Daily Digest - September 24: The Financial Reform Slowdown

Sep 24, 2013Rachel Goldfarb

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How Washington Caved to Wall Street (TIME)

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How Washington Caved to Wall Street (TIME)

Roosevelt Institute Chief Economist Joseph Stiglitz argues that Wall Street lobbyists have managed to essentially halt financial reform in the U.S. Banks and the administration are working side-by-side to convince Americans that the financial sector is working safely, but that's just not true.

Shutdown vs. Default: The Relative Impact (NYT)

Annie Lowrey compares the possible impending results of government inaction. There's already a plan in place for a shutdown, which would keep things orderly; with no plans for public default, the impact would be messier and far more expensive.

The Day after Shutdown (TAP)

Jonathan Bernstein explains how the bargaining table changes if we hit a government shutdown on September 30. He thinks that if it comes to that, the Democrats will come out on top - but the far right will maintain that they could have won if the GOP had just held out longer.

The House Republicans’ Dangerous New Constitutional Doctrine: Repealing Laws by De-Funding Them (Robert Reich)

Robert Reich points out the unconstitutionality of the current Republican strategy. The Affordable Care Act passed both houses of Congress and was signed into law; if the GOP wants to repeal it, they need to pass a repeal, not refuse to fund it.

How Walmart Got Government Support, Despite Union Pleas (Salon)

Josh Eidelson reports that unions used every connection they had to try to stop White House events promoting Walmart, to no avail. Hiring veterans doesn't make Walmart a good employer, and selling healthy food doesn't make it good for communities.

The Idiocy of Crowds (Reuters)

Felix Salmon argues that under new laws that allow for equity crowdfunding, which just went into effect, start-ups that failed to get investors in traditional ways will seek "dumb money" that doesn't know better. He sees a future full of lawsuits.

Does the Fed Have a Communication Problem, Or Do Markets Have a Listening Problem? (WaPo)

Neil Irwin suggests that monetary policy is communications, and today we get more information from the Fed then ever before. That view of the inner workings of the Fed means that markets are more aware of how difficult it is to make long-term plans.

New on Next New Deal

The Next Real Fight for Obamacare Will Be in 2014

Roosevelt Institute Senior Fellow Richard Kirsch argues that leading up to the 2014 elections, Democrats must organize the beneficiaries of the Affordable Care Act to be its spokespeople. Those stories will sell Obamacare - and Democrats - to the voters.

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Daily Digest - September 23: Fishing For Solutions to Underwater Mortgages

Sep 23, 2013Rachel Goldfarb

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Is Richmond’s Mortgage Seizure Scheme Even Legal? (WaPo)

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Is Richmond’s Mortgage Seizure Scheme Even Legal? (WaPo)

Roosevelt Institute Fellow Mike Konczal looks at the questions raised by Richmond, CA's proposal to use eminent domain to reduce underwater mortgage debt. He argues that the plan has plenty of legal precedent, and clear benefits for the residents of Richmond.

Mike Konczal on Economic Collapse, Hugh MacMillan on Fracking Study (CounterSpin)

Mike appears on FAIR's weekly radio show to discuss what has and hasn't changed in the five years since Lehman Brothers's bankruptcy. He argues that the crisis really started in 2007, with the first wave of foreclosures on subprime mortgages.

This Week in Poverty: New Data, Same Story (and Same Dangerous House Republicans) (The Nation)

Greg Kaufmann sees the latest Census data on poverty as proof that even though the needed steps in the fight against poverty are known, they aren't being implemented. Unfortunately, all the policies he wants to see are anathema to the GOP.

Jackie Speier Protests Food Stamp Cuts With Steak, Vodka, Caviar (HuffPo)

Robin Wilkey reports on Rep. Speier's speech calling out her peers who favor cutting SNAP for their excessive travel bills paid by the government. But caviar and filet must come before necessities for the poor, since the $40 billion in cuts passed.

