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For most of us (John McCain excepted), the collapse of Lehman Brothers, Fannie Mae, Freddie Mac, Bear Stearns, Merrill Lynch, AIG (and others no doubt yet to come), is a clear sign something major has gone wrong with our financial system.
One of the main culprits in this debacle is the deregulation of the financial industry—which happened in large part through the efforts of McCain economic adviser Phil Gramm, who as senator, pushed through legislation allowing institutions to combine commercial banking and investment services.
But while the sound of crashing investment firms along Wall Street echoes loudly across the nation, if you listen real carefully, you can hear in homes around the country the distinct cry of millions in America’s middle- and working-class who are experiencing the Crunch of economic hardship.
Far from the hedge fund managers and golden-parachuted CEOs, the working women and men of this nation are working harder for far less pay, spending time away from their families juggling two and three jobs to afford health care and food and often collapsing under the weight of debt accumulated to pay for education, housing and medical bills.
Between the mid-1940s and mid-1970s, inflation-adjusted wages doubled for most U.S. workers, but between 1979 and 2007, they grew only 7 percent Since 1979, productivity, or output per hour, has grown 70 percent—10 times as fast as real wages.
As a result, income and wealth are more unequally distributed in the United States than in any other developed country and are more unequal today than at any time since the 1920s. Even more alarming, American intergenerational economic mobility is falling and is already lower than in many European countries.
The economic shock waves caused by the current financial and housing crises will impact every American—and many others around the globe—through slower growth, lost jobs, and decreased wealth in housing, financial assets, and pensions. In fact, the Economic Policy Institute (EPI) this week released data showing there now are fewer jobs for jobless workers. In July, 8.8 million unemployed workers were actively seeking jobs in the United States—and finding only 3.4 million job openings. That means an average of 2.6 job seekers for every available job—an increase of more than 60 percent from just a year and a half ago, when there were just 1.6 job seekers for every job opening.
But what’s eating away at the ability of millions of us to build our American dream extends far deeper than the current morass and has much longer roots than the financial meltdown.
A book by EPI economist Jared Bernstein goes a long way toward helping us understand the causes of our individual and national economic strife. Crunch: Why Do I Feel so Squeezed? (And Other Unsolved Economic Mysteries) distills big economic questions into bite-sized chunks that make complex economic issues clear.
In fact, Bernstein begins each short chapter with a question, followed by a lively discussion whose main points are conveniently summed at the end (with footnotes tucked judiciously at back).
Here’s one example, with a question many working families are asking themselves.
My dad had a full-time job, but my mom didn’t, and they managed to raise, feed, house and educate two kids on one salary. I can’t do that today. Why not? What happened?
Bernstein explores how it now takes two incomes to support a family because men’s earnings have fallen and women’s participation in the labor market is offsetting the loss. At the same time, prices of key components of the middle-class budget are rising faster than middle-class incomes—resulting in the middle-class Crunch.
A chapter on "Unemployment: Wall Street vs. Main Street," highlights the competing goals of corporate profit-makers and the rest of us. Another chapter examines why those Econ 101 textbooks are wrong when asserting that government laws raising wages for workers require layoffs (gotta watch those long-held economic shibboleths).
And then there’s the complex issue of job outsourcing. The main problem with outsourcing jobs, Bernstein writes, is when a country, say the United States, ships out family-supporting jobs and replaces them with low-wage, no-benefit jobs. The sort of thing McCain and his entourage of bottom-feeder lobbyists support.
McCain is the guy who opposed a requirement that the government buy American-made motorcycles. He said all Buy American provisions were "disgraceful." His campaign advisors include Rick Davis, the lobbyist whose DHL deal could result in thousands of lost jobs in Ohio, and Randy Altschuler, an outsourcing broker who advises companies on how to ship jobs overseas.
Bernstein’s solution to outsourcing would emphasize green manufacturing and leveraging our nation’s market access to force others to play fair. Sen. Barack Obama is on the same page. He proposes a federal Renewable Portfolio Standard and wants to extend the Production Tax Credit, which have the potential to create hundreds of thousands of new jobs and increase renewable energy production. Obama also would make the research and development tax credit permanent to help create higher-paying jobs.
Another key solution Bernstein proposes is improving the nation’s labor laws to level the workplace playing field so more workers have the chance to join together to form unions. Union workers make more money, have more health care and retirement security and job safety. But when workers try to form unions, they often are subject to employer harassment and intimidation. Like those of us in the union movement, Bernstein supports passage of the Employee Free Choice Act, which would level the workplace playing field by enabling employees to sign up for a union through a majority verification (card-check) process or labor board election, whichever they choose.
