I have been a long-time listener to both the morning and evening editions of National Public Radio’s Marketplace. Robert Reich, a long time commentator on the program, has pushed me over the edge. I have meant to voice my concern to Marketplace dozens of times before. I have finally sat down and sent them the following comments. My primary concern is that Mr. Reich holds almost exclusive reign over the economic commentary, and I would like to see greater diversity of thought, idea, and philosophy.
Here is Robert Reich’s blog: Reich’s Blog
Here is the text of his comments on this evening’s edition of Marketplace: The End of the Great Moderation, the Bailouts of Freddie & Fannie and Wall Street, and the Tattered Safety Net for Everyone Else.
Here is the link to Marketplace: Marketplace
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My comments:
Would it be possible to ever hear from another commentator besides Robert Reich? This Berkley economist (is that an oxymoron?) seems to have the same solution to every single situation on which he comments.
His solutions always go something like this:
1. Redistribute wealth
2. Raise taxes on corporations
3. Spend more on social programs
I have listened to Marketplace for at least 6 years. His commentary gets worse and worse to the extent that his recent comments are simply erroneous. Tonight, he pushed me over the edge. Lets take his commentary point by point.
1. “The great moderation appears to be over.”
Uh, what was 2000-2002? Was the tech crash just a dream?Â
What about the recession of August 1990-April 1991? Was the housing bust during that period just a hoax?
What about the market crash on Black Monday of 1987? Wait, I guess that crash doesn’t apply because the loss of wealth only affected the “rich.”
How about the recession of 1981-1982?
I think you get my point.
2. “It led the nation to believe we didn’t need much in the way of social insurance.”
Let me get this straight. During this period, we have the greatest single one day crash in market history, a housing bust, and a bear market, and yet these events made people believe we didn’t need social insurance?
Was not Clinton, Reich’s former employer and friend, President for almost half of the years Reich references? Was it not Clinton that reformed welfare? Beyond welfare, what other social insurance was canceled during this period? Reich doesn’t tell us that.
3. “No one knows for sure what caused the great moderation.”
Has Reich never heard of a Bull Market? Does he believe this is the first Bull Market in all of history? I bet if a democrat was in the White House instead of Reagan, Reich would know exactly what caused the great moderation.
4. “And now tens of millions of Americans are in trouble, with no safety net to help them. That’s because the apparent end of the boom and bust cycles led us to assume the economy would no longer impose such huge, unexpected, and arbitrary losses on large numbers of Americans. So we basically got rid of the safety nets.”
Again, did no one lose money in the 90s housing bust? What about the 1987 market crash? The Savings and Loan crisis? What about the Nasdaq losing half its value in the early part of this century?
Mr. Reich says we “abolished welfare.” That statement is patently false. He says we “let unemployment insurance wither.” While I have not taken the time to verify this comment, I’m certain it is at the least misleading. He surely does not mention that the government just approved an extension to unemployment benefits.
As for his comments about corporations removing pensions and cutting health insurance benefits, in his myriad other commentaries, Mr. Reich has advocated increasing taxes and other penalties on the same corporations. In essence, his plan would increase corporate liabilities while simulatenously decreasing their profits.
He also notes, “We even stopped worrying about the safety of small investors.” Again, more emotional language from Mr. Reich, with not even a hint of fact.
5. “Now we have to rethink safety nets. Right now, nets are being spread for the wrong people.” He notes a bailout of Fannie and Freddie. His use of bailout is incorrect, as the current plan is certainly not a bailout, as much as it involves the government loaning money to Fannie and Freddie at reduced interest rates. Also, I’m wondering if the investors in Bear Stearns, who saw their investment lose 90% of its value, think they were “bailed out.”
6. “There is still no relief in sight for most home owners who can’t pay their mortgages.”
I’m wondering if Reich realizes the irony in the above comment. Probably not. Fannie and Freddie, being government sponsored entities, and being mandated to provide home loans to lower and middle income individuals, have played an instrumental role in making available loans to millions of people who could not afford said loans. Perhaps if Fannie and Freddie were not providing the capital to finance these loans, we wouldn’t have seen millions of people making 30K a year buying more house than they could afford. Furthermore, if the government does not help stabilize Fannie and Freddie, who does Reich propose will finance the mortgages of the lower and middle income families for which he believes he is advocating? Finally, Mr. Reich seems to want government to provide a safety net, a panacea, but seems to have forgotten that Fannie and Freddie themselves are quasi-governmental.
