# Aftershock by Robert B. Reich



## Mustang (Jun 20, 2012)

*[FONT=&quot]&#8220;Aftershock&#8221; by Robert B. Reich[/FONT]*

  [FONT=&quot]In the very beginning of the book, Reich introduces readers to Marriner Eccles (1890-1977) who was a wealthy self-made banker, businessman, and economist and Roosevelt&#8217;s pick to be the Chairman of the Federal Reserve where he served from 1934 to 1948, seeing the country through its deepest depression ever.  Despite his vast wealth, Eccles saw the need to increase the earnings of average people in order to fuel economic growth, and he&#8217;s credited with guiding the federal government&#8217;s economic policies in response to the Great Depression because, prior to Eccles, those policies hadn&#8217;t really changed that much since Hoover was in office.  Eccles was not a detached academic.  He was a very experienced businessman who was ahead of his time in his economic philosophy which he came by through practical experience.[/FONT]

  [FONT=&quot]Reich wrote this book in 2010 during the aftermath of the financial meltdown of 2008.  Hence the title.  His book is partially a look at what led to the near financial collapse, but more than that, it&#8217;s a book that examines many of the similarities of the American economy prior to both the Great Depression of 1929 and what&#8217;s now commonly referred to the Great Recession of 2008.  More specifically, Reich examines how the national income was distributed prior to both periods of economic upheaval. [/FONT]

  [FONT=&quot]Despite how some people like to minimize the importance of the OWS movement and their collective claim of being members of the 99%, it might interest people to know that the top 1%&#8217;s share of the national income reached a zenith of 23.5% in 1928 right before the stock market crash AND in 2007 just before the financial meltdown.  On a graph, the years in between 1928 and 2007 are represented by a U with the years 1929-1973 representing a decline in the top 1%&#8217;s share of the national income (because relative incomes were rising for everyone else) and the years 1978 onward representing an increase in the percentage of the national income for the top 1%, which resulted in real wages falling for everyone else.[/FONT]

  [FONT=&quot]I&#8217;ll oversimplify a little bit here, but Reich&#8217;s contention is this:  The reason our economy got into trouble is because as average Americans&#8217; real wages were falling over a 30 year period from the late 70&#8217;s onward (for a variety of reasons), average Americans were forced to work harder, longer hours and borrow money in order to maintain an overall rising standard of living.  And why were real wages falling over this period?  It was happening because wages and salaries remained flat despite the fact that productivity  rates continued to rise.  This was a change from previous periods when wages rose as productivity rates increased.  Put another way, average Americans were not sharing in the greater wealth that was being created by these rising productivity rates.  Instead, the greater national wealth being created was increasingly flowing to the top instead of being more equally spread out among all Americans which ultimately meant that average Americans were unable to afford the very goods and services they produced which is exactly what had kept our consumer economy humming for decades.[/FONT]

  [FONT=&quot]To make a long story short (actually, the main text of the book is only 146 pp long), Reich states that in order to put things right again in the American economy (which is a consumer driven economy, after all), the trend of the last 30 years must be reversed in order that average Americans again share a greater portion of the national wealth and can then spend that money which will, in turn, fuel job creation and economic growth.  Reich has a few ideas about how to attain these goals, but I won&#8217;t go into any detail about them because I can understand how some people could view some of the ideas as income redistribution (which, frankly, has been happening in reverse for decades).  But that kind of criticism misses the point.  If Americans don&#8217;t have the disposable income with which to fuel demand and, hence, job creation, then policies like tax cuts for the wealthy is little more than tinkering around the margins in the scheme of trying to fix our ailing economy.[/FONT]

  [FONT=&quot]&#8220;Aftershock&#8221; is a worthwhile read if for no other reason than to have a better historical understanding of our economy has (and hasn&#8217;t) worked over the last 80 years.[/FONT]


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## CrusaderFrank (Jun 20, 2012)

Reich is wrong in the trillions column. I doubt you'd find a parakeet that would want to crap on the book for fear of the stupid rubbing off.

Government guided income redistribution has a 100% Guaranteed Fail Rate, even the People Republic of Vietnam has rejected it as a loser theory in favor of Free Markets and they have prospered.  If only the American Left were to the right of the Vietnamese Communists

If only.


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## Mustang (Jun 21, 2012)

CrusaderFrank said:


> Reich is wrong in the trillions column. I doubt you'd find a parakeet that would want to crap on the book for fear of the stupid rubbing off.
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> Government guided income redistribution has a 100% Guaranteed Fail Rate, even the People Republic of Vietnam has rejected it as a loser theory in favor of Free Markets and they have prospered.  If only the American Left were to the right of the Vietnamese Communists
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> If only.



