Real Median Household Income by Race and Hispanic Origin: 1967 to 2015
Multiple sources report that 2015 was a very good year for middle-class incomes (emphasis mine):
The incomes of typical Americans rose in 2015 by 5.2 percent, the first significant boost to middle-class pay since the end of the Great Recession and the fastest increase ever recorded by the federal government, the Census Bureau reported on Tuesday.
In addition, the poverty rate fell by 1.2 percentage points, the steepest decline since 1968. There were 43.1 million Americans in poverty on the year, 3.5 million fewer than in 2014.
I note, in particular, that real median household income for Black households climbed dramatically (by about a third!) during the administration of Bill Clinton. It fell under George W. Bush, and has only partially recovered under Barack Obama. Despite the protestations of some segments of the black community, it seems to me that this chart offers insight into why so many black Americans remember the Bill Clinton administration with such fondness.
The performance of all listed groups was flat during most of the George W. Bush administration, plummeted during the Great Recession, and has only within the last year begun to recover.
This, of course, does not say anything about income concentration. I strongly suspect that income of the very wealthy has increased FAR more than these groups during the same time period.
Still, this is much-needed good news for America’s working-class men, women and children.
…how do we break this news to johntmay?:)
I suspect a few things might make this a bit less happy than we’d like — and it certainly was unexpectedly good news.
One is the continuing widening of the gulf between wages and productivity. That gap has not narrowed. So someone else is taking our money, as it were.
Another effect is that people tend to judge their status and happiness comparatively. Back in the 50s and 60s, one looked at where one was on the income hill and saw a gentle slope rising from one’s station; today one sees a rather steep slope — and that people feel worse. Relative wealth feeds one’s status so much more than absolute wealth. By current standards, for example, Americans in the 1950s were rather poor, but the “gentle slope” made that less telling.
Finally, I think it’s wrong and misleading to attribute this to Obama — just as I think it’s wrong to attribute more than a quarter of the blame to him for our ultra-slow recovery from the recession. The people who have the biggest effect on our economy and our political economy sit in Congress. Had it been possible to get a big enough stimulus through, we’d have had a much faster recovery and an excellent infrastructure on which economic growth would have flourished.
until tax codes and labor laws are changed, but I agree with you that congress, not the president, can make these changes. What Obama did not do and the reason I do hold him responsible was his refusal to aggressively prosecute the CEOS of Wall Street after the recession.
This is, well, a stupid comment.
A stimulus reduces unemployment significantly.
To demand that it wait until changes in tax codes and labor laws and aggressive prosecution of CEO is to reveal the deep impracticality of one’s thinking.
Next time you want to make a comment, there is no need to announce to us all that it is a stupid comment. Announcing it is redundant.
I agree that a larger stimulus would have helped.
The larger reason why the recovery has been so slow has been noted here before — the refusal of the government at all levels to resume typical post-recession levels of government hiring. In most recoveries, government and private enterprise work hand-in-hand to accomplish the recovery.
In this recovery, private enterprise did its part. Hiring in the private sector recovered at about the same pace as it has in prior recoveries. The major and striking difference is that GOVERNMENT hiring did not. The effect was to suffocate a consumer economy already hogtied by unrestrained growth in the wealth concentration of the top one percent.
Because of the wrong-headed GOP lies about how a macro economy works, and because of equally wrong-headed GOP determination to obstruct Barack Obama at every opportunity, we saw needless government shutdowns time and again, each driven by a claimed need for “austerity” that has as much actual basis in economic truth as the claims of a geocentric universe.
A contribution made to this by Barack Obama was his naive belief that by caving to these items of GOP magical thinking, he would gain their cooperation in other matters. All he did was give away the store.
While I, too, am frustrated by his decision to prosecute the CEOs of Wall Street, I’m not sure how much — if any — difference such prosecutions would have made in the outcome. I would, frankly, have preferred to see government prosecutorial resources focused on the war criminals of the prior administration who committed crimes against humanity as they kidnapped, tortured, and killed people throughout the world.
I’m glad to see this bit of good news. It is — if the media will actually REPORT it — a very effective answer to the racist lies about America that Mr. Trump continues to spout at every opportunity.
The Great Recession has revealed a great deal of sincerely believed foolishness — including Cameron and Merkel. There really was a belief that austerity would help recessions. (“If families have to save, the government does too.”)
Now, one could argue that there was some bias in the U.S. instance in that the George W. Bush Administration was not unhappy running up deficits with Mr. Cheney himself (I believe) telling us that debt doesn’t matter. This happened during Mr Bush’s so-called trifecta where he faced a recession in the early 2000’s.
However, I think Paul “The Magic Asterisk” Ryan and other Republican policy makers were sincere in their wrong-headedness.