Obama is a strong supporter of the Employee Free Choice Act—he co-sponsored it in the Senate and voted for it last year. McCain, for all his blathering about Sarah Palin’s union-member husband, opposes unions and voted against the Employee Free Choice Act. Worse, McCain voted FOR a bill that would have eliminated unions altogether.
Jared Bernstein can tell us a lot about what’s going on now and how we got to where we are. Maybe he even can tell us how we can keep McCain out of the White House. Help me welcome him to Firedoglake Book Salon.
Related posts:
- FDL Book Salon Welcomes Wade Rathke, Citizen Wealth: Winning the Campaign to Save Working Families
- FDL Book Salon Welcomes Jonathan Tasini, “The Audacity of Greed: Free Markets, Corporate Thieves and the Looting of America”
- FDL Book Salon Welcomes Nomi Prins, It Takes A Pillage
- FDL Book Salon Welcomes Bruce Bartlett, The New American Economy: The Failure of Reaganomics and a New Way Forward
- FDL Book Salon Welcomes Les Leopold, The Looting of America
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Jared, Welcome to the Lake.
Tula, Thank you for Hosting this Book Salon.
Thanks…glad to be here!
Thanks, Bev. Welcome, Jared!
I’ll ask the obvious question: How can your book help readers understand the current financial meltdown?
My excellent forecasting skills led me to prepare a comment in answer to the question: what the heck is going on in the economy! I’ll post it in a second and perhaps it can motivate some of our discussion.
And thanks to Tula for the excellent summary of Crunch.
Like I said, I was loaded for this one so I wrote this up before we started.
Here’s the broad sweep, though one can go much deeper into the weeds trying to explain this stuff.
Credit—the price of borrowing—was very cheap in the 2000s and the standards for home loans were extremely lax: I breathe, therefore I qualify. This led to aggressive home buying on easy terms, and the share of “subprime” mortgages—home loans to especially credit risky families—rose sharply.
Financial “innovations”—new investment tools in financial markets—also played a role. The subprime debt sold was bundled up with higher quality mortgages and sold on the global market. This meant both less transparency—to this day, banks don’t know the quality of their holdings—and less concern about underwriting standards. Let’s face it. If I can make a loan to you and then can turn around and sell your loan to some other sucker, what do I care if you can pay it back?
Anyway, the housing bubble burst, the toxic debt started to go bad, and the financial system that supported it all started to crumble.
So, summing the whole thing up, once again, a large speculative bubble inflated, and now it has burst, with all the damaging spillover effects such events always cause. The main fallouts so far are:
–foreclosures
–credit market freeze
–failures of banks and other lenders holding the bad loans
–recession
–major fiscal expenditures by the gov’t to clean up the mess.
Who’s fault? Lots of perps here. The regulators were asleep at the switch, especially the Federal Reserve, who are supposed to oversee the quality of loans in mortgage markets. But Greenspan, the Fed chairman at the time, had a laissez-faire view of bubbles. His approach was to stand on the sidelines, ready with the mops.
Bernanke inherited this problem, and now he and other gov’t players, like Hank Paulson at Treasury, are spending your and my money hand over fist to try to calm the waters (i.e., recapitalize the insolvent banks and thaw the credit markets).
There’s tons more to be said about this, like what how it vitiates conservative ideology about self-regulating markets, how all of this was avoidable if policy makers hadn’t been acting from that playbook in the first place, or the quid pro quos we should be asking for these bailouts, but that’s the next chapter of this debacle.
Next question?
Don’t leave out McCain econ guru’s (whiney) Phil Gramm’s repeal of Glass-Steigel.
What’s the percentage of union households now vs 30 years ago? I know it’s diminished, and that “big bidness” is Terrified of anything that looks or smells like organizing.
Union membership (individual, not household) is about 12.5 percent of the working pop now, compared with its historic high of over 30 percent in the mid-1950s.
I have observed several instances where corps have learned something about the economics of their businesses, owing to a particular event or a series of gradually accumulating evidence. For example, it took a sugar price spike in 1974 for soft drink manufacturers to recognized the low price elasticity of demand for their products. Ditto for the instatement of generic drug legislation wrt pharma prices (one of my favorite examples of econ unintended outcomes).
WRT labor, businesses have gradually learned that they have all the power, unless labor is in such short supply that they are forced to bid workers away from each other, like the 3-1/2% unemployment rate in the 1960s. Real wages have been stagnant or worse since then.
That’s my short version. I’m sure you have much richer detail.
