The Great Economic Devolution: Median wealth dropped 20% in 30 years

CEPR:

A NYT article reported on a study from Russell Sage reporting that median household the study is that median wealth is down by around 20 percent from 1984.

wealth was 36 percent lower in 2013 than 2003. While this is disturbing, an even more striking finding from

This is noteworthy because this cannot be explained as largely the result of the collapse of house prices that triggered the Great Recession. This indicates that we have gone thirty years, during which time output per worker has more than doubled, but real wealth has actually fallen for the typical family. It is also important to realize that the drop in wealth reported in the study understates the true drop since a typical household in 1984 would have been able to count on a defined benefit pension. This is not true at present, so the effective drop in wealth is even larger than reported by the study. (Defined benefit pensions are not included in its measure of wealth.)

Raising the minimum wage and job creation

Teresa Tritch @ NYTs:

The standard argument against a higher minimum wage is that it will lead to job loss as employers, unable to pay more, lay off current workers or don’t hire new ones.

It’s important to state up front that research and experience don’t bear that out.

Bolstering what we already know, new evidence shows that job creation is faster in states that have raised their minimum wages. The Center for Economic and Policy Research used federal labor data to tally job growth in 13 states* that raised their minimums in 2014. In all but one, New Jersey, employment was higher in the first five months of 2014 (after the wage increase) than it was in the last five months of 2013 (before the wage increase). In nine of the 12 states with faster growth, employment gains were above the national median.

Inflation hysteria - hilarious

 CNBC nutcase Rick Santelli loses it!

Credit where credit is due - conservative tells right-wing inflation hysterics to accept the fact of low inflation and shut up !

American Enterprise Institute economist James Pethokoukos calls out his fellow conservatives as inflation cranks: 

Are conservatives forever and always doomed to be obsessed by fear that inflation is perpetually just around the corner? Perhaps, since it was the Great Inflation of the 1970s that helped give rise to Reagan and Thatcher and the conservative revival. Even worse, this inflation obsession spawns conspiracy theories that government is manipulating the data to hide skyrocketing prices.

Job creation and tax increases - evidence from the real world

David Cay Johnston takes on the conventional conservative "wisdom" - using DATA!

Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.

“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association,

Anti-taxation cranks keep the crazy coming!

the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.

So what happened after voters approved the tax increases, which took effect at the start of 2013?

Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.

California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.

America has more than 3,100 counties and what demographers call county equivalents. Eleven California counties, including Sacramento, accounted for almost 1 in every 7 new jobs in the U.S. last year.

California raises taxes and recovers from fiscal crisis, while the right-wing fiddles and burns

 Professor Krugman on California's recovery from budget crisis as tax-cutting Kansas sinks:

The states, Justice Brandeis famously pointed out, are the laboratories of democracy. And it’s still true. For example, one reason we knew or should have known that Obamacare was workable was the post-2006 success of Romneycare in Massachusetts. More recently, Kansas went all-in on supply-side economics, slashing taxes on the affluent in the belief that this would spark a huge boom; the boom didn’t happen, but the budget deficit exploded, offering an object lesson to those willing to learn from experience.

And there’s an even bigger if less drastic experiment under way in the opposite direction.

California has long suffered from political paralysis, with budget rules that allowed an increasingly extreme Republican minority to hamstring a Democratic majority; when the state’s housing bubble burst, it plunged into fiscal crisis. In 2012, however, Democratic dominance finally became strong enough to overcome the paralysis, and Gov. Jerry Brown was able to push through a modestly liberal agenda of higher taxes, spending increases and a rise in the minimum wage. California also moved enthusiastically to implement Obamacare.

I guess we’re not in Kansas anymore. (Sorry, I couldn’t help myself.)

Needless to say, conservatives predicted doom. A representative reaction: Daniel J. Mitchell of the Cato Institute declared that by voting for Proposition 30, which authorized those tax increases, “the looters and moochers of the Golden State” (yes, they really do think they’re living in an Ayn Rand novel) were committing “economic suicide.” Meanwhile, Avik Roy of the Manhattan Institute and Forbes claimed that California residents were about to face a “rate shock” that would more than double health insurance premiums.

What has actually happened? There is, I’m sorry to say, no sign of the promised catastrophe.

The Heritage Foundation's epic "data" fail

 Media Matters catches the current state of intellectual credibility among conservative economists:

Heritage Foundation chief economist Stephen Moore was caught using incorrect statistics to mislead readers about the relationship between tax cuts and job creation in the United States.

