Fascinating piece in the FT about the decline of the US middle class:

“The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.

The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.”

Interesting . . .

>

Source:
The crisis of middle-class America
Edward Luce
FT, July 30 2010   
http://www.ft.com/cms/s/2/1a8a5cb2-9ab2-11df-87e6-00144feab49a.html

Category: Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

87 Responses to “FT: Goodbye Middle Class”

  1. DeDude says:

    And the only reason we had any expansion in 2002-2007 was that people were able to withdraw money from their houses. As Berry showed in his slide a few weeks back there was almost no growth at all since 2000 if you take away the contribution from MEW. This time around the consumer class will have to pay back that borrowed “wealth” and keep increasing their consumption to get a growing economy – where will that money come from. Is it time for an effective income distribution policy, or should we just let the market forces kill the american dream?

  2. stonedwino says:

    Our economy has tremendous imbalances and the only way they can be corrected is through taxation….tax the millionaires and corporation in order to save the country and the middle class….or else none of us will like the long term consequences. The current path is beyond unsustainable. Call it income redistribution all right, because that is exactly what our economy and country needs….badly…

  3. Petey Wheatstraw says:

    “Most economists see the Great Stagnation as a structural problem”
    ____________

    “Structural” problems don’t just happen — they are the result of incompetence and/or negligence and/or malfeasance. Ours is a problem of political malfeasance and what can only be described as mass insanity on the part of the electorate (maybe there was something to the idea that putting fluoride in our drinking water would make the populace mentally weak and physically docile). The same lack of interest in holding those in power accountable for their crimes against their constituents is evident in other areas of our culture (for example, how does the clergy of the Catholic church continue in its control over its membership despite the clear evidence that it willfully engaged in and/or supported and/or covered up child rape on a massive scale?).

    In any event, the middle class got taken to the cleaners. We bought the magic beans offered by the Corporatists in Conservative clothing, and paid the family milk cow for the opportunity. That we cheered and encouraged our own fleecing along the way, points to much deeper and more troubling defects in our national psyche.

    Teri Schiavo for President in 2012! (liberals tried to murder her, but she”ll show them who is brain dead and who ain’t, by golly, don’ cha’ know!).

  4. mathman says:

    The gross distribution of wealth as it is now effects everyone on the planet. Due to economic forces and this unbalanced distribution system, our continuing pollution of the atmosphere, biosphere and oceans, weather patterns becoming less predictable, storms (and droughts) becoming more severe, on-going sea level rise, resources of all kinds becoming scarce (on a finite planet, what else would we expect?), and all the rest of our unsustainable ways of living, the bottleneck event has begun (not only for humanity, but for many other species of plants, animals, fish, insects and birds) and will take a while to pass through. On the other side will be some survivors in a bleak place.

    i can’t even envision the future 20 – 50 years from now.

  5. Latigo Seco says:

    Yesterday’s NYT ran a piece by Edmund S. Phelps “The Economy Needs a Bit of Ingenuity” that considers a lack of demand isn’t the current economic problem, rather it’s the lack of long-term investment. Seems it weighs in on the loss of the middle class too.

  6. number2son says:

    As a companion, see George Packer’s article THE EMPTY CHAMBER in last week’s “New Yorker”.

    http://www.newyorker.com/reporting/2010/08/09/100809fa_fact_packer

    The Senate is completely dysfunctional, and the primary reason the most pressing issues of our day our getting no serious attention. The tax system, and the absurdity of the cries against rescinding the Bush tax cuts, are just one example of the fetid decay of one of our most important and cherished institutions.

  7. carleric says:

    When did we start believing that CEOs were deserving of obscene amounts of money? I consulted for a number of years and my experience tells me that most of them (CEOs) need help to find the bathroom. If it weren’t for the blatant cover-up by compensation committees supported by the BOD prostitutes,perhaps payoffs could be eliminated. Until that day, folks like Hurd will get paid even to leave after screwing their companies. I hate government intervention into the economy and into my life (and God knows politicians feed at the slop trough as well) but how do we change the system when we usually roll over and spread them for our so-called “leaders”?

  8. golfer says:

    “In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.”

    If this relationship continues to get larger I hope companies don’t cut their costs by lowering quality..better to fire and/or lay off workers and let the government distribute the wealth…heaven forbid the executives come back to earth and take their “fair share”.

    Some of them have done such a great job of “screwing up their companies and by extension adding to the economic problems” that I can understand why they take so much more of the pie than they used to… “great job=more pie”. But, then again we only get what we pay for.

    But what about the good executives, the “silent majority?” Why are they silent?

  9. Petey Wheatstraw says:

    carleric Says:

    “When did we start believing that CEOs were deserving of obscene amounts of money?”
    __________

    1980, or thereabouts:

    http://en.wikipedia.org/wiki/Reaganomics

  10. Winston Munn says:

    The conversion of the U.S. economy to a service-based economy has had a hand in the stagnation of wages. You simply cannot add 4 billion world workers to the job market without a decrease in wage pressure.

    “Interesting” is NOT the term the U.S. middle-class employs. It’s more like, “Do you want fries with that?”.

  11. call me ahab says:

    or should we just let the market forces kill the american dream?

    if there ever was truly such a thing as the “American dream”- it’s already been taken out back and shot

    and then we have this observation-

    “t’s called the American dream because you have to be asleep to believe it”- George Carlin

  12. call me ahab says:

    You simply cannot add 4 billion world workers to the job market without a decrease in wage pressure.

    exactly- maybe the fall of communism wasn’t such a great thing after all- billions of workers at the ready for mere crumbs

  13. Bruman says:

    It’s more than interesting… It’s tragic.

  14. number2son says:

    Goldsmith’s explanation of the grotesque distortion of the value-added equation is the key to understanding what has happened to the middle-class in western economies. It also explains, to answer caleric’s question, the inflation of CEO salaries.

    Oh, and Laura Tyson was defending the Clinton administration’s policies (which btw, Clinton himself has admitted were misguided). Who knows if she believed the false arguments she trotted out and history has since thoroughly discredited. Who cares. A tool is a tool. She does have the distinction, in this particular instance, of being a strident, shill tool. A good solider who has since been rewarded with a spot in the Obama maladministration.

  15. This story portrays a reality which is not exactly correct. The assumption here is one that those within any given income strata remain in that strata. The article actually explicitly states this:

    “Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.”

    However, there is no reference to this statement, I suspect since they will not be able to find any scholarly reference to support it. Quite to the contrary, published work “Getting Ahead or Losing Ground: Economic Mobility in America,” authored by three Brookings Institution scholars, Julia B. Isaacs, Isabel V. Sawhill and Ron Haskins, looks at this question. While the mobility may not be ideal in the eyes of some (and it is hard to know what is ideal since mobility cuts both ways), there is substantial mobility both in and out of the highest strata of wealth. Whether this has increased or decreased is not a knowable question since it has not been studied in an earlier period.

    http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/Economic_Mobility_in_America_Full.pdf

    The article in the FT implies a situation characterized by stagnation and slow decay. The reality is one of continued dynamism and change.

  16. constantnormal says:

    Decreasing class mobility, accumulation of wealth by the uppermost 1% … this piece could have been better titled:

    “Goodbye, Middle Class – Hello, Feudalism”

    Because that IS the direction in which the planet (not just the US) is headed. We are only the tip of the spear in this regard. Some other trends that fit in with this are the decline in education, both in the standing of US students globally, and in the number of foreign students coming to the US for education (admittedly, our attitudes toward all foreigners and the employment of thugs in the TSA are also helping keep talented foreigners out of the Bananamerican Republic), and the rise in the “let them eat cake” demonization and polarization of the sheeple by our political classes (which are also suffering a pronounced lack of mobility, with a disturbing number of political dynasties ruling the nation), which are owned by the uppermost 1% to a degree not seen since the days of Tammany Hall and Boss Tweed in the late 19th and early 20th centuries.