This is a great book. No offense to bloggers who write on economics, but this book make transparent for me many issues I’ve never understood. I especially liked the Q&A format, because it enabled me to refer back whenever I got that feeling (which I get whenever I read economics) “Now, what were we talking about again?”
But I’d like to take up the question Tula highlighted in her excellent introduction and expand on it a little:
When I look at this question, I have to also wonder what “manage to raise” means, because in our family we had only one (black-and-white) teevee and , for a long time, only one car. No one dreamed of the toys and wonderments like cell phones and cable or DSL that each drains three figures out of every family’s monthly household budget.
So — have we become used to what would look to our parents like unimaginable luxuries? For instance, I recall my dad forbidding long-distance calls anytime but on Sunday, and those were for calls to his folks and my mom’s. The idea of everyone in the family having a cellphone, with a bill over a hundred a month, would paralyze him with indignation.
My question is (I guess): Have our standards of living increased so much that raising a middle class family now includes things formerly thought to be luxuries, and is that part of why so much else seems out of reach? I know there’s lots about created demand for big trucks, high-content luxury cars, and unimagined electronics, but what’s your take, Jared?
Yes, but in the private sector it has declined from a peak of 35% in the 1950s to under 10% today. Unionization is higher in the public sector still, but I wonder how much longer.
What do you think of Paulson’s so-called plan, and do you have any alternate recommendations?
Jared, welcome and thanks for the update on today’s crash.
You say this proves the failure of conservative ideology. Yet Paulson’s highway robbery proposal is designed specifically to avoid admitting that–and to keep the structure largely in place. What do we need to do to make the failure of conservative ideology the central political idea of the day?
15.7 million people are in unions, about 12% of the workforce; only 7.5% in the pvt sector (gov’t sector is much more heavily organized). 30 yrs ago these shares were twice as large. And the decline in collective bargaining is one reason inequality has surged. Unions have been shown to be helpful in claiming what I would characterize as a more fair share of growth for their members, and those standards spillover into the non-unionized economy too. At least they used to.
Welcome Jared, and thank you Tula.
It’s certainly interesting timing for the release of the book!
I have a question about “green jobs.” Let’s say we do create a demand for them — what will prevent those from getting shipped overseas, too?
here’s what the progressives miss when they talk about “regulation”
regulations do not arise from whole cloth, in just about every case, they are put there because an industry has created an issue they refuse to pay for or address
for example, the auto industry was pouring their bronchitis into my kids air, they refused to clean up their crap so we had to force them to pay their own bills, clean the crap out of the air and stop putting more of it in there
bing, the epa
a regulation is ALMOST always productive, it gives a POSITIVE return not a negative one, there are times when a regulation is counter productive, THAT’S when we “REVISIT’ the regulation and adjust it so it is no longer counter productive but we do NOT just eliminate a regulation because an industry doesn’t make as much as they might without it
regualtions force industry into paying their bills, cleaning their crap, it is not there to insure they make money, if they can’t pay their bills and still turn a profit then they have to go out of business
sometimes it’s better for the country to keep an industry in business, when that’s the case we can relax certain regulations, however the issues that are caused by those relaxed regulations have to be addressed by the industry as a whole, NOT the people who industry serves
this is a government for the people, by people, it is not here to insure profit, companies are entitled to profit IF they pay their bills, if they cannot, they are entitled to go out of business
that’s the way the “regulation” debate needs to be framed
Much depends on the November election. McCain would continue Bush’s many moves to deprive workers of the option of joining a union. If Obama is elected, we have a chance to pass the Employee Free Choice Act, which would level the playing field for workers trying to join unions. Ever since the Wagner Act was passed giving workers the right to join unions, the Taft-Hartley Act in 1947 and many federal court decisions have severely weakened the original National Labor Relations Act. The Employee Free Choice Act would provided needed redress.
Teddy P–thanks for a great and tough question.
It’s true that the mid-class enjoys many luxuries that our parents couldn’t have dreamed of, but that partly relates to the kinds of technological progress and productivity growth that’s gone on forever. So you could have said the very same thing ages ago but you’d have been talking about the ability to make long-distance calls, TV, improved housing, etc…
The problem is that while many things, especially those associated with IT, are relatively cheaper, some core goods and services are getting out of reach, including college tuition, reliable health care, a decent house in a good neighborhood with a good school.
And given wage and income stagnation in recent years, families are having to work longer just to make their basic budgets. Those are some of the issues at the heart of the crunch.
So you’ve got to work your butt off to pay for college, health care, housing, but when you get home you can kick back with a really fast internet connection!