On July 7, Moore published an op-ed in The Kansas City Star attacking economic policies favored by Nobel Prize-winning economist Paul Krugman. The op-ed claimed that "places such as New York, Massachusetts, Illinois and California ... are getting clobbered by tax-cutting states." Moore went on to attack liberals for "cherry-picking a few events" in their arguments against major tax cuts, when in fact it was Moore who cited bad data to support his claims. 

Stephen "Pants On Fire" Moore

 On July 24, The Kansas City Star published a correction to Moore's op-ed, specifically stating that the author had "misstated job growth rates for four states and the time period covered." The editorial board of the Star inserted this annotation to Moore's inaccurate claims:

Please see editor's note at the top of this column. No-income-tax Texas gained 1 million jobs over the last five years, California, with its 13 percent tax rate, managed to lose jobs. Oops. Florida gained hundreds of thousands of jobs while New York lost jobs. NOTE: These figures are incorrect. The time period covered was December 2007 to December 2012. Over that time, Texas gained 497,400 jobs, California lost 491,200, Florida lost 461,500 and New York gained 75,900. Oops. Illinois raised taxes more than any other state over the last five years and its credit rating is the second lowest of all the states, below that of Kansas! (emphasis original)

On July 25, Star columnist Yael Abouhalkah explained the correction in more detail. Abouhalkah wrote that Moore had "used outdated and inaccurate job growth information at a key point in his article" and that Moore should have used data from 2009 to 2014, rather than from 2007 to 2012. Abouhalkah also argued that "the problems with Moore's opinion article damaged his credibility on the jobs issue."

"Even a stopped clock" etc. etc.

Uber-conservative "Red State" blogger Erik Erickson spills the beans on his party:

 "I’m just not sure what the Republican Party really stands for any more other than telling Obama no and telling our own corporate interests yes. That’s not much of a platform."

"Inequality Is Not Inevitable"

Joseph Stiglitz @ NYT:

AN insidious trend has developed over this past third of a century. A country that experienced shared growth after World War II began to tear apart, so much so that when the Great Recession hit in late 2007, one could no longer ignore the fissures that had come to define the American economic landscape. How did this “shining city on a hill” become the advanced country with the greatest level of inequality?

One stream of the extraordinary discussion set in motion by Thomas Piketty’s timely, important book, “Capital in the Twenty-First Century,” has settled on the idea that violent extremes of wealth and income are inherent to capitalism. In this scheme, we should view the decades after World War II — a period of rapidly falling inequality — as an aberration.

This is actually a superficial reading of Mr. Piketty’s work, which provides an institutional context for understanding the deepening of inequality over time. Unfortunately, that part of his analysis received somewhat less attention than the more fatalistic-seeming aspects.

Over the past year and a half, The Great Divide, a series in The New York Times for which I have

served as moderator, has also presented a wide range of examples that undermine the notion that thereare any truly fundamental laws of capitalism. The dynamics of the imperial capitalism of the 19th century needn’t apply in the democracies of the 21st. We don’t need to have this much inequality in America.

Our current brand of capitalism is an ersatz capitalism. For proof of this go back to our response to the Great Recession, where we socialized losses, even as we privatized gains. Perfect competition should drive profits to zero, at least theoretically, but we have monopolies and oligopolies making persistently high profits. C.E.O.s enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past, without any evidence of a proportionate increase in productivity.

If it is not the inexorable laws of economics that have led to America’s great divide, what is it? The straightforward answer: our policies and our politics. People get tired of hearing about Scandinavian success stories, but the fact of the matter is that Sweden, Finland and Norway have all succeeded in having about as much or faster growth in per capita incomes than the United States and with far greater equality.

Source: The Atlantic

So why has America chosen these inequality-enhancing policies? Part of the answer is that as World War II faded into memory, so too did the solidarity it had engendered. As America triumphed in the Cold War, there didn’t seem to be a viable competitor to our economic model. Without this international competition, we no longer had to show that our system could deliver for most of our citizens.

Ideology and interests combined nefariously. Some drew the wrong lesson from the collapse of the Soviet system. The pendulum swung from much too much government there to much too little here. Corporate interests argued for getting rid of regulations, even when those regulations had done so much to protect and improve our environment, our safety, our health and the economy itself.

