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Tilting at Windmills

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June 29, 2006
By: Kevin Drum

YOYO ECONOMICS....Jared Bernstein writes about the fact that the U.S. economy has been growing at a pretty good clip lately but middle class incomes haven't benefited:

This disconnect between productivity and living standards is one of todays most important, and most unsettling, economic dynamics. Its obviously not the only salient problem we face the extent of our fiscal and international indebtedness is also worthy of our attention. But I see these all of a package.

Its a package tied up with a YOYO. Thats the acronym for youre on your own, which over the past few decades has become a disturbing and destructive thematic embedded in our economic policy.

Read the rest.

Kevin Drum 1:09 AM Permalink | Trackbacks | Comments (85)

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Comments

You're on your own. Except for the connected, then it's anything but true. YOYO is also a very good description of countries like the Philippines and Brazil (though at least in these places the old welfare system of the extended family is somewhat stronger). Is this where the US wants to go?

And the GOP wants to run on the economy? From Jared Bernstein:

Productivity is up a stellar 15% over this recovery. Real hourly wages of non-managers are up bupkes (-0.6%).
Over five million more people are poor in 2004 (most recent data) compared to 2000, including 1.4 million kids.

Am sure those non-managers and newly poor are ecstactic about the rise in productivity and profits and will duly vote on this basis.

Posted by: snicker-snack on June 29, 2006 at 1:23 AM | PERMALINK

Just more of the same.

Although the top quintile continued its exponential income growth during the Clinton years, the lower and middle class also showed income growth. Otherwise, since 1981 everyone except the top have been shafted. Employment law and policy, minimum wage, taxes, work reward, etc. have all been tilted toward the already priviliged.

If this was France, everyboby would have been on the streets 20 years ago. But we're not. Divided and conquered. White, black, brown, red, and yellow. The country as a whole is not making money. Corporate ptofits, particularly in sectors with influence (energy, arms, pharmas, etc.), are high. CEOs are rewarded irrespective of corporate profit performance.

It's not hard to figure out who is not being paid for increased productivity. The worker.

Posted by: notthere on June 29, 2006 at 1:39 AM | PERMALINK

I think it will take an economic catastrophe similar to the Great Depression before we have any realistic chance to pass the legislation (universal health care, raising the minimum wage and indexing it, Employee Free Choice Act) required to once again expand and strengthen the American middle class.

Am I being too pessimistic?

Posted by: Anonymous on June 29, 2006 at 1:40 AM | PERMALINK

Jared Bernstein writes about the fact that the U.S. economy has been growing at a pretty good clip lately but middle class incomes haven't benefited:

What are you talking about? Wages have RISING lately.

Link

"The Labour Department said productivity, the key factor in rising living standards, rose at an annual rate of 3.7 per cent in the January-March quarter, better than the 3.2 per cent increase initially estimated a month ago. Salaries and benefits per unit of output rose by 1.6 per cent."

Posted by: Al on June 29, 2006 at 1:46 AM | PERMALINK

JUST WONDERING:

Does Kevin Drum have a policy of ignoring the Palestine-Israel problem?

We think we've got it bad? Some of us think the US acts like a bully in the world?

Sort of pales against the Palestinians' situation, doesn't it?

Posted by: notthere on June 29, 2006 at 1:48 AM | PERMALINK

Er, is the salaries and benefits figure adjusted for inflation?

My copy of The Economist Shows wages rising by 3.7% in May, and prices rising by 4.2%: inflation adjusted wages are falling.

Sheesh, this is pretty elementary stuff.

Posted by: Measure for Measure on June 29, 2006 at 1:51 AM | PERMALINK

As for the agenda of the linked article:

Universal Health Care: love it, as does the remainder of the developed world.

"Demand Replacement" for globalization. Er, isn't that what the Fed's stabilization policy amounts to?

"A return to full employment, with a Fed that takes a much more balanced view of inflation vs. job growth..."

What does "more balanced view" mean? The US Central Bank is hardly run by a set of inflation nutters. Among all developed countries listed in my copy of the Economist, the US has the highest inflation. This recommendation smacks of convenient ambiguity at best.

-----
Oh, and I think we can learn something from FDR. When the shit hit the fan, he advocated experimentation. Try everything, but only keep what works.

Bernstein's "Public sector job creation" is hardly a panacea: I would suggest that a little humility and careful study might be in order.

Posted by: Measure for Measure on June 29, 2006 at 2:00 AM | PERMALINK

Sheesh, this is pretty elementary stuff.

Yes, but poor little Al flunked elementary school. Now he's trying to compensate by pretending to be an expert on everything while knowing nothing.

aa

Posted by: aaron aardvark on June 29, 2006 at 2:02 AM | PERMALINK

Am I being too pessimistic?

