Elizabeth Warren just destroyed Federal Reserve Chair Janet Yellen over JPMorgans “living will.”In the Dodd-Frank Act, there is a provision, known as a living will, that must describe a companys strategy for, “rapid and orderly resolution in the event of material financial distress or failure of the company.”This provision comes out of the Lehman Brothers bankruptcy, which triggered the financial crisis and took three years to resolve.Warren has some concerns regarding JPMorgans living will, which she notes has been approved each of the last years.Compared to JPMorgan, Warren said Lehman was “tiny.”Warren noted that at the time of its bankruptcy, Lehman had $639 billion in assets; today, JPMorgan has nearly $2.5 trillion in assets.
The growing wealth gap in developed countries is an incredibly disturbing development. New research suggests that inequality might be growing even faster than we thought. Worryingly, this concentration of wealth has coincided with a concentration of debt at the bottom, as families struggle to maintain their standards of living with stagnating incomes. But even this data understates wealth inequality, argues Gabriel Zucman in “The Hidden Wealth of Nations,” because official statistics fail to capture offshore wealth holdings.Zucman is an assistant professor of economics at the London School of Economics and a visiting scholar at UC Berkeley. At only 27, he’s already co-authored papers with economics superstar Thomas Piketty. His most recent paper estimates that global offshore holdings total $7.6 trillion and rob governments of hundreds of billions in tax revenues each year. He also finds that over the past few decades, companies have stored more and more profits overseas, making the effective corporate tax rate less than half the tax rate on the books.All of this is happening at the same time as Thomas Piketty’s blockbuster treatise, “Capital in the Twenty-First Century,” has brought the issue of wealth and income inequality to the forefront of the political discussion by introducing historical data on inequality. Piketty argues that the best way to address the data, political and economic concerns of wealth is a progressive international tax on wealth holdings, as well as policies to build wealth for the middle class. What was once a technocratic discussion about efficiency has become a deeply political debate about who gets what, as slow growth makes distribution more important. Even the most conservative economists have to grapple albeit clumsily with addressing the moral dimension of inequality.
“The game is rigged,” writes Senator Elizabeth Warren in her new book A Fighting Chance. It’s rigged because the rich and their lobbyists have rigged the rules of the game to their favor. The rules are reflected in a tax code and bankruptcy laws that have seen the greatest transfer of wealth from the middle class to the rich in U.S. history.
America has the most billionaires in the world, but not a single U.S. city ranks among the world’s most livable cities. Not a single U.S. airport is among the top 100 airports in the world. Our bridges, road and rail are falling apart, and our middle class is being guttered out thanks to three decades of stagnant wages, while the top 1 percent enjoys 95 percent of all economic gains.
A rigged tax code and a bloated military budget are starving the federal and state governments of the revenue it needs to invest in infrastructure, which means today America looks increasingly like a second rate nation, and now new data shows America’s intellectual resources are also in decline.
For the past three decades, the Republican Party has waged a dangerous assault on the very idea of public education. Tax cuts for the rich have been balanced with spending cuts to education. During the New Deal era of the 1940s to 1970s, public schools were the great leveler of America. They were our great achievement. It was universal education for all, but today it’s education for those fortunate enough to be born into wealthy families or live in wealthy school districts. The right’s strategy of defunding public education leaves parents with the option of sending their kids to a for-profit school or a theological school that teaches kids our ancestors kept dinosaurs as pets.
The response to French economist Thomas Piketty’s “Capital in the Twenty-First Century” has been surprising, to say the least. Though the Amazon best-seller is well written and artfully translated from French by Arthur Goldhammer, the 696-page text is filled with enough charts and footnotes to occupy experts for months. Indeed, the work was based on decades of research conducted by an entire team of specialists tracking centuries of income and wealth patterns.
The book presents a simple thesis: Unchecked, capitalism’s natural dynamics lead to an unequal concentration of wealth. This trend is increasing at a rapid rate; absent a wealth-destroying catastrophe such as war or depression or powerful new egalitarian political movements, we can expect that to continue.
Here comes another billionaire who thinks that anyone who talks about income inequality is a Nazi; this time it’s Ken Langone, co-founder of Home Depot. I don’t have anything useful to say about this, other than the observation that there must be a lot of these guys. I mean, there aren’t that many billionaires, so that coming up with multiple examples of the genus who not only believe that progressives are just like Hitler but are willing to say so in public must indicate that a substantial proportion of our billionaires share this belief, but more privately. Luckily, great wealth doesn’t bring great political influence in modern America — does it?
But Jonathan Cohn’s report on Langone brought to mind an earlier rant by the same guy, in which he denounced yours truly and my “high-fallutin’ thoughts and ideas.” And I think, now that I remember that, that this rant (and others like it) gives a partial clue to the mystery of the continuing popularity of the Wall Street macro canon, despite its total failure in practice.
