Month: October 2011

When you see things like this, it’s tempting to think one of the biggest problems in American politics is that the Democrats are a little league team playing against the Yankees. But no team can be this out of its league:

Market Instability and the Plight of the Rich
by David Atkins (“thereisnospoon”)

In case you missed it, there was another “pity the poor rich” article this weeknd in the Wall Street Journal. The main upshot was that the incomes of the wealthy have grown increasingly unstable over the past 20 years–and apparently, that we should feel sorry for them or something, even as the upper 1% and especially the top 1/10th of 1% continue to far outpace the rest of us. Case in point was the family of epic douchebags known as the Siegels:

Jacqueline Siegel paces the floor of her unfinished 7,200-square-foot ballroom. The former beauty queen, with platinum-blond hair, blue eye shadow and a white minidress, clacks along the plywood construction boards in her high heels trailed by a small entourage of helpers and staff.

“This is the grand hall,” she says, opening her arms to a space the size of a concert hall and surrounded by balconies. “It will fit 500 people comfortably, probably more. The problem with our place now is that when we have parties with, like, 400 people, it gets too crowded.”

The Siegels’ dream home, called “Versailles,” after its French inspiration, is still a work in progress. Its steel-and-wood frame rises from the tropical suburbs of Orlando, Fla., like a skeleton from the Jurassic age of real estate. Ms. Siegel shows off the future bowling alley, indoor relaxing pools, five kitchens, 23 bathrooms, 13 bedrooms, two elevators, two movie theaters (one for kids and one for adults, each modeled after a French opera theater), 20-car garage and wine cellar built for 20,000 bottles.

At 90,000 square feet, the Siegels’ Versailles is believed to be the largest private home in America. (The Vanderbilt family’s Biltmore house in North Carolina is bigger at 135,000 square feet, but it’s now a hotel and tourist attraction). The Siegels’ home is so big that they bought 10 Segways to get around—one for each of their eight children.

After touring the house, Ms. Siegel walks out to the deck, with its Olympic-size pool, future rock grotto, three hot tubs and 80-foot waterfall overlooking Lake Butler. Her eyes well up with tears.

Versailles was supposed to be done by now. The Siegels were supposed to be living their dream life—throwing charity balls and getting spa treatments downstairs after a long flight on their Gulfstream. The home was the culmination of David Siegel’s Horatio Alger story, from TV repairman to chief executive and owner of America’s largest time-share company, Westgate Resorts, with more than $1 billion in annual revenue and $200 million in profits.

Sadly, due to the crash in the real estate market that hurt the timeshare industry, the Siegels are having to put their poor “Versailles” up for sale for a mere $75-$100 million, let the bank repossess their private Gulfstream, and stay in their 26,000 square foot mansion instead. The loss of the plane will really hurt the kids’ self-esteem though:

Ms. Siegel has started a nonprofit called ThriftMart, a mega thrift-store that sells donated clothes—many from her own closet—and other items for $1.

She does miss one luxury—the Gulfstream. After they defaulted on the $8 million jet loan, the banks seized the plane. The Siegels can use it only occasionally, with the banks’ permission.

Recently, the family boarded a commercial flight for a vacation, making for some confusion. One of the kids looked around the crowded cabin and asked, “Mom, what are all these strangers doing on our plane?”

There are so many different angles to take on this story that it’s hard to know where to begin. One could rant against the repulsive notion that we should feel the least bit sorry for people who still have far more money than they could remotely actually need in a lifetime taking a bath because they tried to build an American Versailles. Or one could point out that Westgate Resorts is one of the more odious timeshare companies out there, and that the Siegels’ business largely consists of suckering and bilking people out of their money for a product they won’t actually use. There is a lifetime’s worth of fire-breathing progressive sermons just in the Siegels’ story alone.

But I’ll be kind and take the article on its merits for the main point it was trying to make, summed up here:

Their story might seem like the exception among the rich, who, we’re told, just keep getting richer. Yet episodes like the Fall of the House of Siegel are becoming increasingly common as the wealthy undergo a sweeping and little-noticed revolution. The American rich, who used to be the most stable slice of the personal economy, are now the most volatile, with escalating booms and busts.

