful driving force he calls "relative deprivation."
This force -- illustrated especially in purchases of houses and cars -- ends up intensifying income inequality of the middle class by spurring desire to keep up with the Jones (and thus living beyond one's means).
I like his documented use of simple illustrations of this force at play such as: between 1980 and 2001, the median size of new homes in the U.S. rose from 1,600 sg.ft. to 2,100 sg.ft. (or 31%), while the median family's real income had changed little in the same period. You could make a similar comparison between college education and health care costs.
Robert Frank's end result conclusion we all are aware of now. But he was perhaps one of the very first to document and convincingly explain the cascading impact of extreme consumption at upper wealth levels -- where income levels continue to grow but stagnate elsewhere -- in setting relative consumption norms for ALL society.
What is that obvious end result from his data? It's that the typical American now works more, saves less, commutes longer (to have a home near better schools), and borrows more to maintain what is perceived to be a deserved or appropriate standard of living.
This dynamic has now got us into serious, serious trouble, in addition to all the other known factors contributing to the breakdowns in our economic paradigm (e.g., cheap money, irresponsible lending and financial oversight practices, pyramiding of exotic, high risk financial products, etc.
Many U.S. economists are also mistakenly still stuck on the U.S. economic paradigm of high Consumption in the 70-72% of GDP range to drive our economy. Our economists never stop to understand why Consumption in mature European countries is much lower in the 65% of GDP range, and yet their economies enjoy relatively stable GDP and income growth patterns combined with reasonable unemployment levels (with exception until recent years of Germany and France). How is this possible? What can we learn from the best European (and Canadian) social-economic paradigms? It's my observation over many years that Europeans are always trying to learn from the best in our society.
Later, I will offer some more explanations, as a non-expert in economic theory who has lived for many years in one of Europe's well-managed European countries, The Netherlands. Suffice it to say that trivial or excessive Consumption habits here are practically non-existent ... as the Dutch are always saving for a rainy day and that annual vacation. An ego and/or pervasive advertising driven purchase culture of constantly keeping up with a bigger car or home, for example, is generally under very sensible, prudent control by all cicizens.
Art the Layman and Weasledog:
You're both missing the fact that the next real crisis will likely be over water rather than energy. We can get by with one horsepower and footpower if necessary, but we can't live without water. As many as a billion people worldwide don't have access to clean water. The privatizers are trying to buy up the world's water resources, commodify them and then sell them back to us. They're pumping thousands of gallons a minute out of wells in Michigan and elsewhere and trucking it away in bottles.
Here in San Diego the mayor just announced that we should expect water rationing soon. All our water comes from hundreds of miles away (the Colorado River and northern CA) and other states are reasserting their rights to that water.
As far as population growth, I agree with Weasledog. If you look at a graph of growth over time, it has been exponential. Thom Hartmann has written about the number of years it has taken to add a billion to earth's population. Just in our lifetimes, I believe, 3 or more billion have been added whereas it took thousands of years to reach the first billion.
This is not to say that there aren't solutions available for energy, water and population problems, but we, as the human race, better get on the stick and stop dithering around trying to make money off of money.
Our new mantra should be: Definancialize, Demilitarize and Deconsumerize!
John,
The 3 "Ds" are an energizing necessary negative mantra that support a suggested positive mantra I call the 3 "Is" : Innovate, Industrialize and Invest internally.
Maybe you or Art can best this suggestion. Please do!
John. Keep up your directness and specifics for real change!
John, Art,
It's amazing for me to watch CNN pundits on Blitzer's show now claim the McCain campaign is re-energized because Obama wants "to use government to REDISTRIBUTE WEALTH. He wants to reduce taxes for those with income below $250,000 and modestly raise taxes for those earning above $250,000 ...who are in the top 10% of household income and wealth status.
Not one of the punditd, including Blitzer, has the sense or courage or quickness of mind, except David Gergen, to say that the government over the last 28 years has used its tax power to enrich the top 10% of households. This is an undisputed fact. So Obama is just righting this imbalance and in a timely, intelligent manner to minimize Deficit financing of Investments so critically needed in our society.
Boy, how we can twist reality in politics! The Redistribution of Wealth argument HAS A BITE that none of the journalists are capable of assessing the historical and future merits, OBJECTIVELY!
John Lawrence:
I agree that neither weaseldog nor I focused on water but below is a statement that I did make:
Water resources may be the true cataclysmic delimiter.
Attempts at economic control of water are bad enough, Boone "Wind" Pickens is or was involved in his own legal battle regarding this, but my understanding is that water supplies around the world are diminishing and, to your point, we have no alternatives for replacing water.
Population growth, I have never argued that it is not a problem, will further aggravate issues with a declining water supply. We do, supposedly, have the science for desalinization plants but since profits are the driver of innovation for those with the financial capacity to effect building those plants, nothing will be done until it becomes profitable.
Ironically, McCain's oil slogan of "Drill Here! Drill Now!" is vacuous since government can legislate the "Drill Here" part but can not do much about the "Drill Now" part.
In a democratic capitalist system it is up to the private sector to deliver us from calamities, through applied science, but that sector wil refrain from doing anything that does not return a decent profit margin. At best, this leaves us without solutions to serious problems until a catastrophe offers a profit.
Interesting that when oil prices were $100+/barrel, offshore drilling, especially deep sea, looked viable because profits appeared plentiful. With the recent decline in oil prices we have now returned to questionable profits and "Drill Now!" is likely to die on the vine.
Our capitalism has bode us well for a long time but, as with all things, eventually the rubber has to meet the road. Faced with all the serious resource shortages that are looming and realizing that many of those resources underpin our entire existence we can no longer afford to wait until we bean counters decide the numbers are aligned to now address the problem. The government is going to have to get financially and directly involved in moving us off the blocks. Even if prices must rise or taxes must increase, if the government is driving, the money merely shifts through the pockets of all of us rather than a select few.
The quandry is the balance of a new paradigm. If the pendulum swings too far in government's direction we likely will encounter more waste and inefficiency and very likely politicians will become the new greedy CEOs. If it doesn't swing somewhat strongly away from the private sector, inaction will be the death of us all.
The necessary ingredient to solutions is going to be the will of the American people and we will surely fail if we can't get off this ridiculous ideological sound bite mentality and return to a reasoned, objective thought process.
