Sensible Leadership On Economics In Real Life
The past few weeks have seen an explosion in fear and panic in the media as the mid-term elections creep up on us, with as loathsome and stupid a crowd of Republicans as we could possibly imagine and the weak-kneed crowd of Democrats we always expect. Political ads are either vicious character attacks or fearmongering. If all you knew was our elections, you’d think we are a nation of whimpering children. The worst thing is that congressionals know they are horrible people, as they reveal in an article in Esquire. The majority of candidates in both parties are cowards, living in mortal fear of losing elections, and dumping their nightmares on the rest of us in ads and at debates. Their surrogates are a crowd of poop-throwing zoo animals. It makes me sick.
In this maelstrom of ugliness, I managed to find two signs of competence and even bravery, one from President Obama, and one from Fed Chair Janet Yellen. The President gave a speech at the Kellogg School of Management at Northwestern, and announced that trickle-down economics is a lie. This is from the White House transcript:
What’s the data? What’s the proof? If there were any credible argument that says when those at the top do well and eventually everybody else will do well, it would have borne itself out by now. We’d see data that that was true. It’s not.
American economic greatness has never trickled down from the top. It grows from a rising, thriving middle class and opportunity for working people. That’s what makes us different. (Applause.)
I’ll join that applause. Trickle-down as a theory was never anything but a public relations gimmick to justify the domination by the filthy rich; and for a select class of people with degrees in economics, like this intellectually dishonest but very rich guy, it provided a nominal justification for their unearned paychecks.
It’s good to see the President rejecting this nonsense, and doing it in front of a crowd likely to benefit from the theory.
Janet Yellen spoke at a Fed Conference on Economic Opportunity and Inequality at the Federal Reserve Bank of Boston. That’s remarkable in itself, that the Fed would host such a meeting. She sounds just like Thomas Piketty when she discusses inequality, probably because she has actually read the work of Piketty, Emmanuel Saez, Gabriel Zucman and Anthony B. Atkinson, whose work on income and wealth inequality is damning to US capitalism. Someone has; see footnote 2 for links to important papers:
The extent of and continuing increase in inequality in the United States greatly concern me. The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression. By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then. It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity. Footnote omitted.
Yellen sees the problem as one of declining social mobility, and not just for the lower class, those with little or no wealth, but for what’s left of the middle class, people whose wealth puts them in the 50th to the 95th percentiles:
According to the [2013 Survey of Consumer Finances], the gap in wealth between families with children at the bottom and the top of the distribution has been growing steadily over the past 24 years, but that pace has accelerated recently. Figure 8 shows that the median wealth for families with children in the lower half of the wealth distribution fell from $13,000 in 2007 to $8,000 in 2013, after adjusting for inflation, a loss of 40 percent.21 These wealth levels look small alongside the much higher wealth of the next 45 percent of households with children. But these families also saw their median wealth fall dramatically–by one-third in real terms–from $344,000 in 2007 to $229,000 in 2013. The top 5 percent of families with children saw their median wealth fall only 9 percent, from $3.5 million in 2007 to $3.2 million in 2013, after inflation.
Yellen says that for the 50th to 95th percentile, housing is 40% of wealth, and we know that’s not going to pay for any social mobility for most of their kids.
Two leading government figures explain reality to the citizenry, and their words vanish in a froth of dread and panic whipped up by politicians and the media. How badly do centrists of both parties have to be beaten up economically before they get past the political/media freak show and renounce their belief in Neoliberalism as the One True Economic Faith?