If Robert Stack wasn't dead, I would call him up and ask him to do an episode of "Unsolved Mysteries" where he could explore the reasons why middle class conservatives' seem to have so much hostility toward the OWS movement when conservatives themselves are members of the very middle class which is getting increasingly squeezed out of its fair and equitable share of the national wealth which it just so happens that they're helping to create through their hard work.

After all, it is indeed a mystery.


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## CrusaderFrank (Jun 21, 2012)

Mustang said:


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It's your fucking genius government that is crowding out the Middle Class with more and more regulations and sucking up 10% of the GDP with new borrowing every year


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## Mustang (Jun 21, 2012)

CrusaderFrank said:


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Your ideology is blinding you to historical trends.  Your lack of understanding of economics isn't helping either.

Here's are some facts:  As more and more of the national income is concentrated in the hands of an ever smaller percentage of the population, the general population can't afford consumer goods (other than possibly the barest of necessities), and the economic engine stalls.  Tax cuts won't spur growth if it continues to go to the very people who are already reaping the benefits of an increasing share of the national wealth and lower marginal tax rates. 

Keep in mind that conservatives don't get some sort special exemption from the trend of the last few decades where more of the national income is increasingly flowing to the top at the expense of everyone else.  This issue isn't about liberal versus conservative.  This is about economics and power, and what the powerful can buy within the political process.  The fact that powerful people with political influence due to their deep pockets can get people like you to sign on to their agenda simply amazes me.  And the fact that middle class conservatives keep lining up to blame liberals for all problems is more amazing still.

Put simply, you champion the agendas of people who have no concern for the economic welfare of your group (the middle class), and then you blame liberals who are fighting for the middle class when things don't improve for your group.


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## Truthmatters (Jun 21, 2012)

Pareto efficiency - Wikipedia, the free encyclopedia


It is commonly accepted that outcomes that are not Pareto efficient are to be avoided, and therefore Pareto efficiency is an important criterion for evaluating economic systems and public policies. If economic allocation in any system is not Pareto efficient, there is potential for a Pareto improvement&#8212;an increase in Pareto efficiency: through reallocation, improvements can be made to at least one participant's well-being without reducing any other participant's well-being.

It is important to note, however, that a change from an inefficient allocation to an efficient one is not necessarily a Pareto improvement. Thus, in practice, ensuring that nobody is disadvantaged by a change aimed at achieving Pareto efficiency may require compensation of one or more parties. For instance, if a change in economic policy eliminates a monopoly and that market subsequently becomes competitive and more efficient, the monopolist will be made worse off. However, the loss to the monopolist will be more than offset by the gain in efficiency. This means the monopolist can be compensated for its loss while still leaving a net gain for others in the economy, a Pareto improvement. In real-world practice, such compensations have unintended consequences. They can lead to incentive distortions over time as agents anticipate such compensations and change their actions accordingly.

Under certain idealized conditions, it can be shown that a system of free markets will lead to a Pareto efficient outcome. This is called the first welfare theorem. It was first demonstrated mathematically by economists Kenneth Arrow and Gérard Debreu. However, the result only holds under the restrictive assumptions necessary for the proof (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). Moreover, in the absence of perfect information or complete markets, outcomes will generically be Pareto inefficient (the Greenwald&#8211;Stiglitz theorem


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## Truthmatters (Jun 21, 2012)

Vilfredo Pareto - Wikipedia, the free encyclopedia


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## Truthmatters (Jun 21, 2012)

Gini coefficient - Wikipedia, the free encyclopedia


The Gini coefficient (also known as the Gini index or Gini ratio) is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" (Italian: Variabilità e mutabilità).[1][2]

The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini coefficient of zero expresses perfect equality where all values are the same (for example, where everyone has an exactly equal income). A Gini coefficient of one (100 on the percentile scale) expresses maximal inequality among values (for example where only one person has all the income).[3]


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## Truthmatters (Jun 21, 2012)

File:GINIretouchedcolors.png - Wikipedia, the free encyclopedia


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## CrusaderFrank (Jun 21, 2012)

Mustang said:


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Did you sell your OWS tent?

The economy isn't a closed system zero sum game. Eating the rich won't help.

I started by saying that the Communist Peoples Republic of Vietnam tried it your way and they failed miserably. They had no rich people and they had to import rice to keep their citizens from starving to death. They dropped your system as a failure, embrace free markets, free enterprise and capitalism and now are growing, prosperous and are the second largest exporter of rice on the planet. 

Same people, same country, they dropped your failed ideas for mine and are doing great


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## California Girl (Jun 21, 2012)

Mustang is a great example of why a little knowledge is a dangerous thing.


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## Mustang (Jun 21, 2012)

CrusaderFrank said:


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I never said anything about 'eating the rich'.  I also made no reference to a 'zero sum game'.  I simply mentioned the fact that the wealthy in this country are (and have been) taking an ever greater percentage of the national income vis-a-vis everyone else going back for some 35 years.  It's an established trend, not an aberration.

