Enslavement of the Middle Class

Financial FAQs

It is becoming obvious that the American middle class (topic dujour among presidential candidates these days) has been enslaved by an ideology that only benefits the wealthiest among US. It is an ideology of austerity that has prevailed in the U.S. at least since the 1980s, and Paul Krugman says is putting Europe into its Second Great Depression.

It is really an economic ideology of the 18^th century first formulated by Adam Smith—of fewer government services and lower taxes that has made corporations all powerful with the greatest profits in their history, left American workers with little or no control over their livelihoods, and resulted in the greatest income inequality since the 1920s.

Such an insidious ideology has kept the poorest states poorer, caused declining investment in education (our seed corn for future entrepreneurs), is quickly degrading our public infrastructure, and even the ability to protect ourselves. President Obama’s State of the Economy report and latest speeches have made it obvious. The greatest income inequality since the 1920s is here to stay, unless there are major changes in economic policies.

That is why most Americans (at least the 90 percent) have become harried, 24/7 workers with little vacation time, poor health care options (in spite of Obamacare), too expensive educational opportunities, too few well-paying jobs, and little protection from the globalization that stronger labor laws would bring.

Those policies have been called supply-side economics, under the theory that giving more tax breaks to the wealthiest by reducing capital gains and maximum tax rates, while shrinking government investment and oversight, would induce the wealthiest to put their money into productive investments, thus creating more jobs.

But that never happened. When President Reagan cut the maximum income tax rate from 70 percent that prevailed in the 1970s to 50 percent, it and 2 recessions created the largest budget deficit of that era, which is why he instituted 11 tax hikes to bring the budget back into a semblance of balance. This was all catalogued by his budget director, David Stockmen in The Triumph of Politics.

Then we have GW Bush’s further tax cuts on both maximum income tax rates to 35 percent and capital gains to their lowest in modern history that so depleted tax revenues it created the largest budget deficits in history, and ultimately the Great Recession.

It’s no use sugar coating the truth any longer. Since the end of the Great Recession, the top 1 percent of income earners have garnered 96 percent of total income since 2009, after a brief dip. And Americans still have the greatest income inequality of the developed western world.

Why could such inequality be here to stay? In part because so much wealth has flowed to so few, and it is easy to buy influence in this country. The most obvious receivers of such largesse are the conservative members of Congress, mostly Republicans, who continue to block the economic reforms that would better the lives of those that live on Main Street.

Nobelist Paul Krugman said as much in his latest NYTimes Oped: “So what does it say about the current state of the G.O.P. that discussion of economic policy is now monopolized by people who have been wrong about everything, have learned nothing from the experience, and can’t even get their numbers straight?... Clearly, failure has only made them stronger, and now they are political kingmakers. Be very, very afraid.”

Graph: CEA Report

The White House just released their Council of Economic Advisors 2015 Report, chaired by Jason Furman. It said, “The second important factor influencing the dynamics of middle-class incomes is inequality. This, too, is a global issue. In the US, the top 1 percent has garnered a larger share of income than in any other G-7 country in each year since 1987 for which data are available, as shown in the above graph.”

It should be clear what must be done to remove the obstacles that hold back most Americans from a better life. Let us start by jettisoning the 18^th century myth which enslaves all economic classes, a myth that only holds us back in the 21st century. Indiscriminately lowering taxes while minimizing government services and oversight hasn’t improved the lives of anyone except the wealthiest among us.

Harlan Green © 2015

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Republicans Just Don’t Get It--II

Financial FAQs

Why don't Republicans get it? The 11 million illegal immigrants who have lived and raised families in the U.S. is the latest millstone around their necks that derails any hope of a Republican presidency. Last year a bi-partisan Senate passed a bill on a 68 to 32 vote that would eventually allow them citizenship, but John Boehner refused to bring it up to a House vote.

And so President Obama just issued a directive that will defer 5 million illegals from any legal action, which polls show 85 percent of Hispanics support. And we are a country founded by immigrants with every ethnic and racial group protected by our constitution.

