CNN - On the Middle Class, The Uber Rich, Income Inequality

So, CNN has been running some front page articles on the demise of the middle class.  This is the reason Ravingleftatic exists!  All those other pesky issues are just side shows.  Yes, Ravingleftatic wants justice for all races, Ravingleftatic wants to eliminate torture and genocide, yes Ravingleftic wants gays to have the right to marry, yes Ravingleftatic wants religious freedom, but Ravingleftatic exists for this:  To eliminate or reduce the rising income inequality between the classes, to deny the aristocracy and the noble class and to promote fiscal equality among democratic peoples.

Which is not to say I don't believe rich people can't be rich.  But a Gilded Age, or the New Gilded Age as people are calling it is a sign of a rotting democracy.  In my old job I'd read about the excess of corporate malfeasance, parties with mountains of cocaine, hookers, secret caves, mansions, and black jack tournaments, ice sculptures, and shell companies, tax shelters and shady investment vehicles.  This is the realm of fiction, that these things actually happened was a travesty almost too much to bear.  But...I'm getting a bit ahead of myself.

The first article is the rising cost of a college education.  Now CNN articles in general are snapshots.  There is very little actual data, though it does include the following nifty chart.  Even so, the snapshot is nonetheless horrifiying.  One of the seminal liberal papers, the Philip Agre paper on "What is Convservatism and What is Wrong With It" makes a point of saying that conservatism is the last vestige of the old feudal social order.  This article highlights one aspect of that truth.  Education for all is liberalizing.  In the feudal societies, only the rich were educated, and only the priesthood.  Keeping the poor superstitious and fearful was one of the main jobs of the aristocracy.  What are fears about The Global Warming Hoax, and Birtherism but base superstitions?  So when it becomes clear that upper education is being choked off for even the middle class this ought to be cause for real concern.  And it is, however, there are some political upsides.  When I was in school, everyone was in school, my own sister used to say, "everyone has a college degree, it's not worth anything anymore."  The argument was ridiculous, but it cast doubt on the efficacy of higher education.  This was a very effective means for "the Haves" to discourage college participation.  So now, perhaps the scale will tilt forward again, particularly with unemployment so high and the facts about employment so clearly favoring those with a four year degree.

One thing to say, Obama has already done a hell of a lot more for the middle class than any conservative president has ever done.  Including the overhaul of the student loan program, which among other things forgave some student loan debt and allowed for increased college subsidies.  Still, it's not enough, and the root of the problem remains.  Income, Income Income.  The minimum wage is the smallest part of the problem.  I took economics, I understand the effect of price floors and ceilings, but something has to be done.  There is this conceit that exorbitant salaries are required to lure the best talent at the top branches.  But is that really true?  I mean, the "best talent" caused the economic meltdown to begin with.  I know, an over simplified analysis, but at the most basic level, it remains nonetheless true. 

There was one thing from this article I wanted to note, and to correct:

"Economists speculate that one reason unemployment is so high is because the American workforce lacks the skills needed to fill the jobs that are open. As a result, companies may shift these jobs overseas, where wages are often cheaper"

Ok, first off, lazy reporting.  What economists, and why are you sourcing mere speculation?  Second, I keep up on this sort of thing, so I know already who CNN is referring to (Narayana Kocherlakota), and its been debunked.  There are some economists, Chicago School, of course, who insist that the real reason for the high unemployment is because American workers aren't trained for the jobs that American companies require.  The counter argument is simple, "Job openings have plunged in every major sector, while the number of workers forced into part-time employment in almost all industries has soared. Unemployment has surged in every major occupational category." P. Krugman, continuing, "percentage citing problems with labor quality is now at an all-time low, reflecting the reality that these days even highly skilled workers are desperate for employment," citing the NFIB.  Third, and last, there is a weird logical leap between the first sentence and the second, namely that since companies can't find workers in America, they're going overseas where labor is cheaper?  I think the author spliced two valid ideas here, incorrectly.  Outsourcing is a common enough problem, but it occurs when wages are too high, and usually occurs with unskilled labor.  So outsourcing the help desk is a good example.  Sending those jobs to India saves the company money, but they're not doing it because the labor pool is too small.  Now, a small wage pool drives up prices, but with 10% unemployment, a small wage pool is NOT our problem.  What the author should have stressed is that companies, with all time low demand, are searching to cut costs to improve margins, and searching the bottom of the barrel for the cheapest way to get product to market.  Which of course, dilutes everything, because no one here can afford to buy the product, and so it goes.