For art: as McConnell is to Kentucky, not Maine. As Dole is to Big Oil and to USDA farm subsidies. I've talked here about the effective ads about Dole's ties to Big Oil. If you search USDA recipients, Bob Dole appears in the top 20, along with Ted Turner-CNN. Plus Bob Dole has held a position at the Alston & Byrd law firm in DC.
A great quip this morning on the NYTimes web site is McCain would be for Joe the CEO, not Joe the Plumber.
Reminder: Ban lobbying. Lobbying groups to go after: Fierce, Isakovitz, and Blalock.
Frank:
Couldn't agree more! The whole TV news model is abhorrent. Not only do the hosts not ask detailed, in-depth questions, when they ask a fair question and the guest dodges and dances and avoids answering they let them off the hook. Why? My guess is that they have a list of questions they want to ask and they have time schedules; the next set of guests or advertising breaks, so they skip on to the next question and the next to get through this set successfully and grade themselves on the number of "probing" questions asked, not on the number of valid answers received. Further reinforcing my theory is that Wolf and many others often seem oblivious to the answers they get.
Their significance is also exemplified in their choice of topics. A discussion of "redistribution of wealth" and its actual history is far more important than what Sarah meant when she said. "..Pro-American areas of the country.." Granted the former is far less titillating, thus we move to the latter.
As with so many aspects of our society, news anchors, hosts, whatever, have evolved away from searing, all encompassing neutral commenters and questioners, to celebrities. Not a celebrity based on in-depth knowledge of the issues and pointed inquiries and then exposing the incongrous, often historically inconsistent, nature of the answers but a celebrity based on face time on TV; on exposure and/or outside references to their recent interviews. They frequently take longer to ask the question than they allow for the answer. Impotence has replaced neutrality. Pushing too hard, holding a guest up to ridicule, can leave them short on future guest list options. Ratings are less driven by substance than on the guests showing up.
I agree that Gergen, perhaps the epitome of political analysis objectivity in today's world, was expressing a true historical comparison, but intermittently he is interrupted by another question or an injection of objection by his opposing viewpoint counterpart or a need to cut him short because it's time for a commercial. I am often infuriated that on news shows when a particular set of guests really get into valid, prolonged, interesting discussions they are then cut short so we can break and begin the next segment with brand new guests, and the new guests often offer nothing more than blather, on both sides.
I frequently feel that TV news does more damage to attention spans than MTV. God forbid we extend a well-reasoned dialogue too long and lose a few viewers that probably shouldn't have been watching in the first place. Never should knowledge and education interfere with profits.
You and I full well understand, to Gergen's point, that we have been living through a "redistribution of wealth" ever since Reagan. That "redistribution" was entirely contrary to the definition envisioned by Adam Smith, Thomas Paine, and many of the great socio-economic thinkers of history. But Joe Sixpack and Joe the Plumber don't think in terms of historical definitions. They don't think in terms of fairness and opportunity for all. Their focus is self and they have bought, hook, line and sinker, the emotional tie created by conservatives, that the term "redistribution of wealth" means stealing from me and giving to some undeserving deadbeat. It is merely another way of describing "Welfare queens and Cadillacs". The really true inanity is that it is not the wealthy that scream and shout about the unfairness of income redistribution. There are a few marginal well-off who squeal and an occasional Steve Forbes who preaches against it but most of those who rebel against the idea are the Joe Sixpacks, the John Q. Publics who will benefit from the concept.
We truly are a nation of lost souls. Some are lost through an obeisance to greed and wealth but the vast majority are lost because they fail to "think". They fail to reason and extrapolate truth from words and proposed ideas. It is so much easier to accept the simplisitic aura of conservative views. The term is never mentioned in the McCain campaign, but all of his economic plans are a clinging to the old idea of "trickle down". His ideas of jobs creation and trade and taxes and healthcare are all predicated on the principle of more to the haves and then they will provide for the have-nots. His ideas are not only absurd, they are patently absurd, but our Joes and their hockey mom wives cannot see the forest for the trees.
We are far too removed from our agrarian heritage. At least then we understood that you "reap what you sow".
Art, John:
Your and many others' stance that Reagan started a "me first and government last" conservative ideology in reaction to some extreme pedulum swings to the welfare state ideal in the 60s and 70s, that of necessity is now being reversed in the new context of globalization.
When are we ever going to learn to get the balance right in our two-party system based on the European realization ... that too much market destroys the government and too much government destroys the market?
Frank:
I would guess you watch him but Fareed Zakaria is a true professional interviewer. He asks serious questions but not in a combative way but in a didactic way. Granted his format is designed for his approach but it could be a good template for other news interview programs. Multiple guests do not guarantee a wealth of knowledge or viewpoints, especially when each guest's answers and dialogue are the same daily campaign talking points.
Frank:
We are a nation that thrives on crisis; on furious competition. Balance is so...mediocre..so...boring...it's so European. ;)
Fareed just gave a great justification for his vote for Obama. Very similar to Powell's and both were extremely impressive, well-reasoned justifications.
Art,
Your analysis is one with mine.
Slight addition I would make to your critique of media "celebrity syndrome" is that prime TV media Journalistic "neutrality" culture is also a silently destroying objective, multi-faceted discussion of important matters.
Wolf Blitzer practices this art-form to its ultimate. The essence of the Neutrality posture is seldom to take a position based on known facts or common-sense judgement and always to continually give each visiting guest equal time and tributes for their points. Result? Joe Public oftens ends up being spoon fed conventional wisdom, confusion, uncreative middle-of-the road pablum, and outright lies!
The reasons for the CNNs behaving this way may also be to keep audience loyalty without recognizing or caring whether they are serious contributors to audience ignorance!
P.S. Just learned the renouwned bank I have worked for some years ago, ING, has received today a €10billion ($13.5)injection from the Dutch government in exchange for a share ownership interest. ING is a sound and robust bank whose stock is also being panically affected by the poisoned financial markets. So some of the best European financial institutions are being touched by global banking system loss of confidence and trust. ING doesn't need all this cash but is accepting it for a short period to shore up some positive confidence.
Art,
As the Dutch are saying now, "Boring is Sexy" for the financial banking community. Back to simple, transparent, traditional banking practices!
Boring is IN here! Thank God.
http://wormseyevieweconomics.blogspot.com/
Art,
Fareed Zakaria is a refreshing, highly astute man ... an invaluable addition to the CNN staff. I´m not a fan of the cocky Lou Dobbs or neutral-dead Wolf Blitzer, as you may have guessed.
