Daily Digest - January 7: Dynamic Scoring Comes to Washington

Jan 7, 2015Rachel Goldfarb

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U.S. House Votes to Adopt Contentious Changes to Cost Estimates (Reuters)

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U.S. House Votes to Adopt Contentious Changes to Cost Estimates (Reuters)

Under new rules passed by the House, cost estimates on fiscal legislation will be measured using dynamic scoring, which could mask the impact of tax cuts, reports David Lawder.

Where Working Women Are Most Common (NYT)

Gregor Aisch, Josh Katz, and David Leonhardt examine data on women's employment rates throughout the country, considering the differing circumstances that lead women to work or not work.

Obama to Pick Former Bank of Hawaii CEO to Be Fed Governor (Bloomberg News)

Cheyenne Hopkins and Jesse Hamilton report that the President will soon announce the nomination of Allan Landon, who has worked at a firm that invests in community banks since 2010.

The Next Big Fight Among Democrats? (WaPo)

Greg Sargent says the next economic fight between populist Democrats in Congress and the Obama administration will be about how much to raise the salary threshold for overtime pay.

  • Roosevelt Take: Roosevelt Institute Senior Fellow Richard Kirsch says these fights between populists and the administration are about the soul of the Democratic party.

Why Is Wage Growth So Slow? The San Francisco Fed Has an Answer (WSJ)

Michael S. Derby looks at new research from the Federal Reserve Bank of San Francisco, which suggests that since employers fired workers rather than cut wages in the recession, hiring will increase before wages do.

The Mortgage Mistake (New Yorker)

James Surowiecki considers the costs of the American emphasis on homeownership and corresponding tax breaks, noting that homeowners' tax breaks don't really help low-income families.

Fair Value Accounting: The Obscure Rule Change That Could Make Student Loans More Expensive (Vox)

Matthew Yglesias explains how changing the method by which government accounts for federal credit programs could have difficult consequences for those seeking student loans and mortgages.

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Let the Fed Lend Directly to Cities and States to Save Taxpayers Billions

Jan 5, 2015Saqib Bhatti

(Updated: 1/5/15) Note: If you like this idea, be sure to vote for it in the Progressive Change Institute's Big Ideas Project. The top 20 ideas will be presented to members of Congress. Voting ends on Sunday, January 11. Click here to vote!

Using our central bank's resources to save cash-strapped local governments from bankruptcy would prevent economic devastation and bring other benefits.

(Updated: 1/5/15) Note: If you like this idea, be sure to vote for it in the Progressive Change Institute's Big Ideas Project. The top 20 ideas will be presented to members of Congress. Voting ends on Sunday, January 11. Click here to vote!

Using our central bank's resources to save cash-strapped local governments from bankruptcy would prevent economic devastation and bring other benefits.

The Federal Reserve should be allowed to make long-term loans directly to cities, states, school districts, and other public agencies so taxpayers can get low interest rates and avoid predatory Wall Street fees. Currently, banks borrow money at near-zero interest rates from the Fed while public entities are forced to pay billions in fees and interest each year. Cities and states should have access to the same low interest rates that banks enjoy so that taxpayer money earmarked for infrastructure improvement and other public goods will no longer be spent subsidizing corporate profits. If the Fed lent directly to cities and states at low interest, it would free up public dollars for services like education and mass transit. Direct loans from the Fed could also help alleviate fiscal crises and become a tool for promoting stronger environmental and labor protections.

Fiscal crises and municipal bankruptcies are typically caused by revenue shortfalls. The definition of "municipal insolvency" is the inability to pay debts as they come due. A city is insolvent and can file for bankruptcy if it is not bringing in enough revenue to be able to pay its bills on time. For example, although there were many political and economic causes for Detroit’s bankruptcy, the technical reason that Detroit went bankrupt was that the city had a $198 million revenue shortfall and could not pay all of its bills. A $198 million loan could have allowed Detroit to avoid bankruptcy. In the future, we can prevent untold devastation if the Fed can provide affordable loans to municipal borrowers.

