Central Issue In Election And Most Important Thing About The Economy: We Falter Economically When Everyone’s Squeezed To Benefit A Few At The Top

Obama on Jon Stewart 10/18/2012 with a pinch representing the few at the top benefitting from a skewing of wealth that slows the economy

The central issue of this election and what everyone should absolutely understand is the most important thing about the economy right now is that our economy bogs down when we focus the nation's policy on squeezing the majority of citizens so that a few at the top can do a lot better than everyone else.  That may seem like a self-evident proposition to most National Notice readers and there have certainly been more than a few National Notice articles related to the premise in one way or another.  It does not seem to be a self-evident proposition to either Mitt Romney or his running mate Paul Ryan.

Why restate this right now?  Because the election is upon us and because, picking up on words of the president previously noted in Noticing New York, President Obama made essentially this point when he appeared on Jon Stewart’s Daily Show not long ago.  His words that deserve being quoted and passed around were as follows:

The most important thing is when you think about the economy, I am absolutely convinced that, when you look at the historical record, that when middle class families do well, when there are ladders of opportunity for poor families to get into the middle class, the entire economy does well, and when a few folks are doing very well at the top and everybody else is getting squeezed the economy grows slower.  And that is the central issue in this election that we've got to make sure we address.

(See: Wednesday, October 24, 2012, Most Important Thing About Economy + Central Issue In Election: Obama On Jon Stewart’s Daily Show Rejects Ratner/Prokhorov “Barclays” Paradigm.  That Noticing New York article makes the point that these national issues also play out on the local level in insidious ways.)

However self-evident this point about wealth inequality is, it can’t be repeated too often right now in light of its importance to the coming election.

If you want documentation, the International Monetary Fund has issued a report saying that this “widening disparity” in wealth is gumming up and slowing down the U.S. economy.  I liken the situation to the way that things grind to a halt at the end of a Monopoly game, when further moves cease to be possible because all the money is piled up in one place.  We used to have a disparaging view of economies in South American countries where it seemed so obvious that things could never work because of concentrations of wealth in the midst of unnecessary deprivation, but more and more we are becoming the thing we once disparaged.

MoveOn.org is sharing a bit of campaigning on this subject by punctuating with animation (by a 'Simpsons' Animator) an Obama speech about what does and doesn’t work when it comes to the economy: BRILLIANT: A 'Simpsons' Animator Works His Magic On A Rousing Obama Speech.  View the video below (or go to the website above to share it more broadly).




Whatever good things can be said about private equity firms, the principal motivating focus of a firm like Bain Capital, where Romney spent most of his career is to figure out how to direct more squeezed-out wealth to a narrow segment of the population owning stocks that pay them income being taxed at a much lower rate than on regular income.  Romney’s tax liability for 2011 was 10% (despite the fact that he told the public it was never less than 13%).

Those at the top do well but other Americans are seeing longer work weeks, lower pay and some are seeing shorter life spans while the wealthy are living longer.

Romney champions programs, tax structures and alterations to Medicare and Social Security that will further skew the allocation of income and wealth in this country to those who are already far wealthier than others.

Meanwhile we are not supposed to know, talk about or understand the wealth practices and equations that pertain to the wealth of those, like Romney, who are seeking to govern the rest of us.   In the United States we have more freedoms and a better system than in China in this respect, but how much so?: In the United States Romney (though not yet elected) doesn’t want to release his tax returns even when we find that he misrepresented them. . . In China when the NY Times reports that the family of prime minister Wen Jiabao and his family, once poor, have acquired wealth in the billions (real money in China), China shuts down parts of the internet not wanting the populace to find out anything about it.

It’s not a good thing not to know what’s going on when a country's leaders consolidate all the nation's money and all the power.  For years Silvio Berlusconi, the vastly wealthy former Italian prime minister, simultaneously controlled most of the media in that country.  Once viewed as untouchably powerful, he has now been convicted and sentenced to 4 years in prison for tax fraud, with more charges pending.

Columbia University professer Joseph E. Stiglitz , a winner of the Nobel Prize in Economics and a former chief economist of the World Bank, has two similar articles about the meaning of this election as it relates to the issue of wealth inequality.  Strangely, one appeared only in the Sunday Review section of the New York Times print edition (available elsewhere though) and the other appeared only in the paper's web edition.  (See: Print edition version, What’s at stake in this US election, October 30, 2012 and the web edition, Some Are More Unequal Than Others, October 26, 2012.)

Says Mr. Stiglitz in the web version of this article:

Mitt Romney has been explicit: inequality should be talked about only in quiet voices behind closed doors.

    * * * *

 . . .  inequality and poverty [have suddenly appeared] as part of the Romney-Ryan makeover, as they attempt to portray themselves (to use a phrase of some 12 years ago) as compassionate conservatives. In Cleveland on Wednesday, Paul Ryan gave a speech that might lead one to conclude that the two Republican candidates were really concerned about poverty. But more revealing than oratory are budget numbers — like those actually contained in the Ryan budget. His budget proposal guts programs that serve those at the bottom, and little could have done more to enrich those at the top than his original tax proposals (like the elimination of capital gains taxes, a position from which he understandably has tried to distance himself).

    * * * * 

. . .Tax havens discourage investment in the United States. Taxing speculators at a lower rate encourages speculation and instability — and draws our most talented young people out of more productive endeavors. The result is a distorted, inefficient economy that grows more slowly than it should.

The Romney campaign, however, has defended inequality or brushed it aside. To do so, it has employed a handful of economic myths.

Mr. Stiglitz then goes on to examine those myths.  One of them is the “trickle-down economics” theory used to justify shifting more wealth to the already wealthy. (Watch the video to see it called something else.)

One example Mr. Stiglitz could have provided of just how impossible it is to make  “trickle-down economics” work is the how the bailout of Wall Street after the financial crisis did not readily benefit Main Street. The banks sat with the money, not passing it along to Main Street, even as their profits were restored and they resumed paying extraordinary bonuses.  The structure of that approach (initiated under the Bush administration) is something for which President Obama is only partially responsible.  Under Romney and Ryan we’d see implemented many more examples of what was misguided with respect to this approach: The priority it placed in helping the wealthy few first.

Chart showing boost to personal income when stimulus was enacted after Obama took office- Click to enlarge

The stimulus was also spent elsewhere, like on American infrastructure.  That worked.  (See the chart above being used in the filming of a commercial for Obama in New York’s Prospect Park.)  Republicans claim the stimulus didn’t work and say they would have spent less.  They probably would have.  Support for the banking community aside, the new breed of Republicans find themselves hostile to almost any form of government spending, be it FEMA, healthcare of Social Security, because government spending, even on things like infrastructure, often levels the playing field, tending to interfere with their goal of redistributing more wealth to the wealthy.  And Republicans, not at all interested in seeing an effective recovery anyway, prevented the level of spending that would have led to an even stronger recovery.

But the top issue of the campaign, more important than any other, is whether Romney and Ryan will, if elected, be put in a position to make a further redistribution of wealth to the wealthy the nation’s misbegotten priority.

The New York Times today has a scary story today about how Paul Ryan, the most ideologically extreme and starkly consistent of the Romney/Ryan pair, with “no record of compromise” in his past, expects to put in charge of cutting back and overhauling government programs like Medicare (presumably Social Security would be among the other top programs to be targeted as well): Ryan, Quiet for Now, Is Said to Be Planning for an Active Role, by Trip Gabriel, November 3, 2012.

Are you ready for these Romney/Ryan plans to tilt things even more to the wealthy?  And are we all ready for the economy to slow way down as a result?