And it continues to get sillier and sillier:
The richest 1 percent of Americans save about half their incomes, while most of the rest of us save between 6 and 10 percent. Being rich means you already have most of what you want and need. Each additional acquisition yields a sharply declining level of satisfaction: That second yacht isn’t nearly as exciting as the first.
So when the top 1 percent rakes in more than 20 percent of total income – twice the share it had 30 years ago – there’s insufficient demand for all the goods and services the economy is capable of producing at or near full employment. Without enough demand, the economy can’t grow or generate nearly enough jobs.
So what can we take from that?
Here’s my interpretation - the top 1% is taking in 20% of the income and burying half in coffee cans in the back yard. Or said another way, none of it is invested and pushed back out in the economy to entrepreneurs, businesses or other pro-economic growth activities. They just keep it, stuff mattresses with it or burn it to light their big fat cigars, or something. Well, at least in Reich’s version of the economy.
And they have this declining level of satisfaction because they have everything they want. Other than an excuse to take their money, what is relevant about that (even if true)? Not much. But back to that excuse business. We can save them from the disappointment they’re bound to have when they buy that second yacht (which, btw, will provide good jobs and pay for those who build it) and screw the yacht workers.
Finally, when the rich take that 20%, there’s less for everyone else to spend, so there’s insufficient demand. Really? That’s why? Or could it have to do with the awful economy, over regulating state, massive unemployment and business uncertainty driven by those three things? Could that possibly be responsible for “insufficient demand”?
Anyway, the apparent Reich argument is that if we just made them (the 1%) give up most of that 20% (I assume, given his usual preferences, he’d like to see that via taxes so the government can do the great job it has done up till now spending it – couldn’t trust the proles to spend it properly you know), why there’d be more money to go around and thus somehow magically more demand and everyone would live happily ever after. And we’d be able to put those yacht workers on extended unemployment and food stamps. Yahoo!
The end of sanity perhaps.
The richest 1% are taking 20% of what size income pool? Oh, context! Reich never says. Nor does he mention the standard of living and comparable income levels of 30 years ago. Or the fact that much of what cost a lot of money 30 years ago is relatively cheap now in comparison. Because, you know, that doesn’t help his argument.
And why 30 years ago? Check out the chart 80, 90 or 100 years ago.
Additionally, the Reich economy is also apparently a zero sum game. If the rich take it the “poor” don’t get it since there is presumably a defined pot of money available. Oh, there’s not. So that again brings us to the question, “20% of what”?
This is just another attempt by a committed collectivist to reignite the class warfare meme. It’s desperation time in the old political sphere and Reich is counting on economic ignorance and envy to do it’s thing. Screw the truth (and history) – it’s never been this bad and it is the root of all our ills.
What guys like Reich, Obama, Axlerod and the Occupy crowd don’t seem to understand is this basic truth:
Successful populists such as Republican Teddy Roosevelt and Democrat Franklin Roosevelt did not allow their championing of “the little guy” to devolve into class warfare.
They realized that Americans tend to view the United States as a land of opportunity and do not begrudge anyone for becoming wealthy.
Oliver Wendell Holmes, Jr said it best:
I have no respect for the passion for equality, which seems to me merely idealizing envy.
And that’s exactly what that bunch is trying to do. Idealize envy.
I don’t think, unless the America character has changed dramatically over the past 3 years, it’s going to succeed.
From The New York Times:
President Obama on Wednesday will make clear that he opposes any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.
Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.
But the problem is that raising taxes in a recession is considered by all objective thinkers to be folly. In fact, the President said so himself as I reminded you recently:
Normally you don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say to Scott is—his economics are right. You don’t raise taxes in a recession. We haven’t raised taxes in a recession.”
But they are going to raise them in a recession now. “Scott”, by the way, was a person who submitted a question at an Obama townhall through MSNBC’s Chuck Todd. Obama admitted that it was the wrong thing to do in a recession. And folks, we’re still in a recessionary period whether or not the spin artists with the administration prefer “recovery summer” (another flop) or not.