Bishop John Spong noted in the late 1990s that a majority of Episcopal clergy preached sermons to their congregations that they knew were not supported by biblical criticism. Virtually every Episcopal priest is a graduate of a credentialed seminary. Each of those credentialed seminaries includes this biblical criticism in its curriculum for decades. The reason clergy continue with these whatever-we-call-them is that their congregations demand that they do so.
I think something similar is happening with the GOP. I don’t think there is any serious dispute among economists about the horrific effects of attempting to “control” national deficits by cutting spending during a recession. It’s been tried multiple times, and has never worked.
A fundamental difference between family budgets and government budgets is that a family may not (legally) print money.
This is, as I understand it, a fundamental criteria that differentiates “macro” economics from “micro” economics. The statement you offer — “If families have to save, the government does too.” — is fundamentally incorrect.
I suppose we can call such statements “sincere”. I, frankly, don’t care very much. I view it much the same way as if they were asserting that the earth is 6,000 years old or that anthropogenic climate change is a hoax.
Is a political candidate who supports the 9/11 truthers telling a “lie”? If that candidate sincerely believes the statement, does that matter?
I agree that Paul Ryan and other Republican policy makers may have been sincere in their wrong-headedness. I guess I’m ok with finding some other terse characterization besides “lies” (“willful ignorance”? “Panderers”?).
I don’t think it matters much, though.
I believe that the expectations for the stimulus, of any size, were extremely overblown. The entire concept of stimulus is, that by putting some dough into the economy, it would be spent, thus producing the Mr. Keynes’ multiplier effect. But the recession was caused by a liquidity crunch, which was itself caused by far too much debt, which was treated as “safe” rather than “risky.” So, when any person or firm had an extra dollar, they didn’t spend it, but rather paid down debt because they had too much debt. That leaves a lot less for multiplication.
In the past, lots of debt was of the fixed interest rate variety, and could be effectively reduced by a little inflation. Now, lots more debt has adjustable rates, which means that the only thing that can happen is that that debt gets worked down, slowly.
It is a shame that either the president or the Congress gets pilloried for the non rocket-fueled recovery, because it was apparent from the beginning that a big steep recovery was never going to happen.
of your comments is stupid is redundant? (Did you read what you wrote?)
But seriously, stimulus will help regardless of the tax codes and labor laws. It may not affect inequality much, but it will make the economy larger, better paying jobs, at least some modest rise in wages, and maybe even some healthy inflation.
“Jobs and a Growing Economy!”…….and look where we are.
Another not so bright comment.
During a recession we have the opposite of growth. We have contraction. The result of contraction is that people lose their jobs. Apparently johntmay did not notice that or didn’t think it was too significant.
In any case, getting the economy to grow is key to getting employment up. It may not raise the median wage — or the median wage for unskilled labor, but it raises employment. The difference between job and no job is rather a large one.
*
A typical sign of the enduring impracticality of the johntmay flood of commentary is that whenever anyone says “X will be good!”, we get back “IT’S USELESS WITHOUT Y, Z, AND J!”
It’s kind of as if achieving anything short of Heaven on Earth — or at least Denmark in North America — is just not worth it. Not worth it at all. One doesn’t tend to accomplish much by denigrating every single step along the way toward a more egalitarian society.
“I’m not at the beach yet — and taking this one step is not going to get me there!”
There is no need for you to warn us about your comments. Just make them.
If we keep accepting “half way to the beach”, you do know that we will never get out toes wet?
The wealth gap in the USA keeps getting wider and wider. Yes, we’ve just had this nice little anomaly but as Tom from Somerville said “I strongly suspect that income of the very wealthy has increased FAR more than these groups during the same time period.”
about something we basically agree on. Stimulus will help the economy; a good economy helps all of us. These are facts. Not slogans.
Increasing the economy grows the pie. That’s good. Our pieces of pie get bigger. They may not get big enough. More of the pie may end up in rich hands.
A growing economy is necessary, it’s not sufficient.
I think johntmay was attempting to compensate for his weakness in economics with a flash of repartee. He meant that my “This is, well, a stupid comment” can be read as applying to my own comment rather than his. This accounts for his ironic uprating.
is that we have a labor surplus in the USA and it’s not going away. So a “stimulus” or other such fanfare will not be the tool that you are looking for.
you know what you’re talking about.
Yup, that’s me. I read, listen, and then repeat what I learned here in BMG. Can’t say much of it is original.
A surplus of labor drives down wages. We have a surplus of labor. Wages are down.
Um … not exactly.
Macroeconomics is not nearly as simple as this.
The equations that support the supply and demand curves only apply when deficit spending is impossible. That’s MICRO economics.
The math of supply and demand is irrelevant, or at least completely different, when we discuss macroeconomics.
We instead need to look at the size of the money supply, the multiplier effect, money “velocity” (how fast a change in government spending propagates through the economy) and similar issues.
It’s COMPLETELY different from supply and demand.
