08/30/2011 archive

It’s a topic I’ve addressed before-

How to feel poor on $500,000 a year

Mon Sep 20, 2010 at 06:46:14 AM EDT

In Which Mr. Deling Responds to Someone Who Might Be Professor Todd Henderson

J. Bradford DeLong, Department of Economics, U.C. Berkeley

September 18, 2010

Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot (get) you all of that. … (W)hy does he think that that is the way things should be? … (H)ere is the dirty secret: Professor Henderson thinks that that is the way things should be because he knows people for whom that is the way it is. … Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world. And so he is sad. He and his wife deserve to be successful. And he knows people who are successful. But he is not one of them–widening income inequality over the past generation has excluded him from the rich who truly have money.

I’ll note that Mr. Deling has respectfully redacted the name of the offending asshole, but I’m free to shout it from the roof tops.

So what has changed?  Things have gotten worse of course!

"Who rules America? Breaking down the top 1%"

by Gaius Publius, Americablog

on 8/29/2011 10:55:00 AM

(T)his article breaks down the top 1% of American wealth into strata, and talks about the differences. It’s a really instructive piece, and an easy read.

The Lower Half of the Top 1% The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. Everyone’s tax situation is, of course, a little different. On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes, leaving them with around $250k to $300k post tax. This group makes extensive use of 401-k’s, SEP-IRA’s, Defined Benefit Plans, and other retirement vehicles, which defer taxes until distribution during retirement. Typical would be yearly contributions in the $50k to $100k range, leaving our elite working group with yearly cash flows of $175k to $250k after taxes, or about $15k to $20k per month. Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group. The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person. While an after-tax income of $175k to $250k and net worth in the $1.2M to $1.8M range may seem like a lot of money to most Americans, it doesn’t really buy freedom from financial worry or access to the true corridors of power and money. That doesn’t become frequent until we reach the top 0.1%.

…

(T)he people above, the “lower half of the top 1%”, still work for a living. I would put them at the top level of the “retainer class” – wealthy, but still servants.

In Roman times, these would be the very-well-off top-level administrators and professionals, many of them ex-Greek slaves, who service the real Masters (the emperor and wealthier senatorial families) and oversee the constant flow of peasant wealth upwards, from which they get a hand-me-down share.

For the author, the key American economic super-strata are:

• 99.0%-99.5%  –  The lower half of the top 1%
• 99.5%-99.9%  –  Most of the upper half of the top 1%
• The top 0.1%  –  The Big Boyz (and Girlz, but very few of those)
• The top 0.01%  –  Where most of the real wealth is concentrated

The first sub-group has a lot of retirement anxiety, as the article makes clear; and the second has some guilt. Guess where the power lies.

I like Gaius.  I like what he writes and I understand from TheMomCat who has met him that he’s a very nice guy.  He has another piece earlier that touches on the same subject-

$2 of every $3 in income growth from 2002-2007 went to the upper 1%

by Gaius Publius, Americablog

on 8/25/2011 08:21:00 PM

Not the upper 10%; the upper 1%. (2002 is the bottom of the tech crash; 2007 is just pre-the bank crash.)

Another bad stat – In 1967, 97% of prime age men with only HS diplomas were working. Today, the number is 76%. Stunning; the middle class (the real one, not the faux-middle class we see on TV) is collapsing hard from within.

All of this comes via Don Peck and his new Atlantic article, “Can the Middle Class Be Saved?“.

…

Peck makes several points that regular readers will be familiar with – in particular, the notion that the super-rich (Our Betters) have not only delinked their expenses from the U.S. economy – they’re started to delink their incomes from it as well.

…

The run-up in wealth inequality is the big story of this generation; in my view, a world-historical event that will have a world-historical outcome if we’re not careful. This wealth will be redistributed, one way or another, in this generation or a later one.

Fascinating stuff.  I encourage you to click the links.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Dean Baker: President Obama’s Job Creation Mirage

We’ve heard plenty about Obama’s post Labor Day job creation speech, but will it contain anything that might actually work?

President Obama has discovered how serious the recession is. That’s what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.

