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Who shipwrecked the economy?

by Evo
Tags: economy, shipwrecked
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ThomasT
#37
Feb14-12, 08:47 AM
P: 1,414
It seems to me that we all had something to do with shipwrecking the economy -- whether via willful ignorance or willful greed or whatever. So, if we accept that, then the question is, what can we do to prevent similar problems in the future? It seems clear enough to me that the financial sector isn't concerned with improving America's general economy. So, imo, the financial sector needs to be minimized, ie., reduced. There are, I think, a number of ways to do this. Will any of them be done? Imo, not without the institution of, and large scale election of representatives of, a major third party.
CAC1001
#38
Feb16-12, 03:04 AM
P: 18
BILL MOYERS: As we’ve been reporting in our series on winner-take-all politics, the Millennials grew up in the years when crony capitalists and powerful officials in Washington rewrote the rules of the economic game to favor the relative few at the top over everyone else. That collusion brought devastating results, from the financial crash four years ago, to the greatest inequality in America since the great depression of the 1930’s. Our economy stopped working for everyday Americans.
Moyers's statement makes for a nice set of talking points, except that the "rules" of the "economic game" were not written to favor any relative few at the top while ignoring everyone else, and to just claim it was those policies that brought devastating results is really over-simplifying the issue. I would also completely disagree that we have "the greatest inequality in America since the Great Depression of the 1930's." Our economy worked just fine for everyday Americans. It had stopped working prior to the Reagan era. The areas where the economy has been bad for Americans are where there is a lot of excessive government involvement. The idea behind the Reagan polices was to free up the economy. Freeing it up is not rigging it to benefit special interests (large corporations utilize subsidies and regulations to rig the system). In fact, some of the large financial corporations at the time were very much even against the Reagan policies.

HEATHER McGHEE: Most of my friends, who are not political and don't have an economics background, who are starting out their lives right now, having children, getting a house don’t even think about the fact that these are common problems that could have public solutions. They don't think there could be financial aid for childcare. They don't think that health care could be portable and go with them and be guaranteed.

They don't think that there could be a pension that is more solid and durable than a 401(k). That's actually been sort of the most pernicious effect of the Reagan revolution is to take the horizon of public policy solutions that could really help people sort of off the radar entirely.
Where does she think the money for all of this stuff will come from? The Europeans have lackluster defense spending and high taxes and still can't afford it (well a few can, but generally they are very small and also lack defense spending). And their high taxes, such as the VAT tax, taxes the poor and the middle-income to pay for this kind of stuff, and raises the cost of living a good degree.

HEATHER McGHEE: They know that they have the problems. They just don't know that there could be public solutions.

I think that's one of the major projects that we have to do is really to create a generational comparison. Where we say, for example, 'My generation-- my grandparents were able to go to college, go to higher education, have a middle class life, save for the future, retire comfortably because of public investments that were made, like the G.I. Bill, because of the federal highway system, because of the retirement system that labor and union jobs were able to provide.'

BILL MOYERS: Well, that's what can happen in the public sector. That the public sector over the last 50 years has created a very large middle class for people who would otherwise never have gotten into it. And now with the assault on public unions and public sector, that ladder's being taken down, right?

HEATHER McGHEE: Absolutely. It's been so shocking to see the demonization of public servants. It's really part of this 40-year attack on the public. And I think the fact that we're seeing right now that teachers, public janitors, school workers, bus drivers, cops, firefighters are the new welfare queens in our public life.
Maybe because of the reputations some of these public-sector unions have for demanding excessive pay and benefits? For using the public treasury to essentially buy politicians who will do their bidding (i.e. pay them more money and further enlarge the govenrment in the name of strengthening the unions?). Not to mention the thuggish behavior many of these public-sector unions utilize in order to get their way.

I also disagree with Moyers's assertion that the public sector "created a middle-class that would never have gotten into it." Public-sector workers produce nothing. Whatever money they make is money that is either from debt or from tax revenues taken out of the private-sector.

I mean, really they are. I mean, if you think about the stereotype that's being trafficked right now. They're talking about these lazy, you know, bloated pensions that are just, you know, cheating the system. I mean, that's the welfare queens of the 1980s. And what has been-- what's the same between the welfare queen and this image of the postal worker who doesn't really deserve the benefits they're getting? These old shop worn stereotypes of race and gender.
As with so many leftists, it's again about racism or sexism for her.

BILL MOYERS: Does it seem to you that inequality is sort of the bequest your generation has been handed.

HEATHER McGHEE: Absolutely. I mean, our generation is, you know, the most diverse generation in American history. Half of young people under 18 are children of color. But we are also the generation that is experiencing this record inequality, inequality in our economy and inequality in our democracy.
Minus the current recession, which may well be being prolonged by the current administration, my opinion would be that her generation is experiencing record equality, not inequality. Just the job market right now stinks.

BILL MOYERS: What do you mean inequality in democracy?

HEATHER McGHEE: Well, let's take, for example, the fact that since I was born, there's an entirely new industry that didn't used to exist. That of corporate lobbyists, for which there are now 24 for every member of congress.

