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Obama Occupies Wall Street

President Obama spoke today about economic inequality and the plight of the middle class more forcefully than he ever has before. He gave the speech in Osawatomie, Kansas, site of Theodore Roosevelt's "New Nationalism" speech in 1910. Here's what Obama said:

"Look at the statistics.  In the last few decades, the average income of the top one percent has gone up by more than 250 percent, to $1.2 million per year. For the top one hundredth of one percent, the average income is now $27 million per year. The typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more. And yet, over the last decade, the incomes of most Americans have actually fallen by about six percent. This kind of inequality–a level we haven’t seen since the Great Depression–hurts us all. When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy, from top to bottom. America was built on the idea of broad-based prosperity–that’s why a CEO like Henry Ford made it his mission to pay his workers enough so that they could buy the cars they made.  It’s also why a recent study showed that countries with less inequality tend to have stronger and steadier economic growth over the long run."

But wait, there's more:

"We tell people that in this country, even if you’re born with nothing, hard work can get you into the middle class; and that your children will have the chance to do even better than you. That’s why immigrants from around the world flocked to our shores. And yet, over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. A few years after World War II, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. By 1980, that chance fell to around 40%. And if the trend of rising inequality over the last few decades continues, it’s estimated that a child born today will only have a 1 in 3 chance of making it to the middle class." 

Okay, the "if present trends continue" bit is a little bogus, because the president doesn't say when your odds of becoming middle class will drop to 1 in 3. Are we talking five years from now, or 50 years from now? And I was not previously familiar with the statistic that upward mobility into the middle class fell from 50 percent to 40 percent between the late 40s/early 50s and 1980. (I'm told it came from Berkeley's David Card and Alan Krueger, chairman of the White House Council of Economic Advisers.) But it's well-established that the rate of upward mobility declined between the 1950s and the 1970s, and the evidence suggests it's declined further since then. Even in the 1950s, Obama might have added, upward mobility was not as great as it was during the late 19th and early 20th centuries. (The industrial revolution brought the U.S. more upward mobility and more income-based inequality than we've seen before or since. Today we're experiencing growing income inequality, static-to-shrinking upward mobility, and shrinking upward mobility relative to other advanced industrialized democracies. This will all be in my book.)

Where does this all end up? In a ringing call to restore the top marginal tax rate to what it was under Bill Clinton:

"[W]hen President Clinton first proposed these tax increases, folks in Congress predicted they would kill jobs and lead to another recession.  Instead, our economy created nearly 23 million jobs and we eliminated the deficit. Today, the wealthiest Americans are paying the lowest taxes in over half a century. This isn’t like in the early 50s, when the top tax rate was over 90%, or even the early 80s, when it was about 70%. Under President Clinton, the top rate was only about 39%. Today, thanks to loopholes and shelters, a quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%. One percent. This is the height of unfairness. It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay a higher tax rate than somebody pulling in $50 million. It is wrong for Warren Buffett’s secretary to pay a higher tax rate than Warren Buffett.  And he agrees with me. So do most Americans–Democrats, Independents, and Republicans. And I know that many of our wealthiest citizens would agree to contribute a little more if it meant reducing the deficit and strengthening the economy that made their success possible."    

Also, Obama talked about how the Republicans wouldn't let him install Richard Cordray as head of the Consumer Financial Protection Bureau:

"Does anyone here think the problem that led to our financial crisis was too much oversight of mortgage lenders or debt collectors?  Of course not.  Every day we go without a consumer watchdog in place is another day when a student, or a senior citizen, or member of our Armed Forces could be tricked into a loan they can’t afford–something that happens all the time."

Also, Obama said,

"Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes these penalties count–so that firms don’t see punishment for breaking the law as just the price of doing business."

Maybe we should have a presidential election every year, because I much prefer this Obama to the excruciatingly reasonable fellow who's inhabited the White House for the previous three years.

The president will of course get called a pinko, but in fact this speech is much tamer than TR's 1910 speech. Check out the original:

"The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need is to change the conditions which enable these men to accumulate power which it is not for the general welfare that they should hold or exercise. [...] We grudge no man a fortune in civil life if it is honorably obtained and well used. It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community. This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country than we have yet had, but I think we have got to face the fact that such an increase in governmental control is now necessary."

Wouldn't it be great to see Obama start talking about "malefactors of great wealth"? Leon Cooperman, the 68 year-old hedge fund manager who can't bear even to hear the president say the word "millionaire" out loud, would squeal like a stuck pig. Too bad!