Aftershock: The Next Economy and America’s Future
by Robert Reich
Top 1% (total income)
1970 => 9%
2007 => 23.5%
Equivalent to 1928 distribution! Gilded Age.
Part I – The Broken Bargain
Chapter 1: Eccle’s Insight
Federal Reserve Board => Eccles Building => Constitution Avenue
Named for Marriner Eccles => Chair => 1934 – 1948
Eccles had a nagging concerns that by tightening credit instead of east it, he and other bankers were saving their banks at the expense of community – in “seeking individual salvation, we were contributing to collective ruin.”
1936 – John Maynard Keynes – General Theory of Employment, Interest and Money
[The Great Depression’s] major cause, he concluded, had nothing whatever to do with excessive spending during the 1920s. It was, rather, the vast accumulation of income in he hands of the wealthiest people in the nation, which siphoned purchasing power away from most of the rest. (quantify this)
For Eccles, widening inequality was the main culprit.
Chapter 2: Parallels
2007 – Male median income – 45k (less than 30 years ago when adjusted for inflation)
0.1% Rich => 13k households
0.1% => 11% total income (~1% of total for each 1000 families – damn)
1% => 23.5% total income (400k+ in 2007)
10% => 50% total income (damn)
17% => 1930s
15% => 1940s
11% => 1950 – 60s
9% => 1970s
Across the nation, the most affluent Americans have been seceding from the rest of the nation into their own separate geographical communities with tax bases that can underwrite much higher levels of services. They have moved into office parks and gated communities, and relied increasingly on private security guards instead of public police, private spas and clubs rather than public parks and pools, and private schools for their children rather than the public schools most other children attend.
1950s – 1980s => Savings => 10% after-tax income
mid-200s => 3%
1960s => 55% of income
2007 => 138%
In both eras, had the shre going to the middle class not fallen, middle-class consumers would not have needed to go as deeply into debt in order to sustain their middle-class lifestyle. (quantify this … 60%+?)
Chapter 3: The Basic Bargain
January 5, 1914 => Henry Ford => Model T, $5 per eight-hour day => Highland Park, Michigan => 3x average
Workers are also consumers. Their earnings are continuously recycled to buy the goods and services other workers produce. But if earnings are inadequate and this basic bargain is broken, an economy produces more goods and services than its people are capable of purchasing.
John Maynard Keynes => Born 1883 => Cambridge, England (the same year Karl Marx died)
[Capitalism’s] failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
Andrew Mellon (Hoover’s secretary of the Treasury)
“Liquidate labor, liquidate stocks, liquidate the farmer, liquidate real estate. It will purge the rottenness out of the system…. People will work harder, lead a more moral life.”
Chapter 4: How Concentrated Income at the Top Hurts the Economy
Their savings are hoarded, circulated in a fury of speculation, or, especially these days, invested abroad. (quantify this)
Jeremy Bentham => “utilitarianism” => tax rich, give to poor => increase total happiness quotient
Top 10% => 40% of spending (but take home 50% of income)
Top 20% => ~half
Chapter 5: Why Policymakers Obsess About the Financial Economy Instead of About the Real One
Chapter 6: The Great Prosperity: 1947–1975
1947–1975 family income => 25k to 55k => more than doubled => (2007 dollars) (no international competition argument)
mid-1950s => 50% of all workers unionized
Interstate Highway System => forty-one thousand miles of road
Top Marginal Tax Rate
79–94% during WW2
1950s => 91%
1964 => 77% (~50% of earnings after manipulating deductions)
James Truslow Adams => “the American dream”
Chapter 7: How We Got Ourselves into the Same Mess Again
The problem was not simply the loss of good jobs to workers in foreign nations but also automation.
America has lost at least as many jobs to automated technology as it has to trade. (truth)
Over the longer term, the problem is pay, not jobs.
2010 => 8% of private-sector workers unionized (what percentage of total workers are unionized? This comparison is ethically shaky when you consider the previous stat was based on total workers. Although, I bet in only weakens the argument a tiny bit, but still, honest is honest.)
CEO salary => 30x typical worker before 1975, to 300x current
More than half of all the money that the top 0.1% of American earners reported on their 2001 taxes represented the combined incomes of the top five executives at the five hundred largest American companies.
5 out of 13k Americans. Doesn’t this imply that the top 5 executives earn 5% of the nation’s total income?
1997–2007 finance became the fastest-growing part of the U.S. economy.
2007 => Finance & Insurance takes home 40% of corporate profits vs. 10% before 1975.
“leveraged buyouts” (Quantify this effect. What percentage of companies experienced buyouts? What was their contribution to GDP? What percentage of the workforce was exposed to buyouts?)
Chapter 8: How Americans Kept Buying Anyway: The Three Coping Mechanisms
Starting in the late 1970s, the American middle class honed three coping mechanisms, allowing it to behave as though it was still taking home the same share of total income as it had during the Great Prosperity … (Quantify this. Assuming we treated borrowing as income, did American’s just “make-up the gap” caused by their flattening wages? Or did they go overboard? Numbers. Sadly, I know that women entering the workforce complicates this issue.)
Women in the Workforce
1966 => 20%
1990s => 60%
Women w/ Children under 6
1960s => 12%
1990s => 55%
(Kids make you broke. Elizabeth Warren)
2002–2007 2.3 trillion extracted from houses (HELOCs? Cash-out Refi?)
Chapter 9: The Future Without Coping Mechanisms
Top 10% => 40% of spending (50% of income)
Bottom 90% => 60% of spending (50% of income)
(The Bottom spends 50% more per capita than the Top.)