Republicans haven’t really gotten it since the 1970s, when they supported policies to maximize profits at the expense of jobs and household incomes by weakening government oversight and regulations. It is a well-documented story of poor job creation and middle class income reductions that enabled the massive transfer of wealth (and power) to business owners and corporate CEOs—the investor class—and away from their employees that has continued today.

Forbes.com

Yet a country is only as strong and able to care for and protect its citizens as its government. That’s been the history lesson that today’s Republican leaders have forgotten—the lessons that earlier Republicans knew. It was Republican Presidents, such as Eisenhower that built our freeway system (when the maximum income tax rate was 92 percent), and President Nixon signed the Clean Air Act with a unanimous Senate.

The 1970s soon changed such cooperation. Republicans and their business interests began creating policies that made government more business friendly and less middle class friendly. Maybe it was the Arab Oil Embargo and the realization of how vulnerable we were to a disruption of energy supplies. It was also the era of so-called stagflation that lasted until 1980 with its sky high inflation and devalued assets.

We saw the growth business friendly lobbies, such as the Business Roundtable that began to spend heavily to influence elections and ease trade restrictions. That’s when President Reagan sounded the death knoll for unions (and collective bargaining) with the firing of Air Traffic Controllers in the PATCO strike. Corporations suddenly found it easier to terminate their employees and export those jobs and manufacturing plants overseas.

Household incomes began to shrink forever after, as President Reagan pushed through cuts in the maximum income tax rates for the wealthiest that had enabled Presidents Eisenhower to build our public infrastructure (when the maximum income tax rate was 92 percent), and Johnson to finance the Great Society that lowered poverty rates.

It was the beginning of President Reagan’s Trickle Down economic policies that his Budget Director David Stockman (in The Triumph of Politics) soon realized created horrendous budget deficits, with very little trickling down to the middle classes and below.

It made the conservatives credo of self-sufficiency a lie, as Republicans now blocked any attempt to raise the minimum wage. For how could families be self-sufficient and live on a minimum wage, unless they held two and three jobs, thus harming their families, and children of any chance for a good education?

Republicans have continued their all-out assault on government with their attempts to defund Obamacare that how insures tens of millions for the first time at lower costs, while continuing their efforts to privatize social security and Medicare.

Even public safety has been compromised with their refusal to help states rebalance their budgets that resulted in the loss of so many public employees during the Great Recession, such as police and teachers.

There is in fact no area that Republicans haven’t weakened the public commonweal. Every one of the Democrats’ infrastructure and job creation bills since 2011 have been blocked by either Senate or House Republicans in the name of paying down the public debt. Yet the productivity improvements and increased tax revenues generated by those jobs and an upgraded infrastructure are the only way to pay down that debt. And Republicans backed by their conservative lobbyists will no doubt continue to do so, until our road and bridges are no longer drivable.

It is a sad state of affairs when Republicans are no longer the wealth creators, but have become the party of no. Instead of finding ways to increase our productive capacity and boost household incomes, which are the real wealth creators, they continue to benefit the few at the top of the food chain, most of whom are only interested in enriching themselves.

PS—In an update of the 2012 jobs chart shown above, more net jobs have been created under Obama — 5,142,000 as of the August jobs report — than under George H.W. Bush — 2,637,000 — and George W. Bush — 1,282,000 — combined, according to the Federal Reserve Bank of St. Louis.

Harlan Green © 2014

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David Stockman’s Crony Capitalism

Popular Economics Weekly

Paul Krugman is being too gentle with David Stockman, whose recent New York Times ‘rant’ glorifies the gold standard and denigrates government for standing in the way of putting “free markets and genuine wealth creation back into capitalism”.

“…like so many in his camp, Mr. Stockman misunderstands the meaning of rising debt,” writes Krugman. “Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.”