Moving on.  Another article "How the Middle Class Became the Underclass."  Go CNN.  Or actually go Annalyn Censky, who happened to pen all three of these articles.  There isn't much in this February article that I hadn't read already, but its good that someone in the mainstream media keeps bringing this subject up.  This isn't free market capitalism, its the height of market inefficiency, with billions of dollars wasted, sitting in trust funds or in various investment vehicles where it isn't getting spent or creating further value.  This needs to be highlighted, studies need to be ran on the loss of economic growth from this stagnation.  And more articles about the opulence of the top 1% need to be written and sensationalized.  People need to be more angry.  And they need to know.  This isn't capitalism, this is feudalism.  Which brings up one of the most important points in the piece, the decline of unions.  Private workers are mad at public workers, because the private unions are almost non-existent, and so workers in government are better paid.  This is a myth which has also been debunked--the truth?  There aren't any valid statistics to support a claim either way.  Federal workers are more educated, more federal jobs are white collar, and the government has contracted out many low-skilled jobs, further skewing the average.  One thing is for sure, Federal workers get better benefits -- duh!  That's the point of collective bargaining!  One other thing I think needs to be said in defense of federal workers.  There is a strict hiring procedure, a strict raise and payment procedure which is difficult to game, and often very stagnant, making it harder to rise in the ranks, or get raises in the public sphere.

The article also attacks globalization as a part of the reason for the rise, namely, the exploitation of new wage pools and untapped markets.  Anytime a new pool is tapped, the market makes adjustments, and those adjustments take generations to reach anything approaching "efficient."  For example, after 50 years of cheap Chinese labor, demands for higher wages are finally being met.  And so they move the factories to India.  The sad fact is that the creation of the middle class was ultimately countenanced by the Black Death, and the commensurate labor shortage.  Still, even if it takes generations many of these bumps will get ironed out.  At the cost of millions of lives crushed in meaningless poverty.  This is the reason the government needs to be an actor in this drama.  Lives are at stake and a nation's duty is to the welfare of all of its people.  And then there are the aristocrats who fight tooth and claw to turn back the clock.  Anyway, I rave.

Another thing the article points out, "In 2000, the Commodity Futures Modernization Act also weakened the government's oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector. "  This is a good thing to know.  It was the last in a series of "reforms" made by the last four presidents.  In financial history, you should learn the name of the CFMA, and its often overlooked.

The last article bothers me.  Not because its point, I agree with it. "How the Rich Became the Uber Rich" but because of its tendency to place blame equally on both sides of the aisle.  There' one offs, simple lines like "The idea of deregulation gained momentum through several decades of policy put forth by lawmakers on both sides of the aisle and the Federal Reserve."  Or, in the previous article, "A major game changer came during the Clinton era, when barriers between commercial and investment banks, enacted during the post-Depression era, were removed," while this is essentially true, I find it oversimplifies in an effort to be judicious in placing blame.  Why be judicious?  The Gramm-Leach-Bliley Act was proposed by three Republicans, and passed mere months before GWB became president!  Not only was Clinton barely acquitted of impeachment eight months before, he was the lamest of lame ducks!  Dennis Hastert was the leader of the Republican majority elected in 1998, Trent Lott lead by 55 seats in the Senate!  Obama will also get blamed for extending the Bush taxcuts, and from a Ravingleftatic, that's completely valid, Obama capitulated.  But from the right, it's sheer hypocracy, those taxcuts were forced on us, again, by a new Republican house!

At anyrate, props to my girl Annalyn Censky.