Over the past decade, a mix of greed, irresponsibility, and well-funded lobbying for deregulation led to incredible wealth in the financial industry, and then to a catastrophic collapse. A tiny sliver of very powerful people played with the economy like it was a blackjack table—with our houses and retirement funds as chips.
For most of us, the consequences were huge—lost jobs and savings, foreclosures, a recession that we’re still trying to climb out of. The financial industry institutions who blew up the economy, though, got bailed out and are trying their hardest to get right back up to their old tricks.
So it’s really insult to injury that comfortably wealthy people in politics and the media seem to think that the biggest problem with our economy is insufficient deference to the very wealthy. You think I exaggerate, but check out James Pethokoukis, a writer at the business-funded American Enterprise Institute, who spins a nonsense misreading of an Obama speech into some sort of “anti-success” agenda and insists that it’s “damaging and corrosive” to our economic prospects. Pethokoukis reflects the earnest beliefs of multi-millionaires like Home Depot founder Ken Langone. Trying to have a conversation about inequality, tax fairness and what the economy is for, as Jon Chait aptly puts it, violates “conservative political correctness.”
Back in the real world, the value we create from our work has kept growing, but our compensation for it has fallen far behind, as Paul Krugman aptly notes. Corporate profits have hit an all-time high and financial markets have mostly recovered from the recession—but here’s what happen
Want a perfect metaphor for what’s actually wrong with our economy? Take a look at Caterpillar, a company that turned a $4.9 billion profit last year, but is still trying to push a 6-year wage and benefit freeze on its workers. The New York Times calls the Caterpillar fight “a test case in American labor relations” and notes that Caterpillar’s profitability has led to big increases in compensation for top executives.
A new report from the National Employment Law Project shows that, increasingly, very profitable big corporations are paying low wages. That’s not just a number on a chart—it’s about real people who have trouble covering the costs of rent and food.
Krugman wrote last week about the hypersensitivity of the executive class and their weird insistence that the economy is faltering because they’re being disrespected. To put it politely, that’s at odds with reality:
Not only do many of the superrich feel deeply aggrieved at the notion that anyone in their class might face criticism, they also insist that their perception that Mr. Obama doesn’t like them is at the root of our economic problems. Businesses aren’t investing, they say, because business leaders don’t feel valued…This, too, is crazy…There’s no mystery about the reasons the economic recovery has been so weak. Housing is still depressed in the aftermath of a huge bubble, and consumer demand is being held back by the high levels of household debt that are the legacy of that bubble. Business investment has actually held up fairly well given this weakness in demand. Why should businesses invest more when they don’t have enough customers to make full use of the capacity they already have?
Indeed, even the tax system, although it’s structured in a progressive way, has a lot of preferences and rules that benefit the very wealthy. There’s no better illustration of this than Mitt Romney, who, as Paul Waldman points out, made $42 million in income in the past two years without actually holding a job:
It really seems that Romney has a hard time understanding why that would rankle people. The entire system is set up to allow people like him to play by a set of rules that was established by the wealthy, for the wealthy; but when you’re the beneficiary, it seems like the prevailing order is a just order. And what Romney wants is to make income from investments and inheritances taxed at an even lower rate.
And, as Ezra Klein notes, Romney’s stated agenda would only expand the divide between the rules for the very wealthiest and those for the rest of us:
Romney’s life and career show a man who did not have to take many risks, and perhaps wouldn’t have used his talents to nearly the extent that he has if not for the fact that he was able to rely on three expansive of safety nets: that of family, personal and corporate wealth.
There is a sense in the United States that the rich play by different rules than the poor or the middle class — rules that make it easier for them to get even richer. Romney’s history shows he has been aggressive in taking advantage of those rules, which is fine. But his proposed policies would make it even easier for the rich to stay rich and even more difficult for the poor to scrape by, which is not fine.
You’re going to hear a lot from the “sore winners” over the next few months, and, unfortunately, they have a lot more access to a sympathetic ear in the press and in politics than working people do. But their incredible self–regard, and equally incredible insulation they have from the lives of working people, shouldn’t be the determining factor in how we set economic policy.