And It Continues...

The last few days have seen some remarkable statements and calls to action by the so called 1 percent. James Theckston, a regional vice president for Chase Home Finance in southern Florida, recently detailed exactly how the financial industry led us into such a disaster.

“You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it,” he said. “That was crazy, but the banks put programs together to make those kinds of loans.”

Theckston, who has a shelf full of awards that he won from Chase, such as “sales manager of the year,” showed me his 2006 performance review. It indicates that 60 percent of his evaluation depended on him increasing high-risk loans.

“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”

Kristoff also does a great job of explaining why the Occupy movement is resonating so much with the American public and, as a result, the tide continues to turn in some very interesting places.

Ruth Porat, executive vice president and chief financial officer at Morgan Stanley, had this to say at the Economist's World in 2012 summit.

"The wealthiest can afford to pay more in taxes. That's a part of the deal. That makes sense. I don't know anyone that doesn't agree with that," Porat said. "The wealth disparity between the lowest and the highest continues to expand, and that's inappropriate."

"We cannot cut our way to greatness," she added.

Right. People need to sit back, breathe, and think about what government spending less will do to our economy. Even though it does need to happen, they really aren't thinking right now.

Perhaps the best illustration of the turning tide can be read in Nick Hanauer's recent article for Bloomberg titled, "Raise Taxes on Rich to Reward True Job Creators." Folks, this is the best piece I have read since Jim Manzi's "Keeping America's Edge." He starts off by introducing himself.

I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)

So, he is one of these "job creators," right? Nope.

Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

No shit. This is exactly what I have been saying all along. The simple fact that Hanauer and others like him are now saying this means we can finally obliterate this ridiculous myth and start working on our problems. The first thing that needs to be fixed?

When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.And that’s what has been happening in the U.S. for the last 30 years.

Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

And why exactly is this a problem?

One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

So, it's simply a matter of numbers. When you have an economy that is 70 percent based on consumer spending and consumers that aren't spending, you...have what we have now. So what does Hanauer recommend we do?

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

Finally, someone actually admits it. They don't really invest in anything.

Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.

Why some folks can't understand this is completely beyond me. Obviously it has a lot to do with hubris and admission of error but perhaps it's more than that. When the central purpose of your life is being threatened with change, what meaning does your existence have?