7. “Nothing for retirees and small investors whose savings are drying up because of Wall Street’s decline.”
Has Mr. Reich forgotten Social Security?
Has he selectively forgotten the previous boom and bust cycles of the last 20 years, all of which have hurt small investors? I am only left to assume that during the entire 20 year bull market, which encompassed these boom and bust cycles, Mr. Reich was lamenting the exponential wealth creation which characterized the overall trend of that period. I bet he thinks only the rich got richer. Yet, when money is lost, in his world, only the “small investor” loses.
8. “Social Insurance.”
Finally, Mr. Reich concludes this commentary as he has done so many others. The solution to this and all other problems: Socialism.
He mentions universal health insurance, earnings insurance, and savings accounts which have a government match. As usual, he offers no plan for how these social programs would be funded. If I had to guess, Mr. Reich would raise taxes on corporations and “the rich” to pay for these programs.
In the end, we have the same solutions (redistribution of wealth, social programs, etc.) from Mr. Reich. I implore Marketplace to consider giving air-time to some alternative view points. National Public Radio purports to give balanced viewpoints, within a variety of ideas and philosophies. I do not find that Mr. Reich is able to provide a diverse, balanced perspective in his commentary.
Robert Reich is an asshat utilitarian and a poor excuse for an economist.
I can never see how these people like Reich can promote their views and economic theory and achieve an efficient use of resources.
NPR is ok for the jazz and quick market news.The rest is so slanted toward liberalism. Having Reich on there without an alternative is poor journalism.
And that’s why those of us in fly over country call it National Pinko Radio. Don’t hold your breath waiting for it to change.
Nice commentary, though!
Never heard pinko radio…lol…
I’ve been a huge fan of NPR for my entire adult life. I also listen to Rush, Hannity, and Savage. I enjoy hearing all perspectives, and I think it is my responsibility to be informed.
Ultimately what troubles me about Reich and Marketplace is not Reich’s ideology, but rather that he is like a broken record. I would just like to hear some other opinions.
It seems like a bailout. I would rather we let the free market.. invisible hand.. do its work.
Reich is a fucking asshat.
I had to stop listening to Savage.
I found I was laughing so hard at some of his commentary that I was coming close to running my car into a tree.
That that dude lives in San Fran is the greatest irony. He must have to go to work with a bullet-proof vest.
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I find that of the “right wing” radio types, Dennis Praeger is the most logical, and least combative.
The smartest of them may be “the Great One” Mark Levin.
Short WABC anyway.
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“The Truth”
The “truth” is your own commentary is self contradictory.
Asshat liberals don’t want to socialize costs?
That’s a “hardy har har HAR,” if I ever heard one.
But it’s obvious you are just repeating some talking point and have no clue as to what you’re actually talking about, as the “privatize profits, socialize gains” is almost as hoary a lefty cliche as “trickle down economics.”
So I forgive you, my son.
Or daughter.
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For the record, this was The Truth’s original comment, before he changed it. I feel it only fair that Jake’s comments are weighed against these original comments.
“You conserv repubs have screwed up the country. The last 8 yrs of Bush Whitehouse and 6 years of repub controlled congress has resulted in what we have today. Maybe we can double our losses with McBush. You want to privatise gains, but socialize losses through gov bailouts. It is a bailout.. and why? Let the asshats go under.. and take you asshats with them. Reich rules.”
The truth?! You can’t handle the truth!!
–Col. Nathan Jessup, “A Few Good Men”
Yeah, what a cowardly dishonest act, to completely rearrange/edit your comment so my response makes no sense.
Is it gratuitous to remark that I’ve seen this kind of bullshit from liberals before? Perhaps.
But maybe it was “all a mistake.”
Next time use the (“/Strike”) html function, or face my opprobrium a second time.
Well, The Truth has missed the spirit of my post. The fact of the matter is that Reich has written at least one flat-out lie, and has bent the truth in several other places. Really, it has nothing to do with libs or conservs as it does with the fact that NPR is allowing a commentator to publish blatantly false information.
Wood, pull your pants up before you wander out of the outhouse.