  17. catman says:

    Petey Wheatstraw speaks the truth. It is utterly mind boggling. I spent 25 years listening to the litany of self deception that is the sound track of this trend.

  18. michaelismoe says:

    America has become Brazil. 98% of us on the bottom ruled by the 2% who are billionaies. Bring on the favellas.

  19. Evoo Kermartin says:

    Petey Wheatstraw: We bought the magic beans offered by the Corporatists in Conservative clothing, and paid the family milk cow for the opportunity. That we cheered and encouraged our own fleecing along the way, points to much deeper and more troubling defects in our national psyche.

    Nicely written. Very Sad!

    Discussions of U.S. education often focus on suburban areas rather than urban areas. Maybe becuase most of the authors of those discussions live in the ‘burbs themselves, I don’t know. Public education in U.S. urban areas is not a serious option. Even blue collar urban families pay to send their children to private or parochial schools to give them a chance. It is hard for families making twice what the Freemans make to afford private schooling for 2.5 kids. And we aren’t talking about university yet! $35,000 to $50,000 a year for a B.A.!

    If the American rich have no sense of noblesse oblige beyond frittering away charitable giving on well-publicized bricks-and-mortar capital projects or temporary feel-good programs that lend themselves to corporate brochures with pictures of smiling black and brown children, I fear for this country. Very much.

    Why do American cities have top-flight colleges and universities but the worst public education in the developed world? That was a rhetorical question.

  20. Janet Tavakoli says:

    It requires a new term, so I coined STRANGUFLATION:

    “Stranguflation: Deflation and Inflation Where It Hurts America Most” – HuffPo – August 2, 2010 by JT

    http://www.huffingtonpost.com/janet-tavakoli/stranguflation-deflation_b_668491.html

  21. Petey Wheatstraw says:

    ahab,

    All through college (in the ’80s), I was somewhat despised by those who promulgated the then-orthodox belief that communism posed a threat to the US “way of life.” My challenge to these folks was to try to explain to me how 2 billion brand new and very hungry capitalists would help the US economically. What, I asked, was the threat to capitalism in a capitalist purchasing a product from someone who would produce and sell it without profit motive?

    At that time, I was able to buy really good wine (actually, world-class wine) from ultra communist Bulgaria for $3.50 a bottle. An equivalent bottle of French wine cost upwards of $20. That difference was the difference between capitalist and communist trading partners (back then, we didn’t borrow from folks in order to buy their products).

    Well, we’re all capitalists now. Even the communists. They’re eating our lunch.

    The brand of wine available back then was from a state-run winery called Trakia. Doesn’t seem to exist any more. Here’s a similar bottle of wine from Bulgaria, today:

    http://www.grandwinecellar.com/vsku1558083.html?utm_source=Shopzilla&utm_medium=feed&utm_campaign=KATARZYNA%20HALLA%20MERLOT%202008

  22. Whether we like to hear it or not, the middle class started disappearing when

    1) Our post WWII monopoly in many industries receded with Germany and Japan getting back into the game, and

    2) We bought the “free trade” model and watched middle class jobs go overseas for a cheaper price.

    It’s really not rocket science and definitely should not surprise anyone who tunes out the mainstream media.

  23. Simply-Put says:

    This all started a long time ago… Someone from Wall Street started talking to someone in Washington about salaries being tied to inflation numbers and the corporate bottom line reflected in stock prices.

    WALL STREETER “WE NEED TO KEEP A LID ON SALARIES BECAUSE IF SALARIES CONTINUE TO GO UP BASED ON THESE INFLATION NUMBERS CORPORATE EPS WILL GO DOWN… WHAT CAN WE DO TO FIX THIS PROBLEM?” WASHINTON BUREACURATE “WELL LET ME SEE… WELL WE CAN TWEAK THE INFLATION NUMBERS THAT ARE REPORTED. NOT ALL AT ONCE BUT A LITTLE AT A TIME. THAT’S IT…”

    The corporate soup mix needs three ingredients; cheap money (low interest rates), cheap materials (low commodity prices) and cheap labor (70% of corporate expenses are labor costs). The only way to keep profits going up was the FED continuous lowering of interest rates over the last 25 years while systematically suppressing inflation numbers. This is when the love affair between Wall Street and the Fed began. READ THIS…

    Numbers racket: Why the economy is worse than we know
    By Kevin P. Phillips

    Almost four decades have passed since the United States scrapped its last currency ties to precious metals. Our copper and nickel coinage still retains some metallic value, but not nearly enough for the purpose of currency tampering—the historic temptation of inflation-plagued or otherwise wayward governments, including, at times, our own. Instead, since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is.

    The corruption has tainted the very measures that most shape public perception of the economy—the monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation; the quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth; and the monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity. Not only do governments, businesses, and individuals use these yardsticks in their decision-making but minor revisions in the data can mean major changes in household circumstances—inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions, and Social Security benefits. And, of course, our statistics have political consequences too. An administration is helped when it can mouth banalities about price levels being “anchored” as food and energy costs begin to soar.

    The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range). We might ponder as well who profits from a low-growth U.S. economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?

    Let me stipulate: the deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms. As we will see, the political blame for the slow, piecemeal distortion is bipartisan—both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt, and a casino-like financial sector. To see how, we must revisit forty years of economic and statistical dissembling.

    A short history of “pollyanna creep”

    This apt phrase originated with John Williams, a California-based economic analyst and statistician who “shadows,” as he puts it, the official Washington numbers. In a 2006 interview, Williams noted that although few Americans ever see the fine print, the government “always footnotes the changes and provides all the fine detail. Nonetheless, some of the changes are nothing short of remarkable, and the pattern over time is what I call Pollyanna Creep.” Williams is one of the small group of economists and analysts who have paid any attention to the phenomenon. A few have pointed out the understatement of the Consumer Price Index—the billionaire bond manager Bill Gross has described it as an “haute con job,” and Bloomberg columnist John Wasik has dismissed it as “a testament to the art of spin.” In 2003, a University of Chicago economist named Austan Goolsbee (now a senior economic adviser to Barack Obama’s presidential campaign) published an op-ed in the New York Times pointing out how the government had minimized the depth of the 2001–2002 U.S. recession, having “cooked the books” to misstate and minimize the unemployment numbers. Unfortunately, the critics have tended to train their axes on a single abuse, missing the broad forest of statistical misinformation that has grown up over the past four decades.

    - snip -

    Continued here

  24. call me ahab says:

    Well, we’re all capitalists now. Even the communists. They’re eating our lunch.

    exactly my man, exactly-

    but KFC and McDonalds are popular in China- so we go that covered

  25. napster says:

    No need for me to add anything. It has already been said.

    However, I disagree with Damien Hoffman’s assertion that this began with the rise of Japan and Germany after WWII. The stresses on the economic pie created by competitors is the norm in the global market. Explaining why the top 1% benefited at the expense of the bottom 99% has nothing to do with economic competition, but rather policy choices that were abetted by our Government leaders starting with Ronald Reagan.

    And it was on purpose. The mantra of radical anti-government evangelical marketism wrote a constant stream of policy papers beginning in the 1970′s that came to fruition under Ronald Reagan. They even called it “starve the beast,” but what they really did was lose control over the investment landscape — which is what good government does, make sure investment actually occurs that is directly creating and renewing our cultural and economic infrastructure. Instead, we got investment in corporate take-overs, junk-bonds, equity firms, consulting fees for all the above, and the dismantling of the infrastructure into privatization schemes.

    All of it in the 40 years since 198o, when Ronald Reagan removed the solar panels from the White House, and been the great dismantling of the infrastructure that was built upon since World War Two.

    Tax decreases were supposed to create magical investment opportunities. The Laffer curve was drawn on a napkin to explain trickle-down economics and was taken seriously by anti-government ideologues.

