Finally! We're heading for equality!
For the last 10 to 15 years, the rich are getting poorer and the poor are getting poorer. Everybody's in the same boat and the falling tide is lowering everybody.
Better yet, all races are getting poorer at the same time! We're all in this together!
I wonder where all the money has gone?
Ahhhh. Found it! The chart below is United States Government Spending (all levels) per capita in constant 2005 dollars. We pay approximately 3 times as much per person as we did 40 years ago.
Yes, yes, I know. I've painted the most dismal and pessimistic picture possible with these three charts. However, the above charts happen to match my observations and daily experiences so perhaps that explains my pessimism.
For better or worse, I think the United States requires forward momentum in terms of wealth generation to exist for the long term in its current form. Another decade or two of stagnation coupled with continued growth of government spending per capita and the continuing onslaught on an increasing regulatory burden will cripple this country.
I'm strongly encouraging my daughters to look for opportunities beyond our borders.
43 comments:
Let me pre-empt - "without all the spending, it would be even worse!".
LOL.
But maybe.
My frustration is more that we're all getting poorer while government, an entity that I'm inherently not particularly comfortable with, is more and more in-my-face.
I'm not saying that I'm certain that the government spending hasn't kept things from being even worse. I personally don't see convincing evidence for Krugman's (and others') assertion to that effect, but it doesn't mean they're wrong.
But, in my opinion, it's still not a good set of trends for the United States, no matter what the causes and relationships.
You think this is bad?
Wait for when the Barbarians start invading!
Oh, wait, who are those Latinos crossing the border? Fiiiiire!
:-)
Heavy government spending and regulation tends to increase stratification as well, hollowing out the middle classes that are the true lifeblood of a nation's wealth. Another example where the government "cure" actually makes the disease worse.
You are engaging in shenanigans.
The vertical scales aren't even remotely the same, so the increase in government spending looks far greater than it is, which masks the difference between ratio and magnitude.
The actual increase in spending over the period leading up the the 2007 recession is $10,000. The income increase for the median earner over that period was just about $10,000. For higher earners, it was far more.
(BTW, I'm picking the recession as an end point because it was caused by the CRA, not government spending.)
And the median household income chart is a better proxy for the divorce rate and delayed marriage than it is for income.
Anyway, I would agree that with more federalism we would be wealthier, but the conclusion that we are getting poorer, or even stagnating, can't possibly be true.
After all, government spending at all levels as a percentage of GDP has increased by only about 3%, on average, over what it was in 1970. The only way we can be spending three times as much per person over that period, while scarcely changing the percentage of GDP is that we have, indeed, gotten a lot richer over that period.
Hey Skipper,
I forgot to mention that I'm focused on the period from 2000ish to the present. Before that things were progressing okay.
I've added that detail to the main post.
Let's follow AOG's lead and have a contest guessing what leftist responses would be:
"But think of the social peace dividend. This is why crime rates are falling".
"Not to worry, once total equality is reached, people will start working that much harder for the common good"
"The third world won't hate us anymore and so we can cut defence and pay everyone a peace dividend"
"It'll be very close, but we just might save the planet after all"
"But don't you see, when we reach total equality we won't even need a government anymore."
"At some point, you've made enough money"
"We need to spread the wealth around"
"when it's egalitarian poverty, nobody really feels it"
"At last we'll be able to hold our heads high at the UN and look Burkina Faso in the eyes"
"This is really going to bring people together"
"Maybe this will make people stop their compulsive shopping and focus more on human rights and equality for women"
"Finally--an anti-obesity program with promise"
BTW, Bret, don't bother to suggest your daughters look up here. We're gonna build a wall. Quarantine. I'm telling you, this is an anti-Americanism I could get into.
LOL. Do I get to pick the winning slogan?
So far it's "Finally--an anti-obesity program with promise."
Hmmmm, aog's latest entries sound remarkably familiar.
Peter,
My family came from eastern europe to the U.S. via Canada. Nearly all my 2nd and more distant cousins live in Toronto, Vancouver, and Ottawa.
You wouldn't want to keep families separated, would you?
Bret;
Good eye.
Peter;
"Nobody can afford to buy guns or bibles now!"
"The conservatives are poor!"
"Contraceptives are free!"