I mean, if you think about who people in congress spend their time with, who they listen to, who they spend one out of every three minutes that they're in office fundraising around, it is people in the top one percent. It is their lobbyists. It is the corporate CEOs. And so much of the policy decisions, whether they are the decision to keep the minimum wage low.

I mean, if we-- the minimum wage was at its peak in 1968 and has lost nearly half of its purchasing power. I mean, just think of that one policy decision that is a number one target for the Chamber of Commerce, year after year, to make sure that the minimum wage stays low. That absolutely benefits people who are invested in big corporations and the executives of big corporations. But the American worker has seen their buying power erode and erode.
Actually, big corporations such as Wal-Mart favor a minimum wage because it hurts smaller businesses: LINK (although Wal-Mart claims its to help the customers ). Wal-Mart's latest move is to create new "Express" stores, small Wal-Marts which if successful are menat o take on dollar stores and mom-and-pops.

And raising the minimum wage is not going to change anyone's buying power. You can't subvert the laws of economics just because you don't like them. In addition, unions have traditionally favored the minimum wage to price cheaper-priced labor out of the market. She talks about youth being unemployed right now, what does she think is one of the main drivers of youth unemployment throughout the world? The first minimum wage, the Davis-Bacon Act, was for racist reasons, to price cheaper-priced black labor out of the market to protect white unionized labor (certain racist people throughout history have even advocated the minimum wage for this purpose).

The minimum wage is a price control, and as such, you artificially increase the price of something, you'll create a surplus. This in particular hits the youth, as the youth make up much of the minimum wage workers.

HEATHER McGHEE: Yeah, it's been a really grand experiment that has-- in, sort of, neo-liberal economics, the trickle-down experiment. The experiment that said that, in fact, the best way that we can shape our economy is to make sure that the most gains are amassed and kept at the very top. And then that somehow those would trickle down.

That's been an experiment. It's been-- it was a theory that was tested. My generation were the guinea pigs. And that experiment has absolutely failed if the aim was to produce greater prosperity for America. That means American people. If the aim was to actually stop at the top and just create greater corporate profits and greater G.D.P. growth, then it's been a success. But I think most Americans would not have bought in to that kind of experiment.
Except that this was never the experiment or policy. Neo-liberal economics is not about any "trickle-down" policy; no economist is. "Trickle-down" economics does not exist. The thinking behind the Reagan policy was that the economy was over-taxed and over-regulated, and that reducing taxes and regulations would unleash a lot of new investment and hence business creation and growth, and hence job creation. It would increase the number of goods and services in the economy (hence the term supply-side economics).

And it worked spectacularly well, producing tremendous prosperity. Along the way however, due to bad governmental policy and lax oversight in the financial system, we ended up with the financial system tying itself into the national housing market and a housing bubble developed which popped.

This woman is a textbook example of when Ronald Reagan said, "The trouble with our liberal friends isn't that they're wrong, it's that they know so much that isn't so."

HEATHER McGHEE: Yeah. We need to fundamentally shift back to a system of grants, not loans. I mean, we cannot indenture a generation just to pay for the ticket to the middle-- to a middle class life. But we also need to do something for people who are not going to get bachelor's degrees, which are still-- it's not the majority of young people who have a college degree.

So I think we need to raise the wage floor. We absolutely have to get back to a place of embracing unions in this country. And we have--

BILL MOYERS: Why?

HEATHER McGHEE: Because unions created the middle class in this country. Because the jobs that were the steelworker jobs that so many of the people in my family had weren't good jobs. They were made into good jobs, because the people who were working those jobs had a voice on the shop floor, and had some power when it came to setting their wages. Which makes all of the sense in the world. That the people baking the pie should be the ones who get to have a decent slice of it.
I think the solution to reducing the cost of a college education is to get the government out of subsidizing it in the first place. It shouldn't be a surprise to anyone that the cost of a college education has exponentially increased as the government has subsidized it. And unions did not create the middle-class in this country. Increasing productivity did that. Unions helped with getting good working conditions established however. As for the rest of her statement, she's a socialist. In a market, your skills are valued by what the market sets them at. You don't have a right to form a cartel and artificially jack up the cost of your skills/products/services, so no, it does not "make all the sense in the world" as she says. It's a sense of entitlement. The only reason why unions were able to get away with doing that as they did during that period of time was because America had no major economic competition at the time. But times are different now.

She believes that the workers of the company are actually entitled to the profits of the company. They're not. They're entitled to decent working conditions, but otherwise, in terms of pay, they're only "entitled" to what the market sets their pay at. The purpose of the business is to make money for the owner or owners (shareholders). The wealth belongs to them. It's basic economics: you provide something, a product, service, or skill, to trade on the market. Businesses sell products and services. They offer to trade money and benefits to workers for the workers trading their skills and labor. The market establishes the prices of everything. That's just how the world works. Workers forming a cartel to artificially increase the price of their skills and labor is engaging in robbery. The workers do not own the wealth of the company. They're ultimately just someone the company trades with. It trades with the workers to be able to produce its goods and services, which it then trades on the market for money.

Everyone, whether the workers or the businesses, are ultimately trading skills/goods/services on the market for money (the medium of exchange) which they then exchange for other skills/goods/services.