American Bile (NYT)

Robert Reich argues that Americans are divided over many issues, but their anger comes from stagnant economic growth and widening inequality. The people who see the economy as rigged against them, whether by government or business, are the angriest.

  • Roosevelt Take: Roosevelt Institute | Pipeline and Roosevelt Institute | Campus Network will join Reich for a conference call on his new film "Inequality for All" on Wednesday.

It's the Austerity, Stupid: How We Were Sold an Economy-Killing Lie (MoJo)

Kevin Drum explains how the now-infamous Reinhart and Rogoff paper on debt as a killer of economic growth kicked off the austerity regime that has reduced U.S. economic growth by as much as two percent. It's been disproved, but we're still on the austerity train.

  • Roosevelt Take: Roosevelt Institute Fellow Mike Konczal was one of the first to look at the UMass paper that disproved the Reinhart-Rogoff paper.

The Shutdown Showdown: What Happens Now? (MSNBC)

Kasie Hunt looks at the likely timeline for the continuing resolution now moving into the Senate, which contains language defunding the Affordable Care Act. It's expected that Harry Reid will strip out that language before the Senate passes the bill.

The Most Important Lesson the Fed Taught the World This Week (The Atlantic)

Zachary Karabell argues that the Fed's announcement of no taper for now is a reminder that there is no certainty in markets. There's no excuse for businesses using "uncertainty" as a reason to not hire, especially when they then blame government dysfunction.

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Daily Digest - September 20: The Last Five Years of Financial Crisis

Sep 20, 2013Rachel Goldfarb

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What We Get Wrong When We Talk About ‘The Financial Crisis’ (Majority Report)

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What We Get Wrong When We Talk About ‘The Financial Crisis’ (Majority Report)

Sam Seder speaks with Roosevelt Institute Fellow Mike Konczal about his most recent piece at the Washington Post's Wonkblog, where he argued that Lehman shouldn't be the center of the financial crisis narrative.

Finally, JPMorgan Admits The Bank Broke The Law (HuffPo)

Mark Gongloff reports on JPMorgan's admission that they broke securities laws in the "London Whale" debacle. The fine is an inconsequential amount for the firm, as it often is in these cases, but it's unusual for banks and bankers to actually admit to their wrongdoing.

The Fed Has Investors Overjoyed, And It's For All the Wrong Reasons (The Atlantic)

Mohamed El-Erian sees this week's surprise announcement of no taper from the Fed as symptomatic of their failure to plan long-term strategy. That's a big problem, since the Fed's uncertainty leads to market instability.

The Fed Stays the Course (TAP)

Robert Kuttner is glad that the Fed will maintain bond buying programs for now, but it's a decision that primarily benefits Wall Street. Hopefully, a Yellen-chaired Fed would reconsider a plan to purchase bonds that put money in the Main Street economy.

Job And Business Growth Strong Under Seattle’s Paid Sick Days Law (ThinkProgress)

Bryce Covert looks at an analysis of the impact of a new paid sick leave law on the Seattle economy. Seattle continues its economic growth, just as has been the case in every other municipality that has enacted paid sick leave legislation.

Rousing Workers to Seek Higher Wages (LA Times)

Alana Semuels speaks with Naquasia LeGrand, a KFC employee who has been heavily involved in Fast Food Forward in NYC. Naquasia was anti-union at first, but after learning more about the movement, she's become a strong supporter and recruiter.

Women Waiting Tables Provide Most of Female Gains in U.S. (Bloomberg)

Ian Katz and Alex Tanzi report on a study by the National Women's Law Center that looks at women's employment gains. Most of the increases in employment for women since 2009 are in the service industry, with 60 percent of new jobs paying less than $10.10 an hour.

Red State Pain (NYT)

Timothy Egan considers the GOP's continued inability to empathize with poor constituents as the House passes a bill that will kick 3.8 million people off SNAP. The underlying assumption is that the poor, even children, have done something to deserve going hungry.

