Another great topic, Michael: A few musings –

There are oligarchs in the US, not all of them conservative, not all of them Republicans, who either don’t care about the existence of a middle class or recognize that capitalism does not require a middle class. President Bush is suspiciously comfortable with oligarchic countries such as Mexico and Saudi Arabia, and has huffed and puffed hard to demonize Venezuela. Chavez is a vile leader, but his opposition, a narrow elite fighting hard to maintain its privilege, is equally unpleasant.

The current tax system, which gives a huge break to capital gains over ordinary income, on the surface appeals to those who clamor for lower taxes. The trade-off is that it creates a huge incentive to sell-off a business and pocket the gain, rather than run it as a going concern since profits and wages are ordinary income. It’s odd that Reagan’s tax plans simplified things by (for the most part) lowering rates and taxing gains and ordinary income at similar rates. But the Bush administration is firmly committed to the idea that “owners” should be rewarded over workers. No surprise that he is big on illegal immigration, creating a huge population working for the lowest wage and forcing wages generally downward. His attempts to repeal the estate tax is icing on the cake since it would allow the oligarchic class to escape all taxes on the increase in value of their capital (the big lie is that all the income in an estate has already been taxed).

These policies put a drag on the ability of a middle class to rise. It is more advantageous to get rid of a business than to create or expand one, and more advantageous to make workers compete for the lowest possible wage. This in turn makes it harder to get an apartment or to buy a house, without regard to whatever else in happening in the housing market.

Many businesses are oddly suicidal, on top of this. I used to work for a company that relocated from Southern California to Kansas, in part to save costs, in part because of a power play by managers already in Kansas. But they have had to slow down the transfer because it is not as easy to find talented workers in Kansas as in California. Nissan, which is moving from Gardena to Nashville, Tennessee, may run into the same hurdles. It is not that people in Kansas or Nashville are dullards, only that the pool of available talent is wider and deeper in California than in Kansas or Tennessee. The same is true of Columbus, Ohio and other communities. And yet between relocations and outsourcing, many companies are doing everything they can to reduce their access to workers who might be able to help their companies grow.

By the way, Nissan’s move will not only take middle class jobs out of California, it will also kill area businesses, from restaurants to ad agencies to fast food joints to parking lots and booksellers, that used to service Nissan workers.

Zetjintsu – Odd that you waste time trying to parcel out blame for the immigration mess. The plain fact is that the current Republican administration has been stridently for “guest workers” with no way to discourage guest who overstay their welcome, and has never pushed or endorsed any plan that is not de facto open borders. It is typical of the cognitive dissonance that affects some people that they always want to look at past policies than face the hard fact that Bush and Wall Street Journal conservatives have pushed hard for open borders since Day One of the Bush Administration.

On the other hand, you cannot blame illegal immigrants for housing problems. That dog won’t hunt. In Southern California, every bank and S&L seriously courts illegal immigrant homebuyers. Banks go where the money is, and if illegals pull their resources and outbid a single buyer, well isn’t that just the free market working? The Southern California housing market has also been artificially sustained by adjustable rate mortgages and other gimmicks whose value is starting to expire. Also, because of quirks in the housing market, a number of people find that they cannot sell their homes and find reasonably priced replacement housing in the same area (apartments or condos) or move to previously lower-priced communities like Phoenix or Las Vegas, where the housing bubble has already popped.

What’s sadder is that the Bush Administration has pushed out of government almost all subtle or strategic economic thinkers in Treasury and other departments and agencies in favor of loyalists, toadies, and middle-brow glad-handers. On the other hand, Democrats are stuck in some early 60s era delusion of the power of infantile socialism, as can also be seen in the disastrous gubernatorial candidacy of Phil Angelides here in California, as well as the poverty of national level Democrats with a brain in their heads.

