Tag: Economics

Last week the House of Representatives killed a proposal that would have raised the minimum wage tp $10.10 an hour over two years. It failed with not one Republican vote in favor and six Democrats voting against it, as well. In an article for the Los Angeles Times, David Horsey says that while both Democratic and Republican politicians express concern for the middle class, they have failed miserably to address the growing class divide in the Unites States.

As politicians in Washington slam one another over competing budget priorities, most avoid facing up to the disturbing question behind all the numbers: Is the American Dream temporarily stalled or permanently kaput? [..]

This is not the country we like to think we are and it is not the country our political leaders are willing to admit they have helped create. Thirty years of catering to Wall Street, big business and the U.S. Chamber of Commerce has not boosted the American economy the way it was meant to do. Yes, the financial industry and giant corporations are awash in wealth, but they are not hiring more workers, they are not paying better pay, they are not enhancing benefits, they are not sharing the wealth. On the contrary, the typical American is working much harder for worse compensation. He or she is paying a bigger share of the healthcare bill and has no pension plan waiting at the end of the line.

This is an all-American crisis bigger than the deficit or the war on terrorism, but no one seems ready to take it on.

Mr. Horsey notes a rundown of the facts about today’s American economy by economics columnist Jon Talton:

• Worker productivity has increased nearly 23% since 2000, but hourly wages rose a pitiful 0.5% in that period.

• Taking a longer view back to 1973, productivity is up 80% between now and then, but pay is up only 11%.

• People at the bottom of the wage scale are earning less now than similar workers in 1979.

• Employees in the middle of the wage scale are getting 6% more than in 1979, but all that increase happened in the 1990s.

• High earners, meanwhile, are making 37% more than back in the 1970s, and the much-talked-about folks in the top 1% have enjoyed a 131% increase in earnings.

In his article, Mr. Talton furthers concludes:

This reality is at complete odds of our self-image as the Land of Opportunity. It is also a change from a previous America. We’ve been losing ground. Some reasons are obvious, others are complex. Many are familiar to readers of this column, and a few are the subject of sharp debate.

Globalization, offshoring and technology have decimated the old blue-collar middle class. The economy has shifted to service jobs that not only tend to pay less but are increasingly part time and temporary. [..]

Whatever the causes, little is being done to correct our trajectory into historic high inequality that is greater than other advanced nations.

Things may have to get worse before change happens. One thing is clear: Our situation is unsustainable and un-American.

Economist Richard Wolff joins Bill to shine light on the disaster left behind in capitalism’s wake, and to discuss the fight for economic justice, including a fair minimum wage. A Professor of Economics Emeritus at the University of Massachusetts, and currently Visiting Professor in the Graduate Program in International Affairs of the New School. [..]

“We have this disparity getting wider and wider between those for whom capitalism continues to deliver the goods by all means, [and] a growing majority in this society facing harder and harder times,” Wolff tells Bill. “And that’s what provokes some of us to begin to say it’s a systemic problem.”

In a day long Senate hearing, Ina Drew, the former head of the chief investment office that oversaw the London trading operation, Braunstein, JP Morgan’s former chief financial officer,  acting chief risk officer Ashley Bacon and Peter Weiland, Chase’s former head of market risk, appeared to answer questions about it disastrous “London whale” trading loss. Along with high-ranking federal regulators, they face withering questions if front of Senator Carl Levin’s Permanent Subcommittee on Investigations a day after the committee release a damning 300-page report on JP Morgan’s $6.2bn debacle. While the report lays out the evidence that JP Morganwas plating fast and lose with regulations and investor’s money, the report is heavily redacted giving the appearance that even Sen. Levin’s committee is covering for Jamie Dimon and, perhaps higher ups in the White House, under the guise of “protecting the markets.”