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Daily Digest - September 18: Five Years And More to Learn

Sep 18, 2013Rachel Goldfarb

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There is Still Much to Learn From Lehman (FT)

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There is Still Much to Learn From Lehman (FT)

Roosevelt Institute Chief Economist Joseph Stiglitz argues that the response to the financial crisis didn't do enough to change the system. The financial sector successfully fought off reforms, and the same ideologies that led to the crisis still hold economic and political power.

Summers' Failed Bid is a Win for the Country (AJAM)

Roosevelt Institute Fellow Mike Konczal thinks the U.S. is better off for Larry Summers's withdrawal from consideration for Fed Chair. The pressure against Summers from the left could be a sign of a new progressive agenda that challenges centrist Democrats and pushes for stronger regulation.

New FCC Head Must Reclaim Authority Over Telecom (Bloomberg)

Roosevelt Institute Fellow Susan Crawford wants to see Tom Wheeler reel in the big telecommunications companies, which have been hard at work convincing the government that there are no regulatory agencies with authority over them.

Why It Matters That Home Care Workers Just Got New Labor Rights (ThinkProgress)

Bryce Covert explains why it's so important that the Department of Labor has closed the "companionship exemption" in the Fair Labor Standards Act. It only took fifty years for this demand of the March on Washington to be fulfilled.

Homeowners vs. Big Bad Banks (TAP)

David Dayen reports that thanks to some recent rulings around class-action certification, homeowners who were deceptively pushed out of mortgage modifications into foreclosure will have to fight Bank of America alone, despite clear evidence of BoA's wrongdoing.

The Typical American Family Makes Less Than It Did In 1989 (WaPo)

Neil Irwin looks at real median household income over the past 25 years, and is horrified to find that it's dropped below 1989 levels. We've lost an entire generation of economic gains in this recession.

Doubling Down on Food Stamp Cuts (U.S. News & World Report)

Pat Garofalo reports on the GOPs newest plan for SNAP, which involves cuts twice as large as those they failed to pass in June. Republicans seem to see recent growth in food stamp enrollment as a flaw, instead of proof of a functioning social safety net.

New on Next New Deal

Why Workers Would Do Better with Janet Yellen as Fed Chair

Jeff Madrick, Roosevelt Institute Senior Fellow and Director of the Bernard L. Schwartz Rediscovering Government Initiative, argues that Yellen is the best candidate for Fed Chair because she believes that right now, the Fed should center its work on increasing employment.

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Why Workers Would Do Better with Janet Yellen as Fed Chair

Sep 17, 2013Jeff Madrick

Wall Street has responded well to Summers's withdrawal, but Main Street would also be better off without an inflation hawk leading the Federal Reserve.

Wall Street has responded well to Summers's withdrawal, but Main Street would also be better off without an inflation hawk leading the Federal Reserve.

The stock and bond markets should not be the only ones rejoicing at Larry Summers’s withdrawal from consideration to run the Federal Reserve. The nation’s workers should, too. Janet Yellen, the remaining frontrunner for the position, is no wimp on inflation. But she is the kind of economist America badly needs, one who cares about wages and employment at least as much as about appeasing bond traders. She also doesn’t think higher wages or a bit higher inflation will undo America. She is old enough to remember a pre-Clinton and pre-Reagan world. 

Right now, that means she would leave monetary policy loose far longer than Summers would have. The job market is much too weak; many people are unemployed or have left the work force, and wages are not growing. Without fiscal help from Congress, the Fed is the only protector of growth and employment around.

The Clinton boom covered up Summers’s true conservative ideological bent. He’s a tough inflation fighter underneath it all. The main policy objective of the Clinton Treasury was to focus on the budget deficit. They successfully got a tax increase passed, for which they deserve kudos. But then they restrained social spending. They did at least expand the Earned Income Tax Credit, but they neglected public investment badly, and the flaws of welfare reform are now showing. They assiduously paid down debt instead of investing, even as tax revenues poured in.