    Tax decreases cannot and do not automatically get directed towards investment. As Kevin Philips himself shows, most of the taxes to the upper 1% went into savings, and was thus outsourced into speculative or foreign markets seeking a high return. That is not the same thing as creating businesses and economic wealth in the communities across the United States. .Although some of this did occur, it was not the result of tax decreases, but because of technological and social changes that would have happened anyway (aka, 24-7 cable television, computers).

    @Simply Put: dude I feel your passion, but you should post a link to Kevin Philips rather than copy and paste 8 paragraphs.

  26. globaleyes says:

    Best Kept Secret : adjusted for credit, the U.S. economy has been shrinking since April, 1970.

  27. RW says:

    Empirical research confirmed some time ago what most have suspected for longer still — the hollowing out of the American middle class is ongoing and real; e.g., Elizabeth Warren’s 2003 work (http://tinyurl.com/2drmt76 and http://tinyurl.com/cnyxgv) — but what is news is that this old news is now appearing above the fold in mainstream media. Doesn’t mean anything meaningful will necessarily be done about it but it does at least strengthen the political hand of those who wish to try.

    Parenthetically I seem to recall a time when mainstream media was more likely to break, pursue and highlight substantive news stories or national trends like this rather than playing catch-up years later when the buzz refused to die but that may just be my faulty memory.

  28. bmoseley says:

    good comments, but how about a limit on words. this is for comments not essays.

  29. Americans weren’t rioting in the streets the day Nixon closed the gold window. This showed they did not understand how their own money worked or what was happening. It has been all downhill from there. Unstable money (measurements of value) leads to unstable societies as everyone tries to stick the hot potato to his neighbor

    Fortunately, this is a social correction (like the type the market shows). Unfortunately, corrections can lead to panics if people don’t recognize value and buy up/turn things around. If a panic gets into the social structure then this could lead to crisis and wholesale social change for the worse. I’ll give that a less than 25% chance of happening. I believe people still care and this will have to happen on a worldwide scale to be effective. If the world goes in the right direction then America will probably become an island of chaos for a while

    If it is just a correction it will still be nasty and will probably not finish playing out until the boomers are safely underground or at least incapacitated. It could happen sooner but there are too many vested interests at this point. I also think that one of the political parties has to die and that probably wouldn’t happen for a while

    The wildcard is the millions of illegal aliens residing in the US. That could lead to fighting in the streets and a breakdown of civil structure. Maybe even a military conflict

  30. FrancoisT says:

    DeDude wrote:
    “Is it time for an effective income distribution policy, or should we just let the market forces kill the american dream?”

    If by “market forces” you mean the buying and selling of politicians to rig economic policies and the tax code, then I understand what you mean.

  31. b_thunder says:

    So let’s give Mark Hurd $50mil golden parachute for fraud, and cut his taxes so that

    1. HP, which undoubtedly will be forced bu Hurd’s lawyers to pay for Hurd’s golden parachute taxes as well, doesn’t have to pay too much – they’ve already “suffered” 10% stock drop

    2. the HP’s shareholders – those middle-class mutual fund holders with 50 shares to their name, who’ve already suffered 10% stock price drop, don’t pay higher cap. gains taxes (which they won’t even have!)

  32. covel says:

    Many of the comments here have a defeatist tone. Redistribution fixes zilch. Give people money, with no knowledge of where it came from or the ability to create more, and they will spend it. Then ask for more. Again and again. That doesn’t work. Maybe if we stopped fondly dreaming about the days of yesteryear, the secure ‘manufacturing’ jobs and all that, and forced people to deal with the real world as it (a wired digital world), there would be hope for progress.

    Extinction always brings opportunity.

  33. zitidiamond says:

    How the common man:

    “The wildcard is the millions of illegal aliens residing in the US. That could lead to fighting in the streets and a breakdown of civil structure. Maybe even a military conflict”

    A scenario of epic “War of the World” proportions, requiring the Tea Baggers to put their collective thinking caps on, and cook-up a virus for which the invading aliens have no immunity.

  34. @Simply Put: dude I feel your passion, but you should post a link to Kevin Philips rather than copy and paste 8 paragraphs.
    ~
    good comments, but how about a limit on words. this is for comments not essays.
    ~~~

    yes, yes, it’s, always, a ‘sticky wicket’..

    at least dude’s Post was, incredibly, on Topic..

    and, we should remember, http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Link+Rot happens..
    ~~~
    covel,

    w.this: “a wired digital world”, remember, “Hyperspace” has a ‘Brick n’ Mortar’-Backbone..
    “Rare Earth Elements: The World Is Rapidly Running Out And China Has Most Of The Remaining Supply”
    http://www.blacklistednews.com/news-9957-0-25-25–.html
    and,
    http://www.infrastructurereportcard.org/ for starters..

  35. call me ahab says:

    Give people money . . . and they will spend it.

    last I checked Covel- that is high on the USG’s wish list- to have people spend-

    also- explain- if you can- how your “wired digital world” keeps people employed?

    I guess we can all be programmers making iphone and android apps-

    brave new world indeed

  36. Apinak says:

    Let’s compare the policy responses to the problem of the disappearing middle-class.

    Republican Party solutions- more tax cuts for the rich, more tax cuts for large corporations supporting offshoring, more free-trade, less government including shifting the risk of retirement and medical costs to individuals through privatizing Medicare and Social Security, eliminating the minimum wage and workplace regulations, fewer labor unions with less power to negotiate wages.

    Progressive solutions- progressive taxes, increasing environmental and labor standards in foreign trade agreements, stronger unions, higher minimum wage, single-payer health care, maintaining Social Security, stronger consumer protections.

    Democratic Party solutions- hell if I know.

  37. number2son says:

    covel, the comments here have a realistic tone with respect to the structural economic changes that have occurred over the past 30 years. Have you even bothered to understand the distortions created by the unfettered free flow of capital versus constrained labor?

    And do you even know what you’re talking about with respect to redistribution? The crux of the problem is in fact that a redistribution of historic proportions has occurred from the middle class to the super-rich. And today that redistribution is not only manifest in wage stagnation and high unemployment, but in the burdens on state and local governments, many of which can no longer pay for basic services. And that’s just the start of the list of problems issuing from the real redistribution happening in this country.

    Certainly business come and go due to competition in free markets. No one argues this. But you conveniently ignore (or are unaware) that there is no such thing as competition when corporations can exploit wage distortions in other countries (and are free to ignore social costs) in seeking the highest return on capital.

  38. covel says:

    ‘Call me ahab’ it is a brave new world in many ways. That we agree on. How to get there? Looks like you might be headed to dinosaur land.

    First, in terms of USG and their goals the last I checked a politician’s goal was to get elected. So yes if they induce everyone to spend all of their money on mall trinkets, then induce them to max out there credit cards on even more mall trinkets, stock markets will go up eventually (the plan at least)… and politicians in office will take credit and hopefully get reelected. Opps, this behavior creates bubbles — which pop.

    Second, your use of the phrase “keeps people employed” is part of the problem. The incessant banter about jobs, as if they were a right, helps no one. People can find much better ways of making money filling their brains with books like ‘Rework’ and ‘Linchpin’ over hoping for the good ole days.

    Brave new world has left the station. You can hang on and beg politicos for candy…or start running.

  39. covel says:

    ‘number2son’, I am guessing you have a solution to your list of ills that involves legislation? I am not denying the world has changed, but you can’t go back. Put the seat belt on and adjust. There are other options for our daily gruel beyond government and big corps.

  40. obsvr-1 says:

    Goodbye Middle Class — yep — middle suggests somewhere in between. With the the ever widening gap between the middle class and the elitist/wealthy you begin to see a picture of castles and peasants.

    without a strong middle class we the economy will continue to be anemic at best. The top 1% elitists at this point apparently don’t care as they are busy exploiting the global resources (human and material) continuing to grow their personal wealth. When Reagan said starve the beast, I now think he was targeting the wrong beast.

