Failure of Conservative Economics Should Discredit Their Bankrupt Ideas Forever

As noted in the prior post, the Republicans have no economic policy other than the same failed voodoo economics that have gutted the middle class and shifted obscene amounts of wealth to the super rich.  More of the same failed policies will only intensify the problem and, yes, it worries me that my children's prospects are worse than mine were at a similar age, and mine were worse than those of my parents.  As noted in other posts, upward social mobility is now higher in "Old Europe" than in America.  A piece in Salon argues why the GOP's economic policies are bankrupt and need to be discredited for all time.  Here are highlights:

On April 30, 2012, Edward Conard, a former partner for the financial management company Bain Capital and a multimillionaire who retired at age 51, sat across from Jon Stewart, host of “The Daily Show,” to promote his new book. Conard smiled and stared intently through his black-rimmed glasses as Jon Stewart, the liberal host of the comedy show, held up his book and described its contents. Conard’s book argued that America’s economy would be stronger if people like Conard were even richer and the country had even higher levels of economic inequality.

Stewart was puzzled by Conard’s argument and joked that it didn’t seem right because inequality in the United States was approaching the level in countries with “kidnapping-based economies,” generating laughter in the audience. 

Tax cuts for the rich and less regulation of business supposedly provide incentives for the wealthy to invest and work more. Enabling “job creators” to get richer helps us all, the theory goes.

Conard’s former boss at Bain, Mitt Romney, the 2012 Republican Party nominee for president, ran on a platform of supply-side policies, as have virtually all Republicans since Ronald Reagan was elected president.

Fortunately, these flawed ideas are beginning to be challenged. Academics have begun to rethink their views about the decline of the middle class and progressive politicians are finally starting to openly contest the logic underlying supply side after years of failing to do so. It is about time because our economy is suffering deeply from a financial crash caused in large part by high levels of inequality. And though we may not have a kidnapping-based economy, as Stewart joked, the American middle class is so weakened that we are experiencing the kinds of problems that plague less-developed countries, including high levels of societal distrust that make it hard to do business, governmental favors for privileged elites that distort the economy, and fewer opportunities for children of the middle class and the poor to get ahead, wasting vast quantities of human potential.

A strong middle class is not merely the result of a strong economy—as was previously thought—but rather a source of America’s economic growth. Rebuilding the middle class would provide the stable base of consumer demand necessary to increase business investment and job creation. It would also enable the country to fully develop the human capital of its people, increase the social trust that makes transactions possible, and balance political power to produce a government that works for the whole country, not just those at the top.

The United States was founded as a middle-class country. On the eve of the American Revolution, America’s carpenters, shopkeepers, and farmers enjoyed a higher standard of living than workers in other parts of the world. Further, economic inequality was lower in the United States than any place else. In an era of kings and peasants, America’s middle class stood apart.

The strength of America’s middle class ebbed and flowed over time, especially as industrialization took hold. But after World War II, America returned to its roots and built a mass middle class that was the envy of the world, with rapidly rising incomes and decreasing inequality.

Yet, over the past three to four decades, middle-class America has come undone. The American middle class was already hurting when the Great Recession struck and is now in deep trouble. While there’s no official definition of the middle class, it’s not hard to see that it is in decline. By most every measure, most Americans are struggling.

First, there is the basic level of income earned by the typical American. Median household income—meaning half make more and half make less—was lower in 2013 than it was in 1989. This means that middle-class households now earn less than they did two decades ago.

The miniscule gains that households have made have largely come because women have increasingly entered the workforce—meaning families are working longer hours, as they run faster and faster to stay in place. Indeed, the hourly wage earned by a typical man is less than it was in 1973.

Median incomes for male workers now in their thirties are about 12 percent lower than the income was for their fathers’ generation at the same age.

While incomes have been stagnant for most Americans, the cost of middle-class basics like healthcare and gas have risen much faster than inflation, and some basics like housing and college have risen at double the rate of inflation over the past four decades. It costs a lot more to maintain a middle-class lifestyle, but no matter their efforts most families have not been able to earn much more income. Not surprisingly, debt levels have jumped sharply—the average debt of middle-class families has nearly doubled since 1983.

In contrast to the middle class and the poor, incomes of the rich, especially the very rich, have grown by astronomical amounts over the past three decades: in 2007, the year the Great Recession started, the top 0.01 percent, the richest one in ten thousand, earned in today’s dollars the equivalent of about $38.8 million, compared to $6.4 million per year in 1979.