Silly me: President Obama’s executive order to expand opportunities for overtime pay Thursday seemed like a win-win. Currently, if you make more than $23,000, you can’t necessarily receive overtime; the president’s order would raise that cap, and also make it harder for employers to classify people with almost no supervisory duties as “supervisors” and thus exempt.
Where’s the downside? Newly qualified workers currently being forced to work overtime without pay will now get higher wages. Or, if their employer doesn’t want to spring for the overtime pay (traditionally time and a half), they will have to expand their workforce to get the work done. Higher wages and/or more jobs: Sounds good, right?
Not to Republicans, of course. The backlash to the president’s overtime-pay expansion just makes clear what we’ve known for a long time: They oppose every attempt by government to reward hard work and protect the rights of workers – unless it applies to the very wealthy.
Speaker John Boehner sounded unusually befuddled opposing Obama’s move. “If you don’t have a job, you don’t qualify for overtime. So what do you get out of it? You get nothing,” he told the Washington Post. “The president’s policies are making it difficult for employers to expand employment. And until the president’s policies get out of the way, employers are going to continue to sit on their hands.”
The president’s policies are in fact making it harder for employers to exploit their workers. That’s all. As Jared Bernstein told the New York Times. “I think a potential side effect is that you may see more hiring in order to avoid overtime costs, which would be an awfully good thing right about now.”
Or you’ll see higher wages, which would also be an awfully good thing. One of the major causes of rising income inequality is that back in the 1970s, rising productivity suddenly became detached from rising wages. For decades — since the labor-rights reforms and social welfare advances of the ’30s and ’40s — the two lines climbed in tandem, with higher productivity translating into higher paychecks. The two came apart, in what’s become known as “the great divergence,” at the same time as income inequality began to climb. There are many reasons for the productivity-wage split, including a stagnant minimum wage, declining union membership, and weaker labor rights overall – including less compensated overtime.
Republicans no longer accept that it was government intervention in the economy, first in the Progressive era and then, more forcefully, after the Great Depression, that created the greatest economic boom and the biggest middle class in history. The 40-hour work week. The weekend. Vacations. Child labor laws. The minimum wage. Social Security. Health and safety protection. All of these represented government intervention on the side of working people, to balance the playing field with exploitive employers, and to carve out a realm of family and personal life that could be protected from ceaseless labor. Progressive public policy essentially created childhood, as a time when kids who weren’t wealthy might be educated and protected from labor abuse.
Most people, if pressed on the subject, would probably agree that extreme income inequality is a bad thing, although a fair number of conservatives believe that the whole subject of income distribution should be banned from public discourse. (Rick Santorum, the former senator and presidential candidate, wants to ban the term “middle class,” which he says is “class-envy, leftist language.” Who knew?) But what can be done about it?
The standard answer in American politics is, “Not much.” Almost 40 years ago Arthur Okun, chief economic adviser to President Lyndon Johnson, published a classic book titled “Equality and Efficiency: The Big Tradeoff,” arguing that redistributing income from the rich to the poor takes a toll on economic growth. Okun’s book set the terms for almost all the debate that followed: liberals might argue that the efficiency costs of redistribution were small, while conservatives argued that they were large, but everybody knew that doing anything to reduce inequality would have at least some negative impact on G.D.P.
But it appears that what everyone knew isn’t true. Taking action to reduce the extreme inequality of 21st-century America would probably increase, not reduce, economic growth.
Let’s start with the evidence.
No, really, you didn’t build that: How the rich became dependent on government subsidies – Salon.com
Remember when President Obama was lambasted for saying “you didn’t build that”? Turns out he was right, at least when it comes to lots of stuff built by the world’s wealthiest corporations. That’s the takeaway from this week’s new study of 25,000 major taxpayer subsidy deals over the last two decades.
Titled “Subsidizing the Corporate One Percent,” the report from the taxpayer watchdog group Good Jobs First shows that the world’s largest companies aren’t models of self-sufficiency and unbridled capitalism. To the contrary, they’re propped up by billions of dollars in welfare payments from state and local governments.
Such subsidies might be a bit more defensible if they were being doled out in a way that promoted upstart entrepreneurialism. But as the study also shows, a full “three-quarters of all the economic development dollars awarded and disclosed by state and local governments have gone to just 965 large corporations” — not to the small businesses and start-ups that politicians so often pretend to care about.
In dollar figures, that’s a whopping $110 billion going to big companies. Fortune 500 firms alone receive more than 16,000 subsidies at a total cost of $63 billion.
These kinds of handouts, of course, are the definition of government intervention in the market. Nonetheless, those who receive the subsidies are still portrayed as free-market paragons.
A new paper by researchers at the International Monetary Fund appears to debunk a tenet of conservative economic ideology — that taxing the rich to give to the poor is bad for the economy.
The paper by IMF researchers Jonathan Ostry, Andrew Berg and Charalambos Tsangarides will be applauded by politicians and economists who regard high levels of income inequality as not only a moral stain on society but also economically unsound.
Chris House has a somewhat odd post in which he argues that unlike in most other academic disciplines, in economics the facts have a conservative bias: