Birth date, business cycles, and lifetime income

I was reading Paul Krugman's editorial and followed a link to the OMB blog. There, I found a sad gem written  by Peter R. Orszag, Director of the OMB.
 My daughter graduates college next year, so this hits very close to home.

I recently read a paper that suggests that, for this cohort, the wage effect of graduating during a period of high unemployment will continue well beyond the end of the recession and even the labor market rebound. In examining the cohorts of college graduates that entered the labor market before, during, and after the recession of the early 1980s, Lisa Kahn of the Yale School of Management found that an increase in unemployment produces a significant and enduring negative wage effect.

http://www.whitehouse.gov/omb/blog/09/10 22/Birth-date-business-cycles-and-lifet ime-income

A parent wants their kid to succeed and to have the best environment to flourish. It's a little heartbreaking to send a kid out into an inhospitable world, after all the hard work the kid has done to prepare. Life is unfair.

But when I think of the American families who have it much worse than we do, I can't wallow in self-pity. Then I think of the kids in Palestine (thanks to Mainstreet) who have grown up in a Universe where the element 'Opportunity' doesn't even appear on the periodic table.

This is why I don't own a pistol. I'd surely end up eating it.

link to krugman: http://www.nytimes.com/2009/10/30/opinio n/30krugman.html?_r=1&hp

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Weekly Audit: Depression-Era Inequality, Only Worse

By Zach Carter, TMC MediaWire blogger

A new study by Economist Emmanuel Saez revealed this week that income inequality in the U.S. is more severe today than at any time since World War I, and the current recession is taking its heaviest toll on the worst-off members of our society. As our government rebuilds the financial sector using taxpayers' money, it's important to remember that both financiers and the government are responsible to our communities, not just bank shareholders. If we want to strengthen our country's economic foundation, we need to demand better wages for workers and an end to all kinds of predatory lending.

Saez's new data on income inequality is, as Paul Krugman put it, "truly amazing." Saez, who teaches at the University of California at Berkeley, found that the top 0.01% of U.S. earners had 6% of total U.S. wages, more than double the level in 2000. Earners in the top 10%, meanwhile, took home an astonishing 49.7% of all wages. That gap is larger now than during the Great Depression or the Gilded Age of the Roaring '20s.

"We're seeing Depression-era inequality again--only now it's slightly worse," writes Steve Benen for The Washington Monthly. Benen also notes that this level of inequality is not an inevitable consequence of a market economy: It's an extreme historical aberration. In the U.S., prosperity for much of the 20th Century was shared. But in 2007, at the economic bubble's peak, the wealthy simply got wealthier.

In that context, it is beyond absurd that the government is allowing 8-figure bonuses to be doled out by bailed out banks. Writing for Salon, Robert Reich dissects the policy implications of Citigroup's plans to pay its top executives an average of $10 million this year and award over $100 million to its top trader, a man who literally owns a castle in Germany. Citigroup was one of the most reckless U.S. banks during the housing bubble, a major subprime offender that received $45 billion in direct bailout money, as well as hundreds of billions in federal guarantees. How much is $45 billion? With the median U.S. home price at $174,100, that's the full market price of over 258,000 foreclosed homes. The company says that $10 million a head is necessary to attract and maintain top "talent," which Reich notes is a somewhat misleading term, given recent history. The problem is not just that Citigroup and other Wall Street firms are paying tons of money to a few people, it's that these people are being rewarded for the same kind of activities that got us into this mess to begin with: Risky, highly leveraged securities trading.

"Over the last several years Wall Street has exhibited a truly astonishing lack of talent," Reich says, noting that, "The Street is back to the same, relentlessly untalented tactics that made it lots of money before the meltdown--which also forced taxpayers to bail it out, caused the world economy to melt down, and tens of millions of people to lose big chunks of their life savings."

In truth, Reich argues, most large financial firms in the U.S. are much more like public utility companies than private-sector businesses. Even in good times, they depend on government guarantees and other support systems to function. In bad times, we bail them out. Instead of paying financiers tens of millions of dollars to reinforce a flawed system, Reich argues that we should impose rules that result in salaries similar to the public utilities sector, where top earners are generally restricted to 6-figure incomes.

The American Prospect features two pieces emphasizing problems in the current financial sector. Under a law known as the Community Reinvestment Act (CRA), enacted in 1977 we require banks to make loans in communities where they collect deposits. The loans have to be to dependable borrowers and they have to be relatively inexpensive. The law works very well--institutions covered by it made only a tiny fraction of the high-interest subprime loans that brought down the financial sector, as National Community Reinvestment Coalition President John Taylor notes for the Prospect. But CRA only applies to actual banks. You know, the places where you deposit your paychecks. CRA does not apply to subcompanies owned by the same corporation, and it does not apply to giant Wall Street securities firms like Bear Stearns and Goldman Sachs. Taylor says we need to expand CRA to cover these other big players in the financial world.

