Health care IS available to all americans. Walk into an emergency room without insurance and see if you are denied. Again, you don’t seem to grasp the concept of priorities. Stop paying for cable and a TV if you cannot afford to see the doctor. Oh, and give people more choice in health care and maybe the prices would come down a bit.
You seem to expect corporations to have compassion. Companies do not have a conscience. They are here to make money. Is this news to you? Everything companies do is profit driven. If it makes economic sense for them to care then they will. The problem with you is that you think that the government has a conscience. Only your mother really cares if you live or die.
Most people who are poor do not remain poor for their entire lives. Hard work and a certain level of competency will gain you privilege. This gives most people the desire to work harder to gain the things they want. There will always be poor people among us…if not, then we are all poor.
This is idiocy! Freedom is not related to how many days of vacation you have. A 40 hour work week does leave quite a bit of time to do what you want and vacation time is a fringe benefit. You must really hate your job.
Wow! Do you really believe that government grants us freedom? Have you familiarized yourself with the Declaration of Independence? Government ASSUMES that we have certain freedoms that they cannot take away. And how exactly do non-governmental sources coerce us into doing anything?
Really?!? This explains all of our welfare programs? What percentage of our annual budget is spent on entitlements?
Look up the figures. Or maybe better, since it’s my assertion, let me provide an introductory cite for you. But I want to note that I’m merely pointing out what’s been obvious to economists for a very long damn time.
The prices for high-end electronics goods will eventually drop. Prices for everyday goods like energy, food, housing, and transportation (the bulk of people’s purchases) continue to go up with inflation and continue to eat up the greater portion of people’s wages. Look at this graph. Real income (compensating for price changes, ie inflation) has been flat for the bottom quintile of workers for almost forty years. The 50th percentile is nearly flat as well, with the gains made under the Clinton administration getting knocked out in the early Bush years.
It’s a shame, too, that the graph doesn’t show the 99th percentile, because they’d have an even steeper upward curve than the 95th percentile.
Real income is one of the most important concepts in economics. It’s not something that “we just don’t notice”. Professional economists spend a great deal of time carefully and deliberately measuring price changes and lifestyle improvements.
The end result is as I said. Real wages have been stagnant for decades for the poorest people. This isn’t something you can hand-wave away. It’s an established, extremely well-known fact that we’ve all got to deal with.
HK is hardly a good example of a free economy. HK has an unholy alliance of government, cartels and property developers. We could have a seperate debate on this, but it cracks me up everything HK is listed as a model of free capitalism. :smack:
Sure, but we do choose to be offended by it, and the countries that you label as “socialist”, eg Australia, UK, Canada are your strongest allies. Is it really such a good idea to demean the systems of the US’s closest allies to score political points?
Every Australian I know would cringe about an american calling our system socialist and the REAL actual socialist party over here would laugh as our system is really quite extremely capitalistic by their standards.
You can cut taxes and regulation and this will undoubtedly spur economic activity. But you also need taxation and regulation to ensure a stable, growing economy. There’s definitely a point when you can underdo/overdo taxation/regulation and it comes back to bite you in the ass, and the last decade is a perfect example. Slashing regulation of the financial system and easy money allowed the housing bubble to form and the banks to make enormous losses. Cutting taxation caused a huge drop in tax revenues with the attendant effect that will have on borrowing, economic growth and future taxation. So as far as taxation and regulation go it’s crystal clear that there currently isn’t enough of either and both will have to be increased.
It’s not really fair to use Cuba as a comparison for the US economy. Go back 50 years and put the US under punitive economic and trade sanctions for half a century and the comparison would be fairer.
Looking at Ireland and former Soviet satellites is definitely instructive to see how low-tax low-regulation regimes work out over a couple of economic cycles. Let’s throw Iceland in there for comparison too.
Over the last few hundred years the banking system has evolved from a collection of independent bankers constantly in crisis via the advent of central banking to the incredibly efficient and productive system we have today. After FDR regulated the banks after they blew things up last time we had the longest unbroken stretch of stability and prosperity ever, a system that endured through some quite large wars, economic downturns, lots of economic cycles. It only went wrong when the regulation was taken away. If and when it’s re-regulated everything will be fine again.