The rich now make so much more than the middle class because they captured the vast majority of the economy’s gains over recent decades. The share of the nation’s income going to the top 1 percent has approximately doubled over the past three decades, while the share of income going to the middle 60 percent of income earners has fallen precipitously and is now stagnating near the lowest level ever recorded since the government began keeping track of the statistic.  

After 30 years of political dominance, it is obvious that supply-side economics has failed in a number of ways and is thus vulnerable to a challenge from middle out. Supply side helped fuel the Great Recession of 2007–2009 by destabilizing consumer demand and encouraging the deregulation of Wall Street—costing the United States 8.7 million jobs and trillions of dollars in reduced economic growth.

[G]rowth was weaker after President George W. Bush cut taxes for higher earners than it was after President Bill Clinton raised taxes on the rich.

Moreover, trickle-down’s supposed growth mechanisms haven’t occurred the way the theory predicted. Savings, investment, employment, and productivity didn’t increase after trickle-down policies were enacted, as a host of studies have shown. And budget deficits skyrocketed when tax cuts didn’t pay for themselves, contrary to the claims of trickle-down proponents.

There's considerably more to the article that deserves a full read.  The take away?  That voodoo economics theories need to have a wooden stack driven through their heart.  And through the heart of the GOP.

The Great Divide: Race and Neighborhood Well Being

A piece looks at an issue that certainly is visible in the Hampton Roads area: poor neighborhoods sometimes mere blocks from affluent neighborhoods where the poor inhabitants are often condemned to never being able to escape early years disadvantages.  In Norfolk, the contrast between the wealthy Ghent neighborhood and Park Place (which is literally on the other side of the railroad tracks) is but one example.  The result of the disparity is that ultimately, we all suffer either directly or indirectly.  We all pay a price economically and in terms of costs of health care and city services.  The Republican Party response, of course, is to simply cut off all aid to the poor in the apparent hope that they will disappear.  While that approach may satisfy the greed and racism of the GOP base, it is not an ultimate solution.  A column in the New York Times looks at the lingering problem.   Here are some column excerpts:

We don’t talk much about “the wrong side of the tracks” in public anymore, but the distinction between one place and another is implicitly understood and often explicitly specified. That location matters greatly for housing values, for example, is taken for granted. Less appreciated is the persistence of neighborhood inequality and its extensive reach into multiple aspects of everyday life. An increasing separation at the top has intensified the effect of spatial divisions on everyone else.

[I]t is still common in American cities to find neighborhoods struggling with poverty rates well above the national average, sometimes just streets away from neighborhoods brimming with affluence. While racial segregation has modestly declined in recent decades, the latest data reveal that approximately 60 percent of blacks or whites in metropolitan areas across the United States would have to relocate to achieve racial integration. In New York City, an eye-popping 81 percent of whites or blacks would have to move.

Fifty years after the Rev. Dr. Martin Luther King Jr. pointed to African-Americans on a “lonely island of poverty in the midst of a vast ocean of material prosperity,” racial and economic disparities by place not only remain but are closely connected. Nationwide, close to a third of African-American children born between 1985 and 2000 were raised in high-poverty neighborhoods compared with just 1 percent of whites. Crucially, income does not erase place-based racial inequality — affluent blacks typically live in poorer neighborhoods than the average lower-income white resident.

The great neighborhood divide extends to many of the fundamentals of well-being. Violence, poor physical health, teenage pregnancy, obesity, fear and dropping out of school are all unequally distributed. Getting ahead economically is also shaped by where you live, even more than you might think.  . . . . the odds of a child raised in the bottom fifth of income rising to the top fifth as an adult — is lower for those who grew up in cities characterized by racially and economic segregated neighborhoods. 

What many have come to call “mass incarceration” has a local face as well — only a small proportion of communities have experienced America’s prisoner boom whereas others are relatively untouched. I was taken aback to learn that the highest incarceration rate among African-American communities in Chicago was over 40 times higher than the highest ranked white community.

The stigmatization and widespread social exclusion of poor neighborhoods is corrosive. Cynicism toward institutions is high despite the commitment of residents to conventional values. In Chicago, for example, lower income and minority residents are more likely to condemn smoking, drinking and fighting among teenagers than upper class or white residents. Yet concentrated poverty lowered perceived trust and social cohesion among fellow residents, reinforcing a negative feedback loop.