Why? As Alyssa Katz details in a piece for the Prospect funded by The Nation Institute, many Wall Street firms are bidding on foreclosed properties and selling them at rip-off rates to low-income borrowers.

But as Mary Kane notes for The Washington Independent, banks have also devised several methods of making money without making a loan. By charging tremendous fees on borrowers for minor infractions, banks generate billions of dollars without producing anything of social value. One of the worst forms of abuse, Kane writes, comes in the form of overdraft fees. When you withdraw too much money from your bank account, the bank fronts you the money, and then charges you a fee for this "protection." The trick is, banks almost never tell you that this has occurred, and often play around with the timing of your charges and deposits to maximize the fees they collect. Banks are on track to collect $38.5 billion in such fees this year alone. The worst part is, the fees come from the poorest customers--rich people don't overdraw their bank accounts, because they have tons of money.

In the case of credit cards, banks routinely slap borrowers with outrageous fees and interest rate hikes when the borrowers are making payments on time. Over the years, banks have targeted younger and younger credit card customers, as Adam Waxman notes for WireTap. After years of declining wages for all but the wealthiest citizens, consumers have been turning to pricey plastic to finance basic necessities.

Sadly, corporate America does not seem very focused on helping workers establish their financial independence. The Real News talks with Richard Wolff, an economist with the New School who emphasizes that, while worker productivity has jumped in recent months, wages have not made the corresponding increases. Quarterly productivity numbers tend to jump around a lot, but the trend of not compensating workers for improved efficiency has been around for years.

In a consumer-driven economy, major problems can't be fixed by giving lots of money to a few people, especially if those few people are already rich. To support broad, meaningful economic growth, we need to tailor our policies that empower those on the lower rungs of the economic ladder. And when we bail out giant corporations with taxpayer money, we need to make sure those companies arrange their business to improve the lot of taxpayers.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

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White Priviledge

That diary up there on the rec list has my collar steamed. So, before i go putting the crimp in it, I'm going to ask you to read this:

http://newstandardnews.net/content/?acti on=show_item&itemid=116

Thank you for your time and patience.

You see, when we start to talk white privilege, most people think about being stalked by security in a grocery store. I'm told that happens (and when you, as plainclothes security, are getting calls about a "suspicious individual" that just happens to be YOURSELF, I can acknowledge that yeah, it is happening).

But this world runs on currency, on money and the accumulation of money. And this is where Black people suffer. And will continue to suffer, for crimes long long past.

75% of whites can trace their wealth back to racist policies, be they FHA loans or the Homestead Act (you didn't know that was racist, now didja?)

I don't have time to write a full well researched diary right now, though I'll try and add onto this as the day goes on.

I'm calling for some action, I'm calling for this to get up on the Recommended list, because... America ought to recognize where she is, before she can go anywhere.

Those MILLIONS of blacks mentioned in the rec list are one Layoff away from being one of those POOR blacks. If you're white, you might not get that. But if you have a house, and you're laid off, you can get a second mortgage to pay the rent for a while. You got money, there, that you can depend on.  If you're renting, if the biggest wealth you can lay claim to is a car, which you happen to need to find more work, you don't got that cushion.

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The Rise of Income Disparity

Harold Meyerson of The American Prospect has a great new piece up regarding the shrinkage of the middle class over the last two decades.  His first target is the notion among some that technological advances contributed greatly to the growing disparity between the middle and upper class.  By this logic, it was technology that allowed educated workers to be more productive and thusly more valuable than those who worked more labor intensive jobs.  Meyerson notes the fallacy of this argument:

In the 1980s, economic inequality in America soared. Many mainstream economists at the time laid the blame on technological change, which enabled better educated Americans to benefit from productivity gains while less educated Americans lagged behind. As Thomas Lemieux, an economist at the University of British Columbia, argues in a paper ("The Changing Nature of Wage Inequality") issued by the National Bureau of Economic Research last October, that thesis failed to explain why the same rise in inequality wasn't evident in other advanced economies undergoing analogous technological changes.

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Indiana: How the GOP "Shifted" Working Hoosiers

Crossposted from Blue Indiana

Anyone who's bee watching the new lately knows that there's something of a property tax revolt going on in Indiana.  Hundreds of thousands of Hoosiers have seen their property tax bills skyrocket, and if you follow the media narrative, you'd think that there's been a massive growth in government spending that's at fault here.  The truth though is that there hasn't been a tax increase in Indiana, but there has been a massive

tax shift.

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Diaries

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