Jared, does Barack Obama understand the tremendous populist opportunity presented by Paulson’s “my-way-or-no-way” proposal? People are really, really fed up with Richistan’s ruination of America, and the idea that compensation limits are a poison pill is really quite toxic.
This emergency is a chance for our own Shock Doctrine, and Democrats need to listen to people like Bernie Saunders to implement it.
Additionally, I hope we shouldn’t read too much into your being excluded from Friday’s Obama Economic Council Emergency meeting in Florida. He needs to hear from those with the peoples’ interests at heart just as much as those who are (or favor the views of) the failed Masters of the Universe.
Please get back “in the room” if you can. We need you there.
that one gramm didn’t do on his own. rubin, clinton’s treasury sec was calling for it’s repeal years before gramm and leach’s legislation.
and furman, obama’s head economic advisor is described as “closely associated” with rubin.
sadly, there are not many stiglitz’s in gov. – or ecahn’s for that matter.
I don’t like the Paulson plan too much.
Not enough safeguards to protect taxpayers from banks perfectly happy to dump toxic debt on the government; lots of breaks for Wall St, but not enough quid pro quos for Main Street.
I’d like to learn a lot more about the criteria under which we buy bad debt from the firms that want to unload it on us. Certainly the taxpayer can’t be expected to take it every crappy defaulting debt in the system, right?
Here’s a note I wrote over the weekend to someone who asked how they’re (the Feds) are going to price the debt they–I mean ‘we’–buy (MBS=mortgage backed security–it’s the bad debt that they can’t sell to anyone else).
****
I don’t know if they’ve said how they’re going to price the MBS’s they take over, but I think the buzz is they hire outside appraisers to come up with a maximum mark-to-market price and then take bids from sellers. They then take the lowest bids and the lowest bid becomes market price.
But I’m with others who are very nervous about this and don’t get the rush. So far, liquidity injections haven’t loosened credit markets, and it’s not clear this big mother will either.
I didn’t like Ben and Hank spending their weekends in boardrooms either, figuring out—-by some mysterious criteria set–who gets the check and who gets the boot. But what I’d like to see here is a) some selection criteria as to whose debt gets absorbed by the new entity and b) some quid pro quo.
Why should every lousy security become taxpayer property, with the only sale criterion being that the bank accepts the ’stop-out’ price? Surely that goes too far. And what do we get for our $700b? And why is there all the sudden $ for this but $30b for SCHIP, well, that’s just out of the question?!?
I really don’t think progressives should go gentle into this good night.
To be sure Rubin was in on the fix. How could he not be? But I prefer to be partisan when possible, esp since Gramm has never done anything good on the economy, while Rubin, though far from perfect, had a hand in the great performance of the economy in the 1990s.
A number of folks–Teddy, perris–made good points re learning the right (left?) lessons from this moment in time. Perris is right regarding regulation, and it is the case that everyone, including McCain (major throat clearing over here) is talking about overseeing markets so this doesn’t happen again soon, if not ever.
But nothing will change if we make a few adjustments at the edges while bailing out some well-connected banks (boy, Lehman must have had some terrible lobbyists, right?).
Here’s my list of transformation lessons to be learned.
–Deregulated markets cannot police themselves; they tend toward speculation, vastly underpriced risk, and deeply damaging bubbles;
–An economy that generates growth while leaving most families behind is a broken economy;
–We can neither achieve broad prosperity nor compete globally without robust growth in key sectors which we have ignored or underfunded, including manufacturing, green production, and cradle to grave public education; crafting evermore clever financial instruments will not pave the way to dependable, broadly shared growth;
–No private sector firm should be too big to fail; any firm of that magnitude must be nationalized;
–Capital markets are dysfunctional; borrowing and lending standards are ignored; lax capital requirements lead to constant over-leveraging; shadow accounts thwart transparency;
–We apparently can quickly find (or borrow) the money to do the stuff the authorities deem necessary, be it war or bailout; thus, we can also find the money we need for investment in people, from health care to education to infrastructure, etc.
–Supply-side, trickle down economics does not work; it exacerbates already excessive levels of market-driven inequalities and defunds government, which leads to:
–Clearly, we need government to be amply funded; as is the case today, we will always turn to federal government to meet the toughest challenges, and if the money isn’t there, we’ll borrow from the future. This means taxes cannot only be lowered; they must sometimes be raised.