The “Great Moderation” is such a widely acknowledged phenomenon that economists have capitalized the phrase. Not just in Berkeley.
And it wasn’t caused by a bull market. Economists do indeed wonder about the causes and have many different explanations. Not just in Berkeley.
If you don’t like Reich telling you about the existence of the great moderation and the mystery of its cause(s), see if Bernanke will get through your shield: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2004/20040220/default.htm
I won’t join in a debate about the merits of Reich’s complaints and proposed solutions – there are plenty of valid arguments on both sides and not much point in running through them here. But I thought I should point out that your particular arguments would be taken more seriously if your pants weren’t draped around your ankles when it comes to some of the factual statements.
Since you are a chart chomper, I offer the following graphic to illustrate what the Great Moderation looks like in terms of some broad measures of economic health:
http://bp2.blogger.com/_pMscxxELHEg/R4E-AlX1mJI/AAAAAAAABbM/2H1YAYmhCRk/s1600-h/EmploymentMeasures60years.jpg
ottnot, thanks for the links.
Here is the deal. I am not arguing that the great moderation didn’t exist. What perplexes me is Reich’s attempt to spin it. It seems to me that Reich’s fallacy is obvious.
Lets examine the argument.
First, what proof is there that the great moderation is over? If during this time period there have been other market crashes, bank runs, etc, why is now any different?
Secondly, if, during this time period, both the rich, the poor, and the middle class prospered, and all risked their capital equally, then shouldn’t safety nets be offered to all, the rich included?
If the poor and middle classes prospered during the great moderation, yet didn’t really contribute capital to the system, why do they need a safety net? How do they reap the gains, with none of the risks? Is that fair? To follow that line of reasoning, only the rich had skin in the game, and so they were the only ones losing $$$ during the busts. If so, then the safety nets should go to the ones who have risked the most, and have the most to lose.
XLF bounced off 20 day premarket. If this breaks through it’s going to be sweet.
Wood, Great post. Love the points made. I’ve hated listening to that airbag for years. Forwarded your post on to the majority of my distribution list. Great feedback from friends and family there.
I stopped listening to NPR about eight or nine years ago. The last time I heard the Morning edition there was a story on Morning Edition about the Feds taking over the schools in Joliet (or was it Peoria), Ill. per a court order because of bias and “racism.” The next day the same leftist reporter with an agenda had to come on the air and say it never happened (no takeover). NPR never fired the reporter. I guess it wouldn’t be PC as the original story fit their game plan.
Anyway, I like to listen to Reich (CNBC on Krudlow) as he is a sane liberal and not full of the lefty hate you can read about in Huffington comments or in the Daiy Kos. I also like to listen to Juan Williams (not on NPR though) as he is sane. I don’t agree with them most of the time but they are respectful of other opinions.
Thanks Eddie.
TC- Reich is a smart guy, and he does exhibit some interesting out-of-the-box type ideas on the economy and markets, occasionally.
However, when he is on Marketplace, he is like a broken record. I just lost my mind listening to him yesterday evening. I had to put my 2 cents worth in.
What the fuck?
I am gobsmacked by the amount of negative karma passed out with nary a counter argument. It’s like libs are fucking cowards too chicken to actually argue their points (true, such arguing takes logic, facts, intelligence) so instead they passive-aggressively “voice” their
opinionseducation with the negs.Oh that’s right, it’s always been like that, since my undergrad days. “I disagree with you… I … I… just don’t know why!”
Kudos to Ottnot, clearly a fucking commie, but at least one with balls enough to voice his opinion.
Well, somewhat.
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Wood – you know I’m a fan and a friend, but I had to comment on this piece.
While I agree that Reich can be annoying, your statement:
“Perhaps if Fannie and Freddie were not providing the capital to finance these loans, we wouldn’t have seen millions of people making 30K a year buying more house than they could afford.”
I think you’re thinking of the private mortgage industry – Fannie and Freddie did have requirements for conforming loans and required full documentation. The issue is that they have been poorly managed for as long as I can remember, and they are dealing with the problem of falling house prices and the value of the mortgages vs. the capital they have on hand. You have to remember that their books have never been solid with huge derivative exposure. GSEs are, by definition, a strange and awful beast.
