Apr 23 2012

Can You Fool 99% of the People 100% of the Time?

(4 pm. – promoted by ek hornbeck)

One of President Obama’s political heroes, Abraham Lincoln famously said, “It is true that you may fool all of the people some of the time; you can even fool some of the people all of the time; but you can’t fool all of the people all of the time.”  The question for today’s politicians is, can you fool 99% of the people 100% of the time?  That is, can you create and implement policies that blatantly serve a tiny fraction of the people at the expense of all of the people and get away with it?

As President Obama’s populist rhetoric heats up into campaign mode and important measures of his own and his party’s performance lag, the question arises, will the voters notice amidst all of the rhetoric that the job market is not improving and income inequality is growing?  

Let’s start with jobs. There’s been a bit of ballyhoo about the “progress” in job growth and the White House accentuating the positive, to wit, “Despite adverse shocks that have created headwinds for economic growth, including weak construction investment, the economy has added private sector jobs for 25 straight months, for a total of 4.1 million jobs over that period.”

On the other hand, here’s what the Bureau of Labor Statistics employment-population ratio time series shows:

employment population ratio

Or to capture the most up-to-date numbers, here is a table:

emp-pop table-c

So, as these data show, despite all of the brewhaha about “unemployment” ticking up or down a tenth of a percent and media hyperventilation about one sector or anothers’  performance in creating jobs, employment relative to population dropped to a low at the beginning of the Obama administration and has remained flat since.

President Obama’s latest attempt to create jobs, is  his JOBS Act.  It’s a bipartisan bill, birthed in the Obama administration’s Jobs and Competitiveness Council.  The legislation steamed through both houses of Congress recently and President Obama eagerly signed it.  President Obama was supportive of this bill even in its early stages as written and introduced by Republicans in the House:

The Administration supports House passage of H.R. 2930… This proposal, which would enable greater flexibility in soliciting relatively small equity investments, grew out of the President’s Startup America initiative and has been endorsed by the President’s Council on Jobs and Competitiveness. H.R. 2930 is broadly consistent with the with the President’s proposal.

Jim Hightower got right to the point in his comment on the JOBS Act:

In an urgent bipartisan push, Democrats and Republicans have joined hands across the aisle to pass the JOBS Act.

In this time of “The Great Hurt” – with widespread unemployment, middle-class incomes tumbling and the price of gasoline skyrocketing – we can all applaud our stalwarts in the capital city for meeting the No. 1 need of America’s hard-hit economy: deregulating Wall Street.


I thought this was a jobs bill?

Apparently, Mr. Obama sees the neoliberal project of reducing the regulation of the finance and corporate sector as a bonanza for job creation.

Among many other progressives, Robert Kuttner disagrees with the President:

This is what Bipartisanship looks like.  This past week, it looked like the JOBS Act. That’s the legislation that sailed through Congress making it easier for investment bankers and start-ups to sell shares of stock to a gullible public without making the usual SEC disclosures, much less following the anti-fraud requirements of the 2002 Sarbanes-Oxley Act.

Its Wall Street and Silicon Valley sponsors baptized it the JOBS Act, a contrived acronym for Jumpstart Our Business Startups — claiming that it would increase jobs. An ill-timed scandal involving accounting misrepresentations by Groupon in its stock pitch nearly rained on the JOBS Act’s parade. But President Obama signed the Act anyway, in a display of… bipartisanship.

Obama, in a Rose Garden ceremony, called it a “game changer” that would promote hiring by small businesses. More likely, it will promote stock frauds.  …

No serious person thinks waivers from disclosure and accounting rules will generate many jobs.

Speaking of neoliberal projects that have an effect on job losses, President Obama is now negotiating in secret another set of Free Trade Agreements, this time called the Trans-Pacific Partnership (TPP) with eight pacific rim nations.  Neoliberals love these deals because they deregulate Wall Street and the Corporate sector. They are also bad for citizens in that they diminish the sovereignty of nations and their citizens by empowering corporations to impose discipline on them through arbitration panels and organizations. That said, the record of job destruction of these deals is well established now:

A typical pro-business study predicted in 1992 that NAFTA would create 130,000 US jobs in two years, double US exports to Mexico and create 609,000 jobs there. Today Tom Donahue, CEO of the US Chamber of Commerce, repeats the promise, saying the three new treaties also “are about creating jobs.”

According to the Economic Policy Institute, however, between 1993 and 2004, the US trade deficit with Mexico ballooned by $107 billion, which cost 1,015,290 US jobs, 123,000 in California. But although those jobs went south, Mexico lost far more jobs because of the treaty than those relocated from the US.

Mexico lost a million jobs just in the first year the treaty took effect. Because the treaty allowed US grain companies to dump corn in Mexico, 1.3 million farmers lost their livelihood as well. Pork dumping cost another 120,000 jobs. Eliminating its domestic content laws cost the jobs of thousands of auto parts workers.

Despite the well-known negative effects on jobs and workers of these Free Trade agreements, President Obama has continued to press for them and signed 3 free trade agreements negotiated by George W. Bush into law thus far in his administration despite government reports suggesting a loss of American jobs and a worsening of the US trade balance for at least one of these agreements.  But at least the deals were bipartisan:

The White House depended on Republican support for the trade agreements to overcome the passionate opposition of Democrats concerned about the loss of American jobs to foreign competition…

Service providers like banks and law firms are expected to benefit. But many manufacturers, and the textile industry in particular, have argued that they will be disproportionately hurt.

