"The Pitchforks Are Coming!""

From Politico:

Memo: From Nick Hanauer

To: My Fellow Zillionaires

You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries—from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. I tell you all this to demonstrate that in many ways I’m no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can’t even imagine. Multiple homes, my own plane, etc., etc. 

You know what I’m talking about. In 1992, I was selling pillows made by my family’s business,

Pacific Coast Feather Co., to retail stores across the country, and the Internet was a clunky novelty to which one hooked up with a loud squawk at 300 baud. But I saw pretty quickly, even back then, that many of my customers, the big department store chains, were already doomed. I knew that as soon as the Internet became fast and trustworthy enough—and that time wasn’t far off—people were going to shop online like crazy. Goodbye, Caldor. And Filene’s. And Borders. And on and on.

Realizing that, seeing over the horizon a little faster than the next guy, was the strategic part of my success. The lucky part was that I had two friends, both immensely talented, who also saw a lot of potential in the web. One was a guy you’ve probably never heard of named Jeff Tauber, and the other was a fellow named Jeff Bezos. I was so excited by the potential of the web that I told both Jeffs that I wanted to invest in whatever they launched, big time. It just happened that the second Jeff—Bezos—called me back first to take up my investment offer. So I helped underwrite his tiny start-up bookseller. The other Jeff started a web department store called Cybershop, but at a time when trust in Internet sales was still low, it was too early for his high-end online idea; people just weren’t yet ready to buy expensive goods without personally checking them out (unlike a basic commodity like books, which don’t vary in quality—Bezos’ great insight). Cybershop didn’t make it, just another dot-com bust. Amazon did somewhat better. Now I own a very large yacht.

But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

I see pitchforks.

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.

The Tea Party "populists" are pushing Wall Streets's agenda

Mike Konczal @ TNR:

"Our problem today was not caused by a lack of business and banking

regulations,” argued Ron Paul in his 2009 manifesto End the Fed, which outlined a theory of the financial crisis that only implicated government policy and the Federal Reserve, while mocking the idea that Wall Street’s financial engineering and derivatives played any role. "The only regulations lacking were the ones that should have been placed on the government officials who ran roughshod over the people and the Constitution.” …

The Tea Party's theory of the financial crisis has absolved Wall Street completely. Instead, the crisis is interpreted according to two pillars of reactionary thought: that the government is a fundamentally corrupt enterprise trying to give undeserving people free stuff, and that hard money should rule the day. This will have major consequences for the future of reform, should the GOP take the Senate this fall.

On the Hill, it’s hard to find where the Tea Party and Wall Street disagree. Tea Party senators like Mike Lee, Rand Paul, and Ted Cruz, plus conservative senators like David Vitter, have rallied around a one-line bill repealing the entirety of Dodd-Frank and replacing it with nothing. In the House, Republicans are attacking new derivatives regulations, all the activities of the Consumer Financial Protection Bureau, the existence of the Volcker Rule, and the ability of the FDIC to wind down a major financial institution, while relentlessly attacking strong regulators and cutting regulatory funding. This is Wall Street’s wet dream of a policy agenda.

Paul Krugman and Bill Maher on craziness & paranoia among the clueless 1%

The comedian's version:




The economist's version:

Suddenly, or so it seems, inequality has surged into public consciousness — and neither the one percent nor its reliable defenders seems to know how to cope.

Some of the reactions are crazy — it’s Kristallnacht, they’re coming to kill us — with the craziness quite widespread; notice how many billionaires, plus of course the Wall Street Journal, rallied around Tom Perkins. But even the saner-sounding voices evidently have a hard time wrapping their minds around the notion that anyone might find 21st-century finance capitalism a bit, well, unfair.

Paul Krugman, the "Liberal Conscience" animated by fairly conventional Keynsianism, further diminishes Our Mr. Brooks:

Why We Talk About the One Percent

Many people in Washington, even those willing to concede that inequality has been rising rapidly, are uncomfortable talking about the famous 1 percent — perhaps because it sounds too populist, too much like an invitation to crowds with pitchforks. For a long time respectable discussion focused on the top 20 percent; today I see my colleague David Brooks talking about the top 5 percent.