Detractors will argue that it would be imprudent to use federal taxpayer dollars to make loans to distressed cities and states that might be unable to pay them back. However, the reality is that municipal borrowers in the United States have extremely low rates of default because their debt is ultimately backed by tax revenues. According to Moody’s, one of the three major credit rating agencies in the country, the default rate for municipal issuers that it rates was 0.012 percent between 1970 and 2012. Even though there has been a slight uptick following the financial crisis, the likelihood of municipal default is still virtually nonexistent.

If a municipality defaults on a loan, it is because elected officials made a political decision to default rather than raise taxes. In the case of Detroit, state elected officials in Michigan made that decision by cutting revenue-sharing with the city and prohibiting it from raising additional taxes. The Fed could take proactive steps to address this political problem. For example, it could attach a provision requiring elected officials to raise taxes on large corporations and high-income earners to avoid defaulting on loans from the Fed.

Direct loans from the Fed could also be used to promote fair and sustainable development. Either Congress or the Fed could establish minimum labor and environmental standards that cities and states must abide by to qualify for a loan from the Fed. For example, cities that borrow from the Fed could be required to pay all workers a living wage. Any state that borrows from the Fed for highway repairs could be required to establish stronger fuel efficiency standards for cars. The Fed could also prioritize loans for green infrastructure improvements. This would ensure that direct loans from the Fed support long-term national interests.

Currently, the Fed already has the power to purchase municipal debt securities that mature within six months. In other words, the Fed effectively has the power to lend to cities and states for up to six months, with some caveats. But if Congress were to pass a law allowing the Federal Reserve to make long-term loans directly to cities and states, we could start using our central bank to support the long-term financial, economic, and environmental health of our cities and states. It would allow us to cut Wall Street out of the middle and ensure that our taxpayer dollars are going toward improving our communities instead of padding banker bonuses.

Saqib Bhatti is a Roosevelt Institute Fellow and Director of the ReFund America Project.

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Daily Digest - December 22: Yellen Speaks and the Markets Answer

Dec 22, 2014Rachel Goldfarb

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Markets Bounce After Yellen Announcement (Melissa Harris-Perry)

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Markets Bounce After Yellen Announcement (Melissa Harris-Perry)

As guest host, Roosevelt Institute Fellow Dorian Warren leads a roundtable discussion about how Janet Yellen's statements are impacting the current economy.

Wall Street Is Dismantling Financial Reform Piece by Piece (TNR)

Friday's announced delay of the Volcker rule, which prohibits proprietary trading, shows the financial sector's ability to limit Dodd-Frank's interlocking provisions for its benefit, writes David Dayen.

  • Roosevelt Take: Dayen links to Roosevelt Institute Fellow Mike Konczal's recent piece on Next New Deal with Alexis Goldstein and Caitlin Kline to explain how another rule eliminated in the recent budget negotiations fits into this picture.

Obama Labor Board Comes Down Hard on McDonald’s (Politico)

In a significant first, the National Labor Relations Board has filed legal complaints that hold McDonald's accountable to workers at its franchises, reports Brian Mahoney.

Workers’ Rights at McDonald’s (NYT)

In an editorial, the Times asks McDonald's if it wouldn't be easier to just bargain directly with employees, instead of illegally interfering with the Fight for $15 movement.

Ocwen Head to Resign in New York Settlement (WSJ)

James Sterngold and Alan Zibel report on the settlement between Ocwen Financial Corp. and New York State's financial regulator, which includes $150 million to be paid to housing programs and borrowers.

Obama Compared to Prior Presidents On Job Creation, In Graphs (TAP)

Paul Waldman compares President Obama's job creation numbers to other presidents', and his clearest discovery is that Republicans are wrong: tax cuts won't save the economy, and Democratic policies won't kill it.

