Monday, September 15, 2008


Though, according to Dante, I confuse "slow" with "grow" when it comes to the economy, I rarely associate a growing economy with one of the largest financial instituions in America filing for bankruptcy. I rarely associate a growing economy when Merril Lynch gets sold off to Bank of America at a loss. As I'm writing this, the Dow Industrials are fluctuating wildly.

These are not one time happenings, and we have had years of stuff like this. From Enron and Worldcom, to the real estate bubble to Freddie Mac and Fannie Mae, and now this. These are not accidents. Like coughing up green phlegm, fever and vomiting are symptoms of someone being sick; our headlines today are even more symptoms of our economy being sick. That would be my analogy.

Oyster uses a shoes metaphor: "They [your shoes] were on Wall Street, but you got a little drunk, and you scuffed 'em up, and stepped in a puddle of blood, and now they're ruined and you have to sell them for pennies on the dollar." He's got a fine write up on this morning's financial news, as well.

A huge part of the American dream, after homeownership, is being able to take care of your own family financially for both medical expenses, sending your kids to college and saving for retirement. The way a lot of Americans do this is through buying in to a small part of the financial markets, so their money can begin working for them. When the market gets sick because of irresponsible decsions by CEO's and the speculator class, aided by the deregulations that are philosophically supported by the Republicans, that keeps the middle class at more financial risk.

And I shouldn't need to remind anyone that the philosophical "fix" for Social Security from the Bush administration and any future Republican administration is to use private accounts tied to the stock markets.

"The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets. This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments.

The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store. Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression.

I certainly don’t fault Senator McCain for these problems, but I do fault the economic philosophy he subscribes to. It’s a philosophy we’ve had for the last eight years – one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else. It’s a philosophy that says even common-sense regulations are unnecessary and unwise, and one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises.

Well now, instead of prosperity trickling down, the pain has trickled up – from the struggles of hardworking Americans on Main Street to the largest firms of Wall Street.

This country can’t afford another four years of this failed philosophy."

The above quote I got from a statement released by the Obama campaign. (Hat tip: Humid Haney)



Dante said...

"Though, according to Dante, I confuse "slow" with "grow" when it comes to the economy, I rarely associate a growing economy with one of the largest financial instituions in America filing for bankruptcy. I rarely associate a growing economy when Merril Lynch gets sold off to Bank of America at a loss. As I'm writing this, the Dow Industrials are fluctuating wildly."

Where's the decline? You've got stories. Where are the numbers? Using the classic definition of economic growth, we're still growing. That might change but until it actually does, I'm not buying into economic decline stories any more. I've heard far too many over the past year and none of them have panned out.

Going along with your analogy, when you're showing symptoms of being sick but you're not actually sick, it could be in your head. A sort of "mental" sickness if you will.

patsbrother said...

Please to explain the following statement: It is an economic policy "that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else."

Explain what we are "giving" to "those with the most". In 2006, the last year for which this information is available apparently, the top 50% of American income earners paid 97% of all federal income tax. The evil rich in the top 1% paid 39.89% of ALL federal income tax. These numbers are disproportionate to their respective percentages of all income earned in America. The rich are paying (numerically) more than their share of income.

A third of everyone filing a tax return paid no income tax at all. Some in this group actually RECEIVED money from this group because of REFUNDABLE tax credits (meaning the federal government ended up OWING them money).

The progressive tax rate ranges from 3.0% of income for those in the bottom 50% of income earners to 22.8% of those at the top 1% of income earners.

I do not expect to ever make it to that top 1% of workers (who made $388,806 or more in 2006). However, your 1984 double-speak really is insulting and part of a greater Democratic ploy to buy votes by convincing lower income Americans that the evil rich are getting away from paying their taxes scott free.

The government does not GIVE wealth (except for welfare and refundable tax credits); it TAKES it (um, through taxes). So really, it's not that Republicans want to "give more and more to those with the most", it's that they are not Democrats, who want to TAKE more and more from higher income earners.

I approve of a graduated income tax. I don't approve of incorrect euphemisms. Don't distort reality when you wax poetic in your attempt to convince yourself that the horse you've back is the better candidate.

patsbrother said...
This comment has been removed by the author.
patsbrother said...

