Bill Maher on The Great Gatsby and the modern wealth gap

http://www.youtube.com/watch?v=8DKD0O-owNM

America's bizarre fetish for romanticizing the leisure-class, mega-rich, Guilded Age types like the Buchanans depicted in Gatsby is especially peculiar today considering what we have (or haven't) learned from the Great Recession, as well as recent the populist backlash against US plutocrats.

The sad irony is the rich would be better off with less income disparity and a more flourishing middle class. Clearly when basic needs are more securely met, people feel more comfortable to consume, which benefits most of the economy and trickles up to the wealthy. Well, the rich got around that issue by expanding credit (pay day loans, adjustable rates, even tax refund loans).

The rich complain that they already pay the lion's share of the nation's taxes. While that is numerically true, maybe we can reframe the issue. When employers and other the powers that be give people quality wages and benefits, they will be healthier and less of a burden on health services. When education is more democratic and affordable, people will make better economic choices and become more productive, which will increase GDP, lower demand for public services, and reduce the "tax burden" on the rich. When we don't fight wars or adopt bad taxation and trade practices just to give special interests more profits, then that also reduces the need for taxes. So if the rich are tired of paying so much tax (even though marginal rates are much lower today than the 1960's), then reduce the wealth gap and make the market more free and democratic.

And when workers are not stressed out and distraught over neighborhood crime and horrible commutes (caused by defunding public services/infrastructure to support tax breaks), rising health care, real estate, and education costs (driven by the irrationally high willingness to pay by those who can afford it), uncertain retirement (brought on by the cutting of pensions, the Fed's low rates pushing people to equities, and market volatility due to risky speculation, manipulation, and fraud), and the omnipresent threat of layoffs/outsourcing/downsizing, then they are actually able to concentrate on their jobs and become more creative, productive, and valuable to the company and its stakeholders. When employers treat their staffs well, they are less likely to be a workplace cancer, a slacker, a defector to the competition, or new competition (launching their own venture). It's strange that the rich, who love to congratulate themselves for being so clever and superior, can't grasp this simple concept.

But here is the circular problem: political corruption allows some companies to enjoy economic advantages. They out-compete all the mom & pop shops without the Washington connections (yes I know companies succeed on their own merit too, but far too many cheated to get to the top and secure their standing). Other firms witness this "recipe for success" and follow suit, because now it's too risky to try to win the old-fashioned way. This Darwinism leads to the "survivors" of the dog-eat-dog market often being the biggest jerks. So now we have fewer and nastier employment choices, and the % of Americans working for public companies is at an all-time high. Employers know they have the leverage, so they cut benefits and make the workers more dependent on investment income (for the minority who can even afford to invest). More and more, our survival is tied to the stock price of our employer and our chosen securities. So for the few shareholders who actually vote, they want boards and execs who are the shrewdest SOBs around - to make the stock appreciate. And for passive shareholders, they are just happy when the price goes up, and they don't want to know how. So public companies are making our lives hell, yet they are also our only potential salvation from hell, so we make a Faustian bargain with them. It is paradoxically in our economic best interests to support those who harm us. 

When people are not desperate, they are less likely to steal or kill or revolt (yes, it has come to that). As Maher said, you can only squeeze people so far before they push back (especially when the squeezers are a tiny minority). It's not as bad as the starving peasants in monarchic France or Russia, but there will be a point when the masses won't take it anymore (see the Arab Spring, which started as an economic uprising). Or look at the angry youth and public workers in much of Europe now. When that stuff happens, it's no good for the rich either (unless you are like the Shah and can loot Iran before you flee to posh exile - not trying to give Lloyd Blankfein any ideas). So wouldn't they rather share a little more of the pie in order to preserve the good thing they have going? They say that love knows no bounds, but really selfishness and greed (even to the point of self-destruction) is America's most abundant resource. Well, one could argue that greed is a twisted form of love - just loving the wrong things.