You really think the last decade was a period of major financial deregulation? The decade that brought us Sarbanes-Oxley and mark-to-market accounting rules? Under the Bush administration, over 4,000 new regulations were passed, and the size of the federal register grew from 64,000 pages to 78,000 pages.
The bogeyman for deregulation of banking always proposed by the left was the repeal of parts of the Glass-Steagal act - those parts which prohibited bank holding companies from owning other financial companies. Since this was explicitly added to the bill in 1933 to control speculation, the argument is that its repeal kicked off the wave of speculation that led to the financial bubble.
The problem with this is that there’s really not much evidence that this is the case, and in fact many economists have argued that the subsequent diversification of bank assets made the crisis less severe and prevented many banks from going under. And of course, the repeal of that part of Glass-Steagal was signed by Bill Clinton, not George Bush.
As far as culprits go, there’s an even better argument that the requirement for banks to use mark-to-market accounting directly lead to the subprime crisis and contributed to the financial instability of the last few years. The correlation is much tighter as well - FAS 157 which called for mark-to-market accounting, was passed in 2007. The markets began to destabilize almost immediately thereafter.
If you’ve got good evidence that deregulation caused the current crisis, let’s debate it.
But frankly, the fact is that it wasn’t deregulation, and it wasn’t new regulation. If anything, the changes in these laws may have simply exposed the emperor. The real problem was that people stopped saving money. We had been in such a long, extended economic boom period that risk was devalued. So everyone started leveraging. People borrowed money against their mortgages and spent it. Banks traded risky derivatives. The government got in the game and used Fannie and Freddie as social engineering tools to push bad mortgages. The Fed held interest rates too low for too long, forcing capital to seek riskier investments.
And the elephant in the room was the massive flood of money from China and Asia in general. The rise of those economies and the intentional high savings plan of China made huge gobs of cheap capital available to the west. This as much as anything is responsible for the wave of speculation that followed.
I see. So all that stuff about people being sold mortgages they couldn’t really afford, that’s all just ACORN propaganda? And those mortgages being bundled together into shaky securities, given ratings far in excess of their actual security, and then being foisted off on pension funds, IRA’s, stuff like that…that’s stuff didn’t happen, or just wasn’t really very important?
Except that it didn’t. Tax revenue during the Bush years increased from 1.9 trillion dollars to 2.5 trillion dollars. It was spending that broke the budget. Total outlays in 2002 were 2.01 trillion. In 2008, they were 2.98 trillion.
If spending had been held to just the rate of inflation over the Bush years, he would have left office with a 110 billion dollar surplus instead of a 458 billion dollar deficit.
Not only did government spending increase faster than revenue, it increased faster than the increase in GDP, and by quite a bit. In 2000, U.S. government spending was about 32% of GDP. At the end of Bush’s term, it had risen to about 37% of GDP. Had the government held spending just to the rate of GDP growth, Bush would have left office with a 190 billion dollar surplus.
When your revenue is increasing every year, but your spending is increasing twice as fast, and even faster than overall wealth in the country is increasing, it takes a very strange analysis to conclude that you have a revenue problem and not a spending problem.
Be aware that government also pressured lenders to meet lending quotas for low-income borrowers. This contributes to banks writing bad loans and for FNMA and FHLMC to buy them.
How exactly did deregulation force people to buy mortgages they couldn’t afford? And who started bundling those mortgages? Oh yeah, that was the federal government. Who was pushing people to buy mortgages and pushing bankers to lower standards for mortgages? Oh yeah. The federal government. Who made mortgages a more enticing investment by making mortgage interest tax deductible? Oh yeah. That was the federal government.
But we must divert all blame away from THEM, unless somehow it can be pinned on those pesky Republicans. Because we all know that Democrats can do no wrong, and that large government agencies like Fannie Mae and Freddie Mac are forces of good and not evil, and therefore their role in this mess must not be examined.
Did you know that Barney Frank is once again calling for lending rules to be relaxed for mortgage buyers, in an attempt to ‘stimulate’ the economy? Apparently, he is incapable of learning.
Let’s listen to some more choice quotes from Barney, shall we?
