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Mister Kowalski

How can you possibly be worried when Senator Charles Schumer is on the case ? You do realize that he's proposing a solution to all our problems-- "Senator Charles Schumer of New York, the chamber’s third-ranking Democrat, called for an “immediate jolt” to the economy by extending and enlarging a one-year payroll-tax cut that’s set to expire Dec. 31. He asked for action “as quickly as possible by including it in the final debt-limit agreement.”

I personally am completely confident that his wisdom and action will see us through any travail. After all, the answer to a problem of debt is quite obviously more of it.

Bill Hicks

@Mister Kowalski - If the AARP wasn't completely corrupted, they would be fighting Schumer's proposal tooth and nail. The payroll tax cut is madness that is going to bring about the downfall of Social Security much sooner than it would have happened otherwise.


Oh mi GAWD, I was driving home from middle daughters first-ever mountain bike race (1st place!) and was forced to listen to a report on NPR connecting income inequality with slow economic growth which ended with this amazing proposal (if you read it several times it's almost like getting high...surreal...I really think Dave is going to like this):

"In the meantime, Moss suggests more social-oriented solutions.

He says that World War II had a profound effect on how executives saw themselves in American society.

"I think that probably led many executives to not even think about asking for the kind of salaries that are now typical," he says. "It wouldn't have seemed right."

Moss wonders what sort of programs could foster that same feeling in the CEOs of today.

"Could there be some kind of compulsory or voluntary public service at a young age, where people come together across groups that don't normally come together?" Moss asks.

"It seems to me that trying to build communities, bring people together from different parts of the spectrum and different parts of the country, probably has, long term, the best likelihood of bringing down inequality."



I found this website today:


Pretty cool, eh? It's hopeless...


That's better.

Deb Schultz

Well, if Moss were serious about compulsory public service, he could advocate for a return of the draft.

Jim A

...Households took on more and more debt to replace lost income.

And why did this happen? Since incomes for most people have been flat for the last few decades when adjusted for inflation, why didn't people simply not spend ever more money and go into debt as a result? Are people so habituated to growing real incomes that their spending automaticaly goes up? I don't think so. There will always be people willing to borrow their way to the poor house. The difference in the past 20-30 years ISN'T really due to changes in the willingness of the bottom 90% of Americans to go into debt. The difference is that those top 1%ers have more money than they are can spend and that gets cycled through Wall Street and the bond market. Instead of building new factories, buying new machines and other productivity improvements, much of it has been made available to be lent out at intrest. The HELOC explosion, REFI mania, and the re-writing of the bankkruptcy laws are all parts of the process lending out the excess money of the rich to the rest of us.

Timothy Gawne

Indeed. Well said.

But you neglected our government's population policy. Yes, we are shipping jobs overseas. But we are compounding this by also importing workers. Current best estimates are that American will reach 500 million people by 2040. This is not an accident, this is a result of deliberate policy. It would take a massive investment to handle all these new people, in particular because as population density rises it takes more and more investment per capita to keep even. But we are not making these investments. We're not even trying.

The issue of course is not "immigrants", but the RATE at which we accept ADDITIONAL foreign workers and their families. A business slows down hiring when times are tough: why not a nation? Unless you want the place to become just another overpopulated cheap-labor sweatshop, of course.


Dave - you're moving up in the world! You got a Nakedcapitalism link for your post today, well done sir.

See, this time it really is different.


Jim A, it's not a question of people not spending money versus going into debt. We have had inflation for years, but incomes have stayed the same. So how do you pay the bills? You need a place to live, food, a car and gas, a phone, heat, etc. If you can't earn enough money, you put things on credit cards, you take out a second mortgage, etc. Don't blame people for not wanting to give up their homes, or being unable to walk to work.

So now we're in tremendous debt and there are no jobs. The government is captured by the corporations, so available "help" goes to big business and the average person is thrown to the dogs. Every one I know, from poor to well-off, is in trouble. I see no political solutions to save the average American, so my prediction is for social unrest which, I for one, welcome.


Of course, what's REALLY different with this crises that say, the Great Depression is this ugly little thing called Peak Oil. From now on, every time a HINT of generalized prosperity rears its head, oil prices will spike up and snuff out any hint of economic "recovery."