But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama’s weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.

Glen Greenwald: The Decade’s Biggest Scam

The Los Angeles Times examines the staggering sums of money expended on patently absurd domestic “homeland security” projects: $75 billion per year for things such as a Zodiac boat with side-scan sonar to respond to a potential attack on a lake in tiny Keith County, Nebraska, and hundreds of “9-ton BearCat armored vehicles, complete with turret” to guard against things like an attack on DreamWorks in Los Angeles.  All of that — which is independent of the exponentially greater sums spent on foreign wars, occupations, bombings, and the vast array of weaponry and private contractors to support it all — is in response to this mammoth, existential, the-single-greatest-challenge-of-our-generation threat:

“The number of people worldwide who are killed by Muslim-type terrorists, Al Qaeda wannabes, is maybe a few hundred outside of war zones. It’s basically the same number of people who die drowning in the bathtub each year,” said John Mueller, an Ohio State University professor who has written extensively about the balance between threat and expenditures in fighting terrorism.

Last year, McClatchy characterized this threat in similar terms: “undoubtedly more American citizens died overseas from traffic accidents or intestinal illnesses than from terrorism.”  The March, 2011, Harper’s Index expressed the point this way: “Number of American civilians who died worldwide in terrorist attacks last year: 8 — Minimum number who died after being struck by lightning: 29.”  That’s the threat in the name of which a vast domestic Security State is constructed, wars and other attacks are and continue to be launched, and trillions of dollars are transferred to the private security and defense contracting industry at exactly the time that Americans — even as they face massive wealth inequality — are told that they must sacrifice basic economic security because of budgetary constraints.

This is your morning Open Thread. Pour a cup of your favorite morning beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

August 30 is the 242nd day of the year (243rd in leap years) in the Gregorian calendar. There are 123 days remaining until the end of the year.

On this day in 1967, Thurgood Marshall becomes the first African American to be confirmed as a Supreme Court justice. He would remain on the Supreme Court for 24 years before retiring for health reasons, leaving a legacy of upholding the rights of the individual as guaranteed by the U.S. Constitution.

Thurgood Marshall (July 2, 1908 – January 24, 1993) was an American jurist and the first African American to serve on the Supreme Court of the United States. Before becoming a judge, he was a lawyer who was best remembered for his high success rate in arguing before the Supreme Court and for the victory in Brown v. Board of Education. He was nominated to the court by President Lyndon Johnson in 1967.

Marshall was born in Baltimore, Maryland on July 2, 1908, the great-grandson of a slave who was born in modern-day Democratic Republic of the Congo.His original name was Thoroughgood, but he shortened it to Thurgood  in second grade because he disliked spelling it. His father, William Marshall, who was a railroad porter, instilled in him an appreciation for the Constitution of the United States and the rule of law.

Marshall graduated from Frederick Douglass High School in Baltimore in 1925 and from Lincoln University in Pennsylvania in 1930. Afterward, Marshall wanted to apply to his hometown law school, the University of Maryland School of Law, but the dean told him that he would not be accepted because of the school’s segregation policy. Later, as a civil rights litigator, he successfully sued the school for this policy in the case of Murray v. Pearson. As he could not attend the University of Maryland, Marshall sought admission and was accepted at Howard University School of Law.

Marshall received his law degree from the Howard University School of Law in 1933 where he graduated first in his class.

Marshall won his very first U.S. Supreme Court case, Chambers v. Florida, 309 U.S. 227 (1940), at the age of 32. That same year, he was appointed Chief Counsel for the NAACP. He argued many other cases before the Supreme Court, most of them successfully, including Smith v. Allwright, 321 U.S. 649 (1944); Shelley v. Kraemer, 334 U.S. 1 (1948); Sweatt v. Painter, 339 U.S. 629 (1950); and McLaurin v. Oklahoma State Regents, 339 U.S. 637 (1950). His most famous case as a lawyer was Brown v. Board of Education of Topeka, 347 U.S. 483 (1954), the case in which the Supreme Court ruled that “separate but equal” public education, as established by Plessy v. Ferguson, was not applicable to public education because it could never be truly equal. In total, Marshall won 29 out of the 32 cases he argued before the Supreme Court.