I´m sure one-liner or even three-
liner thinking will be quickly, but gentlemanly, dispatched with by people of Zakaria´s intellectual caliber. He has a down-to-earth, not-in-love with himself appeal ... combined with a natural talent for mastering and simplifying complex matters. I believe he received a Rhodes Scholarship to Oxford, like President Clinton.
His Sunday broadcasts don´t come through here on CNN, but I do read his occasional writings in Newsweek and other publications. He´s quite impressive analyzing global and national cultural-social-economic developments. In this area, I place him in good company with Francis Fukuyama.
Frank:
Though troublesome to many, it is an absolute truth that to completely eliminate unwanted pregnancies, abstinence is the only answer.
But it leads to boredom. ;)
Frank:
Don't know how well you like to view TV clips on the computer, I'm not super inclined, but I believe you can watch Fareed's program via the CNN website.
He has fantastic guests. He interviewed Wen Jiabao a couple of weeks ago, I think for the full hour. Was interesting.
Well said - but I come to this blog because I expect nothing less! Amazing how nobody blames the multi-millionaire crowd, the golden parachutes for incompetent corporate officers - nope! It's that darned middle class! Shame on them for trying to maintain their standard of living - whatever are they thinking about????
Frank,
How about Innovate, Industrialize, Invigorate. I think the "Invest" part could be taken the wrong way.
I think all the CNN anchors have a slightly rightward bias especially Wolf Blitzer. If you can get MSNBC, you can find much better coverage from Keith Olberman and Rachel Maddow. I get that Wolf Blitzer is a conservative. His bias shows.
David Gergen did point out that the Republicans have been redistributiing wealth upwards for many years. The Republicans keep hammering away that Obama will raise your taxes, but Obama and Joe Biden keep hammering back that "only if you make more than $250K." I think Obama will win this war of words simply because he has bought up all the TV ad buys between now and the election and is outspending McCain by an enormous amount. Finally, the Democrats can repeat their mantra over and over again ad nauseum and hopefully finally drown out the Republican garbage since no one is interested in an objective assesment of the facts.
Try MSNBC if you can get it. If not on TV, it is on the internet. I download Keith Olberman to my ipod and listen at work. Fortunately, my work doesn't require a lot of mental exertion. If you don't have an ipod, please get one and you can download all sorts of intertesting stuff like "The Economist" which gives me a European perspective. I also get a lot of info from Air America, and, listening to the podcast, I can fast forward through the commercials. Otherwise, it would be insufferable. But no commercials on a lot of the podcasts including Keith Olberman.
Art a Layman:
You said
In a democratic capitalist system it is up to the private sector to deliver us from calamities, through applied science, but that sector wil refrain from doing anything that does not return a decent profit margin. At best, this leaves us without solutions to serious problems until a catastrophe offers a profit.
I hope Obama changes that paradigm and that government can help to determine the direction that private enterprise goes in by providing seed money, subsidies and incentives such as in the alternative energy area, but this also could be done in many other areas of the economy.
Desalination is the ultimate remedy but there are objections to shore based desalination plants such as they disrupt the ecolgy nearby. However, there is another interesting solution from a company called Water Standard. (You can google them.) They are proposing floating ship based desalination plants with lines going to shore. These are similar to the ship based or floating oil drilling rigs that Frank has talked about. The advantages are that less energy is required to obtain the water and less damage is done by expelling the brine out at sea. Also, by providing water to the seacoast cities, it doesn't have to be transported hundreds of miles from rivers as it is in San Diego thus leaving more river water available for those inland so it helps inland communities also.
Another advantage is that a ship can be brought in after a natural disaster like Katrina to provide fresh water on an emergency basis, and they can be moved when in harm's way from a hurricane.
John Lawrence, cc: Dr. Reich
I like your modification to US MANTRAS FOR REAL CHANGE:
I. REFORM MANTRA
.......Definancialize
.......Demilitarize
.......Deconsummarize
II. RECONSTRUCT MANTRA
.......Innovate
.......Industrialize
.......Invigorate
Good starting points for a US societal renewal plan guided by traditional values of financial prudence, social, economic and market incentives that are equitable, in balance, and sound for ALL Americans.
Frank Thomas, The Netherlands
John, cc: Dr. Reich
Of course included in the term "Invigorate" is the need to Invest internally in key areas (i.e., infrastructure, energy independence, etc.) and to stimulate Savings to help reduce
dependence on foreign borrowings.
I do not think that we have any numbers to show us why Americans have accumulated this kind of debt. Is it necessities or is it a spending spree? Impossible to know, although from what I observe it's probably both. Borrow to finance the kids' education and at the same time trade in the 13 month old SUV for a larger and a more expensive one because it has some gadgets in the back seat that will keep the kids busy while driving them to school (no...high school kids do not take the school buses, they are either driven, or borrow money with their parents' cosigning to buy gas guzzlers and drive themselves.)
"The fault, dear Brutus, lies not within our stars, but in ourselves…"
Art, on the slow collapse scenario...
If there were examples of petroleum era nations experiencing a slow collapse, I would find it easier to entertain that notion.
Argentina continues to trouble me, because unlike the USA, they had a strong petroleum industry and manufacturing base. Then they gave it all to the banks.
The USA's wealth seems to come from military exploits and the ability to run printing presses at high speeds.
Right now, because of the credit problems, our farmers are going into bankruptcy.
I don't see what industry is going to keep America strong while we switch our economy to one that is dependant channeling all of our wealth into international banks.
The Holy bible says that if you give away all of your possessions, then you will gain your reward in heaven. Though this is a fine spiritual philosophy, I fail to see how it can work out for nations. Especially since they all go into an economic toilet when they do this.
Will the USA be rewarded in heaven if it continues to give everything away?
What is a middle class lifestyle, these days? I know people who live on monthly disability checks of 600 dollars per month. They get subsidized housing, Medicare, Medicaid and get their food at soup kitchens and charity food pantries. They spend their disability checks on Ipods and cell phones and used laptops (and alcohol), and for Christmas their families give them DVD players and video games. I'm not saying they shouldn't do any of this, in fact it makes sense to work the system like this. I wouldn't trade my life for theirs. But clearly, there are more dimensions to the economy these days.
John, I haven't brought up water, though it's on my mind and I've covered it a few times on my blog.
If we had unlimited energy, we could burn it to redirect water or desalinate sea water.
I harp on energy, because everything we do requires the consumption of energy.