Chapter 10: Why China Won’t Save Us
Deep down inside the cerebral cortex of our national consciousness we assume that the basic purpose of an economy is to provide more opportunities to consume. (Oh, I wouldn’t go that far)
(Any future increases in Chinese consumption levels consumption is far more likely to benefit the local economy over foreign economies. “Buy Chinese” is sure to be adopted by the Chinese elite and warmly accepted by its population as a way to maintain economic growth during any transition from a production to a consumption economy.)
Chapter 11: No Return to Normal
The 2010 health reform legislation was a step in the right direction. (Curious. Imagine that health care cost in the US had only grown at the rate of inflation since 1975 (or some other reasonable level, say the average rate of health care cost among western european nations), what would be the realized savings? If these savings would have been put into the American worker’s pocket, what would have been the percentage gain in median American’s purchasing power?)
Part II – Backlash
Chapter 1: The 2020 Election
Chapter 2: The Politics of Economics, 2010-2020
Before 1975, Personal Consumption ~62%; Now ~70%. (What percentage of the 8% difference became consumer debt?)
Chapter 3: Why Can’t We Be Content with Less?
10% of Americans take antidepressants within the course of a year.
putative => generally considered or reputed to be (adj.)
Chapter 4: The Pin of Economic Loss
The mug story seems misinterpreted. In my mind, if I was asked to pay for the mug. The relevant thought in my head would be “Do I want this mug? If so, how much am I willing to pay for it.” If I was in the group where I was given the mug and asked to sell it, I assume that the buyer wants it, so the relevant thought process is now: “This guy wants the mug. How much can I get from him in trade?”. One trade emphasizes my want of the mug and how much I’m willing to pay for it. The other emphasizes how much the buyer wants the mug and how much money I can extract from him in the trade.
1% rise in unemployment = ~1% rise in suicide rate.
Chapter 5: Adding insult to Injury
“that’s even more significantly lower” => gah. what a convoluted phrase.
2008 => Top 400 earners, lost $300 billion, retained $1.27 trillion
1899, Thorstein Veblen => “conspicuous consumption”
James Duesenberry => economist => “demonstration effect” => “He called it the “demonstration effect,” which signals to others that the possessor of an item is wealthy enough to afford it, and thereby establishes his or her position in a social pecking order.” (truth)
Chapter 6: Outrage at a Rigged Game
2005 => typical home => 2,500 square feet (50% bigger in 10 years!)
1997 => typical home => 1,780 square feet
Wedding cost => 11k in 1980; 28k in 2007 (damn)
“Opulence. I has it.” – DirecTV commercial
$1.44 billion in 1998; $3.47 billion in 2009 (250% increase)
1970s => 3% of retiring politicians become lobbyist
2009 => 30% (wow. however, this might be a definition exaggeration.)
Chapter 7: The Politics of Anger
“There is an old Russian story about a suffering peasant whose neighbor is rich and well connected. In time, the rich neighbor obtains a cow, something the peasant could never afford. The peasant prays to God for help. When God asks the peasant what he wants God to do, the peasant replies, “Kill the cow.” (priceless)
“fen fu” => Chinese phrase => “to hate the rich”
Mark Hanna => modern presidential campaign => William McKinley vs William Jennings Bryan (1986)
Pat Buchanan => “silent majority”
Part III – The Bargain Restored (good luck with that. so far, I’m shocked how little race has been discussed as an excuse to break the bargain (now that it includes “other”, presumedly less worthy people))
Chapter 1: What Should Be Done: A New Deal for the Middle Class (to be honest, the book to this point hasn’t really informed my knowledge of what needs to be corrected in the country. Income inequality bad. Lower purchasing power bad. Coping mechanism exhausted. I hope this final chapter actually tells me something I don’t already know.)
The whole “Margret Jones” and her “Independence Party” hypothetical is an irrupting construct and detracts from the seriousness of the situation.
1. Reverse income tax. (I like it, but good luck with that. Transfer payments are incredibly unpopular in the US, because every fool thinks he will be rich one day. Not to mention, the recipients are easily labelled as “undeserving” in this country.)(As for the EITC, I dislike how it’s benefits are so closely tied to having children. Why is a poor person without children any less deserving?)
15k government check for anyone under 20k income. Full-time only? Part-time as well? Children required?
10k for anyone under 30k
5k for 40k
0 above 50k
50-90k => 10% tax
90-160k=> 20% tax
Basically, bring everyone near-ish the median (45k)
633 billion cost (supplements only)
Top 1% (>410k) => 55%
(I support higher taxes, but anything above 50% just seems wrong. 1 buck for you, 1 buck for me. no?)
Top 2% (>260k) => 50%
Top 5% (>160k) => 40%
Tax revenues would be $600 billion over current revenues. (mainly from treating capital gains as normal income, which is a welcomed change.)
The four hundred highest-income taxpayers in 2007, each with an average income of over $300 million, paid only 17% of their total incomes in taxes. (that’s nuts!)
2) Reemployment system
90% of pay difference for up to two years.
$2.35 billion currently spent on unemployment + $3 billion for reemployment (wow. that is cheap.)
3) School vouchers based on family income.
20 billion for early childhood education.
4) College loans linked to subsequent earnings.
2/3 of incoming students are concerned about repayment of student loans.
5) Medicare for all.
6) Public goods.
7) Money out of politics.
“blind trusts” idea is actually pretty clever.
Chapter 2: How It Could Get Done
commonsensical is one word. hmm.