Wall Street marked the fifth anniversary of the fall of Lehman Brothers — which triggered the greatest financial crisis since the Great Depression — by setting new records.
Wall Street marked the fifth anniversary of the fall of Lehman Brothers — which triggered the greatest financial crisis since the Great Depression — by setting new records. You might think things are going well. You'd be wrong.The Dow fell a little the next day, after government regulators hit JPMorgan Chase with a $920 million fine for lying to regulators about the billions in losses rung up by the "London Whale." You might think they're finally getting tough with the scoundrels, but that's not right either. As several commentators have noted, that huge fine amounts to about 13 days' worth of the $6.5 billion in profits JPMorgan racked up last quarter.
The too-big-to-fail banks are bigger than ever and the 1 percent are living large. The rest of us? Not so well. Before the recession, 12.5 percent of Americans lived at or below the federal poverty rate. That number now stands at 15 percent, Census figures released this week say, and holding steady. That's 46.5 million people just scraping by. Family income fell for the fifth straight year, the report says, to the lowest point since 1995. Real household income — that's median income, adjusted for inflation — is down 8.3 percent since 2007. It's a different story for the nation's wealthy. The median income for the top 5 percent of households has grown more than 5 percent over the last three years, and now stands at $318,052.
Income inequality sits at a record high, and things aren't getting better. A study by economists Emmanuel Saez and Thomas Piketty found that the top 10 percent of Americans took home more than half the nation's income last year, a new record. The top 1 percent took in more than 20 percent.
This trend toward a wealthier elite, a smaller middle class and an ever-larger lower class, was well underway before Lehman fell, and little has changed to slow it down. While some elements of public policy contributed to it — the deregulation of the financial sector, tax cuts for the wealthy, incentives for exporting jobs, disinvestment in education and infrastructure — the trend is bigger than U.S. politics. Globalization drove down the price of non-skilled labor; technology has eliminated far more jobs than it has created. Robots will continue to replace humans in the workplace, and there's not much the politicians can do about it.
It's beginning to look like the golden age of the American middle class, from the end of World War II to the ‘80s, when income inequality began to grow, was more the exception than the rule. The question we've barely begun to think about is what do we do about it? How do we create a sustainable society in which there are fewer jobs, at lower pay, with limited economic opportunity? The answer I keep coming back to is that government must bridge the gap between what employers can pay and what it takes to support families.
For generations, conservatives have been portraying recipients of government help as idle, lazy and undeserving. The fact is, major government programs mostly support the working poor and those too old, too young, or too disabled to work.
Government safety net programs are, in effect, indirect subsidies to low-wage businesses. Construction companies can hold on to their seasonal workforce because unemployment insurance pays them in winter. Workers at Walmart and McDonald's survive on low wages and no benefits with help from food stamps and government health programs.
As America evolves into a nation of low-wage workers, we can either make companies pay more — raise the minimum wage dramatically, require employers to provide benefits for health care and retirement — or we can keep employers' labor costs low by strengthening the safety net. Let the government provide health care for all, affordable higher education for those with potential, a more generous Social Security program to make up for the withering away of the private sector pension system. Unfortunately, Republicans in Congress want to go in the opposite direction. The tiny bright spot in this week's Census report: The percent of people without health insurance has fallen slightly in the last year, from 15.7 percent to 15.4 percent. That's Obamacare working, progress Republicans are determined to roll back. House Republicans recently passed their plan for dealing with the fact that 48 million Americans have trouble putting food on the table: They cut the food stamp program by half. Anyone who thought the last recession, like those before it, was just another bump on the road to prosperity for everyone got it wrong. Things were going downhill and, thanks to greedy bankers and sleeping regulators, they fell off the cliff. Trillions in families' savings were lost, millions of jobs disappeared, thousands of people lost their homes, and, five years later, we're back on the downhill path.
How long will it take for the political establishment to recognize what's going on?