I can remember, back in about 1998-99, Fannie hadn’t reported quarterly earning to Wall Street for something like 2 or 3 quarters because their books were a complete mess. I’m sure that nothing has changed given that they are one of the largest lobbying organizations on the Hill and spread out the money between Dems and Reps to make sure no one really pushes them too hard.
As for whether or not it was a bail out, or whether or not Bear Sterns was a bailout, it’s pretty clear that both them go under if the government didn’t step in – so that’s my definition of a bailout. The difference here is that he wasn’t bailing out the company as much as he was bailing out the US economy – because the Fed perceived that the failure of Bear could have thrown the country into a deeper financial crisis. Fannie and Freddie even more so. The problem is that the risk, in these cases, is asymmetrical. That is, the government encouraged the risk and hasn’t put (and cannot put) anything on the people taking the risk.
As far as your other comment: “Mr. Reich was lamenting the exponential wealth creation which characterized the overall trend of that period. I bet he thinks only the rich got richer. Yet, when money is lost, in his world, only the “small investor†loses.”
Without a doubt, the last 20 years have created tremendous wealth for a large segment of society – I think what Reich is talking about is the growing disparity/wealth gap between the richest and the poorest. This gap has been increasing really since the time of Reagan. So, combining rising inflation and stagnant wage growth at a time of record corporate profits and I think you have what he was talking about.
The difference when a small person loses is that his or her income/future is hurt much more by the loss. This is what economists refer to as the utility of a dollar. That is, a lower income person who loses 20% of their net worth is much, much worse off than a rich person who loses 20%.
I personally find the constant mantra of the Reps to cut taxes, while having no ability to control the budget to be, frankly, depressing as that approach has put us where we are today – a country with deep economic issues.
But I didn’t listen to the whole thing – just a bit. That’s as much of him as I can stomach!
Damian, thanks for the comments. There is a guy over on Covestor that I had a back and forth with that gave me some other view points on the whole matter. His point about FNE and FRE was the same as yours, but your explanation is much more clear and simple. It does seem that I had a misunderstanding about how FNM and FRE were doing business.
As for the repubs, I share your depression. To cut taxes, and then continue spending recklessly might be worse than not cutting taxes, and still spending recklessly.
As for Reich, I still maintain that his solutions, for the most part, are always the same. I just wish NPR would give time to someone else.
I totally agree – what about some other economists of great note?
The difference here is that he wasn’t bailing out the company as much as he was bailing out the US economy – because the Fed perceived that the failure of Bear could have thrown the country into a deeper financial crisis. Fannie and Freddie even more so.
The problem is that the Fed should not be able to make that call — to decide who lives and dies like some Caesar at the Coliseum. They think not bailing BSC out will ruin the system, but all it does is ratchet the bow back one more notch for when the ultimate reckoning must come. One cannot continuously “put off” natural market consequences without even greater problems arriving at our door when all the “bullets” are gone,or no longer effective.
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Without a doubt, the last 20 years have created tremendous wealth for a large segment of society – I think what Reich is talking about is the growing disparity/wealth gap between the richest and the poorest. This gap has been increasing really since the time of Reagan. So, combining rising inflation and stagnant wage growth at a time of record corporate profits and I think you have what he was talking about.
This is another statist concept that gives me much agita. Who the fuck’s job is it to monitor at what “rate” someone accumulates (or disaccumulates) wealth? And why would you care, given the benefits of an overall wealthier society? Would you rather we be static, or “even” like good comrades? Do any statists understand that a higher standard of living benefits everybody and that the only way to encourage innovation and progress is to allow creative people to create?
And it’s only simple mathematics which determine that the long end of the wealth bell curve is going to be more extended at the wealthier side… but again, who cares? The farther that side of the curve extends the faster it brings the fatter hump to the right — towards an overall wealthier society.
The only objection to natural economic order is one of envy, and by definition, impractical. Get over it, commies — the government cannot help the poor better than a higher standard of living can.
Fuck that homunculus Reich!
As for the repubs, I share your depression. To cut taxes, and then continue spending recklessly might be worse than not cutting taxes, and still spending recklessly.
It’s not, if that makes you feel any better. It’s all about the proportion of income being utilized by the private sector. If more income is absorbed by the public sector in inefficient gummint products, that is a much greater hobble to the economy than if cash is wasted via the same projects (with debt) while private income is used to invest in cash flow positive projects which will keep the economy expanding.