In fact, Stockman would return us to an earlier era of crony capitalism, before any form of financial regulation, such as by the Federal Reserve. The result then as now is huge income and wealth inequalities that have been the main cause of the Great Depression and major recessions—the last five just since 1980 during administrations that advocated deregulation and a similar opposition to financial regulation.

And then as now, there is an answer to the Oligarchies that ruled Big Business, as corporate monopolies have again concentrated their power today. President Obama gave a speech in Osawatomie, Kansas on December 6, 2011 about that earlier era. Osawatomie was the small town where Teddy Roosevelt gave his now famous “New Nationalism” speech in 1910 that called upon the three branches of the federal government to put the public welfare before the interests of money and property, because we were at a similar historical juncture. Corporate interests again control 2 branches of government—Congress and the Supreme Court—as they had in the early 1900s.

“At the turn of the last century, when a nation of farmers was transitioning to become the world's industrial giant, we had to decide,” said Obama. “Would we settle for a country where most of the new railroads and factories were being controlled by a few giant monopolies that kept prices high and wages low?... Because there were people who thought massive inequality and exploitation of people was just the price you pay for progress.”

Greater equality of opportunity is what economists such as Nobel Laureate Joseph Stiglitz are calling for today, in renewing the cry that we are all in this together. “There are four major reasons inequality is squelching our recovery,” says Stiglitz. “The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. While the top 1 percent of income earners took home 93 percent of the growth in incomes in 2010, the households in the middle — who are most likely to spend their incomes rather than save them and who are, in a sense, the true job creators — have lower household incomes, adjusted for inflation, than they did in 1996.”

Yet greater economic opportunity is more than a moral issue of what is fair, or even the core American value of everyone’s right to the pursuit of happiness. It can be inevitable if modern technology is allowed to fulfill its promise for all, rather than have it benefits be monopolized by the few.

For in an era where technology is replacing workers making the necessities of life at an ever accelerating rate, more Americans will have more leisure time to pursue their own interests. And more importantly, the ever increasing productivity of those technologies can lift all boats—that is, provide more necessities, as well as amenities to improve lives—rather than go only to the profit makers.

In giving his Kansas plea for a new nationalism of the common good, President Obama was going back to a time when Robber Barons ruled, having made enormous wealth from the founding of the railroads, banks, oil and steel industries in the 19^th century.

It was the beginning of the Industrial Revolution, when most of America was rural and Oligarchs ruled government and business. Sound familiar? That has happened once again with the enormous fortunes created via deregulation and the digital revolution. And once again the majority of American households are suffering from the excesses of this modern revolution that has outdistanced the safeguards that were established to protect householders from those excesses.

“The American people are right in demanding that new Nationalism without which we cannot hope to deal with new problems,” said Roosevelt. “The new Nationalism puts the National need before sectional or personal advantage. It is impatient of the utter confusion that results from local legislatures attempting to treat National issues as local issues. It is still more impatient of the impotence which springs from over-division of governmental powers, the impotence which makes it possible for local selfishness or for legal cunning, hired by wealthy special interests, to bring National activities to a deadlock. This new Nationalism regards the executive power as the steward of public welfare. It demands of the judiciary that it shall be interested primarily in human welfare rather than in property, just as it demands that the representative.”

Actually, much of the Great Recession and slow recovery is due to widespread ignorance of economic fundamentals that depend on the public’s welfare. For no economy can prosper if educational and environmental standards are ignored, which enable social mobility and good health. It is also an ignorance of what is in our national interest. Raising educational and environmental standards, restoring our aging infrastructure, and creating a truly universal health care system make us more competitive globally.

Don’t take my word for it. Lord John Maynard Keynes saw the consequences of increasing abundance in his 1930 essay, Economic Possibilities for our Grandchildren: “Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”

And we are beginning to see that abundance, as well as the means to share it more fully, if the Stockman’s of the world would stop glorifying self-interested behavior. Professor Robert Shiller discusses how this can happen in his recent book, “The New Financial Order, Risk in the 21^st Century”, in which he lays out what our new information technologies will be able to do, just as the Industrial Revolution ultimately benefited most Americans.