Once it goes into decline, everything will start breaking down. Our water systems will suffer. Our tap water, that requires high energy chemicals to purify will need boiling before we can drink it.
Our agriculture requires energy to run pumps, to irrigate our crops.
Further, we've eliminated 90% of the food fish from the sea. We have to use ever increasing quantities of fuel to chase down that last 10%.
We are incredible innovators. We are able to swap many resources so that we can push off the day of reckoning, until multiple systems are pushed to the limit and we experience cascade failures.
This is why I don't believe in slow declines. A slow decline would require rational and methodical planning. We would have to have patience and the ability to voluntarily control our population growth. If we were a species that could manage a slow decline, then we'd be a species that would be too rational to end up in the fix we're in.
Art, when you watched the documentary on my site, what did you think of the media circus in Argentina, leading up to and after their public giveaway to Bank of America and Citicorp? Did you notice the parallels between how their politicians became media celebrities as ours are?
How the media promoted the massive giveaways to international banks, just as our media is doing?
weaseldog:
Didn't watch the whole movie, damn it's an hour long, but watched some and then skipped around a lot.
Have a hard time getting all panicky in a US comparison to Argentina. Granted they have had periods of economic success but all in all they have never had the continuity of sound government that we in the US have experienced.
There would appear, on the surface, interesting parallels between the Argentina of the 80s, maybe even through today, with the events occurring in the US today but they are simply interesting not harbingers. We've had our share of ups and downs over the years but never have we experienced the inflation levels that they, and many other nations have experienced, nor have we had to rely on the IMF or World Bank to support us. The fact that we are the largest, most successful economy in the world, buffers us from a lot of the influences of world finance organizations. Many of the actions Argentina took could be considered defensive where our similar actions could be considered pro-active. A fine point but a significant one.
The biggest difference is clout. Argentina, in its best day, was never more than a mediocre player on the world stage. We are the world stage. Admittedly, globalization is weakening our grip but if we successfully manage our way, and much of the world's, out of this current dilemma we will have maintained our leadership. Over time we have managed our financial house much better than most of the world. Ergo, our status.
Is also interesting that while we can be accused of starting this whole mess, the use of financial leverage by our banking institutions seems to pale in comparison to many European banks.
The times and the solutions are not without potential peril but history would appear in our favor. If we stumble, then surely we are headed for troubled times. But looking to the histories of less stable nations, seeking parallel expectations, is a fool's journey. Panic never resolves problems, it only exacerbates them.
It is far from blind faith to believe that we have the braintrust to guide us through this storm. Wise voting, in the current contest, would be a good idea though.
To the post before the one I just responded to: There are no examples of a country or economy of our size collapsing quickly, petroleum era or else.
If you truly believe that our wealth was generated from military exploits and printing presses I would suggest a remedial history course.
One of the reasons we are injecting, or giving in your terms, this money to banks is to avoid farmers having to file for bankruptcy.
What we normal folks cannot see is often what saves us. It is what separates consumers from innovators.
Now I'm not big on bible references, Holy or not, and therefore I take little solace from heavenly rewards. If I were to give away everything I have it would not offset all the sinning I've done so the gates to heaven are closed to me for eternity. You are hyperventilating a bit here. We are not giving banks, or anyone else, everything we have. We are applying resources to a problem to stem the tide and turn things around. In the business world it is common to add to debt to advance. If funds are required to solve serious problems and there are no liquid assets available you borrow, fix and recoup.
If you were truly innovative, given your concerns with Argentina's experience, you would give away the chickens and clear out the garden to make room for saucepans, tons of them.
John Lawrence:
Hear, hear on the MSNBC plug. Love Olberman and Maddow but they too wear their politics on their sleeve. Also love Morning Joe although I hate his politics.
Art, the saucepans seem to have done Argentina little good. :)
And so we have no examples in the petroleum age of countries collapsing slowly, but you say also there are no examples of quick collapses. I beg to differ, the USSR was a large nation with a large economy and it went down fairly quickly, once the collapse began.
1. Argentina has a lot of national wealth in oil. It peaked in 2001. 2. Argentina had a lot of foreign debt.
3. Argentina was a net exporter until 2001.
4. Argentina, under corrupt rule, began just giving away massive sums of money to the banks in 2001.
5. Argentina sold off it's oil industry for a tiny fraction of it's value.
6. Argentina also sold off it's roads, railroads and water supplies, telecommunications and everything else, for a tiny fraction of their value.
7. Argentina saw loans from the banks going from primarily fixed rate ones, to increasingly ARM loans that resulted in massive bankruptcies and foreclosures. This was in both home and business lending.
As to the USA.
1. Oil production peaked in 2001.
2. The USA is the IMF's #1 debtor. The USA has a massive public debt.
3. The USA is a net importer.
4. The USA is giving away massive quantities of funds to the same banks that Argentina gave their funds too.
5. The USA doesn't own it's oil industry. It's the property of international corporations.
6. The USA's public infrastructure is a mix of public and private enterprises. The public ones are being sold off all over the country by states and municipalities that are becoming cash strapped.
7. The move from primarily fixed rate loans to ARMS is causing personal and business failures all over the US.
You keep accusing me of hyperventilating, ie: becoming emotional about this. I find that very insulting Art. I don't believe that I am approaching this topic from an emotional sense. I believe that parallels are strong, though they may not lead to the same circumstances.
To make predictions about Peak Oil in the past I used math and logic. I was told then that I was crying Chicken Little. I told friends and family in January 2001 to sell and get out of the market. All but one laughed at me. told me I was being emotional, basing my predictions on an estimated temporary peak in production. The one dissenter said, "I think we can wait until June. I feel like the market will go higher."
Art, my point of view is different than yours. I don't believe that you're basing your views, primarily on emotion, so please don't assume that I am.
This dramatic rise in fuel prices, then collapse of prices as the markets collapse is connected in my view and part of a predictable cyclic pattern. It will repeat again, but not for 3-5 years. If my model is correct them we're in for a trough like 2002-2003 now, except a bit deeper and longer lasting.
I may feel some emotion about the results of my model, but I don't feel that emotion drives it.
You keep arguing that the USA has a lot of physical wealth left, that it's wealth isn't in it's money. I'm not sure what you're referring to. What backs our multi-trillion dollar debt to other nations? What makes it stronger than a resource rich industrialized nation like Argentina? I don't see the basis for the claim, other than our public education based indoctrination that "We are #1!!!!"