Don’t get me wrong, our current debt spending is still inefficient and wasteful. I agree w. Ron Paul on this front. I just do not agree that continuing to spend at these levels and paying for it by increasing taxes is the answer. It’s the worst possible solution, actually.
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Jake, I agree with many of your points.
My fear though is that a society with the fat part of the bell curve farther towards the right means those poor suckers that exist within that long tail out to the left must have some kind of net negative effect.
Could not that long tail to the left eventually overwhelm a society, even a rich one, through the destruction of culture and humanity?
Why would you presuppose a long tail to the left?
If anything our success shortens that side of it.
“our” success…, are you guys on the left tail?
lol, just kidding.
How much inflation-resilient real assets do you consider to jump onto the right tail?
I say 2000 oz of gold, and few pig farms to receive consistent subsidiaries.
For some non negative interest long ideas:
For at least 3 year long bear weighting on GBP (sterling). Why? Few simple reasons (sources can be found by searching for legit sources, do your own homework):
1. Their budget deficit is, recently, loosely regulated. (They have rules to keep it under 40pct of GDP, however, they seem to have problems to honor the rule with all their efforts)
2. Like US, they want to continue spending, even if it means selling gov’t bonds until they get a positive GDP.(=maintain the illusion of prosperity to prevent depression)
3. This is like what US did for the past 6-7 years. This will be the US’s playbook all over again.
4. Taxing the public is their original way, mate. However, people are too frustated with the gov’t taking all their money (in simple terms). So, gov’t is rethinking their strategies as how to tax people. (=printing overtime)
JG,
This is another statist concept that gives me much agita. Who the fuck’s job is it to monitor at what “rate†someone accumulates (or disaccumulates) wealth? And why would you care, given the benefits of an overall wealthier society? Would you rather we be static, or “even†like good comrades? Do any statists understand that a higher standard of living benefits everybody and that the only way to encourage innovation and progress is to allow creative people to create?
*Allowing creative forces full sway is commendable and necessary. However, the mis-match twixt CEO compensation and wages has grown ever wider.
Can you really argue that the current crop of financial CEO’s [take your pick, Chuck Prince, for example] are worth, or have justified their salaries? What innovation was displayed via no-documentation loans etc?
This phenomena is not confined to financial companies. Examine the returns to capital across almost any industry, and you will find they are all falling.
jog on
duc
JG,
And it’s only simple mathematics which determine that the long end of the wealth bell curve is going to be more extended at the wealthier side… but again, who cares? The farther that side of the curve extends the faster it brings the fatter hump to the right — towards an overall wealthier society.
*The distribution for wealth is inaccurately modeled by a Gaussian distribution.
Thus your argument for a “wealthier society” is incorrect.
Rather you would require a Mandelbrotion distribution, which is fractal. This would display the distribution, and the increasing inequality. An expanding inequality, does not equate to a wealthier society.
Why?
Simply the mathematics of consumption. The greater the numbers of population that have greater disposable income, the greater the aggregate demand for goods/services.
jog on
duc
Duc —
I take the CEO-pay discussion is wholly separate, and an artificial straw man argument (is that a tautology?) as used when discussing overall penalty taxation of the large amount of successful entrepreneurs out there — 99.9% of whom are NOT CEO’s of some fortune 500 company but people who own their own businesses and who are creating jobs in the economy through their wise investment in capital projects.
That said, I don’t have a problem with CEO pay either. There’s a reason CEO’s get paid big bucks, the least not being the gigantic liability that is now put on their shoulders thanks to Sarbox that makes being a CEO something of a “lady or the tiger” bet. You can be Chuck Prince, sure, or you can be Bernie Ebbers and end up in the Big House for thirty years. “No thanks” I’d say, and I’d warrant so would a lot of people smarter than me.
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“Rather you would require a Mandelbrotion distribution, which is fractal. This would display the distribution, and the increasing inequality. An expanding inequality, does not equate to a wealthier society.
Why?
Simply the mathematics of consumption. The greater the numbers of population that have greater disposable income, the greater the aggregate demand for goods/services.”
And I say to that last point — who cares? That only means that more demand properly addressed by a free market will result in more production, more jobs, higher wages, etc. etc.
