Below the radar, important ideas about our treatment for the Bush Deficit Sickness are emerging daily. Before any confusing details are put forth, lets always remember exactly what happened in 2008 -- that is, the "big picture."
The total US "wealth," that is, the total of all domestic assets "collapsed" from around $62 Trillion to around $53 Trillion. We are expected to believe that this money simply vanished. For a bit of foundational reporting, take a look at some excerpts from this Wall Street Journal article from March, 2009. (Read the article here.)
Americans See 18% of Wealth Vanish
The wealth of American families plunged nearly 18% in 2008, erasing years of sharp gains on housing and stocks and marking the biggest loss since the Federal Reserve began keeping track after World War II.
The Fed said Thursday that U.S. households' net worth tumbled by $11 trillion -- a decline in a single year that equals the combined annual output of Germany, Japan and the U.K. The data signal the end of an epoch defined by first and second homes, rising retirement funds and ever-fatter portfolios.
Past downturns have been mere blips compared with the losses Americans faced last year, which set them back to below 2004 levels. "In the postwar period, we've never had anything other than very modest declines. That life experience led many people to think that houses were a one-way bet," says Douglas Cliggott, the chief investment officer of Dover Management LLC.
The decline in Americans' net worth, which was the first in six years, follows an extraordinary boom. Not accounting for inflation, household wealth more than doubled from 1990 to 2000, and then, after a pause, rose nearly 50% before the bust of 2008.
The recession that began in December 2007 has reversed a particularly long boom. "What's misleading about this being the biggest drop is that it was preceded by one of the biggest rises," says David Backus, an economics professor at the New York University Stern School of Business. "Even where it's come down to is not a low level compared to the last 50 years of history."
In all, the net worth of U.S. households stood at $51.48 trillion at the end of 2008, the Fed data showed. Besides being down 17.9% from a year earlier, it was down 9% just from the third quarter.
The net-worth figure encompasses all of families' assets -- housing, stocks, personal property -- minus their total debts.
The balance sheets of a normal bank right after a stupendous robbery would show the amount that the bank's assets had been reduced. A further conclusion would be that the money which had been stolen was now the property of the bank robbers. Everything that they took out of the bank went into their pockets.
However, this nation wide heist would look a little different from the "straight ahead" figures of the recently victimized bank. The heist which occurred "nation wide" was not quite as efficient as our hypothetical bank robbery. To make it somewhat more similar, we would have to add the additional idea that some of the stolen money wasn't actually worth very much.
The part which went into the pockets of the "bank robbers" was the part which was, actually, worth full value. The immense scope of the scheme introduced some unavoidable inefficiencies. The "full take" of the perpetrators was significantly less than the entire amount which had "gone missing."
At first, we might simply accuse the robbers of not being careful enough to "really get their money's worth" from the gamble. However, the take in this scheme was so immense that even a substantial loss turned out to be quite acceptable.
In 2009 -- when the article was written -- the take amounted to around $9 Trillion. In the two subsequent years, the "take" has gradually grown to around $12 Trillion as more and more of the scheme became public, that is, as more and more of the damage finally reached the accounting department.
So we have two things to consider. One is the amount of the "take" which reached the pockets of the crooks, and the other is the amount of damage which was inflicted on the economy. If the title of the 2009 WSJ article is correct, that is, if some part of the wealth simply "vanished," then the "vanished" part would be the "damage" part.
Otherwise, we could simply look around the country and find a small collection of folks who were walking around with $12 Trillion dollars in their collective pockets. Further, we could remove all those Trillions from their collective pockets, somehow reinsert them into the domestic economy and our recession problems would, theoretically, be over. It isn't quite that simple.
MeanMesa has used a quote from Senator Bernie Sanders (I-Vermont) frequently in many previous postings. "Not everyone had a hard time during the last eight years. (Bush Jr. administration) The top 400 richest Americans saw their personal wealth increase by $630 Billion dollars."
Look at the numbers. First, $630 Billion is roughly 5/8's of a $Trillion. Next, if these were the "top" 400, how many Americans are there in the "top 2%" everyone is talking about? Thousands. Actually, tens of thousands.
That "top 2%," along with an even larger crowd of slightly "less rich" hangers-on are the ones who are now sucking the huge, continuing the Bush Jr. "tax cuts" out of what is left of the economy. Remember, the "missing money" amounts to around $12 Trillion. When we discount the "vanished" money, that is, the part of the "take" which didn't actually make any of these folks richer but still mortally wounded the economy for the rest of us, there's still plenty left over to have made these rich folks even richer.
