1 Boring Old Man

The One Percent Economy–Part One: The What
Open Left
by: Paul Rosenberg
September 26, 2009

There are lots of different ways to slice up the economy to analyze it.  But if you slice it fine enough to separate out the top 1% – and subdivisions with it, a funny thing happens: you discover that the economy since 1973 has done almost nothing for the bottom ninety-nine percent as an aggregate. [This data comes from Berkeley economist Emmanuel Saez, with a little extra parsing by me. I’m charting increases in average income for all income groups identified.]

Oh, sure, those in the top 5 or 10 percent excluding the top 1 percent have done okay… but not by historical standards.  Those in 95th to 99th percentile have seen their incomes [including capital gains] rise by just over 50% since 1973, a period of 34 years [the last data is 2007].  But this compares to a 100% gain from 1945 to 1973 – a period of just 28 years.  That’s roughly half the gain in 20% more years.  And those in the 90th to 95th percentile have done substantially worse – just over a 30% gain since 1973 compared to 120% from 1945 to 1973, one quarter the growth over a period 20% longer.

What’s more, when you combine their incomes with everyone else below them, to get an average income for the bottom 99%, that average has only gained 10% over the past 34 years.  Of course people in the 90th to the bottom of the 99th percentile don’t like to think of themselves mixed in with the rabble below. But the folks in the top 1% – particularly those in the top 0.1% must surely find this amusing, since the post-1973 economy really doesn’t work for anyone else but them.  And the folks in the 90th through 99th percentile aren’t fooling anyone else but themselves if they think otherwise.  Heck, even the bottom half of the top 1% only doubled their incomes from 1973 to 2007, the bottom 90% did almost that well from 1945 to 1973.  This is the picture of an economy that’s stagnant for almost everyone – and has been for 34 years now, up until the biggest downturn since the Great Depression kicked into high gear one year ago…

^{[data through 2007 – my adaptation from Open Left]}

I’m used to showing this with the GINI Index…

but Paul’s data is more instructive. It not only shows the wealth inequity, it shows the associated income stagnation [except for the fabulously wealthy] Add to that that the Consumer Price Index [inflation] has risen from 42.6 to 215.8 [400+%] in the same interval.

John Steinbeck’s last novel, The Winter of Our Discontent, was a painful piece of his literary legacy for me. While he had long documented the travails of the downtrodden and marginalized characters among us, he was a master of never losing sight of their humanity or their humor. But in this last novel, he tells the story of a moral man who lost his integrity and moral compass in an attempt to elevate his life station – a modern day Faust. Success brought his character nothing but despair and he escaped suicide only by dreaming that his child might regain the standards he, himself, had renounced. I remember that when I read this book in the early 1960’s [as the country was beginning to slide into the "great polarization" that made the sixties so tumultuous,] I felt that John Steinbeck had become bitter in his late life. After I read it, I made a promise to myself to be wary of making such a descent if I ever "got old."

In the following year, Steinbeck published Travels with Charlie, his driving trip with his poodle around America to revisit the places he’s documented in his novels as a younger man. While he had regained some of his humor, the bitterness persisted – particularly when he got to New Orleans. It was in the height of the Southern rebellion against Segregation, and Steinbeck crossed paths with the "cheerleaders" – those mothers who were picketing the schools with scowls and contemptuous chants. Maybe Steinbeck’s ill humor wasn’t his age after all, I thought. Maybe it was just a really bad time. In fact, Steinbeck died in 1968, one of the bottom line worst times in this country that most of us can recall.

So, now I’m here, in my own late sixties, the winter of my own life, and that earlier vow is hard to keep sometimes. It feels like the same dilemma Steinbeck was confronting – recession, pointless wars, political polarization, international discord, nuclear proliferation, modern problems like global warming, never ending problems like religious fundamentalism, hatefullness, the antics of a Glenn Beck. But it’s something more than the front pages of the paper or the blogs, it’s actually more like a change in my point of view. So many of the issues that inspire great passion and conflict seem really petty now – like Steinbeck’s New Orleans cheerleaders who were fighting a losing battle for a pointless cause. Their only legacy is the absurdity of their antics captured in a book by an author whose work will be immortal. So they will  live on as fools lost in one of those contemporary dramas that complicate real time, but deserve only a line or two in history books.

Right now, we’re in the middle one of those real time black holes that may get only brief play in our history books. A madman set off a bomb in the middle of our national metropolis. The loss of life and property, as bad as they were, paled in the face of what followed – what we did to ourselves, and what we’re still doing.