–For decades, under the spell of mainstream theories like “rational expectations” (bubbles can’t form because prices can’t systematically diverge from reality for long), economists and policy makers have missed almost every big market failure, including the last two bubbles (in IT and housing). Government intervention is only “distortionary” in these models, adding the anti-gov’t bias since Reagan. We desperately need policy makers and their economists to be much better analysts of markets and how they go wrong. It is not an exaggeration to state that much of what’s gone wrong in the current case could have been avoided by better oversight, common-sense regulation, and clear-eyed analysis of economic indicators that should not have been missed.
If I were Martin Luther, I’d hammer such a list—and this is just a rough draft…feel free to edit and comment—to the doors of the Federal Reserve, but I’d probably get arrested or worse the minute I took out my hammer.
Agreed…EFCA could help a lot. Reliable polling data (meaning not one, cherry picked poll) show that about half the non-unionized workforce would like to be able to collectively bargain. Clearly, something is blocking that result, and the tilted playing field…tilted against organizing…is a major factor.
Some other questions we’ve been batting around hereabouts:
1. Do the 60:1 leverage rules Paulson got put in place when he chaired Goldman survive, or do we return to 12:1?
2. Why did Goldman’s prime competitor Lehman miss the rescue by only four days?
3. Is there really $2.5 billion in Lehman bonuses in our $700,000,000,000?
4. Why does Paulson need all $700,000,000,000 right now?
5. Why does Paulson exempt himself from any regulation or court oversight whatsoever? What could he do that was illegal, actually, given his sweeping un-overseen powers?
Lots more, but there’s a start….
You raise the very important issue of tight labor markets. In the latter 1990s, they also worked to push back on the weak bargaining power, and for a NY minute there, even low-wage workers real wages rose with the rest of the economy.
Needless to say, that hasn’t happened since.
ah, but the scientific method (at least as i understand it) requires the opposite approach in order to attempt to avoid confirmational and other types of bias.
it’s something i struggle with, but i don’t want to become like many of the republicans i know.
I have an acquaintance who is a union lawyer in NYC, who flat out thinks polls are not accurate. WRT the one you mention in particular, as he does not see the desire to join unions that the polls show in real case bases. When I asked if govt and corp teaming up to suppress unions, he was dismissive and said that the country was a lot more conservative than I would think. Found it interesting, in a bad way.
I’ve heard the following and haven’t had time to confirm:
1. Lehman Brothers, which Paulson let tank, typically gave much more money to Dems than Rs. Plus, it was a hated rival for Paulson while he was at Goldman Sachs.
2. Freddie and Fannie also were squashed because they gave most of their donations to Dems.
If someone has time, might be worth following the trail.
Ding. Ding. Ding. That was the only other time since the 1960s and it took a 4% unemployment rate to do it.
This is a case when I don’t mind being biased. I’m a person as well as a scientist, and will make exceptions according to my other human needs. I think it’s OK as long as you don’t fool yourself.
Just a couple of responses:
If we don’t return to historical levels of leverage, than we’ve learned nothing.
It’s very important in my thinking–and I’m still learning about this plan–that it not be in place for two years, as currently drafted. It–well, not ‘it’ but something better than it–should be in place for six months and then re-evaluated.
Make him read Richard Freeman’s “America Works”–he’s a Harvard labor economist, really the premiere person in the field, and his academic work supports the claims I made.
It’s also a great read.
Thanks. I need to read it myself, I think.
Lotsa people lost their homes by the time Congress came up with a “relief package”. I’ve never seen legislation written so quickly as this bailout. People just aren’t treated with the same urgency as bankers. I know, Bankers are people, too. You know what i mean. I’m not naive. i understand that a helluva lot more was at stake for ,ore people with this crisis than one person loses his/her home. It’s just the lack of urgency with the mortgage relief…… Had more been done sooner — say what Hillary was calling for; basically a moratorium on foreclosures — could the situation we’re in now have been averted?; minimized? just put off until another day?
but that’s what a bias is – a way we get fooled (although i don’t see you as very susceptible *g*). and maybe even more importantly, we can inadvertently fool other people when we don’t hold the Ds to the same standards as the Rs.
maybe a topic for another thread?
Next bubble will probably have more leverage (or some other “innovation” that accomplished the same end). Heard someone in the last week give the short version of Wall St. history. Used to be a place where participants knew more than anyone else, and profit margins were high. The second is gone, for trading anyhow, and the former is much diminished. So they changed their business model to leverage, which is wildly profitable on the upside, but everyone ignored that leverage is a 2-edged sword.
Another one of those unintended outcomes: unfixing sinfully high fixed commission rates on stock trading didn’t diminish Wall St. profits, it just led to sinfully high leverage.
Welcome Jared (great intro Tula).