It seemed to work. Inequality stabilized, wages rose, GDP soared. But a lot of the boom depended on the high-tech stock bubble—the famed wealth effect, inducing consumers to buy because they thought they were wealthy. The increase in tax revenues was temporarily stoked by capital gains taxes on stocks. Stocks were stoked by malfeasance amid deceptive sales practices.

Would wages have continued to rise rapidly under Clintonomics? Not likely. The stock market collapse, let’s remember, occurred under Clinton. The recession George W. Bush had to cope with in his first term was a Clinton recession.

At bottom, Summers is basically an inflation targeter, converted by the double-digit inflation and higher federal deficits of the 1970s like so many of his Democratic colleagues. This defined Clintonomics. He’d rather have more unemployment than a little more inflation, which of course could spook the markets.

And frankly, Obama is a Clintonite on the deficit and inflation as well. More than anything else, this is why he wanted Summers. He wanted a Clintonite to run the Fed and sit astride inflation. With Summers by his side, he announced he would form a budget balancing commission even before he took office in 2009. His stimulus worked to stanch the Great Recession, but he hardly ever boasted about it and never came back to Congress for another one. He turned his attention to deficit fighting.

Here is a key paragraph from a Yellen speech earlier this year. It sets her apart from Summers, I think.

I believe the policy steps we have taken recently are in accord with this balanced approach. With employment so far from its maximum level and with inflation currently running, and expected to continue to run, at or below the Committee's 2 percent longer-term objective, it is entirely appropriate for progress in attaining maximum employment to take center stage in determining the Committee's policy stance.

Yellen predates Clintonomics. She can remember a time when you could get rapid wage growth, modest inflation, and a well-regulated financial sector at the same time. Summers got on famously with Greenspan. Yellen had her disagreements.

My guess is she’d tighten policy before many progressives think she should anyway, including this writer. She will worry about new speculative bubbles, which Summers and Greenspan did not. She is a mainstream economist, but a thoughtful and compassionate one.

Yellen would also reject the argument that unemployment is basically structural. Some say we have lots of jobs that American’s don’t have the skills for. She had it researched and found, as did others, that there were no increases in demand for workers or resulting increases in wages in the sectors of the economy where workers were supposed to be scarce. So unemployment is cyclical, not structural. We don’t know what Summers believes about structural unemployment, but he almost surely believes the rate cannot fall as far as Yellen thinks. 

Yellen is not part of the old boy network, so Obama may still not appoint her. She is not a backslapper. She’s likely to be more impressed by economists who do very good scholarship than by hedge fund managers.

She is quiet woman. She is personally low-key, which disguises firm, well-developed opinions. But she’s battled before at the Fed, so she’s not afraid of a fight.

Workers should rejoice. Wages may go up handsomely again under her reign. The unemployment rate could fall below 6 percent, where it belongs. That is, if Obama has the stuff to give a pre-Clintonite who seems to dislike Washington networking the job. 

It would be a return to an older Democratic tradition and be damned good for America.

Jeff Madrick is a Senior Fellow at the Roosevelt Institute and Director of the Bernard L. Schwartz Rediscovering Government Initiative.

 

Federal Reserve image via Shutterstock.com

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Daily Digest - September 17: Celebrate Campaign Finance Successes

Sep 17, 2013Rachel Goldfarb

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New York's Campaign-Finance Law Worked, but New Yorkers Still Won't Celebrate It (TNR)

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New York's Campaign-Finance Law Worked, but New Yorkers Still Won't Celebrate It (TNR)

Roosevelt Institute Senior Fellow Mark Schmitt applauds the success of New York City's small donor campaign finance law. Outside spending was incredibly low in last week's election, especially when compared to 2012 Senate and House races.

Can Poor Californians Live on $10 Per Hour? (MSNBC)

Ned Resnikoff celebrates California's minimum wage increase even as he questions whether it's enough. Roosevelt Institute Fellow Dorian Warren suggests that a state-by-state strategy could be the best model for the labor movement on this issue.

