Economic Depression
Posted
March 28, 2008 at
9:01 am by
Rita
I am beyond frustrated. I watch The Daily Show and The Colbert Report and I laugh along with them, but it seems that there is the impression that if we don’t keep laughing at it, we’ll all just burst into tears.
I try to stay away from the mainstream news channels, because of my tendency to get migraines. All that abrupt flashing and shouting and ultra-vivid colors and trying to follow the straw men and red herrings and meaningless stories that don’t have points, but are shouted with urgency anyway. I’m surprised epileptics aren’t suing. I do watch The News Hour With Jim Lehrer and the BBC World News on our BBC America cable channel. So, I’m not ignorant of the news, I’m just choosy about who I let into my livingroom to give it to me.
Regardless of where you get your news—Fox or BBC or Stephen Colbert, it’s impossible to ignore or deny that we’re in trouble. You couldn’t avoid hearing about the housing foreclosures if you tried. The war in Iraq is going on and on. Our dollar value is dropping while prices go up. Everyone I know is afraid for their jobs. Yet a handful of people I know still plan to vote Republican this coming election. I do not understand it.
I feel like every quarter is a game of roulette with a loaded revolver. He didn’t lose his job this cycle, whew. We get to keep our house and make plans for the next few months anyway. I feel all the time like it’s not a matter of “if,” it’s a matter of “when.” I read on the CNN news page yesterday about a woman who went from earning $70K a year to lining up for groceries at a food bank within a matter of months. I can see that. We’re all just trying to hang on to what we’ve got hoping some miracle will swoop in and turn the wind around.
Personally, I’m putting all my eggs in Obama’s basket.
I have a Canadian friend who says that since American politics affects the rest of the world so hugely, everyone across the globe should get a vote. As an American I really cringe at that. But, as a human being, witnessing how badly we fucked things up in the past 8 years, I can’t help but entertain the idea, just for kicks. What would our presidential lineup look like if the world helped elect our leaders? It’s preposterous of course. We can’t eliminate cheating within our own borders (which is the only logical explanation for W in 2000. Jimmy Carter believes it, and so do I), so how could we possibly manage an honest world-wide election? But, it’s still interesting to think about. More interesting than reality, really.
We have a house that’s now worth a fraction of what we’re paying for it. My husband has student loans which are going to take twice as long to pay off as we anticipated because how can you expect the kinds of raises that have historically accompanied his position when you’re just happy to keep working? The PhDs in India aren’t asking for raises! My son’s charter school is having money problems because charter schools are funded by the state, not the district, and our (Republican) governor has slashed state funds for education consistently since gaining office in 2002. We live quarter to quarter, hoping to not have send my husband to live in an apartment on the east coast and send his paychecks home to us to pay the mortgage. Hoping that we won’t have to give up the house or a car, hoping that our son’s school will stay open next year. Our health care premiums raised in such a way that when compared with the small increase in pay my husband received, he actually received a decrease in what he brings home.
This is the American Dream right now. The American middle class has collective nocturnal fantasies about not losing all we’ve worked for. Those of us who weren’t wily enough to cash in on the plummeting housing market, or the booming oil prices, well we’re just fucked. But, how many of us who have been fucked are going to bend over and ask for sloppy seconds from McCain?
I wish I could be like my Republican friends and just be happy for those who had inside connections and are now billionaires because of the war. Just be thrilled with the idea that those who made a literal killing off of the foreclosures of others might toss a shiny coin down our way to spend at Wal Mart, and consider my own personal sacrifices to be for the greater good. I’d even be content with a mild case of denial, to just be able to find a way to spin this so it wasn’t really this administration’s fault at all. Find a way to link it all back to Bill somehow, and believe this his leaving office in 2000 was just a narrow escape from the inevitable, leaving this administration to shoulder what would have happened anyway. See? They should have let Gore keep his votes, then that line of thinking would be more believable. Or I wish I had some unreachable ideal to base my entire vote on, like abortion or homosexuality to oppose. As long as a candidate gives lip service to that one thing and I vote for that person, then I am absolved from any feelings of responsibility for whatever horrors that person commits afterwards.