During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country’s. When the economy falls, their incomes fall two or three times as much.

The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%—far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.

Of course, the trauma of giving up a Gulfstream or a yacht can’t compare with the millions of Americans who have lost their only job or home. The Siegels will make do in their current 26,000-square-foot mansion.

The incomes of the wealthy can also be “managed” through selling stock, exercising options and shifting around business losses. Yet their income volatility is roughly the same when options are excluded, and their accumulated wealth is also highly unstable.

During the 1990 and 2001 recessions, the richest 5% of Americans (measured by net worth) experienced the largest decline in their wealth, according to research from the Federal Reserve. As of 2009, the richest 20% of Americans showed the largest decline in mean wealth of any other group.

Yet the rise of the manic millionaire marks something new in the U.S. economy and will increasingly be felt by the rest of the country. With the wealthy now at the center of the political debate, from the Occupy Wall Street protesters in New York to the tax battles in Washington, portrayals of millionaires and billionaires are being shaped more by partisan ideologies than economic realities. The story of more volatile wealth may not fit neatly with either party’s agenda, but it offers a clearer view of the rich—who they are, how they got there, and how they will drive our own economic futures.

Though often described as a permanent plutocracy, this elite actually moves through a revolving door of riches, with some of today’s nouveau riche becoming tomorrow’s fallen kings. Only 27% of America’s 400 top earners have made the list more than one year since 1994, one study shows.

There are two major sleights of hand in this argument: the first is the false suggestion that the wealthy are experiencing the same sorts of losses in this economy that the rest of us are. This is simply not true: the wealthy continue as a class to remain wealthy, and in fact they are growing richer and richer compared to the rest of us. The second sleight of hand is the idea that the wealthy are somehow falling into poverty or even into the middle class. This is also not true. It’s true that sometimes the very rich become the mega-rich (say, one of the top 400 people who have more wealth than the entire bottom half of Americans), and then slide back down the scale to simply being very rich. Maybe they have to get rid of their private jets. But they don’t stop being rich.

Still, giving the author of the article an extreme benefit of the doubt, this is what happens when a nation relies on financialized assets for its economy. It gets massive volatility–which is precisely what major industrialized economies should be trying to avoid.

Interviews with more than 100 people with net worths (or former net worths) of $10 million or more, and a wave of new studies on the rich, suggest a different cause: the “financialization” of wealth. Simply put, more wealth today is tied to the stock market than to broader economic growth. A larger share of today’s rich make their fortunes from stock-based pay, shares in publicly traded companies, selling a business or working in finance.

Because the stock market is up to 20 times more volatile than overall economic growth, the market-based fortunes of the wealthy are now more unsteady. Fast-moving global capital is also creating more asset bubbles, which have become their own self-destructing wealth machines.

This all falls under the rubric of what Americans are so upset with Wall Street about, and why the Occupy protests have gained such traction. It’s not just the poor and the middle class who experience volatility as a result of over-financialization. The rich experience negative repercussions as well.

There is a battle afoot between the people who want to see economic stability and sustainability even at the expense of short-term growth, and the people who want the entire world careening with nausea on an asset-based rollercoaster in pursuit of next quarter’s frothy profits. The funny thing is that the latter crowd call themselves “conservatives.” Strange moniker, that.

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Smoker and the bandit

by digby

Real Americans smoke dammit!

Cain’s a cancer survivor, but what the hell.

Update: Oh my dear God.

Austerity for dummies

by digby

I hate to hit Paul Ryan twice in one day, but this is so mind-bogglingly disingenuous that you have to assume the man is either a sociopath or extremely disabled:

RYAN: Let’s review for a moment the path we are on, where we stand right now. It pains me to say this, but it’s become clear that the president has committed us to the current path: higher taxes, more dependency, more bureaucratic control, inaction on the drivers of our debt — just not even dealing with it — and painful austerity, the kind you see in Europe.

This is very clever Orwellian gobbledygook. I would guess that the Republicans have found that the word “austerity” has penetrated and has negative connotations. So they are trying to shift the definition. It’s quite a bold move even for a Randian menace like Ryan.