The NYT goes on:
It is not clear that Mr. Obama can prevail given his own diminished popularity, the tepid economic recovery and the divisions within his party. But by proposing to extend the rates for the 98 percent of households with income below $250,000 for couples and $200,000 for individuals — and insisting that federal income tax rates in 2011 go back to their pre-2001 levels for income above those cutoffs — he intends to cast the issue as a choice between supporting the middle class or giving breaks to the wealthy.
Of course, he’s presenting a false choice. There’s a third choice – keep the tax cuts for all and cut spending. But, you can’t stir up class warfare and spend more money unless you demonize the rich and claim you’ll be spending their money for the benefit of the “middle class”.
Any American that falls for the sort of populist class envy nonsense is most likely fine with the government we have and any silver pieces they can siphon off as a result.
That said, the NYT’s first sentence in that paragraph says a lot. Does Obama have the heft to carry this off. We all know the GOP will be the whipping boy for any failure, but unless every Democrat in both chambers of Congress stand up and vote for it, it will be a difficult thing to sell to a skeptical electorate who’ve heard all this nonsense before.
Politically, however, the president is, in effect, daring Republicans to oppose the plan, in that way proving Democrats’ contention that they will block even their own ideas to deny Mr. Obama any victories. And by proposing business tax breaks that, according to nonpartisan analyses, would do more to stimulate the economy than extending the Bush tax rates for the wealthy, Mr. Obama hopes to buttress Democrats’ opposition to extending those rates.
Let him dare the Republicans. If they’re smart (and that’s always debatable) they’ll use the President’s own words against him. That would be their most effective tool. And that would also put Democrats in marginal districts on notice that if they vote not to extend the cuts, they’re doing what their President once admitted was a terrible idea in bad economic times. And, they should understand, they can count on hearing that repeated in ads in their districts along with how they voted.
[ad] Empty ad slot (#1)!
Glad they finally noticed:
The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.
Of course the greatest stoker of this populist backlash has been the Obama administration. I’ll be the first to agree that some of the financial institutions, such as AIG recently, have played into the populist condemnation by the administration, but instead of being specific about the AIGs of the world, they have instead gone after an entire industry to the point that “banks and Wall Street” are synonymous with crooks, swindlers and liars. Having established that narrative, seemingly purposely, there’s now a huge backlash building which may, in fact, cripple the administration’s efforts pertaining to both.
“We’ve got enormous problems that need to be addressed,” David Axelrod, Mr. Obama’s senior adviser, said in an interview. “And it’s hard to address because there’s a lot of anger about the irresponsibility that led us to this point.”
“This has been welling up for a long time,” he said.
Mr. Obama’s aides said any surge of such a sentiment could complicate efforts to win Congressional approval for the additional bailout packages that Mr. Obama has signaled will be necessary to stabilize the banking system.
As it is, there have already been moves in Congress to limit compensation to executives at banks and Wall Street firms that are receiving government help to survive.
Beyond that, a shifting political mood challenges Mr. Obama’s political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style — “in a time of crisis, we cannot afford to govern out of anger,” he said in his address to Congress last month — will prove effective when the country may be feeling more emotional.
And the country is feeling emotional because the administration has been making emotional arguments targeting the industry it wants to help. Not very smart politics. And they’ve now finally realized that.
“Never underestimate the capacity of angry populism in times of economic stress,” said Robert Reich, a professor of public policy at the University of California, Berkeley, and labor secretary under President Bill Clinton. “A big challenge for President Obama will be to maintain a rational and tactical public discussion in the midst of this severe downturn. The desire for culprits at times like this is strong.”
The “culprit” has been identified. In their desire to escape blame, government officials in Congress and elsewhere have almost unanimously used their access to the media to vilify banks and Wall Street while pretending they had no hand whatsoever in this debacle. Unfortunately they’ve been quite successful in the scapegoating. However, having established the narrative, they now have to attempt to reverse it because the public rage they’ve helped stoke may prevent them from doing what they think they need to do to turn the financial industry around.
The entire problem that the administration is now recognizing is one of their own making and another indication of their inexperience and lack of foresight. It’s one thing to demonize such industries when campaigning, it is, as they’re learning, an entirely different thing when you do it as the President of the United States. The administration now has to figure out how to reverse a narrative they helped build and establish. That should be interesting to watch.