I also made no mention of communism.  That's little more than a rhetorical distraction which serves to do little more than derail any discussion of the political and economic trends that have pushed the American middle class closer toward the poorer end of the scale.  Yelling COMMUNISM is also a useful scare tactic of the wealthy class, and it won't work forever.


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## Mustang (Jun 21, 2012)

California Girl said:


> Mustang is a great example of why a little knowledge is a dangerous thing.



You're a great example of why no knowledge makes you a useful tool.


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## CrusaderFrank (Jun 21, 2012)

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We've always had rich people in the USA, it's why people keep wanting to come here: to become like that

What's changed in the last 35 years is the voracious appetite of government.

True Story


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## California Girl (Jun 21, 2012)

Mustang said:


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Let me ask you this. When you read 'Aftershock' did you at least question what you read, did you look to verify or dispute what the author asserts? Or did you just nod and accept?


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## Leweman (Jun 21, 2012)

All that outsourcing leads to shit wages here in America.  Not sure there is an easy solution.  If American companies couldn't do it then Foreign companies may take over in the market, being able to sell products cheaper.  That would be even worse.


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## Mustang (Jun 21, 2012)

CrusaderFrank said:


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You keep throwing out non sequiturs like what's highlighted above.  That doesn't have anything to do with what I was talking about.

As for the voracious appetite of gov't, without intending to sound partisan, you can thank Reagan for tripling the debt with his new emphasis on tax cuts and increased gov't spending on the military.  You can also thank Bush 43 for his crazy ideas on economics where tax cuts aren't paid for even as spending explodes.

But both Republican and Democratic (Clinton) administrations embraced the deregulation of the financial industry which essentially sealed our economic doom because the Wall St wizards were set loose to wreck havoc on the  economy and make a financial windfall (a killing is closer to the truth) betting against the very investments they sold all around the country and the world.  And let's not forget globalization which ended up shipping our jobs overseas.

So, Obama inherits an economy in contraction.  That means increased spending on unemployment benefits and food stamps at the very time of decreasing federal income tax receipts due to millions of people being out of work.  That's not the same thing as cutting taxes at a time of war or pushing Medicare part D. 

With that said, the issue at hand is the change in income distribution in this country and how the middle class is getting shafted, regardless of their ideological beliefs.  

And now that a decent college education is finally financially out of reach for most people (due to cuts in state financial support for higher education), it will only become increasingly difficult for families (and students) to afford the education that helps them move up economically.

So, like I said, the middle class has gotten screwed, and conservatives better decide whose team their on.  



http://en.wikipedia.org/wiki/File:USDebt.png 


 U.S. debt from 1940 to 2011. Red lines indicate the debt held by the  public (net public debt) and black lines indicate the total public debt  outstanding (gross public debt), the difference being that the gross  debt includes that held by the federal government itself. The second  panel shows the two debt figures as a percentage of U.S. GDP (dollar  value of U.S. economic production for that year). The top panel is  deflated so every year is in 2010 dollars.


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## Mustang (Jun 21, 2012)

California Girl said:


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I didn't agree with many of Reich's proposed solutions, but the historical trend he showed is a simple fact.  And the forces that led to it happening are a matter of historical record.


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## MikeK (Jun 23, 2012)

CrusaderFrank said:


> We've always had rich people in the USA, it's why people keep wanting to come here: to become like that.


While there undoubtedly are a few innately greedy individuals whose purpose in migrating to the U.S. is to pursue the kind of power and sense of personal supremacy that derives from excessive wealth, the overwhelming majority of those who migrate here are hoping for nothing more than the comforts and security enjoyed by the fabled American Middle Class.  Which, to the average immigrant, is relative _riches._  If you believe otherwise you are likely projecting from your own orientation.  



> What's changed in the last 35 years is the voracious appetite of government.



It is interesting that you ignore the truly voracious appetites of those recipients of collective trillions of taxpayer dollars extorted in the form of "bailouts."  It is the appetites of those white collar criminals which is responsible for our current economic problems.  But I will concede that certain elements of government are indeed responsible for facilitating the thefts by removing the regulations which for decades had prevented such devious manipulations and sustained the prosperity of the middle class.  And I have no doubt that the motivation to eliminate those regulations was some form of bribery.


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## Mustang (Jun 27, 2012)

This graph may interest people.  I'm including it because it was in Reich's book.


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## TruthSeeker56 (Jun 28, 2012)

Liberals have a basic lack of understanding of even rudimentary economics. This includes the slobbering, bed-wetting, finger-pointing liberals in this forum, and all of their slobbering, bed-wetting, finger-pointing liberal political heroes.  