“Right now we are witnessing an explosion of new information systems, payments systems, electronic markets, online personal financial planners, and other technologically induced economic innovations, and consequently much in our economy will be changed within just a few years. Almost all of our economy will be transformed within just a few decades. This new technology can do cheaply what once was expensive by systematizing our approach to risk management and by generating vast new repositories of information that make it possible for us to disperse risk and contain hazard.”

It will do all this by leveling the playing field in order to create a greater transparency of markets, as financial information in particular will be available to all. Therefore much of the risk in one’s profession, or housing value, or even health, will be able to be insured against unexpected events, such as recessions, or loss of career, or debilitating illnesses because of the new information technologies.

That is the real revolution happening today. Who will benefit from such modern information technologies--the few or the many? Because it will become more difficult for those who profit from such ignorance to accumulate excessive power. Stockman is wrong in believing we should turn back the clock. Or, as Teddy Roosevelt knew, we will continue to repeat past history.

Harlan Green © 2013

Follow Harlan Green on Twitter: www.twitter.com/HarlanGreen

Pending Home Sales, Prices Up For the Year

The Mortgage Corner

Home prices are finally rising nationally, according to same sales in the S&P Case-Shiller Home Price Index. It showed that all three headline composites ended the second quarter of 2012 with positive annual growth rates for the first time since the summer of 2010. The national composite was up 1.2 percent in the second quarter of 2012 versus the second quarter of 2011, and was up 6.9 percent versus the first quarter of 2012. The 10- and 20-City Composites posted respective annual returns of +0.1 percent and +0.5 percent in June 2012.

Graph: Calculated Risk

“Home prices gained in the second quarter,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April."

Graph: Calculated Risk

And the National Association of Realtors reported that the Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said the index is at the highest level since April 2010, which was shortly before the closing deadline for the home buyer tax credit. "While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity," Yun said.

While not yet overwhelming, the real estate recovery will continue to spur growth, with construction spending also up some 7 percent in the year. But lower inventories are the key, and Realtors are reporting rising prices and multiple offers in most of the metropolitan areas.

Graph: Econoday

The FHFA house price index for homes financed with conforming mortgages extended a run of gains including a 0.7 percent rise for June. Year-on-year, the index is up 3.6 percent, which is slightly lower than May's upward revised 3.8 percent but otherwise well above prior months. Seven of the 9 regions posted gains in June led by a 3.5 percent rise in the Mountain region and followed by a 1.1 percent rise in the West North Central region. It showed very small changes in the West South Central and New England regions.

What can we say? That employment and personal incomes have increased enough, in combination with record low interest rates, to increase confidence that this economic malaise is finally coming to an end.

Harlan Green © 2012

Smart Government Creates Better Growth

Financial FAQs

It is smart government that creates better economic growth, not smaller government, per se.  Smart government means effective government that finances and regulates what the private sector can’t or won’t.  So that doesn’t mean downsizing government for its own sake, since the private sector can’t regulate itself, and won’t finance what it doesn’t believe will be profitable.

A recent New York Times’ Op-ed by Paul Krugman talks about what it doesn’t take to run a government—specifically whether owning a private equity firm or being a corporate CEO qualifies one to be President of US. Well, Herbert Hoover and perhaps GW Bush were the last 2 Presidents who were business executives, and the policies of both caused the largest economic downturns in our history.

Why? Because they subscribed to ideologies rather than the reality they were facing. Hoover reacted to the 1929 Black Friday market crash by tightening credit to protect the creditors, thus causing record deflation, when he should have loosened credit to counteract the plunging prices. JM Keynes hadn’t published his theories until 1936 that said a Great Depression was like wartime—emergency spending measures were the only way to lift production during such tough times.