Posted by: Alec on July 3, 2006 7:12 PM

Hmmm, the familiar liberal rant that Repubs are all talk and no show for the average voter. What have they done for us? Well, in '94 they took over the Congress, kept spending in line, almost balancing the budget. They also put a cap on welfare benefits through Welfare Reform. What has Bush done? Lowered taxes, put conseravtive justices on the federal and Supreme Courts, supported us on a host of conservative social issues, including embryonic stem cell research, promotion of traditional marriage ballots in the states, etc. Perfect, no. But a hell of alot better than the Dems. Iraq? It's an all volunteer army. The Dems have gone along with all the monetary appropriations, and voted to let the prez conduct the war. Let's see, get rid of a vicious, murderous dictator, bring democracy to 50 million people, and defend and secure our national interests abroad. I guess we just should have had dinner with Hussein, told a few jokes, exchanged business cards, and then everything would have worked out? A liberal dream world. Of course spending is now out of control, but where are the Dems on that? Part of the problem.

Illegal Immigration? Which party is leading the charge to start enforcing the law? Why, its the House Republicans! Where are the Dems on that one? If you want to see how brown-skinned people are causing the majority of our problems, look at who is in prison, on welfare, and who is driving down wages (shrinking the middle class). Yes, I'm sure those people are just victims. Yes, yes, we all believe that!

I'm glad I have a capital gains tax cut. I am strictly middle class, even on the lower end. But I put money away. It promotes saving and investment, as do my tax-deferred retirement accounts. Maybe you think taxes should be higher? Yes, that's good. I wonder why Nissan is relocating from liberal Nirvana CA to TN? Could it be--higher taxes?

The middle class is shrinking because of the corporatists and small businesses who run on cheap labor, and the voracious government socialists who are taxing us to death and inflating away the value of our money. As far as political parties go, if you are a middle American and voting democratic, you are braind dead. They give you nothing. It's all tax and spend and poor minority worship. The Repubs are becoming the true conservative party more and more all the time. There is no third party. Any third party would be prey to the corrupting influences the other two are beset with if they achieved any power. Stop dreaming!

The Middle must become mobile. It must press for its own agenda. And that agenda is (ta da!) policies which ensure its survival. Lower taxes, less government spending, elimination of most welfare and race quotas, better funding of higher education to lower tuition, tariffs against foreign nations who devalue their currencies for trade advantages, sealing off the border, elimination or huge curtailment of H1-b and other such visas, and pro-business tax and regulation policies which favor business staying in America and hiring american workers.

Posted by: s on July 4, 2006 1:30 PM

S- Let’s try a reality check. Try to stay with me –

It’s 2006. A Republican president has never vetoed a bill sent him by a Republican dominated Congress, which is as addicted to pork as any Democratic Congress. Spending has increased every year of the Bush Administration and the current national debt is $8.4 trillion. In 1994 deficits were bad. Now the GOP says that deficits don’t matter. We have not brought democracy to Iraq, only destabilized the country, injected ourselves into the ongoing struggles between Sunni and Shia, and done nothing to rein in Osama bin Laden. The neo-cons and frauds like Ahmed Chalabi insisted that once Hussein was gone, democracy would sprout like flowers throughout the Middle East, but the Taliban is resurgent in Afghanistan, Pakistan has nuclear weapons (ssshh! Nobody’s supposed to talk about this ‘cause Pakistan, like Saudi Arabia, is our “eternal” friend), and hardliners rule in the Palestinian territories. Oh yeah, and North Korea, which was supposed to be afraid of us after our show of force against Hussein, just tested its seventh medium-range missile. I don’t give a rat’s behind about “Democratic” or “Republican” foreign policy. I do care deeply about foolish, propagandistic, and ineffective foreign policy.

The Republicans are going to “start” enforcing immigration law? Where have they been since 2000 and the beginning of Bush’s term? Podcast LA radio station KFI 640 AM (the local Rush Limbaugh station) and check out the archives of the John and Ken show to hear House Republicans acknowledge that Bush and the Republican Senate were going to attempt to push a guest worker program and gut any enforcement bill. Also, check out the strategy to play smoke-and-mirrors and to blame anyone but Bush for any failure of the plan.

In addition, Bush has pushed a recess appointment of an unqualified party loyalist, Julie Myers (also known as Brunette Barbie) to head immigration enforcement. Even conservative commentators like Michelle Malkin were appalled (http://michellemalkin.com/archives/003576.htm
). But apparently Bush learned nothing from his appointment of Michael Brown and FEMA.