    One World Order, Globalism, GATT/WTO are the beasts we should be fighting. We are getting very close to having that final straw that breaks the camels back, getting to the point where the people exert their collective power to force significant changes.

  41. Petey Wheatstraw says:

    covel Says:

    “Many of the comments here have a defeatist tone.”

    Defeatist? Isn’t that a Fox/Republican talking point word?

    “Redistribution fixes zilch.”

    Redistribution is what left the middle class with less than zilch. Exactly where do you think all of the money created since Nixon depgeged from the dollar went? A: It was (re)distributed to the top 2%. Do you think Bush}s tax cuts for the wealthy were not redistribution?

    “Give people money, with no knowledge of where it came from or the ability to create more, and they will spend it. Then ask for more. Again and again.”

    Give those same people a job at which they can bot be productive and earn a living wage, and they’ll show up day after day after day. Again and again. Ignorant of the facts regarding fiat currency and central banking, they will never once question where that money came from, as long as it buys them food, clothing, shelter, basic medical care, transportation and enough entertainment/diversion to make life worth living.

    “That doesn’t work.”

    Yeah? Well the other jackass, completely moronic way didn’t work, either. You seen prosperity, lately? Why TF do you think that is?

    “Maybe if we stopped fondly dreaming about the days of yesteryear, the secure ‘manufacturing’ jobs and all that, and forced people to deal with the real world as it (a wired digital world), there would be hope for progress.”

    What? You don’t make progress by ignoring the scheme by which you were victimized. Maybe if we locked some Corporatist pigs away in prison and at hard labor for their crimes of commission and omission and started vigorously enforcing the law, “yesteryear” (and it’s actually more like, “yesterday”), wouldn’t be such a difficult objective.

    “Extinction always brings opportunity.”

    Not for the extinct, it doesn’t.

  42. number2son says:

    covel, I don’t want to go back. Like everyone else should do, I move forward as best I can. But do I have hope for legislation? See my reference to the Packer article in the New Yorker farther up thread. Anyway, I endorse many of the ideas put forth by the progressives (see Apinak’s comment above). That would be a great step forward. Real progress.

    The status quo is not tenable. Maybe on that we agree?

  43. FrancoisT says:

    “Extinction always brings opportunity.”

    Well…sure!

    Extinction of the large dinosaurs brought us the mammalians species. Just took millions of years of quasi-obliteration of all life forms on the planet.

    If that wasn’t enough, what do you think can (or should I say, “will”) happen if enough people are deprived of any opportunity to participate in the social and economic life of this country?

    Furthermore, as usual, you totally neglect the role of the corporate-gubmint axis that brought this situation where we are now. Just read “Free Lunch” and “Perfectly Legal”; then come back and tell us what Author David Cay Johnston describe in those books has <b.anything to do with the concept of free markets, as defined by honest people.

    There is also “Money For Nothing”, Numbers Racket” and other well-documented books that shows clearly that what we’ve had in this country had nothing to do with normal functioning of a healthy market.

    But somehow, it seems to be so much easier to ignore the evidence and stick with prejudices.

  44. wally says:

    There has never been a consumer-based economy that ran without a middle class.
    There never will be one.

  45. call me ahab says:

    . . .the phrase “keeps people employed” is part of the problem. The incessant banter about jobs, as if they were a right, helps no one. People can find much better ways of making money . . .

    no kidding-

    those douche bags who don’t have jobs- what losers-

    why don’t they just pick themselves up by their own “boot straps” and start a business on a “shoe string”-

    those cliches must mean something

  46. Winston Munn says:

    Genocide by policy is not extinction from economic evolution. We haven’t replaced horses with automobiles, but have allowed horse owners to move horses to areas where it is cheaper to feed and maintain them, surpressed wages while decreasing taxes on capital, and used public debt to finance the cost.

    This is not a redistribution of wealth – it is a looting.

  47. Joe Friday says:

    stonedwino: “Call it income redistribution”

    Call it income RE-redistribution.

  48. FrancoisT says:

    Hey Covel,

    Here’s another free market tidbit for you:

    From Information Week:

    http://www.informationweek.com/news/software/integration/showArticle.jhtml?articleID=226500202

    U.S. To Train 3,000 Offshore IT Workers

    Federally-backed program aims to help outsourcers in South Asia become more fluent in areas like Java programming—and the English language.

    By Paul McDougall
    InformationWeek
    August 3, 2010 01:59 PM

    Despite President Obama’s pledge to retain more hi-tech jobs in the U.S., a federal agency run by a hand-picked Obama appointee has launched a $36 million program to train workers, including 3,000 specialists in IT and related functions, in South Asia.

    UPDATE: InformationWeek has learned that USAID just launched a similar campaign in Armenia.

    Following their training, the tech workers will be placed with outsourcing vendors in the region that provide offshore IT and business services to American companies looking to take advantage of the Asian subcontinent’s low labor costs.

    Under director Rajiv Shah, the United States Agency for International Development will partner with private outsourcers in Sri Lanka to teach workers there advanced IT skills like Enterprise Java (Java EE) programming, as well as skills in business process outsourcing and call center support. USAID will also help the trainees brush up on their English language proficiency.

    You think they offer something similar to US workers?

  49. Jack Damn says:

    I’m good with this. I never fly middle class anyway. Usually just coach.

  50. covel says:

    Hmmm…lot’s of policy wonking in this thread. This policy caused it, that policy can fix it…yada yada. My view? Our current day troubles (or opportunities) were unleashed by Netscape’s IPO on August 9, 1995. It caused two things to happen outside of government control: 1) the Internet took over and starting arbing away everything (which has not stopped) and 2.) it caused the average Joe to think he could get rich over night. Behavioral finance does a much better job of explaining our current circumstances than harping on about the left or right or whatever fringe political teet one milks from. That said, I know BR and don’t need to keep rambling on. For those looking for a positive outlook, a bootstrap solution? Read ‘Rework’, ‘Linchpin’, ‘Blue Ocean’ and ‘Trust Agents’. Much better insights in those texts over the never ending political tail chase!

  51. bergsten says:

    Ahhhh… another Sunday “Stir up the Troops” posting. Geez, Barry, aren’t you on vacation? Shouldn’t you be out fishing or something?

    Anyway, Executive Summary Time:

    All these sorts of discussions quickly devolve into “who’s to blame”?

    That’s easy — Human Nature.

    I’ve recently (and depressingly) concluded that not only are we heading toward a Feudal Society, we are already in one, and we always were in one. All we’ve done is create new names for all of the same old players.

    Who “makes out” in Feudal Societies? The “rich,” (by whatever name), and the “powerful” (by whatever name).

    How does one hop from one class to the other (well, not really, but redistribute some wealth to yourself)? By giving the perception of having unique value for the upper classes. How’s that done in today’s Feudal Society? By being an entertainer, popular, a celebrity.

    That’s why CEO’s make all of this money — Celebrity. Good gig if you are reasonably competent, lucky, connected, and in the right place and the right time.

    What can be done about all of this? Not a damn thing. Closed system. All one can do is pretend to redistribute by again changing the terms (democracy to socialism to republic to monarchy to hegemony to whatever). By whatever name, it’s slavery. Baboon Culture.

    Screw this. Where’s my fishing pole?

  52. DeDude says:

    Our masters, and the electorate need to realize that an effective wealth distribution policy is essential for sustaining economic growth in an industrial country.

    There is no way that a country of our size and wealth could find foreign markets to allow us any reasonable kind of growth via exports, so it is going to be domestic consumption or bust. Our only realistic growth potential is by focused expansion of the 70% of our GDP that is domestic consumption.

    Domestic consumption cannot grow unless we keep channeling more money to the consumer class. The rich invest most of any additional wealth, so channeling wealth to them does not increase consumption nearly as much as when it goes to the poor and middle class. So our only chance of continued economic growth is to get more money to the poor and the middle class.