Probably not. Unfortunately, be careful what you wish for - I think we are due for a very bumpy ride over the next 10 or so years.

Posted by: craigie on June 29, 2006 at 2:15 AM | PERMALINK

...productivity, the key factor in rising living standards, rose at an annual rate of 3.7 per cent in the January-March quarter....

Posted by: Al on June 29, 2006 at 1:46 AM | PERMALINK

The point about this post is how GDP growth is distributed. Zimbabwe has 1100% inflation and plummeting incomes. Think Mugabe feels any of it? We've had pretty decent growth over the last 25 years and little of it shows in the middle and lower income groups. 75% of the nation.

Now, if you were in the top 5% the increase in your gross income has been . . . well . . . gross!

Posted by: notthere on June 29, 2006 at 2:21 AM | PERMALINK

I realize it's a short post, but Jared Bernstein doesn't breath a word about one of the drivers of that which he complains about: massive illegal immigration. By encouraging massive illegal immigration, the Democratic Party not only increases the number of poor people, they also drive down wages for low-wage Americans. And, they end up supporting the agendas of Bush and his backers.

OTOH, if the Democratic Party opposed (really opposed, not just hot air) illegal immigration, they would reduce the number of poor people in the U.S., they would raise wages for low-wage workers, and they'd oppose Bush and his backers instead of supporting them.

Apparently they want the supposed benefits of illegal immigration while enjoying the supposed benefits of complaining about the effects of that which they support.

-- Illegal immigration introduction

Posted by: TLB on June 29, 2006 at 2:34 AM | PERMALINK

I have a yo-yo.

Posted by: American Hawk on June 29, 2006 at 3:02 AM | PERMALINK

I think it will take an economic catastrophe similar to the Great Depression before we have any realistic chance to pass the legislation (universal health care, raising the minimum wage and indexing it, Employee Free Choice Act) required to once again expand and strengthen the American middle class.

Yep! But that is the optimistic scenario. Let's not talk about the pessimistic scenarios.

Posted by: ppk on June 29, 2006 at 3:04 AM | PERMALINK

that the U.S. economy has been growing at a pretty good clip lately but middle class incomes haven't benefited:

Can you say...HOOOOOOKKKEEEDDD on Hedonics?

Lots of ways to cheat the curves and turn inflation (both commodity and monetary) into 'growth'. At least in the Treasury Department.

Fair is fair: every President has cheated the curves since at least 1968-1972.

It just happens to be a lot worse now.

max
['At least the finacial people are happy. They'd better be, since they're the ones hosing themselves with newly printed paper.']

Posted by: max on June 29, 2006 at 3:10 AM | PERMALINK

I think it will take an economic catastrophe similar to the Great Depression before we have any realistic chance to pass the legislation (universal health care, raising the minimum wage and indexing it, Employee Free Choice Act) required to once again expand and strengthen the American middle class.

Am I being too pessimistic?

Nah, you're not being pessimistic enough. You guys had one round i 1861-65. Half time's just about over. Only now it's not the southerners who want to secede, it's the filthy rich.

Posted by: OmniDane on June 29, 2006 at 3:35 AM | PERMALINK

Go f*** yourself: vote Republican.

Posted by: BroD on June 29, 2006 at 6:50 AM | PERMALINK

The GOP = Organized Selfishness

Posted by: Stephen Kriz on June 29, 2006 at 7:09 AM | PERMALINK

American Hawk: I have a yo-yo.

Sadly so do I.

Posted by: American Hawk's Mother on June 29, 2006 at 7:29 AM | PERMALINK

The amazing thing is not that the rich are pushing the YOYO vision of America. It is the number of not so rich who have totally bought into Republican belief that anything adverse they suffer in our economy is their own damn fault. Scratch a member of the Republican rank and file and you will probably find someone who 1) truly believes these are the best of times and 2) has no idea that his wages have actually been declining for decades. Something feels vaguely funny but so long as he clings to "the poor will always be with us" he can put up with the panhandlers on the steet corner.

After October 17, 2005, new bankruptcy filings abruptly declined. Guess what, they are back.

Lots and lots of fully employed people have been talking to me lately about how they just don't make enough money. Their ARM (which they took out to convert equity into cash and to pay down credit card debt) has been going up, but their income is stagnant. Throw in increased gasoline and health care prices, and suddenly real standards of living are in decline.

Buckle up we might encounter a bumpy ride between here and the new year.

Posted by: Ron Byers on June 29, 2006 at 7:35 AM | PERMALINK

Those fortunate enough to own stock shares are not benefitting, either, with the stock averages basically flat for six years. Is executive compensation/hoggishness taking an excessive share, leaving little for the stockholders? I suspect so.

Posted by: bob h on June 29, 2006 at 7:37 AM | PERMALINK

The future of work in America--Republican vision.