Liberals not only didn't bother to attend "Economics 101" class, but they were the ones who skipped the class to smoke dope in their VW vans.

Newsflash for you liberals, and other "factually challenged" lemmings..........until you figure out the differences between "commentary", "opinions", and "cold, hard, verifiable facts", you will continue to look like a bunch of brainless dolts.


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## TruthSeeker56 (Jun 28, 2012)

Mustang said:


> This graph may interest people.  I'm including it because it was in Reich's book.



Do you have ANY IDEA what this graph shows?  Obviously not.

1. You failed to account for the U.S. and world economic impact of World War 2, unless you consider the war years (1941-1945) as part of "the golden age of the middle class".

2. Why no mention of the SHARP increase in income for the top 10% during the Bill Clinton years (1993-2001)?

3. And last but certainly not least, how does this graph PROVE that the MIDDLE CLASS benefited from the decrease in income for the top 10% from the late-1930s to the mid-1980s? This graph does not account at all for the possibility that perhaps the top 20% or 30% of income earners benefited the most during the so-called "golden age of the middle class".

Singling out the "top 10%" is both disingenuous and patently shortsighted.


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## TruthSeeker56 (Jun 28, 2012)

Mustang said:


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How about the LIBERALS deciding whose team THEY are on?

The only "team" tha the liberals care about is "Team Absolute Power".

When are you liberals going to figure out that going farther and farther into debt does not create PROSPERITY?

So what do you liberals do in your own homes, if you get laid off from your jobs, or stop making your mortgage payments, or stop making your car payments, or stop making your credit card payments? Do you try to borrow MORE money, so you can keep your home and your car?  Do you not understand that you are simply postponing the inevitable? Are you liberals that shortsighted?  Really?


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## Mustang (Jun 30, 2012)

TruthSeeker56 said:


> Liberals have a basic lack of understanding of even rudimentary economics. This includes the slobbering, bed-wetting, finger-pointing liberals in this forum, and all of their slobbering, bed-wetting, finger-pointing liberal political heroes.
> 
> Liberals not only didn't bother to attend "Economics 101" class, but they were the ones who skipped the class to smoke dope in their VW vans.
> 
> Newsflash for you liberals, and other "factually challenged" lemmings..........until you figure out the differences between "commentary", "opinions", and "cold, hard, verifiable facts", you will continue to look like a bunch of brainless dolts.



Liberals, liberals, liberals.

Do you know what the problem is with the kind of hyper-partisanship that is constantly postulated, pushed, and promoted on talk radio?  (I'm including the less well-established liberal version as well as the more popular and successful conservative variety when I ask that question)  It's a distraction.  That's putting it mildly, frankly.  It's a distraction from the problems, and it's a distraction from finding and implementing solutions to those problems. 

Oh, it's a great business model for AM radio success.  There's no doubt about that.  People can and do make a very good living ginning up partisan rancor.  It's a racket worth MANY millions of dollars.  But why should they care what you think...as long as you and a few million others tune in to keep their advertisers happy?  Truly, why should they care?  And why should they care how the issues actually turn out?  I actually sincerely don't think the vast majority of them do care all that much.  They dish up the daily outrage, and people tune in to get their emotional fix.  They support their 'side' and 'rally the troops' when that's what's required, and they 'rail against the opposition' when it serves the interests of whichever side they and their supporters favor.  But what about average people?  What do they (we) get out of all that?  In my opinion, we get little more than entertainment value.  And that's not really that much when you stop to think about it.

Average people are the ones getting screwed by the system.  So, we're back to the whole issue of the distraction.  I'm sure you've heard of the concept of divide and conquer.  That's what's happening.  Many of the politicians in this country have pretty much figured out that THEIR personal and professional interests are best served by throwing their lot in with the lobbyists and wealthy business interests (the politicians' campaign contributors and hence their benefactors) who keep their campaign coffers full and usually help ease their way from one electoral victory to another, on their way to either a lucrative lobbying gig after a defeat or a cushy retirement (on the taxpayers' dime, of course) after they've served for 18 years.  As they say, one hand washes the other.  Those folks are the powerful people.  Some of them we know.  Many of them we don't.  And while many average people are fighting the 'liberal versus conservative wargames' that talk radio and cable news shows toss out for public consumption, the well-connected business interests and politicians are feathering each others' nests...almost always at the expense of average people -- both liberal and conservative.

Think about it!  I say that because the chances are pretty good that the average conservative probably has a damn site more in common with the average liberal than either one of them has in common with the politicians and wealthy business interests who are running the system primarily to their own mutual advantage.


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## CrusaderFrank (Jun 30, 2012)

MikeK said:


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I've said it countless times: Jim Johnson, Franklin Raines, Jamie Gorelick, Barney Frank and Chris Dodd should be serving million year prison terms


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