    In the 60’ies and 70’ies the Scandinavian countries were consistently on the top 10 list of the worlds highest GDP/citizen, in spite of their government being 50% of GDP (our government is 15% of GDP and we claim it to be oppressively big). Part of the high GDP % was because government was paying for all education, health and child care (rather than people being taxes less and paying out of their own pocket). But that was also a way of distributing wealth as everybody got the same benefits regardless of how high a tax bracket they were in. The main reason these countries could be among the 10 richest in the world was that they had strong unions and progressive governments that ensured a fair and equitable distribution of the wealth created by the country.

    At the same time countries like Brazil and Argentina, with huge natural resources, were struggling to get out of third world status. The main reason they could not convert their resources to a strong healthy economy was their absurdly unequal wealth distribution. With almost all the wealth going to the top 1% there was no way for them to seriously grow their consumer base and therefore no way to grow their economy.

    Market forces will always push corporations to reduce labor cost and increase profits for their rich leadership and stock owners (creating more inequity in distributing the wealth from better productivity). Unfortunately with Reagan opening the door for biased propaganda TV like Fox, and with our supreme court giving personhood status to the corporations, it is unlikely that our democratic institution can block our slide down toward a “South American” capitalism model. The only question is if or when the American people will revolt.

  53. gms777 says:

    Here’s a brilliant lecture by Harvard law prof Elizabeth Warren…”The Coming Collapse of the Middle Class…”

    She compares the financial status of the 4-person US nuclear family in 1970 with the same family today. We’ve gone from one man supporting the family and saving large sums to two parents running around like crazy to stay in place or slide backwards, while maintaining two cars, not one, and paying huge sums for childcare, an industry which really didn’t exist 40 years ago.

    And if one of the parents has to take care of an elderly parent, gets sick or the marriage collapses, everyone involved, especially the children, are in big trouble.

    http://www.youtube.com/watch?v=akVL7QY0S8A (hour long)

  54. alnval says:

    As I watch the to and fro of these and other comments about what’s wrong with the economy and why, I think many of us are missing the point. Plainly there is a wall and there’s handwriting all over it. Everyone knows what it says and we don’t even need a Rosetta Stone to translate it. As Luce writes in his FT article; “From the point of view of most economists, the story so far is uncontroversial. Most agree on the diagnosis. But they diverge on the causes.” From my point of view, that’s just another way of saying we’re not there yet.

    In September of ’08, when the economic crisis finally demanded political attention, and the White House was filled with legislators and executives trying to agree on something, Hank Paulson is alleged to have gone to Speaker Pelosi and literally on bended knee begged her to support the pending stimulus bill. Although probably apocryphal, the story still has meaning for us today. We’re not there yet.

    Unfortunately, we’re stuck in a management structure that purports to favor participative decision making (consensus), which is best used as a vehicle for improving the quality of decisions. More recently, however, as the level of threat to the people in charge has increased, it has been favored as a vehicle to better share the blame. IMO that ain’t going to work. We’re close to being in a situation where the enemy is coming over the hill and somebody needs to take charge. When we finally reach that level of crisis again, and we will, and we’re still incompetent to take any action that might allow us to avoid it, we’ll no longer have the luxury of debating for months where best to deploy the troops.

    If whatever we do about this economy is going to be imperfect anyway, let’s get on with it and do it. Might as well be hanged for a sheep as a lamb.

  55. call me ahab says:

    I know BR and don’t need to keep rambling on.

    so is that your way of telling us common folk that you are going to stop rambling here and ramble to BR in person?

    awesome

  56. purple says:

    This will continue as long as the U.S elite insists on maintaining it financial and military empire.. The fact is the US represents 15% of manufacturing production globally, versus 50% at the time of on Bretton Woods. It is no longer productive enough versus other countries to maintain empire without the relentless crushing of its workers and unrestrained militarism throughout the globe.

  57. covel says:

    ‘call me ahab’ you got to find an outlet for all that pi** and vinegar! It doesn’t make much sense (its boring too) to debate ad hominems and straw men. That was my point for bowing out of this one.

  58. purple says:

    It’s not about increased global competition per se, it’s about the need of Wall Street to have de facto reserve currency status for the dollar, which is way over-valued. An over valued dollar means no jobs outside finance.

    Dollar hegemony and militarism (another source of US public sector insolvency) is about the need of US billionaires to maintain their dominance globally, nothing else.

  59. Vilgrad says:

    I am not a hard hearted person. I was brought up in a 900 sq ft row home in a lower middle class neighborhood. Through education and hard work, I’ve made it to the upper middle class. I understand that the rich are getting richer and the middle class has stagnated on the income scales. The corporations, Wall Street and the corrupt politicians have done nothing to help the middle class. They have enriched themselves at our expense.

    Still, I believe in responsibility. You are responsible for your own actions. You are responsible for your own education. You are responsible for your retirement. You are responsible for living within your means. So, when I started to read the story I was initially sympathetic to the plight of this family. Until I got to this part of the article:

    It only takes about 30 seconds to tour Mark’s 700sq ft home in north-west Minneapolis. Cluttered with chintzy memorabilia, it was bought with a $50,000 mortgage in 1989. It is now worth $73,000. “At one stage we had it valued at $105,000 – and we thought we had entered nirvana,” says Mark. “People from the banks kept calling, sometimes four or five times an evening, offering equity lines, and home improvement loans. They were like drug pushers.”

    Earlier in the article it said that they almost lost their house because they were 3 months behind in their mortgage payment. The article goes into NO DETAIL about the current balance on their mortgage. My BULLSHIT METER started to go off. Here is the deal. They bought the house in 1989 with a $50,000 mortgage. Back then, interest rates were 10%, so their monthly payment was about $450 per month and the current balance would be $43,000. Unless they were brain dead, they should have refinanced down to at least 6%. If they had done this on a balance of $45,000, their monthly payment would be $300. They make $70,000 per year. That is about $4,500 per month after taxes.

    Does something smell funny? If they had lived within their means, a $300 mortgage payment for someone bringing in $4,500 should be a piece of cake. It appears the LIBERAL MSM must have left out a few details. You know these morons borrowed up to the $105,000 inflated value of this house and lived the good life for a few years. They have no emergency fund, negative equity and they are barely keeping their necks above water.

    Sorry Freemans. It’s your own fucking fault. This is not society’s fault. Another sob story from the MSM. This isn’t a representative picture of the people who read this site. These are the delusional morons who fucked up and now want us to bail them out. The Obamanistas feel their pain. Time to spread the wealth. Your wealth. This is the crap that is spewed at the American public every day. We are like mushrooms with crap being shoveled on us day after day.

  60. Raleighwood says:

    On becoming a nation of citizens versus consumers.

    I can’t wait to witness the collateral damage and societal collapse when our economic system of stagnation and downward mobility creates a nation of “replacers” instead of “acquirers” and our 70% consumer economy dies and takes everyone with it.

    The non-ubber-wealthy remain but the rest of us all spiral down as we collectively decide we have “enough”, that larger, faster, better and newer is a trap, and we act accordingly. Maybe we’ll become a one-child nation like China or Europe. Maybe we’ll riot in the street. Maybe we’ll legalize pot and spend all our time writing poetry and letters-to-the editor while our adult children fail to launch. Or Thrive. Or survive.

    Maybe cheap food, beer and TV entertainment keeps an entire unthinking nation mollified, much like the gladiators in years past, until the barbarians at the gate enslave us. Maybe that has already occurred. Maybe the aliens come to help us, or eat us.

    If I only knew how to counsel my kids …

    But I hear the military is looking for some good IED fodder to fight it’s wars of natural resource acquisition for the benefit of the few and the patriotically confused.

    @ Vilgrad – my bs meter went off as well. I has those same choices and choose living within my means. But it is not looking good for my kids. The post WWII boom is over and no amount of financial razzle-dazzle is going to recreate that magical, fortuitous age of expansion and rising seas and boats and tides and wages and life-styles. We need a new paradigm and I don’t know what it is but serfdom here we come.