BILL MOYERS: How do you have a new social contract if we don't have a sense of community?

HEATHER McGHEE: I think that is the great question of our time. Because if you look at this sort of hostility and anxiety around public solutions, at its root, it's anxiety around who the public is. And I think that that's happened, because of the real explosion in diversity.

But I think it's something that there is an answer to. It takes leadership. I mean, you have to think about the same system that allows people based on their physical appearance to be valued so differently, to create this hierarchy, is at its root, in terms of cognitively, the same system that allows, for example, the CEO of Walmart, who makes about $16,000 an hour. Whereas his coworker, the associate on the shop floor, makes about seven dollars an hour. And then the woman or man in Malaysia or India, who actually is making the product on the shelves makes pennies an hour.

And yet, they're all in the same enterprise. You have to think about what that says to us as people, when we value the labor of three people who are in the same enterprise, essentially, so differently. I mean, when you and I walk into a store and we see a phone on the shelves. And one is $30 and one is $300, what do we decide about the more expensive one? That it's better.

BILL MOYERS: Yeah, automatically, right?

HEATHER McGHEE: Automatically.

BILL MOYERS: Something about it.

HEATHER McGHEE: Exactly. If it's more expensive, it's better. And the logic of applying that same logic to human beings, which we do all the time in this free market with no fundamental values of human dignity is really dangerous. But it's the same kind of logic that leads us to have racial hierarchies and gender hierarchies, as well.
This one just makes my head spin. Does she have no concept of how the real world works? I've got news for her, but that's not any "system" that does that, that's just reality. Human nature values people based differently on their skin color. And it is not the same thing that causes people working in a company to be valued differently as causes people to be valued differently based on skin color. People being valued on skin color is due to racism. Valuing the three people in the company differently is just the rules of the market, which looks at what does the person have to trade, and prices it accordingly. The CEO offers skills far more highly-valued than the shop-floor worker or the Malaysia person.

The only acception to the coldness of the free market is if the shopfloor person or the Malaysia person are being forced to work in horrible conditions or being worked 24/7 or something like that. Otherwise, of course they are paid differently. A shopfloor worker doesn't know how to run a multibillion-dollar, global corporation like Wal-Mart.

This one especially makes my head spin: And yet, they're all in the same enterprise. You have to think about what that says to us as people, when we value the labor of three people who are in the same enterprise, essentially, so differently.

Because people aren't valued based on how someone like her thinks they should arbitrarily be valued, they're valued based on what they offer to trade. If they have something to trade that is of little value, then they don't get paid that much.

And as the Dēmos report "The State of Young America" has shown, this generation, my generation is really feeling the brunt of the recession that capped off 30 years of widening economic inequality and insecurity. And so young people can't say that they're better off financially than they were four years ago. I really believe that given the levels of unemployment in the young adult generation, the president needs to call for-- and I understand it would be difficult to pass through Congress.

But on the campaign trail, he needs to call for a WPA style, generational jobs program all across this country. And it would be a transformational generational experience. It would be something that would expose people to different Americans from different walks of life. But it would also be something that would say, finally, for once and for all, 'Yes, your American Government is on your side, young people. We're not always going to leave you to the mercy of the banks and selfish employers and the vagaries of the so-called 'free market. We're going to say that your future matters to us as a country.'
How will she pay for the jobs program? And who is saying to leave everyone to the vagaries of the free-market? No one is saying to eliminate the safety net, just that government is not the solution to society's problems.

BILL MOYERS: You're calling for more and more government help. You just asked Obama to take a more aggressive position with using the government to put people to work. You're up against, of course, the predisposition of people out across the country that, 'I don't want to pay taxes to those folks who haven't been spending it well, fighting wars, passing the cost on. Extending benefits to Wall Street, bailing out the banks. I don't want to support government anymore.'

HEATHER McGHEE: Absolutely. I mean I think that in order for us as Americans, who want to see public solutions to our common problems, to really achieve what we want to achieve, we are going to have to clean up Washington first. It is absolutely important. For example, why would the American people trust Washington to do what's right when they know that so much of their energy is focused on rewarding the people who brought them to the party, which is the wealthiest people in the country and the organized corporate elite?

And so we've got to clean up the money in politics problem. And it's time to take that incredibly personal issue of your own personal finances and make them political.
She needs to realize that creating the government bureaucracies and all these regulations is what leads to so much of this lobbying in the first place. It is also impossible to really clean up the money in politics. Trying to do so only limits freedom of speech.
ParticleGrl
#39
Feb16-12, 03:07 PM
P: 685
Actually, big corporations such as Wal-Mart favor a minimum wage because it hurts smaller businesses
How do you know this? Have you sat in on meetings where they discuss it? Given that Walmart is a steam-roller of efficiency it seems more likely they are worried about their customers buying power than small local stores taking away their business. Minimum wage laws generally transfer money to walmart's customer base.

And raising the minimum wage is not going to change anyone's buying power. You can't subvert the laws of economics just because you don't like them.
Of course it will. A minimum wage law transfers money from both consumers and businesses (whether the brunt gets born by consumers or businesses depends on relative elasticities) to minimum wage labor. Thats a decrease in buying power for customer/business and an increase for minimum wage labor.