I could go on all day with quotes from various Democrats who opposed all mortgage reforms during the last decade, repeatedly ignoring the warnings of people like Alan Greenspan that they were creating a housing bubble by pushing mortgages so hard through Fannie and Freddie and other initiatives. The Democrats were on a mission to open up home ownership to lower income people, and saw attempts at regulation to be class warfare.
Or as representative Waters said:
By her own admission, Republicans had set up nearly a dozen hearings to fix the problems in the mortgage industry, and with Mortgage-Backed Securities being conjured by Fannie and Freddie. But the Democrats were operating under different rules. To them, the system was working fine so long as the quota of mortgages being given to low income people was being met.
But by all means, let’s not blame any of them! Instead, let’s find a partial repeal of an act 8 years before the crisis, and throw all the blame at it. Democrats and big government must always be held completely blameless.
With all due respect, those are meaningless numbers. One could have passed 3999 trivial little regulations… I know you’re idelogical on regulation, so perhaps a bit of a pause eh?
Mark to Market was (is) an international initiative that started out as an idea to render values more market transparent, you know…
That seems fair.
This strikes me as a silly argument. The crisis started in sub-prime and it started from economic fundamentals - that is the American sub prime lending, a lot of it unregulated, started going bad at crazy rates. The (private) models were plain wrong.
Blaming mark to market (aside from the fact that it’s post-hoc ergo prompter hoc type of logical error) smells to high heaven as an excuse not to look at market reasons and find some regulation to blame.
Well this seems reasonable, other than the “forcing capital to seek riskier investments” part.
As a factual matter, I believe that the … whatever the Americans called their social lending category… was a trivial percentage of sub-prime lending. I don’t believe one can point to the direct government programs from a factual basis as a major or significant contributor to this lending.
As in the case of the EU markets, it’s rather more a case of too much money getting into real estate.
While I sympathise with the rebuttal to the Senators pushing reinflate the American housing bubble market, the continued assertion it was the Government that pushed for lower lending standards seems to me not supported by any data. Unless you can provide a cite that the major portion of sub prime was subject to the same. But I have read that much of the sub prime occured outside of entities in any way subject to said regulations.
Well, for one thing, we have much more sophisticated economic modeling than you have in Europe. We have discovered that if anything goes drastically wrong with major financial institutions its either a)poor people or worse, b) government attempts to help poor people. And, of course, ACORN.
I haven’t hand waved it away. I suspect that you think that “real wage” means something slightly different than you think it does.
Think about it. It’s a given that the price of most products has fallen over the course of the last several decades. If your assertion that real wage should grow with that, then it should have grown. But of course it doesn’t because the way they calculate it, when a $100 1985 cassette player turns into a $100 2005 iPod, they consider it to be the same product, even though the latter wasn’t something even the most wealthy could have dreamed of owning twenty years earlier.
The price of a cassette player has fallen to the point where it’s not worth continuing production. In the last several decades probably a significant percentage of all products have gone the way of the dodo and most of the rest have been superseded by versions incorporating newer and better technology. The value of these goods is certainly greater. No one would honestly think that if a cassette player sells for $100 that an iPod should sell for $100 as well. The iPod is probably worth at least 10x more. Everything the average person owns today is worth a significant multiplier (M) of whatever the average person of “several decades ago” owned.
So again, it’s a given that the prices of things have dropped in comparison to our wage. If you think that this means the “real” wage should have increased by M, then obviously you’re attributing more information to be included in “real wage” than is really there.
Well, it’s fair to point out that potential issue, but in this case, it’s not true. Rules considered to be ‘economically significant’ (defined as costing more than 100 million dollars per year to implement) increased by 70% since 2001. Sarbanes-Oxley was one of the most expensive regulations ever passed. From here:
I work for a public company, and I know first-hand just how much effort and money is spent complying with Sarbanes-Oxley.
It’s also having the effect of lowering transparency, because it only applies to companies that are publicly held. Since Sarbox passed, there has been an increase in public companies going private, and a decrease in the number of new public filings.