According to the following editorial in the Wall Street Journal which looks at the 2006 information, the Bush tax cuts ended up garnering more money in taxes from the rich by encouraging them to invest more and to use what they have more freely.

Conversely, it points out that the rich paid a much lower percentage of total income tax under Carter, when the top bracket of income tax was highest, because the rich either worked less or invested less. The piece also points out that this is the system to which Mr. Obama wants us to return.

I suppose when Mr. Obama says the rich aren't paying "their fair share" that he really means it, and wants them to pay less of a percentage of the total than they do now.

Cousin Pat from Georgia said...

@ Dante: I did say "slow" rather than "decline," while the economy may be moving forward in certain sectors, it sure wasn't going anywhere fast back when I lived in coastal Georgia and now that I live in NOLA.

But this is America, and we grow our economy by combining money with freedom, enterprise and innovation to create new businesses and grow wealth. We should be experiencing a period of unprecedented prosperity right now, but in reality we're just a few press releases away from recession. I do not believe we are in a growing economy, and I do not believe we have been there for many, many years.

With so much loss of value in real estate and financial market stability, that makes getting and paying back loans more difficult, and stifles the ability to borrow money to spend money to make money. A lot of folks overspeculated the bubble, and this is affecting everyone - even people that made sound financial decisions.

@ Little Bro - The top one percent of folks who are paying taxes are in such a tax bracket because of certain mechanisms that our society pays for that are not free. The working investor class (who I define as those with capital who also work, mostly small to medium business owners) are not completely self made men and women: they have done well not only because they are innovative and hard workers, but because we have subsidized certain industries in this nation that make their success more possible.

Roads, the electric grid, communications, fire, police and military, education, small business loans - etc. These things help make enterprise possible. That hard working individuals are able to get a loan, start a business and turn a profit while working within that subsidized infrastructure is what the infrastructure was put there for.

The top 1% pays less than their share because they benefit so much from this infrastructure.

They also make up that lion's share of the budget you speak of because they have so much money, even when they don't pay their share, that is a huge income stream.

(And then our 'fical conservative' government went out and spent, what, 4000% of that money?)

As for the 'lower 50%' getting money back from the government, I'll let Dante take that one, as he has done so far more eloquently than I, but I'll say this.

Folks who get money 'back' from the government in a tax refund aren't getting government money that came from nowhere, they get that check because they have already paid the government too much money based on their tax bracket. After shelling out huge sums of money every two weeks last year, I still owed money on my lower 50%, lower middle class salary.

The less money you and your family make, the less money you pay in taxes. Because the less you make the more at-risk you are. You use that money to get to work (so you can become more productive), buy diapers and medicine for your babies, and put as much food on the table that you can. Those become your taxes in the "you don't pay taxes at the low end" end.

Dante said...

"I do not believe we are in a growing economy, and I do not believe we have been there for many, many years."

Well, if you make up your own definitions it's easy to make them mean what you want them to. For the sake of argument, what exactly counts as a "growing" economy because you seem to discard the traditional definition of the term?

Cousin Pat from Georgia said...

Who's making up definitions? You look at the numbers you believe and see a "growing" economy, I look at the numbers I believe and see a "slowing" economy.

I don't know what numbers you're looking at that would convince you that this whole thing is mental or growing, but I don't wear your shoes. Maybe you and everyone you know is doing fine and raking in the cash. Maybe banks can collapse and it won't affect you a bit.

And if that's so, awesome. But in my neck of the woods, we got problems. Not small ones, bad ones. Not mental ones, real ones.

Dante said...

Pat, I know you don't agree with me here. That's why I'm asking you what your definition of growth is (and so far you've dodged the issue). I use the standard definition of economic growth. Last quarter we saw 3.3% growth in the GDP. By definition, that's economic growth. I don't rely on anecdotal evidence because it can be very misleading. I don't rely on feelings or horror stories I read in the news. I rely on cold hard numbers.