Thank goodness the banks will prosper!

Sadly when people think about the President’s performance on jobs, even President Obama’s signature “job-saving” act, the auto industry bailout has been hard on workers and has killed a lot of jobs and weakened unions:

Obama and his auto commission have decided to use the power of the capitalist state to impose a solution fully in keeping with neoliberalism. Whatever the ultimate outcome for GM and Chrysler, the industry would be modeled on the lean and mean transplants: competitive, profit-making machines with weak or no unions. Finance would retain a dominant role in deciding its priorities. And the demand for short-term profitability, discouraging longer-term investments and costly new technology, would come at the expense of the environment. The administration is using its power to force reluctant bondholders to accept hugely discounted returns, in the name of the broader interests of the capitalist class as a whole. It is using the threat of bankruptcy to force workers to accept further job loss, reductions in wages, benefits, pension rights, work intensification, and deteriorating working conditions. The firing of Wagoner was an effort to appeal to the growing anger of many Americans with the greedy CEO’s of the financial sector-while making no real fundamental changes, other than reinforcing the disciplining power of Wall Street financial interests. In a similar way, in appearing to be equally harsh with both bondholders and the UAW, the administration maintains a façade of fairness-even though workers will end up paying with their basic livelihoods and pensions.

In the face of a lack of mobilization and struggle by their unions, North American workers have been disoriented, demobilized, and frightened by mass layoffs, speedup, plant closures, and threats of the bankruptcy of their employers. Both the UAW and CAW were compromised by previous concessions, and the larger labor movements in both countries have been unable to mount any real challenges to neoliberalism. This has emboldened employers and the state in their demands on the workers. The auto unions accepted the terms of the original demands with minimal conditions of their own. The UAW negotiated concession agreements with Ford and GM, but wasn’t able to resolve the issue of company contributions to the VEBA [union-administered funds for retiree health care benefits] in the latter.

As one might expect, this failure by the Obama administration to craft policies that make a significant improvement in employment has likely been a strong contributing factor in the escalation of income inequality on President Obama’s watch:

Under Bush, the 1% captured a disproportionate share of the income gains from the Bush boom of 2002-2007.  They got 65 cents of every dollar created in that boom, up 20 cents from when Clinton was President.  Under Obama, the 1% got 93 cents of every dollar created in that boom.  That’s not only more than under Bush, up 28 cents.  In the transition from Bush to Obama, inequality got worse, faster, than under the transition from Clinton to Bush.  Obama accelerated the growth of inequality…

Income concentrations are relatively rare, but when they happen, sharp policy moves can retain a strong measure of equality.  It’s well-known at this point that President Obama did not want to make such moves.  TARP, cramdown, and the foreclosure fraud settlement suggest that his interests lie in preserving the capital structure of the large banks.

Here’s a handy little chart (quoted from a report by economist Emmanuel Saez) in Stoller’s article:

saez income inequality chart

While Stoller wants us to pay attention to the awful number showing the way that the 1% have managed to vacuum up all of the benefit of the economic growth in this “recovery,” it might be well to also pay attention to the number to its immediate left showing the portion of growth that has trickled down on the 99%.  

If it’s still, “the economy stupid,” then this lack of improvement for the 99% should have ramifications for Mr. Obama’s re-election prospects.

Mr. Obama has been sounding populist themes in his campaign appearances, even discussing income inequality.  Recently Mr. Obama said, “What drags down our entire economy is when there’s an ever-widening chasm between the ultra-rich and everybody else.”

Mr. Obama has lately been promoting the Buffett Rule, which appeals to popular sentiments about income distribution but, will have no measurable effect on income distribution.  The Buffett Rule may be ineffective at correcting income inequality, but for neoliberals hellbent on rolling back entitlements, it might have a particular value:

If the Buffet rule affects very few people, does little to reduce the deficit, and adds a new layer of complexity to the tax system, why bother with it? The answer is that it affects the perceived fairness of the system which, in turn, affects the willingness of the middle class to pay their fair share. Eventually, to plug a gargantuan deficit hole, we are going to need major sacrifices from the middle class as well as from the wealthy as part of a comprehensive overhaul of the tax system and restrained growth of entitlements. But a precondition for that broader sacrifice is some sense on the part of the public that the deck is not stacked against them, that everyone does play by the same rules, that millionaires don’t receive favored treatment while programs for the middle class and the poor are being slashed.

According to the Brookings Institution, the Buffett Rule will be of little use in helping correct the maldistribution of income that plagues the 99%, but it will make a lovely, inexpensive token offering to make the 99% feel better when neoliberals ram through policies that screw the 99% by destroying the social safety net.  One must wonder if Mr. Obama, who during this years budget debacle practically begged the Republicans to take a bite out of Social Security and Medicare in exchange for a modest concession on taxes, shares this thinking with other members of the elite.  Looking at Mr. Obama’s economic performance in terms of who has benefitted and who has been asked to pay the costs it’s hard for a person who is consciously a member of the 99% not to conclude that Mr. Obama has mostly been working for the 1%.


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