^{Humanity has been passing through a gray and desolate time of confusion. My great predecessor, William Faulkner, speaking here, referred to it as a tragedy of universal physical fear, so long sustained that there were no longer problems of the spirit, so that only the human heart in conflict with itself seemed worth writing about. Faulkner, more than most men, was aware of human strength as well as of human weakness. He knew that the understanding and the resolution of fear are a large part of the writer’s reason for being…}

^{The present universal fear has been the result of a forward surge in our knowledge and manipulation of certain dangerous factors in the physical world. It is true that other phases of understanding have not yet caught up with this great step, but there is no reason to presume that they cannot or will not draw abreast…}

^{Understandably, I have been reading the life of Alfred Nobel; a solitary man, the books say, a thoughtful man. He perfected the release of explosive forces capable of creative good or of destructive evil, but lacking choice, ungoverned by conscience or judgment. Nobel saw some of the cruel and bloody misuses of his inventions. He may have even foreseen the end result of all his probing – access to ultimate violence, to final destruction. Some say that he became cynical, but I do not believe this. I think he strove to invent a control – a safety valve. I think he found it finally only in the human mind and the human spirit…}

^{Less than fifty years after his death, the door of nature was unlocked and we were offered the dreadful burden of choice. We have usurped many of the powers we once ascribed to God. Fearful and unprepared, we have assumed lordship over the life and death of the whole world of all living things. The danger and the glory and the choice rest finally in man. The test of his perfectibility is at hand.}

^{Having taken God-like power, we must seek in ourselves for the responsibility and the wisdom we once prayed some deity might have. Man himself has become our greatest hazard and our only hope. So that today, saint John the Apostle may well be paraphrased: In the end is the word, and the word is man, and the word is with man.}

So Steinbeck’s perspective contains both hope and despair, the power of mastery and the fears of failure. In Steinbeck’s time, the focus was on nuclear weapons and man’s potential to become so lost in the political struggles of the moment that our collective survival was put in peril – some person might actively blow us into oblivion. Here, not many years later, the stakes seem higher. If we don’t actively step up to the plate on things like population control and global warming, we might as well opt for thermonuclear devastation, since the passive denial of our own toxicity will achieve the same goal as the bombs.

John Steinbeck pinned his hope on the future generation [his character’s daughter] as did Alfred Nobel who established a reward for accomplishment [and peace]. And what I saw as the potential bitterness of later life [the discontent of our winter] was more complex. Though it was in part a fear of and impatience with the short-sightedness of real-time politics, it also contained the comforting sense that our faltering missteps usually ended up sending us down the right path sooner or later. But, unlike the detached perspective of the historian, the devil’s in the uncertainty that always accompanies the present – throughout life…

I periodically have graphing attacks. I know they’re boring, but it’s just a way some of us think. The topic is the economy, and there’s just no way to talk about it without graphs. The one on the right is the familiar Dow Jones Industrial Average plotted over the time stored in the CNN Data bank, and it’s hard to follow historically because of the inlfation of money over time, so many people try to correct for inflation using one of the economic indices available from the BEA [Bureau of Economic Analysis] or the BLS [Bureau of Labor Statistics] Internet sites. The two most used indices are the CPI [Consumer Price Index] and the GDP [Gross Domestic Product].

• CPI  [Consumer Price Index]: This index measures the cost of a fixed amount of goods at any point in time. So the Inflation Rate for a period of time is the percent change in the CPI over the interval.
• GDP [Gross Domestic Product]: This index measures the market value of all final goods and services made within the borders of the US in a year. It is often referred to as the Standard of Living.
• For example, the graph on the right shows the CPI and the GDP during the Bush Era – with the fall in the CPI [deflation] and the fall in GDP [production] in his last year.

While this approach makes logical sense, and the author of the web site where I got this graph has a really interesting discussion of the implications, if anything, the graph amplifies the escalation making the "why?" an even bigger dilemma. I’ve tended to assume that the boom economy of the 1990’s had to do with the Internet Bubble and the other bubbles that swept through our economy [with deregulation]. But, honestly, this "Real DOW" makes absolutely no sense to me. Instead of clearing things up, the mud just gets deeper.

Then I ran across this graph from an article by the Georgia Tech Financial Analysis Center, and it made me rethink the whole question.

The point of the article was that the best indicator for the DOW is the GDP [not the CPI]. They’ve plotted these two parameters using a logarithmic scale [which turns things into something of a linear graph which is much easier to read]. Somehow, it makes intuitive sense to me that the value of the Market and the value of our Gross Domestic Product should track together. And when I look at that plot, the events around 1929 make good sense, the Market got way out of control. That’s what we’ve always been told. And when I look at the "flat" DOW from about 1963 until 1980, I have no idea of "why?" but what thereafter follows looks a lot like a gradual recovery from that period.

So, who cares if the DOW tracks the CPI or the GDP? I apparently do. It makes me feel like our economy is following some sensible rules, and is "on course." The new question, "What happened between 1963 and 1980 is more approachable that explaining that "Real DOW" graph. And the fact that the GDP and CPI have different slopes is intriguing, but is unlikely to be a cause for insomnia. Here are the logarithmic plots of the DOW, GDP, and CPI for those who find such things mildly interesting:

As a non-FOX watcher, I guess I’d assumed that Glenn Beck was like their other guys – Bill O’Reilly, Sean Hannity, Karl Rove – generating negative Taliking Points hourly against whatever any Democrat or non-conservative said about anything. But that’s not right. The other day, I saw his Rockerfeller Center Art piece which he interpreted as documenting Rockerfeller’s secret Communism and Fascism [and therefore NBC’s Communism and Fascism, because they are in the Rockerfeller building complex]. And then I saw one where he was pushing some corny principles where he’s in tears trying to get us to feel like we felt on 9/12 [@1:23 after the commentary]. Today, I see one when he slams McCain [sorry about the commercials].