Now we're getting close to the end of an economic quarter so we'll get a fresh semi-accurate GDP figure soon and a more accurate figure in a month or so. If those show a lack of growth, I'll change my stance but given the doom and gloom I've heard for well over a year now, I'm not buying into economic decline until it's been measured as such. And just to be clear, by economic decline I specifically mean a drop in the GDP.

S.A.W.B. said...

Are you sure you weren't struck about the cranial-region when you were hunkered down for Gustav? Perhaps you got winged by a flying bit of Mexican-foodstuff at your current employer? In any case, you're all wet when you, and His Holiness Pope Obama, blame 'failed Bush policies' for the current state of financial affairs.

For the record, ALL of the current bank, lending institution, brokerage firm, and other financial firm failures are tied DIRECTLY to sub-prime/Alt-A loans made to buyers who, 20 years ago, would have been completely unqualified to get a mortgage.

How, pray tell, did all of these venerable and austere lending institutions, the standard-bearer of risk-averse, up and decide to start writing these high-risk loans? Why, pressure from the Democrat controlled 103rd Congress, of course. Namely in the form of the Community Development Banking and Financial Institutions Act of 1994, sponsored by Senator Donald W. Riegle, Jr. (D-MI).

Before this piece of legislative trash was passed, lending institutions weren't exactly up against the wall to make egregiously large loans to completely unqualified potential buyers.

It is from this act that lending institutions thought it would be a swell idea to start throwing out things like NINJA Loans, which are not nearly as cool as they sound, nor do they involve pirates.

But, since Congress felt compelled to 'make homeownership a reality for millions of Americans', my wallet now takes the hit as the lending institutions fall.

So, yeah, the lending institutions made billions upon billions of horrific loans to people who would have had trouble financing a tattoo, much less a house. And now we all get to pay the price in the form of the old, highly restrictive lending practices, which require you to have verifiable income stream that will exceed your mortgage payment, assets that you can use to back up those payments, and a credit history that doesn't read like a slasher flick.

But, hey, at least all those people got to have the experience of 'owning' a home...

Cousin Pat from Georgia said...

@ Dante. Yup, I'm all about the feelings and emotions. But if I were to use numbers, I'd point to unemployment statistics, where “The number of unemployed persons rose 592,000 to 9.4 million in August.”

Then I'd touch on which industries added or subtracted to the GDP and employment, where I'd find that though auto makers were among the hardest hit this year, construction also continued losing jobs. But job loss in construction totaled less recently than in months prior (probably because the real estate bust has shed most construction jobs earlier in the year). Employment services (the folks who staff temps) also lost employment, most likely because businesses need less temporary labor due to contraction and folks already pulling down administrative assistant jobs are keeping them while trying longer to gain upward mobility. And I'd see that gains came in places like mining and oil production as well as industries related to energy.

As far as record foreclosures, I'd read about the local nature of the market, but I'd learn that, even though places like Michigan and Massachusetts have numbers signaling that the real estate market has hit bottom and can improve, the increased troubles of states like California and Florida outweighed that performance for the national averages.

Since I'm already dealing with debt and economy, I'd throw in that though we’ve known since 2005, it is worth repeating that many working and middle class households in this country that have to file for bankruptcy do so because of medical bills.

I also have this gutsy, emotional feeling that in the United States of America, we have a big enough work force and diverse enough industries to post whole gains as an economy, as measured by such cold numbers as the GDP, even while we are losing big in other places of the economy. Such other places (real estate, consumer debt, interest bearing capital, medical costs, and other industries) may hurt working and middle class Americans severely and "slow" (or "decelerate," in the words of the MBAA spokesman) the economy.

@ SAWB. No head trauma here. But if some Democrat was responsible for a piece of trash legislation in 1994, why did the Republicans who gained the Congress later that year fail to fix the problem? Why did the Republicans who gained the White House in 2000 fail to fix the problem? Further, why are so many of our financial woes today caused by sub-prime mortgages being issued during the real estate bubble of 2002 - 2004?

There is a sea of difference in trying to make homeownership a reality to working class Americans - because home equity is one stepping stone to personal financial stability, the middle class and the American dream - and the predatory lending tactics of the sub-prime risk taking speculator class that attempted to make a fast dollar off any American of any class who would sign on the dotted line.