July 28, 2004

Raines: Class Warfare Nigh!

The system has never been more thoroughly gamed than by Bush and his minders. For that matter, the class warfare has not been so intense in the United States since the days of the robber barons. But so far only one class is fighting, and the ever-widening income gap in America shows who has been winning. At the Democratic convention, there'll be a lot to watch for by way of a predictor of the November election. One I'll have my eye on is whether Kerry-Edwards seem to have a plan for freeing the political prisoners of George W. Bush's brand of cultural populism.

-- Howell Raines, writing in today's WaPo.

And we needed Dan Okrent to tell us the NYT was a liberal paper!

P.S. Isn't it hugely hyperbolic to say that "the class warfare has not been so intense in the United States since the days of the robber barons"?

Worth noting, consumer confidence figures are at a two year high this month:

The creation of 1.3 million jobs so far this election year is starting to lift optimism that lagged as gasoline prices rose as much as 35 percent and higher food and health-care costs helped push up consumer prices 3.3 percent from June 2003. The Conference Board said the percentage of Americans who consider jobs hard to find is now the lowest since October 2000.

The improved outlook is helping sustain demand for housing as interest rates rise, with combined new and existing homes setting a third straight record in June. The median selling price of new homes increased 1.7 percent to $209,900 in June from a month earlier, the Commerce Department said.

``Rising home prices are another reason why consumers feel so confident,'' said Joseph LaVorgna, chief U.S. fixed-income economist at Deutsche Bank Securities LLC in New York.

Now, I should caveat this by admitting I'm something of a mega-bear. I think we likely have something of a housing bubble in our midst, am worried about a pretty hard landing in China (with carry over renewed prospects for contagion in Asia), and see myriad negative 'externalities' up the pike (ranging from mega-terror attacks, to oil price shocks, to a major drop in the dollar). And while I think the Dow is pretty range-bound--I wouldn't be surprised to see it dip back into the 8,000 range (or even lower) in the next 12-18 months.

But hey, markets go up; and markets go down. And, right now, the economy is doing pretty damn well given the bubble of the late '90's, the attendant recession, and 9/11.

This, very obviously, is not going to hurt Bush, is it? 1.3MM jobs created this year is pretty good, after all...

...and they're pretty good jobs, it would appear:

Greenspan told Congress on July 21 that the Fed has not ``been able to find a significantly meaningful change'' in job quality.

FactCheck.org, an arm of the Annenberg Public Policy Center of the University of Pennsylvania, on July 9 said employment ``has recently increased by more than 1 million (jobs) in categories that on average paid above the median earnings'' of $541 a week. ``By that measure, the jobs gained are overwhelmingly good jobs, the very opposite of the claim made by Kerry and his allies.''

So much for Rainesian class warfare, huh (and Kerry's campaign spin...)?

Posted by Gregory at July 28, 2004 12:53 AM

With a tax system that takes the most from the rich, what would you expect a money hunger government to do .. make the rich richer, of course .. with a bigger tax payout. The middle class doesn't and won't ever have enough to payoff the deficit, so every deficit minded politician (think of any ?) is really saying he is going to make the rich richer.
It's that codeword thing:
states-rights = racism (actually old codeword) = gay marriage defense
pay-off-deficit = make rich richer
greatest-nation-on-earth = reaching into your pocket

Posted by: J_Crater at July 28, 2004 03:15 AM | Permalink to this comment Permalink

I think that Raines was guilty of hyperbole, but some of what he mentions has been observed by economists. It is not necessarily that the economy is horrible, just that the recovery has been proceeding at two different speeds, and that economic factors are squeezing the middle class disproportionately.

Here is a couple of observations from a Wall Street Journal article (not exactly a bastion of socialism or liberal class warfare rhetoric):

"To date, the [recovery's] primary beneficiaries have been upper-income households," concludes Dean Maki, a J.P. Morgan Chase (and former Federal Reserve) economist who has studied the ways that changes in wealth affect spending. In research he sent to clients this month, Mr. Maki said, "Two of the main factors supporting spending over the past year, tax cuts and increases in [stock] wealth, have sharply benefited upper income households relative to others."