Unlike the other right wing nasties who dish up their daily menu of contempt and sarcasm, Glenn Beck seems to be running an Elmer-Gantry-esque program that transcends the political issues of the day and aims for a more primitive level. The recent Time Magazine article [which seemed as disjointed as Beck himself] sees him as connecting with the “I’m mad as hell, and I’m not going to take it anymore” disenchantment many of us feel these days. His admixture of hucksterism and libertarianism, served up with shock-value antics, seem to appeal to the same nerve that had people flocking to Pastor Ted Haggard’s church. And like Haggard, it’s hard to argue with Beck, because it’s hard to even figure out where he’s coming from. In that interview with Katie, it’s unclear what he’s even getting at.

The Rights of Corporations
New York Times
editorial
September 21, 2009

^{The question at the heart of one of the biggest Supreme Court cases this year is simple: What constitutional rights should corporations have? To us, as well as many legal scholars, former justices and, indeed, drafters of the Constitution, the answer is that their rights should be quite limited — far less than those of people. This Supreme Court, the John Roberts court, seems to be having trouble with that. It has been on a campaign to increase corporations’ legal rights — based on the conviction of some conservative justices that businesses are, at least legally, not much different than people…}

^{The legal doctrine underlying this debate is known as “corporate personhood”…}

^{The courts have long treated corporations as persons in limited ways for some legal purposes. They may own property and have limited rights to free speech. They can sue and be sued. They have the right to enter into contracts and advertise their products. But corporations cannot and should not be allowed to vote, run for office or bear arms. Since 1907, Congress has banned them from contributing to federal political campaigns — a ban the Supreme Court has repeatedly upheld.}

^{In an exchange this month with Chief Justice Roberts, the solicitor general, Elena Kagan, argued against expanding that narrowly defined personhood. “Few of us are only our economic interests,” she said. “We have beliefs. We have convictions.” Corporations, “engage the political process in an entirely different way, and this is what makes them so much more damaging,” she said.}

^{Chief Justice Roberts disagreed: “A large corporation, just like an individual, has many diverse interests.” Justice Antonin Scalia said most corporations are “indistinguishable from the individual who owns them.” The Constitution mentions the rights of the people frequently but does not cite corporations. Indeed, many of the founders were skeptical of corporate influence. John Marshall, the nation’s greatest chief justice, saw a corporation as “an artificial being, invisible, intangible,” he wrote in 1819. “Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence”…}

^{One of the main areas where corporations’ rights have long been limited is politics. Polls suggest that Americans are worried about the influence that corporations already have with elected officials. The drive to give corporations more rights is coming from the court’s conservative bloc — a curious position given their often-proclaimed devotion to the text of the Constitution.}

^{The founders of this nation knew just what they were doing when they drew a line between legally created economic entities and living, breathing human beings. The court should stick to that line.}

While self determination and freedom from government oppression was indeed part of the spark that ignited our revolution, these quaisi-patriotic messages cover another way to bury us under the oppressive regime of Corporate America. And it worked. Under our Republicans, the rich got richer, and richer, and richer. For example, the GINI Index, a measure of wealth inequity:

A symbol of the rape of our economy has been the outrageous bonuses paid by Financial Institutions to their executives who have brought in the greatest profits. A particularly aggregious example was at A.I.G. where $1 million/year employees insured billions of dollars worth of debt without assets to cover them when the housing bubble burst.

But even after the crash, they continue to pay these outrageous bonuses, rewarding the kind of short term gains that continue to deplete our economic future. Now our unfortunately conservative Supreme Court is winding up to allowing this kind of corporate greed to continue.

It’s been raining here for weeks. We’ve had a drought for a few years, so the torrents of rain were welcome [for a while], but then it started getting old. Our dogs have taken to barking at the rain these last few days. Yesterday, some friends called from Oregon. They’d seen the news. They’re coming back today and wondered if they would have trouble driving home. I didn’t know, so I started watching Atlanta television [we’re 60 miles north at twice the elevation]. It went from bad to worse, with more coming. This morning, the city is shut down [maybe "going under" better describes it].

"Values Voters" Need To Get Their Priorities Straight
Daily Kos
by BarbinMD
September 21, 2009

What are the top three issues among the so-called "values voters" who gathered in Washington D.C. this weekend?

Abortion ranked first among issues of concern to straw-poll voters, getting 41 percent of the vote, with protection of religious liberty second with 18 percent. Opposition to same-sex marriage was third at 7 percent.

Nice values – their top three priorities are to control other people’s lives while whining about a non-existent threat to their own.

And what are the top concerns for the rest of the country? The economy, health care, the wars in Afghanistan and Iraq, education and climate change — issues that affect the entire country, people’s lives and our future. One might describe those as actual values.