But, I don’t. So in the time between now and Obama, I will occupy myself with various plan B options for when we do fire that revolver and the chamber is full. I’ll watch Comedy Central, wipe my cheeks and pretend that the tears are because Jason Jones is just so God damned funny.
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37 Responses to “Economic Depression”
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1. Allison J
March 28, 2008 @ 9:46 am
I’m as worried as you Rita. At 26, my husband and I are starting our life together. We have a new home, two vehicles, school loans — and I’m terrified!!!
I just try to remember that my parents dealt with a recession in the 80s — and things eventually got better.
As middle-classers, it feels as if our fate isn’t in our hands at this point. And, I’m embarrassed to say, I haven’t been following the presidential-race coverage as much as I did 4 years ago. Maybe it’s just too depressing for me. But I almost wonder if any of the candidates are capable of digging us out of this mess.
2. Prescott
March 28, 2008 @ 9:52 am
Your whole argument is hinged on “Republicans” ruining the economy. As if they mandated American citizens to take out mortgages with really stupid terms or maxing out their credit cards. And somehow the “Republicans” caused the insane property appreciation in places like southern California, which is now correcting itself. A correction, by the way, which needs to happen — putting it off and artificially propping up the market (which is what both Clinton and Obama are proposing) will simply make the pain that much worse down the road. It will also create new homeowners, ones that can actually afford their mortgage payment.
As for sounding the alarms about unemployment, the current rate is 4.8%. A simple glance at a history chart reveals that’s not unusually high (and several points lower than the average during Jimmy Carter’s term). It’s also on the lower side of the past 8 year average (it peaked at 6.2% back in 2003 and has generally gone down since).
So it seems like both parties like to peddle fear, eh?
The Democrats have had control of Congress for over a year now — why do they have no culpability in all of this?
3. Rita
March 28, 2008 @ 10:03 am
I can say that for now my biggest issue is outsourcing. That’s the one thing that’s really affecting our lives right at this moment. I know, Bill was in favor of it, but if you read his original ideas about it, it wasn’t anything at all like how it’s been implemented. The way it’s being done is killing us.
I know it wouldn’t take us long to be bankrupt if DH lost his job tomorrow. We’ve been responsible, but we wouldn’t even be able to sell this house to move, which means that if he didn’t find something quickly, then the bank would take it.
It’s just everything all lumped together that’s making it so scary, and yeah, I do blame the Republicans for it.
4. Jessica
March 28, 2008 @ 10:05 am
I blame the Democrats and the Republicans. It’s not a football game, it’s politics and greed and gain. No side is better than the other. Democrats care no more about the little people than Donald Trump does. It’s just a way to garner votes.
5. Rita
March 28, 2008 @ 10:11 am
Well, but their brand of unconcern tends to end up faring better for the little people. So, if it’s a choice between the better of two evils, then I choose the one that’s going to benefit the most people, which isn’t the small percentage at the top with the highest earnings.
6. Prescott
March 28, 2008 @ 10:15 am
But if outsourcing is on a massive rise and creating job losses, why isn’t that reflected in the unemployment rate? Sure, it may affect certain sectors more directly (I’m one of them, as often I’m bidding for web development gigs against people in India and Romania), but I haven’t seen evidence that it’s hurting general employment across the country. (a lot of people point their fingers at illegal immigration instead of outsourcing for the loss of jobs — who’s right?)
In fact, there was a study in 2004 that found that outsourcing actually creates jobs.
Bottom line, I agree that there are shifts in the economy happening right now, but I guess I just can’t justify putting all the “blame” on Republicans, just as I don’t “blame” the Democrats for the bursting of the dot-com bubble.
(Obama didn’t exactly leave behind a robust economy in Illinois before leaving state government, so I wouldn’t be counting on those raises next year just yet.)
7. Prescott
March 28, 2008 @ 10:18 am
[quote comment="151318"]Well, but their brand of unconcern tends to end up faring better for the little people.[/quote]
As one of those little people who grew up in a house struggling to make ends meet in the later half of the 1970s, I will respectfully disagree.