From the colonial times, the region has had more resources than labor, at first because we killed all the native labor, and then because well, we had to entice labor from Europe and Asia to make the trip. We had an ever expanding natural resource until the early 1900’s and that’s when things dot dicey. That’s when labor started to lose its bargaining power. So, labor organized, leaned on government and created a “shortage” of labor with labor laws and labor unions. That all started to erode in the late 60’s early 70’s until we got to where we are.
We have a surplus of labor.
stimulus that creates jobs. Investment in infrastructure, for example, puts more people to work, tightens the labor market, and drives wages up.
But once those bridges are built, we’re back to square one. Technology has advanced to a point where we do not need a majority of human beings to labor for 40 hours a week in order to live a normal life.
“In the long run, we’re all dead.”
It seems to me that a “labor surplus” (ie, high unemployment) is exactly why the several contemplated stimulus mechanisms are exactly the needed tools.
The effect of increased government hiring and increased unemployment compensation is to put dollars into the pockets of people who want to work and can’t find jobs. Those people immediately spend that money on things like groceries, rent, and transportation. That resulting spending helps local small businesses (especially small businesses) that receive those dollars. They are able to expand, and even start to hire people. Landlords are able to start hiring contractors to catch up on maintenance that was neglected during the downturn because nobody was able to pay rent.
The figure of merit is a statistic that measures the ratio of the effective dollars added to the economy to the dollars spent by the government on the stimulus. For the areas described, that statistic was significantly larger than 1.0 (a multiplier effect).
Conversely, the effect of tax breaks is much less than one.
The area that the US economy totally mishandled in the early years of the Barack Obama administration was government hiring. The feds could have significantly increased federal hiring, and could have made much more money available to states (tying those grants to suitable state programs). Think FDR’s “CCC” programs.
Instead, Barack Obama wrongly embraced the failed austerity narrative of the GOP.
Sure it is more complex than the first day’s lesson in Econ 101, but it isn’t completely disconnected.
Over the past few years, economic conditions have improved, slowly, and unemployment has declined even more slowly. Wages have not improved much at all, even though it is theoretically harder to find a new employee now. That is likely because there are more people looking for work than published numbers count, either because (i) they stopped looking at one point, and so aren’t counted any more; or (ii) the pool of available job-hunters is increased by immigration.
This latter point is the potential “grain of truth” in the otherwise racist Trump campaign. But it is almost certainly not true, at least not with respect to growth in wages since 2010, because immigration (legal or otherwise) has been a non-factor over that time. In other words, in order for an immigrant to comepte with you for a job, thus keeping wages low, they must first actually immigrate, and they haven’t been.
So it is probably the case that the reality is that the published unemployment numbers have been missing many unemployed who quit looking, and is therefore still not entirely accurate. Which means that there are still too many people looking for jobs.
Agreed.
Still, even in the presence of immigration, when government hires more people or raises unemployment compensation rates it pumps money into the consumer economy, and that itself strengthens the consumer economy.
One result is that more people are hired (or wages go up), which forms a feedback loop that helps the economy recover. I think this behavior is the same whether or not the affected employees are immigrants.
…JTM means a situation where there are more people who can or need work than there is even work to do, even if money were no object and the public and private sectors could hire all the people they need.
It’s a rather odd book, but I enjoyed reading The Mythology of Work, How Capitalism Persists Despite Itself by Peter Fleming.
In it, there is a strong argument for a 20 hour week. The only downside to such a thing would be that the .1% would not be able to afford such an extravagant lifestyle.
It reminded me of one day when I calculated how much my car cost me to own and operate. I used that number and figured out that I was working about two hours a day for that car. The only thing I really needed it for was to get to and from work. I am an avid cyclist. It would take me about an hour by bike to get to work, so it would make more sense to me to simply work two fewer hours a week and just ride my bike. I’d be spending less time where I did not want to be (work) and more time where I did want to be (my bike) without any financial hardship.
BUT, the guy I worked for needed me to work that many hours because he was “pimping” my labor and needed 40 hours a week to afford HIS lifestyle.
ten hours overall
Keynes predicted that didn’t happen: fewer working hours and more leisure.
I don’t think “extremely overblown” is accurate. The multiplier effect is offset by some variables, but there has also been an anti-stimulus push by the people opposed to government spending in general. There’s a lot of commentary on it.
There were actually three aspects of the stimulus. Some of the money supported states and municipalities. In Massachusetts kept teachers employed. Without their jobs, their income would have decreased and spending would have decreased, and they would have paid less in taxes.
Any stimulus would be undercut by state level contraction. Im not sure that austerity is the right word there–tax revenue goes down and the states can’t print money, so it isn’t exactly a policy choice at that level. It certainly would have been hoped if the federal stimulus had helped fill those gaps in state budgets, as many Dems argued at the time. The federal sequester is also the opposite of helpful.