But this ideology was hypocritical. The bankers, among the strongest advocates of laissez-faire economics, were only too willing to accept hundreds of billions of dollars from the government in the bailouts that have been a recurring feature of the global economy since the beginning of the Thatcher-Reagan era of “free” markets and deregulation.

The American political system is overrun by money. Economic inequality translates into political inequality, and political inequality yields increasing economic inequality. In fact, as he recognizes, Mr. Piketty’s argument rests on the ability of wealth-holders to keep their after-tax rate of return high relative to economic growth. How do they do this? By designing the rules of the game to ensure this outcome; that is, through politics.

"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.

"All Science Is Wrong, Concludes Esteemed Fox News Panel"

Jonathan Chait at New York Magazine exposes the intellectual and moral bankruptcy of "conservatism's" foremost alleged "intellectuals."  "Conservative intellectual" has truly become an oxymoron:

There is no issue where educated ignorance is on more perfect display than Post columnists, and Fox News All-Star panelists. They numbered among the select conservative intellectuals chosen to dine with newly elected president Barack Obama in 2009.

watching the conservative movement confront scientific evidence of climate change. Educated ignorance is not the same thing as the regular kind of ignorance. It takes real talent to master. George F. Will and Charles Krauthammer are two of the intellectual giants of the right, former winners of the Bradley Foundation’s $250,000 annual prize, Washington

On their Fox News All-Star Panel appearance this week, both men discussed the U.S. National Climate Assessment, which they dismissed with various irritable mental gestures. Their evasions and misstatements, clothed in faux-erudition, offer a useful entrance point to study the current state of the right-wing mind.

"Predictions and Prejudice" among that cohort of right-wing hacks posing as social scientists

Krugman @ NYT on the shame - or should I say "shamelessness" - of too many in his profession:

The 2008 crisis and its aftermath have been a testing time for economists — and the tests have been moral as well as intellectual. After all, economists made very different predictions about the effects of the various policy responses to the crisis; inevitably, some of those predictions would prove deeply wrong. So how would those who were wrong react?

The results have not been encouraging.

Brad DeLong reads Allan Meltzer in the Wall Street Journal, issuing dire warnings about the inflation to come. Newcomers to this debate may not be fully aware of the history here, so let’s recap. Meltzer began banging the inflation drum five full years ago, predicting that the Fed’s expansion of its balance sheet would cause runaway price increases; meanwhile, some of us pointed both to the theory of the liquidity trap and Japan’s experience to say that this was not going to happen. The actual track record to date:

Tests in economics don’t get more decisive; this is where you’re supposed to say, “OK, I was wrong, and here’s why”.

Not a chance. And the thing is, Meltzer isn’t alone. Can you think of any prominent figure on that side of the debate who has been willing to modify his beliefs in the face of overwhelming evidence?

Now, you may say that it’s always like this — but it isn’t. Consider the somewhat similar debate in the 1970s over the “accelerationist” hypothesis on inflation — the claim by Friedman and Phelps that any sustained increase in inflation would cause the unemployment-inflation relationship to worsen, so that there was no long-run tradeoff. The emergence of stagflation appeared to vindicate that hypothesis — and the great majority of Keynesians accepted that conclusion, modifying their models accordingly.

So this time is different — and these people are different. And I think we need to try to understand why. Were the freshwater guys always just pretending to do something like science, when it was always politics? Is there simply too much money and too much vested interest behind their point of view?

The knives come out for Piketty...and they are pretty dull

Kathleen Geier outlines "What Piketty’s Conservative Critics Get Wrong" @ The Baffler:

With his book Capital in the Twenty-First Century, Thomas Piketty has lobbed a truth bomb that has blown up several decades’ worth of received opinion about the way the economy works in capitalist societies. He makes a powerful, meticulously-argued, data-driven case that inequality is a feature of capitalist economies, not a bug. Let to its own devices, wealth tends to become highly concentrated. The only events likely to prevent our society from plunging into a dystopian spiral of inequity are, on the one hand, certain rarely occurring catastrophes, such as war or depression; or, on the other, dramatic government intervention in the economy, in the form of steep taxes on the wealthy.

You can see why conservatives are going to be enraged by this book.

A conservative backlash to Piketty was inevitable; the only surprise is that it’s taken so long to develop. But in the last week or so, responses from the right have finally begun to roll in. Send in the clowns!

Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones

Annie Lowrey @ NYT:

WASHINGTON — The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery has been in low-wage work, at places like strip malls and fast-food restaurants.