Also, here’s the article I was looking for earlier that makes the economic case for the government keeping their hands off the foreclosure mess.
8. Rita
March 28, 2008 @ 11:08 am
Outsourcing may create some jobs in some markets, but overall the trend as it’s going will be bad for all of us. We’re moving far more research and engineering jobs overseas, and we won’t necessarily see the results of that for maybe a decade.
We push math and science here, but those are outdated skills. If you want your kid to have a job here in the states, don’t encourage them along those silly math and science hobbies. Everything from our cancer treatments to our airplanes will be designed and engineered by non-US scientists.
The US has always prided itself on its innovation, on its cutting edge discoveries and creativity. We discovered electricity. We invented the first telephone. But, we’re just giving that up so easily because people somewhere else are willing to do it so much cheaper? We’re giving away our sustenance here. This isn’t the making of the items, it’s the creating of them that we’re surrendering for a profit we’ll never see.
As far as the foreclosures, I don’t know. I know that even during all of this, there is still tons of building being done. I drive to my kid’s friend’s house and see sixteen (SIXTEEN!) half-million houses for sale, and around the corner there’s a new development of the same mold of enormous mini-mansions being built. I come home to my ancient little split level and know that if those houses are selling for barely over what I paid for my house, then I couldn’t even give mine away if I tried. There has to be some answer to all of this.
9. ExCareerGal
March 28, 2008 @ 2:13 pm
The economy has cycles. It ebbs and flows. And it does this regardless of who is in government. I do not count on the government helping me financially at all. We just make sure to live well below our means. If my husband and I lose our jobs (unlikely) we can live for 6 months on savings. If only my husband loses his job, we lose all the perks (ie: cleaning lady, lawn person, and manicures) after 6 months but I can still pay the house note and expenses on just my salary. I made sure that we owe nothing but the house. If we can’t afford it we do not buy it. We do not make payments on anything. Our goal is to pay off the house in the next 5-10 years.
We could have bought a much nicer house, but we decided to keep with one we could comfortably afford. We lived in a really small house and saved money for 8 years until we could afford to buy this one. And since we put a lot down on it even our mortgage is not too bad.
Even families with one income need to be realistic on what they can afford. I am sorry you are having this difficulty Rita. But some of it results from the amont of risk you and your husband took on financially. We may be more conservative than you with what we buy and do. But politically we are also voting for Obama - but for differnt reasons.
Janna
10. ExCareerGal
March 28, 2008 @ 2:21 pm
sorry for all my typos!
11. Rita
March 28, 2008 @ 2:53 pm
I seriously doubt if you’ve been more conservative with what you buy and do. We don’t have a cleaning lady or a lawn person and I don’t get manicures to begin with, lol. It’s just that he picked a risky field–chemistry. Who would have thought ten years ago that scientists would be phased out?
12. ExCareerGal
March 28, 2008 @ 3:04 pm
The perks I mentioned are very recent. I have gone without for most of my 47 years. The perks only came one year ago when my husband got a job. Up until then it was all my salary.
I do understand the scientist fears. My husband is in computers (which was also supposed to be a sure thing when he started school 10 years ago) and he can lose his job at any time. Outsourcing ya know . . .
13. DB
March 28, 2008 @ 3:11 pm
Rita, this isn’t directed at you, but as a general point…
Way too many Americans live outside of their means though and the government and tax payer shouldn’t be responsible for supporting people that live outside of their means.
Balloon and ARMS have never changed, it’s always been the same, it’s just that mortgage companies were too lenient in the credit they extended to people that didn’t really deserve or qualify for it. Again, that should not be the burden of people who didn’t take that gamble, IMO.
People are gonna lose their houses in order for the market to correct themselves and then they’ll have to rent and pick themselves up and move forward in the confines of their situation. It is not a constitutional right to own a home.
14. Rita
March 28, 2008 @ 3:15 pm
I totally agree with you on that one, DB. I just hate to see people lose their houses because they lose their jobs because their own country no longer values their skills, not because they aren’t good at what they do, but because someone else does it cheaper. We can’t even comment yet whether anywhere near the same quality is being done for cheaper, all we know is that it IS cheaper and we may be paying those consequences with our health as well as our jobs.