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Daily Digest - December 19: It's a Whole New Economic Policy-Making World

Dec 18, 2014Rachel Goldfarb

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Uncharted Interest Rate Territory (U.S. News & World Report)

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Uncharted Interest Rate Territory (U.S. News & World Report)

Jason Gold points out that since interest rates have been declining for 33 years, none of today's lawmakers know quite what they're in for when the Fed begins to raise rates in 2015.

  • Roosevelt Take: Roosevelt Institute Fellow Mike Konczal says that raising interest rates is not the way to fight "financial instability."

The Greatest Tax Story Ever Told (Bloomberg Businessweek)

Zachary R. Mider shares the story of the very first corporate tax inversion, in which a company incorporates abroad to avoid paying U.S. taxes. The idea was invented by a liberal tax lawyer in 1982.

A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia. (NYT)

The strong safety net programs in Scandinavian countries, which include far more direct aid, might be more effective at getting people to work than the U.S. tax subsidy model, writes Neil Irwin.

How ALEC Helped Undermine Public Unions (WaPo)

Alex Hertel-Fernandez explains that ALEC's attacks on public sector unions aren't new: ALEC-backed anti-union laws were enacted in some states a decade before the Great Recession.

Pro-Warren Protesters Take Their Fight to Wall Street (MSNBC)

Zachary Roth reports on yesterday's protest at Citigroup's New York City headquarters, where protesters denounced the Citigroup-crafted measure weakening Dodd-Frank in the spending bill.

From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages (ProPublica)

Paul Kiel and Chris Arnold profile the Missouri hospital that sues the most patients in the state. Nonprofit hospitals are required to offer low-cost charity care, but that isn't particularly regulated.

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Daily Digest - December 18: Can Subprime Lending Really Be Safe?

Dec 18, 2014Rachel Goldfarb

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The Return of Subprime Lending (AJAM)

Matt Birkbeck says a new wave of subprime mortgages appear to be following much stricter rules and have far less usurious interest rates, but regulators are still watching closely.

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The Return of Subprime Lending (AJAM)

Matt Birkbeck says a new wave of subprime mortgages appear to be following much stricter rules and have far less usurious interest rates, but regulators are still watching closely.

Paid Maternity Leave Is Good for Business (WSJ)

Susan Wojcicki says that the United States is behind the rest of the world in not offering paid maternity leave to all mothers, and that such a policy makes good sense socially and economically.

Federal Reserve Says It Will Be ‘Patient’ on Interest Rate Timing (NYT)

Binyamin Appelbaum reports on the latest comments from Federal Reserve Chair Janet Yellen about when the Fed will start raising interest rates. The process won't begin before April.

Fired Walmart Worker Says She Had to Choose Between a Paycheck and a Child (The Guardian)

Lauren Gambino and Jessica Glenza profile one former Walmart employee who was still asked to work with dangerous chemicals after her doctor said they would endanger her pregnancy.

What Was the Job? (Pacific Standard)

Kyle Chayka says the gig economy brought with it a massive reinterpretation of what it means to have a job, leaving behind a disenfranchised workforce without any of the benefits it once enjoyed.

New on Next New Deal

Ten Years: Students Moving the Country Forward

Roosevelt Institute Vice President of Networks Taylor Jo Isenberg reflects on the Campus Network's tenth anniversary, and how Roosevelters can continuing pushing for a better country for all of us.

Two Contradictory Arguments That Dodd-Frank is Crony Capitalism

Roosevelt Institute Fellow Mike Konczal compares two mutually exclusive conservative analyses of what crony capitalism means and how to fix it, which suggest this isn't a useful concept in policy debates.

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Monetary Policy Event with Paul Krugman and Senator Warren Today

Dec 9, 2014Mike Konczal
I'm very excited to share that AFR, EPI, and the Roosevelt Institute have teamed up to host a conference on monetary policy, the recovery and the financial sector today. The conference will feature keynotes from Paul Krugman and Senator Elizabeth Warren.
I'm very excited to share that AFR, EPI, and the Roosevelt Institute have teamed up to host a conference on monetary policy, the recovery and the financial sector today. The conference will feature keynotes from Paul Krugman and Senator Elizabeth Warren. It also features, among many other great panelists, friend of the blog and Roosevelt fellow JW Mason (who recently wrote about monetary policy here and here, and at the old rortybomb blog here), and who has been part of the financialization project we'll be releasing soon.
 