  61. number2son says:

    Hey Vilgrad, maybe we grew up in the same neighborhood. Same basic deal here. But you lost me on your invocation of the dread LIBERAL MSM in referring to the Financial Times, no less. Are you serious?

    And yeah, I can see how a family struggling to pay their bills while bearing the burden of caring for an autistic son causes your BULLSHIT METER to go red. That is, of course, if you yourself are a total douchebag.

    Here’s hoping you get what you deserve, too, pal.

  62. bergsten says:

    I was put into the penalty box for two hours, at which point my comment was released, in creation time order. In other words, anybody (besides me) who wishes to go back and read my depressing tome has to go back up to here.

  63. econimonium says:

    Like it or not, Covel and Vilgrad have valid points. There is a sense of entitlement to the posts here that I find disturbing…as if making 6 figures was, somehow, and American entitlement. It isn’t. And wishing for the “good old days” or thinking that, somehow, any of this has to do with “policy” is just ludicrous.

    This train has been leaving the station for a while now, but it really hit light speed with the advent of the internet. And it isn’t going to change, it’s just going to get worse. There aren’t any “manufacturing” jobs anymore in the way they are romanticized in these posts. Have any of you actually toured a modern car factory? How many people did you see doing manual labor? How many robots? How about stitchers in shoe factories, or are most of those machines software-guided now? How about those assembly lines and robots, software-guided too, aren’t they?

    The days of people being paid $30 an hour to tighten bolts at the GE plant are over because, frankly, it’s cheaper to pay someone in China to do it and ship it back here because, you know the job isn’t worth $30 an hour. That was the state that was temporary and artificial. And if that made the middle class than that was the short-term illusion. I saw this coming from when I was a little kid and my grandfather was at GE. At eight years old I couldn’t figure out how these people who couldn’t speak complete sentences were making all that money sweeping the floors. And the truth was it wasn’t sustainable. Period.

    So now we have all this talk about middle class, and money. The answer is easy and hard at the same time…it’s to get educated. That is the only way out. But Americans have become so entitled, and so deluded that they belong to a class they don’t, and smitten with the notion that they don’t have to do any real work to get that 5000 sq ft house (as if anyone really needs that) that this gut-wrenching change is going to send most of them back down the ladder because they won’t work hard enough to climb. I see it every day when I teach. The entitlement is just amazing.

    None of what was is coming back. Ever. So instead of just pining for the “good old days” why doesn’t anyone attack the real problem which is, how do we prepare kids for more mental-ability jobs and far less hand-ability jobs in the future? How do we, again, instill that hard-work ethic so they study when they are young and reap the career benefits when they grow up? How do we take those kids that aren’t all that bright (yes, they are probably YOUR kids even if you think they’re the smartest thing ever and you force teachers to inflate grades) and get them into well-paying sustainable technology jobs?

    Get over it. Hand-based jobs are dying and machines do them better. The internet has made global wage arbitrage a fact of life. Evolve or go extinct. The world works that way.

  64. bergsten says:

    @econimonium – “…it’s to get educated…” To what end? What “marketable skill” might one obtain from our educational system (ignoring, of course, the “connections” made in Ivy League (which is also somewhat illusory as there’s a pecking order there too)?

    Not being (entirely) snarky — I’d really like to know. Technology/engineering/computing? Overseas. Business/management? To manage who (whom?). Law/accounting? To sue/account for what? Liberal arts? Well, maybe. Them rich folks need entertainin’. Military/Police/Security? Well, maybe. Them rich folks need protectin’. Medicine? Well, maybe. Them rich folks need doctorin’…

  65. bergsten says:

    @econimonium – Trades? Sure. Who’s going to fix the pipes, wires, structure, potholes, paint? Who’s going to cook? Who’s going to walk the dogs? Maintain that $30,000 salt water aquarium? Fix the Roller and the Range Rover? Tune up the McClaren and the F-whatever? Sales/marketing? Maybe — somebody has to make the actual effort to sleaze the sheep out of their few remaining possessions that aren’t already so shoddily made that they are busted beyond repair.

    My new career: The singing, dancing, plumber!

  66. TakBak04 says:

    @what he Says:

    Petey Wheatstraw Says:
    August 8th, 2010 at 9:22 am

    carleric Says:

    “When did we start believing that CEOs were deserving of obscene amounts of money?”
    __________

    1980, or thereabouts:

    http://en.wikipedia.org/wiki/Reaganomics

    ————-

    PETER…We started doing this when there became a “Musical Chairs Round Table” for CEO’s with “Important Credentials” to put EACH OTHER on the BOARDS of the “Fortune Foundation Companies.”

    IOW’d's: When the INSIDERS promoted OTHER INSIDERS to take care of THEMSELVES.

    It became a CABAL of INSIDER INFO/CORRUPTION…by if You Appoint “My Friend” to your “BOARD” then I, IN TURN will APPOINT YOU TO THEIR BOARD…

    CIRCULAR CORRUPTION. And WHY was this not seen as corrupting WAY BEFORE NOW?

    I cannot understand why…except that it was a created self-perpetuating INSTITUTIONAL FORM of “I scratch your back and you scratch mine.

    That was a recipe for DISASTER!

  67. willid3 says:

    education use to be the way to the middle class, or the way to stay there. today its very easy to export any job that requires education. and that includes lawyers and management. and health care jobs are harder to do, but they are working on it (and there is that new travel industry, health care tourism!).
    that means we are exporting the middle class.

    and manufacturing today is extremely automated. has been for decades. nothing really new there.
    and while the internet is the source of wage destruction, we have allowed it to happen. we allow companies to export their jobs and still keep their tax breaks for their labor costs. how stupid was that?
    and as we export jobs, we are eliminating what drives our economy. there really is only sources. consumers and government. business does nothing with our demand from some one else. and they have done nothing even in the fake economy that we had most of this decade. it was just propped up by easy credit driven by wall street. without which, what you see today, is what we would have had then.
    this is a demand economy, not a command one. if we shrink demand, we all loose, as there isn’t any part of the economy that is insulated from any other part.

  68. Stranded_in_CA says:

    Econonium wrote:
    “How many robots? How about stitchers in shoe factories, or are most of those machines software-guided now? How about those assembly lines and robots, software-guided too, aren’t they?”

    Computer guided and making products for export in China because that’s where almost all our manufacturing went. BTW some of the best cars and shoes are still made by hand and you can’t afford them.

    “… instead of just pining for the “good old days” why doesn’t anyone attack the real problem which is, how do we prepare kids for more mental-ability jobs and far less hand-ability jobs in the future? ”

    So insightful, you mean like engineering and science jobs that are rapidly being off-shored to India and China or in-sourced replacing a $60k a year American engineer with foreigner working for half that. And it gets better India is already replacing lawyers, accountants and MD’s.

    At the rate its going there won’t be any jobs that are done with your mind that will be safe since those are the most easily off-shored.

  69. maynardGkeynes says:

    Kudos to Vilgrad for nailing this. In nature, inept buffoons like these people would have been eaten by sabre tooth tigers years ago. That they make $70K a year is astonishing. A sleep apnea machine? Sorry, as Dr. Evil would say, “liquidate them.” These people should be on their knees thanking the rest of us, instead of bitching to the FT.

  70. Winston Munn says:

    @econimonium,

    This isn’t about “manufacturing”. It is about opening wage competition to 4 billion new wage earners who don’t ask for benefits or have unions. It is about productivity gains hoarded by capital with policy blessings that not only allows it but encourages it. Grass roots efforts cannot hope to match the funding available from wealthy corporations, so while it is no longer true that what is good for GM is good for America, it is increasingly true that what is profitable for Corporations is good for American political incumbents and their handlers.

    This is not about ecomonic evolution; it is about Plutocratic coup d’etat.