But framing the discussion in terms of some broader group is in this case deeply misleading. Here’s what the Piketty-Saez numbers tell us about the top 5 percent (incomes in 2012 dollars):

            Piketty and Saez 

If you look at the bottom 4 percent of the top 5, you see good but not spectacular income gains. These are the kinds of gains that you might be able to explain in terms of skills, assortative mating, and so on. But the top 1 percent is in a different universe altogether. And in fact the gains within the top 1 percent are concentrated in an even smaller group: this is a Pareto distribution thing, in which the higher the income the greater the percentage gains.

The point is that using wider definitions than the one percent is, in effect, diluting the wolves of Wall Street by lumping them in with the upper middle class. Not the same story at all.

The Minimum Wage Brouhaha According to Comedy Central

Jon Stewart supports fast-food workers' strikes, invokes the populist compassion of the new Pope and takes on the wretched, dim-witted, morally obtuse cretins of cable "business" chatter:

"Wall Street Isn't Worth It"

Economist John Quiggan @ Jacobin:

---

The financial sector has grown massively since the 1970s, whether size is measured in terms of the volume of transactions, the number and remuneration of highly skilled professionals, the share of corporate profits, or, most importantly, the political power of the finance capital. As Frase observes, referencing Felix Salmon, the huge returns extracted by this sector distort the distribution of income for the economy as a whole. The market return on any activity must be adjusted for the cut taken by the financial sector. This fact makes the attempt to assign ethical status to marginal productivity academic, in the worst sense of the term.

Taking this further, any strategy for the Left that yields more than modest changes in the distribution of income, wealth and power, must involve a direct conflict with the financial sector, and must imply a substantial contraction in the size, wealth and power of that sector. A necessary condition for such a strategy to be feasible is the premise that the incomes flowing to the financial sector come at the expense of the rest of the economy, and in particular, at the expense of working people.

99% Blues

The Buffet Rule

Greg Sargent at Plum Line:

Picture this scenario. The Senate holds a high-profile vote on a proposal focused directly on implementing the Buffett Rule, one that would bring the current tax rate for millionaires paying lower rates on investments up to 30 percent. This, at at exactly the moment when the GOP is picking a nominee who is worth $250 million and is personally benefitting to an enormous degree from the current rate — one that’s lower than many middle class taxpayers pay.

It could happen...Senator Sheldon Whitehouse is set to announce a proposal to do just this...

The Man from Bain

The expose of Willard Mitt Romney's role as a job-killer with Bain Capital, currently being circulated - in the most ironic electoral gambit in my memory - by a pro-Gingrich "SuperPAC," funded to the tune of $5 million by a right-wing casino magnate and friend of Newt's.  

"No, Conservatives, the Bush Recession Did Not Alleviate Economic Inequality"

Winning Progressive takes on some recent right-wing push-back and misdirection as the issue of income inequality gains resonance with the American public:

Showing how out of touch they are with everyday Americans, conservatives have latched

onto the news that the share of national income taken in by the top 1% fell from 23% in 2007 to “only” 17% in 2009 to contend that the focus of Occupy Wall Street and others on economic inequality is somehow misguided.  For example, in a post titled “The 1% Ain’t What It Used To Be,” conservative blogger Megan McCardle responded that “we don’t want to spend years focused on income inequality, only to learn that the financial crisis fixed it for us.”  Conservative economics professor Steven Kaplan of the University of Chicago business school echoed such doubts and actually offered a defense of inequality, stating in the New York Times that:

“It’s very interesting that [inequality] has become such a big topic now when the numbers are back to where they were in the 1990s,” said Steven Kaplan, an economist at the University of Chicago’s business school. “People didn’t seem to be complaining about it then.”

Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”

Kaplan’s effort to link growth and economic inequality as inherently related is historically incorrect.  For example, from 1950 to 1980, the share of income taken by the top 1% remained below 12% in all but one year, and was below 10% in 13 of those years.  During that same time period, the US economy experience virtually uninterrupted growth.  When the economy dipped in the early 1980s, the share of income taken by the top 1% increased.  While it is true that most recessions lead to a decline in the share of income for the top 1%, the historical record does not support the contention that economic inequality is the inevitable byproduct of growth.  In addition, while some level of inequality may be necessary for economic growth, elevated levels of inequality – such as those in the US today - actually stunt economic growth.