“Maybe you think taxes should be higher? Yes, that's good.” Taxing capital gains at a rate lower than ordinary income only guarantees that workers will be at a disadvantage. Bush’s refusal to deal with the AMT only adds to this problem, and actually hurts middle class taxpayers by automatically raising the taxes of many middle income families who lose exemptions and credits when their income rises. Congress loves hidden tax increases. They can honestly claim that they didn’t “raise” taxes, they just let the system do it for them.

Nissan is moving to Tennessee largely so that it can pay lower wages and benefits to workers, while of course transferring a hefty portion of its profits to Japan. Exactly how does this help the average American worker? Shareholders of Nissan, to be fair, may be laughing all the way to the bank.

By the way, here in California, GOP contributions from ordinary citizens is down, spurred by anger over immigration. But Bush got record amounts from corporations at recent fund raisers, and sent the message that any GOP officeholder who is not on board for guest workers will not get to share the loot. The Democrats may be clueless, but the Republicans are playing the public for suckers.

Oh yeah. Nobody is going to seal the border. Pushing policies to promote transparency and efficiency in the Mexican economy, and punishing American employers who hire illegal labor might have some impact in the long term, but “sealing the border” is a foolish dream since it does nothing to stem the demand for illegal immigrant labor or the benefits to employers. The other stuff you offer seem to be 1950s solutions to 21st century problems. Tariffs do nothing to offset the impact of outsourcing, for example, and “a huge curtailment of H1-b and other such visas” is anti-business and pro-regulation, a bit of a contradiction.

Posted by: Alec on July 5, 2006 6:05 AM

Chris, I want to provide an honest response to this question:

"What confuses me is why those who are in the middle, being squeezed, allow themselves to buy into the myth that their troubles are caused by the starving class at the bottom rather than the wealthy beneficiaries of the "trickle up" economy."

I'm an upper middle income homeowner in the NYC metro area who is constantly amazed by the number of people in my area who are able to afford $1mm+ homes and ridiculously overpriced motor vehicles. I also live in too-close proximity to urban areas with excessive crime rates. Now, ask yourself, which of these do I fear more as a threat to the well-being of my family?

1) an overpaid lawyer or executive; or

2) some quasi-sociopathic drifter who has held a series of marginal jobs in the last few years.

You should be able to guess the answer easily.

And, by the way, the poor aren't starving. They're overweight and consuming 1000 calorie meals every lunchtime.

Posted by: jult52 on July 5, 2006 7:43 AM

Alec: Your post contains so many inanities and inaccuracies I find it pointless to respond.

Posted by: jult52 on July 5, 2006 7:45 AM

Alec

Iraq is conquered country that has now had a number of free elections, ditto with Afghanistan. You might try flipping on the news sometime. That's far more than "destabilization". Also, since you are fond of criticizing the present administration, what would you do about North Korea? Invade it? They won't stop on their own, and they are willing to starve their own people out (BTW, their rocket blew apart in the air 40 seconds into the launch). Also, using North Korea as an example, don't you think its better for a nuclear Pakistan to be aligned with the US rather than against it? Too bad everybody is not as moral as you are, but we just might have to work together anyway. Nice logic.

Also, the republicans in Congress aren't responsible for enforcing the law--the president and the executive branch is. Bush (one republican) decides to flout it. But again, the point stands that the only ones leading the charge to start curtailing it are not just republican congressmen, but also conservative state and local officials nationwide. So what if there is a split in the party--I'm a conservative, not a republican. The republican party is being transformed into a real conservative party, not just a big business party, and immigration is one of the issues leading it there. I really don't care about how some repubs are losing campaign contributions. They deserve to be thrown out of office if they don't represent the people. And replaced with real conservatives who masquerade as republicans.

Actually, living paycheck to paycheck and not saving any money means that the average worker is at a disadvantage. What, do these people think that they will work forever? Do they think someone else will take care of them in their old age? Which party led them to believe that? Social Security and Medicare are projected to have 50 trillion in deficits over the next 50-60 years; in other words, it ain't gonna' be there, buddy. These politicians tax and spend like crazy, and still their socialist schemes blow up. If average people aren't doing anything to prepare for it, that's their problem. Please tell us how giving more tax money to the hated republicans is a good thing, Alec?

Where did you get your info on Nissan? How do you know that they want lower wages? Maybe they just want a more modern plant, a central location, and some tax incentives, which CA would probably regulate and tax to death. Please do some research.