The minimum wage is a price control, and as such, you artificially increase the price of something, you'll create a surplus.
This is only true if minimum wage laborers are priced near their marginal productivity. If they are priced below, then raising their wage won't create a surplus. Do we want to raise wages to $50 an hour, no. But there is plenty of evidence that small raises in the minimum wage haven't had much effect on unemployment in the US (Card and Krueger's famous paper, for instance. Even the papers written in response show only small effects). It seems likely, then, that cheap labor is priced near or below its marginal efficiency.
CAC1001
#40
Feb16-12, 04:53 PM
P: 18
Quote Quote by ParticleGrl View Post
How do you know this? Have you sat in on meetings where they discuss it? Given that Walmart is a steam-roller of efficiency it seems more likely they are worried about their customers buying power than small local stores taking away their business. Minimum wage laws generally transfer money to walmart's customer base.
It's an assumption I make because the entire National Retail Federation was aganst the minimum wage increase and also Wal-Mart being a monster-sized global corporation, can absorb a minimum wage increase. Here is a link where the NRF is supporting policies part of a minimum wage law because of how it affects small businesses: LINK

Here is where they were against a minimum wage increase: LINK

Of course it will. A minimum wage law transfers money from both consumers and businesses (whether the brunt gets born by consumers or businesses depends on relative elasticities) to minimum wage labor. Thats a decrease in buying power for customer/business and an increase for minimum wage labor.
Which means that overall there is no change in buying power. One group has to take a hit in order to transfer money to the other group.

This is only true if minimum wage laborers are priced near their marginal productivity. If they are priced below, then raising their wage won't create a surplus. Do we want to raise wages to $50 an hour, no. But there is plenty of evidence that small raises in the minimum wage haven't had much effect on unemployment in the US (Card and Krueger's famous paper, for instance. Even the papers written in response show only small effects). It seems likely, then, that cheap labor is priced near or below its marginal efficiency.
Remember that there have been multiple papers calling into question Card and Krueger's data and methods. Economists David neumark and William Wascher, for example, performed a study of over 100 studies on the effects of the minimum wage, and found most point ot negative employment affects. Unions have also been a backer of raising the minimum wage in various states. The teenage unemployment rate seems to be the most affected:

LINK

Second, the studies that focus on the least-skilled groups that are likely most directly affected by minimum wage increases provide relatively overwhelming evidence of stronger disemployment affects for these groups.

~~second page (not the numbered page 2, but the second page)
ThomasT
#41
Feb18-12, 12:55 AM
P: 1,414
Quote Quote by CAC1001 View Post
Moyers's statement makes for a nice set of talking points, except that the "rules" of the "economic game" were not written to favor any relative few at the top while ignoring everyone else, and to just claim it was those policies that brought devastating results is really over-simplifying the issue.
I agree that Moyer's statement is an oversimplification, but it seems hard to argue that the people who control most of the wealth aren't influencing policy making in order to increase that share. Are there correlations between wealth/income disparity and the relative health, wrt various measures, of the general economy?

Quote Quote by CAC1001 View Post
I would also completely disagree that we have "the greatest inequality in America since the Great Depression of the 1930's."
A Wikepedia article on this seems to support the quoted assertion.

Quote Quote by CAC1001 View Post
Actually, big corporations such as Wal-Mart favor a minimum wage because it hurts smaller businesses ...
I don't think that smaller businesses pose much of a threat to Walmart. If they do favor an increase in the minimum wage, my guess is that it's primarily because they'll recoup much of that due to a commensurate increase in the aggregate demand wrt their customer base.

Quote Quote by CAC1001 View Post
And raising the minimum wage is not going to change anyone's buying power.
It would increase the buying power of the wage earners (who would be earning higher wages) to a greater extent, in greater proportion, than it would decrease the buying power of business owners and investors, imo.

From what I've read, economists are split regarding speculations on how a significant increase (or decrease) in the minimum wage might affect the general economy.

Quote Quote by CAC1001 View Post
... due to bad governmental policy and lax oversight in the financial system, we ended up with the financial system tying itself into the national housing market and a housing bubble developed which popped.
I agree. The "bad governmental policy" that preceded the inordinate peddling of toxic assets by big financial houses was a relaxation of regulation and oversight. The people in government who could have done something to stop the trend ignored the warnings, and marginalized the people within and without government who were doing the warning. And it all began with lenders making bad loans. A practice that could have been minimized with sufficient regulation and oversight.

Quote Quote by CAC1001 View Post
I think the solution to reducing the cost of a college education is to get the government out of subsidizing it in the first place.
What happens if the government stops subsidizing college educations for low income high school graduates?

Quote Quote by CAC1001 View Post
No one is saying to eliminate the safety net, just that government is not the solution to society's problems.
Isn't solving certain of society's problems what we elect governments to do?

