A Lib friend posted this article from Salon on my Facebook timeline.
Looking at Mr. Atkins AlterNet page it’s obvious that he’s a big Occupy Wall Street type. Thus you can practically guarantee that nothing he says needs to be taken seriously. On the other hand he’s probably young and his ideas probably represent the future Democrats, so they are worth a look.
So lets begin.
If you’ve paid attention to the economy over the last few years, you’ve doubtless seen the charts and figures showing the decline of the American middle class in concert with the explosion of wealth for the super-rich. Wages have stagnated over the last 40 years even as productivity has increased, which is another way of saying that Americans are working harder but getting paid less. Unemployment remains stubbornly high even though corporate profits and the stock market are at or near record highs. Passive assets in the form of stocks and real estate, in other words, are doing very well. Wages for working people are not. Unfortunately for the middle class, however, the top 1 percent of incomes own almost 50 percent of asset wealth, and the top 10 percent own over 85 percent of it. When assets do well but wages don’t, the middle class suffers.
Can’t really argue very much with this. After all I’ve posted all sorts of other sources saying essentially the same thing. The one part that’s more than a little misleading is the part about wages stagnating for the last 40 years. That’s like curve fitting a bubble and only looking at two points. It’s also ignoring the decline of the last ten years or so, most of which happened during the current administration.
He then goes on to blather about the policies of the 1970’s. I lived through the 1970’s and what you need to understand was that the governing motive of policymakers then was panic. The “policymakers,” by and large, Democrats, screwed up as badly as possible and just couldn’t get a grip on what the problems really were.
1) Push people away from defined-benefit pensions and into stocks and 401(k)s. Believe it or not, there used to be a time when the Dow Jones and S&P 500 indices were little-noticed figures in the business section of the newspaper. That’s because most people’s retirements weren’t tied to the stock market. The switch from pensions to market-based 401(k)s helped change all that. Moving employees into 401(k)s did more than just reduce the obligated burden on corporate bottom lines. It also helped goose the growth of the financial sector upon which the ultra-wealthy depend for their passive incomes. This was not an accident. Combined with the Reagan-era excesses and the explosion of the tech bubble, suddenly Wall Street was hot popular culture, and the nation watched breathlessly as the health of the Dow Jones was commonly equated with the health of the overall economy. The share of GDP taken by the financial sector grew from 2.8 percent in 1950 to 8.4 percent and rising as of 2006, and financial sector profits account for nearly a third of all corporate profits in America. As a broader sector of Americans watched their meager stock portfolios rise, they weren’t as concerned with the slow growth of their regular wages. Only lately has the damage done to retirement security by moving from defined benefits to uncertain stock markets started to become more widely known.
Actually the move to 401k’s was the result of too many custodians of defined benefit pensions making poor investment decisions and the pensions going broke. Also IRAs and 401ks were ways to encourage saving for retirement by deferring taxes on money put into the accounts. And yes because of a lot of things, like the creation of entire new industries the stock market was hot for the first time in decades. Booms are fun and we need more of them.
2) Push more people into buying real estate, and increase home prices by all means possible. Rates of homeownership increased most dramatically in the 1940s to 1960s, creating the first major bump in housing prices. However, the period between 1960 and 1975 saw home prices decline slightly when adjusted for inflation. The government used the levers of public policy to encourage greater homeownership and reduce interest rates. Big business and wealthy interests pushed through Wall Street deregulation during the Reagan and Clinton eras, which not only boosted the stock market but also allowed large banks to make unprecedented money off of home loans. The end result was that wealthy landlords and asset owners got much richer while rents increased and wages declined, but most Americans didn’t feel the pinch because rising home values made them feel rich on paper until the Great Recession. After the financial crisis, policymakers have done everything in their power to boost both stock and home prices through quantitative easing, 0 percent interest rates, and increased homeowner incentive programs.
This makes no sense. People buy more homes because of government incentives and the wealthy got richer due to financial deregulation because more loans were made to homeowners. This is mind boggling in it’s incoherence.