Whereas GW Bush believed in Trickle-down economics. He reacted to 4 years of budget surpluses under President Clinton by believing (as did Fed Chairman Greenspan) all those tax monies should be returned to the private sector—mostly by giving tax breaks to the richest—since “Deficits don’t matter”. Instead everyone’s income fell except that of the top 10 percent, causing the huge borrowing binge that burst the housing bubble.

Both business Presidents came from the private sector, which meant they had little idea of how to make government work. The fallacy was in believing it was up to the private sector alone to bring back growth. But growth doesn’t happen by itself. Not when the private sector becomes overextended and over indebted, which is the cause of all recessions and depressions, really.

Economists know it is oversupply that drives down prices and so profits, causing debt defaults on the most highly leveraged. This is why we have business cycles and is no fault of government, which doesn’t produce anything. In fact, economic downturns occur fairly regularly, as anyone can check on the National Bureau of Economic Research website, www.nber.org. It is how to climb out of those holes that is hardest for business types to know.

Modern history since the Great Depression tells us in fact government is not the problem. It doesn’t rob from anyone, but instead finances the most important segments of our economy. Besides defense it finances education, future research and development, public services, and environmental and financial regulation—that private sector business won’t. It’s too risky for private businesses, and doesn’t give them immediate returns. How does one calculate the profit from use of our public highways and bridges, for instance? Yet without those services the private sector cannot function.

So what about the huge government debt amassed since 2000? In fact, it isn’t the dollar amount that matters, but what it is as a percentage of GDP. We had no problem with running the deficit up to 121.7 percent of GDP in World War II, even though most of the ‘goods’ went up in smoke, rather than back into the economy. Firstly, it generated jobs for everyone, including women. And secondly, it modernized our industrial base that enabled U.S. to grow out of such debt until it fell to 40 percent of GDP in 1980, while giving the post-WWII U.S. economic superiority over those economies devastated by war.

The deficit only began to grow again under President Reagan, who coined the term, “Government is the problem”. Why? Because as his Budget Secretary David Stockman explained, cutting taxes didn’t reduce deficits, because it reduced the revenue needed to pay for the tax cuts. It was only when President Clinton restored the pre-Reagan tax rates and reduced government spending that we had 4 consecutive years of budget surpluses. In fact, what was left of the WWII debt—some $1.2trillion—would have been paid off if GW Bush had elected to continue his policies rather than borrow more money.

Graph: Wikipedia

Christina Romer, former White House Chief Economist, explained the effects of government stimulus spending in a recent New York Times Sunday Op-ed . A historian of the Great Depression, her thesis is that without the various stimulus programs, such as Obama’s 2009 ARRA $800 billion stimulus spending, we would still be in a deflationary recession.

Furthermore, “In place of the tepid budget agreement now in place,” said Dr. Romer, “we could pass a bold plan with more short-run spending increases and tax cuts, coupled with much more serious, phased-in deficit reduction. By necessity, the plan would tackle entitlement reform and gradually raise tax revenue. This would be the World War II approach to our problems.”

Then what is smart government? It’s been proven time and again that just returning $$ to the private sector during deep recessions doesn’t spur growth, because they don’t spend it. Two examples are the current cash hoarding by corporations of more than $2 trillion, while paying outsize incomes to their executives, and banks keeping almost all of their reserves with the Fed rather than lending their excess cash out to spur growth.

Why do they continue to hoard? The private sector really doesn’t like much risk, contrary to assertions by free marketers who trumpet that entrepreneurs must lead the way for any recovery, if only there was less regulation! In fact, there are very few successful entrepreneurs, because the failure rate of entrepreneurs is very high. The track record of venture capital tells us so. Even the track record of Presidential candidate Mitt Romney’s Bain Capital is mixed at best. Private Equity Firm Bain Capital may have actually eliminated more jobs than it created, when the record is looked at closely.