Quote Quote by CAC1001 View Post
... creating the government bureaucracies and all these regulations is what leads to so much of this lobbying in the first place.
Well ... yeah. I agree that making and enforcing fewer laws and regulations, and generally minimizing governmental oversight, would minimize lobbying (influence peddling, bribery, and various other forms of pressuring law makers and policy makers).

But we don't expect government to turn a blind eye to expected/predictable behavior of relatively small time criminals, so why should it do that wrt large corporations and the financial sector in general, whose crimes and misdemeanors potentially negatively affect the lives of millions?

Quote Quote by CAC1001 View Post
It is also impossible to really clean up the money in politics.
Only if the status quo is impossible to change. Is it? I don't know. But I think that an individual who's dissatisfied with the current status quo can do something, and I think that that starts with simply not voting for major party candidates. Assuming that most major party candidates are quite in line with the status quo, and quite amenable to the persuasions of lobbyists and various moneyed interests.

Quote Quote by CAC1001 View Post
Trying to do so only limits freedom of speech.
Freedom of speech includes, among other things, the freedom to vote one's conscience. Overhauling the system will entail the minimization of the power of the current major political parties, and the emergence of at least one new major political party. The way I see it, the only way that this might happen is if the collective expression of freedom of speech is maximized. What minimizes one's freedom of speech is the acquiescence wrt a certain status quo.
Lapidus
#42
Feb18-12, 06:55 AM
P: 283
Quote Quote by Evo View Post
No offence, but I remember receiving warnings for just posting links in opening posts.
OmCheeto
#43
Feb18-12, 02:28 PM
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Quote Quote by russ_watters View Post
Thanks, I'd been looking for that! It is starting to get out of date, though...and it seems to be in a different order from what I saw before.
But what a myriad of rabbit holes it provides.

Just spent the last 4 hours drilling down the Gramm hole.

What a freaking character.

------

But as I've pointed out before, someone did have to elect him.

rootX
#44
Feb18-12, 02:48 PM
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Heather C. McGhee can say whatever she wants but I don't find her very reliable
http://www.demos.org/heather-c-mcghee
CAC1001
#45
Feb20-12, 01:18 AM
P: 18
Quote Quote by ThomasT View Post
I agree that Moyer's statement is an oversimplification, but it seems hard to argue that the people who control most of the wealth aren't influencing policy making in order to increase that share. Are there correlations between wealth/income disparity and the relative health, wrt various measures, of the general economy?
Probably, but such statistics can be skewed, so it depends. Regarding wealthy people and their share of wealth, remember that there isn't a fixed pie, you create wealth. Businesses and industries however, run by said wealthy people, have been known to lobby to have regulations and taxes passed that allow them to dominate an industry more, but that requires government. For example, under Reagan, many of the big banks resisted the Reagan deregulation because banking, being so regulated, was a protected industry to a good degree. Deregulating introduced new competitors, which the big firms didn't want. Recently, the appliance manufacturers lobbied to have the energy efficiency regulations raised for consumer appliances (such as washing machine), so as to outlaw the cheaper appliances and force people to buy the more expensive ones (as people preferred to buy the cheaper, less-efficient ones). The same is also being done regarding light bulbs.

A Wikepedia article on this seems to support the quoted assertion.
Yes, but the people using this statistic fall for the fixed-pie fallacy and use it to promote the claim that a fixed aristocracy at the top are hogging more and more of the wealth for themselves, leaving less available for the rest of society. That's not how it works. What happens is during periods of massive wealth creation, which we saw during the late 19th and early 20th century, and since the 1980s up until 2007, you get a whole slew of new wealthy people created, which creates a concentration of wealth at the top. But most all of this wealth is newly created wealth, and it is created by providing products and services (i.e. wealth) to the masses that improve their lives in various ways.

The statistic also I think wrongly measures what wealth is. It goes by financial assets, but financial assets aren't the sole form of wealth. One can look at wealth by what goods and services does the average person have access to (as the production of goods and services is the wealth a society creates) and in that sense, people are far more wealthy today then before, and closer to wealthy people than before as goods, services, forms of healthcare, etc...that previously were solely the purvey of the wealthy now become available to the masses. That's how all that wealth forms at the top---entrepreneurs creating goods and services that allow us to have such a rich society.

Imagine waking up 100 years from now and finding out that trillionaires exist and people talking about the immense "wealth gap," how the wealth disparity is like that of the 19th century...only to your early 21st century eyes, these people have goods and services available that rich people do not have access to today, goods and services you cannot even fathom! What will happen is as society becomes wealthier and wealthier, there will get to be fewer and fewer things that can distinguish being "wealthy" from being "poor." For example, give it enough years, and even a poor person will have a refrigerator better than the finest Internet-connected computerized refrigerators available now. We will always have wealthy and poor, but we are unequally wealthy as a society. A "poor" person in America right now is rich by Third World standards.

I don't think that smaller businesses pose much of a threat to Walmart. If they do favor an increase in the minimum wage, my guess is that it's primarily because they'll recoup much of that due to a commensurate increase in the aggregate demand wrt their customer base.