Yes, I understand. But the law of unintended consequences doesn’t care about intentions. What Mark-to-Market did was increase volatility. For example, insurance companies are in the business of buying risk. They hold enough risk for long enough, and it all evens out and they make a profit if their actuaries are doing their job. But if a short-term change happens which increases the apparent level of risk in the portfolio, an insurance company’s valuation can collapse, even though in the long term their risk is actuarily sound. Before, insurance companies could basically ride out swings like this by holding their assets. Now they have to disclsoe the drop in value and be punished.
You could argue that all mark-to-market did was lift the veil on a whole bunch of bad assets, and that might be correct. Without it, maybe we would have struggled along for years while the problem got worse. But it’s also possible that mark-to-market simply increased volatility and triggered a wave of crises that built on each other until the collapse happened.
It’s also possible that even though mark-to-market is desirable in the long-term steady state case (i.e. if it had always been there, and the markets were adjusted to it), imposition of it on a system that never had it caused disruptions, created winners and losers based on fairly arbitrary factors, such as just who happened to be holding certain types of illiquid debt at the time the rule was passed.
My personal opinion is that the fundamentals of the economy were so unsound that a crisis was bound to happen at some point, but that it’s certainly possible that mark-to-market made it worse. Not proven, but possible.
Here’s a paper from 2004 which calls out some of these issues and seems eerily prescient as to what could happen under a change to mark-to-market accounting standards.
When interest rates are held artificially low, capital seeks better returns on investment. That generally means higher risk.
Which economists are arguing that it was a good idea to let Citi et al use their customers’ deposits to get involved in the derivatives markets? It turns out not to have been such a good idea after all, what with the big commercial banks needing to be bailed out for hundreds of billions and probably still all being insolvent and everything.
Let’s start with all the Asian money that you correctly point out was looking for a home. The home a lot of it and all the other world surplus money found was in various mortgage-backed securities. Now there’s nothing wrong with MBSs, they’ve been around a long time. But there was only a certain amount of them and still a ton of money looking for a home, so a bunch of things happened to accomodate all that cash.
Firstly there had to be more mortgages to make securities out of, so in 2003 the Bush administration scrapped a huge stack of mortgage regulations, actually taking a chainsaw and tree shears to a paper stack of regulations at a press conference attended by a bunch of regulators, people who were generally banking lobbyists who’d spent their careers trying to get regulation scrapped and were now appointed by Bush to do the regulating in a fox/henhouse strategy to deal with financial regulation. Here’s a picture of the presser :
See the guy on the left of that photograph? He was responsible for regulating AIG, and the one person in his agency qualified to regulate insurance derivatives business did so from his office in the midwest. AIG’s derivatives operation being run in London, England, didn’t help effective oversight and neither did AIG telling the regulator that they didn’t want to discuss any aspect of their business with him (and the guy in the picture OKing that stance.)
Instead of mortgage originators having to hold mortgages to maturity, something that obviously encouraged mortgage originators to maintain sensible lending standards, they were now free to sell them as soon as they wrote them to a Wall Street desperate to get their hands on quantity to slice and dice for securities. The only requirement was that a borrower not default for 90 or 180 days.
So long as the mortgage didn’t default in that period of time, it couldn’t be “put back” to the originator. A salesman or mortgage business would only lose their fee if the borrower defaulted within that 3 or 6 month contractually specified period. Indeed, a default gave the buyer the right to return the mortgage and charge back the lender the full purchase price.
So what do rational, profit-maximising busineses do? They put people in houses that would not default in 90 days – and the easiest way to do that were the 2/28 ARM mortgages. Cheap teaser rates for 24 months, then the big reset. Once the reset occurred 24 months later, it was long off the books of the mortgage originators – by then, it was Wall Street’s problem.
The vast majority of bad lending wasn’t even subprime. Losses from prime loans have already dwarfed subprime losses and there’s huge amounts of prime defaults yet to come, an impending commercial real estate crash not too far off as well. Subprime was just the canary in the coalmine and a handy way for the right to blame the meltdown on ethnic minorities.