In an article by Pam Martens at Wall Street On Parade, she partially reconstructs some of the missing pieces:

Although the “Redacted” stamp has censored much of the relevant information on this stock trading, a few snippets can be pieced together. We learn, for example, that the original budget proposed for stock trading in 2006 was twice that for credit trading. The plan was to trade a maximum of $5 million in credit derivatives and $10 million in stock trading – the specific type of stock transactions have been redacted from the document while those for credit trading have been left in. Since the notionals (face amount) of the credit derivatives eventually grew to hundreds of billions of dollars by early 2012, one has to wonder what the stock-related trading grew to from a proposed $10 million since it was originally slated to be twice as large as credit trading.

Another item that slips through is that “ETFs will also be treated as trading instruments.” ETF is an acronym for “Exchange Traded Fund,” portfolios of stocks that trade on stock exchanges. In a memo dated May 5, 2006 to Jason Hughes at JPMorgan from Roger J. Cole in the Compliance Department, we learn that there is a plan to trade stock market indices. The caveat is given by Cole that: “…compliance approval required before trading in credit/equity indices with less than 20 names as we discussed.”

She concludes that the Senate needs to release the redacted portions of the report to let in some “disinfecting sunshine.” The article also contains and excellent chart of the hierarchy of the International Chief Investment Office that was headed by Javier Martin-Artajo, that blogger bobswern at Daily Kos gives us further incite:

If you take a look at the organizational chart provided by Pam Martens, immediately above, it’s topped-off with Javier Martin-Artajo. The reality was that, at the time, Martin-Artajo reported to JPMC CIO head Ina Drew who, in turn, reported to JPMC CEO Jamie Dimon, among others.

I’ve italicized “others” in the paragraph above this because in-between Ms. Drew and Mr. Dimon was none other than William M. Daley, Vice Chairman of the JPMC Board of Directors, who was, among many other duties including that of chief (unregistered) lobbyist for the bank and Chair of the JPMC Board’s Risk Management Committee, also in charge of supervising the bank’s corporate governance, up until January 9th, 2011, when President Obama appointed Daley as his chief of staff, replacing current Chicago Mayor Rahm Emanuel in that job.

It was fairly widely reported, in early November 2011, that Bill Daley was tacitly demoted in his position as White House Chief of Staff, when he was required to share duties with Pete Rouse. Interestingly, in January 2012, around the time that the first, industry-circulated reports of JPMC’s CIO meltdown appeared in the blogosphere, it was then reported that Daley would be leaving 1600 Pennsylvania Avenue, altogether, later that month.

The readers can draw their own conclusions from there.

Contributing Editor of Rolling Stone, Matt Taibbi, live blogged the hearing giving some amusing observations. In a phone interview with Sam Seder of the Majority Report discussed the testimony:

Like the tale of the three bears, the congressional budget battle has three budget proposals one from the House Republicans penned by Rep. Paul Ryan (R-WI), chair of the House Budget Committee; another from the Senate Democrats that was worked out by Sen. Patty Murray (D-WA), chair of the Senate Budget Committee; and a third called the “Back to Work” budget presented by the Congressional Progressive Caucus. Each one has is proponents and opponents and, like that bear tale, it has one that’s too hard, one that’s too soft and one that’s just right.

Paul Ryan’s budget, which is getting the most press, the most negative reaction and is “dead on arrival” so to speak, is a rehash of his last two budgets only worse. The proposal would slash Medicare, Medicaid and repeals Obamacare, which even Fox News host Chris Wallace acknowledges, isn’t happening. It proposes balancing the federal budget with the usual draconian cuts to all non-defense spending and reduction of the already smaller federal work force by another 10%. The Ryan proposal would slash $4.6 trillion over 10 years. The budget plan includes no cuts in Social Security. Pres. Obama has suggested changing an inflation measurement to cut more than $100 billion from the program, which makes no sense since Social Security does not contribute to the debt or the deficit.

The there is the Senate Budget proposal which the Republican leadership insisted the Democrats produce even though, constitutionally, all budget and spending bills must originate in the House. That budget  would seek $975 billion in spending reductions over the next 10 years as well as $975 billion in new tax revenue, which Sen. Murray said would be raised by “closing loopholes and cutting unfair spending in the tax code for those who need it the least.” It includes a $100 billion in spending on infrastructure repair and educational improvements and the creation of a public-private infrastructure bank.