But there were always going to be polices pulling in two different directions. On the one hand, stimulus in whatever form puts some money in some peoples’ pockets. But those people are over leveraged, and use the extra money to pay debt. On the other hand, we had to tell big banks and lenders “too much lending makes too much systemic risk! You must increase capital reserves now!” So when debt is paid, lenders don’t lend it back out businesses can’t rely on debt to cover liquidity issues, and must therefore hold cash they hold a lot of cash.
It is unfair to grumble about lenders and employers “hoarding cash” when doing so is essentially compulsory. Employers hold cash because credit remains uncertain, for the borrower. Credit is uncertain because lenders must maintain certain capital reserves in order to mitigate (not solve) too big to fail problems. Lenders still have a lot of lousy debt out there, and until it is paid or resolved, can’t make new loans without more capital.
No matter which way you cut it, things get bogged down until the debt is worked through. I said here in 2009 that it would be a very long while, and I still think we have another 10 years to go.
My take was that economists like Mr. Friedman were arguing that we faced a solvency, rather than liquidity, crisis.
I could be mistaken, but my recollection was that the issue with the big banks and financial institutions immediately after the crash was that they were insolvent — the “assets” they had listed on their balance sheets were actually worth a tiny fraction of what had been reported.
The “normal” way to handle a liquidity issue, caused by debtors who don’t make payments, is to sell the asset. In the 2008 crash, that wasn’t possible.
Certainly for the financial sector, it was a solvency crisis.
For everything else, it was a liquidity crisis. There are plenty of businesses that are perfectly healthy, but don’t necessarily make money evenly throughout the year. Say you manufacture goods that sell on an extremely seasonal basis– like toys. You work all year to build toys, and sell them all in a rush in December, and then start over. You have to pay all the expenses year-round, but have all of the income in a burst. You can simply save the cash, and spend it out slowly– but if one year sales go down a little, and you run out, you go bust. So you use credit to smooth things out over the year and from year-to-year.
Huge portions of the economy– most of it, likely, depend utterly on the ready availability of credit in this way. So the near-death of the financial sector threatened a massive crisis across the entire economy. Had there been no “bailout,” loads of perfectly profitable businesses would have failed, and the impact would have been a lot more 1930.
What irritates me to this day is that so very much of the debt that made the financial sector insolvent was tied to those awful mortgage loans. Things could have been made better far more quickly if individuals’ mortgage debt could be written off to the extent that it was “underwater” without necessarily requiring people to lose their homes, which could have prevented much of the pain and suffering of the foreclosure crisis. This is a thing that businesses can do in bankruptcy, but individuals cannot.
The legislation necessary to fix that would have been, in total, about 20 words. But the measure got only scattered support in the Congress, and the only person I know who supported it loudly is now our senior Senator. Even today, making this reform would expedite the process of clearing the crappy debt held by the financial sector, and make way for the sort of lending that would make “hoarding cash” end.
that it seems rather apparent that a significant reason for the disinterest in a simple reform is the connection of too much of the Democratic Party in Congress to the financial sector making those loans, even if perceived as “do-goody” involvement in getting more Americans to own their homes, through Freddie Mac and Fannie Mae (thinking specifically of Rep. Frank here).
I have criticized johntmay often for his seeming desire to reduce everything, no matter what it is, to evil “Wall Street” boogeymen. But in this instance he is absolutely correct.
not mine.
I have yet to say that everything about Wall Street is evil but I will maintain that what evil we have, mostly comes from Wall Street.
So please, enough of the straw men and hyperbole.
Banking and investing used to be boring, ordinary, and was a service to the community. That all changed not too long ago with the help of politicians along the way. Now, instead of being a provider of a service with us as client, banks and Wall Street are more predatory in nature and see us as exploitable opportunity, as has been demonstrated again with Wells Fargo.
Is Wells Fargo evil? No. They helped me finance a snow blower two years ago for 24 months, no interest, no fees. But that does not exempt them from this last bit of hanky panky
I was actually trying to credit you. But this is exactly what I mean. It isn’t exactly even clear what you want, other than a return to some past circumstance, which probably didn’t exist, in which banking and investing was “boring,” by which you seem to mean “extremely local.”
But “banking” in that sense means extremely limited credit. Once the bank lends out money, it has to wait for the money to get paid back to lend it again. That means that mortgage loans are just a few years, not 15 or 30, and expensive.
What’s clear enough is that regulations are needed to curb certain abuses, and that Dems, including HRC, aren’t exactly loudmouths about the need for that regulation. Sen. Warren excepted. A little prosecution of prosecutable conduct wouldn’t hurt, either. You have mentioned Glass-Steagall a number of times: I will grant you that this would be a way to address the “too big to fail” problem, but would not have done very much to prevent 2008 (other than the need for the “bailout” of big institutions). Foreclosure crisis, deep recession, etc. would have happened anyway.
But better regulation has never seemed to be what you are after. In fact, I’m not sure what you would like to achieve, other than “stuff people I don’t like don’t like.”