"Hey Mr.Tally man, tally me banana."

Posted by: Ron Byers on June 29, 2006 at 8:22 AM | PERMALINK

I thought YOYO was the replacement for FEMA?

Posted by: celcus on June 29, 2006 at 8:36 AM | PERMALINK

It's also the reason why poll after poll shows Americans don't feel the economy is in great shape. It's not because the "librul media" isn't reporting the "good news."

Posted by: Red on June 29, 2006 at 8:38 AM | PERMALINK

The problem is there is a kernel of truth in the YOYO idea. I take it for granted that I'm on my own, and I think as a general rule, most people should too. However, that does not mean that should be a government's policy towards its citizens.

Posted by: Quinn on June 29, 2006 at 8:39 AM | PERMALINK

The US economy is doing quote well compared to the world's other economies. Unemployment is 4.6%, the DOW is over 11,000.

Nothing can stop the "Eyore Democrats" from whining and complaining, though.

Posted by: Havlicek stole the ball on June 29, 2006 at 8:43 AM | PERMALINK

The US economy is doing quote well compared to the world's other economies. Unemployment is 4.6%, the DOW is over 11,000.

The DJIA was at 11,000 seven years ago, so that is no endorsement.

Posted by: Quinn on June 29, 2006 at 8:48 AM | PERMALINK

If you Bush-haters want a dose of reality, Google "USA economy 2006".

All kinds of objective data on how the USA's economy is doing.

Posted by: Down goes Frazier on June 29, 2006 at 9:14 AM | PERMALINK

Blah, blah, blah, yackity, schmackity... less people are making more.

Posted by: aaron on June 29, 2006 at 9:48 AM | PERMALINK

Blah, blah, blah, yackity, schmackity... less people are eating more.

Posted by: Marie Antoinette on June 29, 2006 at 10:00 AM | PERMALINK

Unemployment is 4.6%, the DOW is over 11,000.
One reason unemployment is lower in the U.S. than other countries is that we don't count "discouraged" workers as unemployed, other countries do. If we did, the unemployment rate would be 2-3 points higher. Also, private sector job growth has been only a net of 2 million jobs during Bush's reign, and those are all due to increased government spending.

Posted by: Jose Padilla on June 29, 2006 at 10:12 AM | PERMALINK

Yeah but can you make your YOYO do the EDFI?

Every Dog For Itself?

[Note to all dogs:

Your only social obligation in this culture is to NOT burn the flag.
Instead when you see it you must whimper loudly and let your puppy eyes go moist.
That way big media can gush: What a cute little doggie; he really does care about his country!]

Posted by: koreyel on June 29, 2006 at 10:13 AM | PERMALINK

If you Bush-haters want a dose of reality, Google "USA economy 2006".

Mr. Down, strangely enough people do not need to google their own economic situations and if a majority of the people are disgruntled with these well, that's worth more than an eternity of googling. For instance, I know for me outside the States that this year is better than last year. Oddly too, it's more difficult to spin people about their own economic situations than about things not directly in front of them like getting them on board for something like, oh, an invasion of a non-threatening country.

It would be fun to see you go on down to Main Street and try though.

Posted by: snicker-snack on June 29, 2006 at 10:22 AM | PERMALINK

youre on your own,

Probably tested better with consumers than YOTOLI ("you're on the outside looking in").

It's not about left and right, it's merely a matter of exploitation.
.

Posted by: Grand Moff Texan on June 29, 2006 at 10:24 AM | PERMALINK

Notthere is right... the rape of Palestine continues unabated and the silence is deafening.

Why? Follow the money.

Posted by: Buford on June 29, 2006 at 10:24 AM | PERMALINK

Soooooo.... in liberal America, it's bad if you have to work to earn what you want/need? How very interesting. You all shouldn't even bother campaigning; power will be handed straight to you... BECAUSE YOU DESERVE IT!!!

Posted by: American Hawk on June 29, 2006 at 10:31 AM | PERMALINK

Rugged individualism is one of the cornerstone virtues of the United States. In this country, people take care of themselves and believe that people will be rewarded in proportion to their abilities, courage, foresight, and hard work. The vast majority of Americans long ago rejected the incipient socialism of not being "on your own".

The failure to understand something so basic to the American spirit is yet another reason why liberals and the Democrat party continue to lose elections.

Posted by: Rock on June 29, 2006 at 10:33 AM | PERMALINK

Soooooo.... in liberal America, it's bad if you have to work to earn what you want/need? How very interesting. You all shouldn't even bother campaigning; power will be handed straight to you... BECAUSE YOU DESERVE IT!!!

Hawkie Dear,

you're still living in my basement. It'd be nice if you could start to pay rent some day. Even a token amount to get you started.

Posted by: American Hawk's Mother on June 29, 2006 at 10:39 AM | PERMALINK

Several articals dealing with economics and popular culture lately have been contrasting our present period with the 1870's and 80's, this was also a time when the aggregate growth figures for the country looked very good, but the broad middle classes were not feeling much of the benefit. Back then, the main reason the supposed representatives of the working people could not mount an effective opposition to the trusts and the railroads was that they were too busy refighting the civil war to deal with reality. Reading most of the responses to my posts on this comment section shows we haven't really moved too far. I don't know how many times responders have said we don't want your vote you Republican/Dixiecrat yahoo. I've listened for a couple years to your jihad against people of faith, people who believe children should have two parents, people who think illegal aliens damage the social fabric [and that damaging the social fabric is a bad thing not a good thing], people that think everyone should play by the same rules -- this is why Rove will continue winning the next few election cycles, unless by some chance McCain turns out to be another Teddy Roosevelt.

Posted by: minion of rove on June 29, 2006 at 10:40 AM | PERMALINK

"It's not hard to figure out who is not being paid for increased productivity. The worker."

There is absolutely no reason that increased productivity should result in rising wages for workers. Productivity gains are almost entirely due to capital investments in new technology. These investments are a result of a management strategy and funds provided by stockholders. The return on the investment should go to management and the stockholders.

Why do liberals reflexively assume workers are getting oppressed? Wake up. American workers have the highest standard of living in the world. Something in the liberal mindset just refuses to reward success and instead heaps scorn on the American management system that has produced this economy.

Posted by: Rock on June 29, 2006 at 10:42 AM | PERMALINK

Rock: Rugged individualism is one of the cornerstone virtues of the United States.

Rugged individualism? LOL. Rugged individualism is living on a deserted island and fending for yourself. Not many rugged individualists in these United States.

Posted by: tripoley on June 29, 2006 at 10:44 AM | PERMALINK

"Rugged individualism is one of the cornerstone virtues of the United States. In this country, people take care of themselves and believe that people will be rewarded in proportion to their abilities, courage, foresight, and hard work."

That pathetic illusion is, fortunately, in the process of dying out. The sooner its desparate adherents realize the truth--that success and failure rarely have much correlation with "abilities, courage, foresight, and hard work"--the better.

Posted by: fumphis on June 29, 2006 at 10:46 AM | PERMALINK

We love to talk in the abstract about GNP, GDP, cycles and the great shape the economy is in. Humans in this country are expected to live on $200 a week according to Congress. These are humans who are dispirited by the lack of concern over their slow decline into political obscurity and poverty levels that remind me of the Dust Bowl. Every year is treated as an election year now and the people are forgotten while the top 1% along with business and industry are courted by politicians in order to help that top 1% make even more while destroying what is left of the middle class.

How much is enough? I see this trend spreading to our young; when I tell students we are running out of oil and that global warming is destroying the planet, there only concerns are if it will affect them. We have become come a country of YOYOs and FYIOs (Fuck You Im Okay)

Posted by: nutty little nut nut on June 29, 2006 at 11:10 AM | PERMALINK

Rugged individualism is one of the cornerstone virtues of the United States.

Exactly.
How do you think I got into Yale?

Posted by: W on June 29, 2006 at 11:17 AM | PERMALINK

A few responses, but MaxSpeak is hosting a party from 12:30-2 to talk about all this stuff. He'll provide (virtual) lunch.

To get the skinny of real wages of non-managers, see Table B here:
http://www.bls.gov/news.release/pdf/realer.pdf

The table only goes back a year or so, but on a year-over-year basis, real wage growth has been zero or negative for 22 of the past 24 months.

Overall average compensation has been rising in real terms, but that reflects both the inequality point from the piece and the rising cost of hth care.

Also, it's simply wrong that productivity gains are "almost entirely due to capital investments in new technology." It's counterintuitive--of course workers add value. Their efforts and skills complement technology to drive productivity forward.

In fact, there's a measure called multi-factor productivity, which tries to extract the effect of capital investment:
http://www.bls.gov/news.release/pdf/prod3.pdf

It's been growing, so you're wrong.

Finally, re the role of immigration in all this, I'm sure it matters but it can't be the whole story, or even that much of it. The 1990s was a period of the fastest immigrant flows on record, legal and illegal, and real wages and incomes rose, especially at the low end. And poverty fell a lot.

So demand matters also. Which is why full employment--which we achieved in the late 90s and lost in 2000--is such a critical component of the WITT agenda.

Posted by: Jared Bernstein on June 29, 2006 at 11:19 AM | PERMALINK

Rock,

Why do liberals reflexively assume workers are getting oppressed?

I dunno, Rock. Why did you reflexively assume that of the three parties in a company (worker, management, and investor) the management and investors share in increased profits while the workers get nothing?

Posted by: Tripp on June 29, 2006 at 11:20 AM | PERMALINK

Someone said:
"Soooooo.... in liberal America, it's bad if you have to work to earn what you want/need?"

Funny, when it comes to the inheritance tax debate, suddenly all the repubs are in favor of giving gobs of money to those who didn't earn it. I guess that whole "hard work and diligence" thing only goes for the unwashed masses, huh? I mean, why should that particular republican meme apply to the trust fund kiddies when nothing else in our society does.

Now back to your ditches!

Posted by: Govt Skeptic on June 29, 2006 at 11:22 AM | PERMALINK

Yes and the same way I get invited to all the hot partays! I earned it baybee!

Posted by: Paris Hilton on June 29, 2006 at 11:23 AM | PERMALINK

American workers have the highest standard of living in the world.

Not for long.

How are we supposed to compete with the Chinese?

As Jon Lovitz used to say, "Lower your standards!"

Posted by: mr. ziffel on June 29, 2006 at 11:23 AM | PERMALINK

"In this country, people take care of themselves and believe that people will be rewarded in proportion to their abilities, courage, foresight, and hard work."

Unfortunately, this belief is now being proven to be wrong.

Posted by: thug on June 29, 2006 at 11:33 AM | PERMALINK

American workers have the highest standard of living in the world.


Is this one of those things like, I was sad that I had no shoes until I saw a man with no feet?

Posted by: nutty little nut nut on June 29, 2006 at 11:33 AM | PERMALINK

Ron,

Anyone who took out an ARM to buy a hugely overpriced asset, or worse used a HELOC to finance their living standards way above their means, deserves everything they get. BK for start. Any fool who bought a home for 10X their income is a nut. And don't get me started on all the real estate speculators. Expect a massive wave of BKs for people who took out all those suicide loans over the last years and a real (at least 30%, probably in the 40% range) drop in real estate prices over the next two years in all the 'bubble' areas as the Fed rate climbs.

This has nothing to do with 'rugged individualism' etc but about basic financial planning and not being stupid. And buying a$1.1M SFH on a $80K salary is just stupid. See you on the county steps at the foreclosure sales!

Posted by: buffpilot on June 29, 2006 at 11:37 AM | PERMALINK

buffpilot: See you on the county steps at the foreclosure sales!

It's not a coincidence that the bankruptcy bill was passed. Our Congress Critters and the special interests that bought them can see what's coming down the pike. Debtor prisons anyone?

Posted by: tripoley on June 29, 2006 at 11:43 AM | PERMALINK
What are you talking about? Wages have RISING lately.

Even ignoring the inflation question others have raised, Average wages and middle-class incomes are not the same thing.

If corporate executive salaries, say, quintuple, you'll move the former, probably by a couple percent, without affecting the latter at all.

You can't use overall numbers to rebut a claim about a particular segment of the distribution.

Posted by: cmdicely on June 29, 2006 at 11:50 AM | PERMALINK

Of course, by definition, conservative policies will revert the country to the mean. In economic terms, that means a highly stratified society, where the people with the maximum wealth have all the economic and political power.

Nothing new year.

Wait for the Republicans to come up with a slogan that will convince everyone that this is good for everyone.

Posted by: nut on June 29, 2006 at 11:51 AM | PERMALINK

The US economy is doing quote well compared to the world's other economies. Unemployment is 4.6%, the DOW is over 11,000.

The DJIA when Clinton entered office in 1993 was approximately 3300. The Dow then rose to 11,500 by December 1999, before settling back at 10,600 by the time Bill Clinton left office, for a total increase of 7,300.

Meanwhile, under Bush the Dow went from 10,600 in January 2001 to about 11,000 today, for a total increase of 400.

Who says Republicans aren't great for the economy!

Posted by: Stefan on June 29, 2006 at 11:52 AM | PERMALINK

Debtor prisons anyone?

This can solve our high labor costs as well as the immigration "problem."

Posted by: nutty little nut nut on June 29, 2006 at 11:54 AM | PERMALINK

Tripoley,
But no one made you sign the papers, use the credit card, or buy the Jag.

I have no problems with people being crushed for this. They lived WAY beyond their means, didn't save, and got into debt and now its time to pay the piper. They aslo hurt the rest of us by inflating housing out of reach of the income of people making even twice the median incomes.

One other point. When you short-sell the house, the forgiven debt is considered taxable income by the IRS. And you can't avoid paying it by BK. Yes the finacially stupid will be culled shortly.

Posted by: buffpilot on June 29, 2006 at 11:54 AM | PERMALINK

Tripoley,
But no one made you sign the papers, use the credit card, or buy the Jag.