Less visible are the long-term consequences of growing up in concentrated poverty for human capital development. In Chicago we found that early exposure to severely disadvantaged communities was associated with diminished verbal skills later in childhood. We estimated that living in concentrated disadvantage depressed the rate of future verbal learning by about four I.Q. points, akin to missing a year of school.

Neighborhood disadvantage can extend across surprisingly long periods of time in the lives of children and families. My colleagues and I just completed a long-term follow-up of over 1,000 children from the study in Chicago that we began in 1995. We tracked a birth cohort, 9-, 12-, and 15-year-olds, no matter where they moved in the United States. Among the near-majority of black infants born in high poverty neighborhoods in 1995, more than half remained there in 2012; 13 percent had “moved up” to low poverty.  What about downward mobility? Over a third of black infants born in low poverty ended up in high poverty neighborhoods, compared with 2 percent of white children.

The phenomenon [gentrification] is real but the fact that it makes the news is precisely the point — “rags to riches” is no more common among neighborhoods than it is among people. For every poor neighborhood on the move, more struggle out of the media glare. And while large cities like Detroit have been much in the news for spectacular failure, smaller cities and towns like Flint, Mich., and Port Clinton, Ohio, contain some of America’s poorest and hardest-hit neighborhoods.

Unfortunately, many social policies tend to accentuate these trends rather than mitigate them. The persistent geography of inequality is reinforced by exclusionary zoning, persistent red lining, selective withdrawal of public services, the segregation of low-income public housing, “stop and frisk” policing concentrated in minority areas, school funding tied to property values and the political fragmentation of metropolitan areas. The city line is more than just geography, it typically means a sharp social boundary.

We live in a free society, of course, but the high-end spatial concentration of income and its associated resources, like well-endowed schools, security, abundant services and political connections, in effect pulls up the drawbridge from our neighbors. The hypersegregation of “the truly advantaged” speaks volumes about the continuing significance of place and raises important questions about what kind of society we want to be.

Yes, it is disturbing.  Even more disturbing is that the political party that claims to honor Christian values is the main opponent to efforts to change this bleak picture.   I continue to respect the Gospel message, but when I see what so many self-proclaimed Christians are doing, I really find it increasingly difficult to call myself a Christian.

Strong Economy Propels Brazil to World Stage

I have long found Brazil fascinating - and not just because it seems to produce some of the most beautiful guys in the world, although that's not a bad thing either. Now, the country seems poised to come into an age of prosperity and international influence that has heretofore escaped it as reported by the New York Times today. It is interesting to note that some of the trends and economic measures that are being implemented in Brazil run counter to what the Chimperator is foisting on the USA, where income disparities are sharply increasing and spending on infrastructure and social programs that strengthen citizens are being cut or subjected to veto threats. Here are some story highlights:

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Brazil, South America’s largest economy, is finally poised to realize its long-anticipated potential as a global player, economists say, as the country rides its biggest economic expansion in three decades. That growth is being felt in nearly all parts of the economy, creating a new class of super rich even as people like Ms. Sousa lift themselves into an expanding middle class.

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It has also given Brazil new swagger, providing it, for instance, with greater leverage to push for a tougher bargain with the United States and Europe in global trade talks. After seven years, those negotiations finally broke down this week over demands by India and China for safeguards for their farmers, a clear sign of the rising clout of these emerging economies.

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Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected to lead Brazil in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia. Instead, he has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasília.

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Long famous for its unequal distribution of wealth, Brazil has shrunk its income gap by six percentage points since 2001, more than any other country in South America this decade, said Francisco Ferreira, a lead economist at the World Bank. While the top 10 percent of Brazil’s earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, according to Marcelo Côrtes Neri, the director of the Center for Social Policies at the Getulio Vargas Foundation in Rio de Janeiro.

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The momentum of its economic expansion is expected to last. As the United States and parts of Europe struggle with recession and the fallout from housing crises, Brazil’s economy shows few of the vulnerabilities of other emerging powers. It has greatly diversified its industrial base, has huge potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade.

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President da Silva has deepened many of the social programs begun 10 years ago under Fernando Henrique Cardoso, who as president ushered in many of the structural reforms that laid the foundations of Brazil’s stable growth today.

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Should John McCain somehow - in my worse nightmare - win the election in November, Brazil may be a country to add to the list as possible emigration destinations for those fleeing the economically declining and increasing fascist USA.