Re the pricing mechanism — it’s not clear to me how the reverse auction can function unless the products are all basically the same. If there are dozens/hundreds of different products, then you need dozens/hundreds of separate auctions, and each requires multiple rounds to find the price.
Does this sound like it can work? Or will it break down? Auction design theory is a separate art, and it’s never been applied to this, has it?
maybe this is OT… but one of the R talking points today is how McCain co-sponsored a bill (I know, co-sponsoring don’t really mean shit)which said it was to regulate Fannie & Freddie. never got outta committee as far as I know. He’s now blaming the Dems for that (the bill;was introduced in 2005, so I don’t know that the Dems controlled the Committee where it died). Is this a legitimate claim at an effort to do something by McCain? Why did that bill die? Anybody know about some details of this? Thanks.
Nothing, unless we create them or fund them through the public sector and can make keeping them here a priority. That’s why it’s worth supporting all this talk about green infrastructure investment. We can kill a number of birds here:
–need to promote green production;
–need to create good jobs that stay here;
–need to make investments the pvt firms won’t make on their own.
Too expensive, you say? Well, if we can cut a $700b check for reckless investment bankers, we can invest in some green jobs, no?
I think there should be incentives given to keep jobs here and not ship them off in the first place. Tax breaks perhaps but some other reward for good stewardship. I think a large part of the problem is people being rewarded for being ruthless and dishonest. If there’s no payoff for doing good,companies won’t do it on their own. They sure as hell have proved over and over they won’t do the right thing when no one is looking.
Yes, another thread, or email.
great questions.
Lilly Ledbetter, in the new Obama ad, effectively debunks the argument that people just need more education to achieve wage parity. “I had the same skills as the men at my plant.” The idea that jobs are moving overseas because workers are more educated there is also ludicrous.
But we do need to improve our educational system, and not simply to prepare people to be workers. An educated citizenry, especially about civics, is the cornerstone of successful Jeffersonian democracy, and an antidote to demagoguery. Do you think our educational system can achieve both these goals in the short-term, and will corporations support a system that has these tandem goals?
Maybe…that’s a tough ‘what if’ question (the one about HRC’s plan). The problem is that a lot of folks are just too deep underwater for such a plan to solve, especially in a recessionary labor market where they won’t have the needed income to service even an adjusted mortgage.
i love that idea for a direct action! but i’d want to use a thumb tack and not a hammer. doncha know, hammers on the list of terrorist’s wmd?
As a general point, people forget how much governments supported business during all of history. The West Indies companies come to mind from early history. It’s hard to find an example of successful economic development if the govt does not play an big, but intelligent role. (Plenty of examples of govt playing a big bad role that results in failure.)
And if govt can help business it can help labor. Fair is fair.
The difference is not small govt vs. big govt. The difference is between stupid govt vs. smart govt. And we’ve certainly had our fill of the former.
I don’t think this answer adequately addresses Teddy P’s question. Yes, core costs including housing, health care and education have risen faster than wages. But wouldn’t they be affordable for most middle class people — given that the wife as well as the husband is working — if the “necessities” of cell phones, a car for every member of the family, a teevee (with high-end cable subscription) in every room, new clothes every year, etc. were considered luxuries and treated accordingly?
I suspect they’ll have reverse auctions for MBS’s and maybe not much else. Once the banks get the toxic MBSs off of their books, some of the other stuff might not matter, like credit default derivatives that were only there to hedge the MBS if it failed.
You said it. There’s this myth out there that up until now, gov’t has been out of the picture and now it’s coming back in.
Wrong. As you suggest, it’s been around…just working for the wrong people.
Why are the folks who created this problem entrusted with solving it? You know a Democratic Treasury Secretary would have had to tender his resignation before a bailout was offered up?
Also, do you think there’s a possibility for an unholy alliance of free-market GOPs and progressive-caucus House members to stop this scheme tomorrow?
The Bernie Sanders/Jim Bunning Block the Bailout Bill?
Not really, though certainly there’s been some degree of over-consumption. I mean, the key point here is that real median family income used to grow at the rate of productivity, and for the last 30 years, it’s grown about 1/3 as fast. So middle-income families simply can’t depend on rising with the tide the way they used to.
Here’s a question for you: without looking it up, what do you think the median household income is today?
Median? I’m a pessimist so will guess in the neighborhood of $30K and think that’s probably high
Jared, do you think a Democratic administration can get us on track in terms of government statistics about the labor market, money supply, and inflation? Won’t the adjustments required be too expansive, in terms of pegged benefits and costs, for any new President to tackle?