Is more bank regulations, the sort of regulations that the Clintons removed. I want banking to pay well, but not the kingly wages it pays now.
Other People’s Money: The Real Business of Finance by John Kay
The finance sector needs to be reminded of its primary purpose: to manage other people’s money for the benefit of businesses and households. It is an aberration when the some of the finest mathematical and scientific minds are tasked with devising algorithms for the sole purpose of exploiting the weakness of other algorithms for computerized
trading in securities. To travel further down that road leads to ruin.
To the Clintons and their ilk, these finest mathematical and scientific minds tasked with devising algorithms are honored as “innovators” and high achievers. That’s one more part of the problem.
I recommend you read the book. He states, and I agree, that simply putting more regulations is not the answer. We need a wholesale change in banking and investing.
In 1906, the great statistician Francis Galton observed a competition to guess the weight of an ox at a country fair. Eight hundred people entered. Galton, being the kind of man he was, ran statistical tests on the numbers. He discovered that the average guess (1,197lb) was extremely close to the actual weight (1,198lb) of the ox. This story was told by James Surowiecki, in his entertaining book The Wisdom of Crowd
Not many people know the events that followed. A few years later, the scales seemed to become less and less reliable. Repairs were expensive; but the fair organiser had a brilliant idea. Since attendees were so good at guessing the weight of an ox, it was unnecessary to repair the scales. The organiser would simply ask everyone to guess the weight, and take the average of their estimates.
A new problem emerged, however. Once weight-guessing competitions became the rage, some participants tried to cheat. They even sought privileged information from the farmer who had bred the ox. It was feared that if some people had an edge, others would be reluctant to enter the weight-guessing competition. With only a few entrants, you could not rely on the wisdom of the crowd. The process of weight discovery would be damaged.
Strict regulatory rules were introduced. The farmer was asked to prepare three monthly bulletins on the development of his ox. These bulletins were posted on the door of the market for everyone to read. If the farmer gave his friends any other information about the beast, that was also to be posted on the market door. Anyone who entered the competition with knowledge concerning the ox that was not available to the world at large would be expelled from the market. In this way, the integrity of the weight-guessing process would be maintained.
Professional analysts scrutinised the contents of these regulatory announcements and advised their clients on their implications. They wined and dined farmers; once the farmers were required to be careful about the information they disclosed, however, these lunches became less fruitful.
Some brighter analysts realised that understanding the nutrition and health of the ox was not that useful anyway. What mattered were the guesses of the bystanders. Since the beast was no longer being weighed, the key to success lay not in correctly assessing its weight, but rather in correctly assessing what other people would guess. Or what others would guess others would guess. And so on.
Some, such as old Farmer Buffett, claimed that the results of this process were more and more divorced from the realities of ox-rearing. He was ignored, however. True, Farmer Buffett’s beasts did appear healthy and well fed, and his finances were ever more prosperous: but, it was agreed, he was a simple countryman who did not really understand how markets work.
International bodies were established to define the rules for assessing the weight of the ox. There were two competing standards – generally accepted ox-weighing principles and international ox-weighing standards. However, both agreed on one fundamental principle, which followed from the need to eliminate the role of subjective assessment by any individual. The weight of the ox was officially defined as the average of everyone’s guesses.
One difficulty was that sometimes there were few, or even no, guesses of the oxen’s weight. But that problem was soon overcome. Mathematicians from the University of Chicago developed models from which it was possible to estimate what, if there had actually been many guesses as to the weight of the animal, the average of these guesses would have been. No knowledge of animal husbandry was required, only a powerful computer.
By this time, there was a large industry of professional weight guessers, organisers of weight- guessing competitions and advisers helping people to refine their guesses. Some people suggested that it might be cheaper to repair the scales, but they were derided: why go back to relying on the judgment of a single auctioneer when you could benefit from the aggregated wisdom of so many clever people?
And then the ox died. Among all this activity, no one had remembered to feed it
remains unclear — and when we get to “ilk” we realize that we will just get some more ad hominem gibberish.
…if the entire population of the US did not conspire to live outside their means and put so much on credit. We have been sold, and have very willingly bought, the idea that we can just put everything and anything on the card and actually pay for it “someday”.
CMD captures quite well here one of the awkward parts of the recovery. A failure of the banking system was not going to result in some kind of Populist National Holiday. It would have resulted in widespread and deep misery precisely because so much of the economy depends on credit.
It was certainly a dilemma. People get upset because all they get is that there was a “bailout” of “Wall Street” and think “why didn’t I get a bailout?” and “Why didn’t we let them all go bust?”
But the panic and resulting recession was a direct consequence of doing just that– they let Lehman Bros. go bust, and doing so nearly imploded the entire economy. So they couldn’t so that twice, but also couldn’t prevent those institutions from going bust without “rewarding” the bad behavior. It sucked.