I have no problems with people being crushed for this. They lived WAY beyond their means, didn't save, and got into debt and now its time to pay the piper. They aslo hurt the rest of us by inflating housing out of reach of the income of people making even twice the median incomes.

One other point. When you short-sell the house, the forgiven debt is considered taxable income by the IRS. And you can't avoid paying it by BK. Yes the finacially stupid will be culled shortly.

Posted by: buffpilot on June 29, 2006 at 11:54 AM | PERMALINK

Buffpilot,

See you on the county steps at the foreclosure sales!

You got that right. My county had foreclosures in 2005 that were FIVE times the number of foreclosures in 2000. The first half of 2006 we have seen 50% more than the first half of 2005, and I think this is just the beginning of an avalanche.

It is time to dust off those old-tyme slogans blaming the poor for their over-spending and laziness.

Posted by: Tripp on June 29, 2006 at 11:57 AM | PERMALINK

buffpilot,

Hey, you beat me to it.

Walk me through this.

Foolish homebuyer, panicked by the rising housing prices, gets an interest-only how to start riding the housing escalator.

Prices fall and foolish homeowner can't make payments. FH short-sells and declares bankruptcy. FH loses house but also owes taxes on forgiven debt. Is that correct?

So FH is homeless and in debt to the IRS, is that the end result?

If so - yikes! Homeless and in hock to Uncle Sam is no way to live a life. Ouch!

Posted by: Tripp on June 29, 2006 at 12:03 PM | PERMALINK

So FH is homeless and in debt to the IRS, is that the end result?

Don't worry, the FH will be able to rely on his private SS-replacement investment account.

Posted by: GWB on June 29, 2006 at 12:18 PM | PERMALINK

Tripp,

Your right! FH ends up BK and renting, with his/hers future wages being garnished to pay off any residual debt to the IRS plus whatever FH still owes to others after his BK. The new bankruptcy laws don't effect the poor at all, but will kill the FH making $100K/years and is now totally underwater.

You will see people going from three-car, 4000 sq ft McMansions in the best areas to suddenly renting an 1000 sq ft apartment in a so-so area. Expect tons of condos and SFH in the sticks to be bulldozed. Also you can expect to see lot's more divorces, alcholism etc as the stress on families to 'keep up appearences' goes way up and people dig much deeper into a hole trying to perserve a lifestyle in the face of ARM resets.

And almost all of this is concentrated in the Blue big coastal cities (exceptions being Phoenix, LV, and all of Florida). Flyover country as barely been touched.

The real question is will the government step in and bailout these idiots.

Posted by: buffpilot on June 29, 2006 at 12:24 PM | PERMALINK

The economy should be designed to make people happy, not to express poorly remembered principles from econ 100.

Posted by: jefff on June 29, 2006 at 12:28 PM | PERMALINK

Jared Bernstein opines: Finally, re the role of immigration in all this, I'm sure it matters but it can't be the whole story, or even that much of it.

Actually, it's deeply intertwined with the issues you complain about. Not just because of illegal immigration itself, but because many of those who support illegal immigration also support the conditions that you decry.

I think you'll find that it's impossible to both support massive illegal immigration and try to fix the problems you complain about.

But, maybe just complaining and not fixing is what the Dems have in mind.

-- Immigration Reform

Posted by: TLB on June 29, 2006 at 12:31 PM | PERMALINK
The economy should be designed to make people happy, not to express poorly remembered principles from econ 100.

More generally, I would say that economic policy should be designed, in light of the best understanding available of the workings of the economy, to increase experienced utility, particularly for those poorest served in the status quo.

Posted by: cmdicely on June 29, 2006 at 12:40 PM | PERMALINK

The economy should be designed to make people happy, not to express poorly remembered principles from econ 100.

The weight assigned by the conservatives to the happiness of the wealthiest people is a thousand times the weight for the rest. So in their mind the conservatives are doing exactly what you want but with results which perhaps do not quite attract your admiration.

Posted by: nut on June 29, 2006 at 12:48 PM | PERMALINK

buffpilot: The new bankruptcy laws don't effect the poor at all, but will kill the FH making $100K/years and is now totally underwater.

The problem with the bankruptcy law is not how it affects people who took out absurdly large ARM's for McMansions. I too have little sympathy for people who indulge in luxuries beyond their means. The problem is that there is little consideration for people who go bankrupt due to medical bills (about half the current bankruptcy cases) or reserves/NG members who have suffer due to extended activations.

Moreover, while I'm a big believer in the importance of personal responsibility, that responsibility should extend to creditors too. Hey bank, you gave an $800k ARM to someone making $100k/yr? Take some responsibility and fire the executives that permitted mortgage policies like that. Foreclosure only netted half the the outstanding principal? Maybe next time you'll appreciate the important responsibility of evaluating credit risks.

The real question is will the government step in and bailout these idiots.

You mean the way they bailed out LTCM or the S&L's?

Posted by: alex on June 29, 2006 at 1:02 PM | PERMALINK

The real question is will the government step in and bailout these idiots.

It will probably cost less than bailing out the Savings & Loans idiots.

buffpilot, dude, I hope you never have a catastrophic illness, which accounts for over half of all bankruptcy filings. I agree that it's foolish to live beyond one's means, but when you are on the bottom end of the totem pole, a threadbare existence might be beyond your means, and every system seems designed to keep you from climbing the ladder.

My hope that you don't have a medical crisis that impacts you financially is perhaps more than a compassionless person such as yourself deserves.

Posted by: maurinsky on June 29, 2006 at 1:05 PM | PERMALINK

For the past generation, conservatives essentially have thought about how they might get along without government. For purposes of present discussion, let us say they have succeeded.

I would like to propose a challenge: how might we get along without corporations? To make the challenge more interesting, simple nationalism or socialism is not an anwswer.

The prize for the winner of this challenge: control of both houses of Congress, the Presidency, and the Supreme Court.

Any takers?

Posted by: Thinker on June 29, 2006 at 1:09 PM | PERMALINK

maurinsky et al,

I have much sympathy for the families of people who get hit by sudden illness. I have none for the families who are making big bucks, yet have no nest egg, no fallback, and are in debt to their proverbiale necks. The family making $100K/yr, buying a $1.1M McMansion with 100% financing has no one to blame but themselves when forced into BK becuase they suddenly need chemo and can't cover the ARM hikes. Just becuase a sudden illness is the straw breaking the camels financial back doesn't mean it was the cause of the BK.

And I have tons of people at the bottom end of the totem pole and think they should be given a helping hand to move up. But that's not the people I'm talking about. The bottom is just as stupid making $35K/yr and using a I/O ARM to buy a $350K house. And I have no sympathy for them either.

Posted by: buffpilot on June 29, 2006 at 1:36 PM | PERMALINK

The real question is will the government step in and bailout these idiots.

Posted by: buffpilot on June 29, 2006 at 12:24 PM

I really don't care if the government bails out the idiots you are talking about, but I live in fly over country. The people I have been talking to are not people living in the housing bubble. They are people who haven't had a raise in 5 or 10 years. They are people who have had to pull money out of hard earned equity (their idea of savings) to pay credit card bills, doctor bills and college tuition--the kinds of things rising wages should cover. They are the people who are really in trouble.

Posted by: Ron Byers on June 29, 2006 at 1:46 PM | PERMALINK

I've read Bernstein's book and it's excellent!! Before making a judgement about what you think Bernstein is saying, read his book, All Together Now: Common Sense For a Fair Economy.

The flip to YOYO is WITT (we're in this together).

Posted by: LJM on June 29, 2006 at 1:52 PM | PERMALINK

...the U.S. economy has been growing at a pretty good clip lately but middle class incomes haven't benefited

I'm middle class, and I've benefitted.

I guess you have to actually "work" to benefit.

Posted by: sportsfan79 on June 29, 2006 at 2:23 PM | PERMALINK

I'm middle class, and I've benefitted.

And, as we all know, a personal anecdote of one individual trumps all broader evidence to the contrary.

Posted by: Stefan on June 29, 2006 at 2:26 PM | PERMALINK

This disconnect between productivity and living standards is one of todays most important, and most unsettling, economic dynamics.

When productivity increases the costs of goods and services go down. Thus, if it is widespread, increased productivity increases the wealth of the middle class even if their nominal incomes do not rise. It is a problem that inflation is defined in such a way that increases in quality and longevity, which generally increase faster than nominal cost, are not reflected in the inflation index.


If you posit that productivity is increasing faster than wages, then you are positing an increased purchasing power at fixed incomes and prices. If you measure the material wealth in terms of equivalent kinds of stuff instead of dollars of income, then the middle classes are indeed getting wealthier.

The problem is in certain parts of the economy, such as housing in some parts of the country and gasoline everywhere, where productivity increases are not leading to reduced costs of the goods.

Posted by: republicrat on June 29, 2006 at 2:35 PM | PERMALINK

republicrat,

The problem with your reasoning is that I don't consume all goods equally.

Yes, I can get a great deal on a new DVD player but I'll only make that purchase once. At the same time the cost of gasoline (which I consume weekly) has gone up, and ditto with the other fuels.

Add health care and college tuition to the list of rising prices. Both of these affect me greatly.

Overall with stagnant wages I'm still losing ground.

Posted by: Tripp on June 29, 2006 at 2:55 PM | PERMALINK

Mesa, Arizona, a Republican utopia where every citizen is on their own. No taxes, no services. No libraries, no parks.