Then there is that third budget proposal from the House Progressive Caucus that is just right balance of spending, revenue increases and spending cuts. The basic plan is the put Americans back to work, by as Ezra Klein explains fixing the jobs crisis:

It begins with a stimulus program that makes the American Recovery and Reinvestment Act look tepid: $2.1 trillion in stimulus and investment from 2013-2015, including a $425 billion infrastructure program, a $340 billion middle-class tax cut, a $450 billion public-works initiative, and $179 billion in state and local aid. [..]

Investment on this scale will add trillions to the deficit. But the House Progressives have an answer for that: Higher taxes. About $4.2 trillion in higher taxes over the next decade, to be exact. The revenues come from raising marginal tax rates on high-income individuals and corporations, but also from closing a raft of deductions as well as adding a financial transactions tax and a carbon tax. They also set up a slew of super-high tax rates for the very rich, including a top rate of 49 percent on incomes over $1 billion.

But to the House Progressives, these taxes aren’t just about reducing the deficit – though they do set debt-to-GDP on a declining path. They’re also about reducing inequality and cutting carbon emissions and slowing down the financial sector. They’re not just raising revenues, but trying to solve other problems. But they might create other problems, too. Adding this many taxes to the economy all at once is likely to slow economic growth.

As for the spending side, there’s more than $900 billion in defense cuts, as well as a public option that can bargain down prices alongside Medicare. But this budget isn’t about cutting spending. Indeed, the House Progressives add far more spending than they cut.

On Sunday’s Up w/ Chris Hayes, host Chris Hayes discussed the various budget proposals released by Republicans and Democrats in Congress this week with his guests Representative Kyrsten Sinema (D-AZ); Representative Jerrold Nadler (D-NY); Sam Seder, host of The Majority Report, co-host of Ring of Fire; and Heidi Moore, economics and finance editor for The Guardian newspaper.

The “sequester that wouldn’t happen” kicked into reality last Friday. So far all the dire warnings of job losses, airport delays and threats to national security haven’t materialized but give it a month for the effects to kick in. Meanwhile the Stock Market seems to have not noticed and is reaching new pinnacles for a third say. If you read the financial pages of the New York Times or the Wall Street Journal, you’d think the economy was on a rapid road to recovery, yet the economy continues to languish, along with the middle class and manufacturing as naked capitalism founder Yves Smith noted:

It’s hard to fathom the celebratory mood in the US markets, save that the moneyed classes are benefitting from a wall of liquidity reminiscent of early 2007, when risk spreads across virtually all types of lending shrank to scarily low levels. Then the culprit was not well understood, although Gillian Tett discerned that CDOs were a huge source of leverage, and in April 2007, an analyst, Henry Maxey at Ruffler, LLC, did an impressive job of piecing together how levered structured credit strategies were driving market liquidity.

Now it’s a lot easier to see what is afoot. The Fed has been trying to reflate asset values to goose the real economy. What it has done instead is goose the incomes of the top 1% while everyone else is on the whole worse off. But the central bank is suffering from a very bad case of “if the only tool you have is a hammer, every problem looks like a nail” syndrome. It’s unwilling or unable to admit that its program is working only for a very few. It has convinced itself that if it just keeps on the same failed path long enough, things will turn around.

The Guardian‘s US finance and economics editor, Heidi Moore explains why this rally is not an indicator of US economic growth and why we shouldn’t trust the Dow:

The last time the Dow hit a high, in 2007, the Federal Reserve and the European Central Bank were already collaborating on a global economic bailout, and Bear Stearns collapsed six months later. Before that, the high was in January 2000, only about three months before the market started a long, ugly downward slide in the wake of the tech boom. Go back further, in 1987, when the Dow hit a temporary high before the recession of the late 1980s and early 1990s hit. In 1966, the Dow hit 1,000 and by 1967 the economy began a long downward slide into the stagflation of the 1970s and the recession of the early 1980s.