I’m not sure if you are arguing that people feel poorer in relation to the amount of consumer goods currently available for their inspection via media, et al — that’s a philosophical discussion I guess.
But the fact is that as a group, Americans (and most of the globe) have experienced an unprecedented rise in standard of living over the last century or so, and that increase has accelerated in the last forty (thanks to the “silicon age”).
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Jake,
Here are the data from 2004 [the latest I could access]
(1)
All returns, total 132,226,042
No adjusted gross income 1,854,886
$1 under $5,000 17,039,057
$5,000 under $10,000 17,211,889
$10,000 under $15,000 15,889,660
$15,000 under $20,000 13,056,490
$20,000 under $25,000 10,990,767
$25,000 under $30,000 8,567,162
$30,000 under $40,000 13,309,262
$40,000 under $50,000 9,928,723
$50,000 under $75,000 13,635,393
$75,000 under $100,000 4,934,480
$100,000 under $200,000 4,213,077
$200,000 under $500,000 1,211,221
$500,000 under $1,000,000 240,876
$1,000,000 under $1,500,000 61,800
$1,500,000 under $2,000,000 26,977
$2,000,000 under $5,000,000 39,047
$5,000,000 under $10,000,000 9,625
$10,000,000 or more… 5,651
Taxable returns, total.. 89,101,934
Nontaxable returns, total 43,124,107
Here are the data from 1990
All returns………………………………………………………………………………….. 113,717,138 3,405,427,348
No adjusted gross income………………………………………………………………………………….. 904,876 -45,809,664
$1 under $5,000………………………………………………………………………………….. 16,478,272 41,497,039
$5,000 under $10,000………………………………………………………………………………….. 14,952,855 111,951,215
$10,000 under $15,000………………………………………………………………………………….. 13,922,750 173,376,264
$15,000 under $20,000………………………………………………………………………………….. 11,543,228 201,638,041
$20,000 under $25,000………………………………………………………………………………….. 9,572,317 214,321,942
$25,000 under $30,000………………………………………………………………………………….. 7,838,225 215,207,577
$30,000 under $40,000………………………………………………………………………………….. 12,282,786 426,384,692
$40,000 under $50,000………………………………………………………………………………….. 8,837,067 394,730,512
$50,000 under $75,000………………………………………………………………………………….. 10,944,102 657,214,261
$75,000 under $100,000………………………………………………………………………………….. 3,276,142 279,524,997
$100,000 under $200,000………………………………………………………………………………….. 2,329,562 305,567,590
$200,000 under $500,000………………………………………………………………………………….. 644,027 188,004,834
$500,000 under $1,000,000………………………………………………………………………………….. 130,252 87,142,014
$1,000,000 under $1,500,000………………………………………………………………………………….. 29,060 34,978,215
$1,500,000 under $2,000,000………………………………………………………………………………….. 11,581 19,891,323
$2,000,000 under $5,000,000………………………………………………………………………………….. 15,331 45,034,350
$5,000,000 under $10,000,000………………………………………………………………………………….. 3,184 21,463,938
$10,000,000 or more………………………………………………………………………………….. 1,522 33,308,207
Taxable returns………………………………………………………………………………….. 89,862,434 3,298,920,383
Nontaxable returns………………………………………………………………………………….. 23,854,704 106,506,965
In this data, the smaller # are the number of people, the second number is what they earned.
jog on
duc
Jake,
And I say to that last point — who cares? That only means that more demand properly addressed by a free market will result in more production, more jobs, higher wages, etc. etc.
You have totally missed the point.
Greater demand is only created when a greater % of people have a greater amount of disposable income.
How much food can 1 person eat, how many cars, TV sets etc. Thus when income is inequitably divided, or the disparity too great…demand FALLS
Jobs are LOST not created etc.
jog on
duc
Jake,
But the fact is that as a group, Americans (and most of the globe) have experienced an unprecedented rise in standard of living over the last century or so, and that increase has accelerated in the last forty (thanks to the “silicon ageâ€).
True, over the last century.
However, over the last decade, your standard has dropped.
Why is that?
jog on
duc
It hasn’t, that’s nonsense.
“Greater demand is only created when a greater % of people have a greater amount of disposable income.”