Romney's disastrous foreign tour

MITT actually stands for "totally not presidential material." He might have some business smarts, but if his worldview, reasoning, and understanding of history are so out of whack, then he is probably a more dangerous candidate than a total business-economics novice with a better "personality" (for lack of a more descriptive term at the moment).

http://www.huffingtonpost.com/2012/07/30/mitt-romney-palestinians_n_1718496.html?utm_hp_ref=tw

I seriously think that you or I would have more foreign policy credibility and competence. I can't imagine what he'll pull on his final leg of his foreign tour, "dumb Polack" jokes? And the sad part is his campaign chose the UK, Israel, and Poland precisely because they are totally uncontroversial pro-America (and pro-GOP values) states - low-hanging fruit for Romney to build up his foreign policy chops. Or maybe it was just an overseas donation tour overshadowed by the Olympics?

For him to make those Israeli-Palestinian comments without historical context (and context is not exactly one of his strong points) is lower than grade school. It's the opposite of the "Guns, Germs, and Steel" argument by Diamond, who did extensive research to disprove the telologists who suggested that Eurasians came to dominate the globe simply because they are superior races/cultures (in actuality, they had massive geographical and environmental advantages, i.e. luck). Romney totally doesn't get the thesis of the book, even though he cited it to support his bizarre claim (I doubt he read it, and I really doubt Diamond is going to vote for him). Diamond does refer to culture, but only in a later and less important chapter. He basically wrote that geniuses and visionaries are about evenly distributed among peoples, societies, and eras. But effective cultures have institutions and norms in place to allow those great people to reach their full potential (which obviously helps their societies), while other cultures squander such human capital for various reasons. Diamond didn't even talk about wealth gaps or median incomes. But when a culture is under foreign occupation, obviously that's a different story and it's hard for the Einsteins and Pasteurs to fulfill their destinies. Like I said before, would Romney be Romney if he grew up in inner-city Detroit instead of his parents' suburban palace?

You can't just look at the end result from a particular set of circumstances, then make an overall value judgment. Phelps did not with the 200 fly recently - does that mean he's not a very good swimmer? If the Israelis were poor, persecuted, and plagued by inept government, embargo, air strikes, infighting, and being used as a proxy war pawn for 60 years, and the Palestinians got massive Western support and diplomatic cover, their histories would be quite different. It's pretty sad that a presidential candidate doesn't already get this. Actually it's kind of an interesting reflection on our times that Obama and Romney are even presidential candidates. The fact that America would seriously consider, and even elect, a person of Obama's background is a credit to our open-mindedness and tolerance today (as well as major Bush and DC fatigue). We're not post-racial and harmonious, but it's at least improving in some ways. And the fact that the GOP would nominate a guy like Romney (plus he has a decent chance to win) is a travesty, and may be an indication of our economic desperation and Washington dysfunction. Also contributing to that is of course backlash from all the groups that feel threatened by Obama's rise. These two men would have been inconceivable as candidates just 10 years ago, for better and worse.   

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http://www.huffingtonpost.com/peter-s-goodman/mitt-romney-israel_b_1721396.html?utm_hp_ref=tw

To simpleton conservatives, the narrative is just so much cleaner and palatable if you try to explain the inequalities in the world as purely based on merit and just consequences. Of course poor minorities are doing worse because they are lazy, and of course WASP and Jewish people are rich and powerful because they are just superior people with superior culture and a superior god. Obama's disruptive, compelling narrative is obviously incompatible, which is maybe why they hate him so much. Race is part of that, but I think it's also about a sense of order of the world - their traditional unjust order. Some people realize that there are many causes of inequality, and several are due to foul play, so we may want to enact reforms to try to ameliorate those problems - but of course the establishment forces will push back and cry socialism and treason. Inequality is inevitable, and maybe it can be beneficial. I forget the actual source, but someone on the right recently went so far as to say that a big wealth gap is good and motivating because it gives the poor a "role model" in the super rich, to aspire to and emulate. Maybe that is what US capitalism is, but it is not a recipe for a healthy society. Inequality may have its benefits, but it should not be achieved through cheating and injustice. I think we learned that in kindergarten (and I know it is part of the Church of LDS teachings). But if these "winners" are just so genetically and culturally superior, and destined for greatness anyway, then why the need to cheat your way to the top and keep others down? Though for Romney types, I guess the ends justify the means and he won't "apologize" for his success. How about Saddam and Escobar - they were among the richest people in the world for a time. They don't have to apologize either? Romney made his TV rounds and accused Obama and the Dems of being envious of people like him, and therefore wanting to tarnish his business reputation. When a football player injures his opponent with a dirty play and the referee issues a penalty, I don't think he's doing it out of envy or vendetta (well, maybe for everyone but James Harrison). For the good of the game (and the safety of the players), there has to be some order, respect, and standards of conduct. But people like Mitt just can't understand that it's not always about him. 