  71. Greg0658 says:

    one thing I have yet to see realized in this thread – is this economy has raised for many in the world into a new status of the so called american dream .. I did see a poster provide with the statement 2 billion new workers – that the fact would have consequences for America in general .. it did

    following that last paragraph and this thread I do think the USA will see lovely castle territories and urban decay situations that will tax folks who can’t run and reward those who can

    Vilgrad not a hard hearted person tells a story heard round the country this last decade .. MEW and how it made our world go round .. me our us All .. time to pay for the on credit overproduction tho .. or rationalize it away without crashing the incentive to work to live and without waste

  72. Init4good says:

    I hear the counter-arguments, but I think ‘econimonium’ has very valid points. The manufacturing economy that was once dominated by the US is gone, if not for good, for at least a few generations. The quality of remaining jobs here are either lower or higher-paying, – not much in between, and there simply are not enough of them. Medicine, corporate business, banking/finance (bloated already), fashion industry, pharmaceuticals, and military/industrial complex come to mind as better-paying more-professional jobs. The lower paying jobs are well-known. I can tell you where I work, we have hired interns in the past few years, but none recently, and the quality of those interns was top-notch. There are way too many over-qualified, intelligent, educated ppl. In my opin there are simply not enough places hiring to put them to good use. As much as I hate to say it (AND BELIEVE ME I HATE IT) I am thinking the value of a college education is starting to not make sense….not b/c education is not better for all of us, but because the chances of finding employment in an area that pays well enough to pay back the college loans are simply not to be had! Enough of them don’t exist here in the US, and those not willing to travel to foreign countries and spend 10yrs learning how their culture operates and how to do business there, are not likely to get hired. And I don’t think it is due to any dumbing-down or lack of ambition or ‘changing the way you think’ that is the primary reason. I think it is b/c the US finally has some real/true competition in the world, and we’re all realizing that we are only one of many choices available to the “world’ consumer. In everything from construction to consumer products, and now even medicine/healthcare, the US has formidable competition, and it may be a simple fact of life that the standard of living in the US has stagnated over the last 30yrs (except for corporate chieftains), and we’re all having a difficult time getting used to it.

  73. FrancoisT says:

    @Vilgrad:

    Here’s a tune-up for your BS meter; out of pocket costs for an autistic kid, (like the Freemans) even with decent health insurance are, at minimum 20,000$ per year, (unless you looow income on Medicaid) if you want the kid to have a fighting chance of becoming a productive member of society.

    How do I know?

    I have an autistic son.

    Costs to my family since diagnosis? (10 years ago) where both my wife and I used to work? I say, used to because I had to stop for 4 years to take care of him full time.

    39,000$ per year.

    But hey! Everyone know that health care is a privilege reserved to those who can afford it, don’t we? Those who can’t afford it shouldn’t be granted the privilege.

    After all, this “personal responsibility” paradigm must also apply to dirty genes like mine, don’t they? Somewhere, somehow, I MUST have done something wrong to “deserve” an autistic progeny, don’t you think?

  74. philipat says:

    http://www.salon.com/news/feature/2010/07/27/american_people_obsolete

    I can’t understand why it is not more widely understood that globalisation has been great for MNC’s but not so great for the average American. Jobs have moved to Asia and, with it, a re-balancing of global incomes is in play. Incomes in the developing world are increasing and those in the developed world are falling, until they meet somewhere in the middle. Globalisation as presently practised is NOT in the best interests of the average American citizen, but don’t expect this to be acted upon in Washington, where Corporate interests come aheead of “We the people”.

  75. TakBak04 says:

    Yes…”Init4Good”….our small business is finding the same thing. Many MBA’s and folks working on Doctorates who are falling over themselves e-mailing us to find work.

    We are a “Start Up” so we can’t pay much…and we try to use some of the MBA’s. They leave us for whatever they can find because of their School Loans.

    Not one of them has ever slacked off in doing good work for us…but when they get a better paying job they really have to take it.

    Because we are a “Small Business” we have to let them go and wish them well. It does disrupt what we can do…but we feel it’s important for both of us to work together…since we are both struggling in this economy.

    But everything you said including the rest of your post that I didn’t “quote” is important for folks in business to understand about our “New Normal…Economy.”

    Thanks for that post… It’s good to know that others are going through the same experience that we are.

    It’s difficult times…indeed.

    ——–

    @Init4good Says:
    August 8th, 2010 at 8:28 pm

    I hear the counter-arguments, but I think ‘econimonium’ has very valid points. The manufacturing economy that was once dominated by the US is gone, if not for good, for at least a few generations. The quality of remaining jobs here are either lower or higher-paying, – not much in between, and there simply are not enough of them. Medicine, corporate business, banking/finance (bloated already), fashion industry, pharmaceuticals, and military/industrial complex come to mind as better-paying more-professional jobs. The lower paying jobs are well-known. I can tell you where I work, we have hired interns in the past few years, but none recently, and the quality of those interns was top-notch. There are way too many over-qualified, intelligent, educated ppl. In my opin there are simply not enough places hiring to put them to good use. As much as I hate to say it (AND BELIEVE ME I HATE IT) I am thinking the value of a college education is starting to not make sense….not b/c education is not better for all of us, but because the chances of finding employment in an area that pays well enough to pay back the college loans are simply not to be had! Enough of them don’t exist here in the US, and those not willing to travel to foreign countries and spend 10yrs learning how their culture operates and how to do business there, are not likely to get hired.

  76. Vilgrad says:

    FrancoisT

    The kid is 20. The article said he was recently taken off the mother’s policy. That means he has been covered until recently. The story states:

    “The state of Minnesota pays for Andy, their 20-year-old son, who suffers from acute autism, to study ­theatre at the local community college.”

    The story fails to discuss what exactly the Freeman’s did with their mortgage. The story did so because it would make their little struggling family look like the standard issue morons who borrowed against the inflated value of their home and lived above their means.

    This is classic MSM bullshit reporting. You don’t run a country based on sob stories. If you do, you end up with a $13.3 Trillion National Debt. Oh yeah. That’s what we got.

  77. elmerfudd says:

    The picture would no doubt look a lot worse if you compared private to public sector income, especially factoring in pension and medical benefits.

    It would also be interesting to compare our national malaise to a ‘hedonism/distraction index,’ something to measure the vast amount of national resources that flow into dead end pursuits – slothful inactivity, gambling, porn, tv watching/internet/excessive media consumption (‘reality’ shows, materialistic lifestyle shows that teach you to be dissatisfied with your material lot in life, such as HGTV, Food Network, and their ilk, venting on blogs, etc), cosmetic surgery, worthless or near worthless higher education degrees in liberal (yes, I have one) and fine arts encouraged by subsidizing and guaranteeing student loans in any and every field of study, the growth of meaningless government jobs, fighting expensive wars to ‘rebuild’ dysfunctional societies that were never ‘built’ in the first place, etc. You almost never see an articulation of work hard, educate yourself, save, live a clean lifestyle, etc. Certainly not from the governing class. That would be ‘judgemental’ and not really in their interest anyway. A lot easier to con a bunch of unengaged sloths.

    You piss away enough of a society’s potential into non-productive pursuits then you end up right where we are.

  78. beaufou says:

    At some point, you have to decide what your prerogative is:
    what is good for the people or what is good for you as an individual.
    The problem when you choose the second option is that you still need other people in order to maintain your high rolling life.
    You see, making mountains of money by having capital isn’t exactly investing.
    Investing is progress, collecting interests is usury.
    While you are collecting those generous interests, because you have capital, those with no capital are struggling to keep up with your interests alone.
    Government is not the problem, private central banks are the problem, if the government could print its own currency borrowing with no interest, with a world index on production/consumption regulating local currencies, no need for generous donors with billions collecting interests doing nothing for the economy.

  79. Simply-Put says:

    This issue isn’t just about the Freemans or middle-class America but us as a nation. Do we believe in the ideal that winner take all (a zero sum game) or that there is something in it for everyone of course depending on the amount of effort given (a positive sum game). I do not belive that the top 1 percent have our best interests at heart or knows what is best for the rest of us.