I don't believe that military endeavors create wealth. But they can prevent other nations from collecting on debt, through extortion. The USA has been able to keep the PetroDollar sustained as the world currency by threat and action. This power has been eroding. First Iraq declared that they would quit trading in Dollars and they began trading in Euros. Then the USA bombed them back to the Stone Age. Now Iran settles oil trades in Euros. We may soon be bombing Iran.
Further, Dubai is being set up as the center of ME finance, creating a new financial center for oil trades in multiple currencies and staying out of the anti-terrorism financial system. The USA watches ever other banking center for illicit transactions, but is kept out Dubai where the illicit drug trade, and oil transaction currencies are traded. This is draining strength from the Western World's finance centers.
Have you noticed that banks in Dubai don't need to be saved from bankruptcy? Yet, Dubai contains the parent corporations for banks failing all over the Western World? This is just an observation. No conclusions need be reached on this account. No tin foil hats needed.
Please feel free to provide counter examples and facts. I want to believe that everything is going really well. I just don't see a reason to celebrate our current circumstances. I don't believe there is any reason to be optimistic about the next few years.
If anything, in the past, I paid the price for being too optimistic. If I had really believed my models from 1999, then I would've paid off my house and credit card debts. I'd be in much better financial shape today. I didn't really believe that I would be mostly unemployed from 2001-2004. Had I known I'd be going from writing security software to packing trucks on a freight dock, I would've done things differently. But I was confident that I'd be employed. Instead, in hundreds of interviews, I was told again and again that I was overqualified and wouldn't be happy working at the job I applied for. So, I'd be back on the freight dock the next day, learning basic Spanish language skills.
That's where optimism led me.
A delayed response to the post from new england opinion.
When possible, I prefer to buy a domestically-made product or patronize a local business. However, I do own a foreign car. When researching my purchase (which was a significant amount of money for me as a student), I discovered that these cars were superior to domestically manufactured products. I need my car to work reliably for me for at least 100,000 miles. Preferably, I'd like to run my car into the ground (and by then I can hopefully buy an alternative-energy car). So far, I've had it for 6 years, I've put 60,000 miles on it and the only trouble I have had is with the domestically-made tires.
My only reason for making this point is to say that our domestic companies need to stay competitive - in product development, new technology, manufacturing quality, etc. I think American workers have a good work ethic, and I wish that our companies would do more to support them and develop innovative technologies.
Art, just a quick note...
I'm reading reports that sinking all of this money into the banks is not freeing up credit.
The Baltic Dry Index tells us that a world of hurt is on it's way to the world because shipping is taking a severe hit with tightened lending.
Further demand destruction has dropped fuel sales by 9%, while the delivery systems are stalling due to lack of credit.
Other reports I'm seeing state that the banks aren't even trying to open up lending. They have to use the money to wallpaper over their losses.
Now the bubble-headed beach blonds coming on at nine, tell us the same story that you're repeating, but they don't have a clue. Further, they've been telling so many lies the last eight years, that there is no reason to trust them.
When is this plan going to show results? And if it's going to take years, wouldn't dislocations in supply chains that will hit us hard over the coming quarters, disrupt the effects?
Meanwhile Circuit City may close 150 stores...
Athena:
Odd that Shakespeare seems to provide apt quotes for what ails us centuries later.
I agree with your brief synopsis but, as you are aware there are many other variables in the equation.
I believe that the slide commenced when in the 80s many working folks felt that annual wage increases would return to the 70s levels and that the use of credit could then be curtailed. My oft mentioned complaint that conservatives then ushered in the idea that taxes were too high, mentioning nothing about wages being too low, added to the rationale that help was on the way via tax reductions.
We also found that if Mom went back to work we could pay off debt quicker, even as we added to it quicker.
Meanwhile many, including me, found themselves already sucked into the eddy and a relaxing swim turned into a swim for survival. The conflict between the two forces meant the energy expended was only enough to offset the opposing force not overcome it.
Even after refinancing or home equity borrowing took us to a semblance of net zero the urge to continue our lifestyles kept the spending flowing. As long as we could, somewhat, comfortably afford the monthly payments, what's to worry? Yea, we weren't saving, but our house was appreciating. We weren't investing for retirement, but our house was appreciating. Besides, retirement was off in the future, there were miles to go before we got there. So what we have to work a few years longer than originally thought? I don't like being idle anyway.
Entwined in this whole process was the ever present advertising. Showing us the good life, beseeching us to try this or that. This, will make you look better. That, will make you feel better. Do away with the cramped four door sedan and get a van, later an SUV, your family will love you for it. What responsible social person would invite friends over to watch the ball game on a 13 inch TV?
Beyond advertising itself were the lifestyles of our favorite TV shows. Those we associated with our existence had nice furniture, nice cars, great casual clothes, designer no less; always entertaining with friends seemingly constantly with them, in homes that never seemed to need cleaning. The good life was in front of our eyes at every turn and living it merely meant a few bucks here and a few bucks there. Generally we were only snapped back into reality once a month when we sat down to pay bills. Realization was stark and painful, so the salve was to make those minimum payments quickly and get back to TV or the kids soccer game. Anything to replace reality with fantasy. If things got particularly depressing then go shopping to relieve the stress.
No doubt it was ridiculous; it was stupid; but this is America and anything is possible and doable. As children we were often faced with waiting for things until our parents had saved up enough money. Modernization had removed that albatross from us. Spending, especially via credit, meant instant gratification. It became as serious a drug as heroin. In our sober moments we knew better; we often shuddered at the daunting pile of bills; we pondered what if we lose our jobs, our health? But, TV had educated us that stress was harmful, that it could seriously affect our health and since the real cure would be a slow and painful process the quicker cure was to move on, avoid dwelling on the negative. We adopted Scarlett O'Hara's outlook.
Then there was John and Sally. Good friends and we loved them but they drove a car that was six years old. It didn't have power windows or a CD player, not even FM radio. They wore the same outfits to every party. They were wonderful but they were boring. And for what? Their money was tied up in savings accounts and investments. It was not working for them, providing them pleasure.
This was the aura that existed. Simplistic I know but it was a mindset that prevailed in many of us. Cannot deny that it was foolish but it was cultural; it was mainstream. It was not premeditated greed or irresponsibility.
Just a view of the American psyche for those of you from different cultures.
