It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.
I am sometimes amazed by the extent to which people who I wouldn't expect to speak to the issues that matter to ordinary people actually publish something relevant. David Stockman said something I didn't expect to hear from something in his party.
The four deformations:
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.
More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. ...
The second unhappy change in the American economy has been the extraordinary growth of our public debt. ...
The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. ... But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. ...
The fourth destructive change has been the hollowing out of the larger American economy.
Reminds me a bit of something Joe Stiglitz said in Australia last week.
The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.
When are we going to turn our attention to creating a stable economy in which all of us can prosper -- those who do the basic work which needs to be done but doesn't required extended specialized training or long experience, as well as those whose education or training equips them for more specialized jobs? We will continue to need farm workers, and janitors, and fast food workers, and dozens of other occupations, and it seems to me that we ought to favor a structure which makes a decent life possible for them as well as the more trained and educated. When 1%, 5%, of us get such a large portion of the products of the total labor in this land, something is wrong. The amount that is left to be divided among the other 99% or 95% is insufficient to properly compensate everyone for their labor. A few are reaping what they didn't sow, and we maintain the impolite fiction that they somehow earned it.
And there ARE answers. There ARE solutions. I happen to think that the best solutions -- probably the only solutions, but I'll leave it to you to propose something better -- are likely to come from the thought associated with Henry George. He was not original; he's part of a long continuum of people over many centuries who saw things similarly. But he was perhaps the most eloquent, and, in his first book, Progress and Poverty, very methodical and thorough in laying out his analysis. We, as 21st century people of good will, would do well to understand his analysis and argument, and see for ourselves whether we have a better answer to offer.