Can Inequality in America Get Any Worse?

PBS Frontline has a special airing on Tuesday night (7/9/13) on our growing inequality issues.  Check out the trailer for that program.  More on this below the fold.

I encourage you to watch that program and if you feel so inclined, I’ve linked out to a handful of related articles below.

Losing Our Way

It seems we’ve allowed ourselves to fall into a reverse Robin Hood economic mess and we need to better inform ourselves if we’re going to pull ourselves out of it. (And that’s to say nothing to of the growing challenges of resource constraints which further complicate matters.)  The chart below shows the trend of our Gini Coefficient over the past four plus decades.

The Gini Coefficient is a relative measure of equality/inequality in which zero would represent perfect equality in which all citizens were financial equals and a Gini score of 1 would represent a country in which all the money was held by a single person.  Scores tend to fall between .25 and .60 for countries which report scores.

As you can see, there are countries that have it worse than the U.S., but we’ve made up a lot of ground on them in recent years.

I believe that fabric of society is held together by a human relationships and the commonly held belief that the systems which are in place are fair and just.  The figures above tell me those things are headed out the window, if they haven’t already left.

The foundation of this country, the thing that made us the envy of much of the world, was the promise of the American Dream.  The idea that anyone could improve their lot in life by working hard, following the rules, and persisting through adversity.  In a fair and just system with opportunities, those virtues seem well placed, but in a system that does not reward those, toeing the line seems less virtuous and more obedient.

The things I might have expected to teach my kids to value, seem less important than they once did.

“Follow the rules.”

“Be patient.”

“You should be happy you have…”

The list goes on.

So much of what our predecessors taught us seems more geared to keeping us under a thumb rather than making us valued and valuable people.  Given the results, maybe we should worry less about teaching our kids to follow the rules and more about being free thinkers who can give the world a nudge towards a better direction?

As goes the American worker, so goes America.

Back to the question in the title.  Can it get any worse?

Answer:  A whole lot.

If we let it.

Further reading:

The New Yorker: The Fall of the American Worker
Zero Hedge: 15 Signs That The Quality Of Jobs In America Is Fading Fast
CNBC: State of the American Dream Is Uncertain

The Importance of Excel

Given today’s news on Reinhart & Rogoff’s potential Excel blunder, this February post from The Baseline Scenario seems prescient.

But while Excel the program is reasonably robust, the spreadsheets that people create with Excel are incredibly fragile. There is no way to trace where your data come from, there’s no audit trail (so you can overtype numbers and not know it), and there’s no easy way to test spreadsheets, for starters. The biggest problem is that anyone can create Excel spreadsheets—badly. Because it’s so easy to use, the creation of even important spreadsheets is not restricted to people who understand programming and do it in a methodical, well-documented way.***

The Baseline Scenario

By James Kwak

I spent the past two days at a financial regulation conference in Washington (where I saw more BlackBerries than I have seen in years—can’t lawyers and lobbyists afford decent phones?). In his remarks on the final panel, Frank Partnoy mentioned something I missed when it came out a few weeks ago: the role of Microsoft Excel in the “London Whale” trading debacle.

The issue is described in the appendix to JPMorgan’s internal investigative task force’s report. To summarize: JPMorgan’s Chief Investment Office needed a new value-at-risk (VaR) model for the synthetic credit portfolio (the one that blew up) and assigned a quantitative whiz (“a London-based quantitative expert, mathematician and model developer” who previously worked at a company that built analytical models) to create it. The new model “operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and…

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What does Social Security have to do with the Deficit?

I think I know the answer to this, but I thought it might help others if we brought in a trusted figure so that we could be certain that we’ve nailed this down.  With that, I present to you our former president, Ronald Reagan.

President Reagan, what does Social Security have to do with the deficit?

Thank you Mr. President, but I’m still a bit fuzzy on the particulars. I thought you said that if we reduced Social Security benefits, that we’d be able to use those funds to reduce the deficit.  Could you go over that bit again, sir?

My fault entirely mister president.  I had this completely confused.  I now understand that Social Security does not contribute to the deficit as it is a stand alone fund that is contributed to separately from the general tax fund.  Thank you for clearing that up, sir.  I feel better knowing how Social Security is funded and that it is not contributing to the deficit.

I have one more question Mr. President.

Could you tell me if defense spending contributes to the deficit?


The source for the video and therefore the impetus for the post came from here.

Are we backing into austerity?


First it was the debt ceiling.  Now we’re cleaning up the fiscal cliff mess, but there are rumblings that we’ll have another debt ceiling showdown in the coming months.  Republicans should be ceding ground as they hold only one of the three houses of power in Washington (gerrymandering aided at that), but instead they’re repeatedly holding the economy hostage for their political gains.  (We already have a reverse Robin Hood system which facilitates an upward transfer of wealth through cartoonishly low tax rates on capital gains and estates.)  If those who could oppose them continue to blink, the situation will continue to deteriorate.  The weak economic recovery will stall and those who wish to dismantle the social safety net will be in a better position to do so.  Hilarity will not ensue.

The old axiom “Never negotiate with terrorists” seems to hold water here, but what do I know, I’m just a poor boy…

I have squandered my resistance

For a pocket full of mumbles such are promises

All lies and jests

Still a man hears what he wants to hear

And disregards the rest

-Simon and Garfunkel “The Boxer”

The Fiscal Cliff, Just Another Serving of Sabotage

You’re scheming on a thing that’s a mirage.

I’m trying to tell you now, it’s sabotage.

-The Beastie Boys

I just finished reading Daniel Altman’s (@altmandaniel) “Sabotage,” a book that details recent congressional efforts to obstruct economic recovery.  Altman’s book takes a close look at last year’s debt ceiling negotiations and surrounding matters.  He delivers strong evidence and logic in stating that it was a manufactured crisis intended to force concessions from President Obama.  I thought it a great analog for the current fiscal cliff negotiations, which shouldn’t be much of a surprise since the current mess is the bastard child of the former.  Here’s a sample of Altman’s perspective on said negotiations.

The Republicans’ first move was unprecedented in political and economic history. To demonstrate their newfound power, they drew a line in the sand, refusing to raise the nation’s debt limit unless the president and the Democrat-controlled Senate agreed to long-term cuts in the nation’s spending.

-Daniel Altman

The old chestnut of “Never waste a good crisis,” is now never waste the opportunity to manufacture and exploit a wildly unnecessary non-crisis.

As I stated in a post last week (How I Learned to Stop Worrying and Love the Fiscal Cliff), it’s time to go over the bump and let the pressure amp up on congress to clean up their mess for those who truly need help.  The rest can fall by the wayside.

Now, if you’re still worried about the cliff, Altman’s book may help put things in perspective.  If you’ve already done that, the book is still a great read.

Still here?  Then I’m guessing you need the song.

I wouldn’t want to disappoint.