Art,
Have to correct you on your statement that it appears that "European banks have used allowed themselves to engage in overleveraging to a greater extent than US banks."
This is a bit overstated to say the least. The primary examples of overleveraging in standard mortgage lending are the Northern Rock Bank of UK (nationalized), the Iceland Banks and the Fortis Bank of Belgium (now partially nationalized by Dutch acquisition).
UBS and the Dutsche Bank have had writeoffs of $60 billion and $15 billion, respectively, due to their purchases of the American Sub-Prime mortgage junk.
ING is the 3rd largest Savings Bank in the world with 75 million clients. It has accepted a $13.5 capital injection by Dutch government for a non-voting ownership interest (although with right to appoint two Borads of Directors)... whereby ING has option within 3 years to buy back the Dutch securities for 150% of the original sale price to the Dutch government or covert the securities to ING shares. Meanwhile, the Dutch government will receive an 8.5% dividend payment. This approach cleverly avoids a watering down of the ING common shareholders' interests, although there is some watering down of the dividends to the ING common shareholders. More importantly, ING is in sound and robust financial health but its stock is caught in the world panic selling spree in combination with ING's relatively small reported loan writeoffs recently. They made this move to restore confidence in their solidity as most of the money amounts to an equity capital strengthing of firm that already is in rather debt-to-equity strong ratio and has an ample capital reserve solvency position. Their stock rose today 29%! It's a great buy now for a 2-3year hold.
Fortis, a Belgian bank, saw its stock fall because of paying far too much to acquire the Dutch giant bank, ABN-AMRO, which is alos a very healthy bank. Fortis has had some bank losses that got magnified beyond reality because of poor management actions combined with the Sub-Prime and credit crunch crisis. So its stock fell lmost 90% in a panic free-fall far divorced from reality of actual financial strength of the bank. The Dutch governmemnt quickly and opportunistically stepped in and bought ABN-AMRO and Fortis Holland back at a 30% discount. These Dutch banking operations are profitable today.
In short, a select few European banks have been caught up in the American Sub-Prime mortgage disease primarily. And in a very few selected cases, some banks have been caught up in their own disease of bad management. In general, however, the European banking system's solvency and financial solidity (inspite of above problem examples where financial problems have been solved except for Iceland's banks) positions are far more secure than those of US banks. This is because European banks have relatively much stricter rules about bank reserves and lending practices. Also, they are not involved in the pyramid Securitization process that has nearly brought down the American banking system.
The one remaining Unknown is to what extent the Credit Default Swap market (that brought AIG down), estimated to be $55 Trillion (more than the GDP of all Western and Asian nations together), contains a substantial added risk exposure where firms have insured loans undertaken by US Corporations against default(as opposed to insuring home mortgage loans and related securites). Also, how many investor groups in Europe and to what extent, if any, have purchased these Credit Default Swaps as investment products. Both exposures remain a risk mystery waiting to be revealed that could involve ever more dire shock waves to the world banking community that is so tightly connected.
weaseldog:
No fair componding responses on me. Makes it harder to keep up and you'll end up distorting the word count competition.
The USSR? First of all if we had known that much about their economy, in the 80s, we would have known we didn't have to spend unholy amounts of money on defense to bankrupt them. What is your basis for their's being a "large economy"? Rubles? Population, which they couldn't even provide food for? It is logical fallacy to present the USSR, and their cockamamy economy, as an example of what might happen to the US. C'mon weaseldog get a little grip.
I realize, although not to the extent of your knowledge, that there are numerous parallels between Argentina and the US but the histories are not comparable in either the stability of the government or the management of their economy and currency. All that glitters is not gold but some of it may be.
You reference that they had a corrupt government; now we have a tainted one but it's far from corrupt. Can you imagine our Congress turning over complete operating authority to our President? We do much, too much privatization of functions but we haven't been given to selling hard assets. Even many of the states, can't speak for all, turn over management of assets to private companies but seldom give up ownership of those assets. In net, although I realize it is problematic, the government can giveth and the government can taketh away. National Security is a broad umbrella.
Don't follow your IMF statements. We help fund IMF we don't borrow from them. What do you mean when you say The USA is the IMF's #1 debtor?
In typical programmer analysis, not intended as an insult, you align various facts and then apply your determinative assumption to the aligned facts. All dogs have four legs and a tail but they do not all act or respond the same way. You would have to weave in entire government/economic/cultural histories to try and support your conclusions and there the parallels begin to divert.
Models can be wonderful, invaluable tools but first of all they are only as good as the information fed into them by their designers. Secondly, given the current state of artificial intelligence, you have to make interrelational assumptions that are often based on fixed relationships. Even the quan methods PhDs of Wall Street failed to incorporate contingencies for matters that any accountant would have raised questions about. I've done some very rudimentary modeling and its great fun but I doubt I'd be tempted to base my life's decisions on any I've seen.
That you may have forecasted a fall in the stock market at one point in time does not necessarily lend credence to your model. There are many experts who have made similar predictions based on gut feel alone and they have been correct. It is the art of a professional stock market analyst, a successful one.
Standard ARMS are not the problem right now. Generally they invoke on interest rate changes and mortgage interest rates have moved in a relatively short range so far. It's the exotic ARMS and the interest only, ballon payment mortgages that are creating the biggest problems right now. There are still one helluva lot of fixed rate mortgages out there.
In general parlance, optimism is not considered emotional, truly it probably is, even maybe to the point of blind faith, but doomsdaying, especially based on cursory evidence, is usually considered emotional, as in hyperventilating. Am not meaning to attack you personally merely your logic, or lack thereof. You, yourself, admit that though the parallels are strong we may not end up with the same result, yet you suggest we will.
The economic downturn played a significant role in declining oil prices, perhaps as a catalyst, but the real driver was just plain ol' supply and demand. When prices reached a certain level, deemed as unacceptable, demand began to drop, interest in alternative fuels picked up steam, and the market reacted consistent with economic theory, prices declined. OPEC has long been aware of the likelihood and has managed around it but they have lost a lot of the control they used to exert.
Weaseldog, experts in the field can't determine where peak oil is or whether we've hit it. If you look at it closely I guess you could come within a decade or two of high probability but there are still all those unknown unknowns.
Our wealth is in land, infrastructure, some remaining natural resources, our expertise and our markets. But above all it's faith in our future. Our foreign debt is unsecured debt. There are no asset claims that can be enforced allowing China or anyone else to come over and take control of property. Our borrowings are based on the "full faith and credit of the US government" only.