None of that, however, beats the Dow’s high in September 1929, just weeks before the giant crash that ushered in the Great Depression. The Dow cannot defy gravity. The higher it rises, the harder it will fall.

So when the Dow is high, you should smile – briefly. Then duck.

If you’re getting a bad feeling about this, you should.

On MSNBC’s The Rachel Maddow Show Tuesday, Rachel’s guests Joseph Stiglitz, Nobel Prize-winning economist and Frank Rich, New York Magazine writer-at-large discuss the stock market and corporate profits reaching record setting heights while most Americans see their wages stagnant and unemployment rates barely moving.

Even though I’m an “only child,” I had a large extended family that we visited quite often, especially my maternal great grandmother and her two maiden sisters. They would gather in the dining room every afternoon for tea and exchange the “news of the day.” Since they were all profoundly hard of hearing, the disconnected conversations were quite amusing and memorable, as you can imagine, even for a five year old.

The conversation about sequester and the manufactured debt/deficit crisis reminded me of the three elderly ladies sitting around that table, talking to each other but not hearing a word the others are saying. The president, congressional leaders and the press are all talking but not hearing what they need to hear and ignoring what the American people want, jobs.

In the middle of the implementation of austere sequestration cuts, we’ve had the inane distraction of the Washington Post‘s columnist Bob Woodward’s “poutrage” which is just another example, as the Washington Post‘s Greg Sargent in the Plum Line puts it, of being stuck in the wrong conversation:

The Woodward flap is superficially an argument about the meaning of Gene Sperling’s email, but as Jonathan Cohn details this morning, this is just a distraction from the broader, far more consequential argument over who is to blame for the creation of sequestration. The answer, of course, is that both sides are to blame for creating it – though one side is far more to blame for the failure to avert it – thanks to the deficit mania that gripped Washington in 2011, at precisely the time we should have been focused on unemployment and economic growth.

Meanwhile, the fact that sequestration is set to hit is a concrete reminder that we’re still stuck with the consequences of that misguided 2011 mindset. Indeed, the continuing argument over how to avert sequestration – whether to replace it with a mix of spending cuts and new revenues, or with just spending cuts – is itself a sign of the continuing power of elite consensus deficit-obsession. After all, the battle is still being fought on deficit/austerity turf, at a time of near-zero growth and mass unemployment, rather than over what government should be doing to boost the economy and alleviate widespread economic suffering. As Atrios has put it, we’re not debating whether to implement more austerity; we’re debating over how much austerity to implement.

Nobel Prize winning economist and New York Times columnist Paul Krugman told Ed Shultz, host of MSNBC’s “Ed Show, “that sequestration was “designed to be stupid” and “this is exactly what the doctor did not order”.

While the spending cuts were conceived as a fix for the federal deficit, Krugman said, this was not the time to implement that kind of measure. Instead, he said, the government should be taking advantage of low interest rates and a high number of unemployed construction workers to invest in infrastructure and education.

“What kind of spending would it take to keep us on the track that we’re on right now?” Schultz asked, noting a continued pattern of private sector job growth despite Republican resistance to a new jobs bill since the stimulus package of 2009.

“If we would just stop cutting, the growth would probably keep going,” Krugman answered. “If spending had grown as fast in this recovery as it has in past recoveries, we’d be spending something like $200 billion a year – state, local and federal – more, maybe $300 billion a year more. Maybe $300 billion a year more. We’d have about a million and a half more public sector workers than we do right now, because we’ve been laying them off at [an] unprecedented pace. So, I think $300 billion a year of additional spending would be appropriate and would mean, if we did it, that we would be pretty close to full employment at this point.”

Talking Points Memo‘s Brian Beutler says that the president has done “excellent job” of “of flipping the politics of taxation to make the GOP’s once bulletproof position a vulnerability,” but the president is still not saying what the public needs to hear about jobs and the social safety net.