It would increase the buying power of the wage earners (who would be earning higher wages) to a greater extent, in greater proportion, than it would decrease the buying power of business owners and investors, imo.
Wal-Mart operates on a thin profit margin (3.77% - LINK)) so they are vigilant about keeping people shopping at their stores. Also, would a higher minimum wage really impact the buying power of their customers? Wouldn't the other retailers likely support such a policy if that was the case, as it would help them to? I'd imagine a higher minimum wage for an individual isn't that much money to make them change their buying much, but for a small business with multiple employees, it could be a significant amount of money to pay.

I agree. The "bad governmental policy" that preceded the inordinate peddling of toxic assets by big financial houses was a relaxation of regulation and oversight. The people in government who could have done something to stop the trend ignored the warnings, and marginalized the people within and without government who were doing the warning. And it all began with lenders making bad loans. A practice that could have been minimized with sufficient regulation and oversight.
Keep in mind though, that while its impact has probably been exaggerated, that it was a regulatory requirement for banks to make a certain number of bad loans.

What happens if the government stops subsidizing college educations for low income high school graduates?
The cost of college would decrease as the demand would drop-off, so the colleges would reduce their prices in accordance to try and win back new students.

Isn't solving certain of society's problems what we elect governments to do?
Certain of them, sure, but more of them, I'd say no. I should have written that, "...that government is not the solution to **all** of society's problems."

Also, most problems in society cannot be fixed, only managed, just some managed very well.

Well ... yeah. I agree that making and enforcing fewer laws and regulations, and generally minimizing governmental oversight, would minimize lobbying (influence peddling, bribery, and various other forms of pressuring law makers and policy makers).

But we don't expect government to turn a blind eye to expected/predictable behavior of relatively small time criminals, so why should it do that wrt large corporations and the financial sector in general, whose crimes and misdemeanors potentially negatively affect the lives of millions?
You regulate each industry as little as safely possible IMO. For some industries, that means heavy amounts of regulation (automobiles, aircraft manufacturing, nuclear power plants, etc...) other industries (such as personal computers and ocnsumer electronics) can be much more lightly-regulated. Also the regulation proponents should remember that regulation is just one form of oversight, of which there are other forms to that, and by itself is not a panacea (the BP oil spill for example, it was found that BP was bribing the regulatory agency so it could skirt the regulations; a lot of good the regulations did there).
mathwonk
#46
Feb20-12, 09:36 PM
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my apologies, i may have inadverdently wrecked the economy. in 1992, i took a voluntary leave without pay to improve my training at the math institute at berkeley. i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride. this kind of irresponsible bailout to undeserving people earning more than average may have started a trend that has threatened the work ethic of the nation.
Evo
#47
Feb20-12, 09:48 PM
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Evo's Avatar
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Quote Quote by Lapidus View Post
No offence, but I remember receiving warnings for just posting links in opening posts.
I posted quotes that described what the video was about.

Quote Quote by mathwonk View Post
my apologies, i may have inadverdently wrecked the economy. in 1992, i took a voluntary leave without pay to improve my training at the math institute at berkeley. i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride. this kind of irresponsible bailout to undeserving people earning more than average may have started a trend that has threatened the work ethic of the nation.
AHA!!! So, it WAS you. I had heard rumors...
WhoWee
#48
Feb20-12, 10:32 PM
P: 1,123
I think Clinton and Gore deserve their fair share of credit for Commodities Futures Act
http://2010.newsweek.com/top-10/hist...gislation.html - this paved the way for unregulated trading of derivatives.

We must also give a fair share to someone who gave Bill Clinton grief and caused the 9/11 attacks - that is Bin Laden. Needless to say 9/11 hurt the economy and led to a great deal of war spending and Government expansion.

Next, while I enjoy tagging Barney Frank, Chris Dodd, and the ACORN type firms that enabled people to buy houses they couldn't afford - everyone who speckulated in the real estate boom is also guilty.
OmCheeto
#49
Feb20-12, 11:36 PM
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Quote Quote by Evo View Post
AHA!!! So, it WAS you. I had heard rumors...
I had a hand in it also.

Over the last 12 years, I've saved the company I work for $8,000,000.
And when I was in the navy, I saved the taxpayers $10,000,000. It took me only 2 hours.

If everyone were to do the same, there'd be only 3 Americans working right now.

One to turn on all the machines in the morning, one to turn them off at night, and some manager puke to take away their staplers.
CAC1001
#50
Feb21-12, 01:13 AM
P: 18
Quote Quote by WhoWee View Post
I think Clinton and Gore deserve their fair share of credit for Commodities Futures Act
http://2010.newsweek.com/top-10/hist...gislation.html - this paved the way for unregulated trading of derivatives.
This piece of legislation seems to have had both good and bad aspects. On the one hand, it removed the decades-old barrier that separated investment banks from commercial banks, allowing financial institutions to be involved in all manner of financial and banking activities. Some say this is bad, but Europe and Canada from my understanding never had such a law, and the lack of such a law allowed Bank of America to purchase Countrywide Financial and Merrill-Lynch during the financial crisis.