Responsible people are losing their houses, too. It’s not just all people who have been over-extended. Those are the people I’m afraid for.
15. DB
March 28, 2008 @ 3:34 pm
I think outsourcing our science and research is a very dangerous and risky proposition for the U.S. If anything, that should worry us the most.
I’ve heard less and less intellects are going into the field of study becasue of the outsourcing and how poorly it pays. The only prayer the U.S. has is innovative technology and research. This has always keps us afloat, but now, I don’t know what we have to rely on.
But what is the answer? If they can get the same research paying people $10 an hour, in India, how is it going to pay off paying somebody $30 instead, especially when Americans want their goods as cheaply as possible? It’s a vicious cycle.
16. Rita
March 28, 2008 @ 3:36 pm
[quote comment="151384"]
People are gonna lose their houses in order for the market to correct themselves and then they’ll have to rent and pick themselves up and move forward in the confines of their situation. It is not a constitutional right to own a home.[/quote]
I forgot to comment on this though. Can they rent? I mean, if you file bankruptcy and lose your house, isn’t your credit totally fucked for a long time? You have to pass a credit inspection to rent, too.
It’s one thing for people to get in over their heads and then have to sell their house. It’s another for a whole lot of people to be so far in over their heads that they can’t sell because the housing market is so messed up.
I don’t know what the answer is, but after all these years of building up our credit and then getting a down-payment and jumping through all the hoops, I for one am PISSED that my house isn’t worth shit now, and that if something tragic does happen, it’s all ruined, everything that we’ve worked for–the house, the money we’ve put into it already, and our credit–could be just taken away because we wouldn’t even have an option of selling to downgrade to something else. And then we wouldn’t even have anywhere to go with ruined credit.
People make mistakes, but I don’t think it’s fair to just sit back and tsk-tsk them when they’re losing everything.
17. Rita
March 28, 2008 @ 3:38 pm
[quote comment="151392"]If they can get the same research paying people $10 an hour, in India, how is it going to pay off paying somebody $30 instead, especially when Americans want their goods as cheaply as possible? It’s a vicious cycle.[/quote]
But, we have no idea whether it is the same research. Do we believe that the education and the conditions in India are conducive to the same sort of innovation that the US has? EVERYTHING was invented in the US, it’s what we do. It’s been our legacy, up until now, and now our legacy is becoming, “Americans, they want things cheap.”
18. Rita
March 28, 2008 @ 6:12 pm
[quote comment="151316"] Democrats care no more about the little people than Donald Trump does. It’s just a way to garner votes.[/quote]
I wanted to comment on this, too, because you know Al Gore and Jimmy Carter both went on to win the Nobel Peace Prize after their political careers, and Bill Clinton has been devoted to very active philanthropy since leaving office, so I’d say that yeah, the democrats do seem to breed more people who actually care about our country and our world than the republicans.
And Prescott, you also know that the unemployment statistics are very misleading, don’t you?
19. Prescott
March 28, 2008 @ 7:24 pm
[quote comment="151405"]I wanted to comment on this, too, because you know Al Gore and Jimmy Carter both went on to win the Nobel Peace Prize after their political careers[/quote]
As did Henry Kissinger and Yasser Arafat — so what does that prove?
[quote]Bill Clinton has been devoted to very active philanthropy since leaving office, so I’d say that yeah, the democrats do seem to breed more people who actually care about our country and our world than the republicans.[/quote]
Maybe if there were no such thing as “Clintonian politics” I could believe that his vague charitable acts were more than a way to boost his image to help his wife’s campaign. I guess time will tell. Speaking of philanthropy, Obama — despite making a healthy income — donated less to charity than the nation average (and not just in percentage of income, but actual dollars) and didn’t step it up until his run for president when people actually noticed this fact. Personally I don’t think that’s a big deal, until it’s trotted out how the Dems are so caring about us commoners.