2009 was an opportunity to heavily revamp the financial industry regulatory structure, but kind of a missed opportunity. I think that the missed opportunity stems from a political miscalculation by Democrats in 2009. That miscalculation is that you get to do one, only one, and not more than one “Major Policy Initiative” at a time. That way, you get everyone rowing the same way, you hold your hearings, produce your reports, and do all of that legislative stuff that actually builds support for your big initiative, and then you do it.
But 2009 Dems had two “Major Policy Initiatives”– Obamacare and the financial crisis. In my view they simply bit off more than they could chew, were not able to do any of the hearings etc.that you need to do, and would up with results on both initiatives that seem a little under-cooked.
At the time, I argued with someone here- fenway?– who said there is no reason that the Congress couldn’t walk, chew gum, and sing a song at the same time. In retrospect, they might have done better to pick one thing and do it well.
….were previously working on Wall Street?
There’s one reason why Wall Street got bailed out and nothing changed. We kept hearing that the ONLY people who can fix this are the insiders. That’s about the same time they stopped calling the outrageous bonuses “performance bonuses” and started calling them “retention bonuses”, but after all, according to Blankfein, these people were doing God’s Work….
I want to build on cmd’s point.
Suppose the administration had done what johntmay apparently proposes. Suppose “Wall Street” was NOT bailed out, and suppose the insolvent banks failed as a result. The big ones, I mean. Citibank, BoA, etc.
I think that however bad it was in 2009 (and it was bad), it would have been MUCH MUCH MUCH worse if:
– ATMs stopped working
– Credit Cards stopped working
– Bank balances were gone
– Your paychecks were worthless
etc., etc., etc.
I really don’t think some of us get just how close to utter and complete catastrophe the prior administration brought us.
, there was a way to keep things running and put people in jail and make changes to see that this would not happen again….but hey, look at “jobs and the economy!”
I’m not following you.
Are you saying that you don’t think the banking system would have collapsed? Are you saying that you don’t think it would have hurt you or us even more if it had?
As CMD pointed out, the administration let Lehman Brothers fail, and it nearly brought down the world’s financial system and DID kick off the worst crisis since the 1929 failure.
It sounds like you’re saying “so what”. Is that what you mean?
You seem to be saying that we had to let perpetrators go free in order to save the system. That was the talk of the time as we were told that “only the Wall Street insiders” can fix this….so we must not upset them. I call bullshit on that. ONE guy goes to jail and all the people who were making billions are still making billions today.
Failure to prosecute was a major fault of the Obama presidency.
What is your other alternative then?
All I’ve heard you say is that we should jailed the “Wall street insiders”. I’m not really disputing that, once the crisis was past. I agree that they did horrible things and probably should be punished.
What I’m asking, that you continue to evade, is what do you think Barack Obama should have done differently in 2008 & 2009? Not in 2012, after the crisis was over, but when he took office in 2009 while America and the world teetered on the brink of a total collapse of the America’s banking system.
Remember that we’ve already established that the banks at that time were insolvent, because they had extended loans based on collateral that was fraudulently overvalued. There was not enough money in the FDIC to cover the depositors of even ONE of the major insolvent banks, never mind all of them.
I’m saying that you haven’t yet explained how putting people in jail would have solved the problem in 2008, 2009 and 2010.
Let’s speculate about an alternative universe where you’ve been elected president in the 2008 election. So in your first 100 days on the job, you send all the “Wall Street insiders” to jail. Got that.
Now that they’re in jail, what do propose to do about the banking system?
It empowers you. When you know that all you have to do it pay a fine and even better, get the shareholders of the company to pay the fine, you become invincible. The first guy goes to jail and people get nervous. the second one goes to jail and people start to wonder if their plans are worth the risk. The third person goes to jail and CEO’s grill their subordinates to operate by the rules, by the book, nothing even remotely suspicious. That’s how can work.
Instead, the Obama administration sent a clear signal, NO ONE goes to jail, NO ONE fells shame by admitting guilt. As we see over and over again with this administration, company leaders admit NO WRONGDOING, pay a fine, and retire in their million dollar mansions in the hills.
But start locking people up, exposing them to public ridicule and shame, and things change.
And no, you don’t have to send all of them to jail, just key figures. My dad gave me this advice when I was a kid and I was fortunate to never have to use it, although I did threaten to use it twice and the threat alone worked. He told me, if I was ever surrounded by a group of thugs who wanted to hurt me, call out the biggest person in the group and take them on, one on one with all I had. He explained, “if you just take on the smallest, sooner or later you’ll have to fight the big guy and by that time, you’ll be too tired”.
The Obama Administration is now too tired to take on Wall Street and I fear that the Clinton Administration will continue that legacy.
Under the current administration, jail is for whistle-blowers.