Marshall served on the Court for the next twenty-four years, compiling a liberal record that included strong support for Constitutional protection of individual rights, especially the rights of criminal suspects against the government. His most frequent ally on the Court (indeed, the pair rarely voted at odds) was Justice William Brennan, who consistently joined him in supporting abortion rights and opposing the death penalty. Brennan and Marshall concluded in Furman v. Georgia that the death penalty was, in all circumstances, unconstitutional, and never accepted the legitimacy of Gregg v. Georgia, which ruled four years later that the death penalty was constitutional in some circumstances. Thereafter, Brennan or Marshall dissented from every denial of certiorari in a capital case and from every decision upholding a sentence of death.[citation needed] In 1987, Marshall gave a controversial speech on the occasion of the bicentennial celebrations of the Constitution of the United States. Marshall stated,

   

“the government they devised was defective from the start, requiring several amendments, a civil war, and major social transformations to attain the system of constitutional government and its respect for the freedoms and individual rights, we hold as fundamental today.”

In conclusion Marshall stated

   

“Some may more quietly commemorate the suffering, struggle, and sacrifice that has triumphed over much of what was wrong with the original document, and observe the anniversary with hopes not realized and promises not fulfilled. I plan to celebrate the bicentennial of the Constitution as a living document, including the Bill of Rights and the other amendments protecting individual freedoms and human rights.”

He retired from the Supreme Court in 1991, and was reportedly unhappy that it would fall to President George H. W. Bush to name his replacement. Bush nominated Clarence Thomas to replace Marshall.

Marshall died of heart failure at the National Naval Medical Center in Bethesda, Maryland, at 2:58 p.m. on January 24, 1993 at the age of 84. He is buried in Arlington National Cemetery. His second wife and their two sons survived him

On November 30, 1993, Justice Marshall was posthumously awarded the Presidential Medal of Freedom by President Bill Clinton.

The former vice chair of the Federal Reserve and member of the President Obama’s Deficit Commission (aka Cat Food Commission), Alice Rivlin joined  a panel discussion about what should be included in the Obama’s jobs initiative.

Most of what she has suggested will not create jobs and will just put our social safety nets at further risk of being cut or completely dissolved. The idea that a one years payroll tax holiday for both employers and employees is ridiculous on its face. Not only have tax cuts not produced jobs over the last eleven years but this particular tax cut will put Social Security at even further risk. Nor will the idea that so-called “reform” of Social Security  and Medicare would “grow the economy”.

Economist Dean Baker examines President Obama’s “widely hyped upcoming speech on jobs after the Labor Day weekend.” He states:

At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.

As it stands, the social security programme is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the programme. Given President Obama’s willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn’t generate much enthusiasm.

snip

There are also reports that President Obama may propose some sort of tax subsidy for job creation. Such a subsidy can be bad or not so bad. One of the proposals, temporarily eliminating the employer side of the payroll tax, is a great plan – if your intention is to give still more money to business and undermine social security.

There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment. If raising the cost of labour by 15-20% doesn’t reduce employment, then we can’t think that reducing the cost of labour by 6.2% as a result of temporarily eliminating the payroll tax will increase employment. (Sorry, Mr President, logic can be cruel.)

(emphasis mine)

Nor will the creation of an infrastructure bank:

This would allow the government to treat long-lived infrastructure investment as capital expenditures depreciated over their expected lifetimes, rather than expenditures to be paid for in full in the years the construction takes place. This is good policy and accounting (it is the same approach used by both private businesses and state governments), but it is not going to create many jobs and certainly not in the next couple of years.

The there are all those trade agreements with Panama, South Korea and Colombia, that as Baker says, “even their supporters can’t claim with a straight face that they will generate any noticeable number of jobs.”

We so screwed.

Evening Edition is an Open Thread

1 NASA: Space station may be evacuated by late November

By MARCIA DUNN, AP Aerospace Writer

40 mins ago