"We could have been better off? What difference, at this point, does that make?"
"The cow is dead!"
At last we'll be able to hold our heads high at the UN and look Burkina Faso in the eyes.
Dammit, still wiping off the monitor.
Let me add one:
"It was all the making of policies those conservatives have been imposing since Reagan!"
Funny or not, it is true.
It's for the children.
Clovis;
I think you're zero for two on that.
erp;
Leftists are simply never responsible for anything - not for what they say, what they do, or the results of their policies. Unless it's cooperating with the real enemy, conservatives, the only people who can be held accountable for anything (see Clovis' comment). Why so many American citizens happily support an elite who have demonstrated, over and over, this total lack of any sense of responsibility, is a mystery to me.
AOG:
I am right on my last economic remark - Krugman told me so and I believe him. (Did not see this one in the above contest yet)
As to your question, the answer is simple: you still have enough people in America with good senses, so "many American citizens happily support" better policies than shutdown of government.
Or so I and the rest of the world believe. If we are proven wrong in a few weeks, you may start losing your Exorbitant Privilege - an economic term that you do not look to understand but is fundamental to explain why US is not following all the wrong predictions of your anti-Krugman economists.
Exorbitant Privilege? In capitals, no less. I'd never heard of it before, but I see it's ostensibly a technical economic term. Talk about an objective term loaded with negative rhetorical punch! Who wants to be the GOP spokesman charged with hitting the hustings to defend Exorbitant Privilege?
Apparently the term was invented by the French, which I find very easy to believe.
Clovis;
Isn't the entire point of the original point that we are in facting following the predictions of the "anti-Krugman economists"? As for a shutdown, I would put the blame on the side that refuses to negotiate. Feel free to argue with me over here.
Peter;
There's strong evidence that destroying America's Exorbitant Privilege is a goal of the Obama Administration. They've certainly managed it in the diplomatic sphere with Syria, why not currency too? Eventually the Qualitative Easing will do the job if other policies don't. I mean, we have a President who thinks you need to raise the credit limit on your credit card to pay it off. I mean, no one could really be that economic ignorant, right?
I assume you mean Quantitative Easing, AOG. There's another one. Doesn't that sound soothing--a bit like slowly taking a heavy burden off one's shoulders at the end of a hard day? Bliss. So, in one corner we have Exorbitant Privilege and in the other, Quantitative Easing. And you are scratching your head wondering why so many vote for the other side?
AOG:
It may be Obama's fault, it may be Republican's fault - what I can assure you is that, for the rest of the world, it really does not matter, the final result (erosion of confidence in the currency) will happen anyway if the situation gets to the worst (international default plus chaos amid shutdown of govt).
For example, throughout the last subprime crisis I remember Brazil and China started serious steps towards making their commercial dealings without dollars. Similar ideas developed among other countries too. Since the crisis has been fading away, the idea is getting less attention. It may look more urgent again if the fratricidal fights in the US hinders the dollar more seriously.
'Heavy government spending and regulation tends to increase stratification as well, hollowing out the middle classes that are the true lifeblood of a nation's wealth. Another example where the government "cure" actually makes the disease worse.'
Wow, And how does that work?
When was stratification more evident, 1890 or 1990?
I agree the middle has been hollowed out, but don't see how government spending did it.
I am surprised all the economic experts here do not know about Exorbitant Privilege; and personally disappointed they did not read RtO's review of Barry Eichengreen's 'Exorbitant Privilege.'
It's not too late: http://www.mauinews.com/page/blogs.detail/display/3550/book-review-225--exorbitant-privilege.html
Allow me to quote the last sentences:
"The fate of the dollar as a reserve currency, or even as currency, is uncertain. 'The fate of the dollar ultimately hinges . . . on U.S. budgetary policy,' Eichengreen writes, although his additional analysis will not bring any smiles to Tea Partiers.
Nor will he comfort Republicans who want to unleash Wall Street again. When it comes to the current recession that brought the dollar's fate into sharp focus, Eichengreen writes, 'And as for what enabled all involved to act on those (misguided) incentives, the answer is simple: inadequate regulation.'"
It would behoove you guys to pay attention to Clovis here.
So, our budgetary problems are due to inadequate regulation?
Perhaps, rather than trying to regulate normal responses to misguided incentives, we could just not create the misguided incentives and avoid both?