A lot richer. They became John Boehner's bosses. They ordered the House Republicans to extend their tax cuts at any price. They ordered the House Republicans to forget about jobs, to work full time on transferring the Social Security Trust fund to their Wall Street cronies.
We know what Boehner, Ryan, Cantor and the rest of them have been ordered to accomplish for these bosses of theirs. Every day we see more of the scheme unfolding in the House of Representatives, on wing nut talk shows and in the embarrassing comments of tea bags who now sit in state legislatures.
For the second part of this posting, we consider the recent editorial by Nobel Prize Winning Economist, Paul Krugman. ( Links are enabled. Read the original article here.)
Wait a minute. This article is about Romney Care and progressive ideals. What does this have to do with "Trillions?"
If we recall the words of President Obama both during his campaign and at the outset of the "debate" on health care reform, it turns out that the issues are "sewn together at the hip."
The GOPCons are fixated on this sector of the economy while carefully avoiding the "elephant in the living room," defense spending. Just as law enforcement breathes a sigh of relief with the prospect of arresting passive pot smokers instead of chasing white collar crooks who can "bite back," GOPCons are far more comfortable attacking the poor and the elderly who have no troublesome lobbyists in the halls of power.
So? So health care costs are at the foundation of economic recovery.
Yglesias looks at calls for a return to something like the McCain health plan — subsidies for individuals to buy insurance on the open market — and gets it exactly right: once you think seriously about how this would work, you end up with something that looks very much like the health reform we have.
Suppose we give people help buying insurance. This doesn’t help people with pre-existing conditions, who won’t be able to get insurance anyway. So we add community rating: insurers can’t discriminate based on medical history.
But this leads to a problem with adverse selection: healthy young people will drop coverage, leaving behind a bad risk pool and high costs. So we add a mandate, requiring that everyone get coverage.
But some people can’t afford to do this. So we add means-tested subsidies to help lower-income citizens.
And you’ve just described the Massachusetts health reform, aka Romneycare, which in turn is basically the same as Obamacare.
There are no more conservative alternatives — not unless you give up on the whole idea that everyone should have coverage. There are alternatives to the left — single-payer, VA-style government provision — but Obamacare is already as conservative as a plan to make health insurance more or less universal can be.
The Progressive Caucus Budget
We have all seen the Ryan "spending cut" proposal. We all have also seen where the "saved money" the Ryan proposal would "save" will wind up when the dust clears. The idea is so bad that even the spineless Senate Democrats are completely, entirely, eagerly comfortable with the prospect of having it reach a floor vote.
Political maneuvering-wise, nothing could be "less threatening" and "more promising" than having all the GOPCons in the Senate vote for the wretched thing out in the open for all to see. The 2012 races for Senate seats, they think, will become something similar to a "hot knife slicing room temperature butter" with enough emphasis on the GOPCon wet dream of destroying MediCare.
The sensible Obama Budget may as well be lounging in the waiting room of a crematorium. MeanMesa thinks that the perhaps overly civil President has finally noticed that "negotiations" with the savage GOPCons should not necessarily always begin with an effort to come as close as possible to the other side's position.
So, what's left?
Spend a few minutes following the links in the following, final part of this post.
Eliminates National Deficit by 2021
The CPC proposal:
• Eliminates the deficits and creates a surplus by 2021
• Puts America back to work with a “Make it in America” jobs program
• Protects the social safety net
• Ends the wars in Afghanistan and Iraq
• Is FAIR (Fixing America’s Inequality Responsibly)
What the proposal accomplishes:
• Primary budget balance by 2014.
• Budget surplus by 2021.
• Reduces public debt as a share of GDP to 64.1% by 2021, down 16.5
percentage points from a baseline fully adjusted for both the doc fix and the AMT patch.
• Reduces deficits by $5.6 trillion over 2012-21, relative to this adjusted baseline.
• Outlays equal to 22.2% of GDP and revenue equal 22.3% of GDP by 2021.
Support for the People's Budget
The New Republic
The Washington Post
Center for American Progress
Economic Policy Institute
For more information on the "players," take a look at the following links. We need to "own" this proposal.
John B. Larson Democratic Caucus Chair