Low 40’s
Education of our children should be the number ONE priority of our nation! Look at what the Dutch have done! When they decided to build the storm gates at the mouth of the Rhine they had to hire 90+ % foreign workers. They didn’t like that so they invested in the education of their people and now because they did so 90+% of the workers on the project are Dutch. Just goes to show you what kind of a pay a country can get if the country does invest in the education of the people! Business is always saying that they need better “educated workers”. The rethuglians want to dismantle the public school systems and privatize them! They are so fucking short sited it hurts… there is no way they should be able to say “They want what is best” for the country… Lies, lies and more lies .. they really just want to line their pockets with the middle class’s money!
Good point.
Maybe. Probably they won’t derail it as much as slow it down and make it smarter…more safegaurds, some clawbacks, and the limiting length of the legislation I noted above. At least that’s my hope and I and others will be pushing hard in that direction.
Hint: Household income includes all workers, probably over 1.5 per household (just guesssing).
You are a pessimist! It’s around $50K, which still seems pretty low when you think about trying to make ends meet in any urban or suburban area, re housing, health care, college tuition, child care for workign parents, maybe actually save something for the future…
And in real terms, it’s no higher now than it was in 2000–that’s the first business cycle on record where real median HH income didn’t end up higher.
The difference between rising wages and rising productivity makes sense to me — hell, when I look at inflation calculators, I’m still making less than I was in my first job out of college in 1979! Median family income without looking it up? I’d say somewhere in the 40s, and it differs wildly by region.
See my comment above yours. I think dakine was not thinking about the fact that the $50,000 you cite (I knew about what it was) includes multiple workers per household.
And the fact the median HH income did not rise in this cycle is even more astounding in light of the fact that there were more people at work (though even that is looking like it will soon no longer be true).
I would contest “more people at work” as I’m firmly convinced the unemployment rate as reported is astoundingly under-counted. I know they supposedly have formulas that account for people who have completed their unemployment but this economy for years has not even been creating jobs at a break even pace to cover new folks entering the work force, much less all those laid off in the last 8 years.
Shameless self-promotion: to learn more about the economy of the 2000s, an important and unique period of our economic history (kind of a “what not to do” primer), go to epi.org and read the introduction to our new State of Working America. It’s a pdf up there somewhere.
Maybe. Probably they won’t derail it as much as slow it down and make it smarter
I’m sitting here reading the proposed Act, and I honestly don’t see much that can be made “smarter”, other than by dropping and deleting most clauses altogether.
There’s a section in Crunch that looks into this question–I won’t summarize it here.
But check this out. The unemployment rate is currently 6.1%. The underemployment rate, which includes a bunch of folks not counted in the official rate, is 10.7%. Much of the difference are part-timers who would rather work full-time but can’t find the hours they want/need.
why the focus on household income and not individual? household income depends on things other than the state of the economy – like household size, women’s participation in the workforce, etc.
Well, dropping and deleting sounds like precisely the right place to start.
And buy and read this book! Link up top.
HT to Thomas Mifflin for opening the Digg So come on Pups Digg this post!!
thanks to you and epi – it’s a great resource.
Stop to consider that if business has all the power (a “market imperfection” in economists’ jargon), then they won’t pay higher salaries for more highly educated workers. Most of the difference between the present value of lifelong income between HS gradutes vs. college graduates stems from the fact that the wages of HS graduates are going down, much more than from rising lifelong incomes of college graduates. The fact that women are rapidly becoming more educated than men, yet still earn 3/4, tells you that the market imperfection of gender discrimination exists.
Actually, none of those changed enough over the 2000s to have much effect on the analyis I cited.
But you’ve got a good point over the long haul. Middle-income families are working more hours at lower (male) wages, so to the extent that they’ve kept up, it’s been more work at higher wages by women.
The median male wage, inflation-adjusted, is about the same now as it was in 1973!
And therein lies a big chunk of the problem.
I don’t think its so much that it’s undercounted as that it doesn’t present an accurate picture of what is going on.. by not counting frustrated workers. For example, if you’re a new graduate, having just sent out scores of resumes to no avail, you might simply decide not to try to enter the job market at all, and instead take a break after finishing school. And, on top of these, there’s the problem of under-employment. All in all, changes in the unemployment rate provide an indicator of the misery of American workers rather than an accurate picture of what is going on. This is fine for us who make our living with such numbers, but it’s a lousy way for the public and the mass media to gage just how bad things are out there.
Yes, also the self employed or independent contractors that businesses love to create. Works great for a while, but then you start competing with all the other independent contractors but you don’t have any leverage to get things like health care for a group.