Someone has finally found the argument that could finally put an end to the death penalty, it costs too much. In the age of austerity, the cost to the state of Maryland to litigate the appeal of inmates on death row is three times higher than the cost of life in prison without parole:

In its 2008 report, the (Maryland Commission on Capital Punishment) wrote that the average cost of prosecuting and imprisoning a Death Row inmate was $3 million, nearly three times higher than the cost of convicting and sentencing a murderer to life imprisonment. Of that $3 million, $1.7 million is spent in the courtroom and $1.3 million is spent in a Supermax prison, the commission wrote. [..]

The commission determined that the state spent $1.8 million dollars for every failed attempt to impose the death penalty, including $950,000 in prison costs and $850,000 in adjudication costs.

Maryland’s Gov. Martin O’Malley said since the death penalty is not a crime deterrent and the exorbitant cost, it is time to end the death penalty in his state.

On Friday, the Maryland state Senate once again began debating a bill to repeal capital punishment in the state. It needs 24 votes to pass and 26 senators have already said publicly that they support the repeal.

Rather than funnel all of their focus into moral and social arguments, the bill’s supporters have been making their point partly in economic terms. The cost of prosecuting a death row case in Maryland can be as much as three times what it costs for a case seeking a life sentence without parole.

On Sunday’s Up with Chris Hayes, Bryan Stevenson, founder & executive Director of Equal Justice Initiative, professor at New York University School of Law, addressed how the savings could benefit public safety. He and Up host Chris Hayes were joined by panelists Mattea Kramer, the National Priorities Project; David Sirota, contributor to Salon.com; and Roberto Lovato, writer for New American Media, contributor to The Nation.

A pair of unlikely allies Sen. Sherrod Brown (D-OH) and Sen David Vitter (R-LA) have teamed up in an effort to break up the mega banks and put an end the taxpayer-funded party on Wall Street the:

“The best example is that 18 years ago, the largest six banks’ combined assets were 16 percent of GDP. Today they’re 64-65 percent of GDP,” Brown said. “So the large banks are getting bigger and bigger, partly because of the financial crisis, partly because of the advantages they have.” [..]

“The system is such that the big banks have far too many advantages, bestowed in part by the marketplace, because investors understand and the market understands that government might in fact bail them out, so there is lower risk for investors, and that means that they can borrow money at a lower cost than anybody else can,” Brown said, explaining why small- and mid-sized banks are at a disadvantage.

Brown and Vitter announced on Thursday that they were working together on bipartisan legislation to address this problem.

“I think the fact that Sen. Brown and I are both here on the floor echoing each other’s concerns, virtually repeating each other’s arguments, is pretty significant,” Vitter said Thursday in his Senate floor remarks. “I don’t know if we quite define the political spectrum of the United States Senate, but we come pretty darned close. And yet, we absolutely agree about this threat.”

Sen. Brown’s speech on the floor of the Senate arguing for fixing “Too Big To Fail”

Sen. Vitter’s edited speech on the Senate floor:

This is progress, let’s see if this float’s with the Senate allies of the TBTF banks. Just how much opposition will there be from Sen. Chuck Shumer (D-Wall St.).

With sequestration looming, many Americans are still struggling to recover from the the 2008 recession that cost them billions in lost savings and jobs but not the banks who were the chief perpetrators for the housing crash. As a matter of fact, American tax payers are still bailing out the “Too Big To Jail” banks $83 billion a year:

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? [..]

Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. [..]

The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc [..] with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

It is outrageous that Americans are being bludgeoned with $85 billion in austerity cuts that will most likely halt any recovery while handing banking shareholders an $83 billion gift.

During his appearance before the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke was asked by freshman Sen. Elizabeth Warren about about the risks and fairness of having banks that are “too big to fail”

Warren quizzed Bernanke on that study. “I understand that we’re all trying to get to the end of too big to fail, but my question, Mr. Chairman, is until we do, should those biggest financial institutions be repaying the American taxpayer that $83 billion subsidy that they’re getting?”

Bernanke responded, “The subsidy is coming because of market expectations that the government would bail out these firms if they failed. Those expectations are incorrect.”

After some back and forth, Warren countered, “$83 billion says there really will be a bailout for the largest institutions.”

“That’s the expectation of markets. But that doesn’t mean we have to do it,” Bernanke responded.