Jim A

I don't buy that sharonsj. Unless you're living in a cardbord box, you can always find somebody poorer than you who IS living within your means, even if they aren't living within THEIR means. And make no mistake, barely making your regular bills and then going unrecoverably into debt when a major appliance dies is NOT living within your means. Now major medical bills or extended job losses can put almost anybody deeply in the red, but car repairs and house maintenance SHOULDN'T. Part of living within your means is putting a bit extra away every month of unanticipated expeses. To some extant if you can't manage this, either your house is too big or your car is too new.


I kind of have to agree with Jim A (having lived well beyond my means for many years!). It's all relative. One person's necessity is another's luxury. I think one thing that happened is that the housing bubble made many people feel a false sense of security leading them to 1. not save for retirement because they thought they could sell the house and downsize and live off the profit; and 2. actually borrow against the (non-existent) equity at low interest rates to fund non-essentials.

Brian M

A middle class American lifestyle is unsustainable. Period. The logical progression for something like that is...

one worker or job isn't enough, so you move to two workers or jobs per family,

two incomes per family isn't enough, so you both work longer hours or add part-time work,

that doesn't get it done, so you start taking on debt to try and forestall the inevitable,

people stop lending you money you will never repay, standards of living start to fall..

Things that are unsustainable, stop.

Jim A

If those in the top 1% (as well as those countries with trade imbalances with the US) didn't have money (or they had better things to do with it than lend it to the other 90%) there wouldn't be so much debt in the middle class. People would have adjusted their real expenditures more quickly to reflect their megere incomes. The middle class is in decline in this country. But people are in debt because they haven't been forced to accept that they should live more modestly than they used to think they were going to have to.

Yes, the A solution would be to broaden the payroll base. In the face of increasing globalization and the decline of manufacturing, that will be VERY HARD INDEED. But our lot will be somewhat improved if we decrease the ammount of money lent out at interest. Forcing investors to take losses for the mortgage debacle, reinstating reasonable bankruptcy laws, and getting rid of the prefered tax rates for capital gains would all constitute steps in that direction.


Excellent article. The current crisis is still being viewed as temporary by policymakers while we circle the drain.
The problems we face today did not just suddenly appear but are the results of decades of monetary and fiscal madness by the "monied interests" you refer to.
Phase II of the ongoing financial crisis is about to get geometrically worse as it becomes obvious that the Fed and the Government cannot "save us" - that's when the real panic starts.

The long road back to recovery in America will take hard work and sacrifice - something you will never hear the special interests and politicians tell the American public.


Brian M: The human need for getting enough to eat is unsustainable. The logical progression for something like that is...

one worker or job isn't enough, so you move to two workers or jobs per family,

two incomes per family isn't enough, so you both work longer hours or add part-time work,

that doesn't get it done, so you start taking on debt to try and forestall the inevitable,

people stop lending you money you will never repay, so you eat only twice a day, then only once a day, then 3 times a week...

Things that are unsustainable, stop.

The above happens to many people throughout our world. Your comment doesn't tell us anything. Where is the bottom line for what's ok and not ok?

Asher Miller

And you didn't even mention the BIG elephant in the room, the one that really makes this time different: Resource limits.


An illustration for your first bullet point (manufacturing jobs):



In comparing debt to GDP, Reinhart & Rogoff are comparing a stock to a flow. If Reinhart & Rogoff had gotten an answer from this that neoliberal academia DIDN'T like, they all certainly would have pointed out the ridiculousness of making stock/flow comparisons. Instead, Reinhart & Rogoff got an answer that neoliberal academia DID like, and now the two are heralded as if they were the new Columbus and Magellan.

You can add economics academia to your list of failed institutions, Dave.

Jim A

And to continue my thread hijacking, and in an effeort not to sound completely heartless, I'll point out that stagnant real median incomes DON'T imply that individual household's have been stagnant. To the contrary, some people's wages have gone up, some have dropped precipitiously, and some have done both, possibly multiple times over the last 20-30 years. Stable employment is sooo 70s. But if people didn't have access to credit, they would have been forced to adjust to declining incomes more quickly. And they wouldn't have been as able to turn their home equity into debt during the bubble.

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