As we all know, Europe is a welfare state and that’s very bad because it creates “welfare queens” who suck all the money from the hard working tax payers. (This is why Germany and France are nothing but hellhole ghettos where you can’t even find a WalMart when you need a quick case of Capn’ Crunch and Dr. Pepper.) Anyway, they gave all kinds of benefits to their welfare queens and now they have to live under austerity — something we can only avoid if we cut government spending and taxes on the wealthy.

I don’t know if it will work, but I do know that it gave me a headache when I read it so I’d guess it has a pretty good chance of sufficiently confusing the issue.

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Tristero’s story

by digby

Most of you probably know that Hullabaloo contributor “tristero” is the pen-name of composer Richard Einhorn. What you may not know is his recent story. The New York Times had it this morning:

After he lost much of his hearing last year at age 57, the composer Richard Einhorn despaired of ever really enjoying a concert or musical again. Even using special headsets supplied by the Metropolitan Opera and Broadway theaters, he found himself frustrated by the sound quality, static and interference.

Then, in June, he went to the Kennedy Center in Washington, where his “Voices of Light” oratorio had once been performed with the National Symphony Orchestra, for a performance of the musical “Wicked.”

There were no special headphones. This time, the words and music were transmitted to a wireless receiver in Mr. Einhorn’s hearing aid using a technology that is just starting to make its way into public places in America: a hearing loop.

“There I was at ‘Wicked’ weeping uncontrollably — and I don’t even like musicals,” he said. “For the first time since I lost most of my hearing, live music was perfectly clear, perfectly clean and incredibly rich.”

What’s a hearing loop?

His reaction is a common one. The technology, which has been widely adopted in Northern Europe, has the potential to transform the lives of tens of millions of Americans, according to national advocacy groups. As loops are installed in stores, banks, museums, subway stations and other public spaces, people who have felt excluded are suddenly back in the conversation.

A hearing loop, typically installed on the floor around the periphery of a room, is a thin strand of copper wire radiating electromagnetic signals that can be picked up by a tiny receiver already built into most hearing aids and cochlear implants. When the receiver is turned on, the hearing aid receives only the sounds coming directly from a microphone, not the background cacophony.

One of the people featured in the article compares it to wheelchair ramps. Obviously, this should be available in all public places.

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Radical Conservatives
by David Atkins (“thereisnospoon”)

Howie Klein has a great post today assembling bits and pieces from Corey Robin’s The Reactionary Mind, Robert Reich’s recent column on flat taxes, and New York Magazine’s profile on Mitt Romney.

The most insightful bit is the juxtaposition of a particular Dinesh D’Souza quote taken from Robin’s book, with the newfound universal love of flat taxes from the GOP frontrunners. Here’s the D’Souza quote:

“Typically, the conservative attempts to conserve, to hold on to the values of the existing society. But… what if the existing society is inherently hostile to conservative beliefs? It is foolish for a conservative to attempt to conserve that culture. Rather, he must seek to undermine it, to thwart it, to destroy it at the root level. This means that the conservative must… be philosophically conservative but temperamentally radical.”

At its core, conservatism has been since the 18th century a slow, grinding fight against the Enlightenment. Religious conservatives are explicitly opposed to the secular humanism that accompanied Enlightenment thinking, and believe that society went off the rails when the Church stopped being the center around which the social order was constructed. Islamists in the Arab world are cut from precisely the same cloth. One of the challenges liberals face is what to do when the principle of national auto-determination runs up against the principle of universal human rights; some progressives think the former takes higher priority, while others see more value in preserving the latter in the interest of Enlightenment principles, even through use of force.

Economic conservatives object to the notion of economic fairness to which Enlightenment principles inevitably lead: it makes no rational sense that the work of someone who plays around and takes risks with other people’s money while crashing economies should be valued at 10,000 times the worth of the work of a teacher or a firefighter. There are Enlightenment-centric arguments to be made for economic libertarianism in a world that presumes that markets are free and each individual makes every decision rationally in their own best interest with the most perfect information available. But that is not the world we actually live in, and the imperfections of human nature and information availability make a farce of the economic libertarian ideal.