Harlan Green © 2012

Warren Buffet’s Truth—No Shared Sacrifice

Popular Economics Weekly

The Oracle of Omaha wrote a very profound New York Times’ Op-Ed recently. Warren Buffet said to “Stop Coddling the Super-Rich”; that what we needed was shared sacrifice in such times of plunging confidence in economic growth. But “when they did the asking, they spared me,” he said.

This cuts to the heart of why we even had a Great Recession, and how to dig ourselves out of the huge debt hole that resulted. There has been no shared sacrifice to date, and without it the economy and financial markets cannot recover. Firstly, the deficit cannot be paid down unless the richest individuals and corporations allow their tax breaks to expire.

The non-partisan Center for Budget and Policy Priorities has calculated that making all of the GW Bush tax cuts permanent would cost roughly $3.8 trillion over the next 10 years. And the Joint Committee on Taxation has calculated all the tax loopholes given oil, agriculture and the like will cost the U.S. Treasury roughly $1.3 trillion just in 2011 tax expenditures. That is our tax monies, folks, that is being paid to keep the super rich.

This is part of the redistribution of wealth that has occurred just since 1992. The top 400’s aggregate taxable income has risen from $16.9 billion to $90.0 billion in 2008, said Buffet. And their federal income tax rate fell from 29.2 to 21.5 percent. So the general taxpayer has been paying a multi-billion tax bill for the tax breaks of Big Business and the wealthiest. Reagan Budget Director David Stockman has labeled it the “reverse Robin Hood effect”.

What have the richest done with our tax monies? Certainly some have expanded their businesses, but much of it went overseas. U.S. corporations have some $1 trillion in unrepatriated profits from their overseas’ businesses sitting in foreign accounts, at the moment.

Much of it has also boosted executive incomes and stock buyback plans. USA Today recently reported that median CEO salaries increased 27 percent in 2010. Data from the Bureau of Labor Statistics shows, however, that workers in private industry experienced only a 2.1 percent pay increase last year. As USA Today points out, though, the great increase in CEO pay in 2010 is not really indicative of booming profits, but rather reflects the fact that many companies have been cutting costs and laying off workers.

In fact, the largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms, according to a landmark analysis of tax returns by economists Jon Bakija, Adam Cole and Bradley T. Heim, says USA Today. These are not just executives from Wall Street, either, but from companies in even relatively mundane fields such as the milk business.

The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories.

And there is even less shared sacrifice in our increasingly unprogressive tax structure. To understand why, Buffet says you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. But for the middle class typically, they fall into the 15 percent and 25 percent income tax brackets, in addition to heavy payroll taxes.

“Back in the 1980s and 1990s,” said Buffet, “tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

“I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000.”

There is much more to Republicans’ disavowal of shared sacrifice, of course. GW Bush thought that by borrowing the monies for his 2 wars, he would prevent widespread anti-war sentiment so soon after Vietnam, our longest war. And it also muted criticism of his tax breaks for the wealthiest. Vice President Cheney’s infamous saying, “Ronald Reagan proved that deficits don’t matter.” was its incredible rationalization that helped to plunge us into the Great Recession.

“Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances,” says Buffet. “…It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.”

But that is clearly the objective of Tea Party Republicans in their budget cutting crusade. With the economy still recovering, unemployment still high, we cannot afford the taxpayer subsidies that are setting record budget deficits. The taxpayer paid tax breaks won’t reduce the debt load, but it will prevent any real economic growth before 2012, as I have said.

So there is even a deeper reason to bring back the idea of shared sacrifice. For as Americans become more hopeless about their economic futures, they become more passive. And passivity means they don't vote, and so participate in the democratic process, as is evidenced by progressively declining voter roles since the 1970s. The massive redistribution of wealth that has occurred most recently has bred a greater cynicism about the democratic process. Warren Buffet may not know this, but less participation in our democracy means fewer control the levers of power, as happens in Third World countries controlled by oligarchies made up of the wealthiest families. And it was depression-era Germans badly discouraged by the destruction of their economy that elected a Hitler.

Harlan Green © 2011