Warren insisted that the large banks should pay for the subsidy. “Ordinary folks pay for homeowners’ insurance, ordinary folks pay for car insurance, and these big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe that the government would step in and bail them out. I’m just saying, if they’re getting it, why shouldn’t they pay for it?” she said.

“I think we should get rid of it,” Bernanke said. He said he agreed with her that government should address the problem of “too big to fail.”

Meanwhile, as Chris in Paris at AMERICAblog points out these banking executives are the forefront of the attack on the social safety net:

You may recall Goldman Sachs CEO Lloyd Blankfein, the guy who Obama has a strange bromance with, adjusted bonus payout dates in both the US and UK to avoid paying taxes. You know, as in the taxes that saved his entire lifestyle.

Even worse is Blankfein’s insistence on bashing programs that are critical to middle class Americans. It’s the Blankfeins of the world that want to take your Medicare and Social Security away.  God forbid we ran out of money and there weren’t any left to bail out the banks next time, right?

Then there’s my other favorite bankster, good old Jamie Dimon of JPMorgan. Dimon is the delightful fellow who ignored the warnings and ended up costing the bank, and our taxpayers, billions.

Since these banks really aren’t turning a profit without government welfare, what would JPMorgan look like without those handouts? For Dimon, banking rules that help protect taxpayers from bailing out the gambling banks are “un-American.”

The major bank chiefs have been quite vocal about trashing the social system, just as they trashed our economy. But when it comes to helping Americans, the banks have little interest beyond their next bailout.

Speaking of Jamie, our favorite vampire capitalist, “thoughtfully” explained why he’s richer than anyone else” in this exchange with Mike Mayo, an analyst at CLSA and Dimon critic:

Mayo: I think what I hear UBS saying in the presentation is that if I’m an affluent customer I’ll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn’t say that. That’s their argument.

Dimon: That’s why I’m richer than you. [..]

FDL New Desk‘s DSWright found Dimon’s response arrogant but indicative of something even more offensive:

Dimon is right, he did get rich having low capital ratios – which is why his form of banking is dangerous. It’s the precise reason the banks could not protect themselves during the crisis, they were over-leveraged.

   “The real issue isn’t who is rich, but rather whose interests are being fairly served and whose aren’t. Dimon’s approach gives short shrift to both shareholders and taxpayers. Taxpayers still carry substantial risks for which they are not being compensated, a state that will only change when regulations are tightened, and hopefully vastly simplified.

   Shareholders do badly because the kind of bank Dimon runs is prone to loss and volatility, leading markets to set a low value on the bank’s earnings.”

Mathematician Albert Einstein said that doing the same thing over and over expecting different results was the definition of insanity. Continuing to bail out these banks on tax payer’s “dime” when there is no evidence that breaking them up would harm the economy is just insane.

Professor of Economics Emeritus at the University of Massachusetts Richard Wolff joined Bill Moyers for a look behind the disaster left in capitalism’s wake and a discussion of economic justice and a fair minimum wage:

“We have this disparity getting wider and wider between those for whom capitalism continues to deliver the goods by all means, [and] a growing majority in this society facing harder and harder times,” Wolff tells Bill. “And that’s what provokes some of us to begin to say it’s a systemic problem.”

A caveat from Yves Smith at naked capitalism:

Wolff pooh poohs financial regulation, peculiarly dismissing the fact that it worked well for two generations. And what broke it was not bank lobbying but the high and volatile interest rates of the 1970s, which resulted from imperial overreach (Johnson refusing to raise taxes when the economy was already at full employment; he deficit financed the combo plate of the space race, the war in Vietnam, and the war on poverty. And Vietnam was the reason for not raising taxes; the war was already unpopular, and a tax increase would have made it more so). At one point, Moyers brings up oligopolies as another driver of increased concentration of wealth, and Wolff misses the opportunity to take up the idea (the failure to enforce anti-trust regulations is a not-sufficienlty well recognized contributor to rising income inequality).