Companies get rewarded for reducing headcount so they turn employees into independent contractors.
And there is the pride thing, not to be discounted. There is no box for “underemployed” or “self employed, but not by choice”.
Firedogs: I was supposed to join the forum until 7 but I’ve got to check out a little early. Thanks for really great questions and comments.
Can I please come back soon and just do an economic update/discussion with you peeps?
Household income is stressed because it is a living unit. You’re lucky that people don’t focus on the family (my that has a familiar ring), which differs from HHs in excluding single-person HHs.
I agree with you. There are so many variables that change over time in the makeup of HHs, the unit that should be focused on is wages/worker/hour worked, aka average hourly earnings. In real terms, of course.
for example, “(The Secretary) may (enter) into contracts…without regard to any other provision of law regarding public contracts.”
and – (The Sec) may “designate financial institutions as financial agents of the Government…”
hey – our private economic institutions may now be nationalized – oh, goody.
There’s a two year sundown in this act, except that it doesn’t really apply: “The authority… to hold any mortgage-related asset….or to purchase.. a mortgage-related asset… is not subject to (the two-year sundown)”.
Can’t speak for management, but as a vote of one, come back & join us at any time. (Hint: if you don’t log out, you don’t need to log in the next time you come here.)
Thank you for the time you spent today.
Well, dropping and deleting sounds like precisely the right place to start.
If done correctly, there *is* no Act.
Jared thank you for your time this afternoon. I’m thinking you can probably stop by FDL at most anytime and find some discussions going in where your expertise is welcome. :})
Jared, Thanks for stopping by the Lake and spending the afternoon, stop by later and answer any questions that you want.
Tula, Thanks for Hosting the Book Salon, and let’s keep the discussion going.
I don’t think Progressives are WILLING to go for this, we can hardly afford meds and food at the same time as it is. One more hit to this household will pretty much put us under.
So other than scream loudly at Congress, and WE ALL KNOW how much that does (Iraq, MCA, PPA, FISA), what would you suggest we do about it. I don’t hear the din of those in WashDC asking us!
Thank you for the book and Tula, GREAT intro, thank you!
We are pretty much always open.
Thanks so much for this great discussion. I can’t recommend your book highly enough. It really makes economics, as it affects Americans, accessible in a way nothing I’ve read does. You are a gifted writer.
Thanks again!
Scarecrow upstairs “You Get To Pay Off Wall Street Losses”
Can’t argue with that as with the recent SCOTUS ruling RE Ledbetter case. So I guess maybe the best solution is for laws forcing business to pay living wages?? Or for ALL workers to be in Unions so business MUST negotiate on wages. One of the underlying factors in the decline of wages is the busting of union since Ronnie RayGun days and the shipping of jobs overseas and the business getting a tax break for doing so. I have never understood those kind of tax incentives??? I would think there should be tax penalties for shipping a job overseas as it puts American workers out of a job, forcing them onto public funding ie unemployment, food stamps, welfare and forcing the workers to have to use emergency rooms for the medical care they need! I am sure the costs to society are indeed enormous because of these trends by big business. And 60%+ pay no Federal income taxes, yes there is the pass through taxes but on at the 15% rate for dividens, seems inherently stupid of having such a system.
Here is my entry on job creation from my scandals list:
I should point out that the August projection numbers knock Bush’s numbers down to 5.004 million (the numbers could go even lower once they firm up). This is a job creation rate 22% that of Clinton’s. And then there is the question of the quality of these jobs.
Thanks, Jared. We’d love to have you.
Thanks to everyone for a very well informed Salon.
It’s always great to be part of the discussion around Jared’s great book!
i’ve wondered if this doesn’t partially explain some of the subconscious resistance we’ve seen to feminism in general and women’s full and equal participation at work in particular.
i know my unemployment isn’t part of any number collected … and i’m certain i’m not alone in that respect.
itunkala
I am writing this comment down here in EPU-land because I want at least to get it in the open where at least someone will see it. Jared mentioned Rational Expectations in a post higher up this thread. Rational Expectations or RE as it is known in the econ jargon takes the notion that the market knows best to its extreme point, which is that it never makes systematic mistakes in its predictions. No point in going through the argument here, but I would like to point out that there has been nary a peep out of the several Nobel Laureats from Chicago and Minnesota who gave birth to the monstrous doctrines of Rational Expectations and the Real Business Cycle concerning the current breakdown in financial markets, which has been going on now for more than a year.
Nothing to see here folks, move along. Seems to be the new Chicago Doctrine.