Monday, September 16, 2013

Asking the Follow Up

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On yesterday's "Meet the Press" David Gregory paused from discussions on Syria to speak about the economy. The panel, consisting of Hank Paulson, Barney Frank and Maria Bartiromo were bullish on the economy. In this segment, although the initial question was framed in terms of wealth inequality, the panel quickly pivoted to a focus on growth, ignoring the question of whether all members of society benefit from this growth:
DAVID GREGORY: Here's the reality, Maria Bartiromo. You look at the favorability of Wall Street firms still very negative, 42% on the negative side in our latest poll. As I talk to CEOs this week and bankers, they say, "Look, one of the issues is we have to keep so much capital in reserve now, there's not enough capital to invest. That ultimately hurts economic growth. We're not able to make as much money, make as many deals." And we have tremendous income inequality five years later. The cover of Time Magazine: Did Wall Street Win in All of This?
MARIA BARTIROMO: Yeah, you mention a very important point. I agree with all that has been said. On the capital front, capital has doubled. Liquidity has doubled or tripled. I think the industry is in much better shape. We need to get beyond the conversation of "Is Wall Street evil? Are the bankers evil and causing pain?" and toward the conversation of, "How do you create sustainable economic growth?" That will answer the issue of inequality. Because with growth comes jobs. So we need to come together and figure out how businesses, banks included, are actually going to spend that money. Trillions of dollars on the balance sheet. You're right, they're sitting on it. But the idea that capital has been raised is absolutely a positive, not a negative, the fact that they have it in reserve.
FMR. REP. BARNEY FRANK: Hear, hear. Yeah.
FMR TREASURY SEC HANK PAULSON: Yeah, I couldn't agree more. I mean to me, that's what it's all about, sustainable economic growth.
What was entirely missing was the follow up to Ms. Bartiromo's assertion that growth will automatically solve the problem of inequality. "With growth comes jobs" but the question is will these jobs be in the United States? Will these jobs pay a living wage? Will the people who perform these jobs benefit when their company sees increases in efficiency and profitability? I thought about this today when I read an article on Sociological Images that shows that the top 1% of income earners have captured a full 95% of all the real income growth during the 2009-2012 recovery from the Great Recession. So far, the growth in the economy has not been shared. It is not "tricking down." Only Barney Frank addressed this in a small way.

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"I do want to add one thing, though, to your question about those poor beleaguered bankers who have been forced to do so much to keep from not being able to pay their debts that they can't lend money," Frank said. "If they really are running businesses that are so stressed that they can't do their basic work, why are they paying themselves so much money? Where did these enormous salaries come from if they were, in fact, in such serious trouble?"

The other members of the panel just laughed.

Pick me! Pick me! I know this one.  The answer is: "Because they can."

Is this what is best for the economy as a whole? It if is not, what can we do to fix it?

Sociological Images concluded its article this way: "We have a big economy. Slow growth isn’t such a big deal if you are in the top 1% and 22.5% of the total national income is yours and you can capture 95% of any increase. As for the rest of us… One question rarely raised by those reporting on income trends: What policies are responsible for these trends?"

Hear, hear!

Journalists: When a politician or pundit says that "growth ends inequality" ask the follow up: "Then why hasn't it?" And the next question: "What would?"