We can seal the border and deport people if we want to. We don't run Mexico, mexicans do. Cheap labor has always been a need in America. Most of the jobs illegals take were filled by high school kids and lower skilled people. there are plenty of people to work those jobs. What is going on has nothing to do with "immigrant labor". It has everything to do with trying to drive wages into the dirt. Also, tariffs work quite well. You see Alec, the reason Nissan and other Japanese manufacturers built auto plants in America was because tariffs were put on their imports. Do a little more reserach fella. Stay with that.

Posted by: s on July 5, 2006 1:38 PM

To: jult52 - The sheer emptiness of your response is amusing. Thanks for making my day. One of the reasons I provided references and links was to shake up Republican true believers. What's the line from that movie? Oh, yes: you can't handle the truth.

Posted by: Alec on July 5, 2006 2:47 PM

Wait a minute, y'all, how'd we wind up mud-wrestling? I can't even remember what the topic of this posting was any longer. Civility, please. Anyway, how's about we take it off the boil and take it up again on some further posting? I promise to volunteer a good amount of red meat for you battlers to feast on.

Posted by: Michael Blowhard on July 5, 2006 3:00 PM

jult52:

I lived for many years in Fairfield County and return frequently to visit friends and deal with clients. I moved away in the late eighties when I realized I would never be able to afford to buy a home there unless I opted for a not-yet gentrified section of Bridgeport or some other marginal area. The middle and working class neighborhoods of my youth were already being eaten by the McMansion and Suburban Assault Vehicle phenomenon.

As to whom I fear, there is a very slight chance that 'some quasi-sociopathic drifter' might mug me ... if our paths crossed some dark night while he was on a meth high ... and he needed cash for his next fix ... and he felt he could get away before the cops showed up. If he did, he might get twenty dollars and pummel me because I didn't have more; that would not be pleasant but I suspect I'd get over it.

However, I honestly suspect that this very minute there is an overpaid executive or lawyer doing my family and me more harm. Maybe s/he is making sure the data regarding carcinogens in their company's product are hidden for another few years so that millions more in profits can be realized before they're discovered. Or maybe s/he's working on getting the local planning and zoning board to take my home by eminent domain so that a more "valuable" hotel and luxury condo project can replace my neighborhood.

I find it interesting that corporations are treated as the equivalent of individuals in our legal system. Within the belief system of "free market capitalism" (and, in fact, legally) a corporation's one mandate is to maximize shareholder value. Given that the definition of "sociopath" is "one interested only in their personal needs and desires, without concern for the effects of their behavior on others." doesn't that mean most corporations are sociopaths?

At any rate, to return to the topic at hand, if one looks at the statistics and data over the past thirty years or so the clear trend in the United States has been more of the total wealth of the nation in fewer hands at the top end, coupled with more individuals falling ever lower in the economic spectrum. So, is this a good thing? Do we like the idea of a wider, deeper chasm between the top and bottom? Do we applaud the hollowing out of the middle class? If not, do we blame those who are falling for not flapping their arms hard enough or those at the top end who benefit from the situation?

As in most things, if you're looking for the most culpable, follow the money.

Posted by: Chris White on July 5, 2006 3:31 PM

Back on topic, one of the main aspirations of the middle class has been to send their kids to college (a sweeping generalization, I know, but mostly true). With college tuition what it is, it's no wonder the middle class is in decline. I have 3 kids in college at $38,000 per kid per year. With travel, books, laptops, etc., at the end of the day, the total cost will exceed $500,000. In saving up and now spending that amount of money, I have certainly not lived a middle class lifestyle. Used cars always in need of repair, furniture bought at garage sales, no eating out or going to the movies. And retirement? I hope I remain healthy because I'm going to be working for a long time to come. I have no choice.

Am I complaining? No. Just stating the facts. I feel fortunate that I was able to do what I've done for my kids. I keep telling myself it's an investment in their future, and a very necessary one if they're going to have kids themselves!

But if you want to know where the middle class is going, it's being sucked dry by the institutions of higher learning in this country. It's a fact that a college education is required to fully participate in our knowledge-based economy. These institutions are the carpetbaggers of society, exploiting the situation to their own advantage. And it seems the ones with the biggest endowments are the biggest offenders.