    We are our brothers’ keeper in the sense that we are responsible for their welfare. I find no glory in seeing my neighbors house being foreclosed upon or a fellow coworker being let go because of a layoff. Anyone who thinks that they are smarter, better or more educated than the next may need to think just for a moment that maybe they are just lucky.

    We believed that we could trust the people that we elected into office and were supposed to be doing the right thing by us. Our only mistake was in trusting them because we had faith in the American system. The question remains do we still trust their judgement going forward otherwise we may be sowing the seeds of revolution. My definition of insanity is vote for same person over and over again and expecting different results.

    Toward the end of the Roman Empire, men were less willing to become soldiers than earlier generations had been, and many would pay gold or cut off their thumbs to avoid military service. What will happen when our young men and woman have no faith in this country and are less willing defend and protect us from our enemies because there are no jobs for them to come home to. Do we outsource our military next!

  80. swag says:

    A commentor in another venue: “good article, but i have to wonder why he felt compelled to describe the body type of all the women profiled. I give that a big yuk.”

  81. @gms777 Says: August 8th, 2010 at 4:51 pm

    And if one of the parents has to take care of an elderly parent, gets sick or the marriage collapses, everyone involved, especially the children, are in big trouble.

    ==============================

    Very true. The pace has now quickened to a death march and if you stumble you die

    @Vilgrad Says: August 8th, 2010 at 5:40 pm

    Still, I believe in responsibility. You are responsible for your own actions. You are responsible for your own education. You are responsible for your retirement. You are responsible for living within your means.

    ==============================

    Actually, that was the last generation. In this generation you don’t get any of those things unless you put yourself in hock to the debt plantation owners first and God forbid you stumble along the way. Of course, how someone walks for 40 years without stumbling a few times is beyond my comprehension. Better not bet big. This is all about managing your gambling stake.

    @econimonium Says: August 8th, 2010 at 6:52 pm

    This train has been leaving the station for a while now, but it really hit light speed with the advent of the internet. And it isn’t going to change, it’s just going to get worse.

    ==============================

    Is it going to get worse for the 2%ers and the ones who hold America’s debt too? I didn’t think so either. They are like cats, somehow they always manage to land on their feet. Talk about born lucky (nudge, nudge)

    The days of people being paid $30 an hour to tighten bolts at the GE plant are over because, frankly, it’s cheaper to pay someone in China to do it and ship it back here because, you know the job isn’t worth $30 an hour.

    ==============================

    But the CEOs job is worth $30,000 per hour for shaking hands and knowing the right people…..right?

  82. victor says:

    Here’s my two bits:

    Winston Munn and Medicalcontrarian have excellent points. Income redistribution (taking from the rich and giving to the poor) has a dismal record; results in churning, look at Cuba or N. Korea: their new upper classes are more so upper than the old ones. So I say, look at the CAUSES of income inequality: 1) discrimination (racial, sex, age, religion, nationality, etc), 2) where and how born, i.e. The Watts vs. Bel Air or Jimmy Sparks from Murphy NC (dirt poor) vs. Teddy Kennedy from Nantucket, Mass (silver spoon in mouth), 3) means of wealth/income acquisition: legal (say Steve Jobbs, may be) or illegal (Maddof but ALSO COUNTLESS CEO’S via investors’ apathy and countless public officials via voters’ apathy and off course the drug dealer) and finally 4) difference in talent, aptitude and luck (not everyone can be Warren Buffett#1, 2, 3 can be addressed via existing laws, policies and taxation of inheritances. Cannot fix #4, though improved education at all levels will help.

    We do have upward mobility here in the US, see “medical contrarian”; we also import poverty from Latin America via illegals. Other thoughts: the going rate for an illegal to successfully enter USA from: Guatemala via Mexico/Arizona: $5000 to $7000; from China to West Coast : $10,000 to $50,000 yes $50,000 (not in a container but via a visitor’s visa that is overstayed).

    Compton ,Ca: 5th generation Americans on the dole buying groceries from a store owned by a newly arrived Korean immigrant whose kids go to Stanford and MIT studying Computer Science and Chemical Engineering.

    17 out of 20 richest men in US are Democrats; richest US Senators and US Congressmen? you guessed, Dem’s!!

    Most needed “reforms”: fix executive comp and inheritance laws

    Sorry but The American Middle Class has always been kind of a myth historically at least, just look at the relevant statistics…

  83. DeDude says:

    Many people kept their middle class lifestyle alive with MEW, which works as long as “house prices only go up”. Pretty stupid and short sighted from the individual perspective. But without those fools, the 2001 recession would not have ended until 2007 – and the great recession would just have been a shallow long double dip added to that long recession. Problem is still the same. You cannot have economic growth when all the benefits of increased productivity, are harvested by the investor class. To get growth you have to get money in the hands of the consumer class – doing so by creating a boom in residential real estate and letting people cash out and consume house appreciation was a hare-brained moronic idea (and part of the Bush II economic policy). Allowing the corporations to kill their golden goose by shipping the work to the lowest overseas bidder is even more moronic (and part of US economic policy of the past 30 years) – but its also a natural consequence of free market forces. So do we block free market forces or do we let them destroy us?

  84. Blunt Instrument says:

    Real wages are flat. However total income (wages + benefits) is actually up because of the large increase in health insurance premiums.

    The article speaks of “declining income mobility.” However, the examples it uses point to declining “upward” income mobility. Income can move up or down. We hope that we will always move up the chart, but assuming that the total distribution remains normal, some will have to move down.

    Of course, there is no reason that the income or wealth distribution needs to be normal. It could be bi-modal, or something else entirely. Perhaps the normal distribution of income/wealth that we have experienced since WWII is an accident of history. There may have been particular forces that created a large middle class out of the returning GI’s because of the existing large domestic capital base and need for utilization. Those forces may no longer exist.

    Our problems ARE structural. Ever increasing improvements in productivity will increase wealth for the people who supply the capital and lead to less demand for current jobs. Many people will find themselves without marketable skills. In the long term, this will benefit society as a whole. In the short term, unfortunately, many individuals will suffer disproportionately.

  85. DeDude says:

    “Ever increasing improvements in productivity will increase wealth for the people who supply the capital and lead to less demand for current jobs”

    And eventually the fully automated factory will produce its products and transport them through the fully automated “factory-to-consumer” transportation system and nobody will need to be hired at all (by the single owner of the fully automated factory and transportation system) – so that owner will be incredibly amazingly rich? NOT –because without any jobs there will be no consumers to purchase the products, so the whole thing stops and everybody including the people supplying capital will be very poor. The less work it takes to produce the services and goods people need, the more important it becomes to find a better way to distribute the wealth. Maybe the old Marxist fools from 100 years ago were right that capitalism eventually will destroy itself.

  86. DeDude says:

    May I use the opportunity to recite DeDude’s rule of capitalism sucking:

    “For every product made, there must be a sucker willing and able to pay the price you want for it”

    Brake that rule at your own peril – baaad things will happen.

  87. Blunt Instrument says:

    Improvements in productivity lead to less demand for CURRENT jobs. We do not know the jobs that current and future innovations will produce.

    We are incredibly bad at making accurate predictions of the future. We typically perceive our universe as static, or linear, at best. However, history suggests that evolution is non-linear. Rapid dislocations occur. Jobs will result from these dislocations. It is difficult to predict what skills will be required to perform these jobs.

    Our struggle as a society will be to shepherd ourselves through a large and difficult dislocation from the predominantly manufacturing jobs of the recent past to the unknown jobs of the near future.

    Thus far, capitalism has afforded the greatest opportunity for improvement to the most people. Capitalism also involves risk – current wealth is no guarantee of future wealth. It is our distortion of that risk-reward balance through government interaction (bailouts) that threatens capitalism.