The Republican nominee must feel perpetual temptation to stimulate white discomfort with Obama while subtly celebrating white superiority -- a message that surely appeals to a core segment of voters.

Obama's rise (which inspired and emboldened some marginalized groups: minorities, immigrants, and the youth), plus the recession and erosion of the American Dream for many whites, has really upset some Americans out there. They feel like the "wrong people" are getting ahead. They're right, but they should be targeting their ire at other folks. The Tea Party tended to attack greedy, corrupt business at first, but then when the movement got corporatized and backed by the Kochs and such, then of course it's the federal gov. and unions at the heart of all those problems - those poor Fortune 500 firms are just like Blue Collar Joe, under Obama's jackboot. And for all their hating on "welfare moms" and "nanny government", isn't it comically hypocritical that some conservatives whites have a sense of entitlement that only they are allowed to succeed in America?

This ties back to Romney's Israel-Palestine comments. He believes it's the system and culture that make societies succeed or fail. If so, then why do he and conservatives want to gut the modern US system that, despite its warts, has created unprecedented prosperity for millions, as well as huge technological and intellectual advances since WWII? Why does he espouse policies that will make it harder for more Americans to realize their potentials (I know he doesn't feel that way, but sorry it's still voodoo economics)? Culture and system are the key, yet Romney wants to make it tougher for regular people to afford college, wants to make it harder for average people to access critical social services that will enhance their productivity and contributions to society, and such. I really hope Obama, the Dems, and the press call him out on this blatant contradiction.

Robert Reich on the wealth gap and recession

Fresh Air had an interview with UC Berkeley professor and former Clinton labor secretary Robert Reich, who recently published "After Shock" about how vast wealth disparities contributed to the Great Crash/Depression and our current economic downturn.

http://www.npr.org/templates/story/story.php?storyId=130189031

The two years when the richest 1% of Americans controlled the most wealth in the US (~23% of all income) were 1928 and 2007. Coincidence? Reich argues that this wealth gap leads to recessions for two reasons: first, the middle class has less purchasing power and can't afford to keep up with standard of living gains (or rising costs of living partly due to Wall Street profit taking), so they resort to credit until it dries up, and then consumer spending just plummets. Second, the rich and those who control the factors of production are reaping huge earnings from financial and technological innovations, which encourages them to invest in more risky, speculative ventures. Obviously this is a recipe for problems. The wealth concentration before the Depression was partly due to the mechanization expansion of US industry at the turn of the century (Ford and Rockefeller types). New consumer goods like cars and radios became more affordable for the middle class, and credit flowed freely until the crash and the failure of 25% of US banks. During the New Deal and WWII, everyone was put to work for the war effort, and FDR enacted labor rights laws and social security, which helped the middle class recover and thrive.

During the Baby Boom, the richest 1% only controlled just 9% of America's wealth. I think they were still doing well, but the middle class was doing great, and there were more of them. But the OPEC embargo, rising unemployment, and stagflation in the 1970's eroded some of the gains. What partially prevented the recessions of the '70s through '90s from being longer was the entry of women into the workforce, and an expansion of the US work week (not by law, but by corporate edict). The US work week was ridiculously long (with only Sunday off) during our Industrial Revolution, then gradually shortened as we entered the Baby Boom, but started to lengthen again in the '70s, to the point when Americans now work much longer than Europeans and even longer than Japanese. This increased productivity and earning power, because back then they still paid for overtime and more workers were unionized. Though extra productivity only translated to so much extra disposable income as inflation and interest rates reached double-digits, so the middle class was pinched again and resorted to credit to make ends meet. During the Carter Era (though it got worse during the Reagan and Clinton years), the government enacted policies to promote a decades-long real estate boom fueled by tax breaks and credit (maybe with good intentions of raising living standards and making the American Dream more accessible, but was ultimately unsustainable). Financial deregulation also removed many Depression-era barriers to riskier speculation, so the construction industry and Wall Street fed off each other. The 1980's signaled another era of capitalist dominance, as computers, automation, globalization, and exotic finance gave them new powerful tools for the rich to grow their wealth, coupled by drastically lower taxes and gradual erosion of worker rights. The trend worsened into the 21st Century, and we know the rest.

