Tuesday, March 12, 2013

Recovery going according to plan

I am often criticized for making claims like "recovery going according to plan," as if there is a room full of evil, old white men dressed in tailored business suits, sitting around a mahogany table, plotting on how to enrich the 0.01% at the expense of everyone else.

In practice, our political system only responds to the needs of the wealthy, so any concerns of the poor or jobless largely get ignored:

Perhaps the most shocking study the authors cite comes from Martin Gilens, a political scientist at Princeton University. Gilens has been collecting the results of nearly 2,000 survey questions reaching back to the 1980s, looking for evidence that when opinions change, so too does policy. And he found it—but only for the rich. “Most policy changes with majority support didn’t become law,” Hacker and Pierson write. The exception was “when they were supported by those at the top. When the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did. By contrast, when more of the well-off supported a change, it was substantially more likely to happen.”

For example, the fact that there are 3.3 job seekers for every job opening (and the fact that it has been this bad or worse since 2009) is not a problem our political system cares to solve because it does not affect the rich.  Joblessness has been a problem for years; Wall Street didn't have to wait years to get bailed out.  Similarly, the fact that the Great Recession and "recovery" resulted in the replacement of middle class jobs with low income jobs is a good thing to the ruling class, not a bad thing (60% of job losses in the Great Recession were middle class jobs, whereas just 27% of jobs created since the "recovery" started are middle class jobs; 58% of jobs created since the "recovery" are low wage jobs).  This is a great recovery for the rich, but bad for everyone else.

A recovery where 93% of income increases go to the richest 1% (2010) is a great recovery for the rich, and not everyone else.  We are now in a recovery that could not have been any better for the ultra rich had they actually sat down around a mahogany table and plotted how to enrich themselves at the expense of everyone else: corporate profits have reached record highs as wages and salaries have reached record lows.  One person's lost wages are another person's corporate profits.  That record low wages correspond to record corporate profits is not a coincidence.

What else is going according to plan?  The stock market recently hit a record high, but that disproportionately benefits the rich (click for larger image):

As Jared Bernstein points out, the only reason most of the bottom three quintiles are invested in the stock market is because of 401(k) plans.  However, I would take this a step further.  This stock market investment simply adds insult to injury.  The rise of 401(k) plans is a result of the fall of defined benefit pensions, where corporations are responsible for paying out retirement benefits to retired former employees.  In a defined benefit pension, a corporation is legally required to pay a specific benefit level to the retiree no matter the state of the economy (hence the name, defined benefit pension).  Unsurprisingly, 401(k)'s are far less generous and far less safe; just ask someone whose 401(k) lost half its value in 2008 when Wall Street melted down.  Obviously, 401(k)'s are better for corporations and worse for workers, so the rise of 401(k)'s and the fact that the bottom three quintiles is even invested in the stock market is an indication of rising inequality as well.  A rising stock market should help the 401(k)'s of the bottom few quintiles, but that is little solace to workers who are being sold the snake oil of 401(k) plans in place of defined benefit pensions.

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