The article continues:

Upper-income families, who pay the most in taxes and reaped the largest gains from the tax cuts President Bush championed, drove a surge of consumer spending a year ago that helped to rev up the recovery. Wealthier households also have been big beneficiaries of the stronger stock market, higher corporate profits, bigger dividend payments and the boom in housing.

Lower and middle-income households have benefited from some of these trends, but not nearly as much. For them paychecks and day-to-day living expenses have a much bigger effect. Many have been squeezed, with wages under pressure and with gasoline and food prices higher. The resulting two-tier recovery is showing up in vivid detail in the way Americans are spending their money.

Link (subscription only):


Posted by: Eric Martin at July 28, 2004 02:31 PM | Permalink to this comment Permalink

that's a fair point eric. I had actually read that WSJ article and, in the context of this blog post, should likely have mentioned it. thanks for doing it for me.

Posted by: greg at July 28, 2004 02:37 PM | Permalink to this comment Permalink

Pleasure to be of service. It's the least I can do considering all the quality work you do on this site.

Posted by: Eric Martin at July 28, 2004 03:09 PM | Permalink to this comment Permalink

I am not an economist, so perhaps someone can help me understand this "rich get richer, poor get poorer" chant.

There is now, and there has always been (by definition), an economic bottom 10%. Who are they? I work in the mental health field (primarily with homeless people) and I am convinced that the poor are disproportionally people with major psychosocial dysfunctions. Statistically, 1% of all adults have schizophrenia, 1% bipolar, 3-5% have cognitive deficits (mental retardation, learning disabilities), 2-3% have severe depression. Then there are all the folks with serious substance abuse problems (3-5%), dysfunctional personalities (sociopathic or paranoid, for example), a serious lack of ambition, a significant lack of education.... Altogether, I estimate that at least 10% of the population suffer from a constitutional, structural inability to be economically successful. It doesn't matter what social order you impose, there is no way severe alcoholics are typically going to succeed. They didn't in communist China and they don't in capitalist US. Many people with these problems have incomes that hover around zero and will for the forseeable future.

On the other side is the rich. I don't have much to say about them except that they are generally functional and very lucky! It is true that the net worth of the top 10% has steadily gone up over the past century, but is this surprising given the overall increase in wealth of the US? In 1900 there was not a single billionare (well, maybe JPMorgan). Now they are everywhere.

What's my point? Well, given my descriptions, is there any mystery as to why the gap between the top 10% and the bottom 10% has steadily widened in the past century? The poor are pegged at zero, and the wealthy increase their wealth as the economy grows. The in-betweens participate in this wealth creation to varying degrees. When people decry the widening spread between the very rich and the very poor, I just don't get it. This fact is simply a reflection of the fact that the US is a very wealthy, growing economy. In fact, I bet that you could show a clear correlation between the general health of a nation's economy and the income gap between its wealthiest and poorest citizens.

A side point-- how does the wealth of the rich "oppress" others? I mean, does Bill Gates' billions make me somehow more miserable? Less successful? A victim? I submit that his wealth has nothing whatsoever to do with me. He invented DOS, not me. Perhaps he has been overcompensated for this... but, again, so what? He helped invent a whole new industry that has enriched us all. I don't see why (beyond mere envy) I should feel oppressed or harmed by his successes.

The rich exist because the US has a very "wealth generating" economy. This is a good thing. Here's an aphorism I thought up-- "The wealthy are the price you pay for living in a prosperous society." If the worst thing Mr. Raines can say is that the US has too many super-wealthy individuals, well... fine. Given the alternative, I'll take that anytime.

Posted by: god fodder at July 28, 2004 10:48 PM | Permalink to this comment Permalink

god fodder is right,
except for the part about Bill Gates inventing DOS (he bought it); Bill's real claim to fame is Microsoft Basic.

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