In essence, the poor economy has replaced good jobs with bad ones. That is the

conclusion of a new report from the National Employment Law Project, a research and advocacy group, analyzing employment trends four years into the recovery.

“Fast food is driving the bulk of the job growth at the low end — the job gains there are absolutely phenomenal,” said Michael Evangelist, the report’s author. “If this is the reality — if these jobs are here to stay and are going to be making up a considerable part of the economy — the question is, how do we make them better?”

The report shows that total employment has finally surpassed its pre-recession level. “The good news is we’re back to zero,” Mr. Evangelist said.

But job losses and gains have been skewed. Higher-wage industries — like accounting and legal work — shed 3.6 million positions during the recession and have added only 2.6 million positions during the recovery. But lower-wage industries lost two million jobs, then added 3.8 million.

Most of the jobs added during the recovery have been in lower-wage industries...

U.S. is a world leader in class conflict over government spending

Political science Prof. Larry Bartels at WaPo:

(Data from International Social Survey Programme; tabulation by Larry Bartels)

The United States does less to redistribute income than virtually any other economically “advanced” democracy. So why does class conflict loom so much larger in U.S. public opinion about government spending than in other affluent democracies? The answer may have something to do with our peculiar system of taxation.

The claim that America is riven by class conflict may come as a surprise to people who like to think that “There are no classes in America,” as Rick Santorum put it during his 2012 presidential campaign. But the fact is that rich and poor Americans disagree about government spending to an extent virtually unmatched elsewhere in the world.

Paul Krugman talks Piketty's "Capital In The 21st Century" with Bill Moyers

Rand Paul is either an idiot or a calculated propagandist...or both

More Krugman on The Crazy:

I can easily understand it when people don’t know the facts about economic statistics; you need a fair bit of background knowledge even to know how to look these things up. It’s more surprising when people don’t know what they don’t know — when they make confident assertions that can be proved false in a few seconds by anyone who does know these things.

I had a one-on-one encounter with Rand Paul over such a case; there our heads were, talking on TV, and he insisted that government employment had risen under Obama. (It has actually plunged.) At the very least, you’d think he would have learned a lesson from the experience.

But no. There he goes, saying, "When is the last time in our country we created millions of jobs? It was under Ronald Reagan … "

Hmmm:

It’s not just that more jobs were created under Clinton, who raised taxes on the rich, than under Reagan; I wonder how many people know that more jobs were created under Jimmy Carter than under either Bush?

But I guess I really do understand it: according to right-wing theology, The Blessed Reagan’s tax cuts must have created far more jobs than the policies of evil redistributors. And so that’s what must have happened. Hey, Clinton was probably cooking the books.

Liberal Facts and "Conservative" Crazy

Krugman @ NYTs on The Crazy:

“The facts have a well-known liberal bias,” declared Rob Corddry way back in 2004 — and experience keeps vindicating his joke. But why?

Not long ago Ezra Klein cited research showing that both liberals and

conservatives are subject to strong tribal bias — presented with evidence, they see what they want to see. I then wrote that this poses a puzzle, because in practice liberals don’t engage in the kind of mass rejections of evidence that conservatives do. The inevitable response was a torrent of angry responses and claims that liberals do too reject facts — but none of the claims measured up.

Just to be clear: Yes, you can find examples where *some* liberals got off on a hobbyhorse of one kind or another, or where the liberal conventional wisdom turned out wrong. But you don’t see the kind of lockstep rejection of evidence that we see over and over again on the right. Where is the liberal equivalent of the near-uniform conservative rejection of climate science, or the refusal to admit that Obamacare is in fact reaching a lot of previously uninsured Americans?

The rich got richer

In what is beginning to sound like a "Dog Bites Man" story from the WSJ:

The rich got richer, the poor got poorer.

A recent article by Labor Department senior economist Aaron Cobet highlights the sharp disparity between the wealthiest and poorest Americans in the aftermath of the 2007-2009 recession.

“While average income has returned to pre-recession levels, income gains have been distributed unevenly,” Mr. Cobet said.

The economist mined Labor Department data to show that the top 20% of earners accounted for more than 80% of the rise in household income from 2008-2012. Income fell for the bottom 20%.

More "Capital in the 21st Century"

Martin Wolff reviews Thomas PIketty's opus @ The Financial Times. Read at link or below:

French economist Thomas Piketty has written an extraordinarily important book. Open-minded readers will surely find themselves unable to ignore the evidence and arguments he has brought to bear.