Though the event is sold out, EPI will be posting the video after the event, and I hope you'll watch it.
 
Tuesday, December 9, 2014
 
12:30 – 4:00 p.m. ET
 
Hart Senate Office Building 902
Washington, DC
 
Sponsored by Americans for Financial Reform, Economic Policy Institute, and Roosevelt Institute's Financialization Project
 
FEATURING
Senator ELIZABETH WARREN
Economist/columnist PAUL KRUGMAN
 
Today, pressure is building on the Federal Reserve to use monetary policy to raise short-term interest rates, a move that could short-circuit a still far from complete economic recovery. Proponents of this move argue it is needed to avert wage and price inflation and prevent excessive risk-taking in the financial sector. But there are serious questions about this argument, and there are new tools available to the Fed to influence Wall Street and the wider economy. These tools and better economic analysis could allow the Fed to better target specific concerns regarding Wall Street financial risk-taking while minimizing unnecessary drag on the Main Street economy.
 
Join Elizabeth Warren, Paul Krugman, and experts on monetary and regulatory policy for a discussion of Federal Reserve economic management. The discussion will range from what the Fed’s next moves should be in monetary policy to the ways in which the Fed can use new regulatory tools to address problems in the financial market without causing unnecessary problems in the broader economy.
 
AGENDA
 
12:30pm – Keynote by Senator Elizabeth Warren
 
1:00pm -  Panel: Monetary Policy and the Economy
 
Panelists: 
 
Josh Bivens, Research and Policy Director, Economic Policy Institute
William Spriggs, Chief Economist, AFL-CIO
JW Mason, John Jay College, Roosevelt Institute
Robert Pollin, Professor of Economics and Co-Director of PERI, University of Massachusetts Amherst
 
2:15pm – Keynote by Paul Krugman
 
2:45pm – Panel: Regulatory Tools For Managing Financial Cycles
 
Panelists: 
 
Marcus Stanley, Policy Director, Americans for Financial Reform
Jill Cetina, Associate Director for Policy Studies,  Office of Financial Research
Jennifer Taub, Professor of Law, Vermont Law School
Jane D'Arista, Author, “The Evolution of U.S. Finance"

 

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Daily Digest - December 9: One Strong Voice Against the Mega Cable Company

Dec 9, 2014Rachel Goldfarb

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Blows Against the Empire (Medium)

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Blows Against the Empire (Medium)

Roosevelt Institute Fellow Susan Crawford praises the new "Stop Mega-Comcast Coalition" for uniting the voices of those who view the Comcast-Time Warner Cable merger as monopolistic.

Fed’s Lockhart Still Favors Mid-2015 for First Fed Rate Increase (WSJ)

Lockhart, President of the Atlanta Fed, calls for patience regarding raising interest rates, writes Michael S. Derby, who describes Lockhart as "a bellwether of policy makers’ consensus outlook."

Congress Races to Reach Spending Deal Before Shutdown Deadline (MSNBC)

With a potential shutdown approaching at midnight on Thursday, Benjy Sarlin says Congress is working through disagreements on issues like environmental regulation and financial reform.

Are West Coast Longshoremen Spoiling Christmas? (Politico)

As their union continues to negotiate wages and benefits, Mike Elk reports that the longshoremen are accused of slowing holiday season shipping by sticking exactly to company rules.

The Lame-Duck Congress Plots to Undermine Retiree Pensions (LA Times)

A proposed change – which has no public language only days before Congress goes on vacation – would decrease the pensions of already-retired workers on certain plans, writes Michael Hiltzik.

U.S. States' Revenue Growth Picks Up But Still 'lackluster' (Reuters)

Lisa Lambert reports on a new survey on state revenues and budgets, which says that stagnant wages are keeping revenues from growing as well.