Knowing how odious anti-Enlightenment arguments appear in the modern world, conservatives have recently found some success in muddying the waters by attempting to graft race, language, gender religion and other cultural constructs onto the Enlightenment, suggesting that only English-speaking white Christian males can truly implement a society based on its ideal. That idea is central to the Tea Party delusion, which twists the Founding Fathers’ radically progressive views for their time in history, into a culturally conservative Christianist mishmash. Of course, the idea that only certain classes of human beings are capable of rational humanistic thought is directly contrary to the basic principle of the very civic ideals conservatives profess to protect.

In essence, as D’Souza rightly points out, conservatives aren’t actually looking to preserve society as we know it, but rather to destroy it. It’s drastically imperfect to be sure, but Western society is based on and strives for humanistic ideals. It often falls far, far short of the mark. But those are the ideals we teach our children, and those ideals are in the very air we breathe.

Conservatives have to work to destroy that through radical means–increasingly so as the social order seems to veer farther and farther away from their anti-Enlightenment grasp.

That’s why we’re seeing such increasing radicalism from the Far Right, one example of which is the mainstreaming of the sort of “flat tax” craziness that used to be a fringe curiosity of whacko candidates like Steve Forbes.

Despite all the progress they’ve made in 30 years dismantling liberal institutions, conservatives have a sense–and probably a correct one–that they’re one step away from losing this ballgame entirely. Demographic trends combined with increasing cultural liberalism, the decline of religion as a centerpiece of society, and increasing economic liberalism among successive waves of the nation’s youth are terrifying for them.

Yes, economic inequality is at a record high, the bankers are getting away with economic murder for now, and multinational corporations are making out like bandits. But that’s largely been due to the lack of a countervailing ideological force since the fall of Communism. State communism was a drastic misstep that abused enlightenment principles even worse than capitalism did. Mao Tze Tung and Josef Stalin were the two most egregious mass murderers in world history, and the demise of the ideology to which they hewed is not regrettable.

But it had the effect of temporarily maximizing the power of radical Capitalism based on equally crazy Objectivist principles. But those days are numbered, too, as the Occupy movement is demonstrating. A new progressive economic consciousness is rising worldwide, based on the idea that one needn’t create politburos to keep corporate monopolists in check while enforcing enlightened economic fairness for all people.

Conservatives are scared, and they know that they have to take increasingly radical measures to fight back. Which means things are going to get worse before they get better.

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The “Real” Class Warfare

by digby

If you’re in DC, you won’t want to miss this Heritage Foundation extravaganza on Wednesday:

OCT
26

Saving the American Idea: Rejecting Fear, Envy and the Politics of Division

The American commitment to equality of opportunity, economic liberty, and upward mobility, is not tried in days of prosperity. Instead, it is tested when times are tough – when fear and envy are used to divide Americans and further the interests of politicians and their cronies. In this major address at The Heritage Foundation, Congressman Paul Ryan will dissect the real class warfare – a class of governing elites, exploiting the politics of division to pick winners and losers in our economy and determine our destinies for us. In his remarks, Congressman Ryan will outline a principled, pro-growth alternative to this path of debt, doubt and decline.

I hate the politics of envy and division, don’t you?

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Picking the right target

by digby

CNN has a new poll:

Among those who have an opinion, the public is split on how they feel about Occupy Wall Street. Thirty-two percent of Americans say they have a favorable view of the movement that has spread from Wall Street to Chicago, and that even cropped up at the most recent CNN presidential debate in Las Vegas. Twenty-nine percent of the nation says they have an unfavorable view of Occupy Wall Street.

But opinions are clear about Wall Street itself. Eight in ten say Wall Street bankers are greedy, 77% say they’re overpaid, and two-thirds say Wall Street bankers are dishonest, a number that has gone up by a third in roughly two decades.

In case you were wondering: 65% of Tea Partiers have an unfavorable opinion of OWS. And perhaps most unsurprising is the fact that they have the greatest faith in Wall Street of all cohorts in the poll, even believing that they are honest in much higher numbers than the rest of the country. (They do agree that they’re greedy, but I’m guessing they see that as an admirable quality. )

Moral Hazards for me but not thee

by digby

So the administration is sufficiently worried about getting re-elected in this economy that they are apparently casting a serious eye toward the housing market and using re-financing as a new stimulus. The road to getting there is revealed in this long WaPo article about the debates within the White House over the past three years about what to do with the massive numbers of foreclosures. It’s well worth reading in its entirety, but I think this gets to the nub of what happened (or rather didn’t happen):

The advisers also worried about the problem of “moral hazard,” when forgiving debts could encourage borrowers not to pay back loans.