But when mortgage companies went on a lending rampage of lending to people who shouldn’t have had mortgages, people who were previously known as “renters”, there was a mechanism to prevent it happening. We’d already had something very similar in the 1920s so a bunch of FDR-era regulations and regulators existed to prevent any wide-scale predatory lending from happening again. I’ll let the New York AG take up the story there :
*Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York’s, enacted laws aimed at curbing such practices.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.*
So now the banks hd huge piles of garbage mortgages. All they had to do was turn them into securities and sell them and they’d make serious money. Except to turn these crappy mortgages into AAA-rated paper would be impossible as the people responsible for rating them would never issue AAA ratings to crappy mortgages once they analysed the loan tapes and the other paperwork, right? You know what’s coming next, yes, ratings agencies had been left to self-regulate too. Analysts were actually fired if they refused to rate stuff they knew was garbage. Here’s one small piece of evidence that became public knowledge a while ago, an IM conversation between two analysts :
Rahul Dilip Shah: btw – that deal is ridiculous.
Shannon Mooney: I know right … model def does not capture half of the risk
Shah: we should not be rating it.
Mooney: it could be structured by cows and we would rate it.
Here’s another one :
Oct. 22 (Bloomberg) – Employees at Moody’s Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,‘’ according to e-mails obtained by U.S. House investigators.
The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody’s, Standard & Poor’s and Fitch Ratings in the global credit freeze. http://www.bloomberg.com/apps/news?pid=20601087&sid=ac8Bkp_7F4Rc&refer=home
So now it was possible to create AAA-rated paper, the same credit rating s US bonds and stuff banks could describe as Tier 1 capital on their balance sheets, out of million dollar mortgages made to unemployed meth dealers. And then you had huge side-bets on these garbage securities via derivatives like credit default swaps which ended up a far bigger market than the value of the actual securities themselves.
And on top of that in 2005 you had the Fed allowing firms like Lehman and Goldman to lever up their debt:assets ratio from 10:1 to 30 and 40:1 because they had all this rock-solid unregulated paper to hedge all their risk down to negligible levels. Whether Citi and the other commercial banks had been allowed to participate in this disaster via the repeal of Glass-Steagal iss irrelvant, that money would have just gone to the people allowed to deal in derivatives and the bubble and losses would have been just as big, Citi et al would have found a way to participate and a helpful government administration to let them.
Let’s not confuse the issue with talking about spending, which will always increase every year, let’s just look at revenues. Here are some actual numbers to help you understand how tax revenues have gone recently and the historical context.
These numbers are all in hundreds of billions :
1970
192.8
1980
517.1
1990
1,032.1
1991
1055.1
1992
1,091.3
1993
1154.5
1994
1,258.7
1995
1,351.9
1996
1,453.2
1997
1579.4
1998
1,722.0
1999
1,827.6
2000
2,025.5
So you can see the tiny increase in revenues under Bush is actually a fiscal disaster for the US budget. Historically tax revenues roughly double every ten years, something you can see above and at the link below. In the 1970s they almost tripled.
Anyway Bush took office in 2001 and enacted tax cuts which were backdated to the start of that financial year. Tax revenues should be on target to roughly double plus we see some of that Laffer increase on top of the doubling, right? Here are the numbers, again in hundreds of billions$ :
Ah yes, the old “no one is poor because they live better than nobility in the Middle Ages” argument. That’s a heaping pile of shit. First, you are neglecting value. The cassette player is so cheap because it hardly has value anymore, since the software that runs on it no longer can be bought. You can probably pick up a DOS machine for a song also - big deal. Record players seem more expensive today than they were 10 or 15 years ago. This doesn’t mean there is a drop in the real wage - just that they have become a niche, not mainstream, item. (My cite was my attempt to find a reasonably priced phonograph to replace my old one.)
We need to talk equivalent functionality at the time. Not the same things, but the things in the same places in the stores. Otherwise shoppers for the CPI market basket would have to shop in either Goodwill stores or antique stores. What are buggywhips going for nowadays?
You are also neglecting food prices, which is a lot more stable than a particular food item. Or clothing prices, or energy prices. And there is also a psychological aspect of this. Being able to afford a cassette player when they were new is very different from being able to afford one now, and reflects a totally different social status.
If this is the only argument you have against the lack of real wage growth, you’ve lost big time.