And? People do have greater amounts of disposable income (that’s what a higher standard of living means) thanks to
a) higher wages
b) lower prices for technology and technology driven services
Do you realize how incredible it is that we are not in the midst of a true recession right now, given that the price of gas has tripled over the last five years?
That’s because disposable income is more abundant than it was in the seventies, when higher petrol prices destroyed the economy.
This will not last forever, of course, but still, it’s a testament to the strength of our far more diversified economy.
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How much food can 1 person eat, how many cars, TV sets etc. Thus when income is inequitably divided, or the disparity too great…demand FALLS.
You are forgetting that capital must go somewhere. Sure, a rich guy can consume all his income, but more likely he’s going to invest much of it back into the productive economy, creating jobs, etc.
Even if he does spend it all, that consumption fuels the private economy (and has some benefit to state & local gov’ts as well through sales and property taxes), which in turn supports job growth, further investment, etc.
The problem is not the amount spent but WHO spends it. The gov’t, because their spending decisions are politically, not economically based, are ALWAYS going to be the most inefficient source of “redistribution.”
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Jake,
Higher wages…really?
Are you talking Nominal or Real?
From 1990, it would take $158.64 today, to buy what $100 would buy in 1990.
That is 2.59% COMPOUNDED inflation rate [and currently accelerating]
What is the compounded wage rise over the same period?
For the UK, which I have the data for, wages rose at 1.29% compounded.
Thus, the standard of living in the UK, under the same or similar conditions to the US, fell by 1.3% compounded
jog on
duc
Jake,
“You are forgetting that capital must go somewhere. Sure, a rich guy can consume all his income, but more likely he’s going to invest much of it back into the productive economy, creating jobs, etc.”
I qualified my response by DISPOSABLE INCOME
That is to say, income that is available to be consumed. Not income that may be reinvested.
“Even if he does spend it all, that consumption fuels the private economy (and has some benefit to state & local gov’ts as well through sales and property taxes), which in turn supports job growth, further investment, etc.”
That is my point.
For the super-rich, they couldn’t spend it all on consumables, food, tv sets, cars, etc.
The “average” wage earner, when aggretized as a “bloc” spender, spend far more than any individual, or small group of individuals on those previously mentioned items.
It is those items that create consumer demand. Thus by increasing the spending power of the bloc, you increase demand exponentially.
Thus, you create expansion and growth.
The meteoric growth from the 1940’s through 1960’s was fueled by millions of little guy’s having greater disposable income.
“The problem is not the amount spent but WHO spends it. The gov’t, because their spending decisions are politically, not economically based, are ALWAYS going to be the most inefficient source of “redistribution.â€
Nonsense.
It is the AMOUNT spent.
jog on
duc
Jake,
If the returns to capital have been falling, which they have, ever since the 1950’s. Then the “profitability” of US corporations, by definition, has also been falling.
If corporate profitability has been falling, how is it that the “labour” input has been appreciating?
Second point. With increasing globilization, and the transfer of the manufacturing base to Asia, how can you argue wage growth?
China et al are, and have been a downward force in wages across all manner of industries.
The SUPPLY of labour has been increasing at a faster rate than the demand component for labour.
jog on
duc
Jake wrote: “This is another statist concept that gives me much agita. Who the fuck’s job is it to monitor at what “rate†someone accumulates (or disaccumulates) wealth? And why would you care, given the benefits of an overall wealthier society? Would you rather we be static, or “even†like good comrades? Do any statists understand that a higher standard of living benefits everybody and that the only way to encourage innovation and progress is to allow creative people to create?”
As a good economist friend of mine once said (and he’s no lefty), the reason why the state and the wealthy should be interested in a reasonable distribution of wealth is that it prevents crowds showing up at your door with pitchforks and nooses.
Also Jake, just because someone believes in some sort of redistribution does not make them a “comrade”. Just about every modern society and government has some form of it.
Good job guys.
Duc, I figured this post and the Keyneiansim might pull you out of the woodwork.
Wood,
The Keynesian piece [I know you didn’t write it] leaves me very uneasy as it is a horrible mixture of the facts, and hideous mis-interpretations.
I might have to take the other side of the argument from Mr Sierra-Water, seemingly he agrees.
Incidentally, welcome back. This site requires your integrity to counter-balance some of the more hysterical entries.
jog on
duc