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Daily Digest - November 24: How to Win Minimum Wage Fights

Nov 23, 2014Rachel Goldfarb

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The Fight for $15.37 an Hour (NYT)

Steven Greenhouse explains how the Los Angeles Alliance for a New Economy won its campaign to get hotel workers in L.A. a significantly higher minimum wage.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

The Fight for $15.37 an Hour (NYT)

Steven Greenhouse explains how the Los Angeles Alliance for a New Economy won its campaign to get hotel workers in L.A. a significantly higher minimum wage.

Elizabeth Warren Tells NY Fed President: Fix Your Problems, Or We’ll Find Someone Who Will (Buzzfeed)

At the Senate Banking Committee on Friday, the four senators in attendance – all Democrats – pushed back hard on William Dudley's framing of his work as a "fire warden," reports Matthew Zeitlin.

What’s a CEO Really Worth? Too Many Companies Simply Don’t Know (WSJ)

Paul Vigna writes about a new report examining how executive compensation lines up with company performance. It turns out that most companies don't measure success very accurately.

  • Roosevelt Take: In her primer on the CEO pay debate, Roosevelt Institute Fellow Susan Holmberg lays out the main theories for the skyrocketing in executive pay and potential policy solutions.

Obama's Executive Action Is About Labor Policy, Not Just Immigration (AJAM)

E. Tammy Kim explains how work authorization will transform opportunities for many undocumented workers, who will have new opportunities to organize or fight wage theft without fear.

The Antitax Push Has Done Harm to State and Local Government (WaPo)

Catherine Rampell says the piecemeal way that state and local governments create new revenue sources are far worse for the economy and inequality than raising taxes would be.

  • Roosevelt Take: Roosevelt Institute Fellow Saqib Bhatti explains the impact of predatory financial deals taken on by state and local governments struggling to fund public services.

The GOP Controls Congress So Now It Can Change How Math Works (MoJo)

The Republicans' preferred method of calculating budget projections uses impossible predictions about economic growth, writes Erika Eichelberger, making tax cuts appear less costly.

New on Next New Deal

Bigger Health Care Providers Mean Bigger Profits, But Not Always Better Care

Roosevelt Institute | Campus Network Senior Fellow for Health Care Emily Cerciello calls on state attorneys general to consider whether hospitals that buy up physicians' practices are violating anti-trust laws.

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Daily Digest - November 20: From the Banks to the Fed and Back Again

Nov 20, 2014Rachel Goldfarb

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New Scrutiny of Goldman’s Ties to the New York Fed After a Leak (NYT)

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New Scrutiny of Goldman’s Ties to the New York Fed After a Leak (NYT)

The leak has led to questions regarding the conflict of interest that arises when people advise the same banks they used to regulate, write Jessica Silver-Greenberg, Ben Protess, and Peter Eavis.

Are Financial Whistleblowers Worth It? Study Says Yes – to the Tune of $21.27bn (The Guardian)

Jana Kasperkevic reports on a new study that proves the value of financial whistleblowers. Rewards encourage whistleblowers to step up, and companies in such cases pay heavier penalties.

Loan Servicer Busted for Backdating, But Foreclosure Victims Say Shenanigans Haven’t Stopped (In These Times)

Ocwen Financial has admitted to a "glitch" involving back-dated loan modification letters, but Joel Sucher says the slow work to fix the problem follows familiar patterns.

Lenders Shift to Help Struggling Student Borrowers (WSJ)

Annamaria Andriotis reports on the plans of two major private student loan providers to lower interest rates, extend repayment periods, and modify loans.

Why It's So Hard for Millennials to Find a Place to Live and Work (The Atlantic)

Derek Thompson explains that cities that provide the best opportunity for economic mobility and cities that have affordable housing hardly overlap at all today.