OTOH, it also completely deregulated derivatives as pointed out. While Clinton did sign it, to be fair I don't think Republicans were exactly against it either.
turbo
#51
Feb21-12, 01:27 AM
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Quote Quote by mathwonk View Post
my apologies, i may have inadverdently wrecked the economy. in 1992, i took a voluntary leave without pay to improve my training at the math institute at berkeley. i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride. this kind of irresponsible bailout to undeserving people earning more than average may have started a trend that has threatened the work ethic of the nation.
I suspected that it was you all along! What a wrecking-ball you are.
DoggerDan
#52
Feb21-12, 07:07 PM
P: 77
Quote Quote by mathwonk View Post
i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride.
Were they all wearing Armani suits and Gucci loafers?
ThomasT
#53
Feb22-12, 02:34 AM
P: 1,414
Quote Quote by CAC1001 View Post
Probably, but such statistics can be skewed, so it depends. Regarding wealthy people and their share of wealth, remember that there isn't a fixed pie, you create wealth. Businesses and industries however, run by said wealthy people, have been known to lobby to have regulations and taxes passed that allow them to dominate an industry more, but that requires government.
Ok, but the sort of regulation that I'm talking about is regulation that reduces fraud and abuse. Not regulation that maximizes big corporations' already inordinate advantages.

Quote Quote by CAC1001 View Post
For example, under Reagan, many of the big banks resisted the Reagan deregulation because banking, being so regulated, was a protected industry to a good degree. Deregulating introduced new competitors, which the big firms didn't want. Recently, the appliance manufacturers lobbied to have the energy efficiency regulations raised for consumer appliances (such as washing machine), so as to outlaw the cheaper appliances and force people to buy the more expensive ones (as people preferred to buy the cheaper, less-efficient ones). The same is also being done regarding light bulbs.
Again, the goal is to reduce the advantages inherent in bigness, as well as reducing fraud. If certain regulations give an inordinate advantage to certain corporations then I would consider those to be bad regulations. And, yes, I agree that industries should be unregulated wrt those sorts of regulations.

But I would also argue that it might be the case, wrt some significant factors contributing to the downturn in the economy, that certain sectors, like banking and investment, weren't sufficiently regulated wrt fraud and abuse. Obviously, it seems to me, we can't afford to allow the development of institutions that are too big to fail, thus creating a situation where, if they do fail, then government must bail them out.

Quote Quote by CAC1001 View Post
Yes, but the people using this statistic fall for the fixed-pie fallacy and use it to promote the claim that a fixed aristocracy at the top are hogging more and more of the wealth for themselves, leaving less available for the rest of society. That's not how it works. What happens is during periods of massive wealth creation, which we saw during the late 19th and early 20th century, and since the 1980s up until 2007, you get a whole slew of new wealthy people created, which creates a concentration of wealth at the top. But most all of this wealth is newly created wealth, and it is created by providing products and services (i.e. wealth) to the masses that improve their lives in various ways.
Most of the wealth is concentrated in the top .1%. It's that percentage that has realized the biggest gains. It's that percentage that controls your government to a large extent, imo. And, it's that percentage that, by design, is most able to exploit tax loopholes and, via monetary and other influence, to determine the scope and depth, ie., the power, the limitations of regulatory agencies. Deregulation from Reagan through Bush has had the net effect of increasing the possibility of non-accountability and fraud wrt large corporations. Did they intend what eventually happened to happen? I don't know. But it seems to me pretty hard to argue that, since they were in control, that they didn't intend for things to turn out in such a way that the financial sector, in general, profited greatly while the rest of America suffered.

Quote Quote by CAC1001 View Post
The statistic also I think wrongly measures what wealth is. It goes by financial assets, but financial assets aren't the sole form of wealth. One can look at wealth by what goods and services does the average person have access to (as the production of goods and services is the wealth a society creates) and in that sense, people are far more wealthy today then before, and closer to wealthy people than before as goods, services, forms of healthcare, etc...that previously were solely the purvey of the wealthy now become available to the masses. That's how all that wealth forms at the top---entrepreneurs creating goods and services that allow us to have such a rich society.
Yes, America is wealthy, and the average standard of living is much higher than in much of the rest of the world. But this thread is concerned with a percieved downturn, a negative trend, wrt the American economy. Is this a permanent, lasting, thing? Or just a temporary negative blip in an otherwise inexorably upward trend? I don't know. But from what I've read and what I see things don't look all that promising.

Quote Quote by CAC1001 View Post
Imagine waking up 100 years from now and finding out that trillionaires exist and people talking about the immense "wealth gap," how the wealth disparity is like that of the 19th century...only to your early 21st century eyes, these people have goods and services available that rich people do not have access to today, goods and services you cannot even fathom!
I think that, more realistically, the US of 100 years from now will have at least 100 million more people living in relative poverty. I think it will be a predominantly Spanish speaking country, basically an extension of Mexico, and Central and South America. I think that this is inevitable. And with the influx and proliferation of a more or less unskilled labor base, then America is on a track to be more like the China (Southeast Asia, India, South America) of today than the America of yesterday.

I agree that there will be goods and services available 100 years from now that maybe we can't fathom today. And I think that the vast majority of Americans will not be able to afford those goods and services. Much like the situation today, but with a more extreme disparity of wealth.

