The New Republic’s Timothy Noah and The Atlantic’s Matthew O’Brien demolish a Wall Street Journal op-ed by Kevin “Dow 36,000” Hassett and Aparna Mathur that purports to debunk the fact that inequality has increased dramatically over the last few decades. Noah:
Hassett and Mathur answer that such studies “leave out too much.” They don’t include employer-provided benefits, or they don’t include government-provided benefits and taxes. Politicians who ignore the effects of the safety net “are putting their thumb on the scale.”
The problem with that argument is that while some studies have indeed left out such factors, others have not. A 2011 Congressional Budget Office study that included all those factors found that, whaddya know, between 1979 and 2007 the top 1 percent saw its income grow by 275 percent, which was about seven times more than income growth for the middle 60 percent and about 15 times more than income growth for the bottom 20 percent. Anyway you slice it, income inequality has been growing rapidly. (Overall, the federal government effects about one-quarter less redistribution today through taxes and benefits than it did in 1979. And if conservatives like Hassett and Mathur and Romney and Ryan get their way, it will effect a whole lot less redistribution in the future.)
The Occupy movement made inequality a political football the past year, but it’s been a policy football for at least a few years. The debate between inequality skeptics and worriers has gone something like this. Income inequality hasn’t gotten worse. Yes, it has. Well, what really matters is consumption inequality, and it hasn’t gotten worse. Yes, it has. Well, what really, really matters is social mobility, and it hasn’t gotten worse. Yes, it has. Well, social mobility might be overrated because rich people have better genes. Really.
— Read Jessica Pressler’s entertaining New York profile of AIG CEO Bob Benmosche, who believes he’s something of a great man of history who’s overcome the shackles foisted on him and his company by the government.
Here she asks Benmosche about the election:
There’s a silence. Benmosche knits his eyebrows together. His wife, Denise, refills her wine. “Let’s put it this way,” he says finally. “I think we need a change. I believe that we need a leader that’s pro-individual, that’s pro-business, and recognizes that there’s no free lunch anywhere. There has never been anyone in history that has proven a free lunch works.”
This sounds a bit odd coming from the CEO of AIG, most obviously because his company received the largest free lunch the world has ever seen, after it was revealed that its Financial Products unit had gone off the rails writing credit-default swaps—insurance—on mortgage-backed securities. When the market tanked, its parent company was left on the wrong side of billions of dollars of IOUs to major banks and hedge funds, which had been using the swaps to bet against the housing market. The insurer was in hock to so many systematically significant institutions that the federal government felt obliged to step in with a $182 billion rescue package, the largest government bailout in history, to prevent the collapse of the global economic system…
By the time Benmosche and his team went to work, the market was improving, and the bonds and securities in the first set of vehicles were rising in value, enough that it seemed that the proceeds from those assets, combined with the interest, could feasibly be used to pay off the Federal Reserve’s loan.
— Bloomberg’s Richard Bravo and Mark Chediak have a nice story on how the private equity firms that have the old Texas Utilities buckling under $50 billion worth of debt that has made it technically insolvent. So why haven’t KKR, Goldman Sachs, and TPG put it in bankruptcy protection? There are fees to be made, at least $528 million so far:
“This is a utility and its product is electricity that it sells to the public, but it really is a debt house,” said Tom Sanzillo, finance director for the Institute for Energy Economics & Financial Analysis, a research group, and former deputy comptroller of New York who oversaw the state’s $156 billion pension fund. “There are fees to be made in all that debt management”…
The fees from Energy Future may allow KKR, TPG and Goldman Sachs to extract cash without infringing on the Delaware Limited Liability Company Act, which limits distributions from a firm if all its liabilities exceed the fair value of its assets, according to Chapter 18 of the law.