Posted by: Hostile on June 29, 2006 at 3:06 PM | PERMALINK

republicrat: When productivity increases the costs of goods and services go down.

No, that's only one of a number of possible effects. By definition productivity is the value of goods and services produced per hour of work. No iron clad law says that has to result in lower prices. Wages could be increased, which is not inflationary if the rate of wage increase is no higher than the rate of productivity increase. In fact, failure to increase wages in response is deflationary. That ain't no picnic either (except for creditors). See latter 19th century.

Another possibility is that gross profits could increase. That could be dispensed as dividends, or, as is happening now, companies could sit on big piles of cash.

It is a problem that inflation is defined in such a way that increases in quality and longevity, which generally increase faster than nominal cost, are not reflected in the inflation index.

The US gov't has switched to the chain method of calculating inflation. That answers most such concerns. The difference in switching to the chain method though has only been a fraction of a percent.

The problem is in certain parts of the economy, such as housing ...

Inflation has long been measured using rents as a proxy for housing costs. For many years this worked fine, with rental prices generally tracking purchase prices. In recent years this has broken down, with purchase price increasing much faster than rental price. That's good evidence for a bubble. It also means that inflation is actually greater than reported for anyone buying a home.

Posted by: alex on June 29, 2006 at 3:33 PM | PERMALINK
TLB 2:34 AM By encouraging massive illegal immigration, the Democratic Party not only increases the number of poor people, they also drive down wages for low-wage Americans.
You missed Reality 101 because it's the Republican corporate business sponsors who encourage illegal immigration for those very reasons you cite. This is a perfect example of decades of Republican propaganda against Democrats who get the blame for Republican policy.
power will be handed straight to you... BECAUSE YOU DESERVE IT!!! American Hawk10:31 AM
That is exactly how Bush has benefited his entire life. Privilege hath its privileges.
Rugged individualism is one of the cornerstone virtues of the United States. Rock 10:33 AM
That is why Republicans are for the repeal of the Estate Tax, to create a permanent class of aristocracy immune from the dangers of "rugged individualism."
Stefan:a personal anecdote of one individual trumps all broader evidence to the contrary.
Especially if it's unsubstantiated without real data.
When productivity increases the costs of goods and services go down. republicrat 2:35 PM
Not when the cost benefit accrues to the managerial and investment class. Then the cost of goods and services remain the same or increase without benefit to the production people. Posted by: Mike on June 29, 2006 at 4:13 PM | PERMALINK

Stefan wrote:

And, as we all know, a personal anecdote of one individual trumps all broader evidence to the contrary.

Well Stefan, check upthread and you'll see that your fellow loony lib 'Snicker snack', when confronted with aggregate data, took the opposite of your argument.

You can't have it both ways, although dems continually try to.

Posted by: sportsfan79 on June 29, 2006 at 7:58 PM | PERMALINK

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Posted by: aacxmmc on June 30, 2006 at 2:42 AM | PERMALINK


sportsfan79: You can't have it both ways, although dems continually try to.

FLIP

"No American will be allowed to torture another human being anywhere in the world." - GWB 1/26/06


FLOP

Bush administration lawyers argue that a new law that bans cruel, inhuman or degrading treatment of detainees in U.S. custody does not apply to people held at Guantanamo Bay. - WASH.POST 3/3/06

Posted by: thisspaceavailable on June 30, 2006 at 9:28 AM | PERMALINK

TLB 2:34 AM By encouraging massive illegal immigration, the Democratic Party not only increases the number of poor people, they also drive down wages for low-wage Americans.

You missed Reality 101 because it's the Republican corporate business sponsors who encourage illegal immigration for those very reasons you cite. This is a perfect example of decades of Republican propaganda against Democrats who get the blame for Republican policy.

Really Mike ? Then tell me why the amnesty bill in the Senate had virtually unanimous Democratic support and opposition has been spearheaded by the House Republicans ? Why has the populism come from the Right while all the Left saw was another identity group to add to its political base ? Why is it that the Right has fought for American workers and taxpayers while Teddy Kennedy wants to sock them with the price tag of his 'compassion' ?

A political party based on identity group secular cultural liberalism has nothing to say to YOYO or WalMart voters. A populist cultural right party (William Jennings Bryan, anyone ?) is what America needs right now. And will get if the Tancredo-Lou Dobbs wing dominates the GOP 2008 convention.

Posted by: Charles Warren on June 30, 2006 at 12:17 PM | PERMALINK
A political party based on identity group secular cultural liberalism has nothing to say to YOYO or WalMart voters.

If such a party actually existed, that argument might have some relevance.

Posted by: cmdicely on June 30, 2006 at 12:32 PM | PERMALINK

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Posted by: kk on July 1, 2006 at 2:21 AM | PERMALINK




 

 

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