Rather than targeting debt, the administration focused its efforts on making monthly mortgage payments more affordable — for example, paying banks to lower the interest rates on loans. At the end of the day, homeowners would still have as much debt

Even with this less-dramatic approach, Obama’s economic advisers worried about spending too much taxpayer money to help borrowers who still might not pay back their loans. So they excluded large categories of borrowers, including those who could not provide extensive documentation of a steady income.

A debate unfolded at the White House about whether to try to reduce the debts of underwater borrowers, which could increase their confidence and free them to spend more, or to sell their homes and seek jobs elsewhere.

Obama sought to strike a difficult balance, as he often did.

“A lot of his concerns and questions were about trying to figure out how we could do more on housing,” said Michael Barr, a former assistant Treasury secretary, “while also being mindful of the costs and risks, and making sure our approach was fair to taxpayers and homeowners who were not going to directly be getting helped.”

As virtually everyone in the nation who read that article this morning undoubtedly exclaimed: there’s certainly no moral hazard to worry about in “too big to fail,” but you wouldn’t want to let the plebes get the idea that they don’t have to pay through the nose for being on the receiving end of a fraudulent loan. Makes the country weak.

And yes, we have President Goldilocks once again trying to find a “balance” between doing nothing and something. As usual, it added up to almost nothing.

I realize that Rick Santelli is a fearsome human being with super-natural powers, but I’m afraid that I just don’t believe that the administration was afraid of the Tea Party or that Tim Geithner was worried about the nation’s moral fabric. They were afraid of the bankers.

“If you’re going to do something make sure what the law says about it first”

by digby

That was said by one of our freedom worshiping GOP politicians. Without irony:

The teacher who heads up New Smyrna Beach High School’s student government association could face thousands of dollars in fines. Her transgression? Helping students register to vote.

Prepping 17-year-olds for the privileges and responsibilities of voting in a democracy is nothing new for civics teachers, but when Jill Cicciarelli organized a drive at the start of the school year to get students pre-registered, she ran afoul of Florida’s new and controversial election law.

Among other things, the new rules require that third parties who sign up new voters register with the state and that they submit applications within 48 hours. The law also reduces the time for early voting from 14 days to eight and requires voters who want to give a new address at the polls to use a provisional ballot.

Republican lawmakers who backed the rules said they were necessary to reduce voter fraud. Critics — including U.S. Sen. Bill Nelson, who testified before a congressional committee — said the law would suppress voter participation.

[…]

Cicciarelli was on maternity leave in the spring when the Republican-led Legislature adopted the new rules, largely on party lines. Supporters said it was necessary to prevent voter fraud, though elections supervisors like McFall said they haven’t had a problem.

“I don’t see it,” she said in a telephone interview last week from her office in DeLand. “I truly don’t see it.”

But supporters of the law view it as an attempt to be proactive at a time when elections are becoming so contentious that the potential for fraud is always a threat.

“There are reasons for the law,” said state Rep. Dorothy Hukill, a Republican from Port Orange who voted for it. “Part of the reason is to protect people like (the students), so they know they’re being registered properly.”

It’s still easy to register to vote, Hukill added, even if it means third-party groups that want to hold registration drives might have to do some more homework in advance.

“It does point out the need for more public education,” Hukill added. “I applaud the poor teacher’s efforts to get her students involved. She just didn’t know. It just goes to show if you’re going to do something, make sure you know what the law says about it.”

We know what this is all about, of course. I have no idea how many of these students might be of the wrong race, so perhaps they just got caught in the net by mistake. But it occurs to me that if this keeps up the Republicans are going to regret doing what they’ve done. What makes them so sure that their voters are so smart and dedicated that they won’t mind jumping through these ridiculous hoops to get registered to vote? It’s not as if they are all educated elites …

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