ONE : Kareem Serageldin
The rest were able to purchase “get out of jail free cards”…
The department began to focus on reaching settlements rather than seeking prison sentences, which over time unintentionally deprived its ranks of the experience needed to win trials against the most formidable law firms. By the time Serageldin committed his crime, Justice Department leadership, as well as prosecutors in integral United States attorney’s offices, were de-emphasizing complicated financial cases — even neglecting clues that suggested that Lehman executives knew more than they were letting on about their bank’s liquidity problem. In the mid-’90s, white-collar prosecutions represented an average of 17.6 percent of all federal cases. In the three years ending in 2012, the share was 9.4 percent.
Managing the world’s banking system is different from fighting schoolyard bullies.
The prior administration jailed Enron CEO Ken Skilling for his part in the Enron scandal. It doesn’t appear to have been effective in stopping the extreme corporate misbehavior that caused the Great Recession. I suggest that this is because such corporate misbehavior is a systemic issue, caused by the regulatory system we use to govern such behavior. We enthusiastically agree that that regulatory system is corrupt and should be changed. I don’t see how throwing some people in jail would have solved the problem faced by Barack Obama in 2009 in time to make any difference at all.
You are still evading my question. You remain focused on sending people to jail. Let me try again — suppose a few had been sent to jail. What do you think would have been different?
By the way, as we’ve said upthread several times, the large banks of the day faced a solvency, not liquidity, issue. They did not have enough assets to balance their liabilities. A liquidity issue involves the timing of receipts and disbursements. This was a solvency issue.
Sending some people to jail does nothing at all to change the problems we agree plague our economy. Nothing. I agree with you and Elizabeth Warren that we can and should be far more aggressive about prosecuting executives of banks like Wells Fargo that abuse consumers.
You are objecting to policy decisions made nearly a decade ago by the incoming administration of Barack Obama while successfully avoiding the total collapse of our banking system. When asked for what policies you think should have been different, you are silent.
The banking system of early 2009 was in the grips of a solvency issue and on the brink of collapse. I don’t see, and you haven’t offered, what should have been done differently.
Sorry, Ken Lay was the CEO of Enron. The observation remains valid, though.
?Let me try again — suppose a few had been sent to jail. What do you think would have been different?”
The rest would fall in line, just like the kids behind the school bully.
“I agree with you and Elizabeth Warren that we can and should be far more aggressive about prosecuting executives of banks like Wells Fargo that abuse consumers.”
You seem to be taking both sides of this argument. Sorry, I can’t follow to lines of reasoning
Because they were allowed to do as they pleased. They were allowed to make things up, buff the numbers, make things appear larger or smaller than they were. All of this was in the gray areas of legal/illegal….and when they knew that “illegal” was NOT going to be an issue, well, why not? NO ONE will go to jail. NO ONE will feel shame. NO ONE will be adversely affected. So why not continue the shady dealings? You agree with me and Senator Warren that these people should be aggressively prosecuted, but not to the point of putting them in jail or taking away their wealth & power……how’s that working out?
@ “You seem to be taking both sides of this argument. Sorry, I can’t follow to lines of reasoning”
Elizabeth Warren is speaking out in 2016. You are criticizing policy decisions made by Barack Obama in 2009, before Ms. Warren was even elected.
@ “The rest would fall in line, just like the kids behind the school bully.”
Repeating your argument does not strengthen it. I offered the Enron scandal (where the government prosecuted, convicted, and incarcerated some of the perpetrators) as an example. I see no evidence that anybody “fell in line” after Enron.
want to see these people in jail? Yeah, they have the money and you’ve already said that the money HAS to come from somewhere….so I guess no reply is needed.
Sellout.
What we do in 2016, while we are NOT on the precipice of national and international economic calamity, is different from what we might have done in 2009, when we were. Surely you can appreciate the difference.
When the stove is on fire and the fire is threatening to spread to the rest of the kitchen and from there to burn down the house, most of us do not worry about how the pan full of hot oil boiled over and ignited. Most of us, instead, call the fire department and do what we can to extinguish the blaze.
After the fire is out, the stove has been replaced and the kitchen renovated it is perfectly appropriate to pursue needed changes to kitchen users to avoid future fires.
Please stop distorting my comments.
I did NOT write “not to the point of putting them in jail or taking away their wealth & power”. Never have. Never will.
I think you’re going to discover that the farthest jtm’s thinking goes is that there are innocent people and bad people, and driving all the bad people to jail will simply resolve all problems.
Every other discussion we’ve had has revealed a paucity of practical thinking, e.g., per jtm, unions won’t help, policy won’t help, and regulations won’t help.
This reflects his continuing conservative style of thinking. The problem isn’t systemic because conservatives don’t like to think systemically. Instead it’s a problem of personal malfeasance, of personal greed, and of personal rapaciousness. Obviously, then, prosecution isn’t just a necessary tool; it is the only tool.