The Foreclosure Crisis

Chris Hayes on the foreclosure "tsunami" and appropriate response:

Visit msnbc.com for breaking news, world news, and news about the economy

Obama in Osawatomie - the matter of Kansas and renewing populism

Today President Obama went on the offensive in Osawatomie, Kansas. His speech struck some welcome populist chords.  Osawatomie is a historic town - best known to historians for the Battle of Osawatomie, which in 1856 was an early skirmish in what eventually became the Civil War.  In the "Bloody Kansas" warfare over the eventual fate of the territory as a "free state",  pro-slavery forces attacked the town - being defended by the radical abolitionist John Brown - and burned it to the ground.

In 1910 progressive Republican Theodore Roosevelt gave a notable speech in Osawatomie, focusing on the dangers of economic concentration and the corruption of politics by corporate money. TR's "money quote":

At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of freemen to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will. At every stage, and under all circumstances, the essence of the struggle is to equalize opportunity, destroy privilege, and give to the life and citizenship of every individual the highest possible value both to himself and to the commonwealth. 

Here's President Obama's message from Osawatomie, which reclaimed some of Teddy Roosevelt's populist narrative:

(F)or most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.

"We are the 99.9%"

Paul Krugman suggests that the 99% "Big Tent" is actually a bit too small. It's the .1% - yes,  the one-tenth of one-percent, - who are the truly serious  malefactors in our contemporary economy and greatest beneficiaries in the income-inequality story. So, apparently,  we have extreme income inequality even at the upper end of extreme income inequality. Krugman's not exactly pulling out the violin to play a lament for the lower 90% of the top 1%, but his point amplifies the general case regarding what's happened in our economy:   

"(T)he 99 percent slogan aims too low. A large fraction of the top 1 percent’s gains have actually gone to an even smaller group, the top 0.1 percent — the richest one-thousandth of the population...

(W)ho are the 0.1 percent? Very few of them are Steve Jobs-type innovators; most of them are corporate bigwigs and financial wheeler-dealers. One recent analysis found that 43 percent of the super-elite are executives at nonfinancial companies, 18 percent are in finance and another 12 percent are lawyers or in real estate. And these are not, to put it mildly, professions in which there is a clear relationship between someone’s income and his economic contribution.

Executive pay, which has skyrocketed over the past generation, is famously set by boards of directors appointed by the very people whose pay they determine; poorly performing C.E.O.’s still get lavish paychecks, and even failed and fired executives often receive millions as they go out the door.

Meanwhile, the economic crisis showed that much of the apparent value created by modern finance was a mirage. As the Bank of England’s director for financial stability recently put it, seemingly high returns before the crisis simply reflected increased risk-taking — risk that was mostly borne not by the wheeler-dealers themselves but either by naïve investors or by taxpayers, who ended up holding the bag when it all went wrong. And as he waspishly noted, “If risk-making were a value-adding activity, Russian roulette players would contribute disproportionately to global welfare.”

Read the whole piece HERE at NYT.

"An Economic Bill of Rights"

Excerpt from President Franklin Delano Roosevelt's January 11, 1944 message to the Congress of the United States on the State of the Union:

It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed, and insecure. This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

The Rove Slime Machine Targets Warren

Simon Johnson:

Karl Rove’s Crossroads GPS group has launched the first attack ad against Elizabeth Warren, presumably because she is now running hard for the Senate in Massachusetts.  This ad is not a big surprise, but the line that Mr. Rove takes could well backfire.

The ad states, “we need jobs, not radical theories and protests,” so we can break the argument down into three separate parts.

First, who destroyed more than 8 million jobs in the United States – and plunged us into the deepest and longest lasting recession since the 1930s?  Surely this was not Ms. Warren, who was just a law school professor, in the run-up to 2008.

Mr. Rove is opening the blame game and this is going to go badly for his presumed supporters – the largest banks on Wall Street that took excessive risks, paid their top people well, and then blew themselves up at great cost to the American taxpayer.  By all means, let us have a conversation about jobs and the history of job losses in the United States; “too big to fail” banks do not look good in this context.



