Wall Street Has Already Voted
by Holly Sklar
October 26, 2010
Before Wall Street drove our economy off a cliff,
bullish Citigroup strategists dubbed the United States a
"plutonomy." They said, "There are rich consumers, few
in number, but disproportionate in the gigantic slice of
income and consumption they take. There are the rest,
the 'non-rich,' the multitudinous many, but only
accounting for surprisingly small bites of the national
Inequality had increased so much since the 1980s, Citi
strategists noted in 2005, that the richest 1 percent of
households and the bottom 60 percent had "similar slices
of the income pie!" Even better, they said, "the top 1
percent of households account for 40 percent of
financial net worth, more than the bottom 95 percent of
households put together." And the Bush "administration's
attempts to change the estate tax code and make
permanent dividend tax cuts, plays directly into the
hands of the plutonomy."
In "Revisiting Plutonomy: The Rich Getting Richer," Citi
strategists considered the risk of backlash. "Whilst the
rich are getting a greater share of the wealth ...
political enfranchisement remains as was - one person,
one vote," they said. "At some point it is likely that
labor will fight back against the rising profit share of
the rich and there will be a political backlash against
the rising wealth of the rich." This could be felt, for
example, "through higher taxation (on the rich or
indirectly though higher corporate taxes/regulation)."
Fast forward. Wall Street wrecked the economy and was
bailed out by the rest of us. "Pay on Wall Street is on
pace to break a record high for a second consecutive
year," the Wall Street Journal reports. Main Street,
meanwhile, suffers record high foreclosures speeded by
Big businesses have a record amount of nearly $2
trillion in cash and are borrowing money cheap to buy
other companies, buy back stock and pay out more
dividends. Small businesses can't get credit to buy more
equipment or hire more workers.
According to the latest IRS data, the 400 richest
taxpayers increased their average income by 399 percent,
adjusted for inflation, between 1992 and 2007, and
lowered their effective income tax rate by 37 percent -
from 26.4 percent to 16.6 percent.
This year, the Forbes 400 richest Americans, all
billionaires, enjoyed an 8 percent rise in their wealth
- while more than one out of eight Americans depends on
The backlash is here, but it's lashing in the wrong
direction. The anti-government Tea Party rage plays
directly into the hands of the Kings of Wall Street.
Wall Street has already voted, pouring money into
Republican campaigns and anti-Democratic ads by
astroturf groups that don't have to disclose their Big
Bank, Big Oil, Big Business donors. "Our target ratio
for the 2010 cycle is 80-20 Republican," American
Financial Services Association representative Karen
Klugh told Politico.
Wall Street expects a good return on their investment.
"Wall Street is preparing for a Republican surge in
Congress that could help it block proposed taxes on
banks and investments, blunt new financial regulations
and regain some of the lobbying firepower it lost during
the financial crisis," Bloomberg reports. "Banks would
prefer to have Republicans overseeing the regulators,
Wall Street wants freedom to gamble with our money -
including the Social Security funds Republicans want to
try again to privatize.
"The Republican agenda could also give new life to free-
trade agreements with Colombia, Panama and South Korea,"
Bloomberg reports. That's good news for the plutocrats.
As Citigroup said in 2005, "Globalization is making it
easier for companies to either outsource manufacturing
(source from cheap emerging markets like China and
India) or 'offshore' manufacturing (move production to
lower cost countries)."
Average wages are 7 percent lower today, adjusted for
inflation, than they were back in 1973. Do you want to
The richest 1 percent has more wealth than the bottom 95
percent combined, but just 1 percent of the vote.
Wall Street plundered your livelihoods, homes and
retirement funds - and now they want you to bail them
out, again, with your vote.
They want to sell you bait-and-switch candidates like
they sold you bait-and-switch mortgages. And laugh all
the way to the bank.
Wall Street has voted. It's your turn.
Copyright 2010 Holly Sklar
Holly Sklar is author of "A Just Minimum Wage: Good for
Workers, Business and Our Future" (
www.letjusticeroll.org) and "Raise the Floor: Wages and
Policies That Work for All of Us." She can be reached at
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Why Growth Still Feels Like Recession
Think the US economy's 2% growth is a good news story?
Think again: it has to be 2.5% just to stop joblessness
by Dean Baker
October 29, 2010
Last month, the National Bureau of Economic Research's
official business cycle-dating committee told the
country that the recession had ended in the second
quarter of 2009. This was, undoubtedly, the correct
call. The economy is showing positive growth, which is
what defines the end of a recession.
However, the growth is so weak coming out of this
downturn that it will be invisible to anyone who doesn't
spend their life looking at economic data. For most
people, this will be a recovery marked by continued high
unemployment and near-record rates of home foreclosures.
And the politicians' response is to cut people's social
It may not be immediately obvious quite how weakly the
economy is growing. First, we need a reference point.
When an economy gets out of a step recession, it should
be soaring, not just scraping into positive territory.
In the first four quarters following the end of the
1974-75 recession, growth averaged 6.1%. In the four
quarters following the end of the 1981-92 recession,
growth averaged 7.8%. The growth rate averaged just 3.0%
in the four quarters following the end of this
But the actual picture is even worse. Most of this
growth was driven by the inventory cycle as firms went
from running down their inventories to rebuilding them.
If inventory fluctuations are pulled out, growth in
demand averaged just 1.1% over the four quarters
following the end of the recession. Final demand growth
was down to just 0.6% in the most recent quarter.
This is cause for serious concern. Inventories grew at
the second fastest rate ever in the last quarter. Growth
is certain to slow in future quarters, meaning that
inventories will be a drag on an already slowing
economy. Instead of accelerating, we are likely to see
growth just scraping along near zero.
This should have people very concerned - and very angry.
Just to add enough jobs to keep the unemployment rate
constant, the economy has to grow at a 2.5% rate. In the
absence of some unexpected change in policy, we will not
see the economy growing at this pace any time soon,
which means that the unemployment rate will be rising.
We can expect it to cross 10% in the not-distant future
and likely to remain in double-digit levels through most
The outrageous part of this story is that the pain is
completely preventable. We know how to create jobs. It
is really simple; we just have to spend money - people
work for it. Unfortunately, the fiscal scolds, the
people who were too lost to see the largest financial
bubble in the history of the world, are telling us that
we have to cut our deficits and tighten out belts.
It is probably worth noting that nearly all of the
fiscal scolds earn at least six-figure salaries and many
earn in the seven figures. So, we have an amazing sight
here. People who earn hundreds of thousands, or even
millions, of dollars a year, who have the job of
designing economic policy, completely failed on the job.
This can't be emphasized enough. Missing the housing
bubble was an act of astounding incompetence for an
economist. This is driving the school bus into oncoming
traffic; it is the kitchen cook burning down the
restaurant; it is the computer technician causing a
complete freeze of the company's systems.
None of these highly-paid, highly-educated people got
fired or even missed a promotion. Instead, they are
running around telling people earning $20,000-30,000 a
year that they have to tighten their belts and accept
lower social security benefits.
If politics and the media in the United States were not
so corrupt, this would have been topic No1 in the
election. Candidates would have been pushing plans to
aggressively stimulate the economy and to throw the Wall
Street crowd in jail. But a candidate who said such
things would not get enough money to run a serious
campaign, because you need to court the Wall Street
types to pay for a campaign these days. And the media
would have ignored and/or ridiculed such a candidate.
So, we have an election based largely on nonsense.
People are rightly angry that their lives are being
ruined by disastrous economic policy. But they have no
idea where to turn. And the latest data tell us that the
situation is likely to get much worse in the year ahead.
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