economics

The other day I tweeted a paraphrase from one of my favorite bloggers Atrios regarding Mitt Romney's tax returns that went something like "the tax rate on any money the pile of cash earns is much lower than it is on the money earned by people who actually work." A couple people asked me to explain this a little more so I thought it would make a good bloggy topic.

Since I'm over in London, I pick up on local news, which has been full of fallout from various austerity programs designed to roll back pensions, housing subsidies, etc. Firefighters, Tube workers, and BBC journalists are all threatening strikes. There's also been a lot of coverage of the widespread strikes/shutdowns in France.

At the same time, executive pay is up 55%!

Incomes Data Services, who conducted the research, said bonuses paid to directors of FTSE 100 companies increased by 34%, while basic pay rose by 3.6%. The amount of money waiting to be disgorged from long-term incentive schemes soared by 73%, to a total of £259m, and share option gains leapt by 90%.

The FTSE 100 rose by less than a fifth over the same period.

Steve Tatton of IDS said the report suggested that companies returned to "business as usual" once the recession ended.

This is an economics article, so it's important to note that the phrase "once the recession ended" refers to the technical end to contracting GDP. As we've increasingly seen by most other measures, the real impact of the "Great Recession" is likely to persist. Incomes for normal people remain depressed (or are falling) and unemployment is high. It is a "jobless recovery," and cold comfort indeed to anyone feeling the pain right now.

It sounds very much like there is a storm a-brewin' designed to start cutting into Social Security. I helped fight this off back in 2005, and it's a real pity to see the same basic bullpucky return under Prez. Obama. Cutting Social Security is both unnecessary and cruel.

For the reasoned economic analysis, keep up with Dr. Krugman.

For a more colorful take, you can't do much better than George Carlin:

How does this sound?

“The state should not tear down the apples from the tree of economics. What the government should do is help grow our apple orchard, develop our economic environment.”

That's Dmitry Medvedev, the Russian president, aka shift manager for Boss Putin.

The question I have is why does the President of Russia (in translation, even) seem to have a better grasp of post-free-market-fetish economic rhetoric than our own progressives? I mean, it'll be really unfortunate if the Left in the US doesn't come to articulate a competent vision alternative vision to the current "world order." Though maybe not all that surprising.

Apropos the previous posts about political power-grabbing and whistful public longing, and after a quick trip through the Jon Robb link farm, another thought I'd like to log for the register: in this crazy modern era of ours, in which the existing system is fumbling more than the San Diego Chargers, how long before we really start to think outside the box. Like waaaaay outside the box.

For instance, just off the top of my head:

• Why not real international solidarity between people of the same generation?
• Why do we still grow food in the dirt? Why not just go ahead and use engineering?
• Why not start your own tribe? Literally.
• Why is it only old people get to live in dedicated communities? Own a home with your roommates.

My parents generation was willing to question pretty basic assumptions about how they were supposed to live. It didn't all work out, but it was a worthy exercise I believe. I think my generation is in an even more (potentially) radical space, thanks to these here internets. Not only can we interconnect with like-minded folks around the world with unprecedented ease, we can self-publish, self-learn, and figure What Actually Works in ways that were completely unthinkable to previous generations.

It looks bleak in some ways, but in other ways it looks pretty bright and wide open. Bears remembering.

Krugman:

I guess my dreams of washing out and starting a second career as a tin-pan-alley vaudeville hobo will have to wait.

Well, I'm glad I got out of debt, but I'm also glad I didn't do it early enough to sink any money into "the market." While I'm sure many funds will still do well and long-term investors have little to fear, the current economic trajectory is pretty ugly. The dow is headed towards 52-week lows, and there's more bad news to come.

This is what happens when you run things like the Soviets. It's increasingly obvious that our economy, beyond being unsustainably debt-based, is also build on a series of consensual hallucinations that don't map well to reality. Because our made-up-prowess is in "financial products" rather than steel and wheat production, we can get by for longer than they did in the USSR -- and we get hit with mortgage defaults rather than breadlines, which is an improvement -- but the books are no less cooked, and CNBC is a propaganda outlet, not a news channel.

The Big D may indeed be coming, although a new bubble/rally may emerge around alternative energy and infrastructure instead. Here are the fundamentals:

* Most major banks and financial firms are facing serious losses of capital and credibility as a result of the housing bubble. The "correction" for this will go on for several years, and though the effects will likely be mitigated by a bailout and other activity, the bottom remains a ways off.
* Consumer spending -- which is to say people buying shit -- has been the main thing keeping the boat floating, but has been based on second-mortgages and credit card debt.
* The falling dollar has been boosting exports, but is also driving inflation and exacerbating energy costs.
* The occupation of Iraq probably prevents any meaningful Federal action, cost-wise. It's also not doing anything to help out with the energy cost situation.