Posted by: Bob on July 5, 2006 4:27 PM

Chris White--good post, and one I finally agree with. But don't forget the reach of the taxman into everyone's pockets either. The rising levels of federal, state, and local taxes is a huge drain on people's incomes, and the middle class gets little in the way of services to show for it.

Posted by: s on July 5, 2006 5:29 PM

Chris -- Interesting response but you are reading more into my reply than is warranted. You asked why the middle class believes "their troubles are caused by the starving class at the bottom rather than the wealthy beneficiaries of the "trickle up" economy." I tried to answer it. (And you should withdraw the use of the word "starving.") You seemingly assumed that I thought the concentration of wealth in a few hands was a good thing. I don't understand the leap there.

The US is beset by many problems. People prioritize. I attempted to explain the prioritization.

Alec: Afraid I wasn't amused by your post. I was frightened by the sheer ignorance and inability to think logically. Here's an example:

"On the other hand, you cannot blame illegal immigrants for housing problems. That dog won’t hunt. In Southern California, every bank and S&L seriously courts illegal immigrant homebuyers."

Scary.

Posted by: jult52 on July 6, 2006 8:05 AM

OK, since we've veered completely off-target, can I ask a perfectly-serious but maybe semi-relevant question? Given the crazy costs of private-college educations, why on earth don't more middle-class parents send their kids to state schools?

Posted by: Michael Blowhard on July 6, 2006 11:06 AM

jult52; we seem to be running around a circular logic track. You say you tried to answer my question about why so many in the middle class seem to believe their troubles are caused by those at the bottom of the economic ladder (whom I referred to as "the starving class") rather than the elite. Your answer, as I read it, is that there is more crime in the projects of Harlem than the country clubs of Greenwich, therefore the biggest threat to your family comes from 'quasi-sociopathic drifters' rather than from overpaid lawyers or corporate execs. And furthermore, you say, those at the bottom are not starving.

As for the last point, a quick Google search gives thousands of hits referencing the following statistics: a U.S. Census Bureau survey of households representative of the U.S. population in 2004 found that 11.9 percent of all U.S. households were "food insecure" because of lack of resources. Of the 13.5 million households that were food insecure, 4.4 million suffered food insecurity so severe that USDA's very conservative measure classified them as "hungry." Since 1999, food insecurity has increased by 3 million households, including 1.4 million households with children. In 2004, 38.2 million people lived in households experiencing food insecurity, compared to 33.6 million in 2001 and 31 million in 1999.

So, okay, replace "starving class" with "hungry class." Does that make a difference? We still arrive at the same point. The past thirty years have seen a clear trend toward greater income and wealth disparity between the top and the bottom with more of the middle trending downward rather than up. As the original subject of this thread was the hollowing out of the middle class, I posit that those who are clearly benefiting from the trend and accumulating a greater piece of the total pie are the real threat to the middle class, not those who are sinking to the bottom.

I tend to like analogies. Since we've parsed starving vs. hungry let me offer this one; a restaurant owner decides to shift from buying fresh produce for the salads and starts getting lettuce from the dumpster behind the local supermarket to increase his profit margin. The chef refuses to go along and is fired, replaced by someone desperate for a job at half the salary. Who do you blame when you get food poisoning? I pick the owner.

As to Michael's question about state vs. private colleges, I suspect the answer is a combination of private schools having more generous financial aid packages that help defray the cost, combined with the belief that if Junior is at Yale rather than the University of Maine he'll be more likely to meet and network with the sons and daughters of the elite and therefore be more likely to join them after graduation.

Posted by: Chris White on July 7, 2006 4:48 PM

Michael,

Sorry for the late response to your comment. I can't answer for all "middle-class parents", only myself. I didn't "send" my kids anywhere. They chose their colleges.

While they were growing up, I stressed education, a strong work ethic and pursuing your dreams, whatever they might be. And based on what I was extolling, I knew what was coming in terms of tuition. That was MY choice.

And I won't answer the implied question. Is an education from Harvard, Williams or the College of William and Mary really better than a state school? I think you've already had that discussion on your fantastic site.

Posted by: Bob on July 15, 2006 9:17 PM






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