New on Next New Deal

A Dem Who Can Explain that Fairness is Prosperity Will Sweep in 2016

Roosevelt Institute Senior Fellow Richard Kirsch argues that Democrats who focus on economic policies that emphasize fairness (which are the best ones for economic growth) will succeed.

Leadership Wanted: Governor Cuomo, Homeless Students Need College Support

Roosevelt Institute | Campus Network Leadership Director Kevin Stump proposes a new program to support homeless youth in achieving their college goals.

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In Blowout Aftermath, Remember GDP Growth Was Slower in 2013 Than in 2012

Nov 5, 2014Mike Konczal

In the aftermath of the electoral blowout, a reminder: the Great Recession isn't over. In fact, GDP growth was slower in 2013 than in 2012. Let's go to the FRED data:

There's dotted lines added at the end of 2012 to give you a sense that throughout 2013 the economy didn't speed up. Even though we were another year into the "recovery" GDP growth slowed down a bit.

There's a lot of reasons people haven't discussed it this way. I saw a lot of people using year-over-year GDP growth for 2013, proclaiming it a major success. A problem with using that method for a single point is that it's very sensitive to what is happening around the end points, and indeed the quarter before and after that data point featured negative or near zero growth. Averaging it out (or even doing year-over-year on a longer scale) shows a much worse story. Also much of the celebrated convergence between the two years was really the BEA finding more austerity in 2012. (I added a line going back to 2011 to show that the overall growth rate has been lower since then. According to David Beckworth, this is the point when fiscal tightening began.)

Other people were hoping that the Evans Rule and open-ended purchases could stabilize "expectations" of inflation regardless of underlying changes in economic activity (I was one of them), a process that didn't happen. And yet others knew the sequestration was put into place and was unlikely to be moved, so might as well make lemonade out of the austerity.

And that's overall growth. Wages are even uglier. (Note in an election meant to repudiate liberalism, minimum wage hikes passed with flying colors.) The Federal Reserve's Survey of Consumer Finances is not a bomb-throwing document, but it's hard not to read class war into their latest one. From 2010 to 2013, a year after the Recession ended until last year, median incomes fell:

When 45 percent of the electorate puts the economy as the top issue in exit polls, and the economy performs like it does here, it's no wonder we're having wave election after wave election of discontentment.

Follow or contact the Rortybomb blog:
 
  

 

In the aftermath of the electoral blowout, a reminder: the Great Recession isn't over. In fact, GDP growth was slower in 2013 than in 2012. Let's go to the FRED data:

There's dotted lines added at the end of 2012 to give you a sense that throughout 2013 the economy didn't speed up. Even though we were another year into the "recovery" GDP growth slowed down a bit.

There's a lot of reasons people haven't discussed it this way. I saw a lot of people using year-over-year GDP growth for 2013, proclaiming it a major success. A problem with using that method for a single point is that it's very sensitive to what is happening around the end points, and indeed the quarter before and after that data point featured negative or near zero growth. Averaging it out (or even doing year-over-year on a longer scale) shows a much worse story. Also much of the celebrated convergence between the two years was really the BEA finding more austerity in 2012. (I added a line going back to 2011 to show that the overall growth rate has been lower since then. According to David Beckworth, this is the point when fiscal tightening began.)

Other people were hoping that the Evans Rule and open-ended purchases could stabilize "expectations" of inflation regardless of underlying changes in economic activity (I was one of them), a process that didn't happen. And yet others knew the sequestration was put into place and was unlikely to be moved, so might as well make lemonade out of the austerity.

And that's overall growth. Wages are even uglier. (Note in an election meant to repudiate liberalism, minimum wage hikes passed with flying colors.) The Federal Reserve's Survey of Consumer Finances is not a bomb-throwing document, but it's hard not to read class war into their latest one. From 2010 to 2013, a year after the Recession ended until last year, median incomes fell:

When 45 percent of the electorate puts the economy as the top issue in exit polls, and the economy performs like it does here, it's no wonder we're having wave election after wave election of discontentment.

Follow or contact the Rortybomb blog:
 
  

 

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