Our economy is not dependent on the rich, but on the consumption of a secure and confident middle class. They may control a quarter of total wealth, but there are fewer of them, and they'd rather earn a "reasonable rate of return" than buy that 20th toaster. If the lower classes didn't matter, then why did Wall Street seek to exploit their buying power in the last decade through the expansion of subprime/payday loans and "no hassle" credit cards? I don't buy the contrary argument, though it is true that the rich pay a lot of taxes (that's the whole point, unless we are living in an undemocratic plutocracy, as some Citi analysts concluded in a leaked letter to their VIP clients: http://www.scribd.com/doc/6674234/Citigroup-Oct-16-2005-Plutonomy-Report-Part-1). But companies and the rich pay much less taxes than they should in fairness. Higher taxes don't have to hurt business as they allege, because hopefully the government would use that revenue on smart spending to spur growth of sustainable commerce (though their spending record is not great, but again it's partly due to policies favoring the rich and condoning waste).

The basic GDP equation is the sum of household consumption (C), investments (I), government spending (G), and net exports (NE). C is over 2/3 of our GDP, and the rich contribute a lot, but it's mostly powered by the sheer number of middle class families. So when the rich and the companies they lead enjoy preferential treatment, they take away from G (by paying less taxes, which leads to deficits) and really only help to increase I, but during recessions I loses value, so they'd rather hoard cash than lend or hire: http://abcnews.go.com/Business/hoarding-hiring-corporations-stockpile-mountain-cash/story?id=10250559. And when they do spend, they may choose overseas investments which aren't taxable and don't help US GDP (remember the IRS probe into UBS? http://www.usatoday.com/money/perfi/taxes/2008-06-30-irs-swiss-bank-ubs_N.htm). So in my (biased) view, they rich are a net drag on the economy and society. If the rich didn't exist, the rest of us would have more purchasing power to grow GDP, and the government would have a smaller deficit. Maybe we'd still consume frivolously and get into credit trouble, but at least wealth wouldn't be so concentrated, so our boats would rise and sink together.

[Former Fed Chairman Mariner] Eccles had nagging concerns that by tightening credit instead of easing it [during the Depression], he and other bankers were saving their banks at the expense of community — in "seeking individual salvation, we were contributing to collective ruin." ... Economists... sought to reassure the country that the market would correct itself automatically, and that the government's only responsibility was to balance the federal budget. Lower prices and interest rates, they said, would inevitably "lure 'natural new investments' by men who still had money and credit and whose revived activity would produce an upswing in the economy." Entrepreneurs would put their money into new technologies that would lead the way to prosperity. But Eccles wondered why anyone would invest when the economy was so severely disabled. Such investments, he reasoned, "take place in a climate of high prosperity, when the purchasing power of the masses increases their demands for a higher standard of living and enables them to purchase more than their bare wants. In the America of the thirties.... people hadn't enough purchasing power for even their barest needs."

Eccles knew Wall Street wanted a tight money supply and correspondingly high interest rates, but the Main Streets of America — the real economy — needed a loose money supply and low rates. Roosevelt agreed to support new legislation that would tip the scales toward Main Street. Eccles took over the Fed.

- Robert Reich

So isn't that grand: the rich help cause market crashes and recessions with their speculation and loose lending, then make recovery even harder by choking off credit to the middle class when it's critically needed (despite the government's best monetary policy efforts to lower borrowing rates and such). Then they skirt blame and say "natural investments" should spur growth even if commercial banks aren't lending (which is their whole purpose of existence). Even if interest rates are lower, so are costs and they're still making money aren't they? Most average Joes would be content with 5% during a recession, but not Wall Street.