Look, up until fairly recently, the home mortgage market was the most conservative financial market out there. The market was not a big money maker because risks were very low and the money was steady. The home mortgage market was the realm of community banks who held the mortgages as assets for the life of the loan. It was the 3-6-3 lifestyle. Borrow from the financial markets at three percent, make home mortgages at six percent and hit the links at 3:00 PM. That all changed in the early 1990’s when Democrat policymakers passed the Community Reinvestment Act and then forced banks to make loans that were far more risky in areas that the banks, for good reasons traditionally stayed away from. Then through Fannie Mae and Freddie Mac the “policymakers” bundled the good and bad paper and sold it on the financial markets creating the current mess. What I don’t understand is how increased home ownership was supposed to increase rents.
Home ownership has been a policy of multiple administrations since WW2, as has suburbanization. There are a bunch of reasons for this. One big one was that the policymakers were, for a bunch of reasons, not fond of urban life. It was considered dirty, old fashioned and perhaps most importantly a big target. This was not a small consideration to people coming back from all those ruined cities overseas.
3) Democratize consumer debt, especially through credit cards. Americans born after 1975 don’t remember a world before the widespread use of credit cards. But it used to be that if a regular member of the public couldn’t pay his or her bills, debt wasn’t usually an option. But that wasn’t usually a huge problem, either: Because jobs were plentiful and wages had more buying power against the cost of living, most Americans didn’t need credit cards. Revolving credit used to be the province of capitalists, not of wage earners.Though Diner’s Club cards originated in the 1950s, the charge cards as we know them today were truly born and popularized in the mid-1970s and early 1980s — not coincidentally the same time as Wall Street deregulation, 401(k) transitions and the birth pangs of the real estate boom. The boom in popular credit had two major effects: to enrich the same financial services companies whose success disproportionately benefits the wealthy, and to disguise and soften the effects of stagnant wages.
4) Reduce the cost of goods through free trade policies. The same decades that produced the previous trends also saw the implementation of free trade agreements like NAFTA. It is commonly understood today that these treaties benefit wealthy stockholders while reducing jobs in developed nations. But their less-discussed effect was also to reduce the price of many consumer goods made overseas, which in turn helped to disguise wage stagnation.
All of these moves toward increasing the value of assets do directly benefit the wealthy. But more important, they have served to create a more purely capitalist society, hide the decline of the middle class and mitigate public discontent over stagnant wages. There are many problems with this, of course. The first is that the vast preponderance of wealth will accrue to the very top incomes in an economy where assets inflate while wages deflate. The second is that a purely asset-based economy is bubble-prone, deeply unstable and given to sharp and painful boom-bust cycles. The story of the last half-decade is in part the removal of the blindfold that has been hiding wage losses over the last half-century. Housing prices have skyrocketed beyond the ability of most people under 40 to afford, even as household debt nears record highs. Nearly half of Americans have no retirement savings at all, while much of the rest of the developed world faces a pension obligation crisis.
The tools policymakers have used to distract the public from the raw deal of low wages are no longer working. And that may more than anything else help usher in a new era of populist progressivism in the U.S. — if, that is, the Democratic Party can shift itself away from reinforcing the asset-based economy toward rebuilding a sustainable model that encourages wage growth and a strong labor market.
I think that Mr. Atkins wants to believe that there are a group of “policymakers” who can pull some levers and make the factories run and the jobs go. What he fails to understand is that the current mess was created by the same “policymakers” that he wants to fix the problems. QE and zero interest rates, the “asset based economy” and all the rest was the result of policies enacted by “policymakers” who were by and large, Democrats working for the benefit of the wealthy vested interests and rent seekers that make up the power brokers in the political establishment. It’s not the like of Romney or Trump, who at least made their money by smart business decisions that’s the problem.
The big problem, that Mr. Atkins cannot see, is big government. Big government is where the big rent seekers and opportunists can play. Big government is the home of the likes of “K” St. Even worse, big government is home of an alphabet soup of agencies filled with “policymakers” who are accountable to no one and who can promulgate any policies good or bad without any feedback from the public who are forced to contend with those policies.
The solution to America’s problems isn’t more “policymakers” and more policies, ever more levers controlling things. We’ve had enough of those and in spite of what Mr. Atkins would like to believe, that’s the reason things are the way they are. The solution to America’s problems is more freedom and less misguided policies. Mr. Atkins, though would rather believe in magic.
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