"Soak the Fat Boys"
Doug Henwood's latest issue of "Left Business Observer" is out. (Subscription is $22 a year for 11 issues.) Henwood wrote the visionary book "Wall Street" in 1997 predicting this mess we are in now. Henwood reminds us that in "All the King's Men", Willie Stark is urged not to speak so wonkish and instead just say that "he's gonna soak the fat boys."
Why should we soak 'em? We've had the lowest growth in 80 years. And Henwood points out that the economy is arguably weaker than the Great Depression. The Depression "was preceded by a serious boom...and while the 1920s expansion was hardly short on froth, it also put the radio and the automobile into wide circulation. The 2001-2007 expansion gave us little more than some empty subdivisions outside Vegas and see-through condos in Miami."
Studies by Thomas Piketty and Emmanuel Saez have pretty nifty charts. Based on income tax returns and not Census Bureau numbers based on a large survey of households, Piketty and Saetz found that "From the early 1930s through the late 1960s, the incomes of the masses and the rich grew more or less in tandem. Then, tragically [snark], growth at the high end began seriously to lag the broader population. While the incomes of the bottom 90% (by the Piketty-Saez measure) fell by 2% from 1968 to 1978, those of the top 1.01% were down by 38%. This was clearly a social emergency". (See why I like this guy.)
And so, Henwood says, the elite mobilized. Paul Volcker slammed the economy into the worst recession since the 1930s and soon after Reagan fired the Air Traffic Controllers. The working class got really really scared, and well they should.
The top 0.01% (about 12,000 households with an average income in 2008 of $9.1 million) had an income growth from 1982-2008 of 4.1% vs 2.1% from 1948 to 1982. the top 99% had growth of 2.3% after 1982 compared to 1.4% in the previous 34 years.
"The 90th percentile's performance pales next to that at the very top: that set (average income in 2008: $109,000--which is curiously what most people would think of as barely upper middle class), saw income growth of 0.9% a year between 1982 and 2008, compared with 2.2% in the earlier period."
Aggregating these changes produces some amazing results. Since 1982, the bottom 90% of the population split about 40% of total income growth, leaving the other 60% to be divided by the richest 10%. Within that 10%, almost half went to the richest 1%. Since 2001, the skew has been even sharper, with the bottom 90% getting less than 25% of the growth income, and the top 1% getting about 36%.
The rich got richer and corporate profits began a 15 year rise from 1982-1997. "...a rise that recouped about two-thirds of the earlier decline."
So capital made a comeback and labor got left in the lurch. Without the props of transfer payments like Social Security and Unemployment insurance and payroll tax cuts, Henwood says the economy would have imploded completely. That's why he feels this austerity business is insane and dangerous.
But hey, he says the rich are betting that they can "continue to thrive while the rest of the economy stagnating around them...And the American masses seem to be acquiescing, and taking out what rage they have on the weak."
Henwood is not optimistic. He sees a dismal picture of our economy. But because the elite are doing very very well, they don't see a problem. People like Bowles and Simpson and Fareed Zakaria do see a problem, but they think it's the long term deficit and balancing the budget. Fine, says Henwood. But it's obvious from all the figures above that the way to fix things is to slash the military budget and soak the fat boys.