Harry wrote: "I am surprised all the economic experts here do not know about Exorbitant Privilege."
There's nowhere near universal agreement on how Exorbitant the Privilege is. The upper end of the claims (for example, Eichengreen's) are implausible since they'd be arbitraged out in an instant. As a result, I don't think Exorbitant Privilege should be taken into account in any policy discussion.
aog wrote: "Perhaps, rather than trying to regulate normal responses to misguided incentives, we could just not create the misguided incentives and avoid both?"
I've always been a bit torn on the problems in the financial sector. Just as the owner of any property needs to set and enforce the rules and uses of that property, the government is the creator of money and has to set and enforce the rules regarding the use of that "property."
The inherent problem is that government controlling money means it's inherently politicized. In this case, Wall Street companies pay politicians and government bureaucrats huge amounts of money (to the tune of hundreds of millions of dollars in campaign contributions in a presidential election cycle, somewhat less the other years) and in return the government keeps the regulations in Wall Street's favor (i.e. with plenty of misguided incentives).
One place you can see this, is the fact that the financial sector gets around 30% of all profits in the United States and typically sees significantly greater ROI than any other industry. Banking, insurance, hedging, trading, etc. are all important, but I think that that level of profitability points to symbiotic relationships between government and Wall Street that, in combination, are parasitic on the rest of the economy. Note that profits as a percentage of total domestic profit are now higher with the new regulations than they were before the financial crisis.
Once again, I think it's inherent and there may not be any solution. Regulation seems to mean let's stifle the rest of the economy and any possible competition but make sure existing Wall Street companies continue to rake in profits. At least that's what it's meant since the financial crisis.
I'd be more impressed by that argument if I didn't know that Mellon Trust consistently made 48%/yr ROI in the unregulated environment.
But I can see why owners of loose money would like to go back there.
Of course, Mellon charged his employees 60% over market rates at his company stores, so achieving 48% was not that difficult.
Harry Eagar wrote: "Mellon Trust consistently made 48%/yr ROI in the unregulated environment."
ROI is different than percent of all profits made in America across all industries.
So? What's your point?
I was wondering what percent of all profits that banking had in Mellon's time.
Bret,
As you know, dogs have a very heightened sense of smell. Most dogs find smelly substances really attractive. My terriers can't resist the opportunity to roll around in really disgusting things. Shepherds seem less prone to this behavior but pointers and retrievers participate with gusto. Understand that "Mellon Trust consistently made 48%/yr ROI in the unregulated environment" just reeks of injustice to the progressive dog. They feel compelled to roll around in such perceived injustice and make a show of it. Simple enough.
If I well remember, "dogs" is the way Arabs usually refer to Jews when they are in a spur of hate.
That we are applying this kind of speech to simple politics is no good signal for our own civilization.
Clovis;
Um, but Howard is not. You are. It's ludicrous to claim that Howard should avoid any analogy or term that any one any where any time used in an unsuitable way.
AOG:
You mean, if I call you a dog, is it OK?
Clovis wrote: "You mean, if I call you a dog, is it OK?"
On the Internet, nobody knows you're a dog...
Yes, you can call me a dog any time you like. I've definitely been called worse.
Bret;
At least you're not being called a terrorist by the White House for politically opposing them.
Sorry guys, it may be cultural. In Brazil it really sounds bad to be called a dog. I mean, it is more offensive than to be called dumb, idiot, and the likes. (But it is still less offensive than to have your mother involved).
We rather like dogs here. The main negative connotation associated with a dog is that they have no rights. They can be kicked, beaten, caged, starved, overworked etc. with no recourse.
Bret,
The term here evokes two possible meanings.
First, it is a very probable name a woman will call a man if she discovers he cheated.
In other contexts, it is evocative of a person resembling a dog with rabies.
Both reflect lack of character and/or dangerous irrationality.
Clovis,
Your comments leave me laughing at myself. The negative connotations never crossed my mind. The positive sentiments towards dogs totally overwhelm the negatives around here. Even in street talk dawg(sp) is used as a term of affection, especially amongst members of sports teams and also jazz musicians. I was trying to make a point in a playful manner without making it a personal attack. Silly me!
Harry:
FTA: Subprime Scandal: Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.
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