Have to run right now, will finish later. Meanwhile drink some of that scotch it will mellow you out.
Although I'm in complete agreement with you about, say, the lower half of our earners, I have to say that there has been some extravagance in consumption the past 12-15 years. New housing developments have larger and larger houses, and many more folks purchased SUV's. The percentage of 'luxury' brand autos, in fact, jumped by a great deal; ten-fold, if I'm not mistaken. Much of this occurred with increased wealth, coupled with the first signs of the housing bubble, in the 1990's. When wages began to stagnate, and value from production was pulled out of circulation in the lower economic circles and hoarded by the most wealthy, many still believed they 'deserved' a Hummer. Conspicuous consumption coupled with social pressures doesn't just affect the wealthy. Many folks took out a second mortgage hoping to make up the difference in the interim. This is when they got swept up.
So, it's not that 'regular' folks are less greedy than the rich. Necessarily. Of course, the tremendous disincentive to save, the horrible pressures in the housing market (effectively forcing people into indentured servitude), and the horrible tax incentives for buying large cars and not making better small cars, all hit home when people realized that they just had to walk away from their debt, take a ding, and start over. The problem with the wealthy that separates them from others isn't their greed, it's their belief that, because they are wealthy, they don't need other people in the system to be okay.
Thank you, Mr. Reich. I'm so tired of the condemnation of consumerism as the cause for Main Street's economic problems. The middle class, myself included, have been circling the drain for most of my life. I don't own an iPod, the computer I'm using was bought used, I've never bought a new car (and my last one quit in January of '05), my vacuum and toaster have both quit, and my TV is on its last legs. I have various kinds of credit card and other debt from trying to keep a series of cars running to enable me to commute to jobs I once held; now I walk, take the bus, or get rides from friends (thankfully they are still willing to do so, as mass transit is woefully inadequate). I have never even thought to buy a house (nor do I ever expect to do so), and I suspect I will have to work until I die or become ill and die in penury. Perhaps I should simply do so now and decrease the surplus population.
Perhaps that Dickensian crack sounds melodramatic, but I can't get caught up in the hope mantra of the Obama campaign, even with an Obama campaign office down the street. The economic decline of the middle class and the suffering of the working class (Yes, Virgina there is an American class system) have been going on for a long time, and the people who have profited from this aren't likely to disgorge their ill-gotten gains. I find I can't blame people buying the cheap imported goods at their local Wal-Marts, for they can't spend what they don't have. So long as their purchasing power declines, they will meet the needs of daily living (the clothing and shoes, the toothpaste and soap, the trash cans and small appliances, ad infinitum ) as best they can afford. Economizing on price only goes so far, and working more hours is limited by pesky things like sleep, so eventually people are reduced to hollowing out their assets (houses, retirement and other savings) with debt to bridge the gap. All of which brings us to the present economic climate.
Oh, and one more thing. I'm so tired of hearing about how capital leaves the country in search of the best returns. Money doesn't walk, it can't swim, and it doesn't occupy airplane seats in any section. People (often behind the cover of corporations) export capital. Somebody gives the order to buy stocks or send wire transfers overseas. People design tax shelters and write laws to permit wealth to leave the country or otherwise duck taxation. There are humans responsible for these things, and they should be held accountable for them. I can't say I expect them to be held accountable, but stop insulting my intelligence talking about invisible hands and migrating money as if nobody is behind it.
Hello Art...
The models I use are as complicated as models used to measure mortgages.
As I pointed out, the exponential function is taught in standard High School math. I'm sure you learned it once.
As to disagreement on Peak Oil. The geologists don't seem to be disagreeing. But economists, lawyers and oil industry marketing personnel disagree.
You're right, it is supply and demand. I've been saying that all along. Supply has peaked. Prices rise. Businesses go bankrupt. Jobs are lost. Demand drops. Price drops.
World oil exports are in decline. Alternative fuels are not picking up the slack. If they were, then consumption wouldn't be down 9%.
You keep calling this Doomsday. I guess the coming decades can be interpreted this way. when I think Doomsday I think Pompeii, Nagasaki, Hiroshima or Easter Island. I don't see it happening like that,
Of course our decline won't be exactly like Argentina's. Just like no two accident victims are likely suffer exactly the same injuries.
Russia exhausted itself in a bid for imperialism. I don't buy the idea that we outspent them. I believe that's a Reaganomic Myth. They collapsed a few business quarters after their oil production peaked and declined. The hit their revenue hard. Further they were bogged down in war in Afghanistan and the considered a war mongering nation by most of the world.
The USA in contrast had the strength of petrodollars. If anyone wanted to buy oil, they had to convert their currency to dollars in order to make the final purchase. The petro-dollar days are ending. Several nations are now accepting Euros for settlement of oil contracts.
Frank:
You know I love ya guy but quotes imply precision. What I said:
Is also interesting that while we can be accused of starting this whole mess, the use of financial leverage by our banking institutions seems to pale in comparison to many European banks.
Notice the word many. Far be it from me to make universal condemnations.
Look at these two articles; NYT , IHT. Same author but the IHT article gives a few more specifics.
Art, I've been thinking about our previous conversations.
I've tried to take it back to essentials, that require the understanding of concepts taught in public High Schools.
Specifically the exponential function and it's implications. One of the most dramatic implications of the exponential function is that large changes in the data set, produces small changes in the curve. This gives us the ability to make fairly accurate predictions on data that can be modeled on it, from data sets with wide error variances.
The beauty of the exponential function is it's simplicity. It's simply an addition of a series of numbers, whereby each one is a percentage larger than the last one. It's the basis of calculating data on mortgages.
You argued that these are complex concepts that are prone to large errors. Which is by definition, and can be demonstrated in practice, to be a false statement.
If we can't communicate these concepts at a High School level of math, then we're at an impasse.
You're not the first person I've tried to discuss the exponential function with and the importance of energy. Most Americans seem to forget basic High School concepts as soon as they leave school. I even had one person tell me that math is a faith based belief system.
weaseldog:
The world is racing by too fast. I'm dancing as fast as I can and I'm falling behind.
To your latest: Am fully aware that there are a number of smoothing techniques out there for analysis and forecasting and I have been too far removed from them to get into an argument over specifics.