If we try to escape such a simple-minded approach, though, we have complexities to face. The communist experiment showed planned economies only about 30% as productive as market economies. (See notes from Brad DeLong’s introductory economics course where he draws this out.) Market economies, like ours, require a fair bit of regulation and government intervention. For example, the 19th century was chock full of awful depressions induced by the instability of the unregulated banking industry. Insurance, likewise, can barely exist without regulation. The economy simply does not work without credit and finance. What’s quite tricky in this area too is that careless regulation can easily cause unexpected effects that are quite harmful.
I think another thing overlooked by our foremost representative of Populist Manicheanism is that large sectors of the economy depend on a working banking system. It’s not in Walmart’s interest for Goldman Sachs to be pushing deceptively bundled mortgage-backed securities. Quite the contrary. Retailers depend on people having money to spend.
Yes, we know where you stand.
No need to keep beating that drum.
When pressed on what it is jtm really proposes, all he can come up with is a paltry collection counter-attack lines: two non sequitors and a rant based on missing the point.
It’s clear then that he is here to “bear witness” in some manner but, as far as getting fixed the problems about which he complains so vehemently, he has nothing. You might recall that he responded to one of my comments inveighing against “outcomes”. With such breath-taking impracticality, yes, this is like having a discussion in an empty dining room.
[Note: this comment, like my previous one, is directed at tomfromsomerville, not at jtm,]
Really, this is boring. Why all the attacks focused on me? They are not even accurate. C’mon, sharpen your game, eh?
Free Market Capitalism or Soviet Style State Controlled “Communism”….yeah, you seem to be stuck in that mind frame….
and you still refuse to hold Democrats accountable for any wrongdoings. I do not need to distort your comments, you do a good job at that yourself. Obama puts virtually no one in jail and you say squat. Clinton courts the bankers and you cry out that the money HAS to come from somewhere. The kitchen is still owned by the bankers and you don’t seem to care one bit.
Like trying to argue with a dining room table.
Or Bob’s Discount? Really Tom, people need to know. Your attacks of my character need work, detail, and a wee bit of creativity.
It seems you missed the analogy. The bankers don’t own the kitchen, the own the entire frigging restaurant.
In fact, the fire IS out. The banking system is not in jeopardy today.
We agree that the dishes being served by the cooks are terrible — wealth and income concentration is arguably the most urgent (as in both immediate and serious) issue facing us today. We agree with Elizabeth Warren that too many of the cooks are still following the practices that caused that fire. We agree that they should be prosecuted, convicted if guilty, and jailed if convicted.
You did, in fact, distort my comments. I never said we should not put them in jail and I never said we should avoid taking away their wealth & power.
What I did say was that it would been a foolish distraction to attempt that in 2009 at the height of the crisis. I did point to the Enron scandal, where the perpetrators were jailed, and show that did not appear to have had any impact on corporate wrong-doing in the context of that time.
We must change the regulatory environment that allows such abuses to continue. We must now, while the banking system is NOT in jeopardy, take a much tougher stance towards perpetrators of such abuses.
2009, at the height of the crisis, was not the time to jail the bankers who knew how to prevent total collapse. 2016, eight years later, is a very appropriate time to jail those bankers who defraud all of us — those who perpetrated the Wells Fargo fraud being an excellent starting point.
Big banks are no safer now than they were before the financial crisis, according to a new analysis by a Harvard duo that includes former White House economic advisor Larry Summers.
Thursday, 15 Sep 2016 | 11:15 AM ET
A supply-side argument for low investment.
I always thought the supply-side hoarding cash was a stupid argument. There weren’t/aren’t good investments because aggregate demand was too low because everyone was over-leveraged. Were companies supposed to invest badly? Would it even help?
The idea of a stimulus is not to pump money into banks or into the coffers of large corporations who will simply sit on it. Instead, the idea is to hire people to do actual work. Those people will spend a large chunk of their earnings causing more business activity, etc. There was a great deal of discussion and examination of multipliers 2009 – 2010 and most of those examinations seemed to justify Keynsian thinking.
In the U.S. case, we had two issue: (1) the federal stimulus was too small and (2) states and municipalities, who cannot deficit spend, all contracted. So the federal stimulus faced the countervailing pressure of the stateside austerity.
to large corporations to sit on, unless we go with stupid, unnecessary tax cuts again.
Consensus was that the federal stimulus should have been 60% higher than it was. Politically speaking, it will be a tough push for another stimulus, but without it we’re looking at low-growth for a long time to come. We have the infrastructure need and the need for stimulus, but we also have the GOP.
Honestly, I have to laugh. The “official” death of the growth of the middle class (AKA a laborer who could support a family) was the year 1973 according to most economists. 1973 was also the year I graduated from high school and joined the ranks of blue collar workers. And now, I am retired. Well, not fully, but I could be if I wanted to. I’m part time. I just really love the company I work for, so no complaints from me. I’ve got pocket money and a nice place to hang out on weekends.