The Myth of the “Free Market” and How to Make the Economy Work for Us (Robert Reich)

According to Robert Reich, there's no such thing as a free market, because even in so-called free markets people set rules, like forbidding the sale of other human beings. So why not set the rules in a way that would decrease inequality?

Employment Inequality: Job Gap Between Rich And Poor Widest On Record (ThinkProgress)

Bryce Covert reports that while the unemployment rate for families earning at least $150,000 is only 3.2 percent, families at the bottom of the income scale have an unemployment rate of over 21 percent. That's not far off Great Depression unemployment numbers.

Did Summers Spoil It for Yellen? (TAP)

Robert Kuttner suggests that President Obama should nominate Janet Yellen for Fed Chair right away - not only because she's well qualified for the position, but because a quick nomination will make him look decisive after a summer of dithering over Summers.

How Larry Summers Paid for Obama’s Sins (NY Mag)

Jonathan Chait says that the Summers backlash was influenced by the fact that Democrats could push left with less risk. The GOP isn't going to block a Fed nominee like they've blocked others, even if the nominee is more liberal then the GOP would like.

Subsidizing Spouses (NYT)

Nancy Folbre argues that provisions in our tax code and Social Security that subsidize non-working spouses may be pro-marriage, but they aren't pro-family. Tax credits to support caregivers would do far more for low-income families, who benefit least under current structures.

New on Next New Deal

Why New York is Home to So Many of the Working Poor, in Graphs

Nell Abernathy looks at graphs from Roosevelt Institute Fellow Annette Bernhardt that show how New York City represents an amplified version of national trends: middle-wage jobs lost in the recession are being replaced by low-wage work, and wages are stagnating or falling for all but the wealthiest Americans.

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Daily Digest - September 16: Exceptionally Poor Social Safety Nets

Sep 16, 2013Rachel Goldfarb

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SNAP Proposal Would Deny Benefits to Millions (Melissa Harris-Perry)

Roosevelt Institute Fellow Dorian Warren pointed out the disappointing side of American exceptionalism: the most children in poverty of any wealthy democracy. Cutting SNAP benefits means more of those children go hungry.

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SNAP Proposal Would Deny Benefits to Millions (Melissa Harris-Perry)

Roosevelt Institute Fellow Dorian Warren pointed out the disappointing side of American exceptionalism: the most children in poverty of any wealthy democracy. Cutting SNAP benefits means more of those children go hungry.

What We Get Wrong When We Talk About ‘The Financial Crisis’ (WaPo)

Roosevelt Institute Fellow Mike Konczal says that the narrative of the financial crisis shouldn't center on the Lehman Brothers bankruptcy. We can't forget the mortgage crisis, and ordinary Americans' distrust in financial systems is still a concern.

Summers Over (Reuters)

Felix Salmon suggests that the trial balloon raised for Larry Summers in July caused the politicization of the nomination for Fed Chair, and ultimately Summers's withdrawal. Sadly, his hopes that the position can remain technocratic instead of political seem unlikely.

Give Jobs a Chance (NYT)

Paul Krugman asks the Fed to put off the taper a little longer. With labor force participation so low, and unemployment still too high, he doesn't want to risk rocking our already unsteady recovery any more than necessary.

Could You Live on $11,940 a Year? (TAP)

Paul Waldman examines the decreasing value of the minimum wage. He supports a bill that would index the minimum wage to inflation, so workers would no longer have to wait on Congress to do something about the decreasing real value of their pay.

Why a Foreign Car Maker Might Be About to Say Yes to a U.S. Union (The Atlantic)

Jordan Weissmann explains how the United Auto Workers may finally get a hold in a foreign company's car plant on U.S. soil. Half the battle, he says, is PR, since there's an assumption that unionization would cause foreign manufacturers to pull out of the U.S.

How Detroit Went Broke: The Answers May Surprise You - and Don't Blame Coleman Young (Detroit Free Press)

Nathan Bomey and John Gallagher examine the financial history of Detroit back to the 1950s, and find that there were plenty of opportunities to prevent today's bankruptcy. Their in-depth analysis shows that Detroit may want to reconsider which mayors it blames or praises.

 

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The 2 Train Travels Between New York's "Two Cities"

Sep 13, 2013Nell Abernathy

New York City is as starkly divided along economic lines as it is connected by its famous subway lines.  The Roosevelt Institute is looking for solutions.

New York City is as starkly divided along economic lines as it is connected by its famous subway lines.  The Roosevelt Institute is looking for solutions.

Another fun/depressing/informative infographic on New York City’s stunning wealth divide: Back in April, before the election was heating up, the good people at The New Yorker plotted the diverging extremes in median income of New York neighborhoods along the subway lines. It turns out you can actually ride the 2 train from prosperity to poverty.

The neighborhood surrounding the 2 train Chambers Street stop in Tribeca  has a median income of $205,192 and is among the city's wealthiest.

Fourteen miles further north, around the East 180th Street stop in the Bronx, median income is $13,750. For those who think income is irrelevant as long as you can access the American dream, opportunities aren't so great up there, either.

 Come learn about solutions from the experts at our September 24 event, "Inequality in New York: the Next Mayor’s Challenge."

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

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Daily Digest - September 13: Labor for Healthier Politics

Sep 13, 2013Rachel Goldfarb

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Joe Stiglitz: The People Who Break the Rules Have Raked in Huge Profits and Wealth and It's Sickening Our Politics (Alternet)

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Joe Stiglitz: The People Who Break the Rules Have Raked in Huge Profits and Wealth and It's Sickening Our Politics (Alternet)

Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz addressed the AFL-CIO convention in Los Angeles earlier this week. Alternet has the transcript, and the video is available on Youtube.

Trumka's Ploy (TAP)

Harold Meyerson argues that the AFL-CIO President was intentionally radical in his suggestions prior to the convention. That way, he got the reform he wanted: non-union workers' groups welcomed into labor, and more permanent partnerships with progressive allies.

The Rise of the New New Left (The Daily Beast)

Peter Beinart uses the NYC mayoral race as emblematic of a new political generation, one that sees progressive values as more than just ideals. The group coming of age under this economic crisis, he says, is shifting the political conversation to an anti-corporate, populist message.

  • Roosevelt Take: Many of Beinart's claims about the Millennial political generation line up with the Roosevelt Institute | Campus Network's findings in Government By and For Millennial America, which discusses what kind of government Millennials want.

Mayor Gray Vetoes ‘Living Wage’ Bill Aimed at Wal-Mart, Setting up Decisive Council Vote (WaPo)

Mike DeBonis reports on the Washington, DC mayor's veto of the Large Retailer Accountability Act. Mayor Gray called for a city-wide minimum wage increase instead, but didn't specify an amount he would support.

How Wal-Mart Keeps Wages Low (WaPo)

Josh Eidelson examines how Wal-Mart discourages workers from organizing so that they won't have to raise wages. With a model built on the lowest possible prices, higher wages would presumably cut into the all-important shareholder profits.

Can the Government Actually Do Anything About Inequality? (NYT)

Tom Edsall looks at a number of studies to question what, if anything, government could do to reduce economic inequality. He sees policy tied to the deepening and spreading of inequality, which presumably means policy could work in the other direction as well.

Congress Searches For A Shutdown-Free Future (NPR)

Frank James reports on the steps being taken in Congress to negotiate away from a potential government shutdown. The Republicans are finding themselves stymied by Tea Partiers, for whom a 42nd symbolic repeal of Obamacare isn't good enough.

New on Next New Deal

The 1 Percent Took Home the Largest Share of Income Since 1928 Last Year

Roosevelt Institute Fellow Mike Konczal points out that the 1 percent's share of all income has vastly exceeded pre-Recession levels. This trend makes it hard to say that everyone in the U.S. wants policy change to help strengthen the recovery.

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The 1 Percent Took Home the Largest Share of Income Since 1928 Last Year

Sep 12, 2013Mike Konczal

Are our rich content? It's a question that bounces back and forth in the blogosphere. Are elites, economic and otherwise, happy with the pace of the weak recovery? Are they indifferent? Or are they actively worse off than they would be if unemployment were lower?

This question comes up when Emmanuel Saez updates his data on the incomes of the top 1 percent. Most of the coverage has focused on the rate of change for incomes of the top 1 percent, particularly the fact that the top 1 percent have enjoyed 95 percent of all income growth from 2009 to 2012. But I want to focus on levels. I'm going to modify one of Saez's charts to show something I don't think has been pointed out:

This is the percentage of all income, excluding capital gains, that goes to the top 1 percent. And as you can see, it's not just back where it was before the recession; it's far exceeded that benchmark. And it's exceeded all the years on record, with the one exception of 1928.

Over the past 20 years, this percentage dropped after each recession. If you look, you can see it drop in the early 1990s and 2000s. However, it then recovered and exceeded the old rates.

We saw this rate fall in the Great Recession. The obvious question was whether this would be a permanent break or whether it would recover and exceed the old rate. That question is now answered. As noted, the only year on record in which the top 1 percent took home a larger piece of the economic pie was in 1928, and then only barely.

This excludes volatile capital income, in part to see a cleaner trend and in part because tax changes from the fiscal cliff and Obamacare probably influenced the 2012 results. But the trend is nearly the same with capital gains, where this year's 22.4 percent share for the top 1 percent is closing in on 2007's 23.5 percent share (and 1928's record high 23.9 percent). This pattern is also true when using average incomes.

But this one chart is something I've particularly watched during the Great Recession. Because you could, at one point, say that the rich had taken a huge fall in the Great Recession, and therefore it was in everyone's interest to get the economy back on track. That is harder to say today, and it will be harder to say next year as these trends continue in the absence of policy action.

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Are our rich content? It's a question that bounces back and forth in the blogosphere. Are elites, economic and otherwise, happy with the pace of the weak recovery? Are they indifferent? Or are they actively worse off than they would be if unemployment were lower?

This question comes up when Emmanuel Saez updates his data on the incomes of the top 1 percent. Most of the coverage has focused on the rate of change for incomes of the top 1 percent, particularly the fact that the top 1 percent have enjoyed 95 percent of all income growth from 2009 to 2012. But I want to focus on levels. I'm going to modify one of Saez's charts to show something I don't think has been pointed out:

This is the percentage of all income, excluding capital gains, that goes to the top 1 percent. And as you can see, it's not just back where it was before the recession; it's far exceeded that benchmark. And it's exceeded all the years on record, with the one exception of 1928.

Over the past 20 years, this percentage dropped after each recession. If you look, you can see it drop in the early 1990s and 2000s. However, it then recovered and exceeded the old rates.

We saw this rate fall in the Great Recession. The obvious question was whether this would be a permanent break or whether it would recover and exceed the old rate. That question is now answered. As noted, the only year on record in which the top 1 percent took home a larger piece of the economic pie was in 1928, and then only barely.

This excludes volatile capital income, in part to see a cleaner trend and in part because tax changes from the fiscal cliff and Obamacare probably influenced the 2012 results. But the trend is nearly the same with capital gains, where this year's 22.4 percent share for the top 1 percent is closing in on 2007's 23.5 percent share (and 1928's record high 23.9 percent). This pattern is also true when using average incomes.

But this one chart is something I've particularly watched during the Great Recession. Because you could, at one point, say that the rich had taken a huge fall in the Great Recession, and therefore it was in everyone's interest to get the economy back on track. That is harder to say today, and it will be harder to say next year as these trends continue in the absence of policy action.

Follow or contact the Rortybomb blog:

  

 

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