Quote Quote by CAC1001 View Post
What will happen is as society becomes wealthier and wealthier, there will get to be fewer and fewer things that can distinguish being "wealthy" from being "poor."
What distinguishes being wealthy from being poor now? I don't think that's going to change much in the next 100 years. Just that there will be proportionately more poor people. At least if we continue evolve according to the current global model.

Quote Quote by CAC1001 View Post
For example, give it enough years, and even a poor person will have a refrigerator better than the finest Internet-connected computerized refrigerators available now.
I doubt that. But even if so, what good is an internet connected computerized refrigerator if one can't afford to stock it with sufficient food to feed one's family?

Quote Quote by CAC1001 View Post
We will always have wealthy and poor, but we are unequally wealthy as a society. A "poor" person in America right now is rich by Third World standards.
No argument there. But might this not be part of the problem? Don't we want Americans to be more civic minded, more civically active? Has America's abundance and high standard of living created a general attitude of complacency, even apathy?

Quote Quote by CAC1001 View Post
Wal-Mart operates on a thin profit margin (3.77% - LINK)) so they are vigilant about keeping people shopping at their stores. Also, would a higher minimum wage really impact the buying power of their customers?
Sure. Even an increase of just, say, $2/hour means $80/week, $320/month, and almost $4000/year. That's a LOT of money to somebody making the minimum wage. Is there any doubt that almost all of that money would be spent in the general economy? A certain portion of it, maybe a significant portion of it, at the very businesses that gave those workers higher wages?

Quote Quote by CAC1001 View Post
Wouldn't the other retailers likely support such a policy if that was the case, as it would help them to? I'd imagine a higher minimum wage for an individual isn't that much money to make them change their buying much, but for a small business with multiple employees, it could be a significant amount of money to pay.
I can't think of any small or large businesses that would be significantly affected by an increase in the minimum wage. But, as noted above, it would significantly positively affect the buying power, and therefore the living standards, of at least 5 million American workers.

Quote Quote by CAC1001 View Post
Keep in mind though, that while its impact has probably been exaggerated, that it was a regulatory requirement for banks to make a certain number of bad loans.
As noted above, these sorts of regulations can be bad regulations. This sort of government pressure isn't what I'm talking about. The goal is to reduce bad loans and reduce fraud and abuse. And this requires regulation and enforcement of a different sort.

Quote Quote by CAC1001 View Post
The cost of college would decrease as the demand would drop-off, so the colleges would reduce their prices in accordance to try and win back new students.
I doubt it. The cost of college is going to remain high, because there are many more people with the ability to pay current college costs than there are openings for them.

Quote Quote by CAC1001 View Post
Also the regulation proponents should remember that regulation is just one form of oversight, of which there are other forms to that, and by itself is not a panacea (the BP oil spill for example, it was found that BP was bribing the regulatory agency so it could skirt the regulations; a lot of good the regulations did there).
That's not an argument against regulation. It's an argument against insufficient enforcement of existing regulation.
ParticleGrl
#54
Feb22-12, 12:31 PM
P: 685
That's not how it works. What happens is during periods of massive wealth creation, which we saw during the late 19th and early 20th century, and since the 1980s up until 2007, you get a whole slew of new wealthy people created, which creates a concentration of wealth at the top.
The single largest,longest period of wealth creation in the history of the country was post WW2 to the mid 60s or so. During this time period, the income distribution grew much flatter (see Russ Water's link to census data). Therefore, your statement is simply false. It is not something that just happens during periods of growth. Something is different about this more recent period, and we can argue about what that is.

Its also no true that most of the top income earners are necessarily providing new products people want. One of the largest growth sectors in this period was the financial industry- and certainly some of those innovations were somewhat destructive. For instance, Dick Fuld got incredibly rich by destroying one of the largest investment banks in the US. Many of his underlings got rich doing same.

Regarding wealthy people and their share of wealth, remember that there isn't a fixed pie, you create wealth.
Right, but real wages for many wage earners have been flat for at least two decades (again see Russ Water's earlier link to census data), despite a might larger pie. This means that the increase in the pie is all going to the top earners.

One can look at wealth by what goods and services does the average person have access to (as the production of goods and services is the wealth a society creates) and in that sense, people are far more wealthy today then before, and closer to wealthy people than before as goods, services, forms of healthcare, etc...that previously were solely the purvey of the wealthy now become available to the masses.
Sure, we have considerably grown access to ipads. BUT we have diminished access to education and housing. Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off.

Keep in mind though, that while its impact has probably been exaggerated, that it was a regulatory requirement for banks to make a certain number of bad loans.
This statement is just ludicrous. The community reinvestment act required loans to be made to lower-income people, but it did not require they be "bad loans." The February 2008 House Hearing, the Federal Reserve made clear that when it surveyed banks they maintained that their CRA loans were profitable and not overly risky. The Traiger-Hinkley study demonstrated that CRA regulated institutions were less likely to issue sub-prime, their sub-prime loans were generally better structured (lower rates, not option ARM) and CRA institutions were much less likely to resell the loan.

If the CRA had perverse effects, those institutions regulated by it should have had a much higher rate of poor performing loans than those institutions that weren't.


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