Second, what exactly is the radical theory here?  Ms. Warren’s point has been that we regulate the safety of toasters but not financial products.  Basic consumer protection is, of course, still resisted strongly by the less reputable parts of the financial sector.  But honestly, what well-run and honest firm fears sensible product standards, which is exactly what the Consumer Financial Protection Bureau is working on establishing?

OWS has changed the national conversation

 POLITICO:

Occupy Wall Street is winning


Whatever the objectives of protesters involved in Occupy Wall Street, they have succeeded in engaging the country in a conversation about income inequality.

A quick search of the news--including print articles, web stories and broadcast transcripts--via Nexis reveals a significant rise in the use of the term “income inequality,” from less than 91 instances in the week before the occupation started to almost 500 instances last week

The impact of "Occupy Wall Street" on the labor movement

Steven Greenhouse at NYT:

Organized labor’s early flirtation with Occupy Wall Street is starting to get serious.

Union leaders, who were initially cautious in embracing the Occupy movement, have in recent weeks showered the protesters with help — tents, air mattresses, propane heaters and tons of food. The protesters, for their part, have joined in union marches and picket lines across the nation. About 100 protesters from Occupy Wall Street are expected to join a Teamsters picket line at the Sotheby’s auction house in Manhattan on Wednesday night to back the union in a bitter contract fight.

Labor unions, marveling at how the protesters have fired up the public on traditional labor issues like income inequality, are also starting to embrace some of the bold tactics and social media skills of the Occupy movement.

Why we need to sustain the "Occupy" movements - things only start to change when the pressure is on and protest is visible & persistent

Dave Weigel at Slate:

In four days, Bank of America was all set to face protests against its proposed $5 per month debit card fees -- a so-called "Bank Transfer Day." Today, the bank told the protesters they could find something else to do.

We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee. Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.

Is this the first popular victory for Occupy Wall Street?

This narrative - that OWS is starting to gain traction in protecting average citizens against monstrosities like the Bank of America - even if only in small ways - is critical.  People can make jokes about drum circles or other bits of fun or trivia that had been associated with OWS, but if Bank of America's customers see their interests served by the movements inspired by OWS, the last laugh is on the bank and the movement's approval among the general public - which is already high - will grow. 

And, of course, despite this significant victory, protestors will find plenty more to do that keeps the financial elite in their sights.

On making the right enemies

Robert Lenzner at, oddly, Forbes magazine:

Former President Teddy Roosevelt returned to Harvard for his 30th reunion and graduation in 1910– and  as he entered the proceedings all his classmates including fellow Porcellian Club members turned their backs on him in unison. TR’s latest biographer Edmund Morris believes this shocking snub in public of a former President was due to TR’s strong belief in regulating Wall Street, breaking up monopolies and not allowing a few wealthy men to run the nation.

Think of that extraordinary event;  some 22 years before TR’s 5th cousin Franklin Delano Roosevelt was called “a traitor to his class”   Teddy was getting the same treatment. Barack Obama should take heart from those historical experiences.  The Gilded Age was followed by the Progressive Era of tough laws and court actions against Robber Barons who controlled state legislatures and Congress with their anti-trust legislation.

Then came the Roaring Twenties and the Crash, followed by the Great Depression– and then the New Deal– which created the blessed Glass-Steagall Act– which separated investment banking from commercial banking,  plus the WPA and other make work programs that gave the unemployed a reason for living and put food in their mouths. Some 20 years later the stock market reached its old pre-crash peak and the economy powered by pent up consumer purchases, roared ahead...

So, the best thing that could happen to Obama is to be snubbed  by much of Wall Street, toughen up, and knowing the score, stick to his guns at a fairer deal for everyone. Act, behave and speak in the tradition of the two Roosevelts.

"No redeeming social value..."

Without offering any particularly useful remedies or further insights, Former Reagan and Bush-1 Treasury Secretary Nicholas Brady responds to the "Occupy Wall Street" sentiments and confirms what, increasingly, we already know - the powerful financial sector has become bloated, unproductive and increasingly irresponsible:

I understand the roots of this vocal resentment. When I came to Wall Street in 1954, investment banking was a profession, one that financed the building of this country’s industrial capacity and infrastructure.