That said, my arguments are not with your mathematical methodolgy, hell even simple algebraic models employing levels far below exponentiality can yield reasonable forecasting results. My assertions are based on a couple issues. If you are modeling a purely mathematical problem, such as mortgages, that's simple. If you are modeling from datasets relying solely on historical inputs, fairly simple. In the latter case your forecasting is highly dependent on history repeating itself, over and over again. No doubt there are datasets where that is highly likely. At the same time significant current events can impact historical responses and tend to render forecasts invalid.
Even, and I am assuming here, whatever models you have for oil supply/demand are predicated on current knowledge of potential supplies coupled with demand prognostications. Despite the fact that there may remain unknown supplies in a "fossil creation" view, the Russian theory, relatively unknown to the rest of the world, which denies the "fossil" origin of oil, may eventually lead to vaster quantities of oil availability than most geologists acknowledge. We should be mindful that most geologist soothsayers are current or former oil company employees and while this doesn't negate their forecasts it can tend to taint them.
When you model processes that are fraught with behavioral variables you have entered a very complex algorithm problem. Again, if you are merely modeling history, not so much a problem, but then you are anticipating that history will repeat and that behaviors will not change. Modeling from history was a big part of the current problems in the mortgage fiasco.
In building even rudimentary algorithms, relational assumptions are made and if those relationships vary with events the model results can become invalid at best and absurd at worst.
The validity of forecasting models from algorithms made up of assumption sets is not that dependent of the mathematical functions employed but rather on the viability of the assumptions. Smoothing techniques simply make it easier to see trends.
I love math and wish I had studied it further in college. The beauty of math is its rigid discipline. To know that, in Log Base 10, 2+2 will always equal 4 is comforting in a world where it can rain from a sunny sky.
amen.
(aka alajac)
REGARDING OUR ADDICTION TO CHEAP OIL...If we are serious about wanting to get the USA to kick its `crude (oil) habit`, we need to have Congress add on a 10% surcharge at the gas pump (bumping it up another 10% every six months) and rebate the surcharge revenue in monthly equi-dollar amounts to every registered car OWNER, regardless of how much or little they drive. That causes the biggest oil consumers to subsidize everyone else with no BOTTOMLINE cost to taxpayers or consumers. The surcharge will incentivize cheaper alternatives to rapidly come to market and we will soon implement and use them, no government mandate required.
Many more good ideas on my www.classmates.com profile page...
If "living beyond their means" means the same as "living beyond our incomes", then this is no myth. In theory, one's income will and should limit their standard of living. If we borrow to maintain a standard of living that used to be, we're living beyond our means. That's pretty simple.
We will owe increasing amounts, we will pay outrageous interest and this is because we cannot accept the reality of reducing spending to match our reduced incomes.
Who's to blame for this reduction of real income? That's a different discussion. But what is undeniable is that we are and have been "living beyond our means" for many years, trying to keep what we used to have. Sad but true.
Unfortunately, we have run our government the same way, piling up massive federal debt, trying to "have (or keep)it all". Each citizen's share of the debt was about $20,000 in 2000 and in 2008, we each owe about $34,000. That is, for sure,"living beyond our means".
Oh yes, I suspect Robert you have or will receive a Government Pension, maybe you would publicly like to declare you are now going to take a CUT in line with the pain everyone that works for a living is experiencing under the Clinton and Bush sellout years.
Lets see Robert you want retirees to have their pensions cut at the automakers, lets see lets deny them healthcare benefits that they worked and earnd over the years.
The automakers have already crafted reductions in future liabilitys, unless you are not aware its been going on for 5 years.
I voted for Obama, but rest assured my opinion of you and your attack on working people wont be forgotten
Thansk to PHD and the eltist thinkers in this country, we now go to stores stocked with Chinese crap, and as worker have had to watch the dignity of working Americans compromised by the politiical hacks and free traitors who hav sold the workers of this coutry down the river.
I used to think you championed workers.
You see Robert I dont have a PHD, and it doesnt take a PHD to figure out NAFTA which the elite politicans used to fatten their own pockets are destroying this countrys manufacturing base. When are you and others that have allowed this travesty occur thru justifying replacing good paying jobs with unemploymnet checks and retraining.
I voted for Obama because as an ignorant middle class blue collar worker, I saw a glimmer of hope that this economic mess created by politicians might be salvaged.
I am once again distressed that you have chosen to blame auto makers, workers, rather than accept the failure that Americans have sold out Americans. NAFTA made the intellectual property rights entrepenoural end of the democratic party, but the rest of as Pat Buchanan puts it "Reagan democrates" the shor tend of the free trade stick.
This is the time I am posting here, I have to help move neighbor who has lost his job pack for moving out of state.
I am a medical UAW Ford retiree. I started worrying about company mergers and companies buying other company's back in the mid 1970' when the Federal Tax code made several changes. One being the Capital Gains Tax, what was supposed to happen is investors reinvesting in the market place. What I see happen was a lot of mergers and because of the mergers many people were let go because of duplicated jobs. Mal Bell was force to divide it self because of lack of competition. For thirty years there have been mergers on top of mergers and now look at our financial system now some are considered to big to fail. I understand some business mergers but some oversight over the mergers is warranted. Now we have a $700 Billion dollars bail out package and what are the banks doing, buying other banks not lending to the consumer to stimulate the economy or lowering credit cards interest, auto loans, home mortgages nothing, no it is Christmas time and I am reminded of the movie "It's a Wonderful Life", Mr. Potter in particular.
If I were still able to work, I would agree everyone should make sacrifices and I hope the people in charge realize that pay cuts and benefits should be gradual in nature giving the workers time to adjust to lower wages and the loss of some benefits. I am on medical retirement and Social Security, I have Medicare, but I use my Company Insurance to pay for the medications I need well over $10,000 a year. I need time to adjust to what ever I need to do, to share my part of the burden of the failure of the company I retired from There are no guarantees in life and certainly not in business. Therefore, it is with great pain that I say not one penny of taxpayers’ money should be spent to bail out any enterprise unless it makes good business since. If it is not reasonable to loan the auto industry any amount of cash without the expectation the loan will be paid back to the tax payer with interest, don't do it. Invest the money to help the worker and the retiree who loses their job or benefits. Any way you look at it there has to be more downsizing of the Auto Industry. I believe we must maintain as many manufacturing jobs in the United States as we can.
Paul A Douglas
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I blame the greed of the banks and lenders. Check my site http://www.refinancingcondo.com for good free advice on how to refinance your mortgage into a safe low rate stable fixed rate mortgage.
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