Minimum wage hike would benefit millions

Moyers opened the segment by saying that even if the country increases the minimum wage to the $9 per hour proposed by President Barack Obama in his State of the Union speech, workers will still be worse off than their counterparts were fifty years ago.

Wolff agreed, “The peak for the minimum wage in terms of its purchasing power,” he said, “was 1968. It’s basically been declining, with a couple of ups and downs, ever since.”

“So, you’ve taken the people who work at the bottom, full time job,” he continued, “and you’ve made their economic condition worse over a 50 year period while wealth has accumulated at the top. What kind of a society does this?”

“Who decided that workers at the bottom should fall behind?” Moyers asked.

“Well, in the end,” said Wolff, “it’s the society as a whole that tolerates it. But, it’s Congress’ decision and Congress’ power to raise the minimum wage.”

Economist, author and co-director of the Center for Economic and Policy Research, Dean Baker took New York Times columnist Thomas L. Friedman back to economics class (he may not have ever went) for his Sunday column that was “once again mass marketing misinformation on economics” and getting it “180 degrees wrong: the Friedman standard.”

Dr. Baker start off citing Mr. Friedman’s first paragraph:

It begins by telling us that Tim Cook and Apple are sitting on $137 billion that they could be investing:

“Apple is currently sitting on $137 billion of cash in the bank. There are many reasons Apple has not spent its cash horde, but I’ll bet anything that one of them is the uncertain economic and tax environment in this country. Think about how much better we’d all be if Apple, and the many other companies sitting on cash, felt confident enough in the future to spend it. These are the most dynamic companies in the world. They don’t need any government help to innovate.”

He goes on to explain how, at this time, investment in equipment and software is near pre-recession levels. He then moves on to Mr. Friedman’s wrongheadedness about consumption and the trade deficit.

Then Dr. Dean get to the real nitty gritty of how really wrong Friedman is on getting the American economy moving is this theory on investment in infrastructure and early childhood education:

Friedman just keeps getting better:

“Our choice today is not ‘austerity’ versus ‘no austerity.’ That is a straw man argument offered by both extremes. It’s about whether we phase in – in the least painful way possible – a long-term plan that balances our need to protect the most vulnerable in this generation while funding the most opportunities for the next generation, and still creating growth. We can’t protect both generations in full anymore, but we must not sacrifice one for the other – favoring nursing homes over nursery schools – and that’s what we’re on track to do.”

You have to love the line:

“We can’t protect both generations in full anymore.”

Somehow Friedman missed the fact that the problem we are facing is a lack of demand. We need people to spend more not less. How does austerity reduce unemployment and get the economy back to full employment? It hasn’t worked in Ireland, Greece, Spain, the United Kingdom or anywhere else that can be identified. How on earth does the fact that we now face a huge gap in demand mean that we are less well-situated to “protect both generations.” (Of course he doesn’t say anything about income distribution.)

Again, if Friedman could be taught some intro economics it would be hugely helpful here. Suppose Friedman gets his wish for a grand bargain and everyone working today knew that they would be seeing sharply lower Social Security and Medicare benefits in the future. All of those consumers who Friedman thinks are paralyzed by uncertainty will suddenly realize that they can be certain that they will need more money to support themselves in retirement because the Thomas Friedmans of the world have taken away their Social Security and Medicare.

As Mr. Friedman has written, he mostly travel’s by taxi. So Dr. Baker has an idea on how you can help with Mr. Friedman’s economic education if you live in New York City:

Print copies of the two graph’s the investment share of GDP and consumption as a share of disposable income;

Give then to NYC cab driver’s to give to Mr. Friedman if, and when, they pick him up.

The theory is that if enough people do this eventually Mr. Friedman will learn something about economics and we will “no longer have to see painfully wrongheaded columns on the economy in the Sunday NYT.”

I stopped reading Mr. Friedman’s columns sometime after 2006, three years into the Iraq War that was only suppose to last six months. Mr. Friedman started predicting the outcome of the war would take six months in 2003. He did it often enough that Atrios started calling the prediction a “Friedman Unit” in 2006 and it became a running joke thereafter.