[quote]And Prescott, you also know that the unemployment statistics are very misleading, don’t you?[/quote]
While it may not be 100% accurate (but lets be honest, even if it’s off by 2% we’re still below the Jimmy Carter years), it’s a better measure than anecdotal evidence, no? Because I could counter most of your statements with anecdotes about the Chicago area, where we had to move to a remote suburb because we can’t afford to live in the city, the owner of the Mercedes that I literally just saw pull in the driveway across the street is doing pretty well, my wife is not in danger of losing her job because she’s in the health care sector which is growing nicely, etc., etc., but I know that’s all moot because my little world doesn’t reflect what’s going on everywhere in the country just like yours doesn’t.
Yeah, it sucks that your husband’s career choice may be dwindling — as I said, part of what I do is as well. But other sectors are growing at the same time. We’re a nation of 300 million people — no matter who is in the White House, chances are not 100% percent of that population is going to be living happy and care free.
20. Susan Rubin
March 29, 2008 @ 6:47 am
Corporations are the big winners here, the bottom line is that WAR is profitible, peace is not. DISEASE is profitable, good health is not. When will our country shift so that peace and good health are “profitable”? This will take a huge shift in consciousness to change things to a peaceful, healthy world and it will certainly take a big shake up in the good old US of A. We are at a pivitol cross roads, I trust that things will shift for the highest good.
21. Rita
March 29, 2008 @ 8:36 am
The actual unemployment rate could be double what the statistics say, since the statistics only count people drawing unemployment benefits. It may be lower than the Carter years. Carter was a good man, but a lousy president.
I know, most of this is whining about how all of this has directly affected us personally, which makes it lose some of it’s point. Yeah, my family is on thin ice right now, but truthfully even if we’re hit and the worst happens, we, personally will recover because we have several plan B options. A PhD might not be as stable as it was 5 or 10 years ago, but it’s still a PhD and there are options to keep us afloat. But, there are a lot of people suffering worse right now and they don’t have a feasible plan B at all. It’s not just the economy. It’s not just the housing foreclosures. It’s not just the war. It’s not just the oil prices. It’s that everything is all in a big tailspin and our fearless leader just smirks and chuckles about it, because he couldn’t care less. But, we want to vote in one of his buddies?
22. Trish
March 29, 2008 @ 6:35 pm
For what it’s worth, I’d give my Australian vote to Barack Obama.
23. Rita
March 29, 2008 @ 9:38 pm
LOL, and for what it’s worth New Zealand is one of our plan B options. Maybe we can hook up if McCain is elected.
24. Jessica
March 30, 2008 @ 6:56 am
If the Democrats lose to McCain, we will only have the Democrats to thank or blame.
I actually think McCain is going to win, so you may want to get those passports in order.
25. Rita
March 30, 2008 @ 9:43 am
Yeah, I don’t think that McCain has the resources or the personality to criminally steal the election the way W did, so it would be because of either racist or sexist people who just won’t vote for a black man or a woman, and therefore give McCain the vote, or people who are kind of undecided and go with McCain. Because I don’t think there are enough genuine party-voting Republicans to carry him. But, we’ll see.
But, if he is elected and doesn’t do something to help keep innovative research here, then we may need to leave if DH wants to continue doing science. New Zealand and Scotland are the most feasible options. It would suck beyond belief to be forced from our country so that DH could continue to do his job. But, I think it would be just temporarily anyway. A lot of the companies who have invested in research in India are finding that it’s not quite as cost effective as they thought, since things are not passing mandatory US inspections and the quality is NOT the same. So, whether they want to continue to invest over there for a possible long-term gain, or whether they’ll just give up and bring work back here is left to be seen. It would be nice if the government stepped in and taxed companies for overseas employees though, to give the US workers a fair playing ground.
26. Nevyn
March 31, 2008 @ 4:33 pm
Anyone who doubts that we are headed into major economic depression is simply in denial. However, pointing fingers as to who is to blame is somewhat pointless. What should be discussed is what can you do as individuals to reduce the stress that is coming at us like a freight train? For myself it was engaging in downward mobility. Sell off what you can, free your self of all credit and live as modestly as is possible. Cash on hand will be useful no matter how devalued it is: get liquid, rent a modest small apartment, sell off the toys and batten down the hatches. Some of us will actually wait until it is too late and find him or herself and their loved ones homeless and begging for food. You can avoid this, but you have to bite the bullet. There are many ways to cope with what is coming, but you have to take action now.
27. Rita
March 31, 2008 @ 5:23 pm
We’re doing all the things you said, Nevyn, except moving into an apartment. It took us 13 years of marriage to get to the point where we could buy a house, so we’re not real eager to give that up. Plus, like I said, it wouldn’t be worth anything if we sold it now anyway. What we were paying in rent at our little townhouse was more than our mortgage payments are now anyway.
28. Nevyn
March 31, 2008 @ 6:05 pm
Hi Rita:
I think the important thing is that you are taking action and making plans. Sadly many people will try to deny what is on our doorstep. I congratulate you for talking action and protecting your family.
Nev
29. Pablo
May 18, 2008 @ 9:26 pm
All the greedy people that bought houses just to flip them eventually and take advantage of prospect buyers will learn a lesson the hard way. And I am very happy to see that!
There are “accidents” and there are “violations”. This housing mess is the result of a massive amount of violations not accidents. People will be more responsible in the future.
30. Irasha
May 29, 2008 @ 12:45 pm
Wow, is all I can say! Everyone who has left a comment does appear to have a valid point. However, I believe one reference has not been made, God’s word. The source of all our woes is GREED, period. Both parties are GREEDY to some extent, but at the end of the day WHO relates best to “most people’s everyday problems,” and has at one point lived with/endured REAL HARDSHIPS? Unfortunately, we live in a sexist, racist and judgmental country/society. In the end, our own biased judgmental ways may prevent our solution because he or she is a woman or black! REAL TALK! Money is the root of all evil (the lust of it); look to your past to understand your present conditons. Also, learn to accept responsibility for your own actions, bottomline! Temptation is a delicate & dangerous thing. Our Western society has increasingly induldged in a numerous amount of tempting, sinful ways which the “word” says ultimately leads to death. Death does not always refer to the physical body! If you’re a tad intrigued, check out Revelations in the New Testament. There’s a blatant reference to God giving the power of rule/control to one nation, over 3/4’s of the Earth and one day that great Nation would fall. If a great nation were to fall, it woud occur gradually not overnight, BRIGHT LIGHT! Common sense which unfortunately isn’t common would tell anyone that you have to drain that great nation’s resources. It looks like the rest of the world figured out our weaknesses and is sticking to the PLAN!
31. Rita
May 29, 2008 @ 9:06 pm
[quote comment="166926"] If you’re a tad intrigued, check out Revelations in the New Testament. There’s a blatant reference to God giving the power of rule/control to one nation, over 3/4’s of the Earth and one day that great Nation would fall. [/quote]
We better stay the hell away from China, then huh?
32. ninja weiner nah nah
May 29, 2008 @ 9:28 pm
I am a white woman. I HATE it when people assume that I will vote for Clinton because I am a woman. AND, it does not make me a racist if I choose not to vote for Obama. I will vote for the person who I think will do the best job. Anyone who votes purely on race or gender is an idiot.
Personally, I would like a do over…all new canidates, please!
33. Rita
May 30, 2008 @ 6:54 am
[quote comment="167048"]I am a white woman. I HATE it when people assume that I will vote for Clinton because I am a woman. AND, it does not make me a racist if I choose not to vote for Obama. I will vote for the person who I think will do the best job. Anyone who votes purely on race or gender is an idiot.
[/quote]
That’s the truth. I mean, you couldn’t PAY me to vote for Condoleezza Rice
34. Don
July 1, 2008 @ 2:37 pm
Life is a struggle. It has always been so.
Individuals perish but mankind some how survives.
21st century Americans live with a sense of
entitlement brought about by post WWII economic
prosperity. That game is over. This is the
deline of the American Empire. Expect a similar
decline in living standard. That’s the reality
of the situation!
35. John Petty
October 24, 2008 @ 4:00 pm
Here is an article about the fed chairman during the time of the Great Depression and what he thought caused it. The same thing is happening again for the same reasons. Please read:
In Review: America’s Most Egalitarian Banker
Marriner S. Eccles, Beckoning Frontiers: Public and Personal Recollections. New York: Alfred A. Knopf, 1951.
At the start of the Great Depression, Marriner Eccles hardly seemed someone who might lead a charge against the economic orthodoxies that justified grand hoards of private fortune. By the early 1930s, after all, the Utah-born Eccles had become the top banker in the Mountain West, the organizer of the first multibank holding company in the United States.
But Eccles had also come to understand, after watching the great speculative bubbles of the 1920s pop into massive misery, that prosperity — to endure — needs to be shared. Eccles began speaking out on that theme, shortly after the Great Depression began, and soon caught the attention of the early New Dealers.
In 1933, Eccles would become an assistant secretary of the treasury. A year later, Franklin Roosevelt would appoint him to the Federal Reserve Board. He would become Board chair in 1935 and remain in that central position for the next 13 years. No one individual, over those years, had more of an impact on economic policy in the United States.
Looking back on those years, in his 1951 memoir Beckoning Frontiers, Eccles would do his best to explain the impact he set out to make. Mass production, he noted at the outset, demands mass consumption, but people can’t afford to consume if the wealth an economy generates is concentrating at the top.
In the years leading up to the Great Depression, that concentrating was accelerating. A “giant suction pump,” charged Eccles, “had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth.”
“In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands,” Eccles observed, “the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
Sound familiar? The decade of the 1920s that Eccles describes in his 1951 memoir comes across today as eerily familiar. Then as now, the U.S. economy was floating on a sea of debt.
Then as now, inequality was hollowing out the nation. Eccles put the matter bluntly: “Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy.”
How would Eccles have reacted to our current debt-ridden, war-torn economy? We can’t, of course, know for sure what Eccles would do. But we do know what he did. In 1942, during World War II, a high-powered team of New Deal officials that included Eccles proposed to President Roosevelt that “a ceiling of fifty thousand dollars after taxes should be placed on individual incomes.”
In our current dollars, this $50,000 ceiling would equal about $700,000. What did FDR do with the Eccles proposal? He turned around and asked Congress to place a 100 percent tax on all individual income over $25,000.
Congress would eventually set the nation’s top tax rate at 94 percent on all income over $200,000, and that top tax rate would hover around 90 percent for the next two decades, years that would see the greatest period of middle class prosperity in U.S. economic history.
In 2005, the latest year with statistics available, America’s leading hedge fund managers and the rest of the nation’s top 400 income-earners faced a top tax rate of 35 percent. They actually paid, after loopholes, just 18.2 percent of their incomes in tax.
Marriner Eccles would not approve.
Stat of the Week
In the two decades between 1986 and 2005, America’s top 1 percent of taxpayers saw their share of the nation’s income jump from 11.3 to 21.2 percent. Over those same years, the federal income taxes the top 1 percent paid dropped by an equally stunning margin, from 33.13 percent of total personal income in 1986 to 23.13 percent in 2005, the most current year with IRS stats available. Taxpayers needed to report at least $364,657 in 2005 to enter the top 1 percent.
About Too Much
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36. john
August 19, 2009 @ 10:20 am
This is valuable information. More is needed like what we are doing here and on my site to get the word out.
37. THELOUISIANAEXPLORER
September 4, 2009 @ 7:15 am
Good post, this is very good information. Things were bad, real bad in the 20s and 30s and history does have a way to repeat itself. There’s a book just out that identifies an individual that sacrificed everything to support the laboring class in Louisiana and across America during the Great Depression. He took on the Roosevelt administration and fought the Banckhead act and called for the removal of Hugh Johnson as the head of the NRA. When he finally dismembered Governor Leche’s former Long organization he became to controversal for Roosevlet. Read more about the man at http://www.thomastfieldsjr.com opr Google “I Called Him Grand